Palladium One Mining – Use Your Cranium: Invest In Palladium? (Transcript)

A photo of 6 blocks of Russian palladium.

Interview with Derrick Weyrauch, President and CEO of Palladium One Mining (TSX.V: PDM).

Palladium One Mining Inc. is a TSX-listed PGE and Nickel-Copper exploration and development company. It possesses several assets: the flagship Läntinen Koillismaa PGE-Nickel-Copper Project in north-central Finland and the Tyko Nickel-Copper, PGE Property near Marathon, Ontario, Canada.

The key theme at play is strong fundamentals. Palladium One published their first Resource for the company in September: 1.2Moz of palladium equivalent (split 50/50 between indicated and inferred). Palladium has a strong foundation of demand and limited supply says Weyrauch.

Palladium is an industrial metal: 86% of it is consumed in auto-catalysts, and it is predominantly used in gas engines. Using Palladium allows for cleaner air, making palladium a modern, green solution to transportation headaches is the marketing spin. The slow decline of the diesel engine is resulting in greater future demand.

There has been a structural deficit of Palladium in the market in recent years, and Palladium One is hoping to fill that gap. The market is small at around 10Moz. There are additional applications of Palladium in dentistry and jewelry, but are much smaller markets.

Palladium One is in the process of closing a non-brokered private placement for $3.8m dollars. Renowned Canadian mining investor Eric Sprott is investing $1.2m, giving him a 19.9% ownership of Palladium One. This is only option money for Sprott as Palladium is not large market, nor a key focus for him, but it is interesting to us that he has selected this Palladium asset.

Weyrauch explains another ace up Palladium One’s sleeve: Finland is an excellent jurisdiction with “first-world geological data sets.” This area has been heavily researched and the information is publically available.

Palladium One has a brand new management team and board as of 2019. Dr. Peter C. Lightfoot, a 20-year nickel exploration veteran at Inco and Vale, clambered aboard in September. A real plus, not sure if this is his only focus though. Neil Pettigrew, a geologist with 20-years of mineral exploration experience, serves as Palladium One’s Vice President – Exploration. Weyrauch’s primary experience comes in the world of finance where his experience has been restructuring mining companies and experiencing success.

Weyrauch claims the main obstacle for Palladium One is the same as for every other junior: raising capital. Weyrauch has used the accurate historical data, obtained in Finland, to successfully push the Palladium One story. He claims the reason behind the lack of exploration under previous stewardship at the property comes from economic downturns of Palladium rather than a lack of promise. We shall see.

Palladium One’s strength comes from the fundamental promise of their flagship asset, and the fundamentally robust level of palladium demand.

Palladium One has a market cap of CA$2.94M. It started the year with a share price of just $0.04CAD, rising to a peak of $0.14CAD in April, before falling back to its current value of $0.075CAD.

A concern is the available capital to do what they need to do and getting to a point where the company understand the economics for this project. There will be questions marks around the management team’s experience in this particular field, and the commodity itself. The palladium market is small, and with the impending EV revolution, battery metals would demonstrate enormously greater growth potential in the automotive sector. By the time Palladium One would be ready to mine, would EV be taking hold?

It is a question of whether investors buy into the macro story of palladium, and can trust the team at Palladium One to deliver on an asset that has failed to be mined under several previous companies.

What did you make of Derrick Weyrauch? Is palladium worth your time, attention and money? Do you have any idea what the palladium market looks like? Comment below and we may just ask your questions in the near future.

Interview highlights:

  • Company Overview
  • Palladium: What is it, What’s it Used For and What’s the Size of the Market?
  • Company Financials and Cash Position: How Will They Finance Their Projects?
  • Finland: Is it a Mining-Friendly Jurisdiction?
  • Team Experience
  • Business Plan and Focus: What is the Plan and When Do People See Things Move?
  • Current Constraints: What is Preventing Them from Moving Forward and How are They Dealing With it?
  • What Did E. Sprott Buy Into and Why Should You Invest?

Click here to watch the full interview.


Matthew Gordon:  You’re over here for the 121 meeting a bunch of investors, I guess, and telling your story.

Derrick Weyrauch: Speed dating at its best.

Matthew Gordon: Why don’t we just start with one-minute summary for people new to the story?

Derrick Weyrauch: Okay. Well Palladium One is basically a brand-new story exploration development company and its flagship asset is the LK Project in Finland. It’s a Palladium dominant poly metallic deposit. And we just published our first resource for the company in September. 1.2MILoz of palladium equivalent in all categories split roughly 50/50 between indicated and inferred, indicated 1.8 grams Palladium equivalent and 1.5grams for the inferred, weighted average about 1.65grams. And we’ve got a 38KM favorable basal contact. And this is just covering 1.1KM of that contact. So, a lot of a lot of territory to still hit.

Matthew Gordon: Let’s start off with the obvious question: palladium, what’s it used for?

Derrick Weyrauch: Palladium is really, in my view, an industrial metal. 86% of it is consumed in the auto catalyst. It’s really a metal for providing clean air. Predominantly it’s used on the gas engine. So, you’d see it in the catalyst and basically scrubs the nitrous oxide and carbon monoxide and with increasing environmental standards for air quality, there’s more and more palladium loading and going into the auto catalysts. It’s feeding the demand. The other aspect with the Palladium is that with the demise of diesel that we see going on since the Volkswagen gate, if you want to call that or diesel gate, consumers are transitioning away from the diesel engine into the gas engine. And there’s more demand as a result of that for palladium. And there’s been a structural deficit in supply for a number of years.

Matthew Gordon: What is the size of the market?

Derrick Weyrauch: The global mine productions is about 6.9MILoz, so fairly small. There’s another 3MILoz that come from recycling. That’s roughly 10MILoz market, 6% of which goes into the auto catalyst. There are other applications for jewellery and dentistry and things like that. But it’s for the most part I consider it industrial metal and not so much on the investment side.

Matthew Gordon: You’re a relatively new story.

Derrick Weyrauch: Absolutely. People haven’t really heard of it.

Matthew Gordon: You’ve got a 3, 4MIL market cap. How much cash have you got?

Derrick Weyrauch: We’re just in the process of closing a financing of $3.8MIL so that should close in the very near future. The lead order on that was with Eric Sprott. So, he’s taking about $1.2MIL of that financing, which will give him about 19.9% ownership interest on non-dilutive basis in the company.

Matthew Gordon: You’re in Finland.

Derrick Weyrauch: North Central Finland.

Matthew Gordon: What’s that like to operate in?

