Ross Beaty a big winner in Hudbay/Augusta offer

There are many interesting things about Hudbay’s takeover offer for the 84% of Augusta Resource that it doesn’t already own – an offer that has breathed a bit more life into a moribund mining M&A scene that is slowly reviving. Augusta is developing the advanced-stage Rosemont copper deposit southeast of Tucson, Arizona, which is projected to be the third largest copper mine in the U.S. once it’s operating.

Probably the most interesting thing is this:

Ross

Ross Beaty is Augusta’s second-largest shareholder

Vancouver resource entrepreneur Ross Beaty is the second-largest shareholder of Augusta, with more than 9% of outstanding shares. He owns 12,200,500 shares indirectly through his Kestrel Holdings company, and 1,235,000 shares directly, according to our friends at INK Research. That’s a total of 13,435,500 shares, or 9.3% of outstanding shares, as well as 5 million convertible notes. According to SEDI records, Beaty filed opening balances for most of the shares on Oct. 25, when Augusta was trading at about $2.15. He picked up 100,000 more shares on Nov. 21 at $1.26, according to a Nov. 22 filing.

The fascinating thing about Beaty’s shareholding in Augusta is that he also has a “For Sale” sign on a giant copper deposit his Lumina Copper has developed, called Taca Taca. The plan was for Taca Taca to have been sold already, but the copper-gold deposit is located in Argentina, which complicates things.

Taca Taca deposit in Salta, Argentina (Lumina Copper photo)

Taca Taca deposit in Salta, Argentina (Lumina Copper photo)

Beaty has an outstanding record of creating shareholder value, even if a sluggish mining sector and geopolitical risk has delayed the sale of Taca Taca. Beaty’s position in Augusta Resource shows that he also recognizes a good bargain when he sees one. Lumina Copper was one of the first stocks I wrote up on World of Mining; for more, check out related links at the bottom.

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A Random Walk Down Howe Street

Cambridge, England is a university town that hosts a house of higher learning.

Cambridge House is a Howe Street abode, a dwelling where hope, fear and greed each have rooms on the same floor (and share a bathroom).

Highway directional sign for Bull market

When it comes to the search for a bull market, don’t believe all the signs. (Photo: Resource Investing News)

And floors and bottoms, of the TSX Venture variety, were something of a theme at this year’s Vancouver Resource Investment Conference, run by Cambridge House International.

I attended briefly on Monday afternoon, wandered the aisles, kicked a few tires and met a few friends. Even entered a new position partly as a result of research I did at the event.

Some random thoughts:

- More optimism than the last show I attended, where despair was the prevalent theme. A better turnout as well, albeit with a heavy industry presence. Notwithstanding the Venture’s 10% rise since the beginning of December, 2014 could be another choppy year for the juniors, making this walk down Howe Street a kind of two-steps-forward, one-step back shuffle, with potholes along the way. That makes a company’s cash position – something I touched on in this Vancouver Sun article written after the January 2012 show – critical.

- I often wonder why more CEOs don’t attend to stand behind their company (tables), particularly those whose companies are based in Vancouver. One of the exceptions Monday was Pretium CEO Bob Quartermain, who was pressing the flesh and speaking to shareholders at Pretium’s booth. The stock has shown signs of life, more than doubling since November, but the controversy over the amount of high-grade gold in Pretium’s Valley of the Kings zone in northwestern B.C. continues to weigh on shares. With a very large short position, PVG is a stock to watch.

- Spotted a dressed-down John Greenslade, former CEO of Baja Mining, one of the more striking examples of shareholder destruction in junior mining in recent years. Baja used to be a regular at the show, and before it ran out of money and was pummelled in a proxy fight, I remember a Baja “workshop” where the well-paid Greenslade waxed eloquent on the blue sky potential of the company’s Boleo copper project in Mexico. The stock, facing delisting from the TSX (that’s right, Canada’s main board), is at 2.5 cents, down from 10 cents a year ago and much greater heights in 2006, 2007, 2008, 2009, 2010, 2011 and 2012. A cautionary tale for any junior mining speculator.

- Peregrine Diamonds didn’t have a booth, but I spotted president Brooke Clements on the floor, chatting with whomever was manning the Diamcor booth. Didn’t get a chance to speak to Brooke, but I did chat with Peregrine fan John Kaiser after his seminar. Takeaways: he doesn’t rule out De Beers taking another run at Chidliak and also mentioned Dominion Diamond as a possible suitor down the road. Also, he said he doesn’t particularly like coloured diamonds and he downplayed the coloured gems recovered from CH-6, which he described as a “spectacular kimberlite.” Peregrine isawaiting a diamond valuation on its 1,124-carat parcel of CH-6 gems.

