BlueJay Mining Research Report from SP Angel “Valuation upgrade on expansion and higher pricing”

  • BlueJay are making good progress towards the start of production next year.
  • Valuation: we are raising our NPV valuation to 37p/s today in response to the high grade and purity levels of BlueJay’s ilmenite concentrate product.
  • Production: While BlueJay plans to start production next year we assume sales  start in 2020.  We escalate the mining rate from 1mtpa in 2020 to 2mt in 2021,  3mt in 2022.  We then see a further jump in production to 5.5mtpa from 2026.
  • Capex: we assume a $60m capital cost to start followed by a further $100m for the second phase expansion.  We assume a 10% discount rate by way of standardisation. The project gives a 43% IRR on these metrics.
  • Pricing: We assume BlueJay could receive $200/t for its product, up from $180/t previously though management reckon they will get higher price levels.
  • Upgrading: we have also assumed the upgrading of material at the first sieve to 18.5%.  This has the double benefit of raising the input feedstock grade reducing costs and improving throughput rates.
  • Feasibility Study: A number of consultants are working on more detailed plans for the process plant and related infrastructure.
  • Costs: we assume relatively high mining, processing and loading costs for a dredging operation given its location in the north of Greenland.  These costs should come down as the operation proves itself.  We assume $3.25/t for mining, $5.0/t for processing and $4.5/t for loading. The loading cost is particularly high given that it should simply require a longish conveyor belt to reach a ship parked in the Fjord, though it should cover the use of a tug boat to manage passing ice bergs.
  • Offtake: management are in Hong Kong presenting at the ‘TZMI’ Titanium and Zircon Congress for mineral sands producers. We expect discussions to continue on offtake with Chinese producers and assume 60% of BlueJay’s Ilmenite concentrate may be sold in China with the rest to be sold in the West.
  • TZMI conference: BlueJay presented at the major Titanium industry ‘TZMI’ conference in Hong Kong yesterday.
  • Price view: Feedback from the conference is that titanium feedstock supply is much tighter than previously thought indicating that prices are expected to rise strongly over the next three years with a major supply constraint 18 months out.
  • MSCI Index:  BlueJay are to be included in the MSCI World Micro Caps, effective 30 November 2017.

SP Angel Conclusion: “BlueJay is fortunate to have discovered the World’s largest, known, high-grade, ilmenite mineral resource. The sheer scale and consistency of the high-grade mineralisation is extraordinary and while the location in Greenland presents some challenges these appear relatively easy to overcome from an engineering and production perspective.”

Here is the full note: Bluejay_Mining_Valuation_Upgrade_flash_note.docx

*SP Angel act as nomad and broker to BlueJay Mining.  An SP Angel mining analyst has visited the Dundas (formerly Pituffik) ilmenite sands project in Greenland.

 

 

DISCLAIMER

This note has been issued by SP Angel Corporate Finance LLP (“SP Angel”) in order to promote its investment services.

This information is a marketing communication for the purpose of the European Markets in Financial Instruments Directive (MiFID) and FCA’s Rules. It has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research.

This document is not based upon detailed analysis by SP Angel of any market; issuer or security named herein and does not constitute a formal research recommendation, either expressly or otherwise.

The value of investments contained herein may go up or down. Where investment is made in currencies other than the base currency of the investment, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Securities issued in emerging markets are typically subject to greater volatility and risk of loss.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. This information is for the sole use of Eligible Counterparties and Professional Customers only and is not intended for Retail Clients, as defined by the rules of the Financial Conduct Authority (“FCA”) and  subject to SP Angel’s Terms of Business as published or communicated to clients from time to time.

It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. This document should not to be relied upon as authoritative or taken in substitution for the exercise of you own commercial judgment. SP Angel is not responsible for any errors, omissions or for the results obtained from the use of the information in this document.

This document has been prepared on the basis of economic data, trading patterns, actual market news and events, and is only valid on the date of publication. SP Angel does not make any guarantee, representation or warranty, (either expressly or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein. This document has been prepared by the author based upon information sources believed to be reliable and prepared in good faith.

SP Angel, its partners, officers and or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SP Angel Corporate Finance LLP is a company registered in England and Wales with company number OC317049 and whose registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SP Angel Corporate Finance LLP  is authorised and regulated by the Financial Conduct Authority whose address is 25, The North Colonnade, Canary Wharf, London E14 5HS and is a Member of the London Stock Exchange plc.

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