This is an excerpt by a professional analyst in the UK who...

This is an excerpt by a professional analyst in the UK who invests in the JV partner Metal Tiger.

I think it provides a great introduction for new MOD Resource investors as the analyst sees the Botswana JV as the clear jewel in the crown for MTR so has spent time explaining his investment case.

Focus on Botswana Project:
This is clearly where the opportunity lies for the MTR valuation so lets explore what’s happening in simple terms:
In Q1 2016, the JV made a discovery of ‘T3’ - T3 is the name of the copper/silver deposit where a discovery RC drill hole intersected 52m @ 2.0% Cu and 32g/t Ag from shallow depth in March 2016. A scoping study was issued in December 2016 valuing the deposit with a pre-tax NPV of US$297m based on $3/lb Cu
Things got a whole lot better (amazingly better actually!) in February 2017, when, following a trading halt, MOD released a statement announcing that they discovered another deposit directly below T3- which was obviously a total game changer. Assay results announced for one hole, MO-G-65D delivered 72.6m @ 1.5% Cu and 27g/t Ag
MOD’s Managing Director, Mr Julian Hanna, said the first assay results from this previously unknown zone were simply outstanding. “This new intersection exceeds the width and grade of the overlying T3 resource which is several times wider than most copper deposits in the Kalahari Copper Belt.”


Both MOD and MTR realised the scale of the opportunity, given the T3 deposit is a tiny fraction of the overall acreage they hold so they both raised significant sums of money, both at a premium to the prevailing SP and attracted big institutional money.
In April 2017, Exploration Capital Partners, a fund operated by Sprott Global Resource Investments, a leading global natural resources investor; took part in a placing in Metal Tiger plc at 3p raising gross proceeds of £4.85m. This marked a defining moment on Metal Tiger’s development attracting this world class fund’s support as its first institutional investor at a 9% premium to the closing price on the previous trading day before issue. Sprott conducted a huge amount of due diligence (nearly 4 weeks) on MTR and its assets before closing the deal which is a huge validation of MTR and its potential.
Drilling was paused in late spring for Environmental Impact Assessments (EIA) applications to grant permission for a wider exploration campaign to commence using the huge war chest of funds held my both MOD and MTR.
Meanwhile, in late July, MOD/MTR announced the results of the high resolution airborne EM (AEM) survey – 50km along the T3 Dome. The AEM survey detected numerous anomalies and has enabled fast track exploration for potential ‘T3 type’ vein hosted and ‘structural contact type’ copper/silver deposits below surface. 19 potential targets have been identified as a result of this data.


In August 2017, an updated and upgraded Mineral Resource Estimate for T3 was released showing a 27% increase in Total Resource Tonnes, this incorporated the results of an infill and extensional drilling programme which was undertaken between the release of the maiden Mineral Resource Estimate in September 2016 and the end of quarter 1 2017. The revised estimate constitutes a significant upgrade to the project and is an important step towards the prefeasibility study which is due to be published end December 2017. Clearly, the 27% increase in resource revises up the NPV $297m accordingly. Details of the upgrade can be found here

On 7^th August 2017, MOD/MTR announced they had secured the Environmental approvals to resume drilling 70 diamond drill holes with 4 rigs (announcement here) and subsequently increased this campaign on 1^st September 2017 to now having 8 drill rigs operating (having identified significant visible copper mineralisation in the first 6 holes – this is highly encouraging – )

On 3^rd October, MOD/MTR announced a potential major strike extension at the T3 project, having completed over 6,100 metres of drilling with a total of 19 diamond holes. MTR CEO quotes “Very excitingly, 50m wide zones of visible copper mineralisation have been logged in core from four holes drilled along strike from the current T3 Mineral Resource. We eagerly await assay results from these holes, and other holes, which point to the potential for major strike and down-dip extensions to the current resource” They also announced work on the pre-feasibility study is progressing well and have taken a decision to increase the modelled ore processing rate to a level 25% above that used in the Scoping Study to reflect the increase in Mineral Resource. These will clearly have a positive impact on the projects baseline economics.
The 25% increase relates to an increase in the proposed plant throughput capacity from 2.0 to 2.5Mtpa. These will clearly have a positive impact on the projects baseline economics. Full announcement here. Mod also corrected the announcement for clarification on 16^th Oct here.
This image shows where the current drilling extends well beyond the existing T3 Resource. The pending assays could then confirm this is a massively growing copper mineralisation well beyond the ‘tiny’ NPV $297m area in the 2016 scoping study. For reference, the mineralisation strike length is now almost a full mile long!