Kaiser covered alot of ground during his talk, including (but not limited to):
- how the major banks are trying to drive the junior retail investor out of the market;
- his belief that the juniors are bottoming and we’re at the beginning of a “selective bull market”;
- his searchable database of junior mining stocks and how he could use it to “terrorize” any exhibitor because he knows more about their project than they do;
- his favourite junior mining stocks – he went through alot of picks, machine-gun style, and I didn’t write them down – and area plays (including the Athabasca Basin).

As for the new position, I’ll write about that in a subsequent blog post.

Disclosure: I own shares of Peregrine Diamonds. Please read my disclaimer.

The post A Random Walk Down Howe Street first appeared on WorldofMining.com

Latest Peregrine Diamonds batch confirms it: CH-6 is a gem

Originally posted on WorldofMining.com

A selection of gems from “Batch C” of Peregrine’s CH-6 bulk sample, including the nearly 9-carat diamond (corporporate website)

A selection of gems from “Batch C” of Peregrine’s CH-6 bulk sample, including the nearly 9-carat diamond (corporporate website)

Diamond explorer Peregrine Diamonds (PGD) released the second and final batch of results from its bulk sample of the CH-6 kimberlite pipe at its 100% owned Chidliak project on Baffin Island, and they were good. Very good.

Here’s the news release.

Batch C returned a grade of 2.87 carats per tonne, including an 8.87-carat white/colourless octahedron, 42 diamonds one carat or larger and 133 diamonds more than .5 carats. The company also used the “y word” for the first time (as far as I know), with 11% of the diamonds in the parcel described by the Saskatchewan Research Council as yellow. Coloured diamonds are rarer and typically worth more than white/colourless diamonds. Another 17% are described as grey and brown, although the smallest diamond in the photo looks quite pink to me.

The grade for the entire 1,124-carat diamond parcel comes in at 2.78 carats per tonne, making CH-6 one of the highest-grade kimberlite pipes in the world, according to the company. (Kennady Diamonds (KDI) has returned higher grades at its Kennady North project in the Northwest Territories, but on much smaller samples.)

The Peregrine diamonds are en route to Antwerp for an independent diamond evaluation by the same company that values diamonds mined at Canada’s four producing operations. Results are expected this quarter.

The stock didn’t move much on the news, closing up 3 cents at 57 cents on the TSX, on volume of about 750,000. However, the stellar grades at CH-6 further de-risk the project, giving Team Friedland more ammunition in its quest to deliver shareholder value. Peregrine CEO Eric Friedland and brother Robert Friedland each own more than 14% of outstanding shares.

Peregrine is shaping up to be an interesting story in a world of few diamond mines and a dearth of high-calibre diamond exploration projects.

Disclosure: I own shares of Peregrine Diamonds. Do your own due diligence.

Chidliak grade gives Peregrine Diamonds an “A”

By James Kwantes, World of Mining

rsz_gems

Photographs of select diamonds recovered from the 2013 CH-6 bulk sample (Peregrine)

Eric Friedland’s Peregrine Diamonds released news this morning that moved the stock 52%, to 64 cents, by the time markets closed.

A 222-dry-tonne bulk sample from the company’s CH-6 kimberlite returned an impressive grade of 2.7 carats per tonne and 48 diamonds larger than 1 carat, including a 3.54-carat stone. CH-6 is the flagship kimberlite at Peregrine’s 100%-owned Chidliak project on Baffin Island. CH-6 is one of at least 7 kimberlite pipes at Chidliak that the company bills as potentially economic.

Here’s a photo gallery of the gems.

The sample is described by Peregrine’s qualified person Howard Coopersmith as a “very white and clean diamond population with excellent shapes,” which bodes well for the valuation expected to be complete in the first quarter of 2014. That valuation will include diamonds from the entire 404-dry-tonne CH-6 bulk sample. Results from the rest of the sample are expected in January.

Peregrine chairman and CEO Eric Friedland

Peregrine chairman and CEO Eric Friedland

It’s not the highest-grade recent diamond discovery – on Nov. 18, Kennady Diamonds announced a sample grade of 5.37 carats per tonne from a 1,500-kg sample at its Kennady North project near Mountain Province Diamonds’ Gahcho Kue joint venture with De Beers. Shares of Kennady Diamonds, spun off from Mountain Province last year, have risen 400% in the past year.

But Peregrine’s CH-6 sample size is equivalent to more than 200,000 kg – many multiples of Kennady’s early-stage sample – making the results more significant. That allows the company – with a rhetorical flourish worthy of a Friedland – to bill the grade as “higher than that of any of the kimberlite pipes currently under advanced exploration or development in Canada.” The grade is surpassed only by five pipes at the Ekati and Diavik diamond mines in the Northwest Territories.

