Canada re-vitalizes Diamond Exploration 25 years on

Paul, Brockington, Margaret, Lake, Diamonds

Paul Brockington is the CEO of Margaret Lake Diamonds Inc., a new diamond exploration company with a solid project and very tight share structure. NWT Ice Roads photo: Ian Mackenzie (Wikimedia Commons)

Canada’s newest diamond exploration company, Margaret Lake Diamonds Inc. commenced trading this morning on the TSX-Venture Exchange under the symbol DIA.

Mining engineer, analyst and investor Paul Brockington, 71, is CEO of the new company, which holds an option to earn up to 70 percent of the Margaret Lake Diamond property, adjacent to Kennady Diamonds ($110 million market cap). Margaret Lake is also just a few kilometers from Mountain Province Diamonds ($540 million market cap) in Canada’s Northwest Territories.

The $1.2 million financing Margaret Lake Diamonds closed yesterday values the company at a market cap of just over $2 million.

After several conversations with Mr. Brockington, other stakeholders involved with the project and experts in the industry, I am in a position to share what I know about Margaret Lake’s people, project and plan.

Please note that as a shareholder and former director of the company, my comments might swing toward a positive bias.

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CEO Paul Brockington was educated at the Camborne School of Mines in the UK. He worked on several mines early in his career, ranging from copper in Zambia to iron ore in Canada’s Labrador Trough, and copper and molybdenum mines in British Columbia. At the latter he found the last deposit on the property to be mined.

Mr. Brockington settled in Winnipeg in 1972, and became a mining analyst with Richardson’s, then one of Canada’s most prominent mining and energy stock underwriters. By the time he left the firm 10 years later to pursue interests in the public sector, Brockington was Richardson’s senior mining analyst.

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Pilot Gold’s Kinsley Mountain Continues to Prove Itself as Nevada’s Top Exploration Play

Yellow trucks at Newmont's Nevada operations (Source: Penny Stock Journal)

Yellow trucks at Newmont’s Nevada operations (Source: Penny Stock Journal)

The high-grade intercepts continue at the Kinsley Mountain project part of Mark O’Dea’s Pilot Gold (PLG:TSX).  The final five holes of a twelve hole, 3,500m winter program were released today and they included 10.6g/t Au over 30.0m in PK133C (step-out), including 16.1 g/t Au over 16.5m and 21.3g/t Au over 29.0m in PK137C (infill), including 46.4g/t Au over 4.9m (oxide).

The winter program has focused on the high-grade Western Flank target of the Kinsley Mountain project which is 79% owned by Pilot Gold and 21% by Nevada Sunrise.

“Kinsley Mountain is quickly emerging as Nevada’s leading exploration project due to its high grade drill results and district potential,” stated Matt Lennox-King, President and CEO. “The newly discovered high grade Western Flank zone continues to grow and remains open in all directions. As a result, we have significantly increased the 2014 exploration program by $1.57 million and 8,600 additional metres of drilling. We are looking forward to the resumption of drilling in early May.”

Pilot Gold continues to develop the early-stage project which is now seeing a lot more activity than was originally planned.  They are building drill roads to access areas between the Western Flank, the Right Spot and the Secret Spot areas which spans an area of 2km. Continue reading

Roxgold Rocks Feasibility Study with 48.8% IRR and Major Improvements to Grades, Recoveries and Costs

Yaramoko is the highest grade undeveloped gold project in the world (Source: Roxgold)

Yaramoko is the highest grade undeveloped gold project in the world (Source: Roxgold)

Roxgold (ROG:TSX) which is developing the highest grade undeveloped gold deposit in the world, released their final feasibility study for the Yaramoko project in Burkina Faso.  The feasibility study was in line with the company’s September 2013 preliminary economic assessment.  The company is on track to complete the final stages of permitting in Q3/2014 with underground development starting before year-end.

The largest improvement from the PEA was with regards to the all-in sustaining cost which decreased to $590/oz from $712/oz.  This dramatic improvement in operating margin helped increase the after-tax NPV(5%) to $250 million from $192 million.  The average grade and recoveries also improved slightly with the average mill grade increasing from 10.2g/t gold to 11.59g/t as well as recoveries increasing from 96% to 96.9%.

