mining aim: the metals one edit

Metals One (LON: MET1) launched its IPO in London on 31 July 2023 — almost a year ago now — raising £2.2 million to advance its battery metals projects in Finland and Norway. 

This left the new AIM company with a £10.4 million market capitalisation and shares changing hands for 5p apiece.

At the time, Chairman Alastair Clayton noted that:

‘Battery metals are underpinning decarbonisation globally, particularly in the transportation sector. We anticipate that over the coming decade minerals including nickel will be needed at scales significantly beyond current production levels. With legislative pressure within the EU to source these strategic metals, at least in part, from within the EU, our Finland and Norway projects are ideally located to play a role in secure and sustainable supply chains.’

These words were to be prophetic. Despite this, fast-forward 12 months and the stock has fallen by more than 80% to around 0.8p.

Every junior resource company always tells you that their entire stable of assets are the best thing in exploration, but in reality, there is almost always one flagship asset that underpins the business’s prospects. For MET1, this is clearly the Black Schist Ni-Zn-Cu-Co Project in Finland. 

This project spans several exploration licenses and reservations within the Kainuu Schist Belt, the geological formation that hosts the black schists mined by the nearby Talvivaara mine, one of Europe's largest nickel-zinc-copper-cobalt producers.

Before we delve into the technical details, it’s probably worth considering the planned timeline:

1. 2024 — updated resource estimate, scoping study and maiden external reporting of forecast project net present value.
2. 2025 — EU strategic project recognition, drilling, environmental studies, pre-feasibility study.
3. 2026-27 — drilling, mine permitting, and definitive feasibility study.
4. 2028 — project financing via debt/royalty, and final investment decision.
5. 2029 — production.

Does this look ambitious? Yes. Is it better to be ambitious or lazy? Definitely the former. While this timescale looks like it may be difficult to achieve, it’s a clear set of expectations for management to deliver — and be judged upon.

On 12 February, the company announced significant intersections of mineralisation at the asset — highlighting the potential of the black schists within the wider region. Key findings included:

• Hole RAU0002: 14.7m of mineralised black schists from 50m (0.18% Ni, 0.11% Cu, 0.01% Co, 0.57% Zn).
• Hole RAU0003: 11m of mineralised black schists from 199.5m (0.22% Ni, 0.10% Cu, 0.01% Co, 0.55% Zn).

These promising results form the core of Metals One's strategy to demonstrate a clear pathway to the economic extraction of its assets. A longer-term ambition includes potentially defining a 200 Mt across the entire asset, which is poised to supply critical minerals to the European market at a low cost of production (more on the economics towards the end of the piece).

Key strategic targets include:

• Target Expansion — increasing volumes and confidence in the R1 and P5 targets through infill and step-out drilling and further assaying of existing cores.
• Target Acquisition — securing additional targets across the Kainuu Schist Belt using an innovative prospectivity model aimed at accelerating and de-risking the identification and development of critical minerals.
• Systematic Drilling and Modelling — undertaking systematic drilling and modelling of new targets.

Metals One holds several exploration licences and reservations within the Belt, including Talvivaara-style mineralisation targets. The Belt, hosting Europe's largest nickel-zinc-copper-cobalt producers, potentially presents a significant economic opportunity.

For context, Q4 2023 saw MET1 identify several prospective targets near its R1 resource in Rautavaara and P5 target in Paltamo. The Company quickly secured these targets with three exploration and three reservation applications covering almost 15,000 hectares.

Metals One's prospectivity model integrates geophysical, lithological, and petrological data from Rautavaara and Paltamo, and continues to evolve as new information emerges. This model enhances its early mineralisation discovery speed, which helps to maximise exploration expenditure returns. 

Initial model insights informed a regional target acquisition exercise, and identified the R1-Hook anomaly for further exploration.

On 20 May, Metals One announced it had raised £895,000 at 1p per share to help develop the flagship — including director buys for 9 million shares. Given that the company lost £1 million in non-listing expenses in the 12 months to 31 December 2023, and that it had a cash position of £751,000 at the end of the year, you can make a reasonable assumption of a decent cash runway of even if you include the broker’s cut and increased activity. 

Importantly, some of this capital was to be used to terminate the farm-in agreement with Gunsynd to retain 100% control of the Black Schist project. 

For context, MET1 had previously entered into an agreement with Gunsynd in relation to the project, whereby Gunsynd agreed to acquire up to 25% of the project for a staged investment of up to £1 million. 

