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AIM’s best-kept secret produces stellar exploration results
Thursday 03 Nov 2016 Author: Daniel Coatsworth

A tiny AIM-quoted mining company on 31 October published some of the best exploration results we’ve ever seen for a copper project on the UK stock market.

It’s not a one-off discovery, either. Savannah Resources (SAV:AIM) has been churning out amazing results for some time which gives us confidence there is plenty of high-grade mineralisation across its project in Oman.

SAV - Comparison Line Chart (Rebased to first)

Impeccable timing

Savannah hopes to start production late next year. Its timing is impeccable. Investment bank UBS has just turned bullish on the outlook for the copper price, saying there are clear signs that Chinese demand for the metal is improving.

UBS believes the copper market will shift from surplus to deficit in 2017 which theoretically means the metal price should increase in value.

It forecasts $5,732 per tonne for 2018 which should be when Savannah is comfortably producing copper from its Middle East project. That is 18% higher than the current metal price of $4,841 per tonne.

Savannah has interests in two very large exploration blocks in Oman. ‘Block 4’ contains several old copper mines. The most exciting, in our view, is ‘Block 5’ which contains two prospects called Mahab 4 and Maqail South. Both were the subject of the latest drill results which caught our attention – and they will be the first projects it brings into production.

Outstanding metal grades

Mahab 4’s latest results included copper grades between 6% and 10% in multiple holes. Maqail South’s drilling unearthed one assay containing an astonishing 32% copper and 30% zinc, albeit over a short distance. ‘These are some of the highest grades in the world with extraordinary levels of zinc,’ claims Savannah chief executive David Archer.

For those not sure what’s deemed good and bad with copper grades, it is fair to say that 1% is good. Some operating mines have 0.5% copper which is workable if there is significant volume and costs aren’t too high. A deposit with average grade in excess of 2% could be considered excellent.

Mahab 4 currently has 2.1% average grade; Maqail South has 3.8%. Savannah will publish a new resource statement by the end of 2016, confirms Archer.

More news on its way

A resource update on Savannah’s Mozambique mineral sands project is also due in the next few months. Investors should expect a smaller number that previous estimates. Savannah is focused on getting the best returns and is only interested in higher grade areas.

The miner also has lithium interests in Finland, but these are early stage so not central to the investment case. (DC)

Savannah Resources  (SAV:AIM) 4p

Stop loss: 2.8p

Market value: £18m

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