With a market capitalisation well in excess of £133mln, Bluejay Mining PLC (LON:JAY) is one of the largest mining companies on the AIM market. What’s particularly intriguing about this punchy valuation is that the company has yet to initiate mining at its Dundas titanium project in Greenland.
So rather than cash flow or profits, it’s the size of the opportunity that’s driving the valuation, and here, certainly, there is plenty to say.
Late in April, Bluejay announced a 400% increase in the resource base at Dundas, as verified by renowned consultants SRK Exploration.
The new number rang in at 96mln tonnes grading 6.9% ilmenite, including 81mln tonnes in the indicated category at 6.1%. But as part of the work involved in putting that resource base together, Bluejay also identified a new target at Iterlak that consultants at SRK say could contain between 20mln and 60mln tonnes of additional ore at a higher grade.
Bluejay’s chief executive Rod McIllree, however, is very confident it will be proven to host more, much more as time goes by.
Since that April resource report, much progress towards an update has been made. A comprehensive drilling and trenching programme has now taken place at Iterlak, with results expected later in the year.
Meanwhile, a 10,000-tonne bulk sample grading around 40% ilmenite has also been taken, and samples have been despatched to potential customers. More samples are likely to be sent out soon, with the ultimate objective being to lock up sales for the full 450,000 tonnes per year of planned production.
But it’s not just about the quantity. Quality is also a factor in marketing Bluejay to customers and investors alike.
“Dundas,” says chief executive Rod McIllree, “has the highest concentration of in-situ ilmenite of any mineral sands project globally.”
This distinction arises in part because of the intrinsic geological characteristics of Dundas.
“This would have been a hard rock mine,” continues McIllree. “But the slow grind of the glaciers has effectively mechanically mined the material for us. Tide and wind and rain have then deposited what is a finished product on the beach over time. Its saved us the front end capex of setting up a mine there which helps a lot.”
That glacial grind has had significant consequences for the economics of production at Dundas. As McIllree puts it bluntly, “we have dodged anywhere between US$200-400mln in capex, mother nature has done our mining and concentrating for us.”
But if Bluejay has the onward advance of glaciers to thank for the quality of the product at Dundas, it also has their retreat to thank for revealing the extent of the opportunity.
“Historically the project was only recognised as a small local occurrence,” says McIllree.
“But then the ice and snow melted, revealing a much larger occurrence. In 2015 we undertook a work programme that demonstrated the project could be globally significant. There are quite remarkable concentrations of the material across thirty kilometres.”
The plan now is to move through ongoing pre-feasibility work and into a bankable study, to be completed by the end of the year.
Precisely what those studies will show remains to be seen, but clearly with the resource base that Bluejay has, production could theoretically go much higher than the 450,000 tonnes currently planned, and the mine-life in the end could be easily more than 50 years.
And for those worried about the costs of operating in remote Greenland, McIllree offers reassurance aplenty. For one thing, there’s that initial capex dodge. But more tangibly, the project is situated near Greenland’s closest equivalent to an infrastructure hub, not far from two ports, two airports and the town of Qaanaaq, home to around 650 locals, all keen for an additional industry to start.
Even the mine camp has come pre-packaged: Bluejay has simply moved into a town that was abandoned following a change in local wildlife migratory patterns, providing a platform for accelerated implementation.
“We are confident that the capital costs will not be insurmountable,” says McIllree.
Some impressive names in mining investment seem to agree with him. Already on the Bluejay register are Sandgrove Capital with 13%, M&G with 12.5%, Capital Group with 6%, HSBC with 6% and ING with 5%. It’s expected these groups will continue to support the project's development moving forward.