Serabi Gold – Double the Fun

A picture of a man wearing a suit in a grey room. He looks at a laptop and dollar bills are flying out towards him. He smiles with his arms raised triumphantly.
  • LON: SRB
  • Shares Outstanding: 58.91M
  • Share price: GB£0.77(15.01.2020)
  • Market Cap: GB£45.36M

There is no doubting the last few years have been tough for gold mining explorers & developers, and mining investors. However, gold producers have seen an uptick in share price since the end of August 2019 and the price of gold emerged from the $1,200 doldrums. Some gold producers have done better than others and have broken away from the pack. Serabi Gold looks to have safely made that cut by more than trebling their share price since the lows of May 2019.

Serabi had a quiet if unspectacular time until mid-2018 until May. A small, high-grade, high-cost, underground South American mine doesn’t usual capture retail investors’ interests, but it was consistent in its output and didn’t encounter any production problems. However, despite having an experienced and lively management team, they were loaded with debt, low margins (if any), and were unable to raise funds cheaply; there were lots of reasons for investors to look elsewhere.

The big move in May was due the market finally seeing the data from the acquisition of another underground gold asset, Coringa Gold Project, which is near their core project, Palito Mining Complex. A break in the gold price in August saw a further resurgence of interest in Serabi Gold and in the share price. In addition, it became clear there could be an opportunity to restructure their debt. Investors became very interested.

The acquisition of Coringa is the game changer for Serabi. Not only will it reduce their AISC to nearer the magical $950 mark, but it also will double their production to c.80,000 oz pa. This small, sleepy gold producer is suddenly on the radar of institutional investors, which should drive volume of trading and solidify the shareholder register.

Today’s record production news caps off a great 2019 for Serabi. The company achieved its highest quarter gold production of the year, 10,223oz. This brings the total annual gold production to 40,101oz, a 7% improvement over the course of 2019.

The total mined ore for Q4 was 44,092oz, at a high-grade of 6.69g/t of gold. 44,794t of run of mine (ROM) ore was processed through Serabi’s plant (combining the Palito and Sao Chico orebodies) at an average grade of 6.81g/t. On the exploration side of things, a sizeable 2,908m of horizontal development was completed in Q4. Serabi has managed to optimise its assets at little detriment to its share price or cash position: the company sits at GB£0.78 on the LSE today (moving back towards 2019’s peaks of GB£0.89), and claims year-end cash holdings of US$14.3M.

In terms of infrastructure, Serabi has also seen great improvements; chief of them is the installation of an ore sorter (sited between the crushing and the milling sections), which entered its final stages at the end of 2019, beginning electrical and mechanical testing. Investors should take note of this. Based on similar ore sorter data, this could improve productivity by as much as 20%. That is significant economically.

A screenshot of a diagram of a sensor-based ore sorter.
A sensor-based ore sorter

Serabi’s step out drilling campaign at Sao Chico has significantly extended the resource beyond current mine limits. A projection of full year production for 2020 stands at 45-46,000oz: a further improvement on an already strong figure as systems continue to be optimised. Serabi Gold has been positively moving along with consistent results.

Rough Assessment Of Serabi’s Current Debt Situation

Serabi currently owes c.USD$12M to Equinox Gold Corp. and c.USD$7M to Sprott Resource Lending Partnership, which it agreed to pay back over 22 months, (30/09/18-30/06/20), in addition to providing 145,479 new ordinary shares of £0.10 each (a 10% discount to the closing price on 14 September 2018).

The company is going to need to give guidance as to how it plans to restructure this. We would imagine Sprott would roll over as Serabi has been consistent with their debt payments. There is cash in the bank to pay back Equinox, but either that gets deferred at the deference of Equinox, which we think unlikely, or Serabi replaces that with cheap debt, serviced by their much-improved net cash production. If this indeed proves to be the case, Serabi holders will not be diluted and should be satisfied with how management has performed for them this year. The big question is how many will take the opportunity to cash-in and who will replace them? I suspect that this is now attractive to institutional gold funds.

The Palito Mining Complex, a high-grade, narrow vein underground mine, is already producing good results with an AISC of US$1,078 per ounce. However, Serabi’s aim to bring that figure down below the $1,000 mark. This is where the Coringa Gold project comes in. Serabi acquired Coringa from Anfield Gold Corp. in December 2017 for US$22M, and they have plans to get in to Production by end of 2021. Coringa is far more than an option: the team at Serabi feel it has an almost identical setup to Palito in terms of geology, size and necessary mining operations.

An aerial drone shot of the Coringa Gold Mine in Brazil.
Coringa Gold Mine

Coringa has a higher grade than Palito, at 8.34g/t, with a total gold production of 288,000oz, and a life of mine standing at around 9 years. Typical fully-operational annual production should stand at 38,000oz. Corringa would require an initial capital investment of around US$25M prior to sustained positive cash-flow, followed by sustaining capital expenditures of around US$9M that would likely be funded by project cash-flow.

To continue developing Coringa, I expect to see a revised PEA to whet the market’s appetite. Once Coringa is up and running, an annual production average of 38,000 oz pa, in addition to an AISC of US$852, could create a quarterly net revenue of c. US$2.5M within 12-18 months. When combined with the US$1.5M of stable cash flow from Palito, Serabi Gold could be churning out a net profit of US$3.5M per quarter for years to come, and this is without Palito’s ore sorter’s impact on results being taken into account.

The sense in the market has always been that Serabi will aim to be a 100,000oz per year gold producer in the not so distant future; institutional investors will likely push for further acquisitions, as mentioned in a recent Crux Investor interview with Nicolas Banados, Managing Director of Family Office Megeve Investments and investor in Serabi Gold.

To conclude, Serabi is performing well. It has a clear plan to create a business with a cross-mine AISC, production level and revenue that investors will welcome. With permitting at Coringa continuing to progress (the date for the public hearing is set for 6 February 2020), this ambition is moving closer to reality, and assuming public and stakeholder support, this is the solid final step for Serabi before receipt of the Licencia Previa (the Preliminary License). My message to the company is more of the same please with both assets; show us success with the drill on your exploration targets. We are watching.

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Scared About Investing? Read this.

More Of The Upside, Less Of The Down.

People have been putting their hard-earned cash into junior mining companies for decades. What exactly do these companies do with your money? They throw it into a hole and hope something good comes out. But let me be clear, investors can make a lot of money investing in mining companies if you know what to look for and are clear about your investment strategy.

An aerial photo of one of the world's largest mining holes, the Mir Mine in Eastern Siberia.
The Mir Mine in Eastern Siberia; is some of your money inside?

This article is for those investors who may be less knowledgeable about mining and nervous of miscalculating the risks. I would also like to introduce you to a very interesting business model within the current electric vehicle (EV) thematic which removes a lot of these risks for investors. 

First, let’s talk about mining risk. There is an ever-present risk factor that is inseparable from junior mining investment, and it is every investor’s most loathed buzzword: uncertainty. ‘Indicated resource’ and then ‘inferred resource’ estimates from preliminary drilling can become the flimsy foundation for investment decisions. Forming the top of this wavering base is the decision-making capacity of a company’s management team; they may have a promising asset, but without mitigating risk effectively, and employing an astute business plan or the appropriate strategy to deliver that plan, the asset can become uneconomical. Not only is the potential value of investment opportunities nebulous, but this value might not even be extractable. 

The truth of the matter is all junior mining operations have an element of luck. We are dealing with resources that are hidden underground, with a list of risk factors that would make Evel Knievel wince. There are an innumerable number of things that can go wrong on a daily basis, and this is just on a company level: expand that logic to the wider financial market and the extent of risk becomes clear. The day to day role of junior mining management teams is to mitigate these risks in the best interests of their shareholders, but the reality is there is only so much influence they can have over an industry more akin to gambling than one might realise.

Junior mining companies have to sell us an idea that doesn’t necessarily require substantial evidence. Boards of directors and management teams are usually master salespeople who can coerce their way to funding they often don’t deserve. Unfortunately, this is the cold, hard reality of investing in junior mining companies; just as gamblers will head to the casino and get the fruit machines bleeping, people are always going to roll the dice and take a punt on a company they think can give them an exciting bang for their buck. Junior mining investment isn’t quite a casino of pure luck, but luck is of undeniable significance.

However, what if there was a better way? What if there was a way to gain exposure to much of the exciting upside of mining investment, but that steer away from geological risk and mining difficulties? The answer is in extracting value from materials and products that are already at surface. This provides a reliable, unequivocal inventory, and helps work towards the green energy sentiment sweeping the western world with all the ferocity of the awful Australian bushfires.

A screenshot of three dollar signs in a line.
More Money, Less Worry.

There is no doubt that mining is essential to provide the items we use in everyday life and no number of protesters outside mining conferences harassing mining executives is going to change that. The irony of these protesters filming themselves on phones made from mined materials, having travelled there on transportation made from mined materials, is not lost on me.

So, let’s get real. Mining is here to stay. If you want to talk about ethical mining, fine. Hold management accountable to those standards, fine. But if you go down this track, you need to go all the way. End to end.

I have previously spoken about true end-to-end green investing. We live in a time of disposable products. Many of these products contained mined materials which go to landfill and dumps. We then mine more materials out of the ground to make more products. It’s not just the ethical and environmental issues, commercially this doesn’t make sense. We are leaving billions of dollars of materials in dumps.

Mining ethically is one thing, but recovering value from end-of-life products is the, as yet, unanswered requirement for a fully functional and genuine green energy investment eco-system. A primary driver of the green energy narrative is the electric vehicle (EV) revolution. There has always been a contradiction when it comes to EV, because the very thing it seeks to positively effect, climate change, is only positively impacted at the front end of the process – less carbon emissions from the vehicles. If one is to analyse the process of battery and electric vehicle manufacture it is far from zero carbon neutral. In addition, the environmental challenges around battery disposal and destructive pyrometallurgic recycling techniques, mean the entire EV macro investment story becomes fatally flawed.

I recently wrote an article regarding an exciting solution to the cost and environmental ramifications of current pyrometallurgical norms. I explained how I discovered an Australian company, Neometals, who have a proprietary hydro-metallurgical battery recycling process which recovers +90% of materials (nickel, lithium, copper, cobalt, iron, aluminium, manganese). However, I didn’t fully explore the genius of their business plan, or how it relates to us investors.

Neometals is a company with value recovery at its core, and its plan will have the approval of the ‘green army’. Neometals signed a memorandum of understanding (MOU) with German-based private metal industry firm SMS Group to work jointly on the funding, research and evaluation of its lithium-ion battery recycling technology in October, 2019. If successful results are registered at the joint venture pilot plant, the companies will likely develop several fully operational battery recycling facilities.

Neometals’ market cap of AUS$103.44M bizarrely only equivalent to the company’s current cash reserves. They are equipped to make this happen technically and financially, and SGS brings all the contacts and cash to roll this out across Europe.

By partnering with a giant company like SMS Group, Neometals will secure contracts with vehicle manufacturers to provide large, stable quantities of feed-stock (scrap and end of life batteries) for their battery recycling plants. By establishing this robust supply, Neometals solidifies its dominance over traditional junior mining companies; there is nowhere near this level of certainty when mining underground resources.

In addition, Neometals will look to secure contracts to supply its >90% recovery of battery materials back into battery manufacturers. In my opinion, €5Bn SMS Group can confidently facilitate these arrangements, and can bankroll all aspects of the joint venture with confidence.

