Vizsla Resources (TSX-V: VZLA) – Lucrative Potential?

The Vizsla Resources Logo.
Vizsla Resources Corp.
  • TSX-V: VZLA
  • Shares Outstanding: 49M
  • Share price C$0.55 (06.03.2020)
  • Market Cap: C$27M

We recently conducted an interview with Michael Konnert, the president & CEO of Vizsla Resources (TSX-V: VZLA). It was a very interesting interview with a gold-cooper-silver explorer.

While you’re here, why not check out one of our recent articles covering the gold space, or even an interview with a gold producer?

This is a risky investment opportunity at its most transparent. It is an early-stage exploration play with many hurdles to clear. However, the prize at the end of the tunnel is, potentially, enormous.

Vizsla Resources is a Mexico-based mineral exploration company listed on the TSX-V. It was founded in 2017, and is engaged in the discovery, development and acquisition of precious and base metal assets in what it claims to be safe jurisdictions. 

We Discuss:

  1. Vizsla Resources’ Gold, Silver And Copper Assets
  2. Business Model, Including Cash On Hand, Remuneration Policy and Burn Rate.
  3. Financing Plans
  4. Reasons For Investors To Be Optimistic In 2020

Company Website: https://vizslaresources.com/

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 Vizsla Resources Logo.

Forum Energy Metals (TSX-V: FMC) – A Play That’s Making The Big Boys Take Notice

A photo of a black Tesla Model S.
Forum Energy Metals Corp.
  • TSX-V: FMC
  • Shares Outstanding: 107.5M
  • Share price C$0.10 (25.02.2020)
  • Market Cap: C$10.2M

We recently interviewed Richard Mazur, President & CEO of Forum Energy Metals (TSX-V: FMC).

We have a variety of energy metals and uranium articles on our platform. Alternatively, you could watch a different energy metals interview.

Forum Energy Metals segued from uranium to energy metals in 2017. Now the focus is more on Copper, Cobalt and Palladium. Forum Energy Metals might look small on paper, but it has got two big boys interested: Mining giants, Rio Tinto, and Orano Canada, have reached agreements for JVs with Forum Energy Metals. Why? Mazur explains.

We discuss:

  1. Agreements With Rio Tinto And Orano Canada: How And Why?
  2. Plans For 2020: Going To Market?
  3. Copper, Cobalt and Palladium Market Outlooks.

Company Website: https://forumenergymetals.com/

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 photo of a black Tesla Model S.

China Gold Int (TSX: CGG) – Gold And Copper On A Grand Scale

A photo of a silhouette hand picking out a gold Chinese ring.
China Gold International Resources Corp.
  • TSX: EQX
  • Shares Outstanding: 113.5M
  • Share price C$12.6 (21.02.2020)
  • Market Cap: C$1.43B

We recently sat down for an intriguing interview with Jerry Xie, Executive Vice President and Corporate Secretary of China Gold International Resources Corp. (TSX: CGG, HKSE: 2099).

Investors may want to read one of our most recent gold-related articles, or even watch a different gold interview.

Gold had a good year and an especially positive 2H/19. However, China Gold Int. had a negative correlation on its share price throughout 2019. The company operates two producing gold mines that form a low-grade, bulk-tonnage gold operation with a copper by-product. The operational statistics look good on paper, so why this share price tail-off? We discuss:

  1. The Decline In Share Price: Why?
  2. The Gold Market Outlook For 2020
  3. How China Gold Int. Plans To Get The Share Price Back Up

Company Website: http://www.chinagoldintl.com/

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 photo of a silhouette hand picking out a gold Chinese ring.

Salazar Resources (TSX-V: SRL) – The Very Model of a Major General

SALAZAR RESOURCES
  • TSX-V: SRL
  • Shares Outstanding: 126.48M
  • Share price CA$0.21 (21.01.2020)
  • Market Cap: CA$26.56M

I am concerned, when interviewing a CEO, if they are unable to clearly articulate their business plan. Call it an elevator pitch, call it a sales pitch, call it what you like, but if you, as a CEO, cannot tell me in less than 2 minutes what separates your business from the crowd and how I am going to make money, you’ve lost me; big red flag planted firmly in the ground and I am onto the next opportunity.

My other bugbear is when I think I am being misled or the CEO is avoiding answering the question directly. Very few people are smart enough to hide the childlike tells. The furtive look, the eyes searching into the distance hoping to find inspiration to be magically plucked from the air and the awkward squirming in their seat. Non-verbal communication and reading body language in all walks of life is important and accounts for so much of how people see you.

Sometimes it can be fun to set a trap for the CEO: ask a difficult question to which I already know the answer and see how the CEO responds. If it is a mistruth or even a small misdirection, I now know I cannot trust this individual to report properly. Another big, and in this case, terminal red flag.

We tend to begin our diligence from a standpoint that places the burden of proof on CEOs: we will not be giving you our money. It is their job to tell me why I am wrong and why I should. I’m looking for faults in their argument. It doesn’t take much, and I’m off. It’s my money. There are thousands of ways and places I can invest it, so why take a risk?

That brings me to Salazar Resources.

Salazar Resources, an Ecuadorian exploration company, has appointed Merlin Marr-Johnson as Director. A mercurially fabulous name! I’m already intrigued. We spoke to him. Mr. Marr-Johnson is British, very British, and demonstrably intelligent. We set about our task of finding reasons not to invest.

A black and white portrait photo of Merlin Marr-Johnson.
Merlin Marr-Johnson, Director of Salazar Resources

The first thing Marr-Johnson talks about is their business plan. They are gold-copper project developers in Ecuador and Colombia. They have just farmed out their first gold-copper-zinc asset, the El Domo Curipamba VMS (Volcanogenic Massive Sulfide) ore deposit discovery. The PEA conducted at the site shows an economically viable resource.

So, here is the clever bit. Salazar received a royalty payment, courtesy of an ongoing partnership with Adventus Mining Corporation. Adventus has the option to acquire 75% interest in the project by funding initial costs of US$25M over five years; they must provide 100% of the development and construction expenditures up to commercial production after the completion of a PFS (scheduled to be conducted in 2021). Salazar Resources earns US$250,000 per year in advance royalty payments up to a limit of US$1.5M. As operator, Salazar receives an additional 10% management fee (on some expenditures), standing at a minimum US$350,000 annually. Salazar also has the option to lease out 3 of their drills and is fully carried through at 25% with no additional capital outlay needed. Salazar Resources currently has c.$5M in the bank and with this additional reoccurring income and low overhead, Marr-Johnson believes that their exploration programme for this year is fully funded. Marr-Johnson takes time to apply a formula for investors to consider how to value the deal with Adventus. It’s reasonable and not wildly out of line with our numbers. So far, so good. I’m still listening.

Salazar has four other 100% interest options; three are in the form of Ecuadorian gold/ copper/VMS assets with exploration licences: Rumiñahui, a 2,910 hectare exploration licence that hosts gold/copper porphyry targets; Macara Mina, a 1,807 hectare exploration licence that hosts VMS targets; and Los Osos, a 229 hectare exploration licence that features a system of gold/silver veins, combined with hydrothermal breccias and mineralised gold/copper porphyries. Salazar Resources also holds 100% interest in a drill company, Perforaciones Andesdrill S.A, that owns three diamond drill rigs.

A diagram of a VMS deposit.
A VMS deposit diagram

Each asset is at a different stage of exploration or development, and each asset has had differing levels of mapping, soil geochemistry and rock-chip sampling conducted. However, when he spoke to us, Marr-Johnson provided some reasons for confidence. Salazar, in the shape of CEO and ex-Newmont in-country team leader, Fredy Salazar, has a ‘proven track record of discovery in Ecuador.’ In addition, the mining jurisdiction of Ecuador is seen by some to have a huge degree of untapped potential. The major mining companies have flooded into Ecuador in recent years, so there is clearly truth in Johnson’s claims regarding the unexplored nature of the geology. Ecuador could have a lot to offer for investors looking to invest in a region in its mining infancy.

We like the gold/copper/VMS side of the story, but the options keep on coming. Their joint venture with Adventus Mining Corporation was originally intended as a zinc exploration alliance. Adventus Mining was offered a stake in zinc-rich assets but instead opted for two different copper-gold (with some silver veins) sites: Santiago and Pijili. Adventus possesses 80% ownership but is required to fund all activities until a construction decision is made on any project.

So, what does this mean for investors?

Salazar Resources is funded for 2020: no dilution anytime soon. We like the look of their cookie-cutter approach to developing their portfolio of assets with minimal cash burn. If they can continue to replicate the Curipamba farm-out model, the numbers start to look very attractive. There is scale to this project. Marr-Johnson was keen to point out that Salazar does want to develop some of their own projects too.

A robust and, more importantly, refreshingly honest appraisal from Marr-Johnson. So far, no red flags, but this is mining. We are waiting for news on the water permit before we get too carried away, but if that comes, Salazar Resources is something that we can see ourselves investing in.

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 – Has The Scale & Returns That Strategic Partners Need (Transcript)

A group of four mining workers stand proudly in front of a huge hunk of gold ore.