Derrick Weyrauch: Finland is absolutely a fantastic jurisdiction. It’s really only been open to private mining investments since the 1990’s. Previously was pretty much state run. And what we like to tell people is Finland has first world geological data sets. The information is fantastic, lots of high-quality mapping, reconnaissance, drilling and whatnot and all that information is publicly available even the assays or rather the core, this is available as well, but because it’s only been open for exploration for 20 odd years, it’s underexplored. There’s a lot of low hanging fruit and we see that in our project, which if this data was available, let’s say in a North American context, it would have been followed up. We have our Murtolampi target, for example. We’ve got a nice 200 meter fence with the number of holes in it going down about 40 meters. All the mineralized holes, for the most part, ending in mineralization. It’s been sitting there for 20 years. Nobody’s ever poked a hole around there or done any follow up work. So, that’s just low-hanging fruit and gives us an obvious target to go after.

Matthew Gordon: Who here has exited, made money for shareholders, built companies…

Derrick Weyrauch: Well, the company’s been completely changed over the course of 2019. So brand new management, brand new board.

Matthew Gordon: Who’s delivered before?

Derrick Weyrauch: So, Peter Litefoot for example, we brought him on the board in September. He used to be the head of Project Generation Nickel Base Sulphides for Inco Valle.

Matthew Gordon: Who’s done it in an exploration company? It’s different.

Derrick Weyrauch: Well, they’re also finding some fairly large deposits in those big boy companies as well. And so, he’s one individual. Neil Pettigrew’s, another individual. He is our vice President of exploration. Also, on the board, he’s actually based in Thunder Bay. And what brought him to Thunder Bay a number of years ago was the Palladium Boom, a couple decades ago that North American Palladium.

Matthew Gordon: And what about you?

Derrick Weyrauch: Well, I’m finance guy by background. 30 years in the capital markets. And most recently, I was the CFO for Jaguar Mining. Did the restructuring there a few years ago and prior to that also was with Andina Minerals, which we sold to Rothschild Mining back in early 2013.

Matthew Gordon: Can you just tell us what the plan is, how you can do it? Who’s going to do it? How are you going to fund it?

Derrick Weyrauch: Well, really, what we’re going to do is leverage off of the data set that’s already available for the project. We have 38KM worth.

Matthew Gordon: What type of company are you going to build?

Derrick Weyrauch: We’re growing a resource base.

Matthew Gordon: That’s the model?

Derrick Weyrauch: Absolutely. To get to that critical mass where you may want to put it into operation or perhaps somebody takes a shine for the asset and decides they’d like to have it.

Matthew Gordon: Hopefully that’s attractive to someone who will take it to the next stage. That’s the model.

Derrick Weyrauch: We’re not currently configured for a development scenario, so we’re not going to fool ourselves.

Matthew Gordon: How do you finance this thing? You’re raising a little bit of money now, and that’s for presumably this seasons’ drilling?

Derrick Weyrauch: It’s predominately for the LK project in Finland. We do have another project in Ontario, a nickel sulphide asset. But the money is really earmarked for exploration in Finland conducting geophysics programs. So, IP as well is a diamond drilling program that we hope to initiate this winter. It’ll be 4-5 meters of drilling. So hopefully we have some very consistent news flow.

Matthew Gordon: Is it seasonal there? Can you drill twelve months of the year?

Derrick Weyrauch: You can drill twelve months a year. As a matter of fact, it’s a preference to drill in the winter. It’s easier to get around. You know, if you if you have a moisture in the soil, not just track right over.

Matthew Gordon: Where are you based?

Derrick Weyrauch: I’m based in Toronto.

Matthew Gordon: You’ve got a local team there?

Derrick Weyrauch: Yeah exactly. But for the most part of the stage, we’re still relying on consultants. We’re early days for us, we’ve only been configured like this for about six months with this management team and board. So, we’re still building it.

Matthew Gordon: When do you get boots on the ground?

Derrick Weyrauch: Well, we’ve had boots on the ground this summer already. So, we have people there working for us, but in a consulting capacity.

Matthew Gordon: When do people start seeing things moved? What do you think people are going to be interested in hearing next?

Derrick Weyrauch: Well, yeah. The key message is that we’ve got a very interesting property package, which is at 38km of basel contact, less than 4km of it has had systematic drilling. Based on the historical data set we get from auto compo and others, we have seen tremendous amounts of reconnaissance, drilling and sampling that’s happened along the contact. So, we know it’s generally mineralised and we know where to go. So, there’s a very good targeting that’s already taken place with only four kilometres of the thirty 38KM trend, having had systematic drilling, our job is really to expand out and grow the resources more. The Kaukua deposit where we announced the resource in September, it’s only 1KM of that 4 where you have got those ounces and that resource. So, our job is to do the geophysics, target into the higher sulphide areas along that contact and drill those out. And we envision having a situation where we have multiple resources, perhaps multiple open pit environments. We’re not really looking at an underground scenario at this point. Our resources are pit constrained, and the pit only goes down to about 275 meters. So, fairly shallow.

Matthew Gordon: How do you manage all of this? How do you watch the pennies? What are the things that are constraining you now?

Derrick Weyrauch: Well, capital is always a constraint when you’re pre-revenue. So, you know, that’s the big issue for any junior explorers. So, you have to have sufficient reason and justification to be able to raise the next chunk of money. So, what we did is we spent the summer validating all the historical information, putting a very robust resource together, pit constrained. We tripled the cut off grade from what had been done by previous operators. And, demonstrating that this is real. It’s not an aggressive estimate by any means. We only used the price assumption of $1100 for Palladium as an example, whereas the market right now is over $1700 per ounce. So, we’ve got that, we show the historical information that we have on the property and then it’s a matter of just systematically working that property. One of the luxuries that we have in this particular situation is we don’t have to come up with any black box magic and new geological theory that’s maybe a little bit out there because this project’s been looked at time and time again. This is more taking a systematic, proven approach and working your way through the process.

Matthew Gordon: Why hasn’t anyone done this before on your property?

Derrick Weyrauch: Well, the property was released by Autocompo’s. They released lots of properties and was sitting in inventory, so to speak. It was picked up by a prospector in 2006, was flipped into a Vancouver junior. They did one program of exploration at the Kaukua area, and they got caught with the downturn in 2008, 2009 and weren’t able to really survive that. The asset, then moved and some additional properties or claims were added to it by another junior out of Vancouver that were able to do one program in 2012. But they had challenges of the 2012/2013 downturn. Nothing’s happened to the project since. It’s just been sitting there and ultimately moved into Palladium One. So, there’s no market awareness, only two real programs and nobody’s followed up on the prior program.

Matthew Gordon: How do you ensure this company isn’t another statistic on the side of the road? What are the things that you need to deliver, stage by stage, to ensure that we’re still having this conversation a couple of years’ time?