It is quite clear: by investing in Neometals, investors gain access to an undervalued, unique, proprietary solution that has the funding security investors wish for. The feedstock supply and market demand provide certainty, and the economics of the project provide junior mining upside but without the risks. The economics of the project also fit into the EV narrative in a way that junior miners have not yet been able to deliver on. By re-using surface-based material, Neometals reduces the costs, safety risks and environmental impacts associated with mining. The EV cycle now has an appropriate end, and it is an end that could make you a bucket full of cash.

The Neometals’ management team has pieced together an eco-system of people and partners. I am under no illusion; this team has a clear, solid plan for growth, with undeniable evidence of great success in the past. The company originally made their money with a lithium mining project, Mt Marion, in Australia, and timed their exit perfectly. They pocketed c.AU$140M, but more importantly returned c. AU$45M to shareholders. This is a team that clearly know what they are doing.

A picture of a 'risk-o-meter;' the risk is in the red zone: 'high.'
Why take a big risk when you can play it safer and still make big money?

In conclusion, let’s start getting smarter with our investments. While conventional mining is always going to have the potential to make us money, why not consider alternatives that can mitigate risk and still provide excitement?

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

What Investors are Forgetting about the EV Revolution.

A picture of a pile of stacks of dollar bills. There is a picture of Duracell batteries in the top right corner, an anonymous character icon in the bottom right and a Crux Investor logo in the bottom left.

The Electric Vehicle (EV) revolution narrative is as rapturous as ever. Macro conscious investors have had their attention, and therefore the contents of their wallets, drawn to ‘statistically’ predicted leaps in demand in nickel, copper and lithium, amongst numerous other battery metals. In other words, every Tom, Dick and Harry have been pushing their green investment credentials and telling us how they are going to make money by selling materials to put into batteries.

The current EV macro story has been digested by a flock of vulture-like investors for many years. However, such scrutiny has oddly failed to explore one of the fundamental stages of the process: the end; just what happens once EV batteries reach the end of their lives?

Each year, millions of pounds of Lithium-ion batteries are landfilled or stock-piled instead of being recycled, which depletes natural resources and causes environmental issues. This has severe environmental and safety issues.

To be ‘greener’ or more eco-friendly, surely we should be trying to retrieve as much of the constituent battery metals as possible in order to make the EV cycle even more economically viable? Recycling Li-ion batteries is not yet profitable and must be subsidised by the government. There is an incentive to recover costly cobalt, but no recycling technology exists today that is capable of producing pure enough lithium for a second use in batteries, or so we thought…

One current method of treating spent batteries is pyro-metallurgy: using high temperatures of up to 1,300°C to process battery waste with the aim of reclaiming the target metals.


During heat treatment of battery waste, several reactions may take place such as decomposition of compounds, reduction and evaporation of metals or compounds.

A screenshot of a table containing details of pyrometallurgy, hydrometallurgy and electrometallurgy.
Pyrometallurgy: an outdated practice?

While the present day’s most prevalent solution is pyro-metallurgy, it is wasteful, environmentally harmful and, if you really think about it, completely contradicts the EV macro story. For EV to fulfil its promise of a greener environment, every stage of a battery’s life needs to deliver on this promise. The EV macro story’s strength is in the totality of its energy solutions. If one stage is inherently flawed, the whole concept becomes a half-baked mess that struggles both societally and economically. Either it all works, or none of it really does.

One of the current largest players in pyrometallurgical battery recycling is Umicore SA, and their process is as follows:

A screenshot of Umicore SA's pyrometallurgic battery recycling flowsheet.
Umicore’s pyrometallurgical process

It produces huge quantities of CO2, is costly, and burns many of the metals intended to be recovered in the first place. While this process allows Umicore to recycle ‘all types and all sizes of Li-ion and NiMH batteries,(1)’ it is an outdated, primitive solution and is on its last legs.

According to the Financial Times, c. 11 million tons of spent lithium-ion batteries will flood our markets by 2025 (2). The current recycling infrastructure is nowhere near prepared to process this volume.

The Solution

Neometals, an ASX-listed Australian-based mineral/material development company, may just provide a solution to our battery recycling headache. With such a solution comes enormous growth potential for shrewd, well-informed investors with a penchant for profit.

Neometals utilises a hydro-metallurgical process that has Australian and EU provisional and now an international PCT patent application. Let’s try to break down how it works and why it could be a game changer.

Neometals’ Process

A screenshot of Neometals' proprietary battery recycling process.

Here it is in simple stages:

  1. Neometals takes EV and consumer electronic batteries (end of life) as scrap from cell production sites and shreds them as close to origination as possible. Neometals can take whole battery packs, smaller modules from within them and individual cells. Once these are compiled, they are shredded as part of Stage 1 feed preparation.
  2. Once the shredding process reaches completion, Neometals takes out metal casings, and aluminium and copper foil for recycling. The ‘black mass’ that remains has now become safe for potential transport, completely eliminating any fire risk.
  3. This black powder is processed via acid leaching chemistry as part of Stage 2. As the powder is leached, Neometals pulls out the remaining valuable electrode materials, which are upgraded where possible into high purity chemicals.
  4. Upon conclusion of this process, Neometals’ immediate aim is to sell chemicals straight back into battery supply chain, ensuring stable, robust supply to an increasingly hungry market.

This process is superior in every regard to the pyro-metallurgical process. It recovers >90% of the constituent elements before the process begins, keeps dangerous chemicals out of the environment and has a considerably smaller CO2 footprint than mining the minerals from scratch. Neometals has answered the question as to how to recycle batteries more efficiently and, most importantly, economically. Their eco-system of experts and strategic partners have also put into place the supply (feedstock) and demand (selling back in gigafactories) side of things, resulting in an exciting upside potential for investors.

The Competition

While most (if not all) investors will be impressed by Neometals’ highly-effective procedures, there will always remain a cynical, scrutinous few, who will likely ask a perfectly reasonable question before getting involved: Neometals’ process may well be superior to pyro-metallurgy, but what about rival hydro-metallurgical companies? What does the competition look like?

There are alternative companies out there with similar technologies. One such company is Canada-based private battery recycling play, Li-Cycle. However, once you’ve compared the processes side by side, Neometals’ idiosyncrasy becomes even more pronounced. There are three key differences:

  1. Product: Neometals’ patent-pending process recovers high-purity, complete chemicals, which can be place immediately back into the battery supply chain. Li-Cycle produces mixed metal intermediates as their product that must be sold to a refiner, rather than to the market, with a smaller margin.
  2. Process: Neometals’ processing flowsheet will have subtle differences that impact efficiency of process and economics (CAPEX and OPEX). The flowsheet is a genuinely closed loop, with no environmentally related contradictions of the EV macro story. Furthermore, the process accepts a broad range of battery chemistries and has a flexible modular approach that allows for differentiation of shredding and refining locations. Lastly, the flowsheet ensures Neometals by-passes most transport complications related to the movement of hazardous substances.
  3. Business Model: Neometals has a unique partnership with a global metallurgical plant manufacturer, €5Bn SGS Group, that I will be writing an investigative article about in the near future. Their partner manufacturer is comfortably able to operate and maintain sites and has the brand to remove possible barriers with large original equipment manufacturers (OEMs). Interestingly, the company does not factor revenues from feed collection into their overall numbers; there is an assumption that Neometals will need to pay for feed or, alternatively, share the project economics with a sizeable OEM in exchange for free feed.
A screenshot of a table comparing battery recycling technologies against Neometals.

The Market

A screenshot of Neometals' share price performance for the year.

I already know what all my readers are going to say in response to this statement, but I’ll make it regardless, because it is entirely, incontrovertibly true: the market hasn’t clocked the true value of Neometals… yet. I know you hear this about every company on the face of the planet. You hear it in the quixotic conference ramblings of overpaid and underperforming CEOs, and you hear it from people like me. It’s an awful lot of rhetoric, but on this occasion, it’s well justified.

Neometals has a market capitalisation equivalent to the cash in their bank. That tells me three things:

  1. Investors are not looking at them.
  2. Those who are looking do not yet understand the potential of this one project (Neometals has 5 projects)
  3. Neometals needs to start telling this story.

I like their business model and the team. I like that they are fully funded to develop all their existing projects and more. I like the strength of their strategic partners. And above all I like the scale of the opportunity that they have built within the EV investment thematic. It feels like a market of one: a very nice place to be.

Neometals provides the unique benefit of having the reward profile of a junior, with the risk profile of an established producer. The company also mitigates risk in a way that would be impossible for mining: they are sourcing their supply materials from above ground and the quantities are pre-existent and guaranteed; they are not drilling into the unknown. Mining derivatives is an investment category that provides a truly unique situation, similar to the treatment of tailings, where investors can enjoy all of the upside with much less of the down. Look out for an article in the near future on just why this is so significant for making you more money.

To conclude, Neometals can cement its status as the frontrunning candidate for EV battery macro completion. It will be interesting to delve into specific details regarding management and the numbers in the near future, but for now, I need a stern cup of coffee and some light-hearted, terrible daytime TV.


If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.


A picture of a map of West Africa. The Sahel region is highlighted with a yellow sign reading 'risk' in the centre.

If you are invested in mining companies that operate in West Africa, you could be about to lose your money. Here’s why you might need to get out while you still can.

We need to look out for each other as retail investors. We are the little guys in the world of investment. We don’t get access to insider knowledge. We don’t get a lot of information until it’s too late and our shares have gone down. Because of this, I’ve been acutely aware of a lack of investor-related coverage regarding a particular geopolitical situation that is growing more and more perilous by the day.

Many of my articles focus on exciting opportunities, but this one is of a much more sombre tone. Islamic terrorist attacks from a range of jihadist groups, including Al-Qaeda, the Islamic State splinter group, ISGS (Islamic State in the Greater Sahara), the homegrown jihadist movement, Ansar ul-Islam, and Boko Haram, to name but a few, have been occurring at increasing rates in the Sahel region. It has sparked a ‘new wave of extremist violence…destabilising…the vast and impoverished semi-arid region south of the Sahara. (1)’

A photo in the desert of armed fighters aiming an AK-47 assault rifle towards the camera, dressed in military-styled overalls.
The violence is an epidemic

The attacks usually take the form of hit-and-run raids on villages, schools and police stations; roadside IEDs and suicide bombings. In one of the most severely affected countries, Burkina Faso, attacks have taken nearly 700 lives since early 2015 (according to an AFP toll correct as of December 2019). In addition, around 500,000 people have been forced to flee their homes. Terror attacks in Burkina Faso tripled in 2018 to 150 (according to the US state department). Just last week, an IED attack on a bus in Toeni mainly carrying students back to their places of study after the New Year break killed 14 people. The week before, militants murdered 35 civilians, 31 of them women, in an attack on a military base and a town in Burkina Faso. 7 soldiers also lost their lives.

In a similarly horrendous instance last month, approximately 40km from Boungou Mine, Burkina Faso, an attack on a convoy transporting local employees of the company SEMAFO Inc. left 37 people dead and 60 wounded. This is devastating news for the community, the families and of course the country. These workers put themselves in grave danger in unstable jurisdictions in order to provide for their families, but at a cost.

Soldiers in Burkina Faso

This bloodshed was the third deadly attack on SEMAFO employees in the space of 15 months. In the following days, the market reacted by offloading SEMAFO shares: the share price plummeted and is down around 55% on Summer highs of CA$5.46. This is no temporary price drop and the situation in the region is only going to deteriorate further.

Investors need to hear the brutal truth about some companies: they are putting profits ahead of people’s lives. As an investor, this is not something I can stomach. Can you?

There are 8 countries that the UN, the French government and the UK foreign office amongst others say are most at risk from terrorist activity: Mali, Senegal, Burkina Faso, Niger, Mauritania, Ghana, Togo and Benin.

