A junior mining share worth watching

There is one small Irish mining company that has some solid reasons to be cheerful and might just make enough money to have its directors bathing in Guinness for the rest of their days. This is Belmore Resources (BEL), a real tiddler that has its shares quoted on PLUS Markets where, at a price of 5.5p, they value Belmore at under £2m.

Let's start with a bit of history... This would not be the first mining success story in Ireland. Despite being dismissed back in 1856 by the director of the Geological Survey of Great Britain as a country devoid of minerals of any worth', Ireland has had a mining boom since the discovery of the Ballyvergin copper mine in the 1950s.

The further discoveries of the Tynagh and Silvermines zinc, lead and silver deposits in 1961 and 1962 spurred more excitement. And since then Ireland has been a significant producer of zinc and lead in particular. Mine production reached a high in 2003 when 419,000 tonnes of zinc were produced. This accounted for 41% of European production and nearly 5% of the world's output.

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So another major find in Ireland would not be a huge surprise

Belmore Resources: cheap stock with great potential

At only £2m, the valuation is low considering the deal Belmore struck with international mining group Lundin Mining Exploration early this year. After all, Lundin has agreed that it must spend £13m to acquire a 70% stake in the licenses that Belmore holds in Ireland's County Clare. And they may be able to confirm the promise of a mining sample taken by Belmore early last year.

And don't worry about "resource nationalisation". I think we can rely upon the Irish government to treat investors fairly, a comment that does not always apply to less scrupulous regimes overseas.

As energy and metal prices climbed last year, a number of governments took steps to grab a bigger slice of the pie. Big international companies like BP and Exxon battled for control of their ventures in Russia and Venezuela. Weighed-up against this stark threat, a junior Irish miner actually looks like a good bet.

Exploration of a previous discovery could reap rewards

International mining companies have taken note of the potential in this region and both Tech Cominco and Xstrata are involved in zinc exploration in County Limerick. But it was BHP Billiton which owned the County Clare licenses before it elected to withdraw from the country in the 1990s. So it is now Belmore that has a license covering four hundred square kilometres in County Clare, as well as a further eighty square kilometres in Donegal.

It was in the former that Belmore made what could be a highly significant discovery just over a year ago. Its drill bit encountered a ten metre band of rock that consisted of 13.84% zinc, 5.52% lead and 62.84 grams per tonne of silver. This is a rich mixture and it attracted considerable attention in the mining industry. The share price of Belmore doubled to 6p, since when it has been moving sideways. But now the action could be about to start again.

In the last few weeks, Lundin has moved two drilling rigs onto the site. Now it has started a drilling programme to determine whether Belmore's initial discovery was a just a fluke, or whether it is just the tip of a major underground resource. We will find out in the next few months.

Nothing in the mining industry is ever certain, and the road between an initial promising discovery and a working mine is full of twists and turns.

We share a sunny view of life with entrepreneurs amongst whom no group is more convinced of the glass being half full than the mining crowd. Add the bonny spirits of the Irish into the mix and you will, for sure, have a band for whom the end of the rainbow is never more than a few footsteps away.

I will be watching out for announcements from Belmore this summer. This is a share that could see some action.

This article is taken from Tom Bulford's free daily email, Penny Sleuth