Interview with Johnna Muinonen, President of Dumont Nickel (TSX:RNX).

Production-ready, shovel ready, development-ready. Dumont Nickel has been positioned as a free ride for shareholders, but the reality is that Dumont may hit the market at just the right point in this cycle for RNC Minerals shareholders. Completing their upgrade of the PFS means that strategic partners will look at Dumont as a shovel ready project which is fully optimised say Muinonen.

We ask what the brief is from the board. What is the timing? What do you think about what you heard? We also discuss the timing and nickel market forecasts. How relevant is the EV revolution to estimates and at what point Dumont and RNC makes decisions about the timing as to when the company monetises this asset for RNC Minerals shareholders.

Let us know what you think about Johnna Muinonen. Does she make you confident? Does RNC Minerals know what it is doing?

Interview highlights:

  • RNC & Dumont: What is the Situation? Best Way Forwards: How Much Control Have They Got Only Owning 28%, What Will They be Able to do?
  • Analysing Dumont: What is There and How Expensive Will it be?
  • Market Dynamics, Nickel and Gold Cycles: How Does One Affect the Other?
  • Opinions on EV’s
  • Value Creation for Shareholders and Dumont Potential
  • What Can They Do in This Cycle and How Will it Affect RNC Shareholders? Financing Talks: Why Invest Now and Why are People Hesitant?
  • Production Values and Cash Generation Potential

Click here to watch the full interview.


Matthew Gordon: Hi Johnna. You are here in London.

Johnna Muinonen: Yes, for LME week.

Matthew Gordon: A lot of Nickel people here for that?

Johnna Muinonen: A lot of nickel people here for that. So, it’s always a good week to come to London because everybody’s here so you get to meet everybody.

Matthew Gordon: RNC is moving to be a gold focus business, but it has this very large nickel play in the shape of Dumont. So, how’s that panning out? Because if I look at some of your presentations from June, you have about 15-20 pages on Dumont. But if you look at the presentation today, 4. What’s happening?

Johnna Muinonen: With Paul coming in as CEO we are really a gold focus company. No question about it. However, what I’d like to talk to you about today is that we own 28% of one of the largest undeveloped sulphide projects in the world. And we feel that we can add value to RNC shareholders by looking at various options for Dumont moving forward.

Matthew Gordon: That’s 28%. Waterton own the balance. What do they do?

Johnna Muinonen: In 2017, we sold 50% of Dumont to Waterton. They’re a private equity firm. They are now our partners and Dumont. Dumont is fully 100% owned within the JV. We are now 28% and Waterton is 72%. RNC remains the operator and manager of the JV. We do all the technical work for Dumont as well and then work with Waterton in terms of looking at strategically moving the project forward. Financing and marketing.

Matthew Gordon: What does that actually equate to? You mentioned a phrase ‘for shareholder value creation’, as directive from Paul. Is there a time line on that? What are the options on the table? What are you thinking about doing here? You’re only 28% shareholder.

Johnna Muinonen: We’re not getting a lot of value for Dumont in our share price. We do feel that we want to make sure that we maximize that value for our shareholders. We are looking at strategic options. That was my directive from Paul on the board when I took on the role as president Dumont Nickel that we need to look at, what could we possibly do to actually get some value for Dumont to our shareholders, to RNC. And that could really involve several different things. We’re looking at options around spin outs, potentially a sale, potentially we hold it until nickel prices come up a little bit. So, everything’s on the table.

Matthew Gordon: The G&A is quite low. Not a lot of overhead associated with it right now.

Johnna Muinonen: So, let me explain a little bit the way the JV is funded. When we got into the JV with Waterton, Waterton funded our portion of the holding costs for 5-years. So, they funded a portion of the costs. Currently, all the work that we have planned that we’ve done to date, we pay 28% from within that funding. So, currently the work that we have planned for the next, say 18 months to 2-years is currently fully funded within the JV. So, it is a bit of a free carry for RNC right now.

Matthew Gordon: Waterton is dependent on you to inform them as to what to do. They’re a private equity firm, they’re not miners. They’ve stumbled across mining assets or they’ve funded mining assets, but they’re not by any means experts. How does that relationship work?

Johnna Muinonen: It’s been a bit interesting and we’ve been doing it for almost 3-years now. We’re getting pretty good at it. What it really works is the JV is structured, it has a board. Waterton has two seats on the board, RNC has two seats on the board. We have a technical committee below the board, which is made up of, again, two people from Waterton and two people from RNC. Essentially, the way it works is we look at the work that we believe needs to be done. And generally, this is in concert with Waterton. We don’t show up one day and say, hey, we need this amount of work. We do talk through and we meet regularly to talk through what work do we think would be value added? The feasibility was one of them, about probably close to a year and a half ago, we started talking about, OK, we have a feasibility study from 2012. It’s getting a bit stale. Costs are getting a bit old. We all believe in the nickel market eventually starting to rise and we wanted to get ready for it. And so, between them and us, we discuss what would the scope of it be? How would we run it? Who would be the engineer? And then once we sort of decide that the budget and the scope and get that approved through both the technical committee and then into the board, we then go off and execute.

Matthew Gordon: That’s the dynamic between you and Waterton. What about Paul Huet, the CEO of RNC. He’s a gold guy. You guys have also got to agree about the best way forward. So, it’s great giving you a directive saying maximize shareholder value. But, as you say, this is dependent on price of nickel now, when you believe the next cycle is and what you can do in this cycle, right?

Johnna Muinonen: There’s a lot of moving parts. And right now, we’re just starting to work through that, because the reality is there isn’t a lot of benchmarks out there about value for development nickel projects, because the reality is there aren’t a lot of development nickel projects out there. it’s not like copper or gold where you can go out and benchmark a whole pile of sales purchases. So, it does become a bit more difficult to sort of really quantify Dumont’s value.

Matthew Gordon: We know it’s a big project. It’s going to require a lot of money. You’ve got to bring in strategic partners. They’ve got to bring a lot of money, maybe technical knowhow, but maybe you guys got that covered. Give us an overview.

Johnna Muinonen: Dumont is a very large scale, low cost, long life asset. It’s a billion-ton reserve. It is going to produce in the first phase, which is seven years above 33,000 tons of nickel annually, expanding in year seven to 50,000 tons of nickel annually and over the 30-year life will produce 39,000 tons of nickel annually. We are located in the Abitibi region of Quebec in a very active mining region. We have lots of local support. So, we have all of the pieces in place to be ready for the next boom. If we look at what work needs to be done to get us into production, we’re talking about a 30-months to 33-months, both engineering and construction. So, from financing, the reality is that’s the lead time. But if you look around the world and you look within sort of low risk jurisdictions, there isn’t a lot out there of scale. There’s lots of smaller operations that will produce sort of say 10,000-15,000 tonnes of nickel a year in Australia, in Brazil, in smaller mines in Canada, in Europe. However, there’s really when you look at sort of the world landscape of sulphide deposits, there really isn’t anything or a lot that’s out there in a development ready, production ready, shovel ready type build like Dumont, which is what I find exciting about it.

Matthew Gordon: Dumont’s got that. There aren’t too many others, or if there are you can count them on one hand. What are the numbers involved? Because large scale means large cost.

Johnna Muinonen: We are looking at building a 50,000-ton concentrator which is large, but it is well within the scale of operation in the area. So, we are right located just outside of Amos Quebec. We’re on an all-weather highway and we have a powerline that runs 5km north of the project. And within 10km, there’s two other large open pit mines of similar scale. So, there’s lots of experience in the region on that sort of scale of operation. But it is a large project. It is $1Bn initial capital.

Matthew Gordon: That’s a lot of money.

Johnna Muinonen: Absolutely it is.

Matthew Gordon: Is it a normal number?

Johnna Muinonen: It is a normal number. When you’re looking at building a 50,000 tons per day mine and mill, you’re looking at $1Bn.

Matthew Gordon: So, that must restrict or give you a very good sense of who you can go and talk to?

Johnna Muinonen: Oh absolutely.

Matthew Gordon: And what are they thinking? Because they’re looking at ‘can we do something this cycle?’ Are you guys ready? Or is it next cycle, in which case, when’s that?

Johnna Muinonen: If you had asked me the same question 10 months ago, people would’ve been like ‘$4 nickel, $5 nickel’, not so sure. I think over the last sort of 3 or 4 months of interest we’re getting more calls. We’re getting more calls, getting more inbound interest by various people who do want to talk. And they’re not small players. They’re people that want to talk about when does it fit? When are you ready? What does it look like? And the $1Bn is a big price tag. But when you start to break it down into pieces, you look at there will be a senior debt facility in that probably to the tune of about $500M. There’ll be some equipment financing. The equity cheque at the end of the day to pull it off, take a loan as part of that, maybe a small stream of the precious metals, potentially. The equity portion of that is probably in the $300M range. So, when you start to break it down like that, it’s not we’re going to go out and build $1Bn… We’ve got to go raise that.

Matthew Gordon: And you’re 28% of that?

Johnna Muinonen:  And we’re 28% of that. Exactly.