As some SEMAFO investors may tell you, companies, their employees and their investors are in danger. There will be casualties in the markets; take gold, for example, an area of particular focus for Ansar ul-Islam amongst others:

  • In Mali, IAMGOLD’s Sadiola Mine (NYSE: IAG), Resolute Mining’s Syama Mine (ASX: RSG), Barrick Gold’s Morila Mine and Loulo-Gounkoto Mine (NYSE: GOLD), Hummingbird Resources’s Yanfolila Gold Mine (AIM: HUM) and Endeavour Mining’s Kalana Project (NYSE: EXK).
  • In Senegal, Teranga Gold Corporation’s Massawa Gold Project and Sabodala gold mine (TSX: TGZ).
  • In Burkina Faso, SEMAFO Inc. (TSX: SMF) has already brutally suffered, and companies like Nordgold may also be subjected to the risk of more bloodshed. The pits around Pama, Burkina Faso, have been taken over by terrorists, who rode in on pickup trucks with assault rifles causing local security forces to flee.
  • In Niger, Sahel Mining Company’s Djado Gold Property and other junior explorers in the south will face turmoil and aggression.
  • In Mauritania, Kinross Gold’s Tasiast Gold Mine (NYSE: KGC) and First Quantum’s  Guelb Moghrein (TSX: FM) face uncertainty.
  • In Ghana, AngloGold Ashanti’s Obuasi gold mine and Iduapriem gold Mine (JSE: ANG) and Golden Star Resources’ Wassa Gold Mine and Prestea Underground Gold Mine (NYSE: GSS)
  • In Togo, Premier African Minerals’ Dapaong Gold Mine (LON: PREM) and Gold Fields’ Damang (JSE: GFI).
  • Lastly, although most of the region is mined artisanally, some Benin-based exploration companies find themselves exposed.

These gold companies could be at risk. If you are invested, you should do your research to see if your money could be too. Imagine extrapolating this to the entire mining industry in the region...

Security firms are stating that the situation is now an epidemic. The violence is deadly and has ‘raised fears among European and US allies that the Sahel will become the next haven for fighters returning from Iraq and Syria, (2)’ particularly after the killing of ISIS leader Abu Bakr al-Baghdadi in late-October.

The ideology claiming to have caused these attacks has made its way from Libya to Mali via social media and is propagated by local extremists. The regional statistics provide a serious cause for alarm. ‘Over the last six months…the security situation in the Sahel has continued to deteriorate with a rising number of attacks against civilians and security forces. (2)’ Jihadis killed around 50 Malian soldiers at the start of November. Moreover, just a few weeks ago, ISGS militants ‘claimed responsibility for an attack on a military installation in western Niger near the border of Mali on Wednesday, which killed at least 71 people and left 12 injured. (3)’

Such violence now threatens to spill into the entire region. According to U.S. Department of Defence research group, the Africa Center for Strategic Studies, the number of violent attacks by Islamist extremist groups in the Sahel has doubled each year since 2016; deaths linked to these attacks have doubled each year.

…people are realising the failure of the strategy that has been used so far to fight violent extremism

Last month, the UN security council commented on the Sahel issue: ‘meeting recently in Dakar, regional Heads of State renewed their calls for a more robust mandate for the joint force.  “The situation in the Sahel is of serious concern and urgent action is needed.” (4)’

Throughout the region, ‘people are realising the failure of the strategy that has been used so far to fight violent extremism. (2)’

 The Sahel region (West Africa) has issues that could be in flux for the foreseeable future. There are three possibilities when it comes to the incentives for the terrorists:

A photo of ISGS militants in a desert holding assault rifles, ISGS flags and one holds a mobile phone, taking a photo.
ISGS militants
  1. Radical Islamic Terrorism

    This is how these attacks are being positioned by the national governments, mining companies and financial institutions. If this is the primary driver for terrorism in the Sahel, this is an unpredictable enemy devoid of moral human thought or logic. An idea is an incredibly difficult (maybe even impossible) foe to contend with.
  2. Tribal Warfare

    Though more of a prominent issue in central Africa, tribal attacks have a devastating impact on the Sahel. A tribal militia killed as many as 150 men, women and children in a village in central Mali in early June; at least 65 people remain unaccounted for. The raid appeared to be a reprisal for an attack carried out by a pro-government Dogon militia elsewhere in the Mopti region in March that killed 157 Fulani villagers.
  3. Criminal Enterprise (under the guise of ideology):

    This is perhaps the reality of the situation as it has been in some of the oil-producing countries. Terrorists are no longer uncivilised renegades lacking the infrastructure and finances to make big things happen. Terrorist cells the world over are incredibly well-financed, and have a worryingly high level of business acumen. They can monetise commodities in the black market. Groups like Al-Qaeda and ISGS are seizing control of mines, oil & gas facilities and pipelines, and are running their own operations, generating billions of dollars of income. While dealing with criminals is usually more straightforward, as these individuals have rational fears and value life, the ideology used to propagate such criminal activity is without rationality. Perhaps the heads of terrorist organisations are easier to combat than the brainwashed soldiers.

Whatever the driver and however it is dressed up by the companies, terrorists hold a tight grip over the Sahel region, and it is unlikely their stranglehold will be broken for the foreseeable future without involvement from external intervention, which in itself brings more problems.

Irrespective of the reasoned business aspect of Sahel terrorism, the perpetuation of the ideology propelling its success is now in danger of becoming generational. This has been building up for a decade without any meaningful intervention and the attacks are becoming more frequent and more violent. The political instabilities, and lack of organised security services throughout the region, render the countries almost helpless in the face of this brutal onslaught. Sooner than you want to believe, some of the companies (and their revenue) that we are invested in could be consumed and controlled by local terrorist groups.

Mining companies are going to tell you they’ve got this under control; they will tell you government forces or privately hired militia can quash the insurgents, but I am sceptical of these claims. Some attacks have featured hundreds of committed, fearless and well-armed terrorists. There is only so much small security teams can do to defend themselves against heavily armed militia with no regard for their own lives. The seemingly bottomless pit of brainwashed cannon fodder will be irrepressible until the idea itself is exterminated. Until then, why put your money on the line?

However, some companies have managed to mitigate the issues in the Sahel. There are three large American military bases towards the Sahara in central Niger, including the biggest American drone base in the world. The French also have a strong military presence in the country as a consequence of the 50 years of uranium production so critical to their energy and security needs. Uranium companies Global Atomic Corporation and GoviEx appear to have sufficient protection, because of their proximity to the military bases and the huge, barren, surrounding desert providing sufficient deterrent.

In addition, the criminal enterprise/tribal element becomes increasingly irrelevant. Terrorist groups are able to extract the value of assets with more simple commodities, such as gold or oil, via artisanal means. Uranium is one that is unlikely to be of interest to them, given the complexities and difficulty of extraction, refinement and sale. Because Niger is such an established uranium country, terrorists lack the economic infrastructure in the region to make things happen as effectively. Global Atomic and GoviEx should have no concerns.

For the remainder of companies who aren’t so lucky, it seems another fatal incident is imminent. This is not the type of volatility that has an upside.

On a final note, let’s take a look at the UK government’s Foreign and Commonwealth Office travel guidelines for many of the countries in the Sahel region:


If the government is advising against all travel in most of the region, you wouldn’t go there. If you wouldn’t go there, you have to consider whether you would send your money there.

You only have to take a look a SEMAFO’s press release after the incident to see the Sahel situation for what it truly is: an utter disaster, ‘Boungou mine site remains secured and our operations are not affected. (5)’ How on earth can SEMAFO claim their operations are unaffected: a number of their workforce have just been brutally murdered! How can they possibly expect future and existing workers to accept working somewhere they are shot at? Workers are not disposable. They need to be more responsible about the danger they are placing employees in, and the potential danger they are dragging your investment into.

It’s time we opened our eyes to some painful facts. There is significant risk inherent in investing in certain companies in this region, so investors should ensure that they have done their research and are comfortable with the true risk / reward return profile of their investments . There are much more stable jurisdictions to invest in after all.






If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

RNC Minerals – To Infinity And Beyon… No. No. Let’s All Calm Down.

A screenshot of Sheriff Woody pointing at a proud looking Buzz Lightyear.

If you’ve been following the topsy-turvy fairy-tale of RNC Minerals, you probably couldn’t help but notice this West Australian article. The contents will provide any prospective or existing RNC investors with more excitement than a late-night extra-terrestrial visitor: RNC is going to make us all rich tomorrow!

The interview cited in the article is with VP Exploration, Steve Devlin, who seems to be very upbeat about RNC’s current affairs, “We have a pretty good idea of what’s controlling this specimen gold now.” He followed up with, “From what we understand, we expect to continue to find coarse gold”

I’ve been attempting to discern whether these statements are new information or if they merely overstate what we already know; either way, it doesn’t seem to marry up with a recent interview with CEO, Paul Huet.

Consequently, some gold bugs are excited and are now claiming RNC knows the location of all its future Beta Hunt Mine coarse gold resource. That’s a monumental statement with nothing backing it up, other than a geologist stating they now have an idea of the geophysical controls.

Some shareholders are likely thinking of purchasing a red carpet for an extravagant Hollywood-esque celebration as the ‘Beta Hunt Fairytale’ churns out even more ‘whopper coarse gold specimens;’ after all, as Devlin says, “I’ve never come across a mine that has got so much coarse gold.”

I can feel the market’s excitement swelling. So, let’s suit up, and get ready to blast off, because… NO. NO. NO. Just STOP for a minute. Sorry to be a Buzz (Lightyear) kill, but you don’t seriously believe this utter exaggerated nonsense, do you?

Let’s get our feet back on the ground.

It’s incredibly important for people to understand the reality of RNC’s drilling program. RNC does not have any certainty when it comes to hunting down coarse gold at the Beta Hunt mine. As RNC drill, they are building up an understanding of the structures and the potential contact points of the coarse gold. Let’s say it again slowly… They have a better idea of what’s controlling the specimen gold now… No more. No less. It’s time to calm down a little. Just breathe. Breathe.

What RNC DO know.

It’s not all doom and gloom though. There are lots of reasons to be optimistic and hopeful of RNC’s future success; reality can sometimes be just as exciting. Consistent, robust success is no less glamorous than more lucrative coarse gold.

RNC is profitably mining 3g/t gold, at 8,000oz per month and processing it through their mill. As they process the 3g/t gold, there is a possibility they will come across large veins of coarse gold with a much higher grade. However, it’s important to remember RNC’s business model works well at 3g/t. Huet has been trying to temper and manage expectations in the market. RNC’s management are pragmatic, grounded, and calculated. The operation is currently operating exactly as it was intended to. The magic fairy dust comes with the reasonably regular large specimens of course gold; that always makes investors tingle with excitement.

A photo of a large pile of coarse gold.
High-Grade Gold From Beta Hunt Mine

Huet has made a lot of changes and has refocussed the company on gold. He is reducing costs, improving productivity, and renegotiating supplier contracts and royalties. Not to say that their Dumont nickel asset doesn’t have value, it does. He has briefed Johnna Muinenon, President of Dumont, to monetise Dumont. We are less clear about the timing of that, but one gets the sense it is coming.

Moreover, talking of nickel, Beta Hunt has a history of nickel; it used to be a nickel mine. Nickel is hot at the moment and people are getting excited about this.  There is a possibility of getting some nickel credit from Beta Hunt again, but there is a long way to go and an abundance of studies to be carried out before the company knows if the nickel component is even economic. So again, I like what the company is saying and doing, I like where it is going, but we need to reign in the speculation and attribute value to what we know and not what we hope.