Derrick Weyrauch: Well, we need to grow the resource in a prudent way and target the low hanging fruit.

Matthew Gordon: What does that mean?

Derrick Weyrauch: So, we’ve defined a resource right now. Our immediate target is to double that. And we believe we have a path to double that in fairly short order. I’m going to say it’s going to happen in the next program. That might be a little bit aggressive. But, I think in the next year, we would have a good shot of doing that with sufficient amount of drilling. We’ve got a budget now for a drilling program. We’re going to be doing 4-5000 meters of drilling. The reality is that we have to do a little bit of a balancing act. So, there’s a little bit about upgrading the historical information to be able to bring another zone into resource. But then there’s also the aspect of how much more discovery you want to get.

Matthew Gordon: Is that what you sold to Eric Sprott, 19%? But this is really option money for someone like that. But that’s the story he bought.

Derrick Weyrauch: Basically. There’s a resource growth opportunity here that’s not high risk. There’re very limited investment alternatives for Palladium. The fundamentals for Palladium are fantastic. You know, 80% of production comes from South Africa and from Russia. 90% of production is a by-product of other mining operations, whether it be nickel or platinum. As a result of that, producers have little capacity to increase palladium production to meet the demand. The commodities have been in deficit position for eight years and is forecasted to continue. The forecast for 2019 is about 800,000onz deficit in a market that’s only producing 7MILoz. It’s a big problem. And what’s also interesting is the two primary palladium producers globally, Still Water and The North American Palladium, they’ve both been acquired by South Africans taking the money and investing in other jurisdictions, whether it be in Montana or Ontario. So, it’s a market where there’s limited capacity to increase supply from the existing producers. And we think we’ve got a project that’s fairly straightforward. It’s open pit. It’s not very deep. We believe it’s going to grow a few multiples of where it is now on a systematic approach without applying huge amount of risk.

Matthew Gordon: Why should anyone look at your company versus the multitude of other junior miners or early stage companies? Why should they trust you to help them make money?

Derrick Weyrauch: It’s a great question. I think it starts off with the commodity, right? There’s fundamental demand it makes sense for the commodity. Secondly, the asset, there’s limited investment alternatives. If you’re looking for exposure to palladium, Stillwater’s gone, North American Palladium is gone. Where else are you going to invest? You’ve got a systematic, simple approach to increasing the resource so it’s not high risk. On top of that, we’re in a Tier 1 jurisdiction. Finland is a fantastic place to work. Rule of law and systems that’s mining friendly. There’re smelters locally. We’ve got power on the property. We’ve got roads to the property. It’s just a nice jurisdiction to be in.

Matthew Gordon: Ok. Well, we look forward to seeing how this story develops. Stay in touch. Let us know how things are getting on and we will see you hopefully in London soon. Appreciate that. Thanks very much.


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

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A photo of 6 blocks of Russian palladium.

Family Office – Major Investor Megeve Investments, Nicolas Banados (Transcript)

A photo of a neat stack of gold bars with 'Serabi Gold' written across the photo.

Interview with Nicolas Banados, Managing Director of Family Office Megeve Investments and Investor in Serabi Gold (TSX:SBI)

Megeve Investments, a non-discretionary portfolio of Fratelli Investments Family Office, is a single-family office located in Santiago, Chile. Its main asset is Chilean retail chain colossus, Farabella. The firm offers asset management and public/private equity investment services. Banados is Managing Director of Private Equity and attorney-in-fact at Megeve Investments. His focus in on direct investment in Latin American companies.

Megeve Investment first invested in Serabi Gold 8 years ago, where Nicolas Banados now serves as the Non-Executive Director for the family office. Megeve Investment already owns a copper company and a gold company in Chile, in addition to a forestry (natural resource) company in Colombia.

Therefore, Serabi Gold sat in a familiar area of the industry and was in a prime position for Megeve Investments to obtain c.50% (now voluntarily diluted down to 32.8% after the 25.3% investment from Greenstone Resource II LP). While the timing of Megeve Investment’s involvement in Serabi Gold was far from ideal given the plummeting gold prices at the time, Banados is still glad he made the decision to invest.

In addition to working on efficiencies at current Serabi Gold operations, Banados is open to the idea of additional acquisitions, like the Coringa Mine, in the future, to further enhance the production capabilities of Serabi Gold and solidify its position as a seriously profitable player. Banados spends a great deal of time working with Serabi Gold to align their strategies, resulting in a more cogent business plan that reduces the risk and provides clarity for existing and prospective investors.

Banados’ primary source of excitement comes from the opportunity for growth and exploration in a huge, gold-saturated country: while Brazil is a developed mining country, particularly of iron ore, the gold marketplace is yet to be fully mechanised.

Moreover, Banados sees immense potential in organic and green-field areas to increase production towards the ‘magic’ 100,000oz/y number. Lastly, Banados touches on South American operations and clearly explains the company’s priorities lie in areas it has established a sense of comfort: Chile, Brazil, Peru, Colombia and Paraguay. What did you make of Nicolas Banados? Are you intrigued by Megeve Investments’ involvement in the Serabi Gold story? Comment below.

Interview Highlights:

  • Megeve Investments: An Introduction. What Sectors Do They Focus On?
  • The Growth Component: How Does Serabi Gold Fit Their Portfolio?
  • Working with Serabi Gold on Increasing Production Capabilities
  • Future for Serabi and Their Investment: Was it the Right Choice?
  • Operating in South America: Positives and Negatives

Click here to watch the full interview.


Matthew Gordon: We are with with Nicolas Banados. He is an investor in Serabi Gold, the AIM listed gold producer. Thanks for joining us here in London. You normally work in South America.

Nicolas Banados: I’m usually based in Santiago, Chile. I travel around Latin America doing our investments in Chile, Peru, Colombia and Brazil.

Matthew Gordon: We’re really pleased to have you here because Family Offices are more and more an important part of the mining investment scene. We’re delighted to be talking to you today to try to understand how Family Offices think. Tell us just a little bit about the group.

Nicolas Banados: Megeve Investments, is the manager of Fratelli. It’s a single-family office. It’s a Chilean family which its main asset is a Latin-American retailer called Farabella. It has department stores, shopping centres, financing consumer loans and supermarkets, it’s a little bit of everything in the whole region. And we manage their other investments, we have public equities, debt, private equity globally, but with a strong focus to Latin America, which is our market. I run the private equity division of the company. We have a five-person team. We mostly do direct investments in companies in Latin America. We operate in Chile, Peru, Colombia and Brazil. Only those countries.

Matthew Gordon: I think you’re being quite modest. It’s a very large group.

Nicolas Banados: It’s an important group.And one of the things that you probably know about family office, is that we don’t disclose numbers.