MET1 received the first stage payment of £250,000 in November 2023, and Gunsynd was issued with 6.25% of the voting share capital of Metals One Finland (the subsidiary of the company which holds the Black Schist Project). These shares have now been bought back.

At the time, the Project boasted a JORC Inferred Resource at the R1 target of 28.1 Mt with grades of 0.19% Ni (53,800t), 0.10% Cu (27,900t), 0.01% Co (3,400t), and 0.38% Zn (180,000t). 

Additionally, the P5 target had a JORC Exploration Target of 16-24 Mt. Metals One aimed to rapidly convert the P5 target into a Mineral Resource and subsequently expand it, again with the long-term goal of establishing a resource of approximately 200 Mt for the entire resource.

The funds raised are being used to facilitate Metals One's resource upgrade program, which includes drilling, aimed at increasing the current 28.1 Mt of Talvivaara-type mineralisation. 

Owen enthused ‘The Black Schist Project is the cornerstone of Metals One's ambition to build a scalable, low-cost strategic metals producing asset. Our decision to raise funds directly and replace the farm-in agreement demonstrates our confidence and that of our investors in the project's development potential. With the EU actively encouraging the development of strategic projects like ours which aim to supply critical metals from within the bloc, the opportunity is highly compelling. We are thrilled with the investor support for our work programme and look forward to updating the market as we achieve key milestones.’

Two days later, MET1 noted it had received all chemical assay results for the P5 JORC Exploration Target in the Paltamo area of the Finland Black Schist project.

As a reminder, the P5 JORC Exploration Target was originally estimated by a previous permit holder using portable XRF measurements correlated to a sample of chemical assays. The company intends to elevate the confidence levels of P5 by completing the chemical assaying of all mineralised intersections of the 5,555m drilled across the target, and generating a new mineral resource estimation with this more accurate data.

The Company also announced that it has commissioned Mining Plus, a global mining services provider, to produce the new P5 mineral resource estimate — the subject of the recent RNS.

Today, MET1 upgraded its MRE for the Black Schist Project, doubling the asset resource in preparation for the planned Preliminary Economic Assessment (which may unlock everything mission critical).

The maiden JORC Inferred Mineral Resource for the P5 area now stands at 29 Mt at 0.18% nickel, 0.08% copper, 0.01% cobalt, and 0.33% zinc. This brings the total Black Schist Project resource to 57.1 Mt. Highlights included:

• 52kt of nickel, 24kt of copper, 3.5kt of cobalt and 96kt of zinc.
• Orientation and proximity to surface lending itself to surface mining.
• Adjacent to major road and rail infrastructure.
• Resource expansion opportunities, particularly to the north.

As a reminder, the P5 Inferred Resource was previously classified as a JORC Exploration Target, and lies within the Paltamo area. The existing R1 Inferred Resource and the P5 Inferred Resource together now represent the foundation of the Black Schist Project.

Assessment of the P5 JORC Exploration Target historical data highlighted an opportunity to significantly increase both the volume and confidence level in this structure — because the P5 JORC Exploration Target was originally estimated by a previous permit holder using portable XRF measurements correlated to a sample of chemical assays — and the holder did not assay several of the mineralisation intersections of the cores, which resulted in a lower category JORC Exploration Target of just 16-24 Mt.

MET1’s work programme focused on increasing its confidence levels in P5 by completing the chemical assaying of all of these mineralised intersections of the entire 5,555m drilled across the target — which allowed contractor Mining Plus to produce this new mineral resource estimation.

But beyond this, previous explorers such as the Geological Survey of Finland intercepted similar mineralisation along the belt, which strongly suggests geological continuity, and therefore the potential for further expansion — both of the P5 resource and also the development of other targets. As mentioned above, MET1 already holds additional Exploration Licences and Reservations along the belt.

Owen noted that ‘The Black Schist Project is key to us achieving our goal of bringing much needed domestic sources of strategic minerals, such as high-purity copper and nickel sulphates, to the European market. The addition of the P5 resource to the project portfolio brings the total value of in-situ metals to $3 billion, at today’s prices. The Black Schist Project is on track to becoming the world-class asset we all believe it could be. Looking ahead, this increased resource base will underpin a Preliminary Economic Assessment of the project which we expect to commence in the near future. This represents a major milestone for the Company as we transition from exploration and discovery to project development.’

The Råna Ni-Cu-Co Project in Norway is Metal One’s secret weapon — the investor focus rightly remains on the flagship Black Schist asset — but new drilling at Råna has just commenced, and the potential impact is being ignored by the market. 

Before we go into any further detail, one key thing to consider is that the junior resource market is all about drilling — a few decent holes can make a company overnight. 

