Regency Mines Has Plenty Of Balance Sheet Strength To Support Its Aspirations In Sudan, Papua New Guinea, And Australia
By Alastair Ford
Andrew Bell pulls no punches about the Regency Mines share price when Minesite rings him up for a chat.
“It has underperformed this year”, he says matter-of-factly, before adding a reasonable enough qualifier: “the whole sector’s obviously bad”.
No doubt about that, with the gold price volatile, iron ore forecasts being trimmed, base metals weakening, and the funding environment in the junior equities space extremely depressed.
But however that may be, Andrew’s still of the clear view that Regency in particular offers value at these levels, and he makes a simple enough case to back up this view.
“The market capitalisation is just under £3 million”, he says. “We have listed investments of £1.5 million. And we have £2.5 million-plus in Direct Nickel.”
So, a simple enough proposition: £4 million in investments to support a £3 million market capitalisation, with all the company’s other licences and interests thrown in for free. But given that straightforward analysis, much then hangs on Direct Nickel and its future prospects.
UK investors may not be overly familiar with Direct Nickel, which could end up revolutionising the processes whereby nickel metal is extracted from saprolite and limonite ores with its proprietary hydrometallurgical technology.
But anyone who attended our Minesite forum back in March of 2012 received a comprehensive enough picture from Russell Debney, Direct Nickel’s chief executive, who presented in conjunction with Andrew Bell.
That presentation is still available here, and provides a pretty good grounding as to the opportunity and the potential for the future.
Much has happened since then, of course. Direct Nickel has gained further financial support from Australia’s prestigious scientific body, the Commonwealth Scientific and Industrial Research Organisation.
But more to the point, it’s now commissioned a test plant capable of treating a tonne a day of laterite feed, and is now beginning to release the results of the first phase of the testing process into the market. The latest update, issued on April 23rd 2013, reported that after three months of initial tests the acid recovery circuit is performing to design, and that the company is on track to complete the overall test plant programme in 2013 as planned.
That’s good news for Regency on two levels. One, the commercialisation of the Direct Nickel process creeps nearer, and the likelihood that Direct Nickel itself will be able to list on the ASX looms ever larger, potentially allowing Regency an easy exit route, should one be needed.
Secondly, and on an even longer-term view, the thinking is that Direct Nickel’s hydrometallurgical process can be applied to ore from Regency’s Mambare nickel laterite project in Papua New Guinea, which holds at the last count, more than 162 million tonnes grading 0.94% nickel and 0.09% cobalt.
This project is, says Andrew, “absolutely enormous”, and he’s fairly clear that ultimately Regency will need a partner to help with development. Success with the Direct Nickel process will go a long way towards demonstrating the economics at Mambare, however, and after the latest release from Direct Nickel, Andrew was quick to put out a press release of his own, in which he expressed view that the latest results were “very promising”, and that the Direct Nickel process could end up being “a disruptive technology for the nickel industry”.
It’ll be some time yet though before Direct Nickel commercialises its product, and Andrew Bell is fully aware that investors need excitement in the short-term if he’s to keep them interested. That’s why he’s now taken Regency into a new area of operations, the Sudan, where a few intrepid London-based operators, including Mark Parker, late of African Eagle and our good friends at Toro Gold, are already nosing around, but where no-one as yet has made a really big splash.
But Regency is moving fast. “We’ve already looked at and eliminated a number of areas”, says Andrew. “It’s very cheap to do that with a hand-held XRF. But the potential for early stage discoveries is enormous and doing that kind of thing doesn’t cost very much.”
Interestingly though, Regency is at least for the time being focussing on phosphate and gypsum, which Andrew argues remain at attractive points in their relative cycles, unlike most of the precious and base metals which are many years into an upswing and are now encountering significant volatility.
“We think that the outlook for agrominerals is good”, he says. “It’s still a growing and important story. The supply is less than the demand, and there is huge interest in the Sudan.”
So the attention will now shift to the Jebel Abyed property, the boundaries of which were recently extended by Regency in response to work already undertaken this year. “The next news from Regency will be an announcement that people are going out at the end of the month”, says Andrew.
But before anyone objects that the market is hardly likely to support big outlays on early stage exploration at the current time, it’s worth just noting that movement in Sudan is surprisingly easy, and that the overall cost of the next pass at the exploration ground shouldn’t amount to more than £30,000 or so.
Longer-term, Andrew talks of the potential of bringing in a partner to help move the Sudanese projects along, and that seems a realistic enough proposition given that he’s had plenty of experience in bringing bigger companies to the table with his other vehicle, Red Rock Resources.
There, Brian Gilbertson no less, took a stake in some iron ore and manganese assets that Red Rock held in Australia in a transaction that also involved Jupiter Mines. And it’s in Australia too that Regency’s other key asset is located, also in an area that’s more than likely to attract in a major in due course – the famous Fraser Range where Sirius has recently discovered nickel in a big, big way.
“We are in the Fraser Range right next door to Sirius”, says Andrew. “Sirius has become a billion dollar company from nothing and we’re right next door.” That success represents a clear opportunity for Regency to monetise its own assets, and accordingly the key licenses are going into a local company, ASX-listed Ram Resources, once A$1.5 million is raised to support further exploration work.
“Our aim”, says Andrew, “is not that this should be a financial burden on Regency shareholders, but rather that it should be a source of revenue”. After all, Andrew runs a fairly tight ship at Regency and isn’t keen on parting with the company’s money unless it’s absolutely necessary. At the moment there’s around £300,000 to £400,000 in the company, with the remains of an £800,000 facility also available.
And as far as future funding is concerned, investors ought not to be too worried about dilution, especially at this price. “We aim to sell off one or two of our peripheral investments, including the listed ones”, says Andrew. These include stakes in Red Rock, Oracle, Alba, and Ram Resources. “We have people approaching us for the Direct Nickel stake at the price of the last financing, but we’d only sell a bit of it”, he adds.
So money ought not to be an issue in the immediate term. But will there be further deals? Well, Andrew’s always got an eye for a bargain, so never say never. “At the bottom of the market, you should be using undervalued stock to get underpriced assets”, he says. So watch this space.
http://minesite.com/news/regency-mines-has-plenty-of-balance-sheet-strength-to-support-its-aspirations-in-sudan-papua-new-guinea-and-australia