News

November 04, 2008

Anglesey Mining Offers Something For Nothing As Labrador Iron Mines Closes In On Production

By Rob Davies

Modern portfolio theory says equity markets are perfectly efficient and that all the information that is relevant to a company is already incorporated into its share price. It follows from this theory that it is impossible to beat the market because the market already knows everything. That’s the theory. The practice is somewhat different and Anglesey Mining is an excellent example. Anglesey has a market capitalisation of £7.5 million, supported by two assets: 100 per cent of the Parys Mountain base metal deposit in Wales, and a 50 per cent stake in TSX-listed Labrador Iron Mines, a company which currently boasts a valuation of C$55 million.

That means the stake that Anglesey owns is worth £14 million, or twice the value of the whole parent company. Put another way it implies that the UK property has a negative value of £6.5 million. Bill Hooley, chief executive of Anglesey, says this discount has been there ever since the Canadian subsidiary was listed, although it is larger now. Why this discrepancy still exists is a mystery to him as one would have thought there would be some broker out there who would seek to exploit the...