Vancouver Resource Investment Conference 2017 in ReviewFriday February 03, 2017 09:58
Each year, I attend the Vancouver Resource Investment Conference (VRIC) to catch up on many of the companies in which I invest, and to get a general feel for the retail mood of the sector. This year, the mood was very positive and optimistic as many quality juniors are now bifurcating from the weaker ones. While this continues to be a stock picker’s market, the sector continues to build a base at $22.50 in the GDX after tax-loss selling ended in typical fashion at the end of 2016.
Here is my take on the VRIC 2017, which took place on January 22nd and 23rd.
Most Popular Spec Play: Northern Dynasty Minerals (NDM.TO). This developer was by far the most hyped play at the conference as the share price of the company is already a 15 bagger from the January 2016 lows. The massive Pebble copper deposit in Alaska boasts a current resource estimate which includes 6.44 billion tonnes in the measured and indicated categories containing 57 billion lb copper, 70 million oz gold, 3.4 billion lb molybdenum and 344 million oz silver; and 4.46 billion tonnes in the inferred category, containing 24.5 billion lb copper, 37 million oz gold, 2.2 billion lb molybdenum and 170 million oz silver.
Two global miners walked away from the Pebble deposit back in 2014 after investing over $750 million on the project, including a $150 million Environmental Baseline Document. However, the Environmental Protection Agency (EPA) blocked the permitting process in 2014 on the grounds that the mine could not be safely built without undue risk to nearby Bristol Bay and the large salmon fishery there.
The stock has really taken off after the election of Donald Trump and has been hyped as “Trump’s Gold” in a few of the popular sector newsletters. It seems the hope is now that Trump has won, he will push to overturn the EPA ruling in order for the project to be considered once again for a permit. I imagine the stock may get another bump if there is a near term resolution to the impasse between the company and the EPA sometime later this year. However, buyer beware as this one has already had a huge run. I believe it will most likely not even be permitted before the Trump Era ends, let alone be built in his lifetime. As much as I would like to see this get resolved and cleared for the benefit of the sector, as well as the many jobs it could create, I am happy watching this saga play out from the sidelines.
Commodity with the Most Buzz: Uranium. This sector has been on fire since the end of 2016 as the ETF for the Uranium miners, URA, has broken out of an 18-month bottoming pattern. During the last U308 boom over a decade ago, there were more than 500 miners in the sector to choose from as fortunes were made by many who got in early. However, after a brutal six-year bear market, only around 40 companies remain with a combined market cap of less than $20 billion. During the last day of the conference, URA zoomed higher on record daily volume after a previous test of the breakout area around the $15 level. There was also a rumor of Kazakhstan cutting 2017 production even further than the previously announced cut of 10% two weeks ago. It seems the 10% cut did not move the spot price up to the $25 per lb level, which was the desired result of the 10% production cut.
CEO I was Most Impressed By: Jordan Trimble – Skyharbour Resources (SYH.V). This very sharp young man became the youngest CEO of any publicly traded mining company at the age of 25 in 2013. When he took the helm, the company was nothing more than a shell with a bit of cash, and a couple of legacy grass roots gold projects. Mr. Trimble has been working in the industry now for 8 years while coming straight out of the University of British Columbia (UBC) with a Major in Biochem and a Minor in Commerce. He began working with former CEO of Bayfield Ventures, Jim Pettit in early 2010, the same year they discovered high grade gold at Rainy River, Ontario. He worked as Bayfield’s Corporate Development Manager for 4 years until the company was ultimately bought out by New Gold in 2014 for a substantial premium. This gave Mr. Trimble direct experience in M&A as the company was sold to New Gold in 2014. Jim Pettit is also now chairman of Skyharbour as well.
Jordan set out to begin building a preeminent uranium exploration company with a prospective asset base and solid team. He was following the high grade discoveries being made in the Athabasca Basin, Saskatchewan by Fission Uranium (FCU.TO) and Alpha Exploration when he came to Skyharbour in 2013. He then proceeded to structure a unique deal by bringing in 3 other companies to help fund a $6 million program over a couple of years. They called this the Western Athabasca Syndicate, and managed to get $5 million spent at the now Skyharbour Preston project during the brutal bear market. In addition to carrying out exploration and drill programs at Preston, he also set out to continue building up the project portfolio in the continually depressed uranium market with a simple mandate: buy highly prospective uranium projects, in the best jurisdiction at pennies on the dollar. I think it is safe to say he has been delivering on his plan so far.
