Just how well-positioned is Alien Metals Ltd (LON:UFO) at the moment?
When it comes to the commodities the company is exposed to, it’s been hard to find a better combination over the past 12 months or so than silver and iron ore. With that mix of silver in Australia in Mexico and iron ore in Australia, Alien has been able to straddle the bull runs in both industrial commodities and precious metals.
And it doesn’t look like stopping any time soon.
Iron ore has once again been on a charge in recent weeks, pushing up past US$180 per tonne, with some pundits now beginning to mark out US$200 as a realistic target.
And silver is sitting more than comfortably at nearly US$27 an ounce.
No wonder Alien’s chief executive Bill Brodie Good is super keen to keep up the pace of progress on the ground, especially in Australia where significant exploration activities are underway.
At the Hancock iron ore project the company hopes to have an initial inferred resource ready within six months, following a first phase of drilling. And there may shortly be a second phase too, given that so far drilling has only covered a small part of the project.
Meanwhile, at the Brockman iron ore project a drill plan is also being put into effect, and Brodie Good is hoping to have it all done and dusted within six months.
Given the strong iron ore price, he’s confident that looking out 18 months or so, these projects will either be being run by cashed-up partners, or that Alien itself will be moving towards putting an initial reserve around the high grade portions of the projects.
At this stage, there’s a good possibility that Alien will be able to ape its larger peers Fenix Resources (ASX:FEX) and Strike Resources (ASX:SRK) and put together a direct shipping ore operation in fairly short order. If that is achievable, then a significant re-rating might be on the cards, given that Fenix has risen by over 500% during the past 12 months on the strength of a relatively small operation.
Indeed, iron ore companies across the board have performed very well over the past 12 months, Alien included, and there could be more to come. Alien’s exploration target stands at between 70mln and 245mln tonnes, so the sums involved are considerable.
Meanwhile, on the silver front Brodie Good is planning a drill campaign at Elizabeth Hill fairly shortly. There’s a good chance that it might get underway during the second quarter of this year, dovetailing nicely with the opening of a new exhibition at the Perth Mint.
Here, Western Australia’s official mint will be showing off some of the mining and precious metals wonders produced in the region over the past 100 years or so. Among the exhibits will be the largest silver nugget ever found in Australia, produced from, yes, the Elizabeth Hill project currently being worked over by Alien Metals.
The existence of that nugget underlines the overall prospectivity of Elizabeth Hill in a way that no geophysical survey ever really could, and the exhibition itself will focus some welcome attention on Alien too.
The company’s shares are some way off their highs of last year, but the positioning remains the same and the bullish backdrop as strong as ever. The coming newsflow could well act as a catalyst for another upward push, and certainly if iron ore goes any higher then new money will flow towards Alien.
“The foot’s gradually going down on the pedal,” says Brodie Good.
So, with the possibility of a DSO operation on the company’s iron ore projects, does that mean that cashflow is likely to be coming into the company within the next couple of years? It’s a possibility that can’t be ruled out.