Matthew Gordon: You started in retail. That’s where the wealth comes from, from a long time. Over 100 years ago, right?

Nicolas Banados: Yes. 120 years.

Matthew Gordon: But you have migrated and morphed into other things.

Nicolas Banados: The family still owns their retailer. They are still active there. I work with the second generation of the family. They are still one of the three brothers. One is still the executive chairman of the retailer. So, what we do here is we want to diversify the family into other businesses, not retail. So, I’m forbidden to do any retail related investment. So, we mostly do traditional industries, mature like mining, infrastructure or real estate. We have a cemetery company. We have a host of investments that we did recently. We have some technology infrastructure businesses as well.

Matthew Gordon: You’re spreading far and wide. Mitigating the retail risk.

Nicolas Banados: Not only to mitigate the risks, but all also to avoid conflict because retail is so important in Chile and Brazil and Peru and Colombia, that any retail investment that we do might have a conflict, so we want to avoid any conflict.

Matthew Gordon: May I talk about the natural resource space? You have got other investments in South America. Where does Serabi Gold sit in that portfolio? Was it one of the latest or earliest or…

Nicolas Banados: Well we have been Serabi Gold or eight years now. In natural resources, we have three mining companies, including Serabi Gold. So, we have another copper company and a gold company in Chile. We have forestry which sits within natural resources in Colombia. That was a Greenfield project. And power which is not a natural resource, but it’s related to in some way. I would say in all these projects we have been investing in the last 15 years. I’ve been with the company 15 years. We have always grown the company and built something. Sometimes like the forestry investment, we build it from scratch. In others like Serabi Gold and the other mining companies, we built a project that was already there, and we funded to build it, the construction of the plant or development of the mine or whatever it is.

Matthew Gordon: These are growth stories you’re looking for. That’s where you get the capital appreciation. Your money is long-hold, long-term money in that you will follow your money and give it a chance to grow, to breathe and become something.

Nicolas Banados:  Exactly. We’re not a fund, so we don’t have to exit. As long as we see a growth story continue. So, sometimes we have investments that have lasted for 25 years. Other investments have lasted all of 3 or 4 years.

Matthew Gordon: Got it. On more of a private equity type investment. But in that growth story, you’re looking for a revenue to start. That’s important to you.

Nicolas Banados: Yes.Within the initial investment that we do and the follow on or the M&A that the company that we’re investing in will do, we always look for, let’s say, projects that can be built just like the hot potato game. This is not what we do.

Matthew Gordon: It’s not a promotional thing.

Nicolas Banados: Not a promotional thing. We just want to make sure that whatever we buy, it’s something that could be built, generate revenues and positive cash flow.

Matthew Gordon: It’s safe to say when you invested in Serabi Gold, you knew what you were getting into. A space you understood, in a jurisdiction you understood and a story which you felt met the criteria which you’ve just outlined.

Nicolas Banados: When we invested initially in Serabi Gold in 2011 when the company IPO’d in Canada, we met Mike Hodgson and Clive Line, the CEO and the CFO. And what we did initially is that they had this project and we wanted to know more. Our initial funding was $200,000 and we funded the PEA of Palito. We funded the project with the objective of after getting that study, if the study was positive, then we will fund the CapEx of the project. So, that’s actually what happened after a few months, it took like 6-months, we received the study, it looked pretty good. So, we funded the CapEx. We went to the market a little bit. It was not so easy to market at that time. The project was built on budget on time. So, in some way the management built a track record with us, which was very important for us. Then we, Serabi Gold, bought a neighbouring project again. We liked it. We said OK we’ll fund the CapEx again. The market still was not so good. Well, that’s what we have been doing. Both are operating today. And then we started to look at other funding sources because we want other people to fund it as well.

Matthew Gordon: I think it’s safe to say that the market has been quite quiet for juniors or producers under a certain level for the last 6-years. You’ve given the chance for the company to survive, because you have a different mentality from institutional money, which needs to see revenues, returns or share price appreciation.

Nicolas Banados: I would say we funded it because, of course there is always the risk of the gold price, but assuming a conservative gold price, we said this investment that we are making, it will have a return regardless of the market, other than gold price. So, we felt confident that the share price can go up or down, but the cash flow would be there. We want to see growth over time, but we want the companies to deliver safe growth. So, it has to grow, but with conservative assumptions. We want Serabi Gold to grow and build other projects and merge with other ones that continue to work. Because in this industry being bigger, it scales the company up, the economics of scales, and reduces costs, that’s important.

Matthew Gordon: You’ve just got your second asset, which the guys are working out how to mine efficiently at the moment, that should double production That takes you towards 100,000oz pa number which everyone wants to see. Your view is that if there are other assets available, that you would encourage the team to consider some kind of acquisition or joint venture etc. that’s your mentality.

Nicolas Banados: Yes, as we have done in the past. We started with Palito, and then we bought Sao Chico, then we bought Coringa. We also see a very good opportunity for organic growth that can be done in parallel of these more inorganic…

Matthew Gordon: So how do you work with the team then? And are you sitting on the side-lines shouting at them?

Nicolas Banados: I sit on the board.We talk often. They run the company.

Matthew Gordon: Do they have the same mentality. Do you want to work at different speeds? Or do you have joined up thinking?

Nicolas Banados: We spend a lot of time aligning the strategy. It’s not that we get to a board meeting and they say one thing and I say the other. That doesn’t happen.

Matthew Gordon: You’re heading in the same direction.

Nicolas Banados: We head in the same direction. There is another board member from Fratelli called Eduardo. He’s a mining engineer and he has worked with Mike before Serabi Gold, other than Greenstone that also brings a strong mining experience. But we talk often, we visit, we help with the local knowledge. Mike knows Brazil very well but having a Latin American investor that can bring help with their banks, with other things and the culture, it helps.

Matthew Gordon: Your view is there’s some way to go on this. You’re happy with the way that the growth has gone, its cash flowing, it’s producing. What is the picture in your head about where Serabi Gold is heading?

Nicolas Banados: Brazil, it’s developed in terms of mining and developed in terms of iron ore, some other minerals, but not much in terms of gold. So, there is a huge opportunity for growth, exploration. It’s probably going to be more brownfield, greenfield projects, not that much because there are not many projects that we can just acquire operating producers. But there is a huge opportunity. It’s a big country with a lot of gold and we have the opportunity there, so we want to grow. Probably I would like to see that faster. But more than that, I would like the products to be delivered, to do it right, is more important. But if we can go faster, then that’s good news for me.

Matthew Gordon: Your team has known Mike for a long time and Mike knows Brazil and you’re heading in the same direction. The path forward all sounds rosy. But at some point Megeve will to monetize this.