I was most impressed by his focus and confidence in his ability to turn Skyharbour into a successful uranium exploration company. Jordan is also quick to mention the contribution of his team when congratulated on his early successes. He is very prudent with the company’s cash as the G&A burn rate is only $12k per month, while his salary is a paltry $40k per year. He understands the importance of share structure and is very mindful of un-necessary share dilution. One of his mentors is Ivan Bebeck (CEO of AUG.TO) who is a master salesman while getting the most bang for his marketing buck with low retail floats and attractive share structures in all of his ventures.
Keep an eye on this young man as I feel he has a very good chance to be one of the next generation’s rising stars in the mining galaxy! Full Disclosure: I own shares in SYH.V purchased in December of last year in the open market.
Most Undervalued and Under the Radar Micro-cap Exploreco: Mundoro Capitol (MUN.V) This company’s main focus is on the Tethyan Belt in Southeastern Europe in which they have tied up a district scale land package with multiple drill targets. The Timok Magmatic Complex (TMC) in Serbia is a part of the prominent Tethyan Metallogenic Belt host of world class porphyry and epithermal Cu-Au deposits. Nevsun Resources recently took over Resrvoir Minerals at a substantial premium for a project on the same system making Mundoro the only public company left in the complex with significant land package for joint venture.
In March of 2016, Mundoro struck an attractive 3 year option to joint venture 4 North Timok projects with JOGMEC, which is in charge of securing a stable supply of oil, natural gas, and nonferrous metal and mineral resources for Japan. This deal now carries Mundoro to commercial production on these projects. The company now has 12 months of exploration drilling for discovery potential scheduled, which should provide a steady news flow throughout 2017.
The company has nearly $.10c per share in cash and is trading at $.135c with only 51m shares outstanding, making mundoro a lower risk exploration play here. Full disclosure: I took place in the most recent private placement last year.
Most Undervalued and Under the Radar Developer: Lion One Metals (LIO.V) This company controls one of the top 10 highest grade gold mines in the world. The Tuvatu Gold Project in Fiji boasts a narrow vein mineral resource with an average grade in excess of 8 g/t Au. The Tuvatu property lies within Viti Levu Lineament, a north-west trending belt that hosts a number of alkaline volcanic centers. These include the world-class Vatukoula Gold Mine, which lies approximately 50 km’s to the north east. Low sulphidation, epithermal gold veins at Tuvatu occur along the margins of the eroded Navilawa volcanic center in a multi-phase geologic environment that also hosts porphyry copper-gold and VMS style mineralization. The nearby Vatukoula mine has over 4m/oz in reserves and has been in operation for over 75 years.
The company is run by Walter Berukoff, whom I have been fortunate enough to benefit from in 2 of his past 3 successful company takeovers. Mr. Berukoff was the founder and C.E.O of Miramar Mining Corporation, Northern Orion Resources, and La Mancha Resources, and has operated or commissioned gold mines in seven countries. I was in both Northern Orion and Miramar Mining when they were acquired by majors at a substantial premium.
The retail float in the company is only 42% of 101m shares outstanding with management owning 21%. They recently completed a $38m private placement above market and have over 41m warrants out @ $1.35 which expire in March of 2018. The company is working on a debt finance deal in order to construct the Tuvatu Gold Mine. Investor Relations Manager Joe Gray informed me at VRIC the finance should be completed in Q1 of this year. Full Disclosure: I own shares in LIO.V purchased in December of last year in the open market.
The next conference I attend will be the PDAC in Toronto, March 5-8, 2017. I will post a review in my column after I return.
David Erfle is a 52 year old self-taught mining sector investor. He stumbled upon the mining sector in 2003 as he was looking to invest into a growing sector of the market. After researching the gains made from the 2001 bottom in the tiny gold and silver sector he became fascinated with this niche market. So much so that in 2005 he decided to sell his home and invest the entire proceeds from the sale into junior mining companies. When his account had tripled by September, 2007, he decided to quit his job as the Telecommunications Equipment Buyer at UCLA and make investing in this sector his full time job. He personally survived two bear markets, witnessed incredible sector changes and had to alter his investment philosophy numerous times in order to adapt to changing market conditions."