Alicanto Minerals Limited
Sala Mineral Resource Estimate: On 13th July 2022 and in just over 12 months after the acquisition of the Sala Zinc-Silver-Lead Project, AQI released a significant maiden mineral resource estimate (MRE): 9.7 Mt @ 3.2% Zn, 47 g/t Ag and 0.5% Pb for 311,000 t zinc, 15 million ounces of silver and 44,000 t lead at a cut-off grade of 1.5% Zn equivalent.
History: The Sala mine has a long operating history since the 15th century. Modern exploration techniques are leading AQI to discover new mineralised lodes in the vicinity of the mine.
Sweden Context: Over a few centuries, Sweden has developed a significant polymetallic base metals (and precious metals) mining industry including recycling and smelting capacity. The maiden Sala mineral resource represents already the largest active undeveloped Zn-Ag-Pb mineral resource in Sweden. Sweden accounts for 36% of Europe’s zinc production and is the second largest producer next to Russia. Considering the sanctions against Russia, more pressure is being put onto Sweden to supply the region with Green Zinc. Sweden is leading the Green Transition in Europe with its 98% fossil fuel free electricity supply. The Swedish government is quite supportive of the project and is very keen to see Sala get up and operating. Sweden also benefits from low operating costs e.g. US50¢/lb Zn at Garpenberg (50km away) while extracting ores between 450m and 1,400m depths.
Sala Scale: The deposit is open in every direction with numerous highly prospective targets to drill or currently being drilled. Considering the prospectivity, we have considered that AQI will delineate in time a mineral resource three times the maiden resource.
Path to Production: in line with its scale, location, de-risking from past operations and government support, the Sala project is highly likely to reach production status.
Scoping Study: To comply with the regulations of the Mining Inspectorate of Sweden, AQI is working on a scoping study, while expanding the mineral resource. The study should benefit from the historical mining and processing operations of the same mineralisation and from the significant infrastructure readily available.
Management: the AQI team has a highly successful track record including Auteco Minerals (AUT), Bellevue Gold (BGL) and Centaurus Metals (CTM).
Metals Outlook: despite the recent correction, the outlook for zinc and silver prices remains positive with market deficits expected for zinc and the silver ETP market likely to grow substantially higher over the next few years.
News Flow and Funding: upcoming news flow includes drilling results, metallurgical testwork, scoping study, update of the mineral resource estimate and environmental permitting milestones. AQI is well funded to continue to grow the Sala mineral resource with $6.1m cash as at 31 March 2022.
AQI Valuation: Considering the stage of evaluation of the Sala project and the current depressed market conditions, we used a selection of ASX-listed market peers and an Enterprise Value per Resource multiple to derive a target valuation. Assuming an EV/Resource of $75/t Zn Eq. and a mineral resource three times the maiden resource, we can derive a value of $96 million for AQI. Adding 15% additional shares for a future capital raising, this represents a target price of $0.22 per share.
Swedish Perspective: Listed on the Nordic Growth Market, Sotkamo Silver AB (NGM: SOSI) has an enterprise value of about $100 million (close to all time low, given current market conditions). With a mineral resource of 194 kt Zn Eq,, its EV/Resource multiple is still in excess of $500/t Zn Eq. In comparison, AQI has the potential to delineate in its unique Swedish low cost mining environment, a much larger mineral resource and attract a significantly higher valuation.