Peregrine’s grade claim includes, of course, Gahcho Kue, which is described on Mountain Province’s website as “the world’s largest and richest new diamond mine.” Gahcho Kue, which today cleared another hurdle with the Mackenzie Valley Land and Water Board, is a joint venture with 60% owner De Beers, which walked away from Chidliak earlier this year, sending the stock skidding lower.

The De Beers farewell followed the exit of Peregrine’s former joint venture partner BHP Billiton. Significantly, both mining giants expended capital and expertise furthering Chidliak before their respective exits. In the case of BHP, part of the divorce included ceding to Peregrine the company’s entire northern Canadian diamond exploration database, compiled over a 10-year period.

Upcoming catalysts for Peregrine include results from the remainder of the bulk sample and diamond valuation of the gems recovered on Baffin Island. Eric owns 14% of outstanding shares and his older brother Robert Friedland is Peregrine’s largest individual shareholder, with a 15% stake that he last added to in June by participating in a private placement at 35 cents a share.

The elder Friedland, the mining tycoon and conference showman, has an interview with Rick Rule tomorrow at the Mines and Money London conference. I wonder if he’ll mention his brother’s Canadian diamond project, which was considerably de-risked by today’s news.

Disclosure: I own Peregrine Diamonds shares, which can be volatile. Please read my disclaimer.

Related Reading:

Diamond partners Peregrine, De Beers no longer dancing | World of Mining

PGD – Diamond partners Peregrine, DeBeers no longer dancing

Peregrine Diamonds stock was introduced to a cliff earlier today when the company disclosed that DeBeers has elected not to exercise its option for 50.1% of Peregrine’s Chidliak diamond project on Baffin Island. Shares dropped from yesterday’s close of 65 cents down to the low-30s, before bouncing to 41.5 cents at the time of writing.

pgd

I don’t believe it was a dead cat bounce; I also resisted the temptation to add to my stake as I monitor developments over the coming months.

Very briefly, a few observations:

- under the terms of the option agreement, DeBeers was obligated to spend $58.5 million on Chidliak, no small amount even for the company that still sits astride (a rapidly shifting) global diamond market. And obviously the people now running DeBeers – owner Anglo-American – felt the price was too high.

- The option deal was for half the project and half the diamond marketing rights. Peregrine now must come up with funding (or find another partner) but gets 100% of the project and marketing rights. So key to any investment decision is whether you think Peregrine’s major shareholders – Eric and Robert Friedland, as well as Ned Goodman’s Dundee (which has been shedding a few shares even before today’s drop) are capable of going it alone. I think they are.

- Another key, obviously, is the results of the bulk sample, which may be released sooner now that DeBeers is out of the picture. Earlier, smaller samples from Chidliak’s CH-6 kimberlite contained rich, world-class grades. I suspect part of DeBeers’ dissatisfaction with Peregrine was being backed into a corner whereby the bulk sample wouldn’t be processed without a commitment by DeBeers one way or another.

With BHP’s earlier exit from its alliance with Peregrine, today’s news makes DeBeers the second major to walk away from Peregrine and its flagship project. DeBeers, however, isn’t the only game in town anymore when it comes to the market they created and dominated for most of the 20th century. Interesting times.

Related reading | Chasing the carat: The Friedlands go diamond-hunting, World of Mining

SBB / RVM – For resource speculators, “deals” abound but value is elusive

“History does not repeat itself but it does rhyme.”
Mark Twain (or somebody else)

For resource speculators, “deals” abound as a result of the great junior mining shakedown of 2008-2013. And therein lies the danger: deals abound but value is elusive.

Most junior mining stocks are priced for the end of the world and for many of them, the price is right – for their world, anyway. But there is also money to be made and interesting – albeit risky – opportunities under such circumstances. That particularly holds true for juniors that are cashed up. Sometimes a look back can help separate the quality from the quicksand.

I usually “disclaim” at the end, but here it is: This is not investment advice and investors should do their own due diligence, always. And remember that past performance is no guarantee of future results, as the mutual fund disclaimer puts it. (But no expensive trailer fees or capital-munching MERs here either.)

Here are a couple of stock ideas that look interesting at these levels.

REVETT MINERALS

Revett mines silver and copper at its underground Troy mine in the northwestern mountains of Montana. The trouble is, the company hasn’t mined any since December, when Revett shut down operations because of “concerns with underground geotechnical conditions.” Translation: parts of the mine collapsed onto an access route to the ore.

At first it seemed like a temporary situation, but the more Revett investigated, the worse things seemed to get. Shareholders noticed, and the stock has lost two-thirds of its value in the past year. Shares bottomed at 66 cents in the summer and have since rallied to the $1.25 level, largely due to a Sept. 5 news release that announced mining could resume in the fourth quarter. Crews recently opened up a new access route to the mining beds.

