MIDAS SHARE TIPS: Erik the Viking was right! Greenland IS a rich prospect as mining firm AEX Gold shows
Just over 1,000 years ago, Erik the Red, a fiery-tempered Viking, was exiled from Iceland to an inhospitable country 750 miles away. He called it Greenland to try to attract fellow settlers. The idea did not work. Greenland may be the world’s largest island, more than twice the size of France and Germany combined, but, even today, fewer than 60,000 people call it home.
Most of them live in the south of the country, where temperatures range from around minus 10C in winter to 8C in high summer. Although far from balmy, southern Greenland has a number of attractions, including sought-after metals and minerals, from gold to copper to rare earths.
The presence of these commodities has long been known to mining experts. Now, however, the case for digging them out of the ground has taken on a new urgency, as Russia’s invasion of Ukraine and China’s growing antagonism to the West have forced governments around the world to think about how to make sure they can buy what they need when they need it.
Gold rush: AEX Gold is set to produce precious metal in Greenland, 1,000 years in the wake of Erik the Red
This turn of events is likely to play neatly into the hands of AEX Gold, a Greenland-based mining firm whose assets cover nearly 3,000 square miles across the south of the country. AEX shares are 44p and should increase substantially over the next three years as chief executive Eldur Olafsson moves the firm from exploration to commercial production.
Born in Iceland and a geologist by training, Olafsson is just 37 years old. But he has spent his career in the commercial world and has built a reputation for energy and smart thinking. Ten years ago, Olafsson started to look at Greenland, particularly the south of the country, where the weather is less prone to extreme cold and mining can be carried out all year round. In 2014, he acquired the Nalunaq gold mine and the seeds of AEX Gold were sown.
Nalunaq had already been in production for several years but the previous owner had run out of money at a time when commodities were at a low ebb so finance was hard to find. Olafsson and his team calculated that, with a bit of cash and a lot of patience, they could expand and develop Nalunaq, while acquiring mining rights in the surrounding areas too.
Everything was going well. Then Covid hit. Plans to bring Nalunaq back into production by 2021 were delayed and Olafsson had to reconsider his strategy. But this pause for thought should work to investors’ advantage. Initial work already suggested that Nalunaq could produce 250,000 ounces of extremely high-grade gold, with each ton of rock producing more than 18g of the precious metal, compared to average gold-mining grades of around 6g per ton.
Further drilling and exploration at Nalunaq suggest the amount of gold on site is substantially higher. New figures will be produced within the next 12 months and the mine should be in production by 2024. At the same time, AEX has acquired several other assets, where surveys and initial analysis indicate serious quantities of gold, including Vagar Ridge, which has already been touted the Fort Knox of Greenland.
To expand AEX assets beyond gold, Olafsson last month acquired a series of new licences, which considerably increase the group’s exposure to metals and minerals including nickel, copper and rare earths. Reflecting this move, AEX will be changing its name to Amaroq Minerals within weeks.
The firm has just signed a £36million joint venture with Acam, a deep-pocketed investment firm, to bring those sites into development over the next three years.
Acam is backed by Louis Bacon, a US billionaire who built his fortune by investing in firms with promise, so his support is a vote of confidence in Olafsson’s plans.
Further reassurance comes from the governments of Greenland and Denmark, both of which own a 3.4 per cent stake in AEX. Olafsson is a large investor too, with a 4.5 per cent stake in the business, so he is committed to make it work.
Midas verdict: AEX is an early-stage mining company run by a dynamic entrepreneur. As such, the shares are not without risk. But the business is well backed, the company’s assets are extensive and initial signs are promising. At 44p, the shares could deliver significant rewards.
Traded on: AIM Ticker: AEXG Contact: aexgold.com or Camarco on 020 3757 4980