Time for Firering to fire up
“…These are very early days for Firering, but this is a new start up that small cap natural resources investors interested in backing the strategic metals mega trend might want to add to their watchlists…”
Reading the markets, as the present turbulence demonstrates, is never easy. But some longer term trends are clear.
Retooling the world’s economy for the energy transition, for example, is going to require materials: lots of them. Wind and solar power, battery- and fuel-cell-based electric vehicles, hydrogen production, and many other critical components of the emerging green economy will depend upon the ready supply of raw materials like copper and nickel, and a host of more exotic rare earth elements such as lithium, cobalt, tellurium and neodymium.
Securing that supply, which is currently concentrated in China and some of Africa’s most unstable jurisdictions, is going to present significant economic and political challenges. Newly-listed Firering Strategic Minerals (AIM:FRG) is seeking to establish itself as a go-to supplier through the exploration and development of resources prospective for lithium, columbite-tantalite, tantalum and niobium in the Côte d’Ivoire, a West African economy that has grown rapidly over the past decade.
Firering joined AIM in November with a market cap of £11.3m, raising £4m to fund exploration of its flagship Atex Lithium-Tantalum Project. The company believes that Atex, where 2021 grab samples indicated high-grade lithium oxide (up to 4.91pc) and tantalum (up to 1,610 ppm) ‘could be the next major lithium resource in West Africa’. Lithium and columbite-tantalite are crucial components of electric vehicle batteries, and are also used in mobile phones and laptops. Firering’s IPO will finance a two-year exploration programme to prove and develop the resource’s potential. If successful, the company plans to scale up operations through a debt facility of approximately €7,500,000 under negotiation with a Togo based investment bank, and cash flow from near term pilot production of tantalum and niobium, which it forecasts will deliver returns within 18 months.
The IPO also funded the €230,000 acquisition of a 51pc controlling interest in a licence application held by Alliance Minerals Corporation SARL adjacent to Atex. Early-stage due diligence shows Atex’s potential minerals extend into the Alliance licence. Firering has the option to purchase a further 29pc stake for €610,000.
Firering is led by Chief Executive Officer Yuval Cohen, who has a record of managing coltan mining operations in Macedonia, Slovenia, Rwanda, Tanzania and Guinea Bissau; Non-Executive Chairman Youval Rasin a co-founder of palm oil company DekelOil, now known as Dekel Agri-Vision; and Senior Independent Non Executive Director Neil Herbert, chairman of AIM quoted Atlantic Lithium (formerly IronRidge Resources) which has interests in Cote d’Ivoire.
Progress since IPO
Drilling at Atex got underway in November to determine the extent and depth of the resource’s lithium bearing pegmatites – crystalline igneous rocks with a very coarse texture – and to define potential coltan resources. Phase 1 of the programme will involve 4,000 metres of auger drilling and 2,100 metres of diamond drilling to identify prime lithium and coltan targets for resource definition. Phase 2 plans a further 1,500 metres of auger drilling and 4,900 metres of diamond drilling. Initial drilling is being carried out by contractor Royal Mining, which worked on Atlantic Lithium’s projects in Côte d’Ivoire and Ghana.
A few weeks later Firering announced the first regional detailed geological map of Atex, undertaken by consultants SEMS Exploration, which confirmed ‘the presence of a much larger pegmatite field’ than initial estimates. A similar mapping exercise will be completed over the newly acquired Alliance licence area later this year. Earlier this month Firering reported the completion of first phase auger drilling campaign and soil sampling at Atex. Assay results from 1,283 drilling and soil samples to inform future diamond drilling have been forwarded for assaying, with the results expected to be delivered in batches during Q1. The 2,100 metre diamond drill element of the Phase 1 programme, targeting both the resource’s lithium bearing pegmatite veins and tantalum, is scheduled to commence in Q2. Firering is also advancing its near-term tantalum ambitions towards pilot production. The first metallurgical sample is to be dispatched to gravity mining consultants Coremet Services Pty Ltd for metallurgical testing, and a technical flowsheet design of the tantalum pilot plant is expected to be completed during Q2. An order to purchase gravity separators for tantalum production is earmarked for H2.
Urgent demand for lithium
A McKinsey report published earlier this month highlighted the urgency of the strategic metals supply conundrum. The rush of public and private sector net-zero commitments, further stimulated by the election of the Biden administration and the COP26 summit in Glasgow last November, is ‘outpacing the formation of supply chains, market mechanisms, financing models, and other solutions and structures needed to smooth the world’s decarbonisation pathway’. Demand for new lithium mines like those being explored by Firering is particularly pressing: McKinsey suggests supply needs to grow by a factor of seven to meet projected demand. The report notes the significant geographical concentration of known transition metal reserves. Around 40pc of rare earth reserves, for example, are in China, as well as most existing processing and separation capacity.
Figures quoted by Firering state that China currently supplies 45pc of Europe’s tantalum, and Brazil most of Europe’s niobium. In 2020, the European Commission added both tantalum and niobium to its ‘List of Critical Raw Materials’, citing economic importance and supply risk as the key determinants of criticality. As well as aspiring to broaden transition metal supply, Firering has set out a commitment to doing so responsibly, in a sector and continent in which environmental and employment standards have not always been observed. The company says it ‘has agreed on the terms of cooperation with BetterChain towards delivering lithium and columbite-tantalum products from the country, complying with international requirements for due diligence on mineral supply chains’. Columbite-tantalite mined in the Côte d’Ivoire is classified as a ‘conflict free mineral’, in contrast to columbite-tantalite mined in other African countries which have struggled with conflicts and political and legal instability.
Firering’s share price has been stable since IPO, hovering around 13p. There are a few value triggers to look out for in the next few months: results from the auger drilling and soil samples at Atex, progress towards the next phase of drilling scheduled for Q2, and developments regarding tantalum and niobium pilot production. These are very early days for Firering, but this is a new start that small cap natural resources investors interested in backing the strategic metals mega trend might want to add to their watchlists.