So the production shutdown coincided with plummeting silver and copper prices and the junior resource plunge that took down resource stocks across the board. The decline has been fierce for current shareholders, but this particular roller-coaster has steep inclines as well. In late 2008, Revett shares traded as low as 30 cents, but the stock averaged above $4 throughout 2011.

RVM Chart

RVM data by YCharts

In the third quarter of 2012, before boulders began to fall, Revett generated net income of $4.4 million on revenue of $19.4 million. Realized silver and copper prices for the quarter, however, were about $32/oz and $3.75/lb respectively – considerably higher than current prices – and cash costs were $19.77/oz and 2.27/lb.

There are a lot of moving parts here and profitability looks tenuous at $21 silver and $3.25 copper but executives don’t seem too concerned. Both chairman Timothy Lindsey, who owns 2% of outstanding shares, and CEO John Shanahan (1.3%) have been recent buyers, according to Canadian Insider.

Revett’s real prize, however, is the Rock Creek silver deposit. At 300 million ounces of silver and 2.5 billion pounds copper (inferred), Rock Creek is one of North America’s largest undeveloped silver-copper deposits. It’s been tied up in court battles with opponents but received a favourable court ruling late last year and is now working with the U.S. Forest Service on environmental permitting. Here’s the legal background (keep in mind that the timelines was before the Troy troubles).

Rock Creek is undoubtedly why streamer Silver Wheaton owns 15% of outstanding shares and commodities trading giant Trafigura owns 10.6%. Revett has healthy insider ownership as well: officers and directors own 9% of shares, according to our friends at INK Research.

SHARES OUTSTANDING: 35 million
MARKET CAPITALIZATION: $44 million
CASH (as of June 30): $15 million

Disclosure: I own shares in Revett Minerals.

 

SABINA GOLD & SILVER

I’ve been tracking this stock since before the 2008 crash when it was “Sabina Silver.” Sabina, which explores for gold in remote Nunavut, has always been pretty cashed up thanks to savvy financings and some smart property deals.

When the bottom fell out of the market in 2008-09, Sabina the stock traded below the cash holdings of Sabina the company for several months.

Sabina incorporated the “gold” into its name and graduated to the TSX in the fall of 2009, when the stock was trading at just over a dollar a share. Shares subsequently ran up above $7 in the heady days of spring 2011 before the plummet back down. It’s now trading at about 90 cents.

SBB Chart

SBB data by YCharts

Sabina sold its Hackett River polymetallic deposit to XStrata Zinc for $50 million cash and 22.5% of the first 190 million ounces of silver produced. A corporate presentation on Sabina’s website values the royalty at $300 million, citing “analyst consensus.” A prefeasibility study is being completed on Sabina’s high-grade Back River gold project, which has a measured and indicated resource of 24 million tonnes grading 6 g/t, for about 4.7 million ounces.

There is exploration upside at Back River and at its nearby Wishbone property. There are also unanswered questions and logistical hurdles. These include the inhospitable operating climate, financing of a proposed deep-sea port at Bathurst Inlet and a joint-venture all-weather road (although XStrata’s presence in the area could hasten the latter two projects). Not to mention a gold price below $1,350/oz.

In a case of bad news for planet Earth being good for northern resource investors, another factor that could accelerate the path to development is the melting of the ice in the Northwest Passage. A cargo ship recently travelled from Vancouver to Europe through that ocean route, which is bordered by mineral-rich lands.

One black mark against the company is chief financial officer Elaine Bennett’s dumping of shares, decreasing her already small stake in the company. Dundee, a 10% holder, has also been dumping (Sabina bought Back River from Dundee Precious Metals).

I do not own Sabina shares.

SHARES OUTSTANDING: 190 million
MARKET CAPITALIZATION: $170 million
CASH (as of June 30): $94 million

Source: World of Mining

World of Mining’s James Kwantes sees signs of life

By James Kwantes, World of Mining

Rebalancing, Part 2: Signs of life (click here for part 1)

In my last post, I detailed the positions that I’ve sold (Amerigo Resources, Sandstorm Gold/Metals & Energy) or dramatically reduced (Lumina Copper) in the past couple of months. This post takes a closer look at stocks I’ve purchased (NexGen Energy, Peregrine Diamonds, Pilot Gold, WesternOne Equity) and my rationale for adding them to the roster. NexGen and Peregrine have enjoyed a nice move today and gold’s rise this week has provided some much-needed lift to the junior market as a whole. The thaw feels good after a near-nuclear winter.

