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http://www.miningmaven.com/longer-tweets/two-to-watch-in-the-week-ahead-20130908342/

THOR MINING (LON:THR, ASX:THR)

Thor Mining was admitted to AiM in 2005. The company has encountered a fair share of trauma with the natural resource sector cyclical swings and the sector lows in 2008/09 and the more recent sector lows of 2012/13. But the times they are a ’changin and although management and longer term investors would have just cause to feel dispirited (the share price at 0.285p is now 93% down from its closing high in 2011 of 4.125p), one can feel a sense of optimism creeping back in.

For one thing, the company has just undertaken back-to-back double placings raising £335,000 at 0.225p on 13th August and £362,250 at 0.25p on 29th August. The total raised (pre-expenses) of nearly £700,000 is now sufficient to enable Management to crack on with business operations.

There are 1.277billion shares in issue (as will be the case when both placings complete) and at 0.285p per share, the company has a market capitalisation of £3.63million.

We expect the market will likely start to drive the share price higher to correct the current undervaluation, in recognition of the fact that the company is now funded. This happened recently with Greatland Gold (LON:GGP), another client of the same broker (SI Capital) who saw a 0.225p placing price turn into a market trading price of over 0.9p in just a few weeks. Greatland Gold is hardly a dynamic stock, and certainly doesn’t have the same kind of strategic focus Thor Mining is working to garner. Its real potential lies within the project portfolio, details of which we summarise below:

Molyhil (Tungsten/Molybdenum) –the company has confirmed it is in marketing and financing discussions with interested parties over its 100% owned Molyhil project. That said they have been trying to do a commercial deal on Molyhil for some time, so far not successfully. We have pondered whether the lack of deal success could be in some way due to an inherent weakness in the proposition, but when conducting peer comparisons we don’t see that as likely to be the case.

It seems to us that, as with any kind of deal, timing is always a critical factor. With strategic metal Tungsten’s price firming considerably in recent months, a pullback in the Australian Dollar and an improved model for Molyhil itself, the commercial viability of the project has now strengthened.

Add to that, the very recent off-take deal announced by Tungsten Mining (ASX:TGN) along with A$15m of financing, suggests that the climate for deal-making is now highly conducive, provided management have the wherewithal to pull it off!

Those interested may wish to compare the scoping study characteristics of the project commercialised by TGN with the Definitive Feasibility Study (DFS) conducted by Thor on Molyhill.

And one final thought: TGN works with Western Desert Resources, as does Thor Mining, so perhaps some knowhow as regards securing Chinese partners may have cross-pollinated?

Spring Hill (Gold) – the gold project already has a 450,000 ounce JORC resource all in the Indicated category. Here the company has decided that plodding along with exploration is not the way to go and has signed a Memorandum of Understanding with Crocodile Gold Australian Operations Pty Ltd a subsidiary of TSX listed Crocodile Gold (TSX:CRK) to produce gold asap with planned mine development within 12 months. The key here is the ultra-low capex (estimated at less than A$5m) because rather than building a mine they are planning to use toll treatment facilities.

Thor currently owns 51% of Spring Hill and is exercising rights to take that up to 80%. Assuming the initial plan comes together, they will be mining 45,000 ounces of gold at a total operating cost of A$1,170 (US$1,076). At $1,400 gold that amounts to $14.6m net cash return over 3 years of operations (subject to capex) of which 80% is $11.7m. For gold bulls expecting the price to reach c$2,000 next year that figure then becomes $41.6m, of which 80% is $33.3m.

As announced in July, the company has also conducted Ore Sorting Test Work in order to improve the ore entering the production process and the results thus far have been positive, clearly bolstering the commercial viability of the project.

Dundas (Gold) –Dundas is less in focus and not quite as advanced. But we find it rather interesting, mainly because its earlier gold focus has since morphed into a hunt for Nickel mineralisation, reflecting its proximity to the Sirius Resources (ASX: SIR) Nova Nickel discovery 80km north/northeast of Dundas.

In April 2013 we saw the first encouraging progress from work undertaken and the June 2013 Quarterly Report indicates the company is intending to undertake geochemical sampling for nickel potential in preparation for drilling. Sirius managed a 100x return post Nova discovery but this is still early stages for Dundas and although the indicators are good thus far, there is can be no certainty as to the degree of success, if any.

When considering the commercialisation drive for the two main projects and the blue sky potential of the third, we feel the market value is considerably understated. As with KIBO, we believe the volume of trading since the placings were announced suggest the placing overhang is now clear or close to clearing. We should then see a tightening of stock available which, with a fair wind should reflect in a strengthening share price. Well that’s the theory anyway!