Copper | EMED Mining - Another One To Have A Look At.

3rd Apr '09 by p3dr036

30 comments 5214 reads

EMED is a mining company which has two main areas of interest; copper and gold, listed on AIM. Its current capitalisation is £14.8 million at a share price of 6p. This, in my view, undervalues the company considerably, particularly when one considers the JORC-standard gold resource already discovered in Slovakia. EMED’s current share price values this gold at about £13/oz!!

Copper: EMED acquired the Rio Tinto copper mine in Spain in 2007, via its Spanish subsidiary EMED Tartessus. This mine was once the largest copper mine in the world. It was closed some years ago when the world copper price was less that US$ 1.00/lb which was below the cost of production. EMED is going through the process of acquiring the necessary permits to re-open the mine and a positive decision is awaited from the Spanish Authorities, probably later this year. EMED has been going step by step through the permitting process and is confident of eventual success. There is a JORC-standard resource of 940,000 tonnes and a reserve of 607,000 tonnes of copper. The mine has the potential to generate cash flow of some £23-£33 million per year!. [source - EMED presentation to shareholders on 23-03-09]

Gold: EMED owns 100% of the Detva Gold Project in Slovakia where they have found a JORC-standard resource of 1.1 million ozs of gold at Biely Vrch. Four more prospects will be drilled in the coming year. [source - above presentation]

The presentation is on EMED’s website: www.emed-mining.com

I feel that an investment at today’s share price will turn out to be a resounding success. I’d be interested in hearing what others think of the company.

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EMED Mining Managing Director, Mr Harry Anagnostaras-Adams said
"The world demand for copper continues to increase and Spain has, in recent times, granted
operating permits to more metal mines than anywhere else in Europe. Europe now
has an official policy to become more self-sufficient in metal production.
The Rio Tinto Mine is the largest known copper deposit in Spain and getting itback into operation is
expected to be relatively quick and low risk. The restart of the Rio Tinto Mine would make a significant
contribution to the local economy over a long period of time. The first step has always been to clean up
its ownership and lay out awell-founded improvement and modernisation plan. Unfortunately, this has
taken us longer than we anticipated. This is now behind us and we are now activating the completion
and submission of all remaining regulatory documentation on detailed operating and rehabilitation
plans. We want all documents to be submitted by the end of Q1-2010 so we can stick to our
timetable for commissioning to start at the end of 2010 and production to settle down in 2011.

p3dr036

8th Apr '09

You are probably being wise. But I have already taken the plunge, in that I've been in [and out and back in] to EMED since 2007. So I've already made my bet!!

There's interesting news today. An article in a local newspaper "Huelva Informacion" quotes Sra Manuela de Paz as being more in favour of the mine re-opening than before. See http://www.huelvainformacion.es/article/provincia/395021/paz/insiste/emed/quotse/puede/abrirquot.html

She heads an important committee of the Junta for Innovation, Science, and Business. In the past she was negative towards the re-openng on environmental grounds. She now seems much more positive towards the company and the re-opening of the mine.

But issues still remain

Gradders73

My Spanish isn't up to that task, I'm afraid. The environmental issues are always a bit of an overhang with these sorts of open-cast mines. I have more experience of this in the oil sector, and what has happened there is that wells with several years of supply left are moved to care and maintenance specifically to avoid the costs of clean-up for which they are are contractually obligated to do once the reserve is exhausted. You find smaller companies buying out mature licenses and the major cost factor is the expected clean-up costs. With open-cast copper mining, the costs are generally higher and in this case you are open to the vicissitudes of local Spanish politics (like may home owners in Marbella learned to their cost), so if things turned nasty, you'd probably find the gold assets vanishing out from the hold co.

I am not trying to be overly negative, just thinking about what could go wrong.

The two big worries in the area are:

1. Employment: The RT mine was closed by its then owners some 8 years ago [reason: Cu market price below their production cost]. Everyone then employed lost their jobs and the owners [who by then were the local miner's Union ] was stuck in between a rock [!] and a hard place. Andalucia has the highest unemployed levels in Spain.

2. The Environment: Mining has been carried on in this part of Spain since Roman times and there is a great deal of heavy metal pollution in the area. Some years back there was a spillage from a tailings dam [not, I believe at the RT Mine itself]. This caused more pollution and the environmental lobby is determined that it should not happen again.

So we have pressure both on EMED and on the Environmentalists to provide a solution.

Murakami

9th Apr '09

As noted by p3dr036, the latest Quarterly update is now available: http://www.stockopedia.com/news/announcement/EMED/090407emed2400q.htm.