Matthew Gordon: And so, again, it depends on what’s happening in the rest of RNC that will determine what the cost of that money is and where indeed where you put it in, project level, presumably. How do you go about having those discussions with people about the cost of that money and how do you retain as much as possible, because your brief is’ shareholder value’, right?

Johnna Muinonen: Yeah, absolutely. Absolutely.

Matthew Gordon: You’re 28%, so you’ve got to create some shareholder value, more than it is today.

Johnna Muinonen: Which is arguably not much, I’ll admit that.

Matthew Gordon: I certainly think you’re not getting much credit for it and I think it’s partly the company has said, ‘Oh, and you get Dumont for free’, that kind of strapline, which is a little bit disingenuous’.

Johnna Muinonen: Yeah. No, no, I mean it really is. I have heard that said ‘oh and you get Dumont for free’. Well I mean if you look at it, if we look at even the two commodities, I realize we are a gold focused company, and our real focus is on the gold assets in Australia. No question about that. But in a rising nickel price environment, where you’re starting to get interest and excitement around people realizing the world’s going to need a lot of nickel in about five years’ time. Where are we getting that from? Dumont has the real potential to add value to RNC.

Matthew Gordon: Is that part of your equation then? It’s like maybe we’re be better waiting for five years?

Johnna Muinonen: We’ve talked about it. Absolutely. Because Dumont is funded within the JV. And I think that’s where we get that whole ‘oh, we get it for free’. You know, the fact is, is that we are funded for several years within the JV. And so, it is a bit of a free carry. So, it is a bit of nickel exposure, future opportunity. However, in the short-term, looking at our shareholders, looking at the focus of the company, we may want to do something sooner rather than later. And like I said, we’re not about to put up for file, so we’re not in a rush. We have cash in the bank.

Matthew Gordon: You’ve got cash in the bank. The costs of running this thing for another 5-years is negligible in the scheme of things. Not negligible in terms of dollars. You’ve got salaries, permits to maintain all of that kind of thing. But you’ll do the math and work out whether you just deal with it now, focus on gold or you wait 5-years because the upside could be because of demand story. It’s going to be better for shareholders.

Johnna Muinonen: And it’s hard because you can’t predict the future. And so, if you look at today and you say, well, maybe the best option for shareholders, do something now, to clarify the structure, be a pure gold company. Maybe that has more value now than having two assets. And being, personally, I know people say it’s confusing. Are we gold or are we nickel? What are we? So, maybe there is value, but it is a bit of a…nobody has a crystal ball. So, you can’t really say, well, in 5-years’ time…

Matthew Gordon: It’s not distracting you financially or otherwise?

Johnna Muinonen: We have a team in Australia that’s fully dedicated to the gold. That is their focus. We have a smaller team within Canada that works on the Dumont story.

Matthew Gordon: How does RNC make the decision about timing? Because obviously the gold part of the business is moving along. It’s normalizing relationships in the marketplace as people understand the business plan. Is there any pressure from what’s happening in the gold side business, which affects your decision making on the nickel side?

Johnna Muinonen: I think the gold side is ramping up. We’re coming along there, the gold side. Like you say, it’s normalizing. We’ve seen a lot of success recently. We’ve hit a couple more pockets of the higher-grade gold. So, that is moving forward. And really, with Graham in Australia and Paul, they really have that managed. Because Dumont is funded within the JV for RNC’s portion, there’s no real immediate need for us to take cash from profits in Australia and funnel it towards the nickel. So, at the moment we are under no immediate pressure to do anything about it. However, we are in an interesting nickel market right now, very much more so than when we completed. So, when completed the fees back in June, nickel was $5.50 a pound. Nickel is now hovering between 7.50 and 8 dollars a pound. The stocks on the LME are almost at an all-time low. So, we’re in a very different place. So, we want to make sure that we do look right now at taking advantage of this current nickel price to see if there’s that appetite. But at the end of the day, we’re not going to fire sale Dumont.

Matthew Gordon: Sure. But neither are you going to decide rashly, because nickel is famously volatile, right? You’ve been through various super cycles of nickel and they last a long time. And I think we talked about it, bits of scrap metal getting to the market if the prices stay high for long enough. And that’s going to again, give us a false impression of supply for a while.

Johnna Muinonen: Absolutely. I agree. If we look at right now, this recent price action is really somewhat artificially generated by Indonesia exclusively. Where Indonesia has restricted the export of ore into China to make NPI. So, originally, they had restricted as of the end of the year, but then people were starting to massively export ore above and beyond their current permits. So as of Monday, they announced that it was shut down completely. Whether or not that’s going to be permanent or going to be for a few weeks until they figure out what’s going on, we don’t know. However, it’s definitely a supply control versus demand. With this rising nickel price environment, it is going to draw out stockpiles of stainless-steel scrap of ferro nickel that has been sitting in people’s backyards waiting for nickel to go above five or six dollars.

Matthew Gordon: I think we know which backyards.

Johnna Muinonen: Yes, we do. So, we will need to chew through that as an industry.

Matthew Gordon: How long?

Johnna Muinonen: Probably, next year into Q1, Q2. It’s not a huge amount. However, there is some. And stainless is still pretty soft in terms of the demand side of things.

[17:39] Matthew Gordon: And that’s going to affect prices?

Johnna Muinonen:  It will. Absolutely.

Matthew Gordon: But it will bounce back up?

Johnna Muinonen: I mean long term, we have seen year on year deficits in nickel production into the industry. We’re on our third year of deficits. I believe next year the International Study Group is predicting another small deficit. We are seeing these deficits. We do need new nickel to come online at some point in time. And that’s really just the stainless-steel story, you start to overlap the EV’s story on top of that. I think the challenge with EV’s is nobody’s quite sure how fast, how much and when. But it is definitely out there. EV’s especially within China, within Europe, all of the large major auto companies are now announcing major plans for EV cars to come out, various models. But it’s a bit uncertain about timing. And I 100% believe it’s coming. I personally drive an EV. I think that once you drive them you realize exactly why people love their EVs. But it is coming. I do think it will probably be slower and I think if you really look at the industry on the OEM side of things, specially within the historical the OEMs, they have so much infrastructure built into building internal combustion engine cars. That is going to be a very hard tide to change quickly. They have billions of dollars invested in plants and invested in manufacturing lines. Plus, you just need to ramp up the battery and cathode supply side. There’s a huge amount of capital that will need to be spent to actually make all these batteries. It’s not just tomorrow. So, when we look at Dumont, the one thing I’m very excited about is if you look at the world of nickel and you look at nickel sulphide deposits the reality is there just aren’t that many or any nickel sulphide deposits that are currently permitted in a low risk jurisdiction that can produce something in the order of 30,000 to 50,000 tons of nickel annually for 30 years. And that’s where I think Dumont’s value really is.

Matthew Gordon: How long did the last cycle last?

Johnna Muinonen: Oh, I mean, the down cycle, the reality is that we haven’t seen a true nickel bull market since 2007/2008 really. I mean, there was a bit of a bull market 2010 when RNC first IPO’d. We sort of lucked into a window there back in 2010, but otherwise it ran up a little bit 2013. But we haven’t been in a true bull market for a while.

Matthew Gordon: We’ve seen some pretty big numbers forecast. What are the conversations internally with Waterton.

Johnna Muinonen: There’s sort of two conversations. One is how do we maximize value for RNC shareholders? And then how do we maximize value for Dumont within the JV? And what does the structure of the JV… It’s a JV between two partners.  

Matthew Gordon: Why are those two separate things?

Johnna Muinonen: Not necessarily. Maybe they get cleared up in one step. Well, in terms of ownership, in terms of how Dumont is owned. And maybe there’s options around things like potentially… to get to your point of you can’t predict the future, looking at an alternative for Dumont that separates it in some form from RNC, but potentially RNC retains an interest of some sort of upside potential. I don’t know exactly what that looks like. But maybe there’s something there where you kind of look at doing the best of both worlds. You create a clean gold company, a clean nickel company but RNC at some level retains some sort of upside interests. We are talking about that, looking at that, what does it look like? Adding a new NSR onto Dumont’s probably not doable but revamping something around that or something. But there are options that we’re looking at because that really for RNC shareholders, that would start to reduce some of these short-term risks of just selling it. It removes the management in Operation and Distraction.

Matthew Gordon: So, these are not unusual considerations in the mining space and those conversations have happened before. But if I’m a long-time, long-suffering shareholder, I am asking the question, ‘how long do you guys need to monetize this?’

Johnna Muinonen: I’ve been there almost 10 years now.

Matthew Gordon: 10 years. Mines can take 10 years to get into operation. So, this has had, because of the nature of the nickel market… I must explain here. It’s not like gold. It’s not like copper. So, you can go in fits and bursts, but people are saying, ‘just get it over and done with. I need to see something now’. What do you think it could do for RNC if you did do something this cycle?

Johnna Muinonen: If we did do something this cycle, first of all, in the short-term, there might be a potential to offer RNC some sort of initial consideration. RNC has some debt outstanding. There’re opportunities for capital spend in Australia as well, potentially. If we could monetize Dumont in some way, some short-term value. I think longer term having or retaining some sort of upside consideration is really where that’s where you get exposure to the nickel prices. The last time nickel ran, we went from $1.98 up to $25 a 1lbs. Nickel is the most volatile of the base metals, it goes the highest and it goes the lowest and it dives the lowest. So, having some exposure to that long-term, I think that that’s how we go about adding value.

