Beowulf Mining: Q&A with the management

We recently started following resource developer Beowulf Mining (LON:BEM) who have a wide range of exploration projects in Sweden, though their main focus is currently on their two significant Iron Ore projects, Ruoutevare & Kallak in the northern part of the country. Following a £1m fundraising in March the company is now accelerating their activities and this has lead to a growing level of investor interest. Last week the company  announced to the market that drilling is to commence to further define the resource at Kallak. We contacted Executive Chairman Clive Sinclair-Poulton and we are delighted that he and Technical Director Jan-Ola Larsson agreed to participate in this Q&A session with investors and readers of Mining Maven, to expand on their plans for the Company going forward:

General - Corporate
 
MM: The recent fundraising secured £1million for the company. How will this money be spent and how long are the funds anticipated to last?

CSP: You can see the immediate impact of the funding by the fact that money was raised in March, we received it at the end of March and drilling started at Kallak in April.

The funds will allow us to drill approximately 3,500 metres at Kallak and around 5,000 metres at Ruoutevare. This will allow us to get JORC classification at Kallak and improve our JORC classification at Ruoutevare. We want, in a year’s time, to have approximately doubled our iron-ore tonnage. The funds raised will allow us to achieve this tonnage along with the analytical work and associated costs related to this.
 
MM:Are you satisfied with the current portfolio of assets or are you continuing to look for new additions to the portfolio?  If so, how do you identify new projects and are you solely limiting any search to properties within Sweden?
 
JO L: The assets we have, located in northern Sweden, are all of excellent status and of high potential to host major discoveries in prospective geological terrain. But we are always looking for new projects when they are identified. It is a process of knowing the regions well with geology and mineral prospects previously identified mostly by the Geological Survey of Sweden (SGU). Then we need to identify the prospects which are free for staking. There is an ongoing rush in Sweden to acquire licences and it is tough to acquire quality prospects.

In this case, selecting target areas in Sweden, Beowulf has advantages on foreign competitors as, during the 1990s, I was a department head with the SGU and was for 4 years also in charge of organising and selling and all government exploration data information available in Sweden (reports, maps etc) at the Mineral Information Office of SGU at Malå. Before that I worked for 10 years as regional exploration head in northern Sweden for the exploration arm of SGU. So I know both Northern Sweden and the mining industry, regulations and infrastructure extremely well.

CSP: I am keen that Beowulf obtains a wide ranging portfolio of commercially attractive resources. This would ensure that the company is not a hostage to just one resource. While we have a good mix at present Jan has a remit to look out for any new licences that meet our requirements be it with resources we already have or new ones. This reduces our resource risk while at the same time extending the depth and breadth of what we have.

MM: Evidently you feel the share price undervalues the assets you have created within Beowulf; however, do you have any estimate of market capitalisation that would more fully reflect the current status of your entire portfolio, include iron ore and other assets?
 
CSP: At our last Presentation at Minesite (click here to view) you can see that we compare ourselves with two iron ore companies operating in North Norway (Northern Iron) and North Sweden (Northland Resources).

Admittedly both are further developed than us but the difference in how the market values these two companies in comparison with us is striking.

2010

The figures in the first table show the current position.

Note that our grades are higher and that when in production Kallak or Ruoutevare will produce more tonnage each year. If we reach our tonnage assumptions then the figures dramatically change:

2011

 

So just on peer comparisons we feel that our valuation should increase. Further this, however, the broker's Alexander David Securities have recently produced a note on us (click here to view). Part of this review and analysis was calculating a Net Present Value (“NPV”) on the two iron ore projects (page 8). They used the high market value for iron ore employed by RMG in their recent report (copy on website). Using very conservative assumptions they have an NPV of the combined assets of US$131 million on current tonnage and US$201 million if we meet our tonnage assumptions. This starts to put us in the same region valuation-wise as currently seen with Northern Iron and Northland. The recent climb in iron ore prices will benefit us, the RMG study and the NPV calculations were done on the basis of US$139 per tonne, some US$20 lower than current market prices. These comparisons and NPV's, of course, give zero value to our copper JV or our gold, uranium and molybdenum assets.

Ruoutevare & Kallak Iron Ore

MM:There has been some discussion surrounding the environmental issues of producing iron ore at Ruoutevare and Kallak. How comfortable is the company that the necessary environmental approvals will be secured and are there any examples of other companies undertaking similar activities in the area that have received the necessary permits?