On 11^th October, MTR raised £480,000 through a Directors warrant conversion by Terry Grammer. This was strange timing because the warrants expired mid 2018 and the company explicitly stated the money is to be used to explore investment opportunities outside of the Company’s two main Direct Project investments in Thailand and Botswana. Terry has also previously agreed to lock his shares in for 12 months after conversion. It may interest readers to know that Terry completed a similar transaction the day before the Botswana 30% JV purchase - so he is keen to put his own money in to fund strategic purchases when he sees a valuable deal.

On 5th January 2018, MOD/MTR announced more Assays which included a record high intersection of 18.0m @ 4.3% Cu and 94g/t Ag from hole MO-G-94D. MOD’s Managing Director, Mr Julian Hanna, said: “MOD is punching well above its weight and while we may currently have a modest market cap, our drill results are competitive with some of the largest copper companies,” said Mr Hanna. He continued with: “MOD is gearing up for its biggest year ever in 2018 and we look forward to announcing new results from the ramped-up exploration campaign and feasibility studies in the next few months,” he said.
In the same announcement, MOD/MTR confirmed the August – end December Assays will be factored into a new, revised resource estimate towards the end of January and this will also be amended within the pending PFS.
MOD/MTR also confirmed that w/c 8th January, a Major Phase 2 drilling programme resumes next week at T3 then expanding over the wider T3 Dome, with 8 diamond drill rigs in operation - testing T3 along strike and also additional AEM targets. The announcement can be found here. This is a very exciting time at the Botswana project in the path to confirming a World Class Tier 1 Copper deposit.


Significant newsflow to drive sentiment:

• The company has confirmed it wants to explore more of the area and has ramped up drilling capabilities confirming there are now eight drill rigs on site drilling new holes. Clearly, a campaign of this size will generate regular and potentially game changing news as was the case in March 2017 and with recent announcements.
• Meanwhile, EA applications are being processed for the remaining AEM targets to be tested (outside of the targets already approved).
• The company has confirmed the substantial resource upgrade and the enlarged (+25%) processing rate plant capacity as a result of this so the PFS due in January 2018 is also eagerly awaited especially as the Copper price is rising and is thought to rise much further through 2018

MOD Resources JV - Strategic Options:
On 19^th September 2017, an interesting announcement was made by MTR who have appointed NRG to provide strategic and financial advice in connection with the company’s strategic options relating to its 30% holding in the JV. This could well lead to a significant monetisation event which would unlock the true value of the JV on to MTR books which is currently undervalued in the MTR MCAP (explored further below) - the announcement can be found here.
My thoughts are that the JV 30% could be exchanged for MOD shares which would sit in the direct projects division and added to the existing 5.49% shareholding. This would clean up the ownership to 100% MOD which is ideal for future project finance or a takeover by a major. MTR retaining their own large holding means that they still have the upside of the massive project as more and more resource is uncovered (remember they have only explored 0.1% of the total acreage which is frightening to think!
The main issue to overcome would be MTR crossing the 25% ownership level which could trigger ASX takeover rules. There are options to overcome this such as applying for a waiver via a shareholder approval or a deal could be structured alongside a MOD cash-raise to strengthen the balance sheet.
We know Sprott really like the Botswana project, so I’m sure they could be involved in the process. An example could be that Sprott underwriting the cash raise and thereby taking a stake in MOD. The dilution effect of the cash raise reduces MTR to 24.99%. In this example, MTR would own 24.99% of a hugely capitalised MOD (also avoiding takeover rules) with no further recall to contribute to the exploration as this is then financed 100% by MOD.
Whatever the outcome, it will transfer the value of MTR’s stake onto the balance sheet which the market is failing to value at the moment.
So clearly, there is loads going on and huge excitement building. MOD shares have risen substantially since the beginning of 2017 rising 54%. However, MTR has trailed the rise in London and therein lies a growing ‘Investment opportunity gap’ which will be explored below.
The crucial thing here of course is that the resource looks to be increasing in size; the original resource was given a base case NPV of US$297m .. Clearly, this will be ripped up and recalculated due to the 27% resource upgrade and further exploration success since August 2017 to date.
That’s not all, however, the seven drilling rigs are now active and seeking more similar discoveries and the IP survey has identified a  further 19 targets – EIA approvals are coming in to expand drilling to these targets with more EIA approvals secured in October 2017.
The big question is – Just how big and how valuable are these discoveries?



I've tried to remove as much unnecessary MTR info as possible, but for those who want to explore the link for more detail here it is: https://bonker99.com/MTRBlog