Tertiary is a fluorspar mine development company with large scale projects in Europe and the U.S. Its two main assets, the MB Project in Nevada and Storuman in Sweden, both have potential to be average to low cost operations with targeted production costs of between $150 and $200/t of acid grade fluorspar. Tertiary’s strategy is to advance both projects during this current down-cycle,so they are construction ready when mine finance conditions improve. Management expects this to also coincide with a shortage of new fluorspar mines and potentially higher fluorspar prices. We have updated our valuation to reflect the current depressed fluorspar price, offset by progress made at MB and Storuman. We calculate a 9.0p target price, 4.5x the current share price.
Fluorspar is probably the most essential raw material that no one’s heard of. It’s one of 20 raw materials on the European Commission’s critical list, while in the U.S. fluorspar is classified as a Strategic Material. Both regions are in need of a long term, local and reliable source of supply and Tertiary’s two main projects suit this requirement.
MB Project – Nevada
Despite lagging Tertiary’s Storuman project in the mine development process, in our opinion MB is of similar importance and potentially higher value. It is very large scale and located in a stable and mining friendly jurisdiction. Also very important is the U.S’s reliance on imported fluorspar, mainly from Mexico, which makes MB a strategic asset.
Storuman – Exploitation Concession granted
On February 18 2016 Tertiary Minerals was granted a 25 year Mining Concession for Storuman. Although the permitting process is not finished (the next stage is the Environmental Permit) this is a major step forward which adds value to the project and reflects strong support from the Swedish Mining Inspectorate.
Fluorspar prices – positive outlook
Both acid and metallurgical fluorspar prices are at 5 year lows. Although downside risks remain (perhaps from weaker China macro), over the medium to long term the outlook is positive, driven by global demand growth of fluorine containing products. Valuation and recommendation Our Tertiary valuation is based on a sum-of-the-parts approach with values for MB and Storuman, based on conceptual mine models and discounted to reflect funding dilution and other execution risks. We calculate a $26.5m valuation which equates to £19.6m or 9.0p per share, and a BUY recommendation.
Target price – 9p
Full Beaufort Securities research note here Tertiary-Minerals–9-_S