BOUGHT

NexGen Energy (NXE)

Helicopter view of the uranium-rich Athabasca Basin. Photo: CEO.ca

Helicopter view of the uranium-rich Athabasca Basin. Photo: CEO.ca

NexGen Energy went public in April and holds land adjacent to two of the hottest uranium properties in Saskatchewan’s Athabasca Basin, an area that Rick Rule has described as the “Persian Gulf of uranium” because of its rich grades.

The company’s Rook 1 property – acquired from Mega Uranium – is directly adjacent to the Patterson Lake South (PLS) area play, a joint venture between Alpha Minerals and Fission Uranium. How hot is PLS right now? A NexGen news release this morning announcing the start of a 3,000-metre drill program at Rook 1 sent the stock up by a third on multiples of its daily volume.

On Thursday, Alpha announced the discovery of a fourth mineralized zone along a 1-kilometre strike length at PLS (Hathor had a 350-metre strike length at Roughrider). The companies have nailed the drilling and shares have responded accordingly – Alpha (AMW) is up more than 300% YTD and Fission is up 150%.

NexGen’s other property – Radio – is directly adjacent to Hathor Exploration’s high-grade Roughrider project, which Rio Tinto bought in late 2011 for $642 million after a bidding war with Cameco. The same group that optioned Radio to NexGen also staked Hathor’s claims.

NexGen was on my radar but what caught my attention was an agreement, announced June 26, by the Radio optioners to take NexGen shares instead of cash to satisfy a $2.9-million payment under the Radio option agreement. They agreed to take the 26 million common shares at a price of 33 cents (and 4.4 million warrants at 50 cents).

The days following that announcement saw NexGen shares trading in the 25-cent range, so I decided to take a position. The stock has since doubled. NexGen just did a $5-million private placement at 35 cents a share, so it will be cashed up for its summer drilling program. Assay results at Radio are pending and drills are turning at Rook 1. Should be an interesting summer/fall for this one.

Hat tip to Tommy Humphreys at CEO.ca, where he has been covering the Athabasca Basin and its players since before Hathor was taken out.

Peregrine Diamonds (PGD)

This purchase has worked out well. I wrote up Peregrine on April 29 and the stock has since almost doubled.

Peregrine CEO Eric Friedland: Set to advance Chidliak, with or without DeBeers.

Peregrine CEO Eric Friedland: Set to advance Chidliak, with or without DeBeers.

Peregrine’s CEO is Eric Friedland – brother of Robert Friedland, also a major shareholder – and its flagship project is Chidliak on Baffin Island. DeBeers has until the end of the year to enter into an earn-in joint venture that would give it 51% of Chidliak, but Peregrine is set to continue advancing the project with or without DeBeers. Eric’s diamond exploration vehicle has already collected – but not evaluated – a 500-tonne bulk sample of the CH-6 pipe. Grades anywhere near those of a smaller mini-bulk sample would put CH-6 among the highest-grade kimberlite pipes in the world. An opt-in by DeBeers could also be a catalyst for the stock.

Both Eric and Robert Friedland have subsequently added to their stakes by participating in a $3.5-million private placement at 35 cents a share. Eric Friedland owns more than 15% of outstanding shares and Robert owns in excess of 16%.

Fun side note: I went for coffee with another Vancouver junior resource blogger – a stand-up guy – shortly after writing up Peregrine, and discussion turned to the grim Venture landscape at the time. Upon hearing that my latest piece focused on a diamond exploration company, his comment was “Nobody’s interested in diamonds.”

Pilot Gold (PLG)

I’ve been watching this Mark O’Dea play for a while with an eye to taking a stake, and it seemed like a good time. Sure enough, PLG promptly dropped to sub-$1 territory but has since recovered.

O’Dea has showed a knack for fortuitous timing and creating shareholder value with previous projects. The Newfoundlander’s big break came in 2001 when he won second prize in Rob McEwen’s Goldcorp Challenge, in which the then-CEO published the geology of Goldcorp’s 55,000-acre Red Lake property online and challenged geologists to identify the next 6 million ounces. O’Dea picked up $80,000 for his troubles.

Fronteer Gold was a Venture shell company with $2 million when O’Dea took it over in 2001. In early 2010, Alamos Gold paid $40 million cash and 4 million Alamos shares for two Turkey gold projects that were joint ventures between Teck (60%) and Fronteer (40%). One of those, the Kirazli deposit, just received environmental approval from the government.

O’Dea sold Fronteer Gold, whose flagship property was the Long Canyon gold project in Nevada, to Newmont Mining for $2.3 billion in 2011 – before the junior market went off a cliff. Earlier, he had sold a Newfoundland uranium project that was part of Fronteer to Paladin Energy for $261 million – months before Fukushima cast a radioactive shadow over the uranium industry.

