Shares in Alien Metals Ltd (LON:UFO) jumped by more than 6% in morning trade after the company announced that had added more than 100 square kilometres of ground to its already highly prospective Elizabeth Hill silver project in Western Australia.
The company completed its acquisition of Elizabeth Hill on 25 September, and has moved swiftly to consolidate its landholding in an area known to be highly prospective for several different metals.
The new ground is thought to contain as much as three million ounces of unmined silver relatively near to the surface, with further potential at depth.
It’s also highly prospective for copper and zinc, and contains structures that are linked to the two million ounce Munni Munni platinum and palladium project across the tenement line.
As such, it’s a pretty good addition to an already highly attractive portfolio and represents the kind of sure-footed deal-making Alien has been able to pull off ever since the new management took over last year.
It’s no coincidence either that as the prospectivity of the portfolio has improved - with favoured metals like silver and iron ore playing a prominent role – the company’s market capitalisation has also jumped.
Investors warmed to the can-do attitude of Alien as soon as the first of the new deals began coming, but it wasn’t until the silver price really took off in the early summer of this year that it really became clear how much value there might be inside the company.
The shares have gone up by almost seven times since the early part of July, even as the silver price has jumped somewhat more moderately, from around US$12.00 per ounce in March to the current price of just under US$23.00.
Amazing what a bit of momentum can do.
But the market isn’t just trading on sentiment alone. There are real hard numbers to digest too. At Elizabeth Hill there’s already a track record of historic production, with grades running at almost 2,200 grams per tonne. Given that silver can be economic at as low as 300 grams per tonne in certain circumstances, there’s clearly a huge amount of room for manoeuvre and margin here.
What’s more, back-of-the-envelope calculations value the silver in the ground at the new acquisition at around US$100mln, and although such calculations don’t have the value of a full discounted model behind them, it’s not hard to see why the market has been getting behind the company and has now pushed the valuation up towards £20mln.
What’s more, there’s huge exploration upside on the new ground to be had as well, in the copper and zinc on at least two other areas of known mineralisation.
All of which would be enough to build a company around on its own. But Alien isn’t just about Elizabeth Hill. It’s also got a sizeable silver portfolio in Mexico, on which much progress has been made of late, as well as the Hancock and Brockman iron ore projects, which are also in Australia.
So, hardy surprising to see the company on the move, and don’t be surprised if there’s plenty more share price action to come.