Forsys and GFI Settle amid Wikileaks Intrigue

8 03 2011

In one of my very first entries, I discussed the failed acquisition of Forsys, a Canadian junior with a fully-permitted uranium project in Namibia, by Georges Forest International (GFI), a Belgian firm with questionable business practices. After being temporarily halted by Industry Canada, the transaction was called off due to GFI’s failure to transfer the funds. I speculated on the cause in a subsequent entry.

Both companies have since attempted to collect funds from each other (either as damages or break fee). A settlement has been reached. Forsys will not have to pay damages to GFI although it is unknown, yet likely that it will receive compensation from the Belgian firm. This is still no happy ending for Forsys whose share price is standing below half of the value envisioned by the 2009 deal.

According to a diplomatic cable made available to Wikileaks, Industry Canada halted the transaction under the national security provisions of the Investment Canada Act in 2009. Washington and Ottawa worried that GFI would provide uranium to Iran if it secured Forsys’ mine in Namibia. GFI is alleged to have held discussions with Iranian officials regarding the supply of uranium.


Brighter and Shinier Future for Asbestos?

25 01 2011

The town of Asbestos that is. I told you about the town’s struggle to revive its asbestos industry this summer when an Australian TV show sought to brand it as a lovely touristic destination. The provincial government is considering providing a guarantee for a CAD $58 million loan to a joint venture (Balcorp LTD) wishing to restart the Jeffrey asbestos mine as underground operations. Physicians, unions, foreign delegations and a lone MP have vehemently opposed this project which could lead to 200,000 tonnes of asbestos being exported to Asia per year. Amid this ruckus, exploration activities in the region are ongoing and, if fruitful, could substitute asbestos by gold.

Bowmore Exploration (TSX-V: BOW) is undertaking exploration activities on a 700 square km area in South-East Québec as part of its St-Victor project. A portion of this area is located only 20 km away from the town of Asbestos and exploration activities have shown discoveries of higher concentrations of gold than usual in that area. Bowmore’s St-Victor project is based on a very large low-grade sediment-hosted gold deposit similarly to Kinross Paracatu mine in Brazil or even Osisko’s Canadian Malartic Project. In fact, Osisko (TSX: OSK) has a 39% stake in Bowmore Exploration. The discovery of higher gold concentration in a small area of Bowmore’s leases has even encouraged Diamond Discoveries International to expand its caribou project by acquiring more mining claims in the region. This company is exploring for gold, chromite and PGMs.

Due to its mining background, the region is prêt-à-miner as miners have access to a network of paved roads and local private trails. Local resources include abundant electricity, water supply, work force and the mining facilities in the cities of Asbestos and Thetford Mines. Neighbouring communities are reportedly favourable to those projects – a rare occurrence since most extractive projects (shale gas, uranium and asbestos) have faced strong opposition from citizens in the past year.

Other junior miners active in the region include Nevado Resources whose Nicolet copper and gold properties are located within 30 km of Thetford Mines. Amseco Exploration could also be involved in the region, yet the firm’s web site is not all that clear.

Mining Exploration: Driven by Algorithms.

24 05 2010

A Québec company, Exploration Azimut (TSX-V: AZM) is relying on an approach based on algorithms to better target deposits worthy of further exploration. In a way, this may well be translating the success of Google’s PageRank onto the mining industry.

The company is using algorithms to target deposits of gold, platinum group metals, uranium and rare earths in the mining-friendly province of Québec. The system analyzes geoscientific data (often from governmental sources) that it manipulates in order to determine the most interesting exploration targets in function of the type of resources sought. The data used is available to others too. Still the sophistication of Azimut’s computer system, which took 15 years to develop, is a step ahead of competition according to the company. On 20 regional projects which had not been previously explored, 18 have given positive results. The company currently has a portfolio of 23 properties covering about 10,000 square kilometres in Québec, covering 10% of the total provincial mineral claims.