Pilot Gold has two remaining 60/40 joint ventures with Teck in Turkey, as well as its Kinsley Mountain, Nevada property. In Turkey, Pilot owns 40% of TV Tower (earning-in to 60%) and has released some very good drill results recently, including 15.3 g/t Au over 45.2 metres and 327 g/t silver over 14.5 metres.

Its other project in Turkey – the European continent’s top gold producer – is 40% owned Halilaga, which has a PEA in hand showing an after-tax NPV of $474 million, a 20% IRR and a 2.7-year payback. Those figures are at a conservative $1,200/oz gold and $2.90/lb copper. Pilot also recently began a 20,000-metre drill campaign at its 65% owned Kinsley Mountain project in Nevada, near Fronteer’s Long Canyon deposit. Pilot is the operator and their geologists, who are area experts, describe it as a Carlin-type gold trend.

Pilot Gold has 87 million shares outstanding, for a current market cap of about $104 million, and about $30 million in the bank as of June 30. Newmont Mining owns almost 16% of outstanding shares and insider buying by executives and Newmont has totalled more than $6.5 million in the past year, according to our friends at INK Research.

WesternOne Equity (WEQ)

I decided to mix things up and add a profitable company that pays a nice, sustainable dividend to the portfolio. Vancouver-based WesternOne Equity is a “pickaxe” company with exposure to construction, oil and gas, the film industry and large government infrastructure projects.

WesternOne has two main businesses – Britco, which manufactures and leases temporary and modular buildings, and WesternOne Rentals and Sales, an equipment rental business serving construction companies, film crews and shipbuilders. Late last year, the company announced a $207-million contract with Manitoba Hydro to build a 2,000-room workforce accomodation complex for a large power generating station. (WesternOne’s current market cap is about $185 million.)

WesternOne pays a 5-cent monthly dividend for a current yield of 7.8% (it rose above 8% recently on share price weakness). Q2 results were announced Wednesday, and they were impressive: revenue growth of 80% over a year ago, gross profit growth of 48% and adjusted EBITDA increased 24%. Cash flow rose to $12.4 million from $10.3 million.

About the only number that went down was the payout ratio, which dropped from 49.5% in Q2 2012 to 42.9%. The year-to-date payout percentage was a very sustainable 41.4%.

CEO Darren Latoski owns more than 8% of shares, which nicely aligns his interests with those of all shareholders.

Disclosure: I own shares in each of these companies. This is not financial or investment advice and investors should do their own due diligence, always. Please read mydisclaimer.

Love and Diamonds: Part 2

A World of Mining special – Part 2 of 2

Part 1: Chasing the carat: Canada’s Queen of Diamonds comes full-circle

Stornoway Diamonds’ hostile takeover of Ashton Mining and Quebec’s Renard diamond project in January 2007 was followed by an exodus of Ashton executives and managers. Several departed for Peregrine Diamonds, which is advancing its flagship Chidliak project on Baffin Island.

Robert Boyd, Ashton’s president and CEO who had characterized the Stornoway offer as “stingy,” is now lead director at Peregrine. Brooke Clements, Ashton’s vice-president of exploration who led the team that discovered Renard, is now president of Peregrine. Other key employees also departed for Peregrine (some after staying on with Stornoway for a period of time).

THE FRIEDLAND CONNECTION

For those who moved from Ashton/Stornoway to Peregrine, the new boss was Eric Friedland, younger brother to legendary mining financier Robert Friedland.

Eric Friedland

Eric has a decidedly lower profile than his famous bro: Google “Eric Friedland” and you’re as likely to get swimming as mining hits. But his track record of value creation for shareholders is impressive.

Most recently, in 2011, Friedland sold Peregrine Metals – a spinout from Peregrine Diamonds – to Stillwater Mining for $487 million in cash and stock. The deal turned heads because Stillwater paid a staggering 280% premium (at the time of the deal) for Peregrine Metals and its main asset: the Altar copper-gold deposit in San Juan, Argentina.

The younger Friedland caught the mining bug from his brother Robert, who is 13 years older. An Oregon property where the brothers spent time as teenagers had an abandoned gold mine on it, and the brothers used to crawl around underground. One day, they found a quartz vein with visible gold. Eric was hooked.

Robert Friedland

With Robert’s participation in an October 2012 $10-million financing that gave him a 13% stake in Peregrine Diamonds, the brothers are back in business together.

The brothers teamed up on Fairbanks Gold, of which Eric was president, and sold its Fort Knox – how’s that for marketing? – deposit in Alaska to Amax Gold for $152 million in 1992 (Kinross merged with Amax in 1998).

