“It is only the farmer who faithfully plants seeds in the Spring, who reaps a harvest in the Autumn.” ~ B.C. Forbes
And so it is no different in the mining sector. A sector that regularly experiences wild cyclical swings from bear market to bull market and back to bear market again. It is rare for a junior resource company to “plant its seeds in the spring” because the nature of the sector means that most companies become more active when the financing window opens and sector sentiment is in an upswing. However, companies that are able to acquire prospective mineral exploration projects on attractive terms when sector sentiment is weak are usually able to better preserve shareholder value during cyclical downturns.
But make no mistake, such companies are rare. Rare like a 2007 .99999 fine one ounce gold maple leaf PCGS graded MS-69.
In junior mining, most investors are looking for a sexy drill play with a flashy management team and lots of flashy marketing. However, the best results over the long run often come from the companies that are committed to building shareholder value over multiple market cycles while maintaining relatively modest administrative/marketing budgets.
One of the companies that can boast a track record of shareholder value creation over multiple market cycles is Eagle Plains Resources (TSX-V:EPL, OTC: EGPLF). Eagle Plains is a well financed and debt free gold-focused project generator led by President and CEO Tim Termeunde.
Eagle Plains has been “planting seeds in the spring” for the last 25 years and Mr. Termeunde is no stranger to the “feast or famine” nature of natural resource sector cycles. In fact, he has expertly navigated Eagle Plains through multiple boom/bust periods in the last three decades as evidenced by the graphic below:
The following two minute video excellently summarizes the Eagle Plain project generator business model:
Eagle Plains has over 35 mineral exploration projects in Western Canada spanning precious metals, base metals, rare earth elements, and industrial minerals. Eagle Plains has been strategically acquiring new projects since its inception, taking advantage of industry downturns and operating in politically stable jurisdictions.
The following is Eagle Plains’ methodology for generating shareholder value over multiple cycles:
- Research, acquire and develop mineral exploration projects using in-house geological expertise
- Utilize the earn-in contributions of option partners to fund development of exploration projects
- Generate revenue through Terralogic Exploration Inc., a wholly owned subsidiary
- Spin-out advanced projects to make available for acquisition and create shareholder value
Eagle Plains creates value for shareholders through multiple avenues. There is significant value that stands to get unlocked over the next 6 to 12 months through a combination of drill programs and potential new discoveries, realizing value from a large share portfolio of other companies, and spin-outs of advanced projects into new companies:
• Potential of mineral deposit discovery with 2 drill programs currently underway targeting gold (Iron Range Gold Project and Olson Gold Project)
• A portfolio of other companies shares (over 20 million shares of 20 other companies)
• NSR’s on dozens of projects – typically 2%
• Spinning-out advanced projects into new companies
• Revenue generation and low burn rate reduce shareholder dilution
Not only does Eagle Plains have multiple ways to increase value for shareholders, but the company's current valuation is well supported by nearly C$10 million in the company treasury (combination of C$6.5 million in cash and C$3.5 million in equity holdings) and C$1 million in real estate (company HQ).
EPL.V Share Structure - November 2020
Shares Issued: 98,339,669
Assigned Options: 8,810,000
Fully Diluted (C$16 million fully diluted market cap at C$.145 share price): 110,057,669
Investors have the opportunity to buy EPL shares at barely more than the company’s book value (roughly $.09 per share) near the beginning of a bull market cycle. Opportunities this good don’t come around often. With roughly 30% of downside and 500%+ of upside potential, in my estimation EPL shares offer an unusual asymmetric risk/reward proposition.
EPL.V (Monthly - 20 Year)
Disclosure: Author owns shares and warrants of EPL.V at the time of publishing and may choose to buy or sell at any time without notice. Author has been compensated for marketing services by Eagle Plains Resources Ltd.
DISCLAIMER: The work included in this article is based on current events, technical charts, company news releases, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. This publication is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.