Sprott Natural Resource Symposium 2019: Lessons Learned & My Notes on Some of the Exhibitors

Prior to the 2019 edition of the Sprott Natural Resource Symposium, I mentioned that Rick Rule’s speech on Thursday August 1st would be worth the price of admission – he didn’t disappoint!

The speech was entitled, Lessons, Re-Learned, In a Bear Market, and for good reason, as Rule covered many of the lessons that I have found so helpful over the course of my investing career.

Here’s a look at 2 lessons that, when incorporated into your investment process, in my view, will be key to your success.

  1. The sequence of answering unanswered questions leads to high returns over time.

This lesson is the basis for share price appreciation across all sectors, but is particularly important in the junior resource sector.

So, given its importance, how does one identify a company’s unanswered questions?

The unanswered questions focus on the catalysts that will drive the share price in the future, for example, the most common unanswered questions surround drill results.

Invariably, the answering of these questions leads to more unanswered questions and, thus, the process really never ends until you get a “no” answer or you have attained an acceptable amount of profit (different for everyone).

Along with identifying the unanswered questions, it’s paramount that the investor evaluate the probability of attaining a “yes” answer to each of the questions and weigh it against the potential profit.

Evaluating the probability of success is rooted in the company’s fundamentals, aspects such as who is running the company, its share structure, its cash position, the geology of the property and the jurisdiction in which the company is operating – to name just a few. 

Examples of unanswered questions:

Question – Does the mineralization extend along strike from the existing deposit?

  • If yes, how far and at what grade?

Question – Is the mineralization amenable to standard mineral processing techniques – crushing, grinding, floatation, magnetic separation?

  • If yes, are there any deleterious elements contained in the concentrate?
    • If yes, what are smelter penalties?
  • If yes, what is the metal recovery?

Share prices are driven by catalysts, and by focusing on these quantifiable answers, an investor can not only maximize his potential profit, but also minimize the effect that emotion has on their investments.

  1. When the reason to own a stock goes away, the stock needs to go away.

Lesson #2 is closely linked with lesson #1, but is particularly important in my opinion because selling a losing position can be hard to do.

The basis of this lesson is rooted in selling a stock because of receiving a “no” answer to an unanswered question. In my experience, this is very wise advice, especially in the short term, as it most often takes time for a company to reset and recover after failure.

Additionally, I think you can parlay lesson #2 a little further.

For example, you may invest in a company for specific reasons, such as its business model, the involvement of a particular person, its focus on a particular metal, or maybe it’s an interest in a particular project.

Following the mantra of lesson #2, if any of these reasons change, it’s time to sell. For example, if a project generation company whose business model centres around using “other people’s money” to explore their properties changes to using their own money to explore, you may want to think about selling, as the risk profile of the company just changed.

In my view, these lessons are invaluable and, when practiced, easily justify the price of admission to a conference such as the Sprott Natural Resource Symposium.

With that said, it will be 2020 before you know it, and with it a chance to register for next year’s conference at a significant discount if done early. Watch for the links in the New Year.

Symposium Exhibitors

One of the many perks of attending the Symposium is its list of exhibitors, each of which has been vetted by the Sprott organization and owned in a Sprott managed equity account.

While this is definitely an advantage, it doesn’t mean that investors should freely invest in any company at the conference. No matter who recommends a company, each investor is obligated, in my view, to complete their own due diligence and determine if it’s an investment which fits their own personal criteria.

I met with 10 companies that were exhibiting at the Symposium and compiled a few notes on each of them. In no particular order:

Aethon Minerals (AET:TSXV)

MCAP – $5 million (at the time of writing)

Cash – Over $3 million

  • Altius Minerals (ALS:TSX) spin out in 2018.
  • Recently announced a merger with AbraPlata, whereby all of the issued and outstanding Aethon shares will be exchanged on the basis of 3.75 AbraPlata common shares for each Aethon share. This implies consideration of $0.248 per Aethon Based on the 10-day volume weighted average of AbraPlata shares $0.661.
  • Currently, Aethon is trading at discount to AbraPlata.
  • John Miniotis will be the new company’s President and CEO.
  • Flagship asset – the Diabillos Project has a total indicated resource of 27,100 tonnes – 80.9 million oz of silver at 93.1 g/t and 732k oz of gold at 0.84 g/t and an inferred resource of 1,100 tonnes – 1.69 million oz of silver at 48.8 g/t and 29K of gold at 0.83 g/t.
  • Diabillos Project – High grade precious metal exploration potential.
  • Large Chilean land package which is slated for future joint ventures with senior mining companies. I expect to see a JV deal before the end of the year.