The reliance on the computer system has allowed the company to reduce the technical risks to mining exploration to a certain extent. Its financial approach is also based on cleverly managing the risks through joint ventures. Exploration Azimut has managed to conclude rather interesting deals with majors (think Rio Tinto and Goldcorp) and juniors alike. Agreements reached have often involved ceding up to 50% stake in a deposit in exchange of the acquiring firm committing to a certain level of exploration expenses to be carried along a specified time-frame and a cash payment. Partners may increase their stake by banking a feasibility study. In the last 6 years the company has signed no less than 26 agreements accounting to CAD $75 million in investments. In short, the company is self-financing. Not bad eh?

Rare Earth Plays outside China.

23 12 2009

I recently tipped you on the importance that rare earths elements (REE) would have in the coming years. I had then promised that I would follow up with a list of the up and comers of rare earths outside of China. I recently attended an investment salon focused on mining projects and was able to gather information on rare earth plays in Canada and elsewhere. I have selected a few companies that came across as interesting stock picks. All of these companies are definitely juniors are varying stages of resource development.

Avalon Rare Metals

Avalon Rare Metals is one of the most prominent new players in the field of rare earths. The company is the only TSX-listed company entirely focused on rare earths. 4 out of 5 of the companies projects currently at an advanced development stage. Its flagship property, the Nechalacho REE Deposit, located in Canada’s Northwest Territories, “is a very large, very rich deposit”. What makes this deposit more appealing than the companies other properties is the ratio of heavy rare earths of 25.4%. Heavy rare earths are generally more valuable as they are much less readily available. REEs found at this property include yttrium, tantalum, niobium, gallium and zirconium.

Commerce Resource Corp.

Another company called Commerce Resource Corp. also came across as especially appealing. This company focuses on tantalum and niobium. Tantalum is usually in demand for high-tech goods used in aerospace, life science industries while niobium is used in the composition of super alloys for steel structures. With the inclusion of 2 per cent niobium to steel, the PSI (pounds per square inch) capacity can be increased from 40,000 for standard steel to 120,000.

The company “hopes to become a large and profitable low-cost producer of niobium and tantalum for the global market”. At present the company is still essentially focused on the exploration and development of the Blue River project in BC and the Eldor Carbonatite project in Québec. The BC property consists of three deposits one of which, Upper Fir, could be brought into commercial production of tantalum and niobium eventually. This Eldor Carbonative project is in earlier development stage and focuses essentially on exploration at the moment.

MDN Inc.

MDN Inc is a company focused on the exploration and development of gold and rare earths. It draws cash flow from its 30 per cent stake in the exploitation of the Tulawaka gold mine with Barrick Gold while undertaking gold exploration in Québec and Tanzania. With regards to rare earths, the company has acquired a 28,75% stake in MCI in which IAMGold also holds a 37,5% stake). MCI which hold the Anita project, a niobium and tantalum play located in Québec’s Lac-St-Jean region. MDN could take a stake of up to 75 per cent of MCI in the coming three years.

Talison Tantalum

I know that I have been presenting you fairly junior companies. However, if you are looking for a company that has production up and running, Talison Tantalum can be of interest. This company was born from a split of Talison Minerals into two separate companies, one that would focus on lithium and the other on tantalum (no kidding eh?!). Anyhow, this company is producing about a third of the world’s tantalum supply and could produce up to 50 per cent of the global demand. The company holds the two largest tantalum mines as well as processing facilities. The company is already positioned as a dependable long-term source of tantalum worldwide. Overall production capacity is in excess of 2.3 million pounds of tantalum per annum.

It seems that even the most juniors of these companies have reasonable chance of succeeding. In light of the high economic priority that some governments have made of securing supply, pricing has been of little relevance to many users of REEs. As part of a ‘growth blueprint’ the Japanese government, taking note from the Chinese’s handbook on snatching resources, was planning on a state-backed resource acquisition for rare technology metals up for sales around the world. I’d love to see those two countries bidding on the same company