Nicolas Banados: When Greenstone came in,we diluted because we thought it was not good for the company that one shareholder owned 50% or more to sell. And so, we decided to dilute, even though it was not the price that I wanted but we decided it was good for the company. Actually, it happened to be a good thing. So, in the future, we’ll probably dilute a little bit more. The company has to be seen as an independent company, it’s definitely not run by us. I’m in Chile. I come here, I can go to Brazil, but I am definitely not running the company. It’s run by Mike and Clive and the rest of the board and the management. And that’s what we believe is the company. And so, we can continue to support the company and we will continue to support the company. But we want also to have more liquidity to open spaces for other people.

Matthew Gordon: Do you think that you made a good investment decision and investing in Serabi?

Nicolas Banados: Yes. The initial investment, the timing of the market at that time was not the best. We were investing when the gold price was $1,800. So, and then it went down to $1,100. Who knew that would happen. Nobody. But I would do it again, definitely because we still see there is a huge opportunity ahead of us.

Matthew Gordon: Do you think they can become a mid-tier producer?

Nicolas Banados: Yes. And I think that Serabi’s also getting the attention of a lot of miners and when a gold company, mid or large cap, want to enter in Brazil. Who are the players there? There are not many. Who has built a mine in the last 5-years other than Serabi Gold. Or one or two?

Matthew Gordon: Not successfully.

Nicolas Banados: So, we havein some way we’ve become a target.

Matthew Gordon: Could you give us a bit of an overview of operating in South America? I know you operate in specific countries and South America, so again some of the questions that we get asked about, especially from AIM. North American investors are comfortable with South America. They know it, travel there, they holiday there etc. Europeans have seen some difficult times in South America.

Nicolas Banados: There are countries in which we do operate and others that we don’t. I would say only the one’s that we do – Brazil of course, Chile is another one, Peru and Colombia and we have one investment in Paraguay. So, we don’t do the other ones. In those countries we feel comfortable about safety. I can travel to those countries. I don’t feel comfortable traveling to some of the other countries. I can travel, I can do business.

Matthew Gordon: Tell me about Brazil, because this is about Serabi Gold, we’re talking about today and the fact that you’ve invested in them. So, Brazil, again, had a bit of a strange few years politically. Bit up and down economically.

Nicolas Banados: All the politics in Brazil happens in Sao Paolo and Rio and Brasilia. We are far from that. We are not in Sao Paulo. We are not in Rio. We’re not in Brasilia, we are not in the cities. We are up north in Parastate. It’s a remote location for business people, but it’s a very good infrastructure for a mining project. And we are very well received because there is not a lot of activity other than agriculture and forestry in that area. And so, we are very well received by the people, by the authorities, because they want new investment in this area.

Matthew Gordon: They want investment, they want jobs, they want taxes, royalties…

Nicolas Banados: The only good part of the political instability in Brazil is that the exchange rate is depreciated and that helps us. So, when noises about Brazil, that’s something people that are taking their money out of Brazil, that’s good news for us because that Real is going down and that exchange rate in in our benefit.

Matthew Gordon: Can I just ask about the Balsonero effect? Do you know much about what’s going on Brazil politically? Should people be worried?

Nicolas Banados: No, there may be more uncertainty in who’s going to run the country. Political uncertainty? Who knows what is going to happen? I don’t know. I have no idea who’s going to be the next President. There is no preferred candidate, but we are far from there. The only important change in environmental law because of Vale problems with the tailings, and there were some changes that we are complying to.

Matthew Gordon: But it’s business as usual.

Nicolas Banados: It’s business as usual. Of course, this trend is restricting some of the legislation. But we do comply with that because we set the standards at a higher level and it’s a completely different size. I mean, I don’t know if you know it moves like hundreds of millions of tons. Whether we are a mine that mines high grade, not high volume. We don’t fear Brazil turning into Venezuela… In Brazil, private property rule of law…. that’s going to stay.

Matthew Gordon: Mike. Clive.  Are they the guys to deliver growth for this company? The growth that you’re looking for?

Nicolas Banados: Yes. They have been for the company for a while. They have been through the tough times. They have delivered excellent results in building and operating projects.

Matthew Gordon: You trust you trust them with your money?

Nicolas Banados: Yes. We trust them with our money. In addition to Fratelli, I personally, I am aninvestor in Serabi Gold as well. I’ve put my own money in, my savings.

Matthew Gordon: So, you must trust them. Nicolas, thank you so much for talking to us. I wish you well with Serabi Gold and your other investments.

Nicolas Banados: Thank you very much. And thanks for having me.


Company page: https://www.serabigold.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 neat stack of gold bars with 'Serabi Gold' written across the photo.

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

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

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

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

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

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

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

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

Let’s get our feet back on the ground.

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

What RNC DO know.

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

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

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

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

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

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

Business As Usual?

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

CLICK HERE to watch the full interview.

Company website: https://www.rncminerals.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 screenshot of Sheriff Woody pointing at a proud looking Buzz Lightyear.

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.

Link Global Technologies – Low-cost Energy Solution for New Generation Data Centres (Transcript)

A photo of a blue sparkly bitcoin against the backdrop of black with dots of blue light.

Interview with Stephen Jenkins, President and CEO of Link Global Technologies.

Link Global Technologies build and manage semi-portable, self-contained power solutions (containers) that can be rapidly deployed in virtually any environment. They are a low-cost energy supplier to the data-mining/data-hosting space.

Link Global started as a crypto-mining company, but recognised the opportunity of a bigger play in 2 additional sections: providing mobile date centre solutions and developing IP around energy efficiency. They have just carried out an IPO of 5,000,000 common shares at a price of $0.30 per share for total gross proceeds of $1,500,000.

This is Jenkins’ first foray into the realm of public companies; all his previous experience came with private companies.

There are question marks as to whether Link Global can compete with its rivals, especially big hitters like Cisco with a market cap of $190.59B! Jenkins remains adamant that despite the massive difference in available capital, Link Global can compete in the big leagues.

What did you make of Stephen Jenkins? Are you crazy about crypto? Can Link Global prosper against the technological behemoths that surround it? Comment below.

Interview highlights:

  • Company Overview
  • Going Public and IPO Raise: What Will They Do With the Money? Who’s Supporting it?
  • What Are They Focusing On?
  • Crypto Currency Mining Origin Story: Why Did They Choose This Commodity, Who’s Involved in it and Why Stay With it?
  • Energy Supplier: How Will They Compete in the Market? Who’s Got the Right Experience to Assure Success?
  • What are New Shareholders Buying Into?
  • Peers and Competition: Why Will This Junior Survive?

Click here to watch the interview.


