African Eagle (AFE) appears to have an awful lot going for it in the drive to become a successful mining producer.
Excellent ground, stable African countries, healthy mix of blue sky and advanced projects, all combined with an experienced management team with a good record of finding quality projects supported by a loyal shareholder base. Look at AFE?s share price over the last 12-16 months however, and you wouldn?t think any of the above points were true. Even the tipster Tom Winnifrith is a fan of the company, and recently reiterating his ?strong speculative buy? recommendation with a belief that AFE is worth over 50p per share.
So what?s the story with AFE?s lacklustre share price performance? I caught up with Managing Director Mark Parker yesterday at the Minesite Forum in London to find out exactly just that.
African Eagle have always stated since listing a few years ago that the game plan was to grab good land, prove up good projects and then look for partners to take any resource through to production. On reflection, Mark is confident the strategy to date has been the right one.
?What we?ve done is pretty logical; a well thought out strategy to build up a portfolio of projects over a period of time, that we could have a good look through them all and then decide which ones arenearest to market and can be taken forward to profit/production quickest. If we had tried to make a decision a year ago, on which project to move on, we might not have picked the best one. We had to look properly at all the projects and make a good justified decision. With the intention to spin them out to either partners or into new companies.?
Miyabi and Mkushi are the most advanced projects AFE are sitting on. The Mkushi Copper project in Zambia is AFE?s most advanced project and most likely the first one which will move into production. Mkushi has a resource of more than 300,000 tonnes of copper and is already in a region with historic mining activities. For AFE, this means the permitting process should be much easier and as the area already supports good infrastructure, this will keep mine development and operating costs favourable.
? Our plans concentrate quite heavily on getting Mkushi into feasibility which means more metallurgical and geotechnical studies and a lot more drilling to build up the economics of the project. We have done an in-house financial projection on Mkushi and we come up with some impressive numbers.?
In Tanzania, the Miyabi Gold Project recently received another upgrade to 520,000 ounces of indicated and inferred JORC compliant resource. Beyond the two most advanced projects, AFE really does have a huge spread of projects covering base metals, precious metals and even diamonds.
Perhaps the market smells a fundraising around the corner?
?It is inevitable that we will need to raise some cash to move these projects forward over the next 2 years. But there is more than one way to fund a project. You can certainly raise equity. But you can also find good partners who can bring in skills and money to the party. We are at heart explorationists, and we know we need to bring in potential partners on a number of projects ? there is no project that is not available to the right partner. For the advanced projects we are probably looking for somebody in the mid-cap range rather than small cap range. We will definitely be signing deals on some projects. We are quite near to closing some now. There is a real shortage of good projects worldwide, so we don?t envisage any great difficulty in farming out our projects.?
AFE is also quite unique when you look at the shareholder base too. Somewhat bizarrely, the company has a large number of retail investors, but also has RAB Capital holding a whopping 25% of the issued shares. It has often been mentioned over the years that the ?market? feels queasy about this large holding by RAB, and what would happen if they decided to exit?
? RAB are very supportive shareholders. We were are probably still are the 5th largest component of the RAB Special Situations Fund. Last autumn RAB divested itself of some shares to exercise warrants, and didn?t do any great damage to the share price. There were institutions who helped RAB exercise the warrants by picking up the stock. We don?t see RAB as an issue ourselves. We plan to make Philip [RAB] a lot more money.?
Just as I wrapped up the interview with Mark, he made a final note which was intended for retail investors, new or familiar with the story.
?Unlike a lot of our peers, we have quite a big retail following, almost 50%, a good part of which is fairly regularly traded. Our average trading volume over the last 2 years is not far short of 500,000 shares per day. That?s quite unusual in a company of our size. Investors have found it relatively easy to move in and out of the stock and investors coming in now shouldn?t have a problem exiting again at a later time. Despite our recent share price performance, we have added a lot of value in two years: our market cap on listing was £2.5 million; it?s now £25 million. We plan to continue adding value and we can see a clear route to success.?
African Eagles most recent announcements have reflected a clear change in strategy. This company is no longer content with exploration. Production is now firmly on the agenda. Underpinned by an impressive portfolio of exploration projects and now two projects moving quickly to feasibility stage, one has to wonder if the market will finally start to agree with Tom Winnifrith?s conviction that AFE is worth a lot more than the share price suggests.