The initial capital for the project remains modest at $106.5 million.  Roxgold recently completed a $29 million bought deal financing at $0.58/share (included $12.5 million from resource private equity fund Appian Capital) and now the company is sitting on approximately $40 million in cash.  The project is economically robust, so I would expect 50-60% of the capex to be finance by debt.

On the conference call, management said they are aiming for $60 million in debt to finance the project.  They will have to complete another small piece of equity prior to production.

The company believes it can save $50 per ounce in operating costs related to securing access to grid power as opposed to diesel ($0.45/KWh versus $0.17/KWh).  On the conference call, management reaffirmed their confidence that these power contracts will be secured well before production starts.

The project remains open at depth, beyond the 430m extension of the current mine plan.  270,000 ounces of high grade inferred gold resources remain below the 430m depth and extend to 900m.  This leaves the project with significant exploration and mine-life extension potential. Continue reading

Canadian billionaire Schulich expecting inflation with $211 million Barrick bet

Seymour, Schulich

Seymour Schulich

[Photo: Mining Hall of Fame]

 

 

Original Franco-Nevada founder and billionaire Canadian financier Seymour Schulich revealed a new 11 million share long position in embattled miner Barrick Gold yesterday, worth roughly $211,200,000 at today’s prices. Mr. Schulich also said he considers a Barrick Newmont merger “constructive,” noting that it would create a “very large” Canadian company. Mr. Schulich is bullish on gold and inflation as a result of the world’s money printing, which he estimates at 15% per year. According to the National Post article, Mr. Schulich chose Barrick stock to play the gold theme for its liquidity, and because he thinks his friend Ned Goodman has joined Barrick’s board to do something big with the company.

Read: Seymour Schulich, new owner of 11 million Barrick Gold shares, ‘constructive’ on possible merger with Newmont

Related books: Get Smarter: Life and Business Lessons [Schulich, DeCloet]

Canada Couple Bring Chinese, Indians Into Cambodia Gold Company

Thom Calandra GRAND PRAIRIE, Alberta – Mike Weeks and Delayne Weeks of Canada had a dream five years ago: create a gold mine. Do it in a nation that has never produced gold commercially. Use the process to educate and enrich an impoverished population.

The country is Cambodia. The mine is in northeast Cambodia, close to Vietnam. Phum Syarung, its name, is proceeding to production at triple the pace of any mining jurisdiction in southeast Asia.

”Cambodia is the most mineable jurisdiction I know, and it is rich in untapped minerals,” says Mr. Weeks, a former oil executive who negotiated leases and contracts in north Africa. He and his wife, Delayne, have been claiming Cambodia mineral properties for six years.

Angkor Gold ($ANK:CA) owns seven mineral licenses totaling 1,448 square kilometres.

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Nolan Watson Consolidates Sandstorm Brand with Acquisition of Sandstorm Metals and Energy by Sandstorm Gold

SSL Chart
(Sandstorm Gold has outperformed the gold miners index)

With limited near-term growth opportunities in the non-precious metals streaming space, Sandstorm Metals and Energy (SND:TSXV) has agreed to be acquired by Sandstorm Gold (SSL:TSX) for cash and shares totaling $49 million.  Sandstorm Gold will issue shares based on an exchange ratio of 0.178:1 as well as issue $0.35 in cash for each Sandstorm Metals share.  This values Sandstorm Metals at a $1.42/share or a 43% premium to the close today (based on SSL share price of $5.99).  As a result, the Sandstorm brand is now focused solely on the junior-to-mid sized precious metals streaming market, which they currently dominate.

Sandstorm Gold has locked up 6.85 million shares of Sandstorm Metals, representing approximately 19.8% of the company.

Sandstorm Metals and Energy has $4.5 million in cash and a total of 3 NSR royalties as well as 1 copper stream.  One of their assets is currently cash flowing ~$4 million per year (2.4% NSR royalty on copper and zinc from the Bracemac-McLeod mine).  They also have an estimated $7 million in tax-loss carry forwards which can be applied against Sandstorm Gold’s future taxable income. Continue reading

Is the VIX Broken?

