Alien Metals Ltd (LON: UFO) shares are up this morning on news about the reopening of the Elizabeth Hills silver mine project. The news is that equipment has been sourced to conduct the next stage of that reopening and is moving to the site. This is clearly a requirement for that reopening to occur.
The full announcement from Alien Metals about Elizabeth Hill is here.
The Elizabeth Hill silver mine has been closed this past 20 years. The project is to reopen it. This is a normal and usual mining technique. For prices of metals change over time, the technology available to mine them changes – advances that is. Ore bodies and deposits that weren’t worth mining at one price might become so at another. Further, the ability to mine a particular configuration gets better over time. Finally, the ability to extract a target metal from a particular ore can and will improve.
So, a useful prospecting technique is to look at older deposits and see whether new prices and technologies make them viable again. This is exactly what is being done by Alien Metals at that old Elizabeth Hill silver mine.
A significant advantage is that a large part of the work has already been done. There are shafts and tunnels and so on. Less earth and rock need to be moved to gain access to that ore body. However, that ease of access is not perfect, mining often involves dealing with significant amounts of water – flooding that is.
This is the next stage of the Elizabeth Hill project for Alien Metals. Drilling has been conducted around those old workings showing interesting if complex mineralisation. Copper, nickel and palladium values have been recorded.
The Elizabeth Hill workings themselves contain significant water. So, Alien Metals is to evacuate that and so be able to examine the ore body from the inside as it were. This will allow a much better estimation of the remaining content. Also, how much-improved mining and extraction techniques can change the economics of the mine. It’s known that there is at least some useful mineralisation there. The question is whether it is now again economic both in quantity and in form.
The work on this mine drainage and internal inspection will continue well into next year. There is though a trading opportunity here. The first is simply the general view of the market on the progress of that remedial work. But there is also something more.
The results of that drilling programme, the assay results, are expected later this month. That will possibly be the next new news to produce a share price change in Alien Metals. Significantly rich results could be expected to produce a bounce or even full rerating of the share price. It’s also possible that those surface mineralisations are not so rich and so the project will rely upon the examinations internally of the ore body once the drainage work allows.
The trading opportunity is to be correctly positioned for the outcome of those assay results.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.