- Company News
- Corporate Finance
- Equity Research
- In Media
- M&A Know-how
- Macro and markets
- Market Snapshots
Read the full report here:
Arctic Minerals’ cash flow and costs in the first half of 2021 corresponded to 40-50 percent of our full year forecast. The prices of the company´s main metals—gold and copper- have risen 3.6 and 11.9 percent respectively since our Initial Coverage Report on 10 March 2021. We adjust our target price for the Arctic Minerals share to SEK 1.06 in our Base case (previously SEK 1.11). This mainly reflect a potential share dilution effect in a new issue in 2022.
A local Nordic mining company focusing on the early stages
Arctic Minerals is a local Nordic mining company exploring early-stage deposits in Fin-land and Norway. Typically, resource drilling is necessary before a project can be valued and sold. The strategy is to divest all or part of these deposits to larger mining companies following the first phases of exploration. The returns for exploration activities are often highest in the early stages.
Burn-rate just under half of our full-year forecasts
Arctic Minerals reported an EBIT of minus SEK 6.3 million for H1 2021. This represents 40 percent of the full-year 2021 guidance we provided in our March 10 Initial Coverage-report of Arctic Minerals. At the same time, cash flow for H1 2021 was around 50 percent of our full-year forecast, minus SEK 13.1 million compared to minus SEK 27.1 million.
The company had a cash position of SEK 26 million as of 30 June 2021, which was roughly in line with our assumptions prior to the Q2 report on 27 August.
4-5% lower target price in Base case, due to share price dilution
It is a challenge to value early mineral exploration companies that do not possess any quantified mineral resources. We use a combination of methods, depending on the asset, to calculate a fair value of SEK 1.06 per share. This could be compared to SEK 1.11 per share in our Initial Coverage report on 10 March 2021. The difference is mainly due to us this time assuming that new issues could be done at a share price of SEK 0.75 in FY 2022 instead of earlier anticipated SEK 1.25 per new issued share. At the same time, the USD has strengthened slightly against the SEK since 10 March, pulling up the value of the company’s mining deposits somewhat in SEK terms.
Our Bear case arrives at SEK 0.41 per share (previously SEK 0.46 per share) while our Bull case land at SEK 1.92 (previously SEK 1.99 per share).
There is an exploration sector risk related to the volatility of mineral prices. Currently though, metal prices have (save silver and palladium) increased since 10 March, making discoveries relatively more attractive for the company.
Carlsquare AB, www.carlsquare.se, hereinafter referred to as Carlsquare, conducts business with regard to Corporate Finance and Equity Research in which areas it, among other things, publishes information about companies including analyzes. The information has been compiled from sources that Carlsquare considers to be reliable. However, Carlsquare cannot guarantee the accuracy of the information. Nothing written in the analysis should be regarded as a recommendation or invitation to invest in any financial instrument, option or the like. Opinions and conclusions expressed in the analysis are intended only for the recipient.
The content may not be copied, reproduced or distributed to another person without the written approval of Carlsquare. Carlsquare shall not be held responsible for any direct or indirect damage caused by decisions made on the basis of information contained in this analysis. Investments in financial instruments provide opportunities for value increases and profits. All such investments are also subject to risks. Risks vary between different types of financial instruments and combinations of these. Historical returns should not be considered as an indication of future returns.
The analysis is not directed to U.S. persons (as defined in Regulation S of the United States Securities Act and interpreted in the United States Investment Company Act 1940) nor may it be disseminated to such persons. The analysis is also not directed to such natural and legal persons where the distribution of the analysis to such persons would result in or entail a risk of a violation of Swedish or foreign law or constitution.
The analysis is a so-called Commissioned Research Report where the analyzed Company has signed an agreement with Carlsquare for analysis coverage. The analyzes are published on an ongoing basis during the contract period and for a usual fixed remuneration.
Carlsquare may or may not have a financial interest in the subject of this analysis. Carlsquare values the assurance of objectivity and independence and has established procedures for managing conflicts of interest for this purpose.
The analysts Bertil Nilsson and Jonatan Andersson do not own and is not allowed to own shares in the company analyzed.