By Dr. Michael Green

Good news this morning comes from Pathfinder Minerals which is beefing up the technical know-how in the boardroom. Accomplished geologist Mark Gasson has just been appointed as an independent Non-Executive Director and brings with him some 35 years’ experience in gold and base metals exploration and development across Africa and South America.

Reading between the lines, Mark’s appointment speaks volumes. Rather than just being a litigation play, this is a clear sign that Pathfinder will be broaden its interest to take in other resources projects. This is tremendous news in that the company is at last going to make better use of its quoted status and benefit from the major uplift we are seeing in the value of resources projects globally.

It does look like Mark is clearly the right man for the job, as he has been both a Director and Exploration Manager of numerous mining companies as well as importantly having been involved in assessing mineral sands projects. Mark is a proven mine finder who has been instrumental in a number of major discoveries including 1Mt of contained copper at Tiger Resources’ Kipoi Mine, 250,000 tonnes of tin (grading at 3.5% tin) at Alphamin Resources’ Bisie Tin Project, 3Moz of gold at Amani Gold’s Giro Project, two billion tonnes of lithium for AVZ Minerals, which are all in the Democratic Republic of the Congo. That is not to mention 2Moz of gold in Tanzania.

Mark is a member of the Australasian Institute of Mining and Metallurgy. In the fullness of time, when the company is out of the close period, Pathfinder will be granting him with options over 6,000,000 ordinary shares at an expected exercise price of 1.25 pence per ordinary share, exercisable for a period of two years from the date of issue. Double the current share price, obviously Mark sees how undervalued this company is.

At the time, Dennis Edmonds, Chairman of Pathfinder, was able to point out that “The international arbitration which the Company is preparing to launch against the Government of Mozambique now opens up an opportunity for Pathfinder to consider pursuing other opportunities in parallel. As such, we are delighted to welcome Mark Gasson to the Board. His extensive technical experience will strengthen our ability to identify and progress other potential resources projects to run alongside the potential arbitration process.”

This looks like a welcome break at Pathfinder where under improved management, legal matters are now being dealt with by an iron fist with rather less legal niceties. All the litigation surrounds mining concession 4623C that Pathfinder lost through some illegal jiggery pokery way back in 2011. Basically, the company asserts that the Mozambique government acted improperly in transferring this licence away from Pathfinder through a transfer which was defective under Mozambique law and are now prepared to take the government to court.

Pathfinder had been planning to engage further with the government in an attempt to recover the licence and advance its development alongside a strategic partner. But, with no luck there, its Plan B where the company is seeking recourse to the Mozambique – United Kingdom Bilateral Investment Treaty (2004) with the support of litigation funders. Legal advice that Pathfinder has been provided with seems to make for good reading as the likely remedy from successful treaty litigation would be nothing less than the return of the licence to the company’s control.

In December 2020, investors learnt that the title holder of the mining concession 4623C as set out in the Mozambique Mining Cadastre Portal, had changed to TZM Resources S.A. Last week, we heard that Pathfinder’s solicitors had written to TZM to place it on notice that a dispute is underway regarding the ownership of the Licence and that, without an acceptable resolution of the dispute with the Government of Mozambique, Pathfinder intends to refer the matter to the International Centre for Settlement of Investment Disputes under the Mozambique – United Kingdom Bilateral Investment Treaty (2004). It is thought that a successful treaty claim against the Government of Mozambique in respect of this mining licence should frighten TZM or any others off from attempting to develop this licence.

Up for grabs is a huge prize as this ex-BHP Billiton mineral sands project is potentially world class. In all, BHP invested US$29 million on drilling/infrastructure to prove up an impressive resource in the mid-1990s. Back then, commercial circumstances did not merit future development. But now, Pathfinder is set to benefit from improved demand for ilmenite, the pigment for brilliant white paint. Importantly, Pathfinder’s project lies just 50km from Kenmare’s Mona Mine which in truth looks to be the natural buyer.

At this stage, we must point out the simply huge disconnect between Pathfinder, with a paltry £4 million market cap, and the estimated value of this mineral sands project and that of Kenmare Resources. Being potentially world class, it is not hard to put a big valuation on this project. The 2019 updated Scoping Study determined an NPV(10) of US$1.05 billion.

This should be compared with neighbouring Kenmare which has a market cap of £473 million and an EV of £517 million. So, there is plenty of opportunity for Pathfinder to really benefit from the big uplift in value seen in mining projects in the early stages to smartly push the project up the valuation curve. On top of this is now be added to corporate development opportunity of other resources plays being run alongside.

We initiated coverage in April 2020 when the stock was trading at 0.525p with an initial target price of 7.23p and a Conviction Buy stance. At that stage were excited that Pathfinder was at an enviable position of being on the cusp of a journey which could create material shareholder value. Now with the stock at 0.675p, we are more than happy to reaffirm our positive stance.

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