Metals One — Black Schist moves to the next stage

Metals One (LSE: MET1)

Last close As at 04/02/2025

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0.01 (4.35%)

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Research: Metals & Mining

Metals One — Black Schist moves to the next stage

Metals One announced on 31 January the results of the preliminary economic assessment (PEA) into its Black Schist project, compiled by Wardell Armstrong. Of its two deposits, the key economic driver, Rautavaara (R1), has been envisaged to mine and process ore at a rate of 3.0Mtpa using a bio-heap leach method at a stripping ratio of 3.08x and a grade of 0.19% to produce c 4,500t nickel pa. Financially, the project is estimated to generate an NPV8 of US$9.29m, an NPV5 of US$41.04m and a pre-tax internal rate of return of 11.3% at a nickel price of US$21,822/t (cf US$15,210/t currently). Significantly, the PEA will now allow Metals One to apply for EU Strategic Project status, making it eligible for grant funding and fast-track permitting. Metals One also announced a convertible loan, a proposedequity fundraise, a retail offering and a potential share consolidation.

Lord Ashbourne

Written by

Lord Ashbourne

Director of Content, Mining

Metals and mining

PEA results

5 February 2025

Price 0.25p
Market cap £1m

US$1.2549/£, A$2.0070/£

Net cash at end-June 2024

£0.6m

Shares in issue

330.2m
Free float 82.0%
Code MET1
Primary exchange LSE
Secondary exchange N/A
Price Performance
% 1m 3m 12m
Abs (41.2) (44.4) (88.9)
52-week high/low 106.1p 0.4p

Business description

Metals One is developing the Black Schist project in Finland and the Råna project in Norway, with the aim of becoming a key source of strategic metals to the EU. Both projects have the potential to produce ‘class 1’ high-purity nickel and are either adjacent or analogous to other world-class deposits.

Next events

EU Strategic Project status application

c Q125

FY24 results

June 2025

Analysts

Lord Ashbourne
+44 (0)20 3077 5700
Andrew Keen
+44 (0)20 3077 5700

Metals One is a research client of Edison Investment Research Limited

Note: PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.

Year end Revenue (£m) PBT (£m) EPS (p) DPS (p) P/E (x) Yield (%)
12/23 0.0 (1.6) (1.77) 0.00 N/A N/A
12/24e 0.0 (1.4) (0.54) 0.00 N/A N/A

Black Schist project valuation range US$1.1–14.0m

In our report, Gold stars and black holes, we calculated that companies with completed PEAs commanded valuations between -4.8% and 50.7% of attributable project net present value (NPV), with an average of 11.7%. Using this percentage, we would value Metals One’s stake at US$1.1m based on its NPV8 or US$4.8m based on its NPV5. However, this percentage could rise to 34.0% of attributable project NPV for a top-quartile jurisdiction such as Finland, in which case we would value Metals One’s stake at US$3.2m based on its NPV8 or US$14.0m based on its NPV5 (note: these discount rates should be seen in the context of a nominal US 10-year treasury yield to maturity of 4.588%). In addition, the project is very sensitive to metals prices, with each 10% change resulting in a US$65.8m change in NPV8. To date, neither the Paltamo (P5) nor R1 Hook deposits appear to add value to the project. However, this could change as Metals One looks to increase its resource from c 57.1Mt to c 200Mt. Other areas for potential improvement are capex, where the current initial estimate stands at c US$230.4m, which is high relative to the project’s NPV, and the potential to produce a battery-compatible nickel sulphate product, similar to that at neighbouring Terrafame (formerly Talvivaara).

Valuation: Under review, equity raise announced

Metals One announced a convertible loan instrument, a proposed equity fund-raising and a share consolidation on 31 January. This will bring in up to £5.0m in gross proceeds (£3m after costs) through a warrant instrument with a syndicate of new investors. Metals One also stated its intention to conduct a retail offer for £0.1m to existing shareholders. The aim of this financing is to secure the licensing commitments, while introducing a range of new investors to the register and opening up potentially new opportunities in a wider basket of commodities. These changes are subject to approvals and are not yet incorporated in our estimates or valuation.

Convertible loan, proposed equity fundraise and share consolidation

In addition to the PEA announcement on 31 January, Metals One also separately stated that it had entered into a convertible loan note instrument and, conditionally, an equity fundraise pursuant to a warrant instrument to raise up to £5.0m in gross proceeds (£3.0m after costs). The company also announced its intention to conduct a retail offer to existing shareholders for up to a further £0.1m. The key stages of this process are:

  1. A convertible loan note instrument that delivers £0.6m in gross proceeds in the immediate term for licence commitments and working capital while the fund-raising is completed. The subscriber is Big Sky Management, a company controlled by Canadian-based corporate financier Eric Boehnke. Upon shareholder approval and the completion of the equity fundraise, this will convert under the terms of the equity fundraise described in stage two below.
  2. An equity fundraise that delivers a further £4.4m of gross proceeds via a warrant instrument. These are prepaid warrants exercisable at a price of 2p per warrant for a period of six months. This raise is conditional on Metals One convening a general meeting within 21 days of the warrant instrument to approve: a) share authorities to enable the full and unconditional exercise of the warrants; and b) a one for 10 share consolidation
  3. A retail offer for a further £0.1m to enable existing shareholders to participate on equivalent pricing terms.

The convertible loan notes and the equity fundraise are both subject to a number of conditions, including shareholder approvals and, as such, we are yet to incorporate the effects of these in our estimates or valuation.

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