By Rubio Toro
The Small Cap With The Big Ideas
I have been investing in AIM companies for a number of years. I’ve been through the highs and the lows many times but most importantly, I have survived. My strategy is mostly long-term investing (rather than trading) and I am drawn to mining exploration companies, looking for future value opportunities. In this article, I provide a snapshot of one of my long-term holds, IronRidge Resources.
IronRidge Resources started life as an iron ore exploration company securing several promising licences in Australia and Gabon. However, it was iron ore’s 2015 rollercoaster ride that forced a major shift in strategy, positioning this junior explorer with a land holding that most majors would envy.
Through 2016 and 2017, IronRidge embarked on an aggressive shopping spree taking its total exploration exposure to over 11,000 square kilometers, comparable to an area just shy of Greater London. Over a 10-day period in 2017, IronRidge bought nine companies and formed six joint ventures in the Ivory Coast! After completing due diligence, the company now sits on 29 prospective gold and lithium licences in Chad, Ghana, Ivory Coast and Australia.
Whilst such a scale of exploration is perfectly normal within the mining community, it is very rare for a small cap company to take on such a huge liability. However, this extraordinary ambition may be explained by IronRidge’s partners, Japanese trading giant Sumitomo Corporation and successful South African miner Assore Limited, both multi-billion-dollar companies who together hold a 40% equity stake and sit on the IronRidge board.
Chairman Nicholas Mather also has previous good form in the junior exploration space. Mr. Mather co-founded Arrow Energy which was eventually sold for $3.5bn and is currently CEO of copper and gold exploration company SolGold which escaped AIM to list on the FTSE250 in October 2017. Certainly not your average AIM board.
However, previous form does not necessarily mean future success. And 41 licences makes IronRidge a very challenging and time-consuming company to research. So let me cut through a huge amount of reading and pick apart a few of their more prominent projects:
- Dorothe (Chad, Central Africa, Gold Exploration)
In 2017, IronRidge bought Tekton Minerals who have been conducting exploration at the Dorothe licence for 4 years. After taking over ten thousand soil and trench samples, the company is now conducting infill trenching and further soil sampling to better define the area for drilling. Both the local geology and historical artisanal workings suggest that gold is at a respectable depth and Tekton has predicted ‘multi-million-ounce deposits’ which could easily be a conservative estimate.
The Dorothe licence is 200 square kilometers (a huge area) and IronRidge is currently targeting two zones, the first around 2km x 2km and the second is spread out over a much wider area. Bearing in mind that the world’s largest open-pit gold mine, Muruntau, is only 3.5km x 2.5km then you can see why drilling results are heavily anticipated. Grades are also pretty respectable. Tekton recorded up to 103g/t whereas more recent samples have yielded up to 8.9g/t.
- Mankessim (Ghana, West Africa, Lithium Exploration)
One of eight prospective lithium licences along the Cape Coast in Ghana, the Mankessim licence contains four distinct targets – Ewoyaa, Abonku, Otsi and Afrwanga. Ewoyaa and Abonku targets have defined hard rock pegmatites from initial trenching and aerial radiometrics whereas the other targets are only defined by aerial radiometrics. A drilling program is planned at Ewoyaa for the first half of 2018 and with trenching grades up to 2.95%, it’s already clear that pegmatites are near-surface and this could be a big factor in project economics due to low strip ratios.
Although Mankessim exploration is slightly further ahead than the other Ghana licences, the recent aerial radiometrics have uncovered much greater potential around Egyasimanku Hill and Apam. Based on these results I would expect to see the company secure a few more licences around the Winneba Town area before the end of 2018. Ghana is the largest gold producer in Africa, very mining-friendly and have some ambitious renewable energy projects which would be complimented by lithium mining.
- Kineta & Kineta North (Ivory Coast, West Africa, Gold Exploration)
IronRidge have one of the largest gold exploration tenures in the Ivory Coast which has a country-wide geology supporting gold mineralisation. Newcrest, Randgold, Newmont, and Centamin are all exploring for gold nearby. Due diligence conducted on each of the 9 licences have yielded potential targets but it’s not the size of licences or the impressive 46.4g/t grade that is noticeable about Kineta & Kineta North – it’s the 12km ‘strike corridor’ with good grades at either end and in the middle. Eight artisanal mining sites are also scattered along the 12km length. Exploration is ongoing and the company currently has up to 100 employees working on projects in the Ivory Coast.
As of December 2017, IronRidge had a total of £7m cash. In June 2017 the company raised £8.25m via existing investors (Assore, Sumitomo and DGR Global). The CEO and Chairman also took shares – this was all done at 35p. All of the Tekton shareholders took shares in IronRidge as full payment for the company.
Overall, the future looks promising for this self-styled ‘emerging giant’. Whether they can live up to this depends entirely on what’s in the ground and, as they say in mining exploration, ‘the drill never lies’. Always do your own research!
Disclosure: the author holds shares in IronRidge Resources.
