Cornish Metals shares jump on plans to reopen South Crofty project

Canadian-owned Cornish Metals recently closed a deal with Sir Mick Davis’s Vision Blue to help fund its operation of the South Crofty tin mine. The company has yet to turn a profit, but with rising global tin prices, driven by the technology sector, it may reap benefits in the near term.

Cornish Metals [CUSN.L] has received a $40m cash injection to help reopen its flagship South Crofty tin and copper mine, which closed in 1998 and was Cornwall’s last working mine.

Since the announcement on 23 May, the stock has risen 39% to close at 26p on 31 May. However, year-to-date, the Cornish Metals share price is down 3.7%. 

Despite being Canadian-owned, Cornish Metals — as its name suggests — is a mineral exploration and development company focused on projects located in Cornwall, UK. The company acquired the iconic South Crofty site in 2016, driven by a growing global demand for tin.

In the new deal, £$25m of the money comes from Vision Blue Sources, an investment company founded by former Conservative politician and Xstrata boss Sir Mick Davis, to focus on clean energy-related mineral and metal companies. The deal will give Vision Blue approximately 27% of the value of Cornish Metals’ shares.

Cornish Metals expands its portfolio

The South Crofty project is a cornerstone of Cornish Metal’s portfolio. The new cash injection will help pay for the pumping required to remove water from the mine so it can operate once again. On announcing the deal, Richard Williams, CEO of Cornish Metals, stated: “The completion of this financing allows Cornish Metals to push ahead with the dewatering of the mine and delivery of a Feasibility Study in order to make a production decision for the South Crofty tin project.”

Cornish Metals’ portfolio also includes the United Downs copper-tin project, situated 8km east of South Crofty. In December, Cornish Metals reported finding high-grade copper, as well as tin and silver, in granite after drilling at the site. Metals such as tin, copper and lithium are increasingly important for many applications in the technology sector. “Tin is essential to anything electronic, including electric vehicle components, computing, 5G, robotics, renewable power generation, and the electrification of the economy, making South Crofty a strategic asset with the ability to provide a secure, traceable, sustainable supply of this important metal,” Williams said in late March, when the investment was first announced.

The company holds 15,000 hectares worth of exploration licences across Cornwall, while its North American businesses include Nickel King, based in the Northwest Territories in Canada.

Can the company’s losses be translated into profit?

Last week, Cornish Metals also issued a trading statement reporting on its financial performance in the year ending 31 January 2022. 

This highlighted its completion last February of its listing on the London Stock Exchange’s Alternative Investment Market (AIM) stock exchange. The move raised £8.2m to help fund the United Downs project. The company’s main listing is on the TSXV, the Toronto Venture Stock Exchange.

Founded in 2004, Cornish Metals’ projects are mainly in the development stage, and the company is not currently profitable. For the year, it announced operating expenses of around CA$3m, as opposed to nearly CA$2m for the previous year, citing costs related to the AIM listing as partly responsible. Its total comprehensive loss for the year also grew from CA$1.5m to CA$3.3m year-over-year. 

Cornish Metals is an associate company of Osisko, the Canadian mineral exploration firm. Its largest shareholder is Barkerville Gold Mines, a subsidiary of Osisko, which holds around 10.5% of the company’s share value following the latest deal. 

Will tin prices keep rising?

Cornish Metals’ earnings have declined by 14.9% over the past five years, according to Simply Wall Street, and its revenue is negligible, standing at less than $1m. Its shareholders have also been diluted in the past 18 months, following the Venture Blue agreement and other deals.

However, investors may find their patience bears fruit in the future. South Crofty’s mining permit is valid till 2071, and the company may capitalise on increasing tin prices, with the growing need for supplies of the metal. In March, tin hit a record high of more than $50,000 per tonne on the London Metal Exchange, after seeing huge growth throughout 2021.

However, tin prices have since dipped, reflecting volatility in the commodities market since the Ukraine-Russia war commenced. It is currently trading at around $34,250 per tonne as of the end of May. Most of the world’s tin supply is mined in Southeast Asia.

Few analysts are offering 12-month forecasts on Cornish Metals shares at the moment. One analyst at the Financial Times expects the Toronto-listed Cornish Metals share price to rise to CA$0.49 in the next 12 months, from its current CA$0.48 on 31 May.