Matthew Gordon: What do you think you need to deliver for this cycle to be able to put you in the position, to give you the opportunity to have those conversations?

Johnna Muinonen: We’re completing the updated feasibility study. We had to do that just because if we had not done that, we would be trying to market Dumont with an outdated study. So, that was done. The next stages: one is off the back of that study. We need to make sure that our stakeholders, which include the government, including the local communities, are all updated on the study, as well as updating things like closure plans, updating looking at our CFA’s, making sure that we don’t need to do anything there or if we do, start to take care of that. Because what we want to make sure is we build Dumont as a shovel ready project, which essentially means what is shovel ready? Shovel ready means that you have your permits in place. You have your land ownership. You have your surface options. You have your mining lease. You have your closure plans. You have your technical study up to date. So, making sure all of those things are maintained because updating your Feasibility Study. That Feasibility Study forms the basis for all of those sorts of feed forward information flow to the government as well. So, the next in the short-term, making sure that we have all of that, maintaining our shovel ready status, that is very important. A couple of things, some of the more optional ones, are really around looking at some of the value-added opportunities that we saw come out of Feasibility Study. So, in the feasibility study, we saw some opportunities around automation, truck automation, just like the EV story, just like all of the things, haul truck automation is coming along faster than… so, by the time Dumont gets into production trucks of that scale will almost all be automated. So, we want to look at that because that adds significant value. We want to look at potentially magnetite off-take. We want to look at some technical equipment choices. So, there are a few things we’d like to look at over the next sort of 6-months to look at how is there an opportunity to add more value to Dumont? Because that really speaks to investors who want to come in to say, what are my upsides? Here’s the project, what else could I get?

Matthew Gordon: But you can have these conversations now because you’ve got to leave something on the table for them because they can go, well, maybe we automate this. There’s an opportunity margin for them, right? Are you having conversations now?

Johnna Muinonen: We’ve had ongoing conversations with people over the last three to four years.

Matthew Gordon: Who?

Johnna Muinonen: The major mining companies, nickel companies. We’re talking with downstream OEMs. Battery companies, as well as trading firms.

Matthew Gordon: But some of those are more realistic like those OEMs, EV revolution, a couple years out, mining companies, they know who you are and you’re one of a handful of big, large scale operations for nickel. So, why aren’t they knocking at your door now?

Johnna Muinonen: I think they’re keeping they’re in a bit of a wait and see approach right now.

Matthew Gordon: What are they waiting for?

Johnna Muinonen: I think they’re waiting for a couple of things. I think that they’re waiting for the nickel demand side of the story to become much stronger.

Matthew Gordon: They’ve got to have a view on this, because they must be looking at nickel, reading the same reports I’m reading going, it’s all good, right? So, why not come in now? What’s stopping them?

Johnna Muinonen: A history of greenfield nickel projects that have not been successful. Now they’re much more complicated than ours. They’re very much higher risk jurisdictions, much more complicated flow sheets. Dumont is a very standard mine and mill, as opposed to some of the very complicated HPALs or a laterite projects that have been blown out the water.

Matthew Gordon: By complicated, do you mean more expensive?

Johnna Muinonen: Technically complicated, which then leads to more expensive, significantly more expensive. We are a mine and a mill. On a scale of simple, people know how to build mines and mills.

Matthew Gordon: People should be attracted to that. You’re saying people still just aren’t committing because the nickel price is doing what they think it should be doing.

Johnna Muinonen: I think that they’re still in a wait and see mode. Absolutely they have forecasts. I mean, absolutely. They think that the future of nickel is, ‘we are about to enter a bull market over the next 12-months to 18-months’. They’re keeping in touch. They’re making sure, knowing what’s up, knowing what’s happening. But I think people are waiting to see the demand side start to get a little bit stronger. I just think that with the supply restraint in Indonesia…We were at $5 a pound 3-months ago. I just think most people haven’t quite caught up and there’s still there’s a bit of a disbelief that now we’re between $7.50 and $8, let’s just have a wait and see for a bit.

Matthew Gordon: They want some consistency.

Johnna Muinonen:  Do we make it through this next quarter? Do we see the price fall back? And if so, how much does it fall back? How much scrap is really out there that’s going to come into the market?

Matthew Gordon: That’s a question of pricing. How much they are going to pay. Not a question of if, it’s a question of what’s the optimal timing for us to work out how much this is going to cost us? Is that what you’re saying?

Johnna Muinonen: I think in some ways. I do think that whole EV story… I do believe in the EV story. But I do think the question on speed that it’s going to advance and the timing. I think that most people are still somewhat bearish on some of those estimates. And so, people are still taking that wait and see. Everybody believes that the EVs are coming and that batteries are going to be a significant consumer of nickel moving forward. But timing! Is it really 2023 or is it 2025? What are we really going to need this nickel to come on board? And then with the run up that’s been so sudden and somewhat unexpected, I think people are just sort of wait and see. So, keeping in touch and making sure they know what the updates are, what’s happening.

Matthew Gordon: If someone puts a $1Bn, gets this thing built out for you. What do they expect to make?

Johnna Muinonen: If you look at the free cash flow of the project over the life of the deposit, somewhere, EBITDA $200M annually. It’s a large cash generating project. It is a low cost. Overall our C1 cash costs over the life of mine (LOM) are just over $3 – $3.22 are all in sustaining cash (AISC) per pound on a U.S. dollar basis is just under $4 at about $3.90. So, when you’re looking at projects to invest, because the thing about nickel, I talked about it before, nickel is the most volatile of the base metals, it jumps the highest and it falls the lowest. If you’re going to invest $1Bn in the project, you need to make sure that that $1Bn is going to be paid back. You have to make money.

Matthew Gordon: And there’s a cost to it.

Johnna Muinonen: And there’s a cost to it. There’s interest there. There’s a cost to that to everybody. The reason why I believe in Dumont, one of the reasons, is just because of its scale. So, we have a 30-year life project. That 30-year life allows you to take advantage of those peaks and valleys of the nickel cycle. And because it’s such a large scale, low-cost project, you are profitable along that that entire time. Any investor that comes in has that time on their side to be able to get back their investment. Because nickel, unlike copper, it does really go up and down. When you look at some other projects that are $300M – $500M to invest, but only are 10-years, you can really easily miss the price cycle.

Matthew Gordon: The cost of building the plant, aggregated at over 10 years versus 30 years. We understand that. Johnna thanks very much for coming in. Brilliant to catch up with you. We understand your brief. Monetise this for shareholders. That’s what they want to hear from you in the next few months. How you going to do it, what are those discussions are developing and what it’s going to mean for them.

Johnna Muinonen: Our focus is shareholder value. And the board and Paul have given me very clear direction around looking at what we can do with Dumont to maximise shareholder value.


Company page: http://www.rncminerals.com/

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A group of four mining workers stand proudly in front of a huge hunk of gold ore.

Regulus Resources – Credible Copper Company Creating Cash Coppertunity (Transcript)

A map of Regulus Resources' assets including the Antakori Project.

Interview with John Black, CEO of Regulus Resources (TSX-V:REG).

In the mining country of Peru, Regulus Resources specialise in identifying promising copper or copper-gold exploration projects. Large copper and gold projects are in high demand and short on the ground.

This team thinks they have the perfect asset for a major mining operation to extract. Regulus has a market cap of $120M and while the share price rose in March to $1.92 after promising drill results (34 holes with 820 meters of a 0.77% copper equivalent), they’ve now receded down to around $1.36.

Regulus Resources is an excellent example of a copper/gold company in the evaluation period of its life cycle. There is clear potential exemplified by the level of investment by management in Regulus projects, the experience and track record of the management team, and their strong list of assets.

However, Regulus Resources has work to do before investors can think about scheduling an extravagant party with no expenses spared upon the sale of their shares. While no hitches are expected, Regulus Resources is still waiting for a permit to come through for their asset in the North of the property, which isn’t the fastest process in Peru. Liquidity of their stock is an issue: a symptom of the company’s position in its life cycle but also because the stock is so closely held by a just few insiders, c.70%. Regulus Resources is conscious of this as they enter their next round of fundraising.

Capital is available but management must decide what type of investor they want to come in at this stage. Regulus Resources needs to convince prospective retail investors their copper/gold project has what it takes. This can take a significant amount of time and not all investors are willing to play the long game.

Regulus Resources is in a heavy drilling phase that has only just begun and there is lots of work left to do and funds to raise. The management’s track record suggests that they are capable of creating real value for shareholders by developing exploration assets. While Regulus Resources looks like a safe, stable investment, with solid if unspectacular long term prospects, it looks unlikely to be making shareholders money anytime soon; that will require them reaching a point where larger mining operators come in and bring it through to production. For the patient investor, money is certainly there to be made, but just how long is the long-term? What did you make of John Black? Let us know in the comments below.

