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Tertiary Minerals Falls 10% On Audited Year End Results, What Now?

Tim Worstall
Tim Worstall trader
Updated 10 Dec 2021

Tertiary Minerals PLC (LON: TYM) shares fell 10% this morning on the publication of the audited year-end results up to 30 Sept 2021. This marks a roughly 50% fall in the share price since the summer.

Tertiary is an early-stage exploration company with a number of projects under investigation. There are prospects in the US (Nevada for copper, gold and silver, Zambia for copper).

There are no producing assets and so the only income for the company is whatever interest is earned on corporate resources in the bank account. The company is financed entirely by new capital being put in to cover exploration and administrative costs. This isn’t a problem it’s entirely normal for this stage of a mining company’s life. It does bring with it, though, certain features.

One is that the share price at Tertiary Minerals will be hugely geared to, leveraged by, any news of significant advances or discoveries at a prospect. The value of a mine is the net present value of all future revenue streams minus costs. So, the discovery – or in later stages, further proofs of – of significant mineralisation of a target metal will grossly change today’s valuation. 

This brings with it the fact that no particular news of very much doesn’t increase the price at all. Which is what has been happening at Tertiary. In this reporting period there just hasn’t been an announcement of some interesting find. Work progresses, more information is acquired, but nothing to move the dial as yet. 

The second feature is that all projects and prospects under discussion are many years away from exploitation and revenue streams. Again, this is normal for this type of mining company.  

But it does mean that the present valuation depends upon the price of money to carry it through those development years. 

As we can all see inflation is becoming a thing again and interest rates are on the rise. Well, interest rates are likely on the rise. This makes projects with long development times less attractive in current day valuations. That’s just how things work out – higher nominal financing costs are the same thing as a higher discount rate so the current value of long in the future revenues is lower. 

Tertiary Minerals do have interesting prospects. Their Zambian operations are in an area known for excellent copper results, just as one example. But everything they’re doing is a long time away from market and so subject to significant valuation changes just from those outside influences of capital costs and discount rates. 

The future of the share price at Tertiary is of course unknown. But it’s entirely possible that it will be hugely volatile. For exactly that reason of revenues being that far in the future. Any change in the results from a specific prospect or exploration hugely change that possible future revenue flow, the very thing that is so highly geared to the current capitalised valuation.

What’s needed to significantly move the share price at Tertiary is significantly positive results at one of its prospects.  

Should you invest in Tertiary Minerals shares?

Tertiary Minerals shares are traded on the London stock exchange's AIM market (the alternative investment market), which is the submarket specifically for smaller companies. AIM stocks are attractive to investors as they have tax advantages and smaller companies have the potential to benefit from rapid growth. But are Tertiary Minerals shares the best buy? Our stock market analysts regularly review the market and share their picks for high growth companies

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.