One factor I believe could change the dynamic slightly would be if an ore sorter was added at Beta Hunt (just one for now). Engineering is required to work out the size, scale, economics, timing and cost. This could improve the productivity of the mine 20-30%, but it takes time. Huet is clear that RNC is not committing to anything until the engineering is done. However, some peer analysis suggests the payback is less than a year and the cost could be funded from cashflow. I’m going to allow myself to get a little but excited about this as it is within the company’s control and not hidden underground.

Business As Usual?

So, where does this leave us? Disappointed and downtrodden? No, not one bit. RNC is starting to provide moderate excitement to the market via its consistently impressive results. We need to see the Q4 results though. There is always a chance that somewhere down the line, RNC could locate more coarse gold which is great. However, there are no guarantees, and we have enough to be excited about without getting carried away. Let’s not be greedy, but my bet is that RNC Minerals delivers 27,000 oz of gold in Q4. Any takers?

CLICK HERE to watch the full interview.

Company website:

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Global Atomic Corp: Primed for Growth in the Next Uranium Bull Market?

  • TSE: GLO
  • Shares Outstanding: 145.44M
  • Share price CA$0.49 (15.01.2020)
  • Market Cap: CA$71.264M

Global Atomic Corp (GLO) was formed in 2017 when Silvermet Inc. (owner of Turkey’s Zinc operations) and Global Atomic Fuels Corporation (Private Uranium company) merged. (1)

GLO has two divisions. Base metal division which owns 49% of a Zinc recycling plant in Turkey and Uranium division that explores and develops Uranium assets in Niger.

Uranium Development Underpinned by Cash Flow From Zinc Production

Global Atomic Q42019 Corporate Presentation

It is the only Uranium junior with positive cash flow and net income.

It has a large and high grade multi decade asset (DASA) in Niger. “Largest High-Grade Uranium Sandstone Deposit Globally.”

It has a large insider ownership with the CEO Stephen Roman owning >8% of the company. He has also been actively purchasing more shares from the open markets (2):

Stephen Roman also has a track record in Uranium mining and he sold a Gold company (Gold Eagle) to Goldcorp in 2008 for $1.5B. (33)

These are the things you want to see in a company. Great assets, great management with large ownership, insider buying and better yet, GLO looks cheap even just based on the Zinc operations.

So let’s take a deeper dive.

Zinc operations

GLO owns 49% share of Befesa Silvermet Turkey (BST) which owns a Zinc recycling plant (Iskenderun) in Turkey. 51% of BST is owned by a Spanish company, Befasa. Befasa was purposefully brought in as an operational JV partner. It’s a large Steel dust recycling operator and knows this business extremely well.

Steel mills produce Electric Arc Furnace Dust (EAFD) which contains a Zinc. Steel mills have to recycle this material. BST collects the EAFD, recovers zinc from it and produces a high-grade zinc concentrate which is sold to smelters.

Befasa Company Presentation November 2019

BST had a capacity of 65kt (equals roughly to 30Mlbs Zinc pa.). In 2019 the plant had an upgrade and was re-opened in early November 2019 with a capacity of 110kt (c. 60Mlbs Zinc pa.). This was done on time and in budget.

OPEX for the pre-upgrade plant was about $0.45/lbs and after this upgrade, based on what S. Roman (11) and Merlin Marr-Johnson have said in their interviews, OPEX will fall to around $0.37 – $0.4/lbs range.

BST has been a profitable operation for almost 10 years now. It’s a great cash flowing business with an extremely low break-even. Not taking 2019 into account, BST is a lean and profitable operation with high margins and low overhead.

In 2018 BST made a net profit of CAD$21.4M. GLO’s share of these profits was 49% CAD$10.5M. GLO received c. CAD$7M in dividends. (3)

CAPEX for this upgrade was $26M. It was financed using debt ($2M from Turkish bank and $20M from Befasa (Libor +4%)) and part of the cash flow generated in 2018.

“The Befesa funding is expected to be repaid out of operating cash flows or refinanced during 2020/21.” (4)

So GLO’s share of the Debt is $10.8M and interest payment will be around $0.65M in 2020.

If BST doesn’t refinance (which I doubt) GLO has to pony up c. $6M in both 2020 and 2021 to be able to pay down its debt.

BST, luckily, is a cash machine. Even in with a 90% utilization and $0.8/lbs Zinc price it can take care of the debt.

Zinc price $/lbs $0,6 $0,8 $1,0 $1,2 $1,4
Capacity utilization 90% 90% 90% 90% 90%
Mlbs of Zinc 54 54 54 54 54
OPEX 0,39 0,39 0,39 0,39 0,39
Smelter 3% 3% 3% 3% 3%
Revenue $32,4 $43,2 $54,0 $64,8 $75,6
Cost of Sales $21,1 $21,1 $21,1 $21,1 $21,1
Smelter $1,0 $1,3 $1,6 $1,9 $2,3
EBITDA $10,4 $20,8 $31,3 $41,8 $52,3
SG&A $2,0 $2,0 $2,0 $2,0 $2,0
Depreciation $1,5 $1,5 $1,5 $1,5 $1,5
Tax $2,1 $5,2 $8,3 $11,5 $14,6
Net Income $4,8 $12,1 $19,5 $26,8 $34,1
GLO’s share of NI $2,4 $5,9 $9,5 $13,1 $16,7
OCF $6,3 $13,6 $21,0 $28,3 $35,6
GLO’s share of OCF $3,1 $6,7 $10,3 $13,9 $17,5

In the short term there are some important risks. BST collects the EAFD from 7 (soon 8) local steel mills. Because the 8th mill isn’t in production yet, BST will not reach 100% capacity in 2020. There just aren’t enough EAFD. If any of these steel mills close, BST will not be able to have enough feed stock to operate in full capacity.

As a base metal Zinc has a history of falling off the cliff when a recession hits. This combined with closures (or production cutbacks) of any of the local Steel mills would mean lower revenue and lower capacity utilization and could affect GLO’s ability to pay down its debt.

Nevertheless, I think that BST is a great asset. I think that a $1/lbs long-term price for Zinc is a conservative number. With that price BST can pay close to $10M pa in dividends to GLO. If they can refinance and pay the debt down in 5-years, GLO can expect to receive a dividend of $7-$10M from BST pa from 2021 (when the 2020 dividend is due) onwards. There will be no dividends in 2020.

DASA and Niger

In short Niger has had a long history as a Uranium producer. It was a French colony and from the 70’s the French have been operating in Niger mining Uranium. Uranium is >70% of Niger’s export proceeds and an important source of foreign currencies. (5)

Niger has a fast-permitting schedule of just 6 months. It also has a problem as Orano is closing its Cominak mine in Niger. And so both Uranium juniors GoviEx and GLO seem to be getting the message of “get to production ASAP” from Niger’s government.

GLO owns 100% of DASA. DASA is a large and high-grade deposit. It is also open to multiple directions and GLO’s management believes that with more drilling they can show it’s a >300Mlbs resource. (6)

Global Atomic Q42019 Corporate Presentation

Depending on the interview GLO’s management might talk about 210Mlbs or 150Mlbs asset. Needless to say, either way DASA is large. By changing the cut-off grade companies can make it really hard for investors to compare different assets to each other’s. So few examples of peers.

GoviEx’s Madaouela uses a cut-off grade of 400ppm and has c. 140Mlbs in MI&I. Average grade is around 1300ppm. (7)

Bannerman’s Etango project uses a cut-off grade of 55pp for its reserves of 130Mlbs and resources of 165Mlbs in M&I and 62.5Mlbs of Inferred. Average grade is around 190ppm. (8)

Besides DASA GLO owns:

  • Tin Negouran Deposit, 10Mlbs U3O8
  • Dajy Deposit, 17Mlbs U3O8
  • Isakanan Deposit, 34Mlbs U3O8 that has “Significant ISR potential” and is next to DASA.

There are currently no technical studies, so we cannot say if the deposits are economic.

GLO has said that it will begin a Feasibility Study (FS) on DASA imminently. But like me fixing my wife bike, this will likely mean in a few months. GLO has few options going forward.

It can try to summarise the Memorandum of Understanding (MOU) signed with Orano in 2017. According to the MOU, GLO can deliver it’s ore directly to Orano’s mill. Orano will pay GLO a spot price, times the amount of Uranium pounds in the rock delivered.

The good point about this is that based on GLOs low AISC, it can start operations fast and with small CAPEX ($35M). It can start creating cash flow and use this for example build its own mill.(9)

It can also build its own mill (probably in a 5Mlbs pa range) and start with an open pit and then go underground. With this strategy it will be mining its lowest-grade materials at the start but it can use this cash flow to finance the underground mine.

This is close to what their 2018 PEA studied. Initial CAPEX is $320M and Post-tax NPV goes up around $130M for every $5/lbs rise in Uranium price after 50$/lbs. (9)

After the PEA, GLO has grown its resources by a meaningful amount.

Lastly it can go underground, using semi-automatized mechanical underground mining. CAPEX would be a bit higher but it could start mining the best materials it has straight away and maximize the value of those first 3-tax free years. This would also probably end up meaning lower costs per pound in the long run.

But we have to wait to see what they will do. GLO has to make the decision before starting the FS process, as FS will study the option GLO chooses.

In a CruxInvestor interview, Roman said “in the next 10 years it’s going to be a very easily mined open pit, right from surface, low strip-ratio. No nasties in the Ore. I’d say our costs, we would be able to mine a pound, process it and put it in a drum for under $20/ lbs.” This is with their own stand-alone plant. (10)

This might be an indication on what they are planning.

Timeline-wise Feasibility Study will take 6-9 months. After that permitting will take another 6 months.

2019Q4 Corporate Presentation

Roman has mentioned in his interviews that they could be mining in early 2021. But it’s more reasonable to say that even if everything works perfectly, they need another 2-4 months to secure financing, 2-4 months to hire the right people and 3-6 months to do some pre-stripping/ stripping exercise

Then if they do decide to build their own mill, another 12-24 months to build it (this stage can coincide with pre-stripping). Hence if they go with the Orano MOU plan late 2021 is the earliest moment they would be mining and if they go with their own mill early 2023 seems reasonable.

GLO’s earnings potential

When the Feasibility is done and a company receives its permits, the Government of Niger gets a free 10% share of this newly formed mining entity (i.e. of DASA). It can also opt to purchase another 30% but this is in my opinion unlikely.

Niger has a corporate tax with a tax-free period of 3 years after mine starts operations. There’s also a sliding scale royalty of 5.5%-12% that is dependent on the profit margin. (9)

So taken those factors into account let’s just look at the PEA option.

AISC, Global Atomic Corp 2018 PEA

This is a simple ‘what-if’ model I built:

Stand alone
OPEX $29,15 * +10% as a contingency
Production Mlbs 5,25  
Uranium Price $40,00 $45,00 $50,00 $55,00 $60,00 $65,00
Revenue $210 $236 $263 $289 $315 $341
COGS $153 $153 $153 $153 $153 $153
Margin $57 $83 $109 $136 $162 $188
Margin in % 27,1% 35,2% 41,7% 47,0% 51,4% 55,2%
Royalty % 9% 9,0% 9,0% 9,0% 12,0% 12,0%
Royalty in $ $19 $21 $24 $26 $38 $41
EBITDA $38 $62 $86 $110 $124 $147
Depreciation $25 $25 $25 $25 $25 $25
Taxes in $ $3 $8 $14 $19 $23 $28
Net Profit $10 $28 $47 $65 $76 $94
GLO’s share of NP $9 $26 $42 $59 $69 $85
Sustaining CAPEX $11 $11 $11 $11 $11 $11
OCF GLO’s share $20 $35 $50 $65 $74 $88

Well that is just wonderful. It’s even better taken the tax-free years and the fact that the Government of Niger start to get it’s 10% only after the project has fully paid itself into account.

