by James Kwantes
Published first at Patreon.com/jameskwantes
Most mornings I slip on my shoes and walk over to a nearby beach access trail off a short dead-end street, on a plateau overlooking the Salish Sea. The trail down is unmarked and begins a few feet into a long driveway at the end of the road. The route to the water meanders through salal, ferns, blackberry bushes and a treed canopy to a rather sketchy path consisting of makeshift walkways of plywood and roofing material. It shudders with each step as I descend.
It’s no sandy beach but beautiful nonetheless: a wild west coast tangle of driftwood, green algae, veined rock outcrops and pebbles, with seagulls and often seals nearby. Very occasionally, usually on sunny days in glass-like water, humpback whales can be seen cavorting in the distance. Magical.
"Whale" watching in the junior mining sector - better known for its sharks - can also be rewarding.
You can only track the whales when you can see them, of course. In Canada, that visibility level occurs at the 10% ownership level, after which non-insiders must report insider buys and sells on SEDI. I would like to see that threshold lowered to 5%, the reporting threshold in the United States; that’s a different article.
A 10% position in a junior mining company is a chunky holding, not to mention a ballsy bet. It’s especially noteworthy when the equity is at or near multi-year lows. Let’s take a closer look at a few recent cases of investors going over the 10% threshold in a sector that is among the riskiest:
Glenn Pountney
Glenn Pountney landed on the Mirasol Resources (MRZ-V) registry as a 10% shareholder with a Sept. 21 SEDI filing. He has since bought another 700,000 shares at prices ranging from 39 to 43 cents, including 563,000 shares at 42 cents on Oct. 28. The purchases give him an 11.3% stake in the company worth roughly $3.3 million.
Mirasol is a well-funded project generator advancing two flagship projects in northern Chile: Sobek (wholly owned) and Inca Gold (optioned from Newmont). Sobek consists of 11,120 hectares of ground in a district that hosts several large magmatic-hydrothermal ore deposits including one of the best recent mineral discoveries globally: Filo del Sol. Mirasol is one of the only juniors with a large land package near Filo del Sol, 7 km to the east. Numerous rich copper-gold discoveries have propelled Filo Mining to a $2.15-billion valuation. Mirasol conducted a detailed reconnaissance and sampling program at Sobek; results are pending. At Inca Gold, the company is refining targets for a planned drill program kicking off before year-end.
Mirasol had working capital of about $6.8 million as of June 30 and has a $29-million market capitalization. The stock is tightly held and Pountney isn’t the only insider buying – both CEO Patrick Evans and major shareholder John Tognetti have added to their stakes this year. Tognetti, the Haywood Securities chairman, owns 19% of Mirasol shares; Evans owns 3.7%.
Rewind to the ’90s: Pountney was head equity trader at First Marathon Securities (working alongside Mike “The Wek” Wekerle) during the “cowboy years” of the 1990s. First Marathon was at the centre of several of the top mining deals of that decade, as well as a couple high-profile regulatory controversies. National Bank bought First Marathon in 1999; Pountney left as head equity trader for National Bank Financial in December 2000.
Pountney soon put his pile of money to work. He began to acquire shares of the original Norsemont Mining, which was advancing the Constancia copper project – now mine – in southern Peru (Patrick Evans was Norsemont’s CEO). By the time HudBay bought Norsemont for $520 million ($4.50 a share) in 2011, Pountney owned 6,296,100 Norsemont shares, according to a lock-up agreement filed with the SEC.
The next time Pountney went over 10% was on Klondex Mines, which had the Fire Creek, Midas and Hollister mines in Nevada. At one point, Pountney owned 11.5% of Klondex shares, many of them purchased in 2012-13 when the stock traded between $1 and $1.50 CAD. In September 2012, a management shuffle backed by Pountney and other large shareholders including K2 installed a new CEO, Paul Huet. In early 2018, Hecla Mining bought Klondex for US$462 million, consisting of US$2.47 in cash and shares. The takeover didn’t work out so well for Hecla – none of the three Nevada mines is producing gold currently.