Plus there's some commentary here: http://proactiveinvestors.co.uk/companies/news/5124/emed-mining-still-targeting-2010-start-up-of-rio-tinto-spain-5124.html

20th Apr '09

EMED have put out a "Mining Team Update" which has a number of translations of recent articles and comments by local leaders, including the fearsome Manuela de Paz, of the local junta. Quote:Ms. De Paz is Delegate of the Government in Huelva for Industry & Mines. She is the person that has the main sign-offs for a mining project in the región. (Excerpts) "Delegada Manuela De Paz assures that the project is going "in the good direction". She explained how the project presented "in hard-copy", has been withdrawn to be improved, and that things are going in the very good direction". This way she reminded that ET presented in 2008 the first stage of the project, related to the applica-tion for mineral rights. "In August, we asked them for more information, and the complete project was presented in November. We understood that this one needed more work so the company decided in January to stop the procedure so they can work it out without the pressure of the deadlines that administrative proceedings require."

Other comments from the Head of the Local Chamber of Commerce [FOE], Sr Anionio Ponce; the Head of the Local Socialist Party, Sr Mario Jimenez, and the Head of the local UGT Union, Sr Luciano Gomez, were all very supportive of the re-opening of the Rio Tinto Mine.

I get regular e-mails from EMED and this .pdf file was sent to me recently. However it is not yet on the EMED website, but will be there in a few days I'm sure.

Betasurfer

11th May '09

p3dr036, what's your take on today's results? Shares up 7% - seems quite encouraging... Highlights:

Now own 100% of Rio Tinto copper mine and planning to bring back into production in 2010.
In Slovakia, work progressing as planned and an initial mineral resource totaling 1.1m ounces was estimated for the Biely Vrch gold deposit.

Anything in there to be wary of?

“The global financial crisis has caused severe challenges for EMED Mining, following the substantial fall in the copper price, the collapse in junior equity markets and the consequent effect on our funding capability. Copper has risen significantly off its recent lows, reflecting its importance in the infrastructure building now being pursued by China and other nations around the world... Copper's recovery bodes well for the early restart of Rio Tinto.”

http://www.stockopedia.com/news/announcement/EMED/090511emed000547.htm

MrT

Errr.... Before getting too carried away, it's worth noting that they still made a loss before tax of €17.1m (2007: Loss €11.8m) and only have net cash €1.42m!!

12th May '09

Betasurfer - EMED are simply stating it as it is! There are severe challenges for all in the current financial climate. However I still feel that EMED are well placed. The sentiment in Spain regarding re-opening the mine seems to be hardening in EMED's favour. People who were "anti" a year ago are more positive today. The local Spanish paper [Huelva Informacion] carried the story a couple of days ago that EMED had now submitted their revised proposals for the re-opening and the local Union boss [UGT] called for negotiations between EMED and his union to start. See [in Spanish] http://www.huelvainformacion.es/article/provincia/419976/emed/tartessus/entrega/la/junta/el/proyecto/para/reabrir/la/mina.html

Here's a sample with "automatic" translation from the last paragraph: "The Board [Junta] of Andalusia will now have to study the plan submitted to respond to the company. Mientras tanto, UGT ha emplazado a Emed Tartessus a iniciar las negociaciones del convenio colectivo para la plantilla actual y la que tendrá en el futuro, con el objetivo de "normalizar las condiciones laborales de los trabajadores". Meanwhile, UGT has called EMED Tartessus to start negotiations on the collective agreement for the current and will in the future to "standardize the working conditions of workers." Para UGT la presentación de este proyecto es una "buena noticia" en momentos de crisis y considera que, por las expectativas que ha generado en los vecinos de la zona, "merece los máximos esfuerzos de todos los estamentos políticos y administrativos implicados". For UGT the presentation of this project is a "good news" in times of crisis and believes that the expectations it has generated in the residents, "deserve the best efforts of all the political and administrative support.

MrT - At this stage in its development, EMED is a mining exploration company. Therefore like most explorers, is still running at a loss. Thus the current running loss is to be expected and is budgeted for. EMED has good solid financial backing and, always providing that the Junta does allow the mine to re-open, will have a bright future I am sure. "The future's bright - the future's copper & gold coloured!! A recent broker report on the company pointed out that either the RT mine or the Slovakian gold resources was in the current EMED share price for nothing! If you believe, as I do you, that the Rio Tinto mine permts will be granted then EMED's current share price looks very cheap.

17th Sep '09

When I started this thread on 3rd April, EMED's share price was 5.9p. It is now just under 15p. We are still waiting for news of the issuing of the permit to re-open the old Rio Tinto copper mine in Spain. EMED has been negotiating the subject with the Junta in Andalucia now for the best part of three years. But has only really got close in the last six months or so. they have re-submitted their application which is apparently receiving good local support from the local government in Huelva Province and from local unions. There are a number of facsimiles of local newspapers and translations which can be seen on the EMED web site which show this support.