Råna Ni-Cu-Co Project at a glance

• Proven potential for massive sulphide nickel-copper-cobalt mineralisation.
• Råna intrusion analogous to Voisey’s Bay world-class Ni-Cu-PGE deposit.
• Directors believe the asset is underexplored using modern methods, technology and deposit models, with no exploration or evaluation since 2007 except by MET1.
• Project encircles the previously producing underground Bruvann Mine.
• 37 km by main road from Narvik deep-water port.
• Kingsrose (ASX: KRM) to earn up to 75% over eight years, through staged expenditure of up to AU$15m (circa £7.6 million).

Project Overview

The Råna project is located in Nordland County, Norway, and encompasses the historically significant Bruvann Mine — extending over a 25-square-kilometer exploration license. The region's potential, combined with modern exploration techniques mot available to past operators, positions Råna as a pivotal project in the European mining sector.

Strategically located just 37 kilometres from the ice-free, deep-water Port of Narvik, Råna boasts excellent access to nearby infrastructure. The project's exploration area includes four contiguous licenses, granted in January 2019 and valid until 2026.

Exploration within the Råna intrusion dates to 1880, with significant work carried out in the 1970s and 1980s by Stavanger Staal and the Norwegian Geological Survey. The Bruvann Mine — which remains the centrepiece of the project — operated from 1989 until 2002, producing approximately 8.5 million tonnes of ore with recoveries of 74% nickel, 85% copper, and 62% cobalt. 

Not bad at all.

Historical drilling and geophysical surveys have laid the groundwork for current exploration efforts; and as any geologist will tell you, the best place to find a new asset is on the site of an old mine.

In technical terms, the Råna intrusion is a mafic-ultramafic complex comprising basal ultramafic peridotite and pyroxenite sills, with upper mafic gabbronorite and quartz norite. This geological setting is conducive to hosting high-tenor nickel sulphides, particularly in the basal ultramafic units. 

Key prospects within the project area include the Bruvann Mine, but also Rånbogen, and Arnes:

1. The Bruvann deposit, though largely mined out, remains open along strike. Historical data indicates the presence of a disseminated sulphide zone, with high-grade massive sulphides reaching up to 5.87% nickel. Unmined copper-rich zones south of the mine present further exploration opportunities.
2. Rånbogen, located 4.5 kilometres northeast of Bruvann, features a 1.6-kilometre zone of nickel-copper mineralisation. Historical drilling revealed intercepts including 17.5 meters at 0.53% nickel and 2.5 meters at 1.13% nickel. The prospect remains underexplored, with potential extensions to depth.
3. Arnes, located 2.5 kilometres north of Bruvann, is characterized by disseminated sulphides with lower metal tenor. However, its geological setting suggests the potential for undiscovered massive sulphide mineralisation at greater depths.

Financial Agreement

The Råna project is being explored through a Transaction Implementation Agreement with ASX-listed Kingsrose Mining, which can earn up to a 75% interest in the project over a period of eight years.

Below are the key financial terms and milestones:

First Milestone (For 10% of shares in the JV Company) — Incorporation of the joint venture company with an issued capital of 90,000 shares, and allocation of 80,000 shares to SRH and 10,000 shares to Global Energy Metals. Transfer of exploration licenses to the JV company, 10,000 JV company shares issued to Kingsrose, AU$30,000 paid to SRH by Kingsrose.

Second Milestone (For 51% of shares in the JV Company) — Kingsrose must incur at least AU$3 million in expenditure within three years, including AU$1 million for 2,000 meters of drilling by 31 December 2023, and 3,000 meters of drilling and preliminary metallurgical test work by 31 December 2024. Consideration of 94,617 JV company shares to be issued to Kingsrose, 10,513 JV company shares issued to GEMC and 1 million Kingsrose shares issued to SRH.

Third Milestone (For 65% of shares in the JV Company) — Additional AU$4 million expenditure by Kingsrose within two years following the second milestone. Consideration of 103,391 JV company shares issued to Kingsrose, 3.5 million Kingsrose shares issued to SRH, AU$250,000 paid to SRH by Kingsrose.

Fourth Milestone (For 75% of shares in the JV Company) — Additional AU$8 million expenditure by Kingsrose within three years following the third milestone. 10,000 JV company shares issued to Kingsrose, AU$750,000 paid to SRH by Kingsrose.

Alongside a few common t’s and c’s, it’s also worth considering the Net Smelter Royalties: the project is subject to three NSRs of 1% each, payable to GEMC, Electric Royalties Corp, and Chincherinchee Pty. Additionally, under Norwegian mineral law, there is a 0.5% net smelter royalty — these are not currently important but should not be ignored should the project advance.