Matthew Gordon: I’m interested in your strategy and how you’re going to move forward. I’d love you to kind of tell our folks, our followers, subscribers, a little bit about what you’re planning to do.

Stephen Jenkins: Sure. So Link Global Technology started primarily as a crypto mining company. Got in on the craze, located some machines down in low cost power, Oregon, and has been building a business based on crypto mining. But we quickly recognize the opportunities, I think in a much bigger place. So, that is providing the infrastructure for not just crypto mining, but also data centres in general. So, we’ve really launched what we think are three pretty exciting branches to our business. Those being the underlying revenue from crypto mining. Number two is providing mobile data centre solutions for all types of data centres. And number three, is developing some IP around energy efficiency.

Matthew Gordon: Kind of interesting. You’re a relatively small company. You know, the IPO, you going to raise some money on that. I think you’re issuing like 5MILshares. What sort of price you thinking?

Stephen Jenkins: 5MIL shares at 30 cents.

Matthew Gordon: 30 cents. With this IPO, you’re raising some money. What are you gonna do with it?

Stephen Jenkins: So, what we’re doing with it is we’re actually just building more. We’re basically building out more places to put in machines, but also really to build some more of the mobile units. And eventually we’ll use that. We’re partnering with a few people. We already have a partnership in Canada right now with Astra and we’re co-locating with them. We’ll build out that data centre for them. So, we’ve got things, I think, in the works. Obviously, we we’ve been in the IPO process for a long time. After the IPO happens, we can you know, really get busy with our business, put it that way.

Matthew Gordon: Get by focused on the business of doing business.

Stephen Jenkins: Yeah. It’s a long process.

Matthew Gordon: It really is.

Stephen Jenkins: And, you know, it again, goes to show you that the maturity of the crypto or immaturity of the crypto market. Anything could happen in the crypto market. We had exchanges fall apart. We had a bunch of other things happen. So, the commission came to us and said, well, how are you going to deal with it? Quite rightfully so. But what that did is it dragged on an IPO process for much longer than we were hoping. But at the second time, it made us look at our own business to see is this where we really want to be? And I still think we have a good underlying opportunity in that crypto space with all these other verticals.

Matthew Gordon: So, you’ve got a busy few days in front of you. You’re going public 14th, 15th?

Stephen Jenkins: November 15th. We should be trading the 14th or the 15th. Yeah. It’s been a fairly busy time.

Matthew Gordon: Exciting, exciting times. Is this your first public company?

Stephen Jenkins: Yeah. So, I’ve always been focused on private companies and this is my first foray into the public side. It’s definitely respecting that there is the market side, but respecting that, you know, everybody that buys into this company buys into any company, whether it’s private or public, we have to be able show people that we’re working for them.

Matthew Gordon: For sure. For sure. Okay. Well, you mentioned Lee Gable in there, well known. Who else? Who are the other names involved in supporting this IPO?

Stephen Jenkins: So really, they’re the main body underwriting this. And we’ve really stuck with them and we haven’t had to go out to find. We’ve had a lot of interest and much credit to them as well for raising awareness about what we’re doing. And really right now where we’re staying very tight. We like that it’s tight. We could have raised more money, but we want to stay focused.

Matthew Gordon: Yeah. Well, I agree with that. I think that’s smart and unusual for the Canadian market. You’re not raising a whole stock of money. But you’ve got already three branches to it. And again, when we sort of analyse companies and look at companies, we want to understand what they’re trying to be when they grow up, as it were. So, you started this crypto, you’ve kind of got the energy component to this, which I think is quite exciting. And then you’ve also, of course, obviously got the container technology as well. What’s the focus?

Stephen Jenkins: Yeah. Great question. So, what we’re using the crypto mining for is really that’s our what I would call our endemic cash flow at this time. So, we’ve managed to cover our overheads and get through a long IPO process with the exchange by having a Bitcoin mining ongoing. But I would say that in in the larger play is that it’s providing infrastructure for data centres in general. That means, you know, IP around energy efficiency is number one for sure. And using data, integrating it into mobile data centres.

Matthew Gordon: Right. And so why have you morphed like that, because obviously crypto has been fairly erratic, I think is be fair to say in terms of the price of Bitcoin etc. as people get excited and then it falls off again and it comes back up. So, what was your origin story with regards to crypto? Why did you kick off in that space?

Stephen Jenkins: So, we looked at crypto as a very interesting part and potentially some substantial blue sky on the revenue side. But watching and being involved in it day to day realized it’s a highly volatile, highly unpredictable market. We’ve got things coming up next May. So, we want to provide for people. One is this blue-sky opportunity with what could have happened with crypto. But two, is some revenue knowledge and some consistency in the business in terms of growth. So, providing infrastructure is always a good way to do that.

Matthew Gordon: Right. I’d agree with that. I wonder why keep the crypto bid at all if it’s that erratic. Why not focus on what seems to be quite a big demand area, which is energy and technology run energy supply.

Stephen Jenkins: That’s a great question, Matthew. We’re actually quite good and quite efficient at crypto mining. We have a very knowledgeable team behind that. We don’t do anything too complicated. We mined Bitcoin. That’s it, bitcoin core, so that’s all we do. We can turn that to Fiat. So, we use that as really as we say, as our cash flow. But we also we’re also using that to learn about the infrastructure that we’re building. So, we use that to demonstrate to people that we actually know what we’re doing ourselves as well, so we can lower our base costs by our own energy efficiency innovation.

Matthew Gordon: Okay. I can understand that. You’ve kind of got a working model which I guess you can test yourselves. And I guess it’s something you’d hope that you’ve come less dependent on that revenue stream. So how many machines have you got actually deployed at the moment?

Stephen Jenkins: Yeah. So, we have 1400 machines working now. What we’ll be doing and as profiled in our in our use of proceeds, we’ll be upgrading some of those machines in the short term. But again, I think, you know, watching how fast innovation is occurring in this space, it’s absolutely incredible. So, these machines are really only good at the outside for two years. So, unless you’re paying them back and making them, you know, cash positive within 18 months, you’re really fallen behind the curve. So, we’ll watch that closely and we want to be very conscious of our capital expenditures in that area. We’ll get to mine a little bit. And I think that really helps on a lot of cases. It’s still good cash flow today.

Matthew Gordon: Steve, if you don’t mind, tell me a little bit about some of the names that… You were kind enough to send the document over and some names on there. Michael Vogel, who’s well-known in the crypto space. I mean, how did you come across him? Why is he working with you?