Fun Friedland fact: During his hippie days, Robert set up a commune on the Oregon property called the All One Commune. The commune also had an apple farm – the same farm that inspired a young Steve Jobs, then a friend of Robert’s, to name his company Apple, according to the Jobs biography by Walter Isaacson. The charismatic Friedland was a strong influence on a young Jobs, with one early Apple employee saying Friedland inspired the Apple co-founder’s legendary “reality distortion field.”

DANCING WITH DE BEERS

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Chasing the carat: How Canada’s Queen of Diamonds came full circle

A World of Mining Special - Part 1 of 2

This is a story about Eira Thomas, dubbed the “Queen of Diamonds” for her role leading the geologists who discovered the kimberlite pipes that became the Diavik diamond mine. Diavik, Canada’s second diamond mine, produced 1.9 million carats of the sparkling stones in the fourth quarter of 2012, up 19% from a year earlier.

Eira Thomas

Eira Thomas

Eira, the daughter of Welsh immigrant and Aber Resources founder David Grenville “Gren” Thomas, followed in her father’s footsteps both figuratively and literally. A geologist before she became an executive, Eira cut quite a figure in a mining industry dominated by men. The mud on her boots came before the earrings adorned with diamonds mined from the deposit she discovered.

Later came the falling-out at Aber Resources, the cofounding of her own diamond exploration company, an audacious takeover of a Quebec diamond project – where our paths crossed – and a return to the diamond exploration game.

But first, a bit of background.

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Barkerville Gold: No volume as shareholders fume

Seven months after the B.C. Securities Commission slapped a cease-trade order on shares of Barkerville Gold Mines (BGM), the stock remains halted. The regulatory slapdown came after Barkerville, helmed by Frank Callaghan, proclaimed an NI 43-101 resource estimate of 10.6 million gold ounces, indicated, for its Cow Mountain project and the “geological potential” for 65 to 90 million ounces.

In August, I blogged about Barkerville as a case study for the importance of due diligence, particularly in the junior mining sector.

But there’s unrest among shareholders – imagine! – particularly one Rex Harbour, who owns 7% of outstanding shares and has gone to B.C. Supreme Court in a bid to force Barkerville to allow one of his director nominees to be a candidate at the upcoming AGM, according to this Stockwatch article. The AGM will be held on April 16 at the Rosewood Hotel Georgia in Vancouver.

On the bright side, the company has finally fixed the misspelling of Premier Christy Clark’s first name on its homepage (For months, the featured video advertised “Christie Clark at Vancouver Round-Up.”)

Come to think of it, the cease-trade order has helped Barkerville avoid a particularly nasty spell in the junior mining space, particularly among the golds. If gold finally goes on a run and the juniors follow just as the cease-trade order is lifted, Callaghan may yet get the last laugh.

Source: World of Mining | See Also: The Last Laugh Of Frank Callaghan

Lumina Copper’s PEA shows NPV of $2.1 billion

Geologist and project manager Guillermo Almandoz (left) and investor Ross Beaty at Lumina Copper's Taca Taca project in Argentina's Salta province. Photo by Trish Saywell

Geologist and project manager Guillermo Almandoz (left) and investor Ross Beaty at Lumina Copper’s Taca Taca project in Argentina’s Salta province. Photo by Trish Saywell

Lumina Copper on Tuesday announced a preliminary economic assessment that gives the Taca Taca project in Salta, Argentina a net present value of $2.1 billion, assuming a discount rate of 8% and $2.75/lb copper, and after-tax internal rate of return of 17.2%.

The assessment includes substantial gold and molybdenum at assumed prices of $1,200/oz Au and $12/lb moly. Here’s the full news release; here are a few bullet points:

- initial capex of $3 billion, life-of-mine capex of $1.8 billion. Payback on initial capital of 3.8 years.

- 28-year mine life with average annual production of 244,000 tonnes of copper, 110,000 ounces of gold and 4,100 tonnes moly.

- life-of-mine cash costs of $1.11/lb of copper.

I listened to the conference call with a chipper David Strang, Lumina Copper CEO, and Marshall Koval, vice-president, corporate development, and was struck, again, at the gaping divide between fundamental value and share price performance in this market . A few quick takeaways and observations:

Continue reading

Mining Titans Nolan Watson, Mark O’Dea To Watch At #VRIC13 By @JamesKwantes

Source: World of Mining

The annual Vancouver Resource Investment Conference goes Sunday and Monday at Vancouver Convention Centre West. If you’re prospecting for investment ideas and kicking tires on potential stock picks, read the Vancouver Sun article I wrote about the Cambridge show a year ago. The piece is dated but not much has changed (except for a little tech stock role reversal with Apple’s recent fall from grace and Research in Motion showing signs of life):

Junior miners: Worth the investment?

