Key points:
- Cornish Metals is raising £40 million through a new share placing
- This includes a strategic investment by Vision Blue
- Vision Blue was founded by Sir Mick Davis, previously of Xstrata.
- Cornish Metals Jumps 10% On No News – Why?
Cornish Metals (LON: CUSN) shares have reacted well to the announcement of a fund or capital raise. The current market capitalisation is a shade under £80 million and they’re raising up to £40.5 million in this process. The placing is at £0.18 – 18 pence – as against the current market price of 27.5 pence. We would normally expect that to produce a significant decline in that Cornish Metals share price. It hasn’t, so what’s going on?
The answer is, in part at least, that Cornish Metals has been able to bring in a strategic investor at the same time. This is Vision Blue, set up by Sir Mick Davis after his career at Xstrata. They’re taking £25 million of this new issuance as a core stake in Cornish Metals.
As to what excites investors here there are really two parts to Cornish Metals. The first is the old South Crofty tin mine. This has been on the edge of being reopened for years now. The Cornish tine mines were famous for centuries (actually, millennia) for the richness of their ore. But the costs of hard rock mining, when set against those of alluvial in Indonesia and elsewhere meant they couldn’t, in the end, compete.
Also Read: Base & Precious Metal Trading Guide
This has now changed as the electric revolution increases demand for tin around the world. The current tin price – $49,000 a tonne – might look a little overblown to some but the all-in cost at South Crofty is thought to be some $15,000. That provides a certain gap for the global price to fall and the mine to still make sense.
The other main part of Cornish Metals is the copper deposit at United Downs. That’s at a much earlier stage of exploration and so isn’t really value determinative. It’s an interesting addition that is, but uncertain as yet.
There’s also a third issue, which is more of future possible interest. Cornish Lithium is exploring and investigating for lithium in the geothermal waters underneath the county. It’s definitely there, it’s whether it can be extracted profitably that needs to be checked. The two companies, Metals and Lithium, have a cross agreement. Hard rock deposits found by the one will be open to the other, geothermal supplies by the other open to the first. Again not value determinative but a useful lightening of the exploration expense load.
In the longer term, the value of Cornish Metals shares is going to be inextricably linked to the global tin price. The reason the mine closed was because that fell, decades ago. In the shorter term, the investment by Blue Vision is a considerable vote of confidence in the medium-term prospects of that happening – or not, as the case actually is. That’s why the share price hasn’t fallen as much as we would expect from this dilution and offer below the market price.
