07/09/2023

Introduction:

As the summer begins to wind down, Arc Minerals, one of the very favoured junior miners on AIM, has recently begun to regain favour with the market moving sharply over the past month. The shares, with a 52-week high of 4.65p and a low of 2.3p printed in a quiet summer have bounced to over 3p again with technicals suggesting further moves to the upside could be possible. The shares also printed over 8p in early 2021.

JV News

The market sometimes has a way of anticipating when big news is due and Arc investors have certainly been waiting for the biggest of news specifically the long-awaited completion of Arc’s Joint Venture deal on their Zambian copper licenses with mining industry giant Anglo American. ‘Big news’ in the form of a deal with headline numbers of US$88.5 Million (should Anglo play through Phase 1 into Phases 2 & 3) finally being ratified by the Zambian government.

Anglo American

Anglo American and Arc first signed an ‘in principle’ JV agreement in May 2022 and due to some of the more than significant sums involved in terms of exploration spend by Anglo (as well as upfront cash), the market has been eagerly awaiting full completion since. Investors also had to bear through no less than four extensions to the Anglo due diligence exclusivity period as it seemed to drag on and also got caught up with temporary closures to certain departments in the Zambian Ministry of Mines as they ‘restructured’.

Upfront Payment

To Arc’s credit their team led by the highly regarded Nick von Schirnding, managed to get Anglo to sign the JV deal in April of this year subject to regulatory approvals in Zambia. So with the deal inked and signed waiting to be ratified by the Zambian government to complete, Arc investors would see a $3.5M upfront payment (followed by various anniversary cash payments) to go alongside a whopping $24M exploration and earn-in programme funded by Anglo – and that’s Phase 1. We won’t go into further detail here but the deal has potential for subsequent investments of $20M and $30M from Anglo in exchange for additional percentage ownership of Arc’s Zambian license.

Boots On The Ground

The deal is certainly monumental as far as early-stage exploration is concerned and hard to find anything across the globe which might compare. Arc investors may be in for a hell of a ride once Anglo finally gets boots on the ground and gets drills turning on what has been described as ‘some of Africa’s most prospective remaining exploration ground’.

Drilling Season

How good Arc’s huge territory really is yet to be seen and therein lies risk for investors but if Arc and Anglo can get drilling in this season there should be further exciting chapters to the story in the near term. A huge deal for Arc and a huge win for Arc investors and the junior space if the company can move out of the summer with all the Zambian regulatory red tape done and dusted clearing the way for tens of millions of Anglo dollars to be deployed.

Exploration carries high levels of risk but who better to do it with than Anglo American as a partner. As always investors are advised to manage their risk appropriately.