Regency Mines - Initiation of Coverage
Focus on battery metals and US coking coal should provide a strong re-rating of the shares and the prospect of early cash flow
Regency joined AIM in 2005 seeking to add shareholder value not only through mineral exploration but also by impressive deal making, using the same skill set that has been employed at Red Rock Resources. Always quick to spot undervalued opportunities, Regency used the Horse Hill Developments/Gatwick Gusher as a cash point to net a £1.8 million profit which is now being re-invested strategically to add substantial value.
Metallurgical coal JV announced – and separate deal to gain 100% interest in US coking coal mine
In a classic Regency-style deal, the company has acquired the right to put what looks to be the last dollar into reopening the Rosa Mine in Alabama, which has existing NI 43-101 Proved Reserves, raising its stake from 20% to 100%. On 27th February Regency announced a Joint Venture with Legacy Hill Resources Ltd targeting US metallurgical coal opportunities. Although these are early days for the JV this could be the company’s most important development of recent years.
World class battery metal project is being repackaged to add value
The vast Mambare nickel/cobalt project and the DNi processing licence now forms the solid base on which to build a battery metals and technology arm which could allow Regency to share the lofty valuations of its peers.
World class project number 2 is in niobium, tantalum and rare earths
Regency also owns Motzfeldt, which is the world’s largest undeveloped Niobium-Tantalum deposit with significant in-situ value rare earth credits. Motzfeldt is being actively promoted to joint venture partners.
EBITDA multiples and peer comparisons suggests upside of 436%
Our conservative valuation demonstrates the stock is under-priced. We initiate coverage of Regency with a target price of 2.41p and Conviction Buy stance.
RISK WARNING & DISCLAIMER
Regency Mines is a research client of Align Research. Align Research holds an interest in the shares of RGM. For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.
| Year to June | 2016A | 2017A | 2018E | 2019E |
|---|---|---|---|---|
| Revenue (£'000) | 25 | 113 | 150 | 200 |
| PTP (£'000) | (1,966) | (534) | 1,030 | 280 |
| EPS (p) | (1.20) | (0.13) | 0.15 | 0.03 |