If [I like to think "When"] the Rio Tinto permit is finally granted then EMED forecast being able to be in production in six months, having run a care & maintenance at the mine until the beginning of this year. They forecast having an EBITDA of some £30 million per annum thereafter.

There is also their Slovakian Gold interests to take into account and the fact that they own some 30% of Kefi Minerals, a Turkish Gold explorer which recently also started work in Saudi Arabia.

All in all, I think, the future's bright it Copper and Gold

montparnasse

Pr3

We certainly are in "prime permitting time" with Harry Adams saying he expects to hear something this month and John Leach, FD, saying that he thinks the permit will be issued in October. Either way, the applications were filed in late April so they have been with the Junta for almost 5 months. One point - production is now forecast for Q4 2010. I think the estimate is currently 6 months to obtain all necessary permits (not just the initial authorisation) followed by further 6 months to start up.

Correct - I was aware of when Harry expects to restart. But on re-reading my post I see it implied that production re-start could be 6 months after initial permitting. I meant of course "final" permitting that is after all other matters including financials and environmentals were "ticked" off.

doverbeach

12th Oct '09

RNS out today on the Scoping Study for the Slovakian gold: http://www.investegate.co.uk/Article.aspx?id=200910120700045478A

Net present value to shareholders ("NPV") of US$80 million at a 10% discount rate, internal rate of return ("IRR") of approximately 39%;

Initial expenditure of US$45 million with a payback period of 2 years;

Expenditure in the surrounding region of over US$400 million during the project life with average cash operating cost of US$590/ounce and cumulative cash surplus (undiscounted) of approximately US$194 million

Two year pay back sounds good. But IRR of 39% not so good given where they are in the development process:

"The next steps are to select and procure the land sites for mine infrastructure, finalise any restrictions in relation to the industrial complex nearby, resolve the rate of government royalty and agree with the authorities the timetable and conditions of permitting. Upon satisfactory progress on these fronts we will commence the reserve drill-out and detailed engineering required for a Definitive Feasibility Study. If all that goes well, the Board will trigger development in 2012."

And I have heard HA's optimism on timescales so often that I start from a position of scepticism

db (no position)

16th Oct '09

Don't blame you, doverbeach. I can only say I assume that when Harry came on the scene in 2007 he thought that the process would be quicker than it has been. EMED also underestimated the level of detail that they would be asked for. However the Aquas Tenidas permit took somewhere in the region of five years from start to finish. So I feel that EMED's two years to get where they are now is looking pretty good in comparison as I think that they are only weeks away from getting the first of the many permits needed before mining can re-start. That first important piece of paper could be in Harry's hands quite soon. The others will take another 6 months or so. But Harry seems quite sure that the mine will be back on production before the end of 2010.

I think EMED have well learned the local "ropes" now and also seem to have got much closer to the Regional Govt in Seville from the look of recent statements including this from the presentation to journalists on their site visit [slide 3]

STATUS OF PERMITTING AT RIO TINTO MINE

The Company and the Junta de Andalucia today approved the following statement: “The Junta de Andalucia and EMED Tartessus (EMED Mining’s wholly-owned subsidiary) are working in close collaboration on Proyecto Rio Tinto with the goal of starting operations as soon as possible and always in strict compliance with the legislation in force.” The collaboration also includes support having now been received from all local municipalities and the close consultations between the specialists of the Local Municipalities , the State Administration and the Company. " [ENDS]

I've held EMED since July '07. It's been an up & down ride but I am confident of eventual success. I expect the share price to be in the range 20-25p once the market sees that the permitting process has well and truly started by the issue of the first mining licence [followed by the licences to cover environmental, air quality, health & safety etc etc]. I further expect to see the shares rise higher as positive news emerges from Slovakia as that moves towards an eventual bankable feasibility survey and production.

In my view 75-100p is not out of the realms of possibility in a couple of years. Fox Davies Capital's latest research note dated 12th October 2009 gives estimates for EBITDA and Cash Flow per Share for the years 2011/2012 as £39M & 15.6p [2011] and £58.7M and 21.6p [2012]. At the 11p share price when the report was written EMED's Market Cap was £25.1M!! So as they say, "The future's bright - the future's copper and gold!"

Cheers

Peter

24th Nov '09

It appears very lonely on here as far as EMED is concerned!!!

There has been an excellent RNS out today which seems to confirm that the permitting story is on going and we can see some light at the end of the tunnel. However, to be fair, the tunnel seems to have got possibly six months longer!!

Permitting was till now forecast to be finalised early in 2010, with first production from the re-opened Rio Tinto mine in Q3/Q4 of 2010. It now seems that final permitting with all the Environment Impact Assessments, and other hurdles completed, may not be achieved till Q3 2010 with production starting in early 2011.

