07/08/2023

Introduction: First Class Metals (FCM) was the first spin off from Power Metals (POW), and like the second one, Golden Metal Resources (GMET), it has got off to a firm start in its first year on the London market. Helpful over the near term has been a near £1m fundraise at 10p in June, something which was timely to drive the company’s busy summer season campaign. Top of the list are the diamond drilling at Sunbeam and North Hemlo, as well as exploration at Zigzag. The key with appreciating FCM is to appreciate the sprawling portfolio, especially given the way that many small cap investors like to focus on a company which has a flagship asset or a company making prospect. That said, with FCM one could say that it has an embarrassment of riches in terms of its extensive portfolio.

An Expanding Portfolio

FCM came to the main market of the London Stock Exchange in July 2022 at 10p, with the shares currently just below 9p. For the stock to be anywhere near, yet alone below the admission price appear to be an aberration. This is especially the case if one measures the progress made by the company in its first year as a listed company. For instance, three new exploration properties have been added, in Sunbeam, Zigzag and Ongold. Sunbeam has been estimated to contain 50,000 to 70,000 tonnes of gold at a 13.0 g/t grade. Zigzag may be regarded as a standout given the way that it adds it an asset which historically had grades of 1% of lithium.

In the past month the company has expanded acreage at Hemlo by 30% via an earn-in agreement. Indeed, this has been helped along by drilling results at West Pickle Lake implying that a district scale sulphide nickel play is present at North Hemlo.

Conclusion: Conventional thinking regarding the junior miner space suggests that investors have become more risk averse over the past year, and they are more squeamish regarding exploration risk and volatile commodity prices. However, FCM is the perfect play against such fears given the spread of risk, the quality and magnitude of the assets, and the way they are spread across various metals. An additional point to note as far as the valuation of the company is that the ongoing progress made since listing should more than offset such concerns, with FCM likely to continue to add to the value of its portfolio as results from the summer 2023 campaign are delivered as we head into the autumn. The proximity of many of its assets near to operators such as Barrick Gold, mean that it is rubbing shoulders with major operators, and significant assets.

With two key directors holding nearly 30% of the company, and Power Metals (POW) at 23%, a large chunk of the free float is in sticky hands, supporting the share price. Indeed, at a current market cap of £7m it is not surprising that broker First Equity is calling for a market cap of up to £25m.