Stephen Jenkins: So, Michael, he developed a company called Net Coins, which was really a good on ramp off ramp for Fiat currency. We came across Michael because we’re actually using a service to provide us with the Fiat, so on ramp, off ramp from bitcoin to cash. And we started discussing, Michael saw what we’re doing, got quite excited about it. He’s built, you know, and he really understands the crypto space. So, he’s been very valuable to us in terms of, you know, looking at our business and helping us decide if we’re on the right course with respect to crypto.

Stephen Jenkins: Great question. Jeff is a electrical engineer, 35 years’ experience. He’s well versed in automation. So, he’s done a lot of work within Canada’s space power. He’s done a lot of work within automation for skids and containers. And he’s really what we look at as our expert on the electrical side. Ed Smith is a well-known engineer, Phoenix Energy. He helps us with the heating and cooling side of stuff. So, they come together and really my focus is on the energy, renewable energy, but also taking the technical garb and putting it in English for people. So, I’m a bridge between the technical side and what I think are the retail people that maybe don’t understand all the technicalities of it. It’s a good team.

Matthew Gordon: Yeah. And then there’s have a guy in her called Feng Tao, quite successful Chinese businessman. How has he become involved with you? What’s his role here?

Stephen Jenkins: Lee Gable’s is the underwriting and financier for the project. Tao is very well known in China for being successful in terms of business. And he is the largest shareholder in the company. He has offered some incredible insights into the crypto market. Chinese are obviously very, very big players in the crypto space. So, he’s provided us with really great contacts and I think he provides that high level vision of what can be in that space and understands business very well.

Matthew Gordon: So, is that it or is there a kind of link to China in terms of the production and manufacture of some of your products?

Stephen Jenkins: Yeah. So, some things maybe that are early stage, but there’s no question where when we’re bringing over hardware, anything to do with crypto, all the hardware is still coming from mainland China or from Hong Kong. So yeah, we’ve got to have those contacts and we’ve got some interesting ideas about things that can be done and certainly he does as well. But yeah, it’s a critical connection for sure.

Matthew Gordon: Just staying on him, he’s your largest shareholder. How much does he hold?

Stephen Jenkins: He’s under 10%.

Matthew Gordon: OK. And has he introduced other money from China, or was that the idea?

Stephen Jenkins: Well, there was no question that, you know, they have a discussion there about to what’s going on in North America. There’s obviously an interest to grow the business to North America. So, he’s been incredibly helpful with respect to introductions and that kind of stuff. So, we have growing relationships, for sure.

Matthew Gordon: Right. OK. Let’s come back to the energy component, because again, I see what’s going on out there in the marketplace. You got players like Amazon and Google and Facebook. They’re building these huge data centres. You’ve got a lot of second three, second tier, third tier companies out there as well with their kind of respective technologies. Where do you hope to sit in all of this? I mean, how do you compete with those second, third tier companies?

Stephen Jenkins: The bottom line is that the demand for something like Amazon Web Services is overwhelming. Where we are in Oregon right now, there’s 14 data centres just for Amazon. They’re building another 16. And they’re also learning that, you know, that the demand for products and innovation in this space is huge. So, we’ve had early discussions with a number of players in the market. And we know that this will provide us a really enormous step forward, I think, in terms of our own business. So, we’ll stay focused in that area in Oregon, because that’s really where you’re seeing lowest cost power and the biggest development of data centres right now.

Matthew Gordon: OK. So, I named a few big names there. And I appreciate you can’t say too much about names, a few big names operating in that space around there. Have you got relationships with these people? Are you in conversations with them? What is it that you’re actually talking to them about? Are you going to be a supplier to them or what’s the relationship look like?

Stephen Jenkins: Well, it depends on what we can provide for them. So, we’re fairly motivated, I think, on the energy innovation side. And providing turnkey mobile data centres that integrate our own IP in there. So, what we’ll do with them is and what we’ve been doing is just really having early stage discussions about what they want, understanding what their needs are. So, we make sure that our focus is to fulfil their needs. Right. And just to give you an example, one data centre for Amazon is using $1.6MIL a month in power. 200,000 gallons per minute in water. So, that’s all money they’re spending out. So, whatever we can do for them, let’s say we can provide 20/30% energy savings. That’s a massive amount of number or what could be 30 data centres. So, yeah, of course, they’re interested.

Matthew Gordon: Yeah, they would be. And is that the type of products and intellectual property which you are developing currently? Because you talked earlier, you’ve got a bunch of crypto guys on the team, which is great. But around energy, who on the team has got that kind of background build to bring this on board?

Stephen Jenkins: So, the team we have electrical engineers, 35 years’ experience in automation and in containerized solutions, skid solutions so that they’re semi mobile solutions. So, bringing together people with understanding of how data centres operate, how computers operate and how power operates is really what our focus is and that’s how we’ve got forward on IP and innovation in energy efficiency. So, if you look, there’s been a lot of exploration today on DC data centres. So, we know that, you know, between alternating current and direct current, we know there’s real great gains to be had on DC data centres.

Matthew Gordon: Right. I mean, it kind of fascinates me how these big companies make investment decisions, right? They’re making a lot of money. Reliability, it’s got to be more important to them than energy saving, surely, isn’t it?

Stephen Jenkins: Oh, for sure. But if you want if you look at, say, one of the Amazon data centres as a good example, they’re backing up that entire data centre with Diesel Jensen. So, they’re using generators that are diesel powered. They’re conscious of the marketplace as well. And, you know, social impacts and perspectives and perceptions on green power. So, they didn’t want to have these massive diesel generators hanging out of all their data centres. What we can provide, and one of my focuses is renewable energy. So, in somewhere like Oregon, you’ve got massive wind resources, you have massive solar resources, but you don’t necessarily have a way to put those into the data centre in a coherent fashion. What battery storage does is which is one of the other things we’re playing with right now. It provides this amazing opportunity to… Doesn’t matter what type of energy you provide or what kind of generation you’re getting. They will put them in batteries and distribute that when needed. You can also use these solutions for managing power on a grid scale. All of the major utilities want to be able to manage power at a grid scale. So, if you’re relevant enough in the marketplace, you have enough power draw, they can use you to balance an entire group. There’s a lot of opportunities that are coming that we have our fingers in, but we want to stay focused as well on creating value. Step by step for our shareholders. So, I think there’s really this to balance one of, you know, letting all the minds get crazy and think about what could be, but also how to get there is really important, step by step.

Matthew Gordon: So, you’re private at the moment but you’re doing the Canadian thing, going public at a relatively early stage. What is it that you’re selling to the public? What are they buying into at the moment? I’m hearing a lot of stories about intellectual property, around product development, product innovation. You’re talking to the right customers, but you’ve got to have something for them to buy. So, what are your shareholders or the new shareholders buying into?