We Discuss:

  • Company Overview
  • Update on the Jurisdiction: Permitting Processes in Peru
  • Share Price Bump in August: How are They Continuing to Grow the Share Price: Working the Cycles: Can They Raise Money and How?
  • Focus and Strategy: Have They Got the Money to Make it a Reality?
  • Creating Value: Should You Invest in Regulus Resources?

Click here to watch the interview.


Matthew Gordon: We spoke to you back in the beginning of May. Can you give us a one-minute summary for people new to the story?

John Black: We have a company that we’re a group of seasoned explorers and we specialize in identifying large copper or copper gold projects at a relatively early stage, but at a stage when it’s clear that it will be a fairly strong project. We capture those projects, we drill those out, and then ideally, we deliver a large, economically robust resource to the market at a time when major companies are looking to acquire these type projects.

Matthew Gordon: You have project’s in Peru. Peru’s a well-known mining region and district. You’re surrounded by some big name companies. How have things been since we spoke in May.

John Black: When we spoke in May, we had just put out first resource estimate on the project. So, between indicated and inferred resources, we announced over a 500Mt resource of attractive copper gold grades on the project. And we were just entering into our Phase 2 drill program. Our Phase 2 programs designed to be about 25,000m. We’re about halfway through that program and we’ve been announcing some very eye-catching drill results from that drill program.

Matthew Gordon: You’re waiting for a permit to come through. Any reason to believe that that won’t come through?

John Black: No. The good thing about Peru is it’s a mining country. It’s a fairly standard process. It’s a very transparent process in the sense that there’s no jumping the queue or anything like that. The frustration that many of us have with Peru is that sometimes it’s a slow process and you don’t know exactly when it comes out. But ours is fairly straightforward. And it’s just a wait now. We anticipate that we’ll have the permit by the end of the year.

Matthew Gordon: And no challenges or issues from that neighbour?

John Black: No, not at all. No. The fact that we’re next door actually helps us. We’re more of a brownfield situation and we’re in Northern Peru, we’re in Cajamarca. We’re in an area that is a mining community in the area. And we don’t have indigenous community issues or anything like that. We have good support from the local communities on moving forward. So, it’s just a just a process. The process now involves a number of other ministries, not simply just mining. You have to check off with other interests in the country. And that’s good for us. That means that it confirms that we have broad support to go forward with what we’re doing.

Matthew Gordon: When we spoke in May, your share price was about $1.45. It’s about $1.30 at the moment. But you’ve had this peak, had a bit of a run up in August, September. Can you tell us why that was?

John Black: What we’re seeing and is an interesting pattern in our space right now as we drill the project out. We’re drilling lengthy holes into a fairly large deposit. And so, we have drill results coming out about every two months. And we’ve been announcing some rather spectacular results. Results that came out in September included hole 34 with 820m with a 0.77% copper equivalent. Eye-catching results on that. That catches the market’s interest. We tend to see a run up in price. But we’re fighting headwinds right now with trade tariffs affecting copper price and affecting sentiment in the copper space. And so, we tend to see a pattern where we have good news results in a run up and then we drift back off until we get the next good news coming out. We believe the results we’ve been putting out warrant more steady, positive results that accumulate over time on this. But our trading pattern has resulted in kind of flat for the year.

Matthew Gordon: Yeah, it’s kind of flat overall. I was just interested in that peak because you went up to circa 175, then back down at 130. It dropped off rapidly. And you’re putting that down to trade tariffs and commodity price as a result of the trade times. Right? But are you at that kind of funny stage in terms of your drilling. You’ve got about four rigs, is that right, in the ground at the moment?

John Black: We’re currently drilling with four rigs. Yeah.

Matthew Gordon: OK so that’s giving you meaningful data, that you’re that kind of funny stage where you’re waiting to tell people what it is that you think you got there in the ground and how do you sustain, how do you consistently convey what it is that you’re trying to do or trying to be to enable the share price to actually start going upwards?

John Black: Well, the good thing is this is not the first time we’ve done this says as a company. Our business model is to get on a project like this and drill it out. We have good access to capital, we have good supporters, good shareholders on this. And so, we focus on steadily drilling the deposit out, demonstrating the size of it and de-risking it. It’s kind of a funny market that we’re in right now is there’s a lot of positive sentiment for copper in particular. And when you talk to major mining companies, they’re all trying to position themselves to have large copper deposits. There’s a general consensus that there will be a looming shortage of copper as we see further electrification of vehicles. And quite frankly, we’re not putting too many new mines on in production is an industry right now. However, in the short term, there’s uncertainty. I mentioned the trade tariffs. It’s partially centred around that, maybe global economy as well on this. And so, I’ve described it as the most positive yet, cash poor market that I’ve seen right now, where everybody seems to be in agreement that copper is a great place to be, but everybody’s waiting for it to happen. And so, everybody’s watching. They’re taking a look, but they’re afraid to be the first movers on this. We see this commonly in the market when we’re on a market, bottom or lower spot on this. Nobody wants to go first. Everybody wants to wait. Everybody agrees it’s a good idea, but they need to see those breakouts and sustained breakouts. Quite frankly, it’ll be mostly in copper price for us if we see, for example, trade tariffs resolved between the US and China or a general more positive feeling on global growth. We will most likely see the copper price move and then names like us will be in a very good position because we’re working on a large deposit, one that’s very attractive for people to acquire. And so, we kind of look one to two years out is where we want to be, and it’d be nice if our share price was steadily climbing and that, but we know we’re building the base so that when the positive sentiment comes back, then we’ll probably see a rather sharp uptick for names like ourselves and many others.

Matthew Gordon: So, what’s the thinking for you? I mean, how do you deal with these cycles? OK so you’re a bulk play. You’ve got some credits with gold, silver. So that’s kind of appealing. But it’s very it’s a low-grade belt play here. Do your shareholders like, Route One I think one thing was someone who was on board, do they say we’ll continue to follow our money? We believe in the thesis, we believe in this management teams’ ability to deliver this project. Will they continue to fund you or are they now sitting back and also waiting to see what the market does?

John Black:  No. Route One’s, a very steady supporter for us. They’ve actually encouraged us to go out and take advantage of these low spots in the market, both to acquire projects. Quite frankly, the Anta Kori project we had, we acquired it in 2014 when the market was even a more difficult situation right now. So, we like these soft spots in the market. It’s a good time to acquire projects. It’s a good time to work on them. It’s easier to get drill rigs, prices are cheaper. Good qualified people are available. So, the important thing is to have access to capital and be able to work steadily in these periods where the market’s struggling a little bit more. Then we’re building up the resource, we’re building up the project that we want to have when the market hits that boom. And then the thing about our business is it’s very cyclical when we have these low spots, we always see the high spots come back on it. So, it always seems a little scary while you’re waiting for them. Yes. But we’ve been through this a few times before. And that’s the important thing, is to work steadily, focus on project quality. You want to have a project that stands out. We believe we have that with Anta Kori. You mentioned a key point is it’s not only copper on this project as a strong precious metal’s component to very significant gold content. So, we kind of have some protection on metal prices. Copper is down a little bit now, but gold’s up a little bit, too.

Matthew Gordon: Where you were in 2014 and having Route One encourage you to buy something in 2014 is different from today. You didn’t have assets then. You have assets now. The market, the cycle is at a low point now. What is Route One telling you to do today? Because they’re not saying go out and buy more projects, are they?

John Black: Well, in general, and it’s not just Route One, we have a number of backers that encourage us to do what we do, as well as our own personal philosophy on this is it right now is Regulus we’re on to a very, very good project. We’ve recently spun out a new company called Aldebaran on a very encouraging copper gold project in Argentina as well. And so, we’re not aggressively seeking new projects right now. But you always keep your eyes open. Projects like what we have with Anta Kori and Regulus and what we have with Altar and Aldebaran are very hard to find. It’s an industry we’ve been able to, as juniors, put our hands on a number of these over the last 15 years or so, reveal the full potential for them and sell them to majors. It’s been a very good business model for many of us to do. We were very successful in our first company Antares when we discovered the **** deposit and sold out to First Quantum. We’re back on another one that we think we can do again. But it’s harder to find those right now. And so, groups like Route One or others that back up are always encouraging us to keep our eye out if we see another one of these rare, rare opportunities. We’d certainly tried to put our hands on it, but we’re, as you mentioned an interesting point, right now we’re onto a very good one with Anta Kori and Regulus. And so, we’re really in the stage now where we’re focusing on drilling it out, showing the full size, de-risking the project, having it ready so that when the market enters into a stronger phase than it’s in right now, interestingly enough, that’s when the major companies acquire projects is when copper prices are high. It’s because they’re cashed up and they’re looking to grow.

Matthew Gordon: I understand that. So that’s the M&A components. And then towards the end that you think answered the question, I was going to ask. So, what have you as a board or a management team decided to focus on now in this low cycle? And have you got the cash to be able to do that?

John Black: Yes. Essentially, in these low cycles, capture a good project, which we have and now focus on drilling it out, showing the full size, de-risking it, having it prepared to be ready when the market comes back more strongly than it is right now. And we see the roots of that. We see the major companies clearly indicating they want to have very good projects and they’re looking. We’re not quite into a strong M&A phase. Capital right now, we have we have good, strong supporters and for good projects we’re seeing access to capital is, I wouldn’t call it easy, but it’s there for good projects and good teams. And particularly those with a gold component. There’s been a flurry of financings for gold related projects recently and we can play. Both aspects of this project as being both copper and gold say.

