Niche Capital Kelantan gold mine forecast to yield attractive returns

Gold concentrate.

LITTLE-KNOWN Niche Capital Emas Holdings Bhd recently made a filing on Bursa Malaysia which went largely unnoticed. But here’s an interesting nugget of information from that filing – pun intended. An independent assessment of a small part of the land Niche Capital is mining in Kelantan has an estimated 17,100 ounces of gold in it.

That figure translates to close to RM150mil in today’s gold price.

But hold your horses – as is well known, gold mining is an ancient industry fraught with challenges. There have been companies entering the scene only to subsequently terminate their gold-mining agreements.

However, there are some making decent profits such as Bahvest Resources Bhd, which posted a profit after tax of RM12mil for its financial year ending March 31, 2022.

There are also a few gold mines in Malaysia that are listed abroad such as Singapore-listed CNMC Goldmine Holdings and Canada-listed Monument Mining Ltd which have been reaping profits from their gold-mining business in Malaysia.

Back to Niche Capital, what exactly is the company doing in gold mining and what promise does it hold?

First, some history on Niche Capital. The company was formerly known as Yikon Corp Bhd and was involved in jewellery and ornament manufacturing, owning stores in China, among others.

The stock was listed on Bursa Malaysia in 2002. In 2015, Julian Foo Kuan Lin emerged as a major shareholder in Niche Capital and subsequently assumed the role of chief executive officer in 2017.

From then, the 38-year-old has been busy restructuring the business and building up its gold-mining segment. About three years ago, the company diversified into construction and property, and in 2021, Niche Capital ventured into the exploration of minerals and mining.

Speaking to StarBizWeek, Foo says that Niche Capital began its mining business when it entered into a joint-venture agreement in April 2021 to carry out exploration, extracting and selling of gold on a 50-ha mining area located at Sokor in Kelantan.

In August that year, it entered into a supplemental agreement to expand the exploration and mining area to cover the entire 547.4ha known as Sokor North Area.

“Early this month, we reported our maiden mineral resources estimates on an eight-ha site within the Sokor North Area, making Niche Capital among a handful of companies listed on Bursa Malaysia to report this in accordance with acceptable reporting standards of the JORC Code,” Foo says.

The JORC Code is a professional code of practice that promotes robust standards for the public reporting of exploration results, mineral resources and ore reserves. Its report is often used to value miners in markets like the Australian Securities Exchange.

Foo says there are several benefits to reporting resources based on the JORC standards. For one, the data is seen to be impartial and reliable.

Secondly, putting the finding through a systematic methodology gives Niche Capital the confidence to develop the eight-ha site into a mine.

Thirdly, as the code is widely accepted internationally, Foo believes it can increase the intrinsic value of the company.

Notably, the company has started its alluvial gold-mining operation – the process of extracting placer gold; gold carried by gravity or hydraulic action to low lying areas. The pre-commissioning of this was carried out in February this year, according to Foo.

Production, he says, has been encouraging with the mining segment contributing its maiden revenue of RM220,000 for the third quarter ended March 31, 2023 (3Q23).

Interestingly, a major part of the 3Q23 revenue of RM2.56mil came from construction and services where the company intends to bid for more construction contracts to build its order book.

As for its jewellery trading segment, low consumer demand has impacted the business. To reduce cost and losses, Niche Capital ceased its jewellery retail operations in March 2022 to focus on wholesaling.

Moving forward, Foo says the company is preparing for hard-rock gold mining operations and is in the midst of obtaining the necessary regulatory approvals.

“We project this will take place in the second quarter of next year and should contribute positively from the financial year 2024 (FY24) and onwards,” he says.

He expressed confidence in converting a substantial portion of the deposits reported under the JORC Code on the site into “mineable ore reserve as the mineralisation occurs near surface, which makes mining relatively cheaper and easier”.

This month, Niche Capital also saw two other developments. One is it had expanded its mineral tenements by an additional 910ha, known as Sokor South Area, and 373ha, known as Sokor Midland Area.

Both are near to its current mining tenements.

“In total, this has expanded our mineral tenements to 1,831ha, making Niche Capital one of the largest gold mining companies in Malaysia in terms of tenement area,” he adds.

Foo reveals that the company has identified at least three other potential hard-rock gold deposits within the Sokor North Area and will begin exploration drilling by 4Q23.

He does not rule out needing to raise more capital to fund upcoming plans apart from the recent share issuance exercise that raised RM33.1mil.

The other interesting development is that Niche Capital is exploring nickel venture in Indonesia. Towards this end, it has entered into a memorandum of understanding with an Indonesian nickel mining company.

“The proposed collaboration is part of the company’s strategic plan to expand its mining operation beyond Malaysia and to diversify into other minerals, especially those categorised as critical minerals like lithium, nickel, copper and aluminium.

“These are commodities needed to generate low-carbon emission energy,” Foo says.

He adds that the party it is currently in negotiation with has more than five years of experience in nickel mining operation in Indonesia, which is the largest producer of nickel in the world.

“Four of the five largest nickel mines in Indonesia are located in Sulawesi, while the fifth is located in Maluku.

“However, currently, most of Indonesia’s nickel smelters output is of Class 2 nickel, which is a low-purity type used for stainless steel,” he notes.

Going forward, he says the Indonesian government is determined to transform its nickel industry to meet the rising demand for Class 1 nickel – a crucial component for electric vehicle (EV) batteries.

While nickel demand has softened over the past few months, Foo anticipates demand to pick up in the second half of 2023, driven by a recovery in EV sales.

“The nickel-based batteries are expected to dominate the global battery market through 2030 as they offer greater energy density for long-range EVs.

“So Niche Capital is well-positioned to capitalise on the growing and sustainable demand for nickel when its venture in Indonesia comes on full stream, which is expected in the next 12 to 24 months,” he adds.