Pountney was also a major shareholder of VMS Ventures, which owned a 30% interest in the Reed copper mine in Manitoba and was purchased by Royal Nickel/RNC Minerals in a $9.4-million cash-and-shares deal in April 2016 (RNC Minerals is now Karora Resources KRR-T). Pountney owned a 20% stake in VMS Ventures at the time of the takeover.
Larry Childress
Larry Childress is a mining engineer and private American investor who got his start in oil and gas and diversified into real estate and junior mining along the way. He went over 10% on Fireweed Metals (FWZ-V) on July 4 – and has since spent another $1.1 million buying Fireweed shares at prices from 53 to 63 cents. The purchases give him a 12.86% stake in the company worth about $7.4 million.
Fireweed is developing the Macmillan Pass zinc-lead-silver project on the Yukon side of the Yukon/Northwest Territories border. The company drilled about 7,000 metres this exploration season, assays pending, and plans major resource updates and an updated preliminary economic assessment in 2023.
Childress owns other juniors that are higher profile, with larger market capitalizations. But the self-described “gambler” said he likes the risk-reward profile of Fireweed (market cap $58 million), which he is holding for multibagger gains from current levels. He’s a big fan of both the project and the management and board.
Childress's first big win in the space was Arizona Star Resources, which Barrick bought in 2007 for $773 million to secure Arizona Star’s 51% of the Cerro Casale gold-copper deposit in Chile. A recent win was Noront Resources (NOT-V), bought a year ago by Andrew “Twiggy” Forrest’s Wyloo Metals for $321 million after a bidding war with BHP. Childress had accumulated Noront shares over a 13-year period.
“Mining is my love, and they’re mostly Canadian companies,” he told me in a recent phone conversation. “It’s like oil and gas – one good producer will take care of five or ten dry holes!”
Dave Lotan
Lotan is a veteran junior mining executive and investor who in September went over 10% on Aurion Resources (AU-V), where he is chairman. Aurion has a large wholly owned land position in the Central Lapland Greenstone Belt as well as 30% of a JV with B2Gold that has yielded the Helmi gold discovery. Helmi is along trend with Rupert Resources’ four-million-oz Ikkari high-grade gold discovery. Aurion had $18.6 million in working capital as of June 30 and is funding its 30% share of an 11,000-metre drill program at Helmi that is halfway finished.
For Lotan, who takes no salary or options from Aurion, it was a return trip above the 10% threshold. He does most of his buying in the public market and was diluted below 10% in the November 2021 financing that saw Aurion raise $16.7 million. Lotan has purchased more than three million shares in the past two years, the vast majority of them at higher prices than current levels. Lotan owns 11,836,582 Aurion shares, a 10.04% stake worth about $5.3 million.
Lotan tends to take large positions in out-of-favour companies and wait until they are back in favour or get sold. One big win has been Foran Mining (FOM-V) – Lotan started buying in size when Dan Myerson moved over from Glencore to become Foran’s executive chairman in November 2020. Foran has been a ten-bagger since Myerson took over.
Lotan is a 10% plus shareholder of two other Venture-listed companies: Chibougamau Independent Mines (CBG-V), where he is a director, and Fox River Resources (FOX-CSE). Chibougamau owns a large land package in Quebec’s Chibougamau gold mining district and a 2% gross metal royalty on the Mont Sorcier iron ore deposit in Quebec, which hosts more than one billion tonnes grading over 30% magnetite and 64% iron, plus vanadium. Mont Sorcier is owned by Voyager Metals (VONE-V). Fox River Resources is developing the Martison phosphate deposit in northern Ontario. Both stocks are trading at or near two-year lows.
Disclosure: James Kwantes owns shares of Fireweed Zinc and Aurion Resources and has done work for Fireweed Zinc in the past year. He is the editor and publisher of Resource Opportunities, an investment newsletter. His writing is supported by subscribers and patrons. All dollar values CAD unless otherwise specified.
