14 Mar Cornwall springs back to life as a mining investment destination
Cornwall’s once proud mining heritage is enjoying the early stages of a renaissance
South Crofty is to the south-west, near Redruth
In the early part of 2016, shares in Strongbow Exploration (CVE:SBW) more than doubled as the company announced the acquisition of the famous South Crofty tin mine, near Redruth in Cornwall.
Subsequently the shares gave back some of those gains, but are still, one year on, more than 50 per cent better off on the strength of the Cornish deal.
Of course, mining markets have been on the move too and sometimes it’s hard to separate the quality of a deal from the momentum it rides on.
But in this case there is a wider picture, wider even than the usual commodity cycle that runs every ten or 15 years. This picture is the revival of the mining scene in Cornwall, back at the last gasp from a close brush with death.
South Crofty itself assumed a kind of talismanic status in Cornwall towards the end of the 20th Century as the only operating tin mine left in the UK.
Its proximity to the Cambourne School of Mines, one of only two schools in England dedicated solely to the craft of mining, added a certain poignancy to its eventual closure in 1998.
Once at the heart of a thriving British mining scene, Cambourne was cast adrift, an outpost of memory able to nurture skills for export, but precious few for home consumption in Cornwall.
Bu that may now be about to change.
Strongbow has just put together a study that makes the economic case for a redevelopment of South Crofty and renewed production.
The plan is to mine nearly 2.6 mln tonnes of mineralised material containing 88 mln pounds of tin equivalent at an average cash cost of US$3.36 per pound. Given the current tin price is US$8.75 per pound that allows for plenty of margin, and the study duly forecasts total revenue over the life of the mine of US$776 mln and undiscounted cash flow after tax of US$214 mln.
The generation of this data, according to Strongbow chief executive Richard Williams, represents a “significant step in advancing the project to a production decision.”
More significant for Cornwall than the revival of old traditions will be the creation of new jobs. Because Strongbow envisages employing of 100 people during the build period and then 275 people permanently once the mine is up and running. In an area like Cornwall, that’s quite significant.
Whether or not it happens remains dependent on metals prices, on the mining equity markets and on the planning authorities. But mining companies are likely to gain a highly sympathetic hearing in a region that was heavily reliant on European subsidy and which is going to have to cast around for other forms of income once Brexit goes through.
Will mining take up the Brexit slack?
Well, things will certainly be different from here on in. It’s easy to set the decline of Cornish mining in the context of the wider industrial decline that took place across Britain during the 20th Century.
But the real context is the geological setting beneath the surface of the Cornish earth and that doesn’t change, even if some of the rock has now been mined out.
According to Peter Wale, a director of Strategic Minerals (LON:SML), Cornwall contains two of the top five tin resources in the world by grade and, as far as these things are measurable, by size as well.
One is South Crofty.
But the other is Redmoor, a well-known old project which Strategic Minerals acquired 50% of in the first half of 2016 when the mining bear market was still in its final phase.
Here the geology throws the tin up in small, high grade veins, such that any new mine would follow them down from a small entry point and actually have very little impact on the surrounding landscape.
Accordingly, drilling at Redmoor is expected to get underway very shortly, following the granting of the relevant permissions by local authorities and considerable demonstrations of support at community meetings.
“This is very much a mining area,” says Wale. “People understand what we’re doing at a headline level.”
And in the press release that announced the imminent drill programme, Strategic talked openly of “plans to develop Redmoor into a producing mine.”
More jobs and more investment for Cornwall.
But if tin remains a commodity of old-world industry, the latest venture in Cornwall to grab the imagination of investors and headline-writers alike is very much focussed on the commodity of the future: lithium.
Cornish Lithium, run by City mining veteran Jeremy Wrathall, has tied up the rights to extract lithium from brine across vast swathes of Cornish ground – it’s done a deal with the major aristocratic landowner, with the major acquirer of Cornish mineral rights, and of course, with the current Cornish leading light: Strongbow.
Wrathall acknowledges the risk inherent in his lithium plans – there’s actually very little hard data to go on. Most of his conceptual thinking was formed while he was undertaking intricate detective work, looking for clues in old documents, in passing references, and in mine logs from South Crofty and elsewhere that complained of the problems of heat and flooding.
That heat and flooding was indicative of water rising from deep inside the earth and, as the Cornish geology would have it – the context doesn’t change – this water leaches lithium from the granites that it passes through.
There’s a lot of hype around lithium these days, but if Wrathall can get Cornish Lithium off the ground then Cornwall’s past might just marry up with its future and bring a whole new wave of prosperity to the region.