We can create a “ballpark” consolidated P&L by using the above as a basis and adding in the BST numbers. I also added $220M in debt, $8M in SG&A and a 100M new shares to dilute the EPS numbers. I use $1/lbs for Zinc with 90% capacity utilization. Average Uranium production is the same as in the previous spreadsheet i.e. 5.25Mlbs. The PEA uses LOM production of around 5.5Mlbs.

Consolidated P&L for Global Atomic
Uranium Price $40,00 $45,00 $50,00 $55,00 $60,00 $65,00
Revenue $215 $239 $263 $286 $310 $334
COGS $149 $149 $149 $149 $149 $149
Royalty $17 $21 $24 $26 $38 $41
SG&A $9 $9 $9 $9 $9 $9
EBITDA $41 $60 $81 $103 $114 $135
Debt $220,00          
Interest (8%) $18 $18 $18 $18 $18 $18
Depreciation $26 $26 $26 $26 $26 $26
Taxes 30% $0 $5 $11 $18 $21 $27
Net Income −$3 $12 $27 $41 $50 $64
OCF $23 $37 $52 $67 $75 $90
Shares (M) 250 *Added 100m to current share count
USD to CAD 1,32          
EPS in CAD$ −$0,014 $0,062 $0,140 $0,219 $0,262 $0,338
OCF per share C$ $0,122 $0,197 $0,276 $0,355 $0,398 $0,474

I know that looking at a hypothetical what-if-EPS model isn’t a “proper” way to do analysis but for me it is relevant. I want to know what the company could really make per share because I own shares. NPV models are, to me, more of a mutually accepted stupidity. We know that commodity prices are highly cyclical and that company level profitability doesn’t equal project level profitability.

But these scenarios are just a thought exercise to get a ballpark understanding of the potential earnings in different price environments. GLO shows extremely robust numbers.

Dilution, no dilution?

Dilution is the rule for pre-cash flow juniors. GLO is unique because it has cash flows. In his SmithWeekly interview (11) Stephen Roman said:

37:26 “I don’t think we need to ever actually come back to the market to develop the DASA project.

38:08 “We don’t really foresee having to issue more shares”.

Can it be?

Based on GLO’s Q3/19, they had CAD$5.2M in cash.

Their burn rate is around CAD$1.2-1.5M per Q. They need to finance a Feasibility Study in 20/H1 (CAD$3-5M).

They also, in their newest Presentation, brought up Isakanan deposit that has 34Mlbs of U3O8 and “Significant ISR potential”. I couldn’t find an older presentation with even a mention about Isakanan.

Isakanan is located in Adrar Emoles 4 exploration permit. To be able to hold exploration permits companies need to show that they aren’t merely sitting on them but actively exploring.

Global Atomic Corp Annual Report 2018

Based on GLO’s 2018 Annual Report GLO needs to spend USD$4M before 28th of January 2021 to keep Adrar Emoles 4. And this figure is just for Adrar Emoles 4, not Tin Negoran 1-4.

Seems logical to think that if a company starts to bring up an asset in their promotional materials they have the goal to hold it.

So in 19/Q4 we have a cash burn of CAD$1.5M. In 2020 c.CAD$10M and 21/Q1 another CAD$1.5M. That’s CAD$13M in total before spending the required CAD$5.3M to Adrar Emoles 4 (In fairness they will not lose 100% of the exploration permit area if they don’t spend the required sum but this is a meaningful discrepancy nevertheless).

Thing is there’s no dividends from BST for 2019. There can be some dividends for 2020 if they refinance the debt that is due for 2020 and 2021. But dividends for 2020 are paid in 21/H1.

So there will be a raise and a meaningful one in 19/Q4 or 20/Q1. They need, in my opinion, CAD$6-8M. This will mean around 12-16M new shares. I wouldn’t bet my farm that there wouldn’t be another raise in 2021.

The statements Roman has given are to me somewhat irresponsible and worrisome.

Another detail I want to point out from their 19/Q4 Corporate Presentation is this one:

This P/E of 2.5 on forward basis is simply false.

Management team and Stephen Roman

Stephen Roman is the son of the founder of Denison Mines. He’s to my knowledge the only Uranium junior CEO with a background of working in a mine as a miner. He has worked in multiple positions and made a long career in mining. He has built mines and sold them.

His compensation is a bit much taken the early stage of the company. George Flach is also extremely highly paid.

What is worth pointing out is that during these years Roman was a part-time CEO (and President and Chairman). He was also the CEO (and President and Chairman) of Harte Gold and was paid handsomely.

Here are the compensations Roman earned from Harte during the same period. And if you look at the names you will notice another familiar one. Rein Lehari works as the (part time) CFO for both GLO and Harte.

In fact GLO’s George Flach also works in Harte Gold as a Director. So does the VP and secretary of GLO, Timothy Campbell. He’s, you guessed it, the VP and secretary of Harte.

Until a few months ago GLO’s board members Richard Faucher and Fergus Kerr were also Board members in Harte Gold.

The reason why Faucher and Kerr “resigned” is because an activist investor ANR Investments B.V. came in and started a “ Plan To Bolster Management”. This plan also included Roman resigning the CEO post and he will soon resign from the post of the Chairman. (11)

I will also note that Messrs. Roman, Flach, Lehari and Campbell are also currently directors in Romex Mining.

These things in and by themselves aren’t necessarily red flags but they are a sign of a bad corporate governance. It’s also sign of bad governance that Roman seems to always be the CEO and Chairman at the same time.

Compensation Committee should always be an independent entity. Yet Messrs. Roman, Faucher and Rance are all part of the Committee. Derek Rance is not a director in Harte Gold but he was a director in Gold Eagle back in 2008 and hence close to Roman.

Global Atomic Corp Annual Report 2018

Good Corporate Governance is about checks and balances. It’s hard to see them in companies where Roman is involved.

This could be one of the reasons why it wasn’t a first time Roman “resigned” after an activist investor came in.

In 2010 Roman was the CEO, President and the Chairman of Belo Sun (then called Verena Minerals) when “Stan Bharti, through his private equity firm, Forbes & Manhattan, Inc., has agreed to subscribe for the majority of the private placement financing”. He also requisitioned a shareholder meeting where “Mr. Bharti will be appointed Chairman of the Board replacing Mr. Roman, Mr. Eaton will become President & CEO, replacing Mr. Roman”.

Also “Mr. Helio Diniz, based in Belo Horizonte, Brazil, will become VP, Exploration, replacing Mr. George Flach.” George Flach should ring a bell because he’s is currently Director in GLO, Harte and Romex. (13)

In 2009 S. Roman (Chairman) and Douglas Willock (President and CEO) founded Polar Star Mining Corp. The company had internal disagreements. On Jan 26th Willock requests for a special shareholder meeting to remove the current directors including Roman.

On 29th Polar Star formed a special committee which includes Messrs. Dellelce, Rance (board member of GLO and director of Gold Eagle) and Douglas Scharf (also director in Verena Minerals/ Belo Sun).

On 30th Polar Star terminates Willock from the posts of the President and CEO. (14)

On Mar 9th 2009 D. Willock launches an Information Circular where he calls

“I am accordingly providing to you a proxy circular and a form of proxy that I have prepared in connection with the April 17, 2009 shareholders’ meeting. At that meeting, I will nominate a new slate of highly qualified individuals for election to Polar Star’s board of directors. (15)

Willock send his proxy form (16) and Polar Star offered up their Proxy that was for Roman and the incumbent board (17).

Willock won and Roman and Rance lost their positions. (18)

I bring these up because I think it’s interesting to see this kind of actions happening around S. Roman. I think it’s also a bit concerning to see these same names connected with S. Roman, time and again and losing their positions with S. Roman.

And a Proxy fight has happened in Global Atomic too. Some owners of Silvermet felt that the merger was not beneficial and that there were conflicts of interest due to the fact that S. Roman was the CEO, President and the Chairman for both of the merged companies. Other directors like Mr. Campbell and Mr. Lehari were also directors in both of these companies.

The proxy fight ended up losing but some of the things I was able to dug out were also mentioned in the “Greyling Information Circular”. (19)

There’s three more specific cases I want to mention in S. Romans history.

A mine builder: Harte Gold

I already mentioned that there’s a “Plan To Bolster Management” ongoing in Harte Gold. Besides the bad Corporate Governance and the officers paying themselves multiple full salaries, Harte is also a sad example of a case where almost everything went wrong.

2019 is the first year of operations.

On November 1st Harte Gold Provides Third Quarter Update and Guidance for 2019 and it was bad. “full year 2019 guidance has been adjusted to 24,000 to 26,000 ounces at an AISC of US$2,000 to US$2,200 per ounce. Previous guidance was 39,200 ounces at an AISC of US$1,300 to US$1,350 per ounce.” (20) Production estimate cut by c. 40% and costs up by almost 60%.

Besides this Harte Gold did some “clever” financial engineering by announcing Feasibility Study after the mine was built. This means the FS doesn’t include initial CAPEX and the IRR and NPV numbers look better than they should. (21)

To make things worse, debts starting to come due. Harte Gold is between a rock and a hard place.

If things can be worse they usually are. And although Gold prices are up Harte has “successfully” capped a lot of that upside by using a hedging strategy that in the current environment is detrimental for the company.

I’m not impressed. I am – to say the least – concerned on the implications this might have for the shareholders of GLO.

Exall Energy and the Board that resigned

Exall Energy was an Oil E&P. Roman served as the Executive Chairman and a Director. Exall’s oil production was miniscule and falling.

Exall Energy, Annual Report 2014

This didn’t prevent the CEO Roger N. Dueck from saying in their 2014 Annual report that “Exall is positioned with a strong asset with light oil and good cash flow in distressing times.”.

Nor did the fact that Exall Energy had a negative equity of CAD$25M, liabilities of c. CAD$65M and it was losing money. (22)

Exall had maturities and interest payments coming due and it was tapped out. It was trying to arrange financing which, taken the situation it was in, was challenging.

On 9th of March Exall released a news release which said

“In addition, Exall notes that the next semi-annual interest payment under Exall’s outstanding $23 million convertible debenture is due on March 31, 2015, in the amount of $888,808.22. Absent closing of the Bond Transaction, and other financing arrangements, Exall will not have proceeds available to make this required interest payment.(23)

On 19th of March 2015 Exall released a Press Release of their 2014Q4 results and mentioned that:

on March 9 Viking Investments Group, Inc. (“Viking”) (OTC: VKIN) had advised Exall that given the current timing, it was considering dispensing with a bridge financing arrangement as a means to retire Exall’s existing facility with its current senior Canadian lender (the “Facility”) in full (24)

On 25th of March 2015 Exall went into receivership “the Court of Queen’s Bench of Alberta appointed MNP Ltd. (the Receiver) as receiver and manager over the assets, undertakings and properties of the Issuer in an order dated March 25, 2015 (the Receivership Order)” and put the company into a trading halt. (25)

On 26th of March 2015 Viking “Opts Not to Proceed With Opportunity Involving Exall Energy Corporation”. The company was unable to pay its debts. (26)

What makes this story interesting is not the fact that the company failed. Oil prices fell and Exall was not a unique in failing. But when the company went into receivership they didn’t inform the shareholders. “A publicly traded company has the responsibility to issue a news release when there’s a material change in its fortunes, such as going into receivership. “ (27)

To make things worse is that shortly before the announcement of going into receivership came the board stepped down.

