"Restaurants," Alan Hopkins told me, "are having to close back home. Because they just cannot find waiters." Alan is an Aussie, from the beautiful city of Perth and his home town is short of waiters because everybody has gone off to work in the mines. Alan has been in the mining business for twenty-five years, and he has never seen anything like it.
He has never been treated like royalty before, either. But that is what happens when he visits The Gambia, a tiny West African country that runs alongside the meandering Gambia river. For years its population of just 1.3m people has made a living by exporting peanuts. But now, thanks to the efforts of Alan Hopkins and his colleagues, jobs and wealth are being created among the coastal sand dunes.
These mineral sands are rich in Zircon and the two Titanium Minerals Ilmenite and Rutile. Zircon is a refractory material, while Ilmenite and Rutile provide brilliant white pigment used in paints and plastics. They are all vital ingredients of industrial production. And they are all desperately needed in China.
Alan Hopkins is Managing Director of Carnegie Minerals. Carnegie was one of the many small resource companies that came to AIM last year, raising £2m on its debut in August. But it is not typical of the breed. It has proven resources. It is already producing. And it has a Chinese big brother.
'Economic colonisation' in action
This is Astron, China’s largest buyer of Zircon. Astron is a 50% joint venture partner in Carnegie’s operations in the Gambia. And it has agreed to fund all mining costs by way of interest-free loans, until the project is cashflow positive and the loan is repaid. This is no act of charity to a small miner. Astron wants the product, and its subsidiary, the Yingkou Astron Chemical Co, has agreed to buy all the Zircon and Rutile that is produced at prevailing market prices, and has right of first refusal over the Ilmenite.
Here is the creeping Chinese economic colonisation of Africa in action. From the port of Banjul the minerals are shipped by way of the north coast of Africa, the Suez canal, the Indian Ocean and the South China Sea – a long journey, and yet it costs less to ship the material from The Gambia than it would from Australia. Why? Because the ships are sailing to Africa filled with Chinese exports and are looking for a cargo for the return journey.
Already this year, using equipment imported from China, Carnegie is producing some 10,000 tonnes per month of HMC (’Heavy Mineral Concentrate’) for export to China. At a price of around $50 per tonne, this is providing a handsome income. Hopkins wants to increase production from The Gambia. But now his eyes are on an even bigger prize...
The secret to finding the big opportunities
I met him last month. We played golf together and, recovering afterwards from the rain in the shelter of the clubhouse, he produced a long cardboard tube from which he withdrew a large map. This was a geologists’ map, with different land structures and features delineated in the sort of garish colours that cause headaches. Alan pointed out to me the coastal dunes of The Gambia, and followed them southwards into neighbouring Senegal. "We are pretty ce rtain," he explained, "that we will find the same rich mineral sands in Senegal as we have in The Gambia. And the quantity could be much larger."
Astron is funding half of Carnegie’s exploration costs in Senegal and work is well underway. In June Hopkins was able to report that the ore reserve at Niafarang, just a few kilometres south of the Gambian border had been classified in the Probable Ore Reserve Category, and samples have been sent for assaying to an Australian laboratory. There is every reason to believe that Carnegie will be shipping zircon, rutile and ilmenite from Senegal before long.
Strangely none of this progress has been reflected in the share price, which at today's level of 7p has slipped below last year’s issue price and values the company at just £4m. Alan Hopkins cannot understand this – and neither can I.
So this is one potentially good investment I'm watching. As it stands it's a risky play regardless of the opportunity. A little too risky for me at the moment. I'll need to do a lot more careful research and scrutinising before I'd even consider buying into this share.
When it comes to the stock exchange’s smallest companies, the market is far from efficient. But profitable opportunities abound for those prepared to look and to do a bit of leg work.
But that is what I do. I love it, and it makes me money. Especially when you find a unique way of playing a special opportunity with considerably lowered risk.
Regards
Tom Bulford
for Penny Sleuth
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