Stephen Jenkins: So, they’re buying into a company that’s really already generating revenue, has survived on its own for over a year process of an IPO. So, a private company that’s been run like a private company, we may be going public, but we’ll continue to be very, very cash conscious. You have to be in this marketplace today. Investors are much more sophisticated there nowadays than they have been ever. So, I think one is, you know, providing that ongoing responsibility and fiduciary duty around our cash flow and what we’re doing, but also at the same time, they’re buying into this company that’s really operating, has proven operations already and also is stepping forward and more into the marketplace of larger data centres and energy efficiency.

Matthew Gordon: Okay. So, you’ve got a track record of producing cash through the crypto component, but you are morphing the company into allowing it to play in a much bigger space, which is an efficient energy space. What have you got today which investors can put their finger on and go I understand what these guys are going to produce, I understand what they’re going to sell, I understand where the revenue is coming from. How do they get a sense of that?

Stephen Jenkins: Well, one is I think you can always go back. Everything we’ve done to date is public record. So, that to me gives me comfort. Two is we actually have already built our own mobile data centre solutions for our own equipment and we’ve deployed those. They’ve been operating without fail since day one. So, May 2018 we deployed our first mobile solution for a data centre or for crypto mining. It’s irrelevant which one. And we’ve simply made more and more of those mobile data centres available for ourselves. So, people can come and see that they can see that we’ve delivered it. You know what I think is a very, very reasonable price. But also, it’s UL certified. So, we’re not one of the companies that jumped on the market and sort of put up crypto miners in a very sketchy way. We’ve had two huge power surges in Oregon. Both of them didn’t do any damage to us because we built our equipment properly. And I think those are things that we can say today that we’ve really proven our way.

Matthew Gordon: Right. I was doing some research and I was trying to find companies which did similar things to you and I couldn’t. Who are the other players? Who are your peers in this space at the moment?

Stephen Jenkins: I think there’s certainly lots I mean, you have lots that are focused on crypto mining. You have some people that are playing in the providing mobile data centres. You have massive players. You have Cisco, Sun Microsystems, you have massive players that are building these portable data centres now because everybody started recognizing there’s an opportunity there. So, you’re certainly seeing what I would call is fringe players trying a couple of things. And it’s just that I think it’s also the age of the market. It’s still very new. So, Sun Microsystems, they’re building mobile data centres that might be a million dollars a pop. So, there’s certainly room in there for us to operate.

Matthew Gordon: But how do you compete against people like that? I mean, they’ve got big pockets here. They can spend outspend you, surely? I mean, how do you win?

Stephen Jenkins: Yeah. So, I think what we provide is a really focused, detailed mobile data centre at a price that nobody else can compete with. We certainly have them operating already in a number of locations. So, we’re in two locations with plans to expand. So, I think we’re proving it out ourselves. We’re not just selling it and saying, there you go. We’re selling it. And we’re just simply making them better because we rely on them to operate ourselves as well. So, I think we’re going to provide a really good product that I think will be competitive in a space. And listen, nobody wants to be first, right? Everybody wants to be first to be second because you’ve got a proven product there. If there wasn’t competition in the space, it would mean there’s no business there. And having the big players in there shows you that there’s space, right? So, we’ll run the business very tight and be very, very competitive.

Matthew Gordon: Okay. That says to me you’re going to undercut the competition, right? In other markets, when you look at other verticals, the big guys will go in there. They don’t mind providing a loss because they want to own that space. I mean, are you susceptible to some kind of behaviour like that or do you think that it’s going to be easier for you to have conversations?

Stephen Jenkins: I think the market space is going to get very competitive. There’s no question. By saying that, you’ve got to find ways to build a very cost-effective product. And, you know, knowing who wants what and understanding how it works. We have those people I think already that they’re building some of those units for other people as well. So, we understand what’s going on in the marketplace. But it’ll evolve over time. And the mobile data centre market will become very mature in the next five years, I think.

Matthew Gordon: Yeah. There’s a lot of players out there in the market place, okay. So how does a small company like you hope to survive? Are you still going to be around in five years’ time? And what are you doing to ensure that you are?

Stephen Jenkins: Yeah. So, one is I think we’re creating our own revenue and we continue to keep our revenue stream alive with crypto mining. Number two is we’re building containers for ourselves. But at the same time, these data centres; Amazon, Microsoft, Facebook, they all are looking now at these mobile data centres. We can do those. We can provide reliability, quality, price. So, we know because we’re proving it out for ourselves that we can also do that for the bigger entities, regardless of who’s in that marketplace. If it’s Sun Microsystems or somebody like that building, we’re still going to be a player in there and there’s still going to be a need for the services we find.

Matthew Gordon: Stephen, thanks for running us through that story. I wish you every success for the IPO next week. I hope that goes smoothly. I think you’re in the right space. Very, very interesting space that you’ve decided to operate in. And you seem to be talking to a lot of the right names. So, I wish you well. Stay in touch and let us know how you get on.

Stephen Jenkins: Matthew, thanks. Thanks for your time and thanks for the questions. Also, I think it’ll be a good discussion after the IPO happens. We can we can start to delve into other areas, because I know that we’re really excited about moving forward and moving forward quickly.

Matthew Gordon: Thanks very much for watching. We hope you enjoyed that. And if you did, please click the button in the corner of the screen to subscribe to our YouTube channel. You can also catch us on our website CruxInvestor.com and Crux Cast, our podcast series. Plus, most days you can catch us on LinkedIn or on Twitter. We love getting your feedback, so please keep that coming. And we’ll speak to you again soon.


Company page: http://linkglobal.io/

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 blue sparkly bitcoin against the backdrop of black with dots of blue light.

The Nickel Investment Bible

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

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

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

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

The Commodity

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

Nickle: Key Properties

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

Applications of Nickel

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

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

The Current Nickel Market: An Outline

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

Spot Price and Production Analysis

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

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

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

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

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

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

Reasons to be Excited

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

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

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

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

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

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

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

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

Price Forecast:

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

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

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

Inside Investment Tips

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

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

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

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

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

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

Lastly, if you’re an investor looking to make a quick buck, don’t listen to the hype. In Crux Investor’s interview with Conic Metals Corporation (https://www.youtube.com/watch?v=9PWkM9RxFy4), it was clearly laid out that current spot price increases are not due to electric vehicle demand, and are instead generated by asset discovery, general euphoria and the Indonesian export ban on nickel ore. The EV revolution is a few years away at best.

What Nobody is Telling You

…smelting companies will march to their own drumbeat

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

The Ten Commandments of Nickel Investment

A photo of an open bible with a woodland background.

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

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

An Example of a Good Nickel Company:

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

  1. https://www.nickelinstitute.org/about-nickel/

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

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