Harte Gold where Roman was the CEO and Chairman made sure to mention in their 2018 Information Circular that:

“Stephen G. Roman was a former director and the former Executive Chairman of Exall Energy Corporation, having resigned prior to it entering into receivership on March 25, 2015.” (28)

While company was struggling between 2011 and 2014, Exall Energy’s directors and members of the executive committee received over $4.6M in compensation.

So to wrap up with Roman’s career history with the biggest win Roman has delivered, the sale of Gold Eagle to Goldcorp. It is boldly said in every interview and in every Bio of Roman. It’s the main attraction. The PDAC award in 2016 is also related to Gold Eagle because it was given for the Bruce Channel discovery that made Gold Eagle the success it became.

Global Atomic Corp Corporate website Bio (15.11.2019)

The Big Score: Gold Eagle 2002-2008

“The first big success I had was a discovery of a gold project in Northwestern Ontario called Gold Eagle. I sold Gold Eagle in late 2008 to Goldcorp for $1.5B” – Stephen Roman. (11)

Gold Eagle had been a producing Gold mine that had operated from 1934 to 1941. It’s located in the famous Ontario’s Red Lake district. After the mine closed the property had multiple owners, last in line Exall Resources (led by Roman).

Besides limited exploration nothing happened until “In November 2002 a 50/50 joint venture was entered into between Exall Resources Limited and Southern Star Resources Inc.”.

Some success was achieved in 2003 and 2004 but “in 2005 drilling east of the old Gold Eagle Mine intersected significant gold mineralization beneath the Bruce Channel”. (29)

In 2016 Roman (Exall Resources) received a PDAC Bill Dennis Award for Bruce Channel discovery with Robert Cudney (SSR) and John Whitton (Chief Geologist/ Project Manager). (30)

After the 2005 drilling season, financing more drilling became easy as the share prices soared.

In December of 2006, Exall Resources Limited and Southern Star Resources Inc. merged to create a new Gold Eagle Mines Ltd. (29)

This new company was led (President and the CEO) by Simon Lawrence. (31)

Roman and Cudney both continued as the Co-Chairmen of the company. (32)

Gold Eagle was a success. There’s no two ways about it. But how much of this success is truly attributable to Roman? It is almost impossible to piece the real picture out from public filings, but the facts are that it was a joint-venture and there were multiple key persons. The discovery hole was made when Roman was the CEO of Exall, but after 2006 the new company was led by Simon Lawrence and they drilled a lot, proving the size of the project.

When in 2008 Goldcorp made the buyout offer of $1.5B Roman was a Co-Chairman of the company with Robert Cudney. (33)

Gold Eagle was also a pure exploration play. I’m not trying to take anything away from the success but it truly was, until 2005, just a few explorers drilling away and hoping to hit big. And they did. In 2008 Gold Eagle had no technical feasibility studies, no mine, no permits.

The company was also lucky with their timing. Gold was trading at around $450/oz in 2005. In 2009 Gold had reached $900/oz range and was even courting the $1000/oz level. It was an excellent environment to make a discovery.

I can say, for a fact, that the way Gold Eagle story is told leaves purposefully an impression that Roman spearheaded the company from discovery to the sale and he was the most important individual. Based on my reading this doesn’t seem to reflect reality.

Summary of Global Atomic

Let’s start with the assets. I truly believe that GLO is uniquely positioned. It has a cash flow positive business BST. It has a large and high-grade asset in Niger, in a jurisdiction where, although they don’t have permits today, I don’t feel it is a meaningful risk.

BST gives them a lot of options when it comes to financing DASA. They can sell their 49% share of BST to Befasa or use it to secure loans more easily than other juniors. DASA has multiple option and each of them work pretty well on paper, even after adding some contingency. It is one of the few companies that can work even without an overshoot in Uranium prices. In a case of M&A I think that DASA would attract a price multiple times higher than the current market capitalization of the whole company.

But the Management is a concern. I think that multiple members of Board don’t add any value. I think they sit in the Board because they support Roman. I’d love to see them being replaced by independent Board members. I don’t think that Roman should be the CEO and Chairman at the same time. It is bad Corporate Governance. Neither do I think he should sit in the Compensation Committee.

There are things in his history that make me highly uncomfortable. But to give a balanced opinion I will say that Roman always has skin in the game. He’s almost always a large owner and purchases shares from the open markets. There are CEO’s who don’t own anything and pay themselves outsized salaries while the companies are standing still and living on raises. This is not the case with Roman. The red flags he raises are different in nature.

I think that he wants to make a lot of money with GLO and his main way to make that happen is by getting the share price higher.

He has also been a successful explorer with multiple meaningful discoveries under his belt including DASA. After everything I’ve said I fear that, he still might be one of the most capable mining CEO’s in the Uranium junior field. I hope that this sinks in.

There’s also a bright spot in management, namely the very intelligent and capable Merlin Marr-Johnson. I’d love to see Roman taking the backseat, offering advice as and when required, and let Merlin drive for a change.

So the main question here is if GLO is cheap enough for me to bite? I think it is. It’s not without risks, but I truly think that the assets GLO has are so much more valuable than its current market capitalization that it is a great way to position oneself for the Uranium bull market.

  1., Silvermet and Global Atomic Fuels Merger 2017
  2., Insiders 15.11.2019
  3. Global Atomic Corp Annual Report 2018
  4. Global Atomic Corp 2019Q3 MD&A
  5., Wikipedia Economy of Niger
  6., Global Atomic reports significant new mineral resource estimate for DASA project
  7. GoviEx Corporate Presentation 2019
  8. Bannerman Corporate Presentation 2018 & Etango 43-101 Technical Report
  9. NI 43-101 Technical Report, Preliminary Economic Assessment – November 16, 2018
  10., CruxInvestor interview: Global Atomic – Largest High-Grade Uranium Sandstone Deposit Globally
  11., Discussion with Stephen Roman, SmithWeekly interview, 16 April 2019
  12., Harte Gold Accelerates Plan To Bolster Management and Provides Financing Update
  13., Verena Minerals Announces New Board and Management Appointments and Significant Private Placement
  14., Frosty times at Polar Star
  15., Polar Star Information Circular, 9 Mar 2009
  16. (, Polar Star D. Willock Proxy
  17., Polar Star S. Roman Proxy
  18., PolarStar Newsletter 20th April 2009
  19., Greyling Proxy
  20., Harte Gold Provides Third Quarter Update and Guidance for 2019
  21., Harte Gold Announces Positive Feasibility Study For The Sugar Zone Mine
  22. Exall Energy, Annual Report 2014
  23., Exall 9th of March News Release
  24., 19th of March 2015 Exall released a Press Release of their 2014Q4 results
  25., 25th of March Exall goes into receivership
  26., 26th of March 2015 Viking “Opts Not to Proceed With Opportunity Involving Exall Energy Corporation”
  27., Exall Goes into receivership, doesn’t tell shareholders
  28., Harte Gold 2018 Information Circular
  29. 2007 Annual Report Gold Eagle Mines
  30., 2016 PDAC Bill Dennis Award Winners
  31., Southern Star Resources Inc News Release 21 Dec 2006
  32., Gold Eagle 2007 ANNUAL INFORMATION FORM
  33., Gold Eagle strikes it rich with Goldcorp acquisition

Nuclear Power: What is REALLY going on?

Peter Griffin, Quahog resident, stars in a Spanish Soap Opera. His hand is aloft, and several ladies lie on the ground. A nuclear power plant is in the doorway and a Crux Investor logo is in the top right corner.

It reads like a low-rent soap-opera.

Apparently, the Nuclear Working Group is still at it!  Juan Bolton, the former Co-Chair, stepped down last month, and now it is being suggested he might even be considering testifying against El Presidente Trump in impeachment proceedings being driven by the Partido Democrático.

The Working Group was not ready on 10th October 2019, so El Presidente gave them more time.  However, there was no official announcement from the White House on this extension of time.  A spokesperson for the Dept. of Commerce (and a couple of other lower-level Department of Energy and other agency officials) publicly stated the extension was for 30 days (until this past Sunday, 10th November 2019).  However, that date came and went with no official announcement.

I’ll stop with the Spanish soap-opera analogy because this is confusing enough. 

A photo of President Donald J. Trump shouting angrily with his index finger pointing up. He wears a suit and red tie.
He might be even angrier in a few weeks time… (Photo by VIEWpress/Corbis via Getty Images)

So what’s happening? No-one is saying.

Possibility 1:

It is possible that certain members of the Working Group (like the Departments of Commerce and Energy) were working on the assumption of a 30-day extension, but there was no official revised timeline.  It is also possible the Nuclear Working Group members were given a 30-day extension to complete their work and deliver their comments and recommendations to the Working Group Chairmen (Economic Advisor, Larry Kudlow and National Security Advisor, Robert O’Brien (formerly John Bolton)) by 10th November 2019. 

Possibility 2.

There’s also a possibility (we don’t know) the report has already been delivered to the President, and they made no public announcement.  It wouldn’t be out of the question to get no announcement since the report likely deals with sensitive national security and foreign policy issues.  Lastly, the impeachment circus may be delaying things, as several of the agencies on the Working Group are involved in some of those issues. 

There have been a couple of “Freedom of Information Act” (FOIA) requests to have the US Dept. of Commerce release the Section 232 report to the public; it’s something of a court case against the Dept. of Commerce.  We found a recent court order in one of those cases in which the court declined to make the Section 232 report public because the Dept. of Commerce believed the Nuclear Working Group would be sending their report to the President on 14th November 2019. Now, this is the Dept. of Commerce’s belief – and they are only one part of the process right now.  So, it would be unwise to put too much stock in this. However, the more optimistic uranium equities investor might surmise they’re not in for an interminable delay. Or not!

All that said, we think the uranium and nuclear fuel issue is a priority for the US government.  Everything we’re hearing makes us believe something is coming, but many of the things we’re hearing might be classified as rumours, and there is often a lot of misinformation that comes out of the government. 

So, this has been a rather a long way of saying “we really won’t know, until we know.” The Nuclear Working Group is just providing recommendations to the President (as with the Section 232, where Dept. of Commerce recommended supporting the uranium industry); Trump may not accept or act on his agencies’ recommendations.

The believers in the uranium macro story are all optimistic, but we also need to be realistic.  Even industry figures and fund managers have gone silent on the topic. Us retail investors will just have to wait and see what happens.

Company page:

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

“There’s gold in them thar hills!”

A photo of a pile of 24k gold bars.

Over a century old but Mark Twain’s sentiment remains that there are riches to be found. For thousands of years, gold has been a popular choice of investment and a consumer good. The complexity of gold makes it enormously hard to understand, even for those in the gold mining industry.

As a new investor myself, I am on a steep learning curve to find out as much as I can about investing in gold, so that I can make sensible investments with my own money. So please do join me on my discovery of gold production and the journey I am now on to find out how to make the safest investments, with the biggest returns! Please do feel free to make suggestions and comments below, which will both help me and other potential investors in the gold market. Remember you once stood where I stand now! We all have different needs and goals from our investments and each of us will come at it with different knowledge and expectations.

So how should investors make informed decisions when they don’t understand what drives the price of gold? It appears that it is mainly driven by demand and alterations in reserves, rather than purely from the gold mine supply. As investors, we are looking for a strong return on our investment. Without good management, no asset can be successful. I am looking at company track records, are they flatlining or they making good decisions and producing more gold at lower cost? A profitable company is not necessarily going to make me money… this week I learned about ‘Shorting’… but more of that another time. What I did know walking into this is that I only make money if I sell my shares for more than I bought them for.

