25 Nov Half yearly report for the six months to 30 September 2022

Chairman’s Statement and Management Report

(VIEW THE CHAIRMAN’S STATEMENT AND THE FULL FINANCIAL REPORT IN PDF FORMAT HERE)

This interim period of 2022 has provided shareholders with some very positive news generated from the significant progress at both our Parys Mountain copper-zinc-lead project and our iron ore projects in Sweden and Canada.

At Parys Mountain we completed the first drilling programme since 2012, began environmental studies and appointed Knight Piésold to undertake both the design stage for the tailings management system together with the geotechnical assessment of the underground development. We also continued our engagement with local planning and regulatory authorities and local councils.

Meanwhile in Sweden, a Pre-Feasibility Study Update for the Grängesberg Iron Ore Project was completed with very encouraging results, while in Canada Labrador Iron Mines continued to advance its Houston direct shipping iron ore project toward production.

Unfortunately, we have not yet seen the benefits of this positive news flow through into the Anglesey Mining share price. Global uncertainty continues to be a theme for investors with both economic and political volatility, inflation concerns and conflict in Ukraine impacting flows of money into the more speculative end of the market.

The Conundrum of Net Zero and More Mines

As many commentators have written over the last couple of years, metals are critical for the climate transition and the clean energy technologies needed to meet the world’s climate action goals will require much more metal. There are many statistics available to support this argument with more mainstream commentary almost every week.

Critical raw materials – which include the copper, zinc and silver that will be produced from Parys Mountain – are fundamental to the increased deployment of renewable energy, installation of battery storage capacity and the mass shift to electric vehicles. According to the United Nations Economic Commission for Europe (UNECE), over the next two decades, demand is expected to rise over 40% for copper and rare earth elements. The International Energy Agency also states that global battery and mineral supply chains need to expand 10-fold to meet projected needs for critical minerals by 2030.

At the recent COP27 gathering at Sharm el Sheikh in Egypt, the UNECE warned that urgent action is needed on sustainable financing and the use of critical raw materials. It was stated that without scaled-up efforts to finance and sustainably manage the critical raw materials needed for a rapid renewables and clean energy shift, countries of the pan-European and North American regions will face significant challenges to deliver on the Paris Agreement and Sustainable Development Goals.

H.E. Mr Mahmoud Mohieldin, UN Climate Change High-Level Champion for COP27 and UN Special Envoy on Financing the 2030 Agenda for Sustainable Development stated that ‘a resilient, sustainable and ethical supply of critical raw materials is essential for clean energy, mobility transitions and digital transformation. We can’t afford to not act on critical raw materials, because the cost of inaction is much higher’.

Despite the significant global macro headwinds, the prices of the metals to be produced at Parys Mountain remained consistently above those used in the 2021 Independent Preliminary Economic Assessment (PEA). The PEA utilised the three-year trailing metal prices as of September 2020 that included US$2.81/lb Cu and US$1.20/lb Zn, which compares to US$3.84/lb Cu and US$1.41/lb Zn respectively at the time of writing.

At the current metal prices, copper production from a Parys Mountain mine would represent 50% of the net smelter revenue under the expanded case of 3,000 tonnes per day. The PEA indicates production of 75,000 tonnes of copper over the project’s 12-year mine life; when combined with the other metals produced this equates to an average copper equivalent production rate of 14,000 tonnes per year over the proposed life of the operation.

As a consequence, our Board continues to remain very confident that the medium and long-term outlook for most minerals, particularly for copper which will represent 50% of production at Parys Mountain, is very encouraging.

At Grängesberg, a very positive update of the PFS indicates production of 2.3 to 2.5Mtpa of iron ore concentrate grading 70% Fe that generates strong economic returns, including a NPV8% of US$688 million post-tax using an iron ore price of US$120pt, and confirming that the Grängesberg iron ore mine has the potential to be restarted as one of Europe’s largest individual producers of high-grade iron ore concentrates.

The conflict in Ukraine has highlighted the strategic positioning of Grängesberg. Prior to the conflict, Russia and Ukraine each supplied approximately 30% of all iron ore into the European steel market. With the future uncertainty around this supply, a long-term source of iron ore could be highly sought after by European and Middle Eastern steel producers. Grängesberg, with the high-grade nature of its concentrate, existing infrastructure and favourable location in southern Sweden in proximity to European steel mills, represents a highly strategic opportunity.

Next steps

I firmly believe that Anglesey is positioned very strongly to advance its two key assets at Parys Mountain and Grängesberg over the next year. At Parys Mountain, the ongoing work programmes including a mineral resource update for the White Rock and Engine Zones, additional metallurgical testwork and environmental studies will continue to advance the project through the production studies and permitting phases. Additionally, the initial review of the Northern Copper Zone suggests that the system could be significantly larger than currently modelled, although this will require additional drilling to test prospective areas.

At Grängesberg, advancing the project to a Bankable Feasibility Study remains the priority. This initially requires finalising some of the recommendations from the PFS update, including baseline studies for the environmental impact assessment and updating the mining reserve to include some improvements to the proposed Grängesberg mine plan.

Operations and financial

In gearing up for the future, recruiting a new chief executive, reinstating directors’ remuneration and increasing corporate activity, there have been higher expenses for this period when compared to last year. The significant expansions in operations at both assets have also led to growth in the value of our investment in the properties.

The group had no revenue for the period. The loss for the six months to 30 September 2022 was £453,854 (2021 £298,055) and the expenditures on the mineral property in the period were £320,887 compared to £42,412 in the comparative period. Net current assets at 30 September 2022 were £539,077 compared to £796,920 at 31 March 2022.

The private placing in May 2022 has put Anglesey in a position to fund its planned operations for the next 12 months.

Outlook

Despite global uncertainties and weak financial markets, we continue to be encouraged by growing investor interest in Anglesey Mining recognising the significant progress made over the last year. We also believe that the commodity price outlook remains positive due to the ongoing decarbonisation of the global economy, combined with renewed growth in China following relaxation of its Zero Covid Policy, and western governments stimulating economies to exit a potential recessionary environment.

Fundamentally, we believe that the backdrop for commodities remains positive. Demand is forecast to increase, yet the supply side response has been comparatively weak over the last 5-years leading to potential deficits across the commodity space. Ultimately, this provides a very supportive backdrop for our projects.  Metals are a prerequisite for electrification: copper for power generation, motors, transmission and energy storage, zinc for extending the lifespan of products and lead for energy storage. Iron ore is essential for steel which is used extensively in infrastructure and transportation.

Over the course of the next year, we look forward to advancing both Parys Mountain and Grängesberg through the planned work programmes and demonstrating the underlying values to both existing and potential shareholders.

In closing, on behalf of the board of Directors, I would like to thank our shareholders for their ongoing support, and I remain very confident that the assets held by Anglesey will deliver significant value as they continue to be progressed over the next year.

John F Kearney

Chairman

24 November 2022

(VIEW THE CHAIRMAN’S STATEMENT AND THE FULL FINANCIAL REPORT IN PDF FORMAT HERE)