While this admittedly is a disappointment. The Andalusian Government is reported as being fully supportive of the EMED plan to re-open. I thus remain confident!
Fox Davies Capital has issued a note on EMED coinciding with today's news. This gives a 12-month target price of 41p for EMED, currently at 13p.
Peter

Just adding a link to the RNS: http://www.stockopedia.com/news/announcement/EMED/091124emed000616.htm

lowersharpnose

In reply to p3dr036 (post #24)

To me, that RNS smells of further delay.

I'll buy you a pint if they start mining in 2010.

The expected date of approval has continued to drift.

To offset this they, EMED & the authorities-that-be, are starting to look at the other permitting requirements concurrently.

I used to be concerned that the project simply would not be given to EMED. Now I am pretty sure it will be.

I am hoping that the share price drifts down or simply goes nowhere until the main approval is granted and will then consider buying in size. If I don't get that opportunity, ah well, there are other fish.

lsn

27th Nov '09

lsn - mine's a pint of Woodford's Wherry - a fine Norfolk ale!! That's of course if they start mining in 2010 [I reckonm Q1/2 for permitting and Q4 for actual mine start!
Peter

The Prospector

30th Nov '09

Update RNS: http://www.stockopedia.com/news/announcement/EMED/091130emed001129.htm

1st Dec '09

I managed to catch up with a rather knackered looking Harry Adams at Mines and Money today. Key points:

It seems that regulatory changes to the EIA process which took place relatively recently threatened to totally undermine the company's timetable to production leaving EMED facing delays of up to a year. The refined permitting process is a major positive outcome and preserves the target of commissioning production at the end of 2010. It is clear that these were the "important procedural issues" recently referred to.

All permits, including the mineral rights transmission, are now anticipated to arrive in one block. Applications to be completed in Q1 2010. Permits to be granted in Q2 2010.

Further draw down on the SEDA facility is very much seen as a last resort. Other capital raising options are likely to be explored first.

I don't think it is suitable to mention the details in a public forum, but Harry explained that the appeal to the Supreme Court by Mantesur does not represent a challenge or an obstacle for EMED. Indeed, it is rather the opposite.

When I asked Harry if he was still optimistic he said; "Yes, we've cracked it now". Up until a couple of weeks ago it appears that there were " a couple of men still standing" but they have been dealt with now.

27th Apr '10

It's ages since I [or anyone else] added to this thread and I thought it was about time I updated it!

The saga of the re-opening of the Rio Tinto Mine in Andalucia rolls on and on! But I still remain confident that the company will get the required permits to re-open the mine eventually. It has taken much longer than anyone felt a year or two back. But this process could have been expected to take time as it is complex and involves many different interests!

Very recently EMED were given a permit by the local authorities which allowed re-connection of the main electrical supply to the mine. This will enable the care & maintenance programme which has been in place for over a year to accelerate. I regard this as a positive step.

There are a number of other processes or hurdles that EMED still must overcome, including the acceptance by the local government [ the Junta de Andalucia] of an Environmental Impact Assessment . EMED are currently working with a number of Environmental Consultancies in this connection. The Junta appear to be supporting EMED in the re-opening as are the local trade unions and local opinion seems to be more and more in favour of the mine re-opening.

The ownership of some areas of land involved in the Rio Tinto complex is in question. The problem is with a group of business men [including a past major shareholder of the mine] who bought the lands involved some years ago when the mine was closed and before EMED came on the scene. At the time of the purchase they announced plans for an urban regeneration project which never materialised. These people are now seeking more than twenty times their original buy price which EMED have refused to pay. This matter [in my opinion]
will eventually be settled either by them reaching a sensible outcome with EMED [perhaps by the issue of shares in EMED Tartessus] or by going through a government arbitration or compulsory purchase arrangement.
Other organisations such as the mine workers co-operative who were all made redundant at the last closing of the mine are also involved. One trade union has always been in favour and another seems recently to be weakening its opposition to the re-opening.

In February EMED issued a time table for the re-opening which looks for first production in 2011. This can be found on http://www.emed-mining.com/site/dmdocuments/PRT_16Feb_2010_V5_FINAL%20.pdf.

This included the following timetable:
• Q1-2 2010: submission of reports and responses to regulatory queries and requests.
• Q2-Q4 2010:
     o public information and consultation;
     o further regulatory reviews in Andalucia and in Madrid; and
     o administrative approval of mineral rights and permits to allow start-up activities.
• Q3-Q4 2010: shareholder approval and commencement of start-up activities.
• 2011: production, exact timing dependant on permit timing and any conditions attached.

This timetable will of course be subject to administrative delays. But I remain confident that we will hear more positive news in the coming weeks.

Hope this is of interest. there is much moire of course on the EMED website http://www.emed-mining.com

EMED Mining - another one to have a look at.

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P3dr036

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