Shares in Canadian junior mining explorer Atico Mining (ATY-V), while highly risky, have the potential to be a 10-bagger, maybe more. Exploring in one of Colombia's top gold regions, Atico recently sunk one of the best exploratory drill holes found anywhere in the past few years. It found a seam of ore a jaw-dropping 119 metres thick, containing 6.9 per cent copper and 6.3 grammes of gold per tonne. A seam of this width with just the copper or just the gold mineralisation would be a great discovery; having both indicates the potential for a world-class mineral deposit that could attract major mining companies.
- Possible world-class copper-gold discovery
- Fully funded for exploration
- Experienced management
- Shares eligible for an Isa
- Thinly traded shares
- Exploration is risky
Atico is exploring at the El Roble underground copper-gold mine in Colombia, where the company has the option to buy a 90-per-cent interest in the mine and surrounding land for C$14m (£9m) until January 2014. The current owners have operated the mine for the past 22 years and had exhausted most of what they could find.
But Atico's geologists knew that so-called 'volcanic massive sulphide' deposits, like El Roble, typically occur in clusters and thought more minerals could be found nearby. Exploratory drilling has quickly turned up several new 'lenses' - big blobs of high-grade mineralisation - below the mine and along the trend line, confirming the company's hopes. The key now will be to firm up the size of the new lenses and find even more.
To that end, Atico plans more drilling over the next six to nine months. Its bosses say there is the potential to discover as much new ore as has been mined in the past, maybe more. Importantly, the company has the funds for its drilling programme; it raised C$8m in a share placing at 65¢ each in January and in mid-January had C$10.5m cash.
ATICO MINING (TSX-V: ATY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 96¢ | MARKET VALUE: | C$50.0m | |
| TOUCH: | 91-96¢ | 12-MONTH HIGH/LOW: | 113¢ | 40¢ |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 21¢ | NET CASH: | See text | |
| Year to 31 Dec | Turnover (C$m) | Pre-tax profit (C$m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2010* | nil | -0.31 | -26.0 | nil |
| 2011 | nil | -0.62 | -5.0 | nil |
| % change | - | - | - | - |
Normal market size: 25,000 Market makers: 7 £1=C$1.56 *From incorporation on 15 Apr 2010 | ||||
Managing the project is a team with plenty of underground mining experience. The company's chief executive and president both hold top roles at Latin America-focused Fortuna Silver Mines, while Atico's senior exploration manager joined the company from Barrick Gold, where he was the miner's exploration manager for Colombia.
Despite the recent placing, trading in the company's shares is thin given its tight share structure. In addition, the shares are only quoted on Canada's TSX Venture Exchange, which is chiefly for resources companies. However, according to broker TD Waterhouse, its shares are eligible for holding in an Isa.
