Anglesey Mining – Comment on Labrador Tata link up

PUBLISHED: 14 Mar 2013 @ 20:59 | Comments (7) | More info about Tom Winnifrith

Shares in fully listed mining group Anglesey (LSE:AYM) have bounced sharply to 9.375p, valuing it at £15 million, on the back of news that TSX listed Labrador Iron Mines in which it holds a 15% stake has signed a link up with Indian giant Tata. LIM’s shares have bounced on the move to 75 cents valuing the Anglesey holding at just over £9 million. So is this the start of a big rebound.

The deal will see Tata sticking $30 million in LIM to buy a 51% stake in its Howse deposit but as importantly will see the two companies working together to ensure the successful joint development of rail and port infrastructure facilities at Schefferville and Sept-Iles.

That should improve the maths on LIM’s flagship James mine.

Anglesey’s other asset is the old Parrys Mountain deposit in Anglesey, North Wales. It has been mothballed for years and it is hard to see how this can be monetized short term. And so the issue is what is the real value of its stake in LIM.

In the past, when sentiment towards the sub-sector was rather less bearish analysts have suggested that LIM could be worth several dollars per share. If indeed such a valuation is achieved and the Tata deal greatly strengthens the balance sheet, then Anglesey has further to go. In the short run the extreme volatility we saw in the share price earlier this year was directly linked to swings in the iron ore price. And on that I am not exactly bullish. But with a solid balance sheet we can afford to wait for the iron price to move ahead further. I would not chase Anglesey at this level but those who took my advice to buy HERE should not sell either.

Tom Winnifrith writes for 10 US and UK websites – you can access all of his material via www.TomWinnifrith.com but the smartest way to be alerted to all of his articles is by following him on twitter @tomwinnifrith

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