Mining exploration as a business is in recession at the moment.
No-one really doubts that. The Chinese recovery is moving in fits and starts. Inflation is ravaging western economies and consumer spending. Realisation is only just beginning to dawn about the debt hangover from Covid.
And yet, there are always exceptions.
In mining exploration, the recession only counts if you are treading water.
Make a major discovery, and the world can still look like a place of optimism and hope.
When Empire listed in 2021 its focus was on a gold project called Central Menzies
And a major discovery is why, against the trend of the sector, shares in Empire Metals have risen in value by more than four times over the past 12 months.
The real uplift came in July of this year, when the company announced that its Pitfield titanium discovery in Australia was likely mineralised to a high grade across its entire 40 kilometre extent.
That’s a big discovery in anyone’s book, but although the gains thus far look impressive, there could be plenty more to come.
And for several reasons.
The first thing to note is that Empire, as with all junior explorers started from a relatively low base.
Back in 2021, when it first listed, the focus was on a gold project called Central Menzies. But Central Menzies didn’t quite make the grade, and there was a switch in emphasis to two other gold projects.
Pitfield only came into the company in April of 2022, and although it looked promising from the get-go, the degree to which it would come to underpin the overall value of the company wasn’t yet clear.
And although the July 2023 announcement gave some clue as to the direction of travel, a lot of unrealised potential remains.
Because, even with the triple digit percentage share price gains that Empire has now booked, the market capitalisation remains a relatively modest £23mln (4.8p).
For a company with a high-grade titanium deposit that stretches for 40 kilometres in length and laterally by 8 kilometres, and which is located in one of the world’s safest and most easily worked jurisdictions, that valuation looks as though it still offers considerable upside.
Now, as we mentioned, there’s a recession in junior exploration at the moment, and that’s one reason for the market’s apparent caution.
Another is that for all the sound and fury about geographical extent and grade, there’s still a great deal of hard physical work to be done to get Pitfield into a position where anyone will be able to mine it.
Most of the information thus far has been gleaned by combining new drill data with historic data. That historic data is likely to be accurate, but will need confirmation in due course.
Accordingly, more drilling is planned, and some of this work will use a diamond drillbit which will provide much more detailed information.
Well and good – as at mid-June 2023 the company had £1.8mln on the balance sheet, and can easily afford to get into the field and go to work. But at some point there will come a need for more funding, and shareholders could well be asked to stump up.
That’s won’t necessarily be a hurdle, given the rising share price, but it does add a cautionary flavour to any early overexuberance.
It’s true, as Empire itself has said, that Pitfield has the potential to be one of the largest primary titanium mineral resources discovered globally. It’s also true more money will be needed to prove it.
Even so, given the sheer potential – the size and scale of that lateral footprint – there is a clear path forward for value accretion.
We are no longer wildcatting here. What we are talking about is the methodical building up of an extremely valuable resource that could end up being worth countless millions and millions of dollars.
It’s not possible to put any round number yet on how much it might be worth, but it is worth noting that titanium is on the “critical minerals” list of many countries, including the USA, Japan and members of the European Union.
As the world continues to fret about the emergence of new trading blocs the discovery and development of a major supply of titanium safe and secure inside the western sphere of influence is likely to provide satisfaction for politicians as well as investors.
All other things being equal, the project is likely to be supported when it comes to permitting.
In the more immediate term, though, watch for news on the imminent drilling, and for positive momentum if the company’s early conclusions start to be confirmed by a newer flow of hard data.
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