Hot Chili Limited (HCH:ASX)

MCAP – $44 million (at the time of writing)

Cash – Over $1 million AUD (will need to finance for Phase 2 drilling)

  • Christian Easterday is Managing Director.
  • 2 Projects: Cortadera Copper Porphyry Project and Productora Copper Project.
  • Cortadera was optioned from a private Chilean mining group, SCM Carola, earlier this year.
    • Located 14 km from Productora Copper Project.
    • Initial 5,500 m drill program was highlighted by the discovery of a new high grade zone at Cuerpo 3, the main porphyry- CRP0013D – 750 m grading 0.6% copper and 0.2 g/t gold from 204 m depth, including 188 m grading 0.9% copper and 0.4 g/t gold.
    • Exploration potential – geochemistry and geophysics (ground mag and IP) have identified a North Target area which has never been drilled.
    • Exploration potential – Additionally, each of the 4 porphyry centres remain open at depth and laterally.
    • Phase 2 drilling to commence shortly.
    • Maiden resource on Cortadera to be released very soon.
  • Productora Copper Project
    • Total Proven and Probable Reserves (JORC) – 166.9 tonnes at 0.43% copper, 0.09 g/t gold and 138 ppm molybdenum (at metal prices – Cu $3.00 USD/lbs, Au$1200 USD/oz and Mo $14.00 USD/lbs).

Altus Strategies (ALTS:TSXV)

MCAP – $16.9 million (at the time of writing)

Cash – roughly $1 million in cash and securities

  • CEO Steven Poulton leads a team of geologists and mining engineers who have a history of success in the resource industry.
  • Altus team has a long history of success in Africa.
  • Insider Ownership – CEO Steven Poulton owns 14.2%.
  • Strategic shareholders, which includes – Exploration Capital Partners (2012 and 2014) combined 13.2%, and Euro Pacific Gold Fund 3.8%.
  • 18 projects, all located in Africa, encompassing a wide range of precious and base metals.
  • Prospect generator business model.
  • Targeting greater than $10 million USD per annum JV financed exploration expenditures.
  • 9 projects in the “Joint Venture Ready” portion of their development – precious and base metals.

Millrock Resources (MRO:TSXV)

MCAP – $8.3 million (at the time of writing)

Cash – Over $2 million in cash and securities

  • Greg Beischer is President and CEO.
  • Millrock is mainly focused on mineral exploration within the Tintina Gold Province located in Alaska, but does have additional project interests in BC and Mexico.
  • Prospect generator business model.
  • No joint venture partners at the moment, however, this is likely to change in the weeks to come.
  • Currently, the Goodpaster Project is a focus for the company, as they are targeting an extension to Northern Star’s Pogo mine.
    • Using CSAMT geophysics Millrock is targeting a deep shear zone to the west of the existing mine. Key to this program is the fact that they are using the same contractor as Northern Star did to complete the work.
    • Completion of the program will either be followed by a decision to drill or wait for a JV partner to fund the drilling of the prospective target.

Mundoro Capital Inc.

MCAP – $8.67 million (at the time of writing)

Cash – $3 million (Q1-2019)

  • Teo Dechev is President and CEO.
  • Prospect Generator business model.
  • Exclusively in Eastern Europe, mainly Serbia and Bulgaria.
  • JOGMEC JV – Currently in Phase 2 program – geophysics, with drilling to follow in Q3 2019 – JOGMEC can attain 51% of the project by spending $4 million USD in expenditures by March 2019 and purchase up to 80% of the project with the delivering of a Feasibility Study.
  • Freeport JV – Currently in Phase 1 program – Alteration mapping and geophysics, with drilling to possibly follow near the end of Q4 2019 – Freeport can attain 51% of the project by spending $5 million USD in expenditures by September 2021 and up to 75% of the project by solely funding an additional $40 million in expenditures by 2026.
  • Timok Project is up for Joint Venture, but no partner at the moment.
  • Strategic Alliance In Bulgaria with JOGMEC.
  • Large institutional holdings – 58%.

Ardea Resources (ARL:ASX)

MCAP – $59.44 AUD (at the time of writing)

Cash – $11.2 million AUD

  • Andrew Penkethman is the CEO.
  • Focused on both precious and base metals, with a primary push towards nickel-cobalt.
  • Goongarnie Nickel Cobalt Project – PFS: 2.25 Mtpa, before tax NPV of $2.4 billion and IRR of 31%, CAPEX cost $918 million USD, Pressure Acid Leach (PAL).
  • Large gold and nickel exploration land package totalling 3500 square kilometers.
  • Possibility to spin out gold focused projects and make Ardea solely a nickel company as we move into what may be a strong nickel price environment in the years ahead.

