Source: Adrian Day for Streetwise Reports 03/13/2019
Fund manager Adrian Day looks at three junior resource companies that are following the prospect-generator model.
Midland Exploration Inc. (MD:TSX.V, 1.30) reported an early-stage copper-gold-molybdenum discovery in James Bay based on grab samples taken just prior to the end of the exploration season. Now, following soil testing and an IP geophysical survey at the 100%-owned Mythril, which seems to confirm and extend the possible discovery, Midland has announced a 2,000-meter drilling program to commence next week. The month-long program will consist of 12–14 shallow holes to test the various IP anomalies and showings, and which should be sufficient to confirm the mineralization from the grab samples.
Though the stock price has moved up since the initial announcement, it has much further to go if drilling confirms the initial testing. Aggressive investors can add to positions ahead of the drilling. Meanwhile, Midland is advancing other projects, including a drilling program underway on the Jouvex joint-venture with Soquem to test new targets.
Rare financing provides firepower for activities
Lara Exploration Ltd. (LRA:TSX.V, 0.48) saw its stock move up, unusually, after announcing an above-market equity raise for C$2 million. Lara has traditionally had very little stock dilution for an exploration company, but a delay in receipt of $1 million expected last October pushed the company to raise money to avoid missing a field season of work.
Several projects are active, with three expected to see drilling before summer. These include the Panalto project into which Capstone is earning. A $200,000 payment is due once permits are received, which Capstone also paying all of the property holding costs. Lara also plans to undertake further drilling on its new 100%-owned vanadium project before seeking a partner. The Maravaia property (part of the Curionopolis project) is now expected to be in production by September, and Lara will receive its $1 million out of projection. It also has a 5% carried interest and a 2% royalty.
Various other projects are available for joint-venture partners, including the attractive Puituco zinc project. All in all, this promises to be a very active year for Lara. It is a solid buy here.
Evrim advances on multiple fronts
Evrim Resources Corp. (EVM:TSX.V, 0.32) also has multiple activities at its various projects. First Majestic has reported strong exploration results at its Ermitaño project, which Evrim discovered, and on which it holds a 2% royalty. Drilling has commenced at the nearby Sarape project, funded by partner Coeur Mining. And Newmont has selected a project from its regional alliance with Evrim in the Northwest Territories; a $1.2 million exploration (including drilling) program at the Astro project is scheduled for this summer.
Other joint ventures and projects are also moving along, showing Evrim to be active on multiple fronts. Evrim is well funded, with $12 million cash. Given the disappointment of the Cuale drilling, