Auking Mining Ltd
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Feb 04 2022
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Investment Memo: AuKing Mining Limited (ASX:AKN)
What we want to see from our investment in AKN during 2022
4th Feb 2022
This investment memo is a short, high level summary of why we continue to hold AKN and what we expect the company to deliver in 2022. The purpose is to record our current thinking as a benchmark to assess the company's performance against our expectations 12 months from now.
What does AKN do?
AuKing Mining (ASX: AKN) owns 75% of a JORC copper/zinc resource near Halls Creek in WA. AKN is focused on exploring and developing this resource.
What is the macro theme behind AKN?
Copper is already the third most widely used metal in the world - and with demand set to increase from things such as electric vehicles and semiconductor wiring — we see it as leveraged to the global electrification boom and anticipated commodities super cycle over the coming decade.
Why did we invest in AKN?
- Metallurgical solution away from production: AKN has an already established JORC resource that sits across 2 already granted mining licenses. If metallurgical testwork is positive, then AKN can put the shallow-near surface resource into production quickly.
- Established JORC with upgrade upside: A recently completed drilling program together with prospective areas have the potential to increase the resource significantly. Any additional tonnage for the resource will mean the base valuation of AKN increases.
- Project acquired at a time when copper prices were depressed: AKN acquired its core asset at a time when copper prices were trading at ~US$2.60/lb, with copper now trading at US$4.49/Lb just shy of its all time high of US$4.90/Lb. If a processing solution for the Onedin deposit is found the company could quickly put the project into production selling into high copper prices.
- Low enterprise value (EV) means leverage to a discovery: Company has ~75 million shares on issue with ~7 million under escrow. With a market cap of $11.6M and Cash in the bank of $2.5M the enterprise value is only $9.1M.
What do we expect the company to deliver in 2022?
Objective #1: More drilling at the Copper-Zinc project to upgrade the JORC resource.
- More drilling at both the Onedin and Sandiego deposits. We want to see deeper drilling at the Sandiego deposit to test the most recent mineralisation found under the known resource zone and some extensional drilling at the Onedin deposit.
- We want to see the drilling eventuate into an upgraded JORC resource.
Objective #2: Complete metallurgical testwork on the Onedin deposit:
- We want to see AKN push forward aggressively with metallurgical test-work testing, this is the key to unlocking the shallow near-surface ore at the Onedin deposit.
Objective #3: Test its regional prospects.
- We want to see AKN go in and test the Emull prospect where Northern Star Resources had previously identified an open-pittable resource of ~4.7mt @4.5% Zinc +0.33% Copper + 0.2% Lead.
What could go wrong?
- Metallurgical risk - The shallow part of the JORC resource that can be quickly mined by AKN at the Onedin deposit is made up of oxide-hosted Copper mineralisation. Oxide-ore is more complex to process, and with AKN’s resource in particular, previous attempts to find a processing solution have failed. There is a chance a solution is not able to be found and this part of the resource is deemed stranded.
- Commodity pricing - Copper is a highly industrial metal that is reliant on buoyant economic growth, if there is any significant decline in economic activity globally then copper prices are likely to de-rate.
- Funding risk - AKN is still doing a lot of exploration work and so is reliant on financing from investors who are willing to fund high risk exploration programs. Market conditions turning negative could mean getting these type funds may be difficult.
What is our investment plan?
AKN is a new investment and this is the initial investment memo for AKN.
Consistent with all of our investments in exploration companies, we will look to partially sell some of our holdings (~20%) if the share price runs to partially de-risk our position, in line with our investment plan detailed in our 2022 investment memo.
We have in place a mandatory 90 day trading blackout on all our new investments prior to being able to sell a maximum of 20% of our position, which gives the company time to deliver some material announcement towards its plan.
Our plan is to review our investment thesis based on the progress the company makes with respect to our 2022 investment memo.
Disclosure: The authors of this article and owners of Catalyst Hunter, S3 Consortium Pty Ltd, and associated entities, own 1,515,152 AKN shares at the time of writing this memo. S3 Consortium Pty Ltd has been engaged by AKN to share our commentary on the progress of our investment in AKN over time.
Our Past Commentary on Auking Mining Ltd
|Type||Date||Share Price $||Title|
|19-Aug-2022||$||WA Copper Stock - AKN - What we are looking to see next|
|21-Feb-2022||$||Monster Copper Intercept Hit - So what’s Next?|
|04-Feb-2022||$||Shallow Copper Resource - waiting to be de-risked through “met work”|
Most recent catalysts for Auking Mining Ltd
Catalyst Hunter 19/08/2022
WA Copper Stock - AKN - What we are looking to see next
AKN is down ~40% since we first Invested, and currently has a market cap of ~$15M. This is an update to look at the progress that AKN has made at its' projects.
Catalyst Hunter 21/02/2022
Monster Copper Intercept Hit - So what’s Next?
Today our copper investment Auking MIning Ltd (ASX: AKN) posted its first assay results from a seven hole diamond drilling programme confirming a monster intercept of copper.
Catalyst Hunter 04/02/2022
Shallow Copper Resource - waiting to be de-risked through “met work”
It's been 3 months since our last new Catalyst Hunter investment and today we are adding a new stock to our portfolio. Our latest investment is Auking Mining Ltd (ASX: AKN).