Tempting as it would be to go out on a ‘gold rush’, the inexperienced investor must understand the importance of looking at a company’s management experience, the corporate structure, their assets, their financial position and how they promote themselves to the market and investors. The saying goes that “a fool and his money are soon parted.” There is a ‘gold minefield’ of information out there but this often overlooked. Finding out as much as possible about a company, their experience and management structure, assets and financial position is crucial before investing. Lacking gold mining ‘know-how’ makes it notoriously difficult to make sensible decisions on future investments. Some people make money from investing in gold and some lose, so if you have any tips for me on making money and good investments, please do highlight these below. I am grateful for all shared knowledge.

Investing issues and the value of gold

As part of my research, I have found encouraging quotes from the financial markets:

“‘The value of gold hit a six-and-a-half-year high at $1,546/oz at the start of September 2019, driven by investor sentiment and macroeconomic factors,” in its latest ‘GFMS Gold Survey’. Over the third quarter of the year, gold recorded a “spectacular” performance, with its dollar value appreciating by 12%, compared with the prior quarter, and was valued at 22% more year-on-year, at an average of $1 472/oz. (9)

“Further, a visible shift among the world’s key central banks towards a more accommodative monetary policy this year has seen investors flee back to safety, making gold shine even brighter.” (6)

It is estimated that ‘the production globally of gold will break new record levels of between 3,380t and 3,390t this year, which would be an increase from the 3,332t reported in 2018’. (6)

I have discovered that it would be unwise to only invest in gold though, as it can be high risk. Although it should not be dismissed as an investment, as it can be a ‘store of wealth’. It is cited that investors turn to gold, when they are ‘scared’, which in turn boosts the value of gold, when stocks are falling.

Adding to my confusion is whether gold is seen as a commodity or a ‘non-printable’ currency. Experts argue over this endlessly, but many will see it as behaving as both, but nevertheless it is seen as a ‘global monetary asset’. Gold has many uses and purposes and it is in constant world-wide demand, always available for use and not typically consumed like other commodities.

I also identified that investors will often look at the Environmental, Social and Corporate governance (ESG) of an and how it manages risk through environmental, social and governance issues. Sustainable investing! Yes, a company’s organisation when evaluating the financial health of a company, their long-term business performance who promote their business with strong environmental, social, ethical values in accordance with corporate governance seek to generate positive returns. Investors who are socially minded will be encouraged to invest in an organisation which endeavours to manage its carbon footprint and have a positive long-term impact on the local community of the mine, the environment and the company.

The jurisdiction, geopolitical and economic state of the country producing the gold will affect gold production. Is it stable or uncertain? Are there concerns of lower interest rates or a slowdown in economic growth? Are there issues with the government? Trade disputes, access to licences and permits, power supplies, riots and political unrest, difficult climate conditions limiting mining prospects, accessibility of water, transport issues or access to skilled labour, all provide their share of difficulty. These are very real and important issues to consider, as they will all affect the gold production, availability and cost price.

When investing, it appears that market downs can often boost investment demand for gold. Competing assets, such as bonds can also influence gold attitudes and price trends and capital flow can affect the performance of gold. Some questions we should be asking ourselves are: Is there enough investment in infrastructure? Is it a well-trodden path? Is there potential for global expansion? Are there restrictions on cash?

So much to learn and take in, it makes it even more complicated when I think about parting with my money.

The streets of London are paved with gold

Initially, I have decided to look at two gold mining producers who have many similarities but who also who have differences. One is a large producer and one is a small to medium producer.

I feel that the similarities are that they are both are UK based companies listed on the London Stock Exchange. They are both honest companies and successful in mining high-grade gold from two underground mines, with strong management teams. Both offer steady growth and dividends to shareholders and both make money when the share price goes up. Both face operational issues within the jurisdictions that they work in. I shall give some background detail about each company and invite you to ‘dig deeper’ through the links!

The two companies are Pan African Resources (large) (AIM: PAF) in South Africa and Serabi Gold (small and soon to become medium) (AIM: SRB) in South America.

Serabi Gold is listed on the London Stock Exchange

An aerial photo of Palito Gold Mine.
Palito Gold Mine

Mike Hodgson is the CEO at Serabi Gold. He had interview recently with Matthew Gordon of Ptolemy Capital and Crux Investor  

I like as they have an easy style and less technical of interviewing but get in to the important detail with the CEO. The CEO has a chance to explain the strategy and story as the interviews tend to be 30-50mins.

As a gold exploration and production company, Serabi Gold is based in North-central Brazil and is involved in the development of gold deposits in the area.

They own the Palito Mining Complex, which is currently producing approximately 40,000 ounces per annum. While this is deemed as relatively small, their gold production should double when their recently acquired Coringa Gold Project goes fully into production. This should increase their standing to a medium size producer and could make this a less risky investment.

We got the right team in and the formula for success has been the mining. My saying always is ‘grade pays, tonnes cost

Mike Hodgson

Serabi Gold has a very long and successful history of operation in this area of Brazil and takes its relationships with local communities seriously.  They are keen to ensure their long-term impact on society; the environment and that business holds strong.

During the above-mentioned interview Mike was asked about the team around him and their level of experience and this was his response:

“We got the right team in and the formula for success has been the mining. My saying always is ‘grade pays, tonnes cost’”. (3)

Some of the difficulties that are faced by Serabi Gold are maintaining the supply of power, internet communication, together with conditions such as water filling trenches. They also come up against difficult climate and terrain with a tropical high humidity climate, tropical jungle tree canopy and a wet season between October and April. These factors play their part, but the company does state that work can still be carried our year-round.

Other risk factors that play a role include political changes in Brazil, regulatory issues, changes in law together with social unrest, currency exchange fluctuation and the changes in the gold price. All these factors have made me think about how difficult gold production is.  Serabi Gold is overcoming these issues, with excellent results.

The share price has risen this year following a period of 3-4 years of being relatively static. This move in share price would appear to be because investors see the acquisition of Coringa as an indication of the company’s growth ambitions as a gold producer.

Pan African Resources is also listed on the London Stock Exchange

A photo of two maintenance workers checking mining equipment.
Pan African Maintenance Workers

Cobus Loots is the CEO and he also had a recent interview with Crux Investor

Pan African is based in South Africa. They are a mid-tier African-focussed gold producer with a production capacity in excess of 170,000oz of gold per annum. They own and operate a portfolio of high-quality, low-cost operations and projects and they like to grow business in a value-accretive manner to benefit stakeholders and that meet their stringent investment criteria.

Pan African has two large underground gold mining complexes, one at Barberton, one at Evander. Cobus Loots said “Operationally we exceeded our production guidance for the year past. That’s obviously quite a positive. Actually, from all operations we had an improved performance. Pan African has emerged at year-end as a safe, low-cost and long-life gold producer, following the successful execution of our strategy.” Asked whether he plans to raise any more money for capital expansion programmes, he responded “We are funded as far as the existing projects are concerned. So, there’s no need for us to go to market. I think the shareholders want to see us deliver on what we said we would do. 2019 was a first or second step in doing that and 2020 should be more of the same.” So, to me this says no more dilution of investors shares. That’s a good thing”. (4)

Pan African has emerged at year-end as a safe, low-cost and long-life gold producer

Cobus Loots

The South African Government has established targets for the mining industry in terms of social development and community upliftment that are laid out in the Mining Charter. President Cyril Ramaphosa outlined the “steady, but sure” progress being made to make South Africa a “more competitive investment destination”. An Investment Fund being set up to attract both public and private finance. (6)

With a large focus on seeking sustainable growth, Pan African invest in their time and efforts in ESG. They understand that this can positively affect their long-term business performance and health of their company through strong risk management. There is a chequered history in South Africa, and they are operating in an environment fraught with risk because of unionisation issues, artisanal miners, high unemployment in the country which has led to rioting.  With all these factors to deal with, Pan African strives to be a low all-in sustaining cost (AISAC) producer of gold in South Africa.

I have to say I admired the way both CEO’s talked honestly about the difficulty of mining and didn’t appear to be trying hide anything or mislead me.

So, to invest or not to invest, that is the question?

Please look at the Crux Investor website and the company profile pages I found it useful. I included the links for both Serabi Gold and Pan African Resources in my short company summaries. The company pages will give insight and provide you with more detailed information about the issues each company is facing. You will also find a profile, financials and a stock chart for each company listed. There is a magnitude of opportunity, when you know what you are doing. Read and learn!

After this initial research, I am personally still not ready to invest yet and will continue to research and do my homework. I know that there are deals to be done, but there will always be deals to be done in the future too. So, I won’t rush into anything, neither will I miss out. My money is valuable to me and before I part with my money, I also need to consider investing my money into other sectors, such as technology, manufacturing or healthcare. All these sectors are cyclical, sometimes going up and sometimes on a downward trend.

Your thoughts on this will really benefit me and other readers. Maybe you can help me understand what makes a good company to invest in and I welcome your thoughts on this. Some people make money, some people loose money. Should I keep my money in my pocket?


  1. Crux Investor
  2. London Stock Exchange
  3. Serabi Gold
  4. Pan African Resources
  5. World Gold Council and  
  6. Mining Weekly
  7. Wealth Simple
  8. Gold

Company page:

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

What on earth are we doing?

In recent weeks, my research into investing has become considerably more detailed and focussed. Whereas before I took a passive overview of market proceedings, now I consider myself to be active; I look at stocks with a genuine consideration of purchase.

I am an investor, just like you, but in the last few weeks, I’ve become genuinely perplexed by a consistent narrative saturating the investor community.

Hearts not heads?

In the last few weeks, I’ve reviewed all aspects of numerous public companies with scrutiny. I have reached a conclusion that has truly surprised me: the vast majority of companies are going to lose you money.

A phenomenon that exists amongst investors novice and seasoned alike is a peculiar prolificacy that descends any time a vague, yet promising press release comes out from a junior mining company. Logic and prudence fly out the window, and gut gambling instinct takes control. A desperation to be ahead of the curve and locate a winning lottery ticket is the downfall of many investors. It is startling just how little shareholders know about their investments; this is evident in the most basic of enquiries regarding companies finding their way onto community boards via investors whom, with their retirement fund in hand, have already taken a leap of faith. Having made this poor decision, the investor is then forced to double down; they can’t admit to their friends or partners they have made a bad call, which has strangely become more frightful than losing a huge sum of money. The subsequent lies they tell themselves as the share price falls serve only to insure by the time the penny finally drops, it’s all too late, and their shares are worth about as much as a second-hand toothpick.

Most companies have an Achilles heel that renders them doomed from the very beginning. One would think such fatal flaws are well hidden given the tendency of investors to fall for them so often, but this is simply not the case. It does not take a rocket scientist to notice a plummeting share price, a mountain of debt, a low percentage of insider ownership or a terrible management team/structure. Therefore, how do so many investors manage to navigate their financial vessels into deep waters of unparalleled danger? The answer is simple: investors do not take anywhere near enough time to educate themselves before making investment decisions.

It is obvious that investors don’t simply have a wanton disregard for money, and nor are they just lazy; the problem lies deeper than that and manifests itself throughout much of our financial culture. We are too trusting, too emotional, and not critical enough. We have a tendency to fall for snake oil salesmen the world over. As a consequence, resources like Crux Investor are vital. Crux cuts through the nonsense, and gives easy to access, trustworthy information so you can make proper investment decisions in the light of certainty, rather than the dark of ignorance.

Before making investment decisions, you must ask yourself if you are prepared to lose the money you will be investing. If this money is not something you can afford to never see again, you shouldn’t invest.

