Mining Journal Article

Metal Tiger’s Botswana arbitrage
With the MOD Resources (AU:MOD) share price having rocketed 350% in the
past year, many investors will be thinking they have missed the chance to grab a
cheap piece of the T3 copper-silver action in Botswana, of which the company
owns 70%.
• Daniel Gleeson
• 28 Mar 2017
• 4:29
• Feature
A core asset: Metal Tiger is trying to highlight its main asset – the 30% stake in the T3
copper-silver project
These same investors may want to consider the share price of the owner of the
remaining 30% interest in T3, Metal Tiger (LN:MTR). The London-listed
investment entity, which also owns close to 5% of MOD, has not had the same
fortune. Its share price is down 6% over the same timeframe.
Yes, its reduced exposure to the burgeoning project validates a discount. Yes,
Metal Tiger has other interests outside of Botswana. And, yes, it is an investment
company with little operational control, and a £23 million (US$28.96 million)
market capitalisation inhibiting its ability to raise masses of cash, but there is still
an arbitrage opportunity to be snapped up.
Cognisant of this, the newly-installed management of Metal Tiger is doing
everything it can to make such a selling point even more appealing.

First, the company is making plans to spin-off its interests in polymetallic assets
in Thailand. It has already completed a pre-initial public offering of shares in
Kemco Mining to raise £514,500 (US$641,793) and hopes to carry out the full
IPO in the June quarter.
Second, it has ceased joint venture activities with Kibo Mining (LN:KIBO) in
Tanzania, while declaring its interests in projects in Spain and Russia as noncore.
Third, it has completed the allocation of investment funds in its asset-trading arm
and is looking to exit its investments in metal projects – bar its MOD holding – to
concentrate on its core business.
Under the stewardship of chief executive Michael McNeilly, the company has
simplified its structure and, sensibly, emphasised its most attractive assets: the
30% stake in T3.
If getting an immediate piece of the high-grade resource – 350,000t of copper
and 14 million ounces of silver at 1.24% Cu and 15.7g/t Ag – and the longerdated
potential of the 14 exploration licences in Botswana is not enough to lure
investors in, Metal Tiger’s Thai sweetener could seal it.
The Kemco Mining spin-off will see Metal Tiger shareholders retain a toehold in
the company operating both its Song To and Boh Yai silver-lead-zinc assets in
western Thailand. Having previously been mined until 2002, the company is
confident they can can be restarted by the end of 2018 for a modest amount of
cash.
Metal Tiger’s plan is to use dividends from Kemco to pay its way at T3. In this
respect, it’s worth taking a look at the 2013 preliminary economic assessment on
the Thai assets.
This study, non-compliant as far as AIM goes, envisaged restarting the
operations for US$12.6 million in return for a post-tax net present value (7.5%
discount) of US$69.6 million. There is a ‘but’. These economics factor in a US$30
per ounce silver price (US$17.86/oz today). They are also based on zinc and
lead prices of US$0.95 per pound and US$1/Ib, respectively (US$1.27/Ib and
US$1.06/Ib, currently).

A competent person’s report, with a resource update, is expected next quarter
and should allay any fears about the project being economically feasible, while
the company’s intention to have two Thai directors on the board of Kemco, plus
the fact Song To and Boh Yai both operated before, should considerably improve
the chances of the projects getting licences to operate.
A dividend from Kemco, on top of the £1.29 million Metal Tiger had in the bank as
of August 22, isn’t likely to meet the 30% cash call that could come from a T3
build – estimated at A$40.5 million (US$30.85 million) in the 2016 scoping
study – but it gives conviction to McNeilly’s claim the company is not out for a
“quick buck”.
“We’re focused on getting to the definitive feasibility study stage and then we
have to take a view of the financing environment,” he told Mining Journal.
Still, McNeilly knows the company would have no option but to consider a
significant offer should one be made for its Botswana project stake.
If the exploration keeps going as it has – MOD recently intersected a substantial
72.6m copper zone grading 1.5% Cu and 27g/t Ag directly beneath the existing
T3 resource – there is every chance of this happening.
This arbitrage will not stay open forever.