Azure Minerals Ltd (ASX:AZS) was featured on top of Far East Capital’s Weekly Commentary with analyst Warwick Grigor noting that the company has 60% of a noteworthy nickel/copper discovery that should progress to a long life mine at some point.
Grigor said nickel and copper stocks are in strong demand owing to the alternative energy and battery opportunities.
While there will be trading opportunities as speculator interest waxes and wanes, there is strong longer term growth merit.
Grigor believes Azure has considerable exploration upside.
He noted that Azure’s $100 million market capitalisation is modest given the potential and the $34.6 million cash balance as at 30 June, which means there is no need to go to the market for additional funding in the foreseeable future.
The following is an extract from Far East Capital’s Weekly Commentary:
Azure Minerals - resource definition drilling the Andover Ni/Cu discovery
We added Azure Minerals (AZS) to our chart coverage a couple of months ago because we thought the share price performance was rather anomalous. Back in November 2020, the share price spiked higher from around 20¢ to peak at 99¢, but it has been falling ever since (until last week).
Significant Ni/Cu discovery announced Nov ‘20
In a series of announcements starting early October 2020, Azure first announced a 40.7m intercept containing significant nickel and copper mineralisation as detected using an XRF tool, in its first hole at the Andover prospect (60% AZS, 40% Creasy Group). Similarly, the second and third holes gave comparable results that were released a few days later.
Assays were announced on 11 November, confirming massive sulphide assays with 2.85% Ni and 0.47% copper, within a broader intercept of 39.7m at 0.95% Ni and 0.52% Cu, from a depth of 81.6m in Hole 1. Hole 2 and subsequent holes gave similar results. You get the picture. It was a significant discovery and the share price reacted appropriately.
Timely $37m placement underwrote funding …
Shrewdly, Azure undertook a $37m placement at 74¢ in late November. It was a smart move that gave institutional investors the chance to get set, and the strong cash balance should have underpinned the share price at the higher levels. However, the shares almost immediately began to free fall, eventually dropping back to 20¢ a week ago. Why? Was the new discovery a rouse? Was it a fantasy? Not at all. The reason lies in the actions of one of the institutions that took the placement.
… but institutional about face drove the price down …
Brokers and companies get excited when they get the interest of institutional investors in a placement, but there are plenty of examples of institutions behaving like unsophisticated punters when it comes to managing their investments. They can do incredible damage to a share price if they decide to quit a position by dumping in the market rather than working with the company and brokers to place lines of unwanted stock. They have their reasons for behaving like this, but they are never really credible and they are always annoying.
In the case of Azure, one of the placees in the raising decided to dump 4-5 million shares one morning just after settlement. That spooked the market and it induced more selling from other shareholders who couldn’t understand what was going on. The more selling that came out the more the confidence in the stock was eroded, and the lemmings kept running for the cliff.
… resulting in a brilliant buying opportunity
Fast forward the clock to August, with the share price coming back to 20¢, giving a market capitalisation of $62m, even with $35m in the bank … and a major nickel/copper discovery. It is a perfect example of how the market can get it wrong, and how an astute investor can make a real killing by doing a little analysis and backing a fundamental view as opposed to being driven by short term market sentiment.
Drilling update doubled the share price this week
It is interesting that the release on 2/8/21, detailing good assay results from VC-07 East at Andover, didn’t cause a reaction in the market. This drilling confirmed a 300m strike length, to a depth of 550m. Yet, three out of 11 holes came back with “encouraging” results.
It took until the release last Monday, to set the market alight. This detailed visual descriptions of 22 new holes with encouraging indications using an XRF scanner, but no assays yet. To date, Azure has now drilled 80 diamond drill holes with about 90% of them giving positive results, testifying to the robustness of the discovery. The program has evolved from that of green fields exploration to resource definition on a 50m x 50m pattern, utilising three drill rigs.
While the company has to do the work to come up with the JORC compliant numbers, we can speculate that so far we are looking at mineralisation measuring 400m x 300m, at widths of 10-15m, with grades of 1-1.2% Ni and 0.5-0.6% Cu. The high grade massive sulphides assay in the range of 2.3-2.5% Ni.
We could be looking at 4-8 million tonnes of mineralisation available for underground mining so far as a starting point. Don’t forget the exploration potential on another 4-5 EM anomalies. To date there has been a 100% success rate on conductors drilled, so expect more positive news as the program continues.
Other gold exploration projects
Without going into any detail, we note that Azure has gold exploration ground near De Grey’s Hemi discovery, with 12 km of strike length to be tested. Barton is another gold prospect, mostly soil covered, south of Leonora.
The Bottom Line
Azure has 60% of a noteworthy nickel/copper discovery that should progress to a long life mine at some point. There is considerable exploration upside to consider. The $100m market capitalisation is modest given the potential and the $34.6m cash balance as at 30 June, which means there is no need to go to the market for additional funding in the foreseeable future. Nickel and copper stocks are in strong demand owing to the alternative energy and battery opportunities. While there will be trading opportunities as speculator interest waxes and wanes, there is strong longer term growth merit.