There are a few interesting developments with regard to recent market volatility, both realized & implied. While realized equity volatility has been trending higher since early March, implied volatility (namely the VIX) has remained relatively muted and as of Thursday’s close the VIX was on the verge of losing its ‘teenager status once again:

Click to enlarge

VIX_4.20.2014

While the VIX technically measures implied volatility of options prices on the S&P 500, it has historically held a very high correlation with the realized volatility of both the Nasdaq Composite and the Russell 2000 (small-cap index). The recent disconnect between the explosion of volatility in small caps (highest since 2011) and the dormant VIX is unusual to say the least:

IWM_ATR_vs._VIX

While the VIX represents the market’s expectations of future volatility 30 days out, it has generally had a very high correlation with realized volatility. In fact, the recent disconnect between realized volatility in small caps and implied volatility as represented by the VIX is the widest it has ever been.

Even moving the Average True Range (ATR) to a 7-day measurement, to better capture sharp changes in market volatility, illustrates that the current market episode is highly unusual:

RUT_20_year

This is made all the more interesting that we are fast approaching the beginning of the seasonally weak May-September “sell in May and go away” period for the market.

What is the explanation for the relatively low levels of implied volatility currently despite an ample amount of mounting warning signs? I believe the answer lies in recency bias; net buyers of hedges using put options have not done well in recent years as every shallow correction has given way to the next leg higher in equities. Market participants have now been trained to believe that dips will continue to be bought and that put hedges are an unnecessary expense which have only served to reduce portfolio returns.

An exceptionally high level of complacency among market participants is also confirmed by the NAAIM Exposure Index which shows 0 bearish managers in its most recent survey:

NAAIM

This is quite a shift from January/February when the bearish reading registered -125 for four consecutive weeks.

Will the current market complacency get punished? Or will the dips continue to get bought up throughout the summer and into the fall? If history is any guide, adding some equity put exposure amid the mounting warning signs is probably not a bad idea…..

Friedland’s New Copper Porphyry Explorer

KZD ChartKZD data by YCharts

Yesterday, Kaizen Discovery (KZD:TSXV) announced it has signed a definitive agreement to acquire West Cirque Resources (WCQ:TSXV) in an all stock transaction.  West Cirque is a prospect generator with copper porphyry targets in BC.  Kaizen is a exploration company which is majority owned by HPX TechCo which is 50% owned by billionaire mine developer, Robert Friedland.

Pursuant to the transaction, Kaizen will issue approximately 14.5 million shares to West Cirque shareholders on an undiluted basis. Post-transaction, Kaizen will have approximately 148.3 million shares outstanding. Continue reading

Are Tech Stocks Broken?

Technology stocks have been one of the leading sectors during the recent bull market, however, there are mounting signs that the bull run may be over. March was not a pleasurable month for tech investors, and April hasn’t been much better with many investors sustaining double-digit losses in a relatively short period of time.

Some large hedge funds have even decided to return money to investors after the recent reversal of fortune. Stocks such as FB, NFLX, TSLA and GOOGL led the market rally at the end of 2013 and into early 2014. However, since early March many of these names have suffered 30%+ declines:

Click to enlarge

FB

FB

GOOGL

GOOGL

NFLX

NFLX

TSLA

TSLA

While there has certainly been a great deal of damage inflicted upon these charts recently, 3 out of 4 of these names remain above their 200-day moving averages and all continue to be in long term uptrends.

However, should we see the percentage of Nasdaq stocks above their 200-day moving averages fall below 50% and remain there for more than a week it could be an indication that a significant change of trend has taken place:

Nasdaq_200-day

The percentage of Nasdaq stocks above their 200-day moving average peaked in August and continued to make successive lower highs before rolling over in March. 

If there is one stock that may hold the key to overall market sentiment, it is GOOGL – clearly the strongest stock of the 2013-2014 bull run in tech, GOOGL has since begun to exhibit strong signs of institutional distribution and a large rounded top has formed:

GOOGL_Daily_4.17.2014

The bulls will need to defend the $530 level in GOOGL or risk a much larger correction with the potential for the open gap down at $444.83 to be filled in.