Matthew Gordon: So relatively easy. And I know you’re stressing the word relatively. Where would you be getting this money from? You’re not yet looking for strategic. You want to maintain control, to prepare, as your word, the company to get the best outcome for your shareholders. Is that fair to say?

John Black: That’s fair to say. Yes, absolutely.

Matthew Gordon: So, who are you talking to? Or who will you be talking to with regards to raising the next round of capital? What type of money are you expecting to bring in? How much? What are you going to do with it?

John Black: Well, there’s been an interesting phenomenon really in our space recently. If you look at most of the major financings that have been done for larger amount of moneys for serious drill projects. We’ve seen a migration away from the traditional private placement in our space and we’ve seen an increasing number of strategic placements, major mining companies, putting money into interesting projects that they want to monitor, even at a relatively early stage. And in some ways, it’s acting as a proxy for their expiration efforts. They’ve realized they’re not generating sufficient projects themselves. So, they just get a toehold into a group like this. And so that’s something we’re very aware of and we’re constantly in discussions with potential groups to do that. And then the other alternative is to do a more traditional private placement, which has been difficult for us, partly due to competition from other high risk, high reward opportunities like the cannabis industry or prior to that cryptocurrencies. So that’s drawn a lot of funding away from us. We’re starting to see that come back into the mining space, particularly for gold right now, so right now we really have two principal avenues that we’re exploring. One is a strategic placement from a variety of major mining companies or private equity funds that want to have a toehold into an interesting project like we have or always with the opportunity to go in a more traditional private placement. They have their pros and cons. The strategics are very attractive, but you have to watch out for strings attached. You can’t be wed to one company by simply having them make a minor placement into you.

Matthew Gordon: Right. And with all your experience and your track record, what’s that telling you with regards to the amount of money that you think you’ll need to have in the kitty to be able to prepare this company for some kind of exit?

John Black: Well, our business model requires us to do a lot of work on a project. When we acquire the right project like we have our hands on right now, we’re into a heavy drill phase on this as we drill that out and so our burn rate, the amount of funding that we need to progress the project is approximately 20-$25MIL Canadian per year. We’re nearing the point where we need to get set up for next year on this. And so that that would be approximately the amount of money somewhere between $15-20MIL is what we’d be looking at raising in any variety of manners between now and, say, the end of the year.

Matthew Gordon: Right. And then I guess then comes the question again, using your experience, you’ve been there, done it before, is do you think you then reassess the situation at the end of next drill season and then work out what you want to do? Or do you say, well, that’s the moment where we’re going to have meaningful conversations to try and monetize this, have a monetary event?

John Black: Really, we’re right on this as we’ve put out our first resource in March, we’re in our Phase 2 drill program. That’ll be about 25,000 meters. We anticipate we’ll finish that about the end of Q1 or sometime in the first half of next year, which will allow us to put out an updated resource about mid-2020. At that point, we’ll make a decision on whether we put a preliminary economic assessment around that or if we still feel the project is quite open for expansion we would enter into a Phase 3 drill program. Our strategy really is to demonstrate the full size of the project and identify the best areas of the project before we enter in to putting economics around it. You really don’t want to start too early on that because you want it to have the best foot forward when you put your first look at what the project might look like, the full potential of the project.

Matthew Gordon: And where do you believe that shareholders get the most value? At what stage? Obviously, the PEA, Phase 3 I think you’re calling it, has some benefits, but PEA’S you know, I think they vary in terms of the numbers, in terms of what they tell you. It’s preliminary. Do you think that the company will see more of an uplift if it gets into a pre-feasibility stage? Or do you think a PEA is the point you could exit just as meaningfully?

John Black: If we look at the lifecycle of a junior mining company or really any mining company on this, there are two really notable points when you see a lot of increase in value in projects. Well, one is between the discovery point and approximately the completion of a pre-feasibility study. It’s the drill definition. You’re onto a good project. You’re revealing the size of it and you’re de-risking the project to confirm that it could be economically developed. There’s a very sharp increase in value in the project at that point. And then there’s another increase in the ramp up right before you go into production. But sometimes that space between completion of a pre-feasibility study and production is a long period of time and it’s a risky time for a single asset company like ourselves. And so, our business model is to identify projects as close to that discovery stage as possible. Ideally, we acquire them after the discoveries been made, but maybe not fully realized by the market or the group that is offering it to us. And then we reveal that discovery. That’s exactly where we’re at right now in the Anta Kori project. And then typically we notice that up to about a pre-feasibility stage, it’s a good time for us to be investing money and showing that. If we’re on a very strong project at the time, we complete a pre-feasibility and we’re in a good market, a robust market with good metal prices, it’s highly likely that a major mining company would like to take it from us. It seems strange that they let us add that much value to it, but they want to have certainty it’s there. So, it’s not simply it’s a large project. They want to have it de-risked and be comfortable with it. So, we typically see our role as working up to about that pre-feasibility stage. And then ideally, we pass it on to a company that has skill sets to develop the project. We’re not miners. We’re good at identifying projects and discovering them, revealing the full potential on them. But then it’s best for us to pass that on and that results in an earlier return for our shareholders. So, we like that early monetization at about a pre-feasibility stage. A good project and go to a PEA. Sometimes they take a little bit longer. It depends where the market is in terms of price and how robust the project.

Matthew Gordon: Right. So, people think to have a view on the price of copper at the moment, looking at chat rooms and forums, people seem confident in the management team’s ability to deliver this. I think the question’s always been around timing. That’s their only concern. It’s not a case of if, it’s when, which is good. It doesn’t do much for your liquidity, though. So, what do you want to say to new investors or potential new investors looking at this as an investable proposition?

John Black: Yeah. For somebody looking at a project, liquidity is an issue that we were quite conscious of as we go into a round of raising additional funds. So, that will be a consideration on when we bring in new funding. It’s nice to go to one source, or same shareholders or steady hands that way. But we do realize that liquidity is important. So sometimes bringing in new investors could be advantageous to us. So, we’ll certainly have that in consideration. But for those that are looking for a project right now, a good management team that has done it before, is a very important way to identify good opportunities in our space on this. Our group has successfully completed our business model once with Antares, which resulted in a very nice return for our shareholders. We learned a lot in that process and we believe we’re on to a better project now and a chance to do that again. It does take some patience on these. So, we’ll be building value. We’re the type of investment opportunity where you accumulate when prices are weak like they are right now. And you sit on that and wait for us to have that monetization event. A lot of values added very quickly as we approach that point in time when we can monetize the project.

Matthew Gordon: John, look I appreciate the catch up. Sounds like you’re sticking to the business model you know. You’re very clear. My interpretation is that, you know you’re not miners, you’re not pretending to be minors, not pretending to get into production like some management teams do, even though they’ve never done it before. You’re clear of what that point that you’re looking for is and how you’re going to get there. I guess what we will like to see is how you fund that and what the cost of that money is. As you say, it’s cheap to come in now, but not necessarily good for existing shareholders. With that dilution. But if it allows you to deliver an exit that like, I guess everyone’s going to be happy.

John Black: Well, it’s not like we’re rock-bottom prices by any means that right now at all. We’ve identified a project and that shows we have a market cap of about $120MIL right now, which shows that we’re on to a good project. It’s a good intermediate stage with us right now. And the real trick now is to make that next jump up. And we’ll do that by continuing to deliver the drill results we’ve been doing right now. Should that increase in resource, a critical stage to watch for us is that we anticipate we’ll have the permits that let us make that next jump to the north. And by moving to the north, we’re have the opportunity to increase the size of the resource that we’re on. But we also anticipate that the quality of the resource is greater to the north. As we move to the north, we’re moving into an area, the project that has cleaner metallurgy with it and is associated with better quality ore, so we think that that’s a critical stage for us and that’s a great opportunity for people to get into the company before we make that jump to the north. Once we’re drilling to the north, if we don’t deliver the results, we anticipate that we’ll see from there, that’s the type of point when we’ll see not just a jump, but a sustained jump in the value of the project.

Matthew Gordon: It’s a bit early, but we’re coming up to tax loss season in Canada. That’s always a tough one for juniors. Is that going to affect your decision making as to the timing of raising money?

John Black: Tax loss is kind of a funny one. It’s always hard to predict. I mean, we are coming up to that time of the year when that’s mentioned a lot on this. Keep in mind, many investors are not just in our sector, they’re in other sectors as well where they may have a lot of tax benefits on this. So, it’s kind of hard to tell. Investors have their reasons to be selling. If there are those that want to sell for very good reasons right now. That just creates an opportunity for other people. So, I view the end of the year this way as a great time to look for opportunities for good prices in solid projects with good management teams and to position yourself well for those, in particularly in the copper space. We will see a point in the not too distant future when we see a price increase and any company on a very good project right then is likely to see a substantial increase in price. So. it’s a great time to patiently position yourself for one or two years down the road.

