Ishareinfo.tv recently carried out a series of interviews with Strategic Natural Resources (Epic: SNRP.L) who are the majority shareholder (74%) in the Elitheni mine (www.elitheni.co.za) in the Eastern Cape in South Africa. These interviews were with recently appointed Deputy Chairman, Don Nicolson (http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11254736) and SNR’s CEO, David Nel.
Don Nicolson has nearly 30 years’ experience in the energy sector, 26 of those with BP where he ran large scale oil businesses for BP in Canada, Alaska, Houston Texas and also in the North Sea. In the latter years he worked in corporate roles and was chief of staff to Tony Hayward. He then became CEO at Scottish Resources Group, the UK’s largest open cast mining group.
Don talks about having run production businesses before which is the stage Strategic is now at and that in working with Strategic he see’s big upside potential. Don also tells us how very impressed he is with the company quoting ‘a great resource base of 266 million tonnes on just 6% of the mining area, great routes to market, two ports waiting for new business and how important Strategic is to the Eastern Cape of South Africa’
The Eastern Cape is the second largest province in South Africa and also the second poorest, but the Elitheni project is one of the top three projects in the Eastern Cape according to government officials. The company is very fortunate to have very strong provincial and national government support.
Furthermore, Don goes on to explain how undervalued the company is in share price terms based on the size of resources, being weeks away from revenue and the huge upside potential in their prospecting and mining right’s, as well as the potential for a power plant at the mine in the coming years. He tells us that the company has a potential one billion tonnes of coal to mine and that his role will primarily be focused in the city of London with institutional investors and private client brokers as well as private investors to sell the SNR story.
In summary, Don believes that SNR is a really compelling investment
David Nel, CEO openly discusses the broker reports that have been released on the company this year by Allenby Capital (www.allenbycapital.com) with inclusions from Edison Research and also SP Angel www.spangel.co.uk) and takes the time to discuss the business in great detail.
The company has mining rights on its phases 1 & 2 and prospecting rights on its phases 3, 4 and 5. However, due to the nature of drilling that has taken place, Strategic will not need to apply for new mining rights on phases 3 and 4, but simply expand their mining rights via an amendment on phases 1 and 2 saving both time and money.
Phase 5 is a significant area requiring a drilling programme and then moving to a pre-feasibility study, hopefully to be completed in 2013 which will then allow the company to consider its options on this vast area of 120,000 hectares. These options could include developing the area with partners.
The company is well funded and funding requirements have been reduced substantially from £25-£30 million down to £18 - £20 million. The company has also saved another £5 million in capital requirements by leasing containers from Thelo Rolling Stock Leasing (PTY) Limited rather than purchasing them. (http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11369888) The company is also currently in receipt of term sheets for longer term debt finance which requires reserves status on their coal deposits to be able to move these finance opportunities forward. A reserves statement via RNS is due soon (http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11374323)
SP Angel’s report of the 10th September 2012 ascribed a valuation of 76p a share (http://www.spangelcf.co.uk/media/pdf/SNRP%20Research%20Final%2010%20September%202012.pdf) and this valuation is pre reserves status. Currently the share price as at 20/11/2012 is 23.75p
David goes on to talk about developing an entire coal industry and an entire energy complex with the vast area of phase 5 to add to the first 4 phases through exports and the erection of a power plant at the mine
Rail improvements anticipated in 2013 will see increased capacity in sales which it is hoped will be ramped up in 2014. SNR is aware that companies, possibly majors are watching what the company is doing and he recognises that SNR is currently significantly undervalued. There is great demand for Elitheni’s coal and it is the only coal mine in South Africa, with dedicated port and rail services. David goes on to explain that the company is not averse to being ‘courted’, but it wants the timing to be correct and to see full value achieved.
David talks about the political climate in South Africa and his close working relationship with some very politically connected people and politicians. He discusses his confidence in the government and SNR having a unique political advantage. There is 98% unemployment in the area and recently 4,000 people applied for 50 positions with the company. Whilst not immune to the political climate, he feels it does offer protection to SNR and the Elitheni mine.
Finally, David talks about the forward profitability of the business with an Anthracite coal product in addition to Thermal coal, the ‘middling’s’ product that is produced once the Anthracite is washed so that it can be sold as Thermal coal, but without any associated production costs and then finally the discard that is subsequently left which will be stockpiled and used in the anticipated power plant. The net result of this for SNR is that from the mine coal produced, there is little or no waste which offers the potential for a very, very profitable business.
For more information, please go to the company’s website. www.snrplc.co.uk
Filed Under: Energy,
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