UPDATE – We are to speak with a mining executive with a live project in Greenland and whom is familiar with the Bluejay interest at Dundas later today and will update ref his experiences operating there and his opinion as to likely timescales for an exploitation licence let alone any future cash flows from mining sales (which is not by any stretch a cert). Given Rod Mcillree’s comment that they have just £12m left of the £17m placing raised only months ago, and their broker’s own assessments of the “tens of millions” required to build out the infrastructure there, we suspect that the weakness seen in recent months (which coincided with the Sunday Mail article of a £50m rights issue moot) is down to insiders being aware of a raise being required on the horizon in 2019 (only, amazingly, 5 months away) aswell as leveraged players speculating on an offtake agreement getting margined out. Also, as ALBA has effectively ZERO in the way of ascribed value in the current stock price for their Thule licence area which is just adjacent to JAY, the light bulb may be going on for some holders as to just what justifies the disconnect for the SAME product between the two companies.
We also note the key word in the RNS from the company yesterday per here – “I am delighted to welcome Ian to the board and I look forward to drawing on his significant commercial experience as we finalise off-take discussions” Note the use of the word “discussion” not “agreement”. Major difference in commercial implications. Link HERE.
Our stance has been to Sell Blue Jay for many months and remains resolutely intact.
We received the briefing note below from a mining specialist with extensive experience and connections of operating in Greenland. There is particular read through to Blue Jay Mining given the highlights, namely the seeming timescale to actually achieve an Exploitation licence and the difficulties in obtaining this. In particular, the fact that only 6 of these licences have ever been granted and only one company is in production leads us to believe that capitalising JAY at near £150m against cash resources of @ £12m (and dwindling) remains a major value dislocation in this space.
The intention of this note is to provide a brief overview on the mining industry in Greenland, together with a comment on the regulatory issues that face exploration companies.
The Mining Industry in Greenland is regulated by an act passed by the Greenlandic Parliament in December 2009. Before the implementation of this act, mineral resource was regulated by a joint Greenlandic – Danish administration. Greenland now has full authority to make decisions regarding principal investments in minerals resource activities including the granting of licences.
Mining code – this was reviewed in 2013 along with taxation policy and the implementation of a much more robust environmental policy.
- An exploitation licence regarding minerals resources will, as a main role, only be granted to intended companies domiciled in Greenland.
- Following the granting of an exploitation licence and prior to commencement of development and production the licensee must submit a development plan to MSLA for approval together with an environmental assessment.
- Licence is granted for 30 years, which can be extended to 50 years but no longer.
- Exploitation licence will only be granted when the environmental and social sustainability assessment has been approved.
- To date only 6 exploitation licences have ever been granted with only one company in production.
Protection of the environment is high on the agenda in Greenland, and the Greenland Self Government requires mining companies to carry out the ESIA based on baseline studies from 2-3 years before mining operations can commence.
Citronen Fjord Project:
Exploitation Licence granted on 16/12/16 to extract zinc ore.
- Environmental Impact Assessment (EIA) started in 1994. Took 30 years to finally be granted.
- To say that it is a very long drawn out process to obtain the EIA is an understatement.
Additionally, once you have obtained an exploitation licence, you still have to produce further social impact studies and develop a plan before you can be in production.
2012 – 79 exploration companies
2018 – 6 exploitation licences awarded
2018 – 1 company in production.
Many projects fail in Greenland precisely due to the measures put in place by the Government with regard to the ESIA, this tends to raise the costs of production to a level which challenges the economic viability of a project.
In order to secure a legally binding “off take” agreement, a company will need to have an exploitation licence awarded together with the ESIA and mine plan. Without this in place it is very difficult to confirm the date for the first shipment, which is what the off taker will require in the legally binding agreement and, if the shipment does not arrive, there will be financial penalties. A company is able to enter into discussions with potential off takers to identify a market for the end product but, at best, may be able to obtain only a Letter of Interest but I do not believe that this will provide confirmation of any prices or timings.