Matthew Gordon. Beautiful. Thanks for the summary, John. Appreciate your time. Stay in touch and let us know how things are getting on.


Company page: https://www.regulusresources.com/

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 map of Regulus Resources' assets including the Antakori Project.

Aldebaran Resources – Copper Gold bought cheap with Regional Scale (Transcript)

A wide photo of the Altar copper-gold project in San Juan Province, Argentina.

Interview with John Black, CEO of Aldebaran Resources (TSX-V: ALDE).

The third company from Regulus Resources’ management team, Aldebaran Resources is an “exciting” copper-gold play based in San Juan Province, Argentina.

Their flagship project, Altar, is a large copper-cold site obtained for a discounted value from a different mining company. Aldebaran, in conjunction with precious metals mining company, Sibanye Stilwater, are currently in the process of re-evaluating the project. Drilling began in January 2019, but time must be taken for exploration and the conduction of a logging program.

While the well-established track records of the Regulus Management team will instill confidence in many a prospective investor, the financials are slightly concerning. Share price has been as high as 90, but this year it’s plummeted down to 35. The company is also sitting on significantly less cash than it was in February, which begs the question: if the value of shares has gone down, how has Regulus used its cash reserves to add value?

Another concern will be the priorities of the management team. With so much already on their plates with Regulus, is Aldebaran a fledgling project that will find itself neglected? John Black offers some reassurance; a drill program on another Aldebaran project has begun in Aguas Calientes, and the primary asset, Altar, demonstrates immense potential, with over 2.5 billion tonnes of low-grade copper-gold mineralisation, and the promise of significant zones with a much higher grade.

The Route 1 group are significant shareholders with nearly 50% ownership of Aldebaran. This can provide long-term stability but for retail investors, there will be concerns regarding such high ownership levels from a single group. Will Route 1’s priorities align with the remainder of Aldebaran’s shareholders?

What did you make of John Black? Is Aldebaran Resources a promising prospect, or is it more of a pipe dream? Comment below.

Interview highlights:

  • Company Overview
  • Company Financials and the Share Price Drop of 2/3: What Happened?
  • Getting the Share Price Up: Will it be Possible?
  • Challenges and Opportunities for Raising Money
  • History of Aldebaran and its Potential

Click here to watch the full interview.


Matthew Gordon: We recently spoke about Regulus. Want to talk about the spin out which is Aldebaran. Could you give a one-minute summary for people new to this story, please?

John Black: Aldebaran is the third company from our same management team. Our first company, Antares Minerals, was sold to First Quantum in 2010 for about $650MIL. From that, we formed Regulus, which has the exciting Anta Kori Copper Gold project in northern Peru. And then we recently identified the opportunity for another exciting copper gold project called Altar, which is in San Juan Province in Argentina. And that forms the flagship project for Aldebaran. And it’s a large copper gold project. It’s one that was drilled out and previously purchased by a mining company. It was not a good fit with that company. And we identified an opportunity to pick it up for pennies on the dollar. We’ve captured that. We’re in the process right now of re-evaluating the project ourselves. And in the very near term, you’ll begin to see us demonstrating the full potential of this project.

Matthew Gordon: Beautiful. Thanks, John. Let’s start with the money side of things. So, you’re sitting on quite a bit of cash at the moment to develop the Aldebaran project, somewhere in the region of 11-12MIL bucks, is that right?

John Black: Oh, no. We’re actually at about $5MIL on the project right now.

Matthew Gordon: OK sorry. You’re right, that’s from February 2019. Good. Just sticking with the financials, share price, it’s been as high as 90, this year’s down at around 35 at the moment. What do you put that down to?

John Black: Well, when we captured this project, what we did is we had projects in Argentina as part of Regulus Resources that we had parked while we focused on the Anta Kori project. But we realized we had value in those. But we needed a little bit more to form a solid package of projects: a solid portfolio projects in Argentina. So, when we saw the opportunity to acquire Altar, we saw the opportunity to spin out and form a new company in Aldebaran. And we spun that out at a set price that was based on what our principal investors were willing to put in to get that setup at. And then the market settled that price down into where the market saw that, at that time. It’s a new project or a project that hasn’t been seen for some time on this. It’s in Argentina, which is a little bit less of a mining country. And so, we’ve seen a natural drift off on this as many of the investors that received Antares shares as spin offs, decided that they wanted to cash those shares out and put the money to work on projects that maybe had a more immediate opportunity to. And so, we’re now in the in the phase where we’re quietly putting together the Altar project and we’ll begin to reveal that value on the project over the course of the next year or two. And we’ve also just set up to begin to drill on our Aguas Caliente phase. So, a lot of the drift off has just been it’s a new company. There are projects that have not really seen much news on, as we’ve set it up in the years, it’s kind of in that initial stage where we’re consolidating and putting everything together, but we’re now in a position to begin to put out new drill results with the Aguas Caliente drilling. Aguas Caliente is a high-grade cup or high-grade gold silver opportunity that we see in Argentina, that drilling will start on in the next few weeks and we’ll soon be able to reveal how we see the Altar project and what the potential value is. And so, it’s a great time to get into a quiet story that’s just not really noticed by the market.

Matthew Gordon: Okay. I think as denoted by me getting the cash position wrong, your PowerPoint is from March 2019. You talked about starting to tell the story and I know you’ve got a PR presence, foreign personnel on board to start doing this. And you spent clearly 6-7MIL bucks since we last spoke. So, what are you going to be able to tell people about what’s happened to date?

John Black: We’ve recently just come out with the drill results from the field campaign earlier this year at the Altar project. And so, we drilled four long holes into the system, discovered a brand-new zone on the system, and have announced some very long consistently mineralized intervals. We’re talking about intervals of 800-1000-meter intervals of a +.5% copper equivalent with higher grade zones within those. So, that drilling was done to help us understand better the geometry of the mineralization in the system. We’re currently relogging the existing 115,000 meters of drilling that had been completed previously on the project, and with the new drilling and our re-evaluation of the old drilling on this, we’ll be able to present to the market over the next several months how we see this project really looking. It’s known as a very large but low-grade deposit and we view that that is what it is. But within that, there are distinctly higher-grade zones. And we want to reveal the importance, the economic importance of those higher-grade zones within the deposit. So, there’s a lot of geologic work we have to do in the background on this. We have put some of those results out quite recently. And they’re there for those that want to look for a good opportunity like this. But we’ll be able to show that in better ways in terms of how those higher-grade zones look in the in the course of the next few months.

Matthew Gordon: Right. So, it is interesting bit for me as a shareholder, I make money by share price going up. The share price has been hit, there’s been some resetting, I think you’ve called it, also maybe some market conditions, market nervousness around trade wars. And as we spoke with Regulus, you spent 6-7MILbucks within the last six months. You’ve no sense of whether you’ve got a dollar for dollar return there or not because the share price is down. What do you think you’re going to be able to do with the next 5MILbucks, which is going to drive to share price back up, or is that just not going to be possible for you?

John Black: We wouldn’t be spending this money if we didn’t think it was a good investment. We think of this money as our own money. We’re heavy investors. And keep in mind that as management we own nearly 18% of Aldebaran. And so, we think very carefully when we put this money in. Our business model is predicated on us identifying opportunities that we can capture at a bottom in the market, either due to lower prices in the market or in the case of Altar it was a project that was held by a company where it didn’t fit, and they were willing to part with that project. So, we captured this project for much less than it would cost to drill out, what’s known on it right now. And then it takes us many times a number of years for us to either drill the project out or in this case, to partially drill it out, but partially re-evaluate and identify clearly more economically viable portions of the project. So, this project is one of the larger copper resources that’s out there in the hands of a junior, potentially available for a major mining company to acquire. Major mining companies are not finding these projects themselves. And many of them are very optimistic that there will be a necessity for a lot more copper in the future as we see further electrification of vehicles and other things that drive copper price on this. And so there will be, I believe, in the next few years be an increased demand for these large copper projects. And we’ve put our hands on a great one right now. And a lot of times when we do that, when we initially acquire, this is not the first time we’ve done this. With the Hickory project we suffered through a couple of years when our market valuations were really low, even though geologically we knew we were on a great project. The same thing happened with Anta Kori and Regulus. And now we’re beginning to reveal the value on this one. I just view with Aldebaran right now, we’re in that early stage where we’ve put our hands on something at a great acquisition opportunity on this. We’re beginning to invest the money into it to reveal, but sometimes the full reveal of that value doesn’t come until just a little bit later on in the project. But there’s not an instant X number of dollars increase in price of our business. A lot of times you’re putting that money in. You’re working on showing the full potential of a project and then that potential gets revealed when we can show the project in its full potential on that. And that just takes us a little while to set up.

Matthew Gordon: Sure. So, you’ve got 5MIL bucks on the current run rate. That suggests another five months burn, right? Is that about right?