JO L: We are well aware of the environmental issues and these issues are of high priority for our forthcoming developments of both deposits. With our present information and relations with important decision makers like the local boards of administration we feel relatively comfortable all these issues can be managed. There are highly qualified consulting groups available in Sweden for these issues. All rules are set in the Environmental Code of Sweden. Details can be found on the Beowulf´s website in the recently registered report of the RMG conceptual study of Ruoutevare and Kallak deposits. It is a relatively costly and time consuming process for any mining company operating in Sweden but we know that it is achievable from personal experiences and from the activities of other mining groups in northern Sweden like Northland Resources (Iron Ore mine) and Lapland Gold (Gold mine). For a holder of an exploration permit to move forward to obtain the required environmental permits/licenses for a mining operation are in essence two sub-processes. First is the process to get an approval for an exploitation concession for which a first environmental approval is a part (chapters 3–4 of the Environmental Code). Thereafter comes the process to get a final environmental permit setting out the conditions and limits for the emissions to land, water and air and including noise levels etc. (chapter 9 of the Environmental Code).

CSP: It is important to stress that the recent developments with both Northlands and LKAB, where permission was granted to open new mines, shows that gaining such permits is possible.

MM: Is it your intention to take the Iron Ore projects to production or is it more likely that you will look to JV or sell the projects with/to third parties?

CSP: We are looking at all the options open to us. Our current strategy is to prove up the quality and quantity of the assets we have. We want to confirm the high quality commercial grades we have so that we can discuss with investors, producers, smelters and all participants in the iron ore/steel industry and community the value we have. At the same time we want to confirm the quantity of this ore so that we can show the volumes we have. When we have this we can then value the projects and then decide if these assets will improve in value if we take them a stage further or look to divestment. Whatever the route than can benefit the company is the one we shall seek to follow.

MM: How are your discussions with your potential Chinese partners developing, particularly in respect of the letter of intent announced in your July 2009 RNS?

CSP: I had been waiting to receive the RMG report before revisiting China. We have met with potential Chinese allies twice, once in Sweden and once in a trip to China. I wanted to be able to have full documentary and independent proof of what we have. Too many exploration companies work upon hopes, wishes and assumptions.By having independent third-party studies and analysis from MINPRO and RMG we are able to cite external experts on what we have. These are powerful tools in any discussions. Now that we have them in our possession then we can continue discussions with the Chinese we met in 2009 and others and to start discussions with new targets.

MM: In addition to the Chinese strategic interests mentioned above, have you been approached by third parties or do you anticipate third party interest in the Iron Ore properties in the future? 

CSP: We have been contacted on a regular basis. The problem we had until recently was how to be able to value what we have. We now have this. We also want to increase the value by proving up what we have. In addition to Asia the EU has to import iron ore (See Insite on our website) so there is great potential for us there.

Ballek – Gold, Copper and Uranium

MM: Could you outline, in simple terms, the assets you are developing at Ballek?

JO L: The Ballek project is a Joint Venture project between Beowulf Mining and the Australian-listed Energy Ventures Ltd (EVE).  It comprises of four exploration permits covering 11 copper prospects over a total area of 109.9km2, located in the Norrbotten region of Northern Sweden. In September 2008 Beowulf reported a maiden Inferred Resource estimate, under the JORC code reporting standard, for the Lulepotten copper-gold deposit on the project. This represented the first stage review of known copper resources in the Ballek area following the diamond drilling programme completed by our former joint venture partner, Agricola, earlier in 2008, which also intersected copper sulphide mineralisation.The Ballek licences were initially selected as possibly hosting a large size IOCG (Fe-oxide, copper, gold) deposit. The chairman of EVE and the EVE project manager for Ballek both worked and were in the discovery team of the Olympic Dam project. It is the world´s fourth largest copper deposit and presently owned by BHP. The estimate for the Lulepotten deposit outlined a total JORC Inferred Resource of 5.4 million tonnes, grading 0.8% Cu and 0.3g/t Au, representing a total of 43,000 tonnes of contained copper metal and 52,000 ounces of contained gold using a cut-off value of 0.3% for copper. Initial metallurgical tests on the Lulepotten deposit undertaken by MINPRO, Sweden in July 2009 showed that a high grade copper concentrate could be produced containing 32.4% of copper, 320 g/t of silver and 5.6 g/t of gold. This is much in the upper brackets of what the market is wanting. Energy Ventures has recently been completing a 1600 m drilling programme at Ballek to test high priority targets on potential extensions of the Lulepotten deposit. First results of this drilling are anticipated by the end of May.