Equinox Gold (EQX:TSXV)

MCAP -$843.6 million

  • Christian Milau is CEO and Executive Director.
  • Ross Beatty is a major shareholder, owing 12% of the company.
  • Gold focused, with 3 advanced staged / mines in Brazil and California, USA.
  • Aurizona Gold Mine poured its first gold in May 2019, 2019 production guidance is set at 75 to 90,000 oz Au at a AISC of $950 to 1,025/oz.
  • Mesquite Gold Mine – in production, YTD 2019 – $70.8 million in revenue, 52K oz produced, $780/oz cost and a AISC of $907/oz. Production guidance updated to 125 to 145K oz at an AISC of $930 to 980/oz.
  • Castle Mountain – 3.6 Moz Au reserves, 16 year mine life, $763/oz avg LOM AISC – construction to begin second half of 2019.
  • Overal,l Equinox should produce 200 to 235K ounces in 2019, with a goal of attaining production over 1 million ounces per annum by 2023.

ISO Energy (ISO:TSXV)

MCAP – $49.9 million

Cash – $3 million

  • Craig Parry is the President and CEO.
  • Board of Directors is led by the Chairman Leigh Curyer, who is the CEO of NexGen Energy. NexGen owns arguably the best undeveloped uranium deposit in the world.
  • Team has the background to be successful in the Athabasca Basin.
  • NexGen owns 53.4%, Cameco owns 5.4%, Orano owns 2.0% and Institutional owns 19.2% – doesn’t leave much in the public float.
  • Summer Drill Program – Hurricane Zone – 8 holes into a 16 hole program on their Larocque East Project, which is located in the eastern portion of the Athabasca Basin. Targets are hosted in Sandstone/unconformity. Drill program is expected to cost $1.5 million, leaving them with $1.5 million going into 2020.
  • 3 other projects in their portfolio – Thorburn Lake, Radio and North Thorburn.

CanAlaska Uranium (CVV:TSXV)

MCAP – $11.24 million (at the time of writing)

Cash – roughly $1.0 million in cash and cash equivalents (April 2019).

  • Peter Dasler is President and CEO.
  • Prospect generator business model.
  • 3 main Projects: West McArthur, Cree East and NW Manitoba.
  • West McArthur is a JV with Cameco – Targeting a unconformity-basement uranium deposit.
  • Cree East has no JV partner – 9 target areas across the property, possibility of both basement and sandstone hosted uranium deposits.
  • NW Manitoba lies in close proximity to the Saskatchewan border and is similar geologically to Rabbit Lake, Collins Bay and Eagle Point Uranium mines which are within 90 km of the property.

Goviex Uranium (GXU:TSXV)

MCAP – $65.6 million (at the time of writing)

Cash – $2.8 million USD

Debt – $8.0 million USD

  • Daniel Major is the President and CEO.
  • 3 uranium projects, all located in Africa – Madaouela, Mutanga and Falea.
  • Flagship Madaouela Project is at the definitive feasibility study stage of development. The Republic of Niger has signed a definitive agreement to jointly develop the project.
  • After-tax NPV@8% – $340 million USD, IRR – 21.9% at a uranium price of $70 USD/lbs.
  • Orano (formerly Areva) operates a uranium mine in close proximity to Madaouela, which is reaching the end of its mine life.
  • “The State is to receive an additional working interest of 10% in exchange for approximately US$14.5 million of claims due by the Company to the State comprised of the final €7 million Madaouela I Mining Permit acquisition payment and settlement of previously challenged three years of area taxes (US$6.6 million) (collectively, the “Debt”) between the Company and the State related to the Madaouela Project. The Company is to receive a final, complete and unconditional release without reserves in respect of the Debt, upon the transfer the additional working Interest.” ~ News Release
  • The company is working at optimizing its metallurgy and subsequently extract value from the other base metals that are present – nickel, cobalt and molybdenum. Gravity separation and floatation techniques are being tested for their ability to concentrate the metals effectively. If successful, these advances have the potential to positively affect the project’s economics.

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Until next time,

Brian Leni  P.Eng

Founder – Junior Stock Review

Disclaimer: The following is not an investment recommendation, it is an investment idea. I am not a certified investment professional, nor do I know you and your individual investment needs. Please perform your own due diligence to decide whether this is a company and sector that is best suited for your personal investment criteria.  I have NO business relationship with any of the companies mentioned in this article. I am a shareholder of Aethon Minerals.