John Black: No, it’s very lumpy in this company right now because that’s very dependent on when we’re drilling on this. And so, what our plans are right now is, is that we will be drilling the Aguas Calientes and Aldebaran, we have the Altar project, which is our flagship project, the large copper gold play opportunity. But we also have a series of other projects at earlier stages and one in particular has caught our eye called Aguas Calientes. We have very encouraging high-grade copper or high-grade gold silver material on the surface and we’ll be drilling this for a high-grade gold silver epithermal vain opportunity in the course of the next few weeks. So that’s a relatively small drill program. We’ll spend about a $1MIL Canadian on that, which will result in the potential for a new discovery on this and results to come out soon on that. And then in the background, we’re putting everything together to be able to define what the next stage at Altar project is. Probably the first stage of that is to reveal the full potential of it. So, people can begin to see what that opportunity is. And that will determine how much drilling we’d need to do. We have a lot of drilling in Altar already. We have a lot of data there. So, it may be simply having us reveal what’s there by being able to better present in a different light the information that we already have.

Matthew Gordon: So, here’s the question. You’ve got 5MIL bucks left. You outlined some of the ways you can spend the money and I guess you’ll prioritize that in the way that your experience tells you to prioritize that. You expect some of those things to have an effect on share price. If they don’t, your market cap stays the way it is. You’re going to need to raise some capital. It’s going to cost you what it’s going to cost you. How are you going to approach that? I know you’re going to tell us story in the market. Really, really well. You’ve said you’re going to start telling the market really well. How do you approach the fund raise when you’ve done these things deliverables on your three projects and the market doesn’t appreciate it yet? They’re not listening to you. Just go ahead and raise small amounts or do you try and say I need to raise 12 months’ worth. What’s your thinking?

John Black: Well, our thinking really on this we’re just as I mentioned, we’re just kicking off a drill program in Aguas Calientes, so we’d like to see what those results are. They have the potential to dramatically change the situation on the project. We will be able to better reveal the full potential of the Altar project as we complete our relogging program and can present that in a little different light. I think what you’ll see us showing is the higher-grade portions of the deposit, which are still extremely large. The current resource is over 2.5BIL tonnes of low-grade copper gold mineralization. On this we view that within that 2.5BIL tonnes there are significant zones of much higher grade that form a deposit by themselves, if you will. And so, we’re in the process of being able to put that together to reveal that. When we show the results from the program at Aguas Calientes we will show our full thoughts on where we’re going with the Altar project. We believe that will warrant an adjustment in the share price on this, which would allow us to raise capital with less dilution. But the important thing is that we move projects forward on that. So, we do have the capability of raising capital somewhat independent of the share price on this. It’s just always best for ourselves as current shareholders and all of our other shareholders to do it at increasingly higher prices.

Matthew Gordon: What does that mean? What do you mean we can raise this independent of share price?

John Black: Well, we have some very supportive shareholders. This is a bit of a different structure to a company on this in that we have a group called Route 1 that’s been a strong backer for our team all the way back to the Antares days and they’re strong supporters for Regulus and they own nearly 50% of Aldebaran. Sibanye, the company that we acquired the project from has 20% of the project and his management, and we have 18. So, it’s fairly concentrated shareholders on this. And there’s alignment amongst the shareholders on this that the important thing is to move the project forward. Ideally, we’d love to do this. Our goal is to increase the value in the company, certainly by the end game, which we view as monetization and selling the projects to a mining company at the end of this. But we’re focused more on that end game than we are on day to day on this. But we do believe that the results from Aguas Calientes have the opportunity to bring us back on the map, if you will, on this. And we believe that when we’re in a position to reveal our full vision on what Altar is and what the full potential is, that that’s likely to result in an increase share price. But there are other factors that are beyond our control, like copper price or other things that could affect us as well. So, we have some time on this. And when we’re in a position where we don’t like our share price on this, the important thing is to roll out additional information, so people can understand better what we have and to be cautious. You don’t spend as much, you don’t raise as much on this when your lower share prices. But it’s important that you keep the company moving forward.

Matthew Gordon: But isn’t that kind of your problem. Based on that maths you’ve got 12% of free-floating shares, haven’t you? You’ve got 50, 20 plus 18. Liquidity’s the issue here, right?

John Black:  You’ll notice that many of the companies that do well, this is not terribly different than some structures of, say, some of the Lundeen companies and others where you have large concentrated holdings from groups that are very comfortable in the long term on this. It almost becomes a little bit more like a private company structure on this. And sometimes when you’re in a market bottom, that’s a little easier structure to have than when you have a lot of liquidity in a tough market. Liquidity is your friend when the market’s robust and going up, but your enemy when it’s going down on this. And so right now what we focus on is setting the project up, acquiring the project which we’ve done, and then setting it up and getting ready to begin to reveal that. And as we reveal that, and we raise additional capital, that’s where we anticipate we’d be bringing in new investors and increasing that liquidity. But the nice thing is it doesn’t take too much interest in us to move us pretty quickly right now, too, because it’s there not very many shares available. So, if we deliver the results that we believe these projects will deliver, a little bit of demand will have a sharp increase in our share price.

Matthew Gordon: Potentially. I think that’s a kind of fine balance. We’ve seen a few companies over this side of the pond who’ve had too much in the hands of one or two shareholders and it’s killed their share price, it had the opposite effect. It’s a balancing act. I appreciate that. But also, it gives me an insight into how you guys are thinking in terms of taking this forward. You know, you believe you’ve got the ability through your current shareholders to get you to a point where you’re comfortable to go out to market and it put some more shares in the market. Understood.

John Black: Keep in mind one thing on this, if we had a project that required a lot more drilling to reveal the full potential on it and a lot more investment on it, that would be one challenge. But here we acquired this project under very good terms, but it’s a project that actually has quite a lot of drilling to it. The Altar project was drilled out by a junior company like ourselves called Peregrine Metals and sold to the Stillwater Mining in 2011 for almost $500MIL U.S. cash at the time. It then stalled. The company that purchased it was not a good fit for the project and it disappeared off the map. So, we acquired it for much less than that. So, you know, right now, when you take a look at our market cap and the size company we have, we have the option to turn 80% of a project that at one point was valued in cash at over nearly $500MIL U.S. and when the copper market was robust. If we returned to that type of a copper market on this, we believe we can show that there’s more to this project than was even known then. And much of that we can do from simply relatively low-cost work to re-examine this and recast the information that’s there so people can better understand that this is not simply an enormous low-grade deposit, but there are distinctly economically more attractive higher-grade zones within it. That’s what we want to reveal to the market. That won’t cost us too much money to do that. That’s a lot of geologic work. We did spend some money this year for the drilling to gather information to better evaluate what we have. But we’re now in a position where we can reveal quite a bit of information about this project without a particularly large spend on it to go forward. And we believe with that information on the table, we’re likely to see a different valuation.

Matthew Gordon: So how much money has gone into this company in total then?

John Black: The way we structured this is as I mentioned at Aldebaran was a project that was acquired by Stillwater Mining for $487MIL in 2011. We acquired the option to pick up 80%. So, we had the option to earn 80% of the project for $15MIL U.S, which has been paid and for Sibanye, which was the new owner of the project after they acquired Stillwater, has 20% of Aldebaran as part of the process. And we need to spend $30MIL over the course of 5 years to acquire 60% and $25MIL additionally to go to 80% on the project. So, over the course of the next 8 years, we need to spend $55MIL total to acquire 80% of the project. We’re well ahead on this, we’ve just completed our first year on this and we’ve spent approximately 7 or $8MIL into that work commitment. So, we don’t have to work at that pace right now. We can a little slower as markets a little bit slower on this. But we anticipate we’ll spend that money to acquire the 60% interest within the next four years. So, we have we have time to do that. What we need to do now is to better demonstrate to the market what the potential of this is first. And then we anticipate over the course of the next few years, we’ll see, most likely, an increased interest in these type projects from major companies. And that will likely come as a predicted supply gap in copper emerges and we start to see copper prices move up. And so that will provide us a better environment to raise money at less dilutive costs.

Matthew Gordon: So, you don’t feel you’re under any pressure with regards to money as it stands because you can control the pace at which you move forward.

John Black: We can control the pace of it and we have good supporters on it and we’re on a great project with much more value than is currently revealed in our share price on this. But we don’t want to spend all of our effort just trying to get that up in the short term. We really want to set the fundamental situation so that the end game is there. We focus on that maximum value at the point that we would monetize this project by selling it to a major mining company.

Matthew Gordon: Okay. Look John, I think that’s a great reintroduction to what’s going on with Aldebaran. Fascinating. I think if people can pick shares up, might be worth having a look. Well, stay in touch. Let us know what’s going on. Sounds like a bit more drilling to happen as those results come out. Give us a call. Let us know how you’re getting on.

John Black: Yeah. Keep an eye on these Aguas Calientes. That’s a second project in there that has potential to emerge as something pretty exciting on this. And then the real fundamental part of the company to watch is how we reveal that value in Altar. And we’ve discussed a little bit on where the share price is right now. But in our previous two companies, we suffered through these same points where even though we knew we were on a great project, a lot of times takes a while for the market to see that. And the important thing is, is that we will be able to move the project forward. We will have access to the capital we need. We’re no risk of concerns that way.


Company page: https://www.aldebaranresources.com/

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 wide photo of the Altar copper-gold project in San Juan Province, Argentina.