After asking this initial question, there are 10 further questions you should ask yourself. The questions will be explored in an article in the near future right here on

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The Nickel Investment Bible

A man walks on water, labelled 'This Article,' and pulls a man, labelled 'Your lacklustre investment decisions,' out of the swirling water. A wooden boat with a nickel on its front and full of men watches on in the background.
A photo of a pile of shards of nickel.
Nickel, nickel, nickel.

Nickel is the fifth most common element on earth. It is ‘a naturally-occurring metallic element with a silvery-white, shiny appearance.’(1) Frankincense, gold and myrrh? No. Nickel, nickel and…

However, if you’re an investor, I doubt you’ll be reading those words with any bubbling sense of excitement; you want to know one thing and one thing only: “how is this big hunk of metal going to make me money?” To realise the full potential of investing in nickel, one must have all the facts available to them.

The following serves as the definitive nickel investment article. It is filled with inside knowledge that the average investor would struggle to access. One shouldn’t consider investing in nickel without reading it. Sit back, relax, and take in all the information you need to make money investing in nickel.

The Commodity

Nickel occurs extensively in the earth’s crust. It had been utilised for thousands of years as meteoric iron before its isolation as an element in 1751 by Swedish scientist Axel Frederik Cronstedt.

Nickle: Key Properties

  • High melting point (1453 °C)
  • Strongly resistant to corrosion and oxidation
  • Can easily form an alloy
  • Magnetic (at room temperature)
  • Malleable and ductile
  • Can be a catalyst
  • Can be deposited via electroplating
  • Harder than iron
  • Good conductor of heat/electricity
  • Average life in many applications of 25-30 years

Applications of Nickel

Nickel is used in a massive 300,000 products, with fields varying from:

  • Engineering/Investment (33%)
  • Transport (20%)
  • Metal Goods (18%)
  • Home Appliances/Electronics (13%)
  • Building/Construction (10%)
  • Others (6%)
  • 70% of nickel’s specific application is alloying with a (minimum 10.5%) chromium to form stainless and heat-resisting steels. These steels form a multitude of items, from household cutlery to medical equipment.
A photo of a stack of stainless steel poles with holes in the centre.
Stainless steel is the main use of nickel.
  • 9% is used in alternative non-ferrous alloys. These have a more specialised application in industrial, aerospace and military equipment.
  • 6% of nickel is made use of in electroplating practices.
  • 6% is used in iron and steel castings and low allow steels.
  • A modern, rapidly growing use of nickel is in batteries for hybrid and fully electric vehicles and stationary storage. However, this still only accounts for 6% of present-day use.
A photo of a Tesla Model 3 battery pack inside a workshop.
A Tesla Model 3 Powerwall.
  • 1% of nickel is consumed to produce coins and for other electronic applications.

The Current Nickel Market: An Outline

The nickel price has demonstrated more volatility than a lion in a butcher shop. Since the 80s, Nickel has been regarded as a boom/bust metal that moves in giant super-cycles. The market saw a quite staggering boom, followed by a dramatic downturn and lingering bust.

Spot Price and Production Analysis

A primary factor behind nickel’s ascension to a high of $54,000/t in May 2007 was the rapid expansion of Chinese demand in the 2000s. However, this soaring price resulted in nickel becoming a victim of its own success. As prices rose, China began seeking more affordable options, thus turning to 200-series stainless steel (1-2% nickel) rather than 300-series stainless steel (8%) nickel; with this compression of demand, spot prices fell through a trap door.

A graph demonstrating nickel price in USD/lb against the date from Jan 3 1989 to Jan 3 2019.
A spot price chart that moves as frenetically as a broken elevator.

When nickel prices were high, a new source of cheaper nickel was developed: nickel pig iron, a version of nickel created using low-grade laterite ores and blast/electric furnaces. Nickel pig iron now accounts for 35% of international nickel supply, up from ≈0 in 2006.

The decrease in Chinese demand and oversupply combined to push the spot price of nickel off a cliff edge. Brief increases in the spot price, specifically around 2009, were attributed to the Chinese government’s economic stimulus. Subsequent price increases have been created by a nickel ore export ban from Indonesia in 2014 (partially over-turned in 2017) and again last week. A planned Filipino ban in 2017 never took place.

Nickel’s recent low point came in February 2006, with a price of $8,000/t causing 80% of the industry to lose cash.

However, over the last three years a large, and mostly permanent reduction in supply of over 200,000tpa (particularly Chinese nickel pig iron), and an increase in worldwide demand has caused the nickel market to recover surprisingly quickly. While uncertainty still exists surrounding high global inventories and the government policy in Indonesia and the Philippines, this upwards trajectory has caught the attention of many investors. This is especially true given that by the end of 2020, total market inventories are projected to fall below normalised levels, which paints a very promising picture of an increased nickel spot price.

Reasons to be Excited

If you’ve read any base metals company’s press releases in the last ten years, you will have heard a seemingly indelible torrent of positivity regarding the incoming EV revolution. If the macro is to be believed, the growth of nickel will be propelled. While, at present, nickel’s preeminent use is in stainless steel, an EV revolution would skyrocket the demand of nickel.

2006-18 quantities of nickel use for specific purposes are as follows:

  • 683,000t in stainless steel.
  • 103,000t in batteries.
  • 105,000t for other uses.

However, nickel forecasts for 2018-2030 place use at:

  • 729,000t in stainless steel, a 46,000t increase.
  • 825,000 in batteries, a massive 722,000t increase.
  • 119,000t for other uses, a 14,000t increase.

Nickel now has two growth drivers, batteries and stainless steel, whereas before it was just stainless steel. When investors also account for nickel’s specific importance in batteries, this is even more promising; another metal that is currently crucial for the EV revolution is cobalt which I wrote an article on and you can click here to read. However, because of cobalt’s controversial ethical issues, such as using child labour in the Democratic Republic of Congo, companies have been pressured into signing up to the Responsible Cobalt Initiative. Some high-profile individuals like Elon Musk, and companies like Panasonic, have stated they are actively at work to virtually eliminate cobalt from their batteries. By reducing cobalt in batteries, the beneficiary is nickel; in a recent interview with Crux Investor, Conic Metals explained the development of batteries with as much as eight times more nickel than any other metal in the battery designs, including cobalt.

The Vanadium Redox Flow Battery (VRFB) is yet to become a serious contender in the market because of their excessive weight and the poor ratio of vanadium to electricity stored. Unlike the short high-burst energy of Lithium-ion batteries, VRFB is seen as a means of long-term energy storage to allow for management of peak-flow energy requirements (we will write about this in the next few weeks). At the end of the battery’s life, the Vanadium is reusable for either use in steel or a new battery. Nickel-lithium batteries are a future technological prospect and are predicted to hold more than three and a half times as much energy per pound as lithium-ion batteries, while also enhancing safety.

All the production signs for nickel are incredibly promising, so what about the price outlook?

Price Forecast:

Year Nominal Constant
2018 13,122 13,122
2019 (f) 13,469 13,127
2020 (f) 15,000 14,249
2021 (f) 17,000 15,740
2022 (f) 18,000 16,244
2023 (f) 19,250 16,931
2024 (f) 19,811 17,000
2025 (f) 20,306 17,000
2026 (f) 20,814 17,000
2027 (f) 21,334 17,000
2028 (f) 21,868 17,000
2029 (f) 22,414 17,000
2030 (f) 22,975 17,000

The LME forecasts steady growth in the USD$/t spot price of nickel up until 2030:

In terms of constant 2018 dollars, the nickel price will have to average around $17,000 to incentivise sufficient new capacity to meet increased demand. Moreover, analysts have speculated the capital costs for non-Chinese and non-Indonesian integrated projects may need nickel prices above $25,000 to gain a return. However, increased EV demand is likely to be satiated by these cheaper projects in addition to high-pressure acid leach projects.

Inside Investment Tips

Now you’ve had some insight into the financials of the nickel market, it’s time to hear some crucial inside knowledge that could make or break your investment.

The primary drivers behind the EV hysteria are companies themselves. When you actually dig a little, the truth is the EV revolution is not as close as CEOs would like you to believe. Researchers are also uncertain as to when electric vehicles are going to take over. There are a lot of factors at play and while the trend is towards embracing EV to reduce our carbon footprint, there are still a number of psychological and financial barriers for the consumer to overcome.

The usability of this information will vary based on two things:

A photo of a pile of dollar bills.
  • Your confidence in the EV macro.
  • Your expected speed of returns.

If you have a wholehearted belief in the EV macro, it doesn’t matter if it happens tomorrow, the next day, or in ten years’ time, it is going to happen, and when it does, prices are going to rise. Therefore, if you’re a patient investor with some time to spare and have disposable income that you can afford to wait for a return on, now could be a great time to invest in a nickel company.

However, if you don’t fully buy into the EV thematic, nickel isn’t the commodity for you. Perhaps you foresee a shift in direction when it comes to vehicular transportation, or perhaps you see nickel as a commodity that will become obsolete in batteries after further advancement. Maybe you believe there will be an even longer time scale of 20+ years before EV rises to prominence, in which case many of the companies you might invest in today could have gone under, especially given nickel’s track-record of erratic prices.

Lastly, if you’re an investor looking to make a quick buck, don’t listen to the hype. In Crux Investor’s interview with Conic Metals Corporation (, it was clearly laid out that current spot price increases are not due to electric vehicle demand, and are instead generated by asset discovery, general euphoria and the Indonesian export ban on nickel ore. The EV revolution is a few years away at best.

What Nobody is Telling You

…smelting companies will march to their own drumbeat

Some investors might view all the information already mentioned as more than sufficient for them to make an investment decision on nickel. However, there’s an incredibly important secret that big nickel mining companies aren’t letting you in on: the nickel smelters currently have a huge amount of their own raw product on site, and the smelting companies, in many ways, control the market and the ability of public nickel producing companies to forecast. This means nickel mining companies are at their mercy; smelting companies will march to their own drumbeat. 

The Ten Commandments of Nickel Investment

A photo of an open bible with a woodland background.

To conclude this article, here are the ten things to be aware of when investing in the nickel market:

  1. Nickel is a volatile asset; its price is often unpredictable; depending on what type of investor you are, this is either an opportunity or a curse.
  2. The EV revolution is by no means just around the corner. Some say it is two years away from kicking in. Others point towards a longer timescale. However, nobody is disputing its inevitability.
  3. All financial projections point towards a prosperous future for nickel in batteries as there are very few large-scale operations globally; with nickel, scale is king.
  4. China, Indonesia and the Philippines are the foremost producers of lower quality steel, which contains only 1-2% total nickel. Indonesia has just stopped all exports of nickel.
  5. Nickel is almost certain to be central to any evolution generated by electric vehicle demand. Other battery metals (such as cobalt) lack its longevity.
  6. The smelters control the market. Until they can make money, no-one makes money.
  7. Not all nickel companies have the cash or assets to attract capital investment to last until the EV demand commences. Choose your nickel investment carefully.
  8. For the next 12 years, total nickel production is projected to be almost double what it has been for the last 12 years.
  9. As the nickel price recovers a lot of scrap metal will come into the market causing a dip in short-term prices until Q3/20.
  10. Don’t make investment decisions based on sentiment. Look at a company’s management and level of experience. Investigate their assets and potential. Analyse the point in the developmental cycle the company is at (ready to mine, or still exploring). Work out if the company’s priorities are aligned with its shareholders’. Finally, educate yourself fully on nickel by reading this article again and again and again. Oh, and maybe once more for luck.

An Example of a Good Nickel Company:

Examples of nickel companies I feel have great potential are Canada Nickel, Conic Metals or RNC’s Dumont asset. I’ll be writing a full piece on them in the near future; but, for now, happy investing!


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