Arc Minerals: something larger is brewing in Zambia
Good afternoon MINING AIM, and welcome to Thursday.
I have a brief update for you on Arc Minerals (LON: ARCM) this morning - while we wait for an RNS, a tweet, or anything officially material, there are a few new considerations to update you on:
First, given the recent private placing by Avanti, ARCM will likely gain circa $1.25 million in shares - while it will probably keep hold of these for the foreseeable (remember, the business is capitalised for the next three years), it does mean that Arc will soon have another source of capital. Given Avanti's business case, I'd also wager they will be worth more when sold.
Add in the cash gong into the JV from Anglo and it's all looking good for the balance sheet.
Second, I have had it confirmed from trustworthy sources that the Royal visit is happening, though the timing has changed from imminently to a less immediate timeframe. This may have something to do with what's happening in Zambia. I also have it on good authority that any remaining licence issues are being resolved, and are now viewed as nothing more than a box-ticking exercise.
On Zambia, things seem to be going well. Two independent sources on the ground in country have advised me that senior Anglo American personnel have been quietly rushed into site at Cheyeza - including a very senior head of exploration.
Importantly, this was not a previously scheduled visit; whatever they've drilled up has been sufficiently interesting to grab the attention of ranking individuals of a company which is already grappling with a major reorganisation, including divesting De Beers, in addition to its coal and nickel operations.
I suspect given this news, that core samples may have already been shipped off for assay. Remember, this is some of the most exciting exploratory copper tenure on earth.
And it's time to get excited.
Additional drill rigs are just over the border and can be brought in at any time. And while Anglo is running the show, they are required to spend $24 million over three years. If they don't spend it now, they will spend more later.
Here's some more context:
The key complaint that Anglo had about BHP's takeover offers (over than not being enough money) was that BHP's proposals loaded the risk of divesting the 'unwanted' assets onto Anglo shareholders. As Anglo works to shore up the balance sheet and move less profitable operations out of the business, it may become easier for BHP to make another offer - and it can do so as early as November.
Duncan Wanblad needs to show the market that (a) he can source the copper he needs to meet his future production targets, which are nowhere near achievable from current operations, and (b) that Anglo can deliver more shareholder value than would be found within a renewed takeover offer.
For context, the latest offer was for some £38.6 billion and Anglo currently has a market capitalisation of £29.8 billion.
Given the intense pressure on the CEO, earmarking his calendar makes little sense unless there is a bigger reason - as you know I have speculated on this before.
The bottom line is that Anglo management are on a ticking clock but are setting time aside for in-person visits. I can only think of 25 million reasons why.
More widely on Zambia, Finance Minister Situmbeko Musokotwane has repeatedly noted he wishes to see the country's copper output rise to about 1 million tons by 2026, and to 3 million tons by the end of the decade.
It's no wonder President HH made a roadtrip of the copperbelt:
According to the Zambia Chamber of Mines, copper output slumped to 698,000 tons in 2023 from 763,000 tons from 2022. But Mopani has secured IRH to the tune of $1.1 billion, and Konkola will be coming back online - which should reverse the downwards trend. Then there's the investment at FQM's Kansanshi mine and the $2 billon going into Barrick's Lumwana mine.
I wonder who else may be planning a major investment?
Jumping across to Botswana, where ARCM has already seen visible chalcocite, core samples should now be at the ALS laboratory in Johannesburg (that's a place you want a source!), though I have heard from multiple companies operating in Botswana that they have had to deal with border delays with their core samples, so it's possible results may be a week or two later than expected.
For reference though, nobody uses any other lab than ALS - it's the gold standard for assays with results internationally recognised.
That's it for now - I suspect that when assays come back for Botswana, they'll blow the lights out.
But always remember: Botswana is the sideshow.
Zambia is the centrepiece.
- Charles Archer, 29/8/2024