Archived article
Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
A tiny AIM-quoted mining company on 31 October published some of the best exploration results we’ve ever seen for a copper project on the UK stock market.
It’s not a one-off discovery, either. Savannah Resources (SAV:AIM) has been churning out amazing results for some time which gives us confidence there is plenty of high-grade mineralisation across its project in Oman.
Impeccable timing
Savannah hopes to start production late next year. Its timing is impeccable. Investment bank UBS has just turned bullish on the outlook for the copper price, saying there are clear signs that Chinese demand for the metal is improving.
UBS believes the copper market will shift from surplus to deficit in 2017 which theoretically means the metal price should increase in value.
It forecasts $5,732 per tonne for 2018 which should be when Savannah is comfortably producing copper from its Middle East project. That is 18% higher than the current metal price of $4,841 per tonne.
Savannah has interests in two very large exploration blocks in Oman. ‘Block 4’ contains several old copper mines. The most exciting, in our view, is ‘Block 5’ which contains two prospects called Mahab 4 and Maqail South. Both were the subject of the latest drill results which caught our attention – and they will be the first projects it brings into production.
Outstanding metal grades
Mahab 4’s latest results included copper grades between 6% and 10% in multiple holes. Maqail South’s drilling unearthed one assay containing an astonishing 32% copper and 30% zinc, albeit over a short distance. ‘These are some of the highest grades in the world with extraordinary levels of zinc,’ claims Savannah chief executive David Archer.
For those not sure what’s deemed good and bad with copper grades, it is fair to say that 1% is good. Some operating mines have 0.5% copper which is workable if there is significant volume and costs aren’t too high. A deposit with average grade in excess of 2% could be considered excellent.
Mahab 4 currently has 2.1% average grade; Maqail South has 3.8%. Savannah will publish a new resource statement by the end of 2016, confirms Archer.
More news on its way
A resource update on Savannah’s Mozambique mineral sands project is also due in the next few months. Investors should expect a smaller number that previous estimates. Savannah is focused on getting the best returns and is only interested in higher grade areas.
The miner also has lithium interests in Finland, but these are early stage so not central to the investment case. (DC)
Savannah Resources (SAV:AIM) 4p
Stop loss: 2.8p
Market value: £18m
This article is provided by Shares Magazine. Shares publishes information and ideas which are of interest to investors. It does not provide advice in relation to investments or any other financial matters and does not guarantee the accuracy or completeness of the information in this article.
Investors acting on the information in this article do so at their own risk and AJ Bell Media Limited and its staff do not accept liability for losses suffered by investors as a result of their investment decisions. Shares is published by AJ Bell Media Limited part of AJ Bell.