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Valuation anomaly puts spotlight on Metal Tiger
Small cap mining group Metal Tiger (MTR:AIM) believes its shares are trading below the value of its investment in Australia-listed MOD Resources.
If true, it would mean anyone invested in Metal Tiger effectively gets its other assets for free including interests in Thailand and a few investments in AIM-quoted resource companies.
Project stake could be worth more than investor's market cap
Metal Tiger has a 30% stake at the project level in MOD’s Kalahari copper project in Botswana, as well as approximately 5% of MOD at the company level plus 1.5m warrants exercisable at 6c.
MOD’s share price has risen by 110% so far this year to 7.9c off the back of positive exploration results at its Botswana copper project and a rising copper price.
‘I’d say 95% of MOD’s market value is its copper project,’ says Metal Tiger chief executive Michael McNeilly, adding that minimal value is being attributed to MOD’s gold interests in New Zealand.
Applying that 95% ratio to MOD’s A$128m (£79m) market valuation at the time of writing equates to its 70% share of the copper project being worth A$121.6m (£75m). Metal Tiger’s 30% stake would therefore be worth approximately £32m – which is higher than Metal Tiger’s £19.9m current valuation.
You have to remember Metal Tiger also owns that 5% stake in the business as well.
In a previous conversation with Shares earlier this year, McNeilly said he has turned down an offer for Metal Tiger’s shares in MOD, adding that private equity firms had been looking at the Australian-listed firm as a whole.
‘We don’t want to give away any value yet. People should be excited about the asset, as we’ve barely scratched the surface,’ he said.
The MOD copper assets used to be owned by former AIM-quoted Discovery Metals. McNeilly says that company missed the copper mineralisation now being worked by MOD when it previously drilled the licence area.
MOD continues to drill out decent copper grades and on 6 March said it had found a new zone of copper mineralisation located beneath its T3 Resource area.
Metal Tiger has a joint venture with several parties in Thailand who hold mining lease applications for two former-producing silver/lead/zinc mines.
It wants to get approval from the government to reopen the mines. A new Minerals Act in the country comes into force on 30 August 2017.
The company intends to spin off its Thai assets into a separately-listed company to be called KEMCO Mining. This is expected to float on AIM in June or July.
Metal Tiger raised £514,500 via the issue of warrants earlier this month to fund IPO costs and working capital for the Thai operations.
Failure to admit KEMCO to AIM by 13 October 2017 would see the warrants automatically convert into Metal Tiger shares.