CSP: We also believe that the copper we see at Ballek could also continue into the adjoining Geddaur licence that we acquired in 2009. If so EVE, with their knowledge of the local geology and terrain, could be ideal future partners for this licence.

MM: Please explain what the advantages are of the JV with Energy Ventures re Ballek and how you see this JV developing in the future?

CSP: Beowulf traditionally had a business model that was based on the company sourcing the Licences and then getting a partner to take the commercial risk in proving up the asset and “earning-in” to gain a percentage of the project. With EVE we are able to continue with this model as they have the resources, people and financial, to develop the asset along with experience of copper related projects. By them concentrating on a resource they have considerable expertise with it allows us to concentrate on the iron ore projects. In this way a small company can fast track two projects, two resources in such a way that the company gets speedier results and faster upgrades in assets.

MM: When are the drilling results from Ballek expected and what aspects of the Ballek property are these expected to encompass?

JO L: Energy Ventures has recently been completing a 1600 m drilling programme at Ballek to test high priority targets on potential extensions of the Lulepotten deposit. First results of this drilling are anticipated by the end of May.

Munka – Molybdenum

MM: Why did you decide to branch into Molybdenum and how does this complement the existing asset portfolio?

JO L: The company´s interests for molybdenum (”Mo”) have grown with the company´s development of iron ores. The potential clients of our iron ores are also directly involved with the steel industry. High quality steel is today produced with an increasing amount of molybdenum as an alloy metal. All steel makers in Sweden and Europe have to use imported Mo. We knew of the potentially best areas for Mo in Sweden. So it is only natural we have been watching the exploration licence status of Sweden, issued monthly by the Mining Commissioner. I follow this every month and I noticed that the largest known molybdenum deposit, Munka, had became available last year and, after talking with Clive, immediately staked the claim for Beowulf. The Munka deposit, confirmed by historic drilling, extends over 800m in length with parallel mineralised lenses of varying width in excess of 20 m. Between 1973 and 1977, a total of 67 holes were drilled for approximately 10,000 metres. Based on these historic drilling results, the SGU estimated resources up to 100m depth to be 1.7 million tonnes at 0.156% Mo. This historic estimate does not comply with current JORC or 43-101 international standards.

At the estimated tonnage, the Munka deposit is the largest molybdenum deposit in Sweden but available data indicates that the deposit may be significantly larger and with very high grade additional deposits indicated in the vicinity.

CSP: I think this shows our strength in Sweden. Through Jan's in-depth knowledge we can see what is available and, if it is commercially viable, we add it to our portfolio.
 
MM: Can you explain how you intend to take the Molybdenum project forward?

JOL: Today Beowulf has reviewed all of the available data on the Munka deposit registered at the SGU’s offices at Malå, parts of which have not previously been reviewed.  All drill cores presently stored at the SGU’s offices are being rechecked with the analysis subject to Beowulf’s control.  With additional control studies in the field and some further limited drilling, Beowulf anticipates to rapidly achieve a JORC compliant resource estimate.

CSP: Munka is an asset that we know has value but we are not concentrating on as we are managing our own drilling campaign for the iron ore and our involvement with copper at Ballek. This means that it is like the gold we have at Grundtrask and the uranium we have at Geddaur: assets we have and that we shall develop.

and finally...

MM: What news flow can investors expect over the next 6-12 months?

CSP: As we have concurrent works taking place on copper and iron ore there will be two tracks of news flow. One for Ballek where we shall have the drilling results out soon and then further developments. Then we have the three month iron ore drilling campaign which will have its own momentum as Releases are made on that, the analysis of the cores and the road to JORC classification and JORC upgrading. We have recently upgraded our website so that it can act as a platform for Releases, news and views. There may also be news coming from the other assets we have, new ones we may acquire or other commercial activities that are beneficial to the company.We are confident that there will be consistent stream of news, all of which we expect to be positive. We shall release as much news as possible while at the same time go out and meet as many investors and future investors as possible in the UK, Sweden and elsewhere. To put it into perspective we have already booked a place for the April 2011 Minesite presentations.