Guardian Metal Resources: the perfect storm
Good morning MINING AIM and welcome to Thursday.
I just want to take three minutes of your time today to talk about Guardian Metal; when assays start to come back I will give the stock some proper coverage including management interviews - but it's worth touching on the business as of today.
This morning's RNS on Pilot Mountain notes that 'drilling operations (at Pilot Mountain) have been underway for over three months with seventeen HQ (63.5mm) core diameter diamond drillholes completed for a total combined 2,396.2m, a material increase from the originally planned 2,000m programme.'
The 18th drillhole is already underway, and:
At Desert Scheelite Parallel West, an altered skarn/marble zone was successfully intersected in drillhole PM24-03. A follow up drillhole PM 24-05, designed to test the zone further along strike and down dip, was also successful in intercepting the newly identified zone. These represent the first holes ever drilled into DSPW, with the two holes together suggest mineralisation continuity.
Thirteen drillholes have been completed within Desert Scheelite, designed to support the Pre-Feasibility Study. These successfully intersected the mineralised skarn zones where expected based within the existing block model, as well as locally within the hanging wall and footwall, supporting further resource expansion potential.
CEO Oliver Friesen enthused 'the findings to date which have greatly exceeded our expectations. In the Company’s view, we consider the potential offered by the Project is now much greater than when it was originally acquired...only two of the Company’s multiple exploration targets identified have been drill tested, both confirming new mineralised and altered zones.'
So where next? Assays from the lab will start to come back soon - and then there will be a steady trickle of assays thereafter (it's a similar story at Arc Minerals, Rome Resources, MET1, Helix Exploration, Galileo etc - drilling is back in fashion). Guardian is also finalising a permit notice amendment to support further drillholes into Porphyry South, DSPW and Porphyry West to test for the suggested porphyry system.
But let's grab the bull by its horns: GMET is for many investors the best performer in their portfolio over the past 12 months. It tagged all-time-highs yesterday, and many will now be considering taking some capital off the table.
Now of course, we all invest to generate a profit. You must do what is best for your portfolio and the following is not advice. But if you're going to invest in a pre-production play, it still merits a spot:
Reasons to stay invested
China will ban tungsten exports very soon. I wrote on this yesterday and have been saying it publicly for well over a year. Now with antimony kicking the bucket, others including Christopher Ecclestone, principal and mining strategist at Hallgarten & Company, agree with me. My guess is an announcement in mid-October and a ban in mid-November.
Going further than yesterday, I suspect that China's refusal to support its steelmakers (and by extension Australian iron ore producers) will only last until a few months after these new export bans go through. They do not want to be acting in a position where the West feel they might have some leverage.
GMET has £4 million+ cash, and is due more from the exercise of the 17p warrants, leaving it with a 24 month+ runway at current cash burn levels.
2.4k metres of assays will start coming back from the lab soon - and these will be continual as the company has already indicated that the rig is staying on site to do more.
There is a new zone to explore at Desert Scheelite Parallel West that until now has never before been drilled. Despite the tactful words on the previous operator, it appears a lot was missed.
The company has uncovered multiple porphyry targets to explore; this could be a gamechanger.
Exploration technology has moved on significantly, driving increased knowledge of the flagship as noted by the CEO.
The 'effective free float' is tiny. Power Metal owns 48.9%, Lars Bader 6.4%, Chang Turkmani (grants adviser) 4.7%, Purebond 6.6%, with management a further 1.5% That's 68.1% tightly held at least, and this does not include a loyal retail base.
The tungsten price is hovering around a 10-year high, driven by falling Chinese production dictated by China’s Ministry of Natural Resources and stricter environmental controls in the country. The country already has a 20% tariff on tungsten concentrates (from 2022). But more widely, increased demand from defence, the solar panel industry, and increasingly, novel nuclear power applications is also piling pressure on the price - such that global demand is increasing while global supply is falling.
Grant funding from the US Government is likely to be forthcoming before Christmas, probably in excess of $6 million initially; with more as Pilot Mountain is developed - and potentially accelerated should China expedite the export ban on tungsten.
A focus on the pre-feasibility study for Desert Scheelite rather than resource expansion, suggesting funding is close.
The largest undeveloped tungsten deposit on US soil, and one of the most hard-working CEOs on AIM.
Easily one of the best places in the world to develop a mine; Nevada - land of the free and home of the drill bit.
Grant funding will make GMET significantly more attractive to major institutional investors (already hinted at in the last institutional raise), as well as JV partners with the big players in the region.
The only caveats to this are the usual ones; there is exploration risk and the assets remain early-stage, and given the success thus far, many are starting to 'fall in love' with the story. Investing is a business relationship, not a personal one - and remember that diversification is King.
But it's hard to overstate the political willpower to develop domestic supplies of critical minerals in the US - and if they want to develop domestic tungsten supply, there is only one candidate.
And if you're going to be invested in junior resource companies, GMET continues to deserve its spot.
- Charles Archer, 22/8/2024