BY JAMES KWANTES, VANCOUVER SUN FEBRUARY 3, 2012

The replica bull on the floor at the Vancouver Resource Investment Conference last week symbolized the type of market that suffering resource investors hope is about to break out. The imposing animal’s lack of motion was also apt – the TSX Venture Exchange has plummeted almost 30 per cent in the last year and a staggering 50 per cent from highs reached in March 2007. WoM update: The Venture dropped another 20% in 2012.

Read the rest at VancouverSun.com

I plan to visit the Cambridge House show on Monday morning and drop by the booths of a few companies whose stock I own and a few others that I’m watching for possible investment. I’ll write about it here at World of Mining and may do some live-tweeting as well @jameskwantes.

Due to other commitments, I’m going to miss Sunday, which is a shame as the marquee event of the conference takes place Sunday at 2 p.m. in Speaker Hall West. That’s where Pilot Gold chairman Mark O’Dea is hosting a panel discussion with Sandstorm Gold CEO Nolan Watson and Sabina Gold and Silver CEO Rob Pease, called Building Value: Tomorrow’s Trends from Today’s Trailblazers. (For those able to be in two places at once, Rick Rule is in Speaker Hall East at 2 p.m.)  Continue reading

Vancouver Perspectives

Vancouver, 1907

To some, Vancouver is a collision of condo towers, a mecca for mining companies or a promoters’ paradise. It is all of these, of course, and much more.

Last night I tweeted this photo of Vancouver and the Lower Mainland from space, courtesy of Canadian astronaut Chris Hadfield’s Twitter account (a must-follow). Hadfield has been tweeting unearthly photos and anecdotes from his post on the international space station.

The photo is a gem – clearly visible are Deltaport, the ferry terminal, Burns Bog, Stanley Park, the Fraser River and other landmarks.

Today, a different perspective: a 1907 video of downtown Vancouver taken from the front of a trolley car. Step into a time machine and watch the chaos: horses and buggies, well-dressed men and women cutting it close in front of the railcar, and mischevious children darting in front of the car. The 6-minute film is a treasure, especially because Vancouver is a young city with a tendency to demolish its past, leaving only ghosts.

The video was taken by pioneer Seattle filmmaker William Harbeck, who was later commissioned to document the Titanic’s maiden voyage. Harbeck didn’t survive his final assignment; his fine work lives on.

World of Mining Jan 1, 2013 Update

May the best of 2012 be the worst of 2013

2012 was both a challenging (to put it mildly) year for junior mining stocks and a great opportunity to pick up high-quality names at bargain prices. I hope you managed to take advantage of some of those sales.

Sandstorm Gold, the first company that I wrote up, was an exception to the rule. Its gold streaming model shone in a terrible financing environment for juniors and shares almost doubled in calendar 2012, including a 20% advance since I featured the Nolan Watson company in my first blog post. Sandstorm Gold also obtained NYSE and TSX listings in 2012. Sister streamer Sandstorm Metals & Energy did even better, advancing 68% since my Sandstorm post (and 43% on the year).Newstrike Capital, featured on Sept. 20, was a different story. Shares were down about 24% in 2012 and 15% since I wrote about Newstrike on World of Mining. But the stock rallied more than 6% on Dec. 31 and major shareholder Lukas Lundin added to his stake late last year, picking up 2 million shares at $1.80 through one of the Lundin family trusts (the topic of my latest post). This year, Newstrike will put out a maiden 43-101 resource estimate on its 100%-owned Ana Paula gold deposit in Mexico’s Guerrero Gold Belt. I view the Lundin purchase as bullish and suspect – knock on wood – that the $1.80 he paid will be the floor for the stock going forward.

Shares of Ross Beaty’s Lumina Copper finished the year at $9.43, virtually the same level as when I wrote up LCC but down considerably from late March, when the stock hit $17. Growth in China may be slowing, but demand from the rest of the developing world is supporting copper prices, which have rebounded to pre-financial crisis levels and stayed there. I expect Lumina and its vast Taca Taca copper deposit in Argentina to be snapped up by a suitor in 2013. Another copper play I featured, Amerigo Resources, has dropped a few pennies and now sports a 7% dividend yield. On Amerigo, a pessimistic Mr. Market seems to be focusing on bad news in the rear-view mirror while ignoring company-specific positive developments that should drive revenue and earnings going forward.

While I have worked for several years at a major daily newspaper, World of Mining is my first foray into the world of web publishing. I am honoured that you have joined the thousands of investors – from Canada to Panama, Chile to China and points in between – who have stopped by or signed up since the August launch of WorldofMining.com.

In 2013, I will continue to offer up investment ideas at World of Mining, as well as roll out some new features. And I suspect this year will bring better times for long-suffering junior resource speculators – particularly those who invest their money in high-quality names.

Best regards,
James Kwantes

World of Mining,com