The first point to raise of course, is that Glencore’s arrival represents a vindication of Arkle itself.
The company originally worked up this project alone and unloved in some of the toughest markets in living memory, until it brought joint venture partner Teck Resources (TSE:TECK) to help share the load back in 2012.
Teck eventually sold out to Group Eleven in 2017, which has in turn brought in Glencore.
But it was Arkle, or Connemara as it then was, that made all the early running.
Now, though, whisper it softly, with the arrival of Glencore, the Stonepark project has been transformed from a promising-looking zinc exploration play to a realistic candidate for development.
That’s because, across the way, on the other side of the tenement line, Glencore is already pushing ahead on its Pallas Green project, once the property of another one-time luminary in London and Ireland, Minco.
And with Pallas Green boasting an extremely robust resource in terms of tonnes, but possibly just a little shy of world-class in the grade department, Stonepark, with its higher grade and significant exploration upside, could fit very nicely indeed into Glencore’s Irish portfolio.
The synergies would be significant, and beneficial to all concerned.
It’s still a long way away though, and plenty of decisions will have to be made along the way, not least by Arkle, which since the Teck deal has held only a minority 23.44% interest in Stonepark.
How best to manage this stake moving forward? Does the company try to keep its end up when the exploration and development budgets are being set, or does it instead try to monetise and walk away with a handy chunk of cash?
As of this moment, Patrick Cullen, the chief executive, and to all intents and purposes the only employee of Arkle, is playing his cards close to his chest.
But he does have one ace to play, an ace that’s rarely available to other junior miners in similar positions.
Back when Connemara was negotiating with Teck, Connemara’s chairman, the wily old John Teeling was careful to insert a clause in the deal allowing Connemara to keep the rights to a percentage of the revenues from the sales of any metal produced that corresponded with the size of Connemara’s stake.
To put it in even simpler terms, 23.44% of the metal that comes out of Stonepark is directly attributable to Arkle, as it stands, and the percentages will stay equivalent to the size of the stake held as long as Arkle stays above 10%.
For those who aren’t overly familiar with the mining sector, this arrangement may sound somewhat arcane, but it is in fact highly significant. A standard deal structure would allow a company with a minority interest in a project to a share of any revenue, but would not grant actual ownership of a percentage of the metal produced. In Arkle’s case it will own that metal, and will be able to dispose of it as it sees fit.
How valuable this particular right is, remains to be seen. But it does mean that if, as is likely under one possible scenario, Glencore moves to take absolute control of Stonepark, it will have to negotiate not only for the stake in the project, but also for the metal rights. That may not seem like such a big deal, given that Arkle’s room for manoeuvre is likely to be fairly limited, given its tiny size relative to Glencore.
But there is another possibility: that Arkle could market the metal rights to a larger company, with greater financial heft, a company that would have no trouble following its rights, and which could then in due course benefit directly from an income derived from the Stonepark metal rights.
Looked at in that light, and the metal rights start to look quite valuable indeed. And it seems likely that if Glencore came knocking on Arkle’s door, Patrick Cullen would point this out.
At the moment, he’s more interested in being specific about the upside potential on offer at Stonepark, as new geological models start to be tested by exploration work next year.
“Glencore have made their move now, I think, because they’ve recognised the potential we have for a big discovery,” he says.