While we can’t emphatically state that tech is a broken sector, the warning signs are mounting and the bullish momentum has all but completely dissipated.

Peter Munk – Heart of a lion

Peter, Munk

The Economist is out with a first class post on Barrick Gold founder Peter Munk.

Munk’s tale

How a former refugee from the Nazis made and lost several fortunes

Apr 19th 2014 | From the print edition

YOU can’t be right all the time. In a 1995 profile of Peter Munk, the founder of Barrick Gold, a mining giant, The Economist concluded that the biggest problem facing the company was who would replace him as boss. Mr Munk will at last step down as the company’s chairman at the annual meeting on April 30th, aged 86. In the same profile we fretted that by spending $500m on a property company, Mr Munk risked ending up in the same boat as two fellow Canadian tycoons, Paul Reichmann and Robert Campeau, who had gone spectacularly bankrupt. In 2006 Mr Munk had the last laugh, selling the company for $9 billion.

Continues here.

The Lind Partners Add John Hancock as Consultant and Continue to Grow Canadian Direct Investments

John Hancock (Photo: Perini Michael/The Australian)

John Hancock (Photo: Perini Michael/The Australian)

The New York-based alternative asset manager, The Lind Partners, have announced a unique strategic partnership with John Hancock (the eldest son of Gina Rinehart of Hancock Prospecting, the largest private company in Australia) in which Mr. Hancock will become a consultant to Lind and advise them on investing in the Australian resource sector.  The team at The Lind Partners has been investing in juniors since 2009 they employ a multi-strategy approach to investing.

Mr Hancock has over 20 years of experience in the resources industry (iron ore), financial markets, public relations and capital raising. In his role at Hancock Prospecting, including operational and marketing experience at both successive JV partners to the Hope Downs Iron Ore project-Iscor and Rio Tinto.

thelindpartners

The Lind Partners is led by Jeff Easton and Phillip Valliere who, combined, have over 50 transactions totalling $475 million under their belts.  The majority of their deals have been in Australia (40 of the 50), with the remaining spread between Canada and the UK.

Lind’s investment team is focused on growing their Canadian and UK businesses and is currently looking to help finance junior resource companies.

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Newly Consolidated Spartan Energy Announces Production of 6,600boe/d

SPE Chart
SPE data by YCharts

spartan

The recently consolidated Spartan Energy (formerly Renegade Petroleum and Alexander Energy) has provided their first post-merger quarterly production and drilling update.  The company has been garnering a lot of attention from institutions and analysts abroad due to the underappreciated assets that have been removed from Renegade and put into the capable hands of the new Spartan Energy team.

Spartan’s team is the same team that have had two previous iterations of the Spartan name, both being sold out.  Most recently, in January of 2013, they sold Spartan Oil to Bonterra Energy for $480 million.

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Torex’s Final Financing Piece Found with US$375M Bank Facility for Morelos

Locals gaze at Goldcorp's Los Filos mine, located next to Torex's Morelos project (Photo: subversiones.org)

Locals gaze at Goldcorp’s Los Filos mine, located next to Torex’s Morelos project (Photo: subversiones.org)

This morning, the long awaited financing piece for Torex’s (TXG:TSX) Morelos project has been found. The company announced it has signed a commitement letter with six banks, including Bank of Montreal, BNP Paribas, SocGen, Commonwealth Bank of Australia, ING and Bank of Nova Scotia for a US$375 million, 8.25 year project debt facility.  This package fully-funds Torex to complete their 21 month build (15 months remaining) to production of their high-grade Morelos gold project in the Guerrero Gold Belt, Mexico.

The company recently closed a $148 million bought deal in February and had over $216 million cash at year-end.  They have raised over $500 million in equity in the past two years.  The company is roughly three quarters of the way through their $725 million build and so with the $300 million available plus the additional $364 of cash they have on hand, this should take them through to production.

There are also some 60 million $1.50 warrants that expire on August 12, 2014 (currently TXG is trading at $1.09).  The company does not need the potential proceeds of these to finish construction.

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