This exploration deal was agreed on 17 January 2023 — a day later Kingsrose was selected to participate in and benefit from the BHP XPLOR accelerator program to the tune of US$500,000. 

Was this a coincidence? No. Kingsrose Managing Director Fabian Baker noted at the time ‘We are delighted to have been selected to participate in BHP Xplor, and to collaborate on our concept for nickel discovery in the Nordic region.’ As part of the deal, BHP gets exclusivity and pre-emption rights over assets the junior explores — and this will include Råna as Kingsrose will eventually become the 75% and therefore majority shareholder.

Indirectly, owning MET1 shares gives investors access to a BHP exploration program with 

a readymade buyer/JV partner with very deep pockets.

In the 28 June final results, MET1 noted:

• Project partner/operator Kingsrose Mining had already completed a 4,318m drill programme across 12 holes. 
• Identification of new zones of nickel sulphide mineralisation, further demonstrating the potential of the largely underexplored Råna Intrusion.
• The discovery of mineralised bodies at the Rånbogen and Malmhaugen prospects.
• Identification of multiple high‐priority targets, including areas of outcropping massive sulphide nickel mineralisation associated with conductive geophysical anomalies extending to depth.
• Kingsrose has already started the 2024 field season with geological mapping to identify additional targets for core drilling later this year.

And just last week, the company advised further drilling was imminent. Kingsrose has entered into a service agreement with Arctic Drilling AS for the commencement of helicopter supported core drilling at the Rånbogen prospect in August (essentially starting within days):

• Drilling is expected to finish in early September 2024, with assay results expected during October to November 2024.
• Drilling is focused on the two targets identified last year through the geophysics.
• These targets comprise shallow, highly conductive electromagnetic anomalies immediately down dip from mineralised nickel-copper-cobalt massive sulphide at surface.
• Completion of a minimum 700m of drilling will satisfy the drilling milestones under the Transaction Implementation Agreement.

Owen enthused that ‘This strategic work programme is aimed at testing two compelling anomalies characterised by highly conductive EM responses down dip of nickel-copper-cobalt mineralised massive sulphide in outcrop, which were identified during last year's core drilling and are located within a previously undrilled area.’

Kingsrose has already received dispensation for helicopter use from the local Municipality including drill rig moves and personnel/supply logistics, executed land access agreements with landowners, engaged with the local reindeer herding district, communicated with Sami Parliament to identify cultural heritage sites, and completed a baseline water quality survey and a drill site flora study, alongside commencing a noise survey.

As a reminder, two shallow, moderate-to-strong bedrock conductors were identified through geophysics at Rånbogen by Kingsrose back in 2023. Each target comprises modelled EM plates situated at steep gradients in Magnetotelluric geophysical data, coincident with mineralised disseminated and massive sulphide at surface:

• Target 1 is a 170m long, 100m deep steeply dipping zone comprising two modelled EM plates with conductance between 6800 and 9600 siemens.
• Target 2 is a 150m long by 50m deep, steeply dipping zone comprising two modelled EM plates with conductance between 1900 and 2800 siemens.

These targets enjoy the same geological, geochemical and geophysical signatures as the mineralised intercepts drilled elsewhere in the Rånbogen and Malmhaugen area during 2023. The targets are inferred to be closer to the base of the intrusion than the mineralised intercepts discovered in 2023 drilling, which implies good potential for high tenor mineralisation.

The bottom line

Metals One has:

• A share price which has fallen by more than 80% to an all-time-low of 0.78p from an IPO price of 5p just one year ago.
• A market capitalisation of £2.55 million, which vastly undervalues the company given money already sunk into the ground, cash at hand, and asset values. 
• Millions have already gone into the ground; a shell alone would be worth £1 million.
• Pole position for EU grant funding at both assets, similar (but likely smaller) to funding expected by GMET in the US.
• Imminent further drilling at Råna with a JV partner that was selected for a BHP XPLOR grant, the same grant enjoyed by EST prior to its rise.
• This JV is worth millions of dollars more than the market cap, with assays to return in Q4.
• $3 billion of metal at the Black Schist Project for which a Preliminary Economic Assessment is being prepared, which should also land in Q4.
• A source of low opex and environmentally friendly nickel, which is evidenced as profitable at today’s low given neighbour (and government run) Terrafame’s operating mine.
• Enough cash runway until at least 2025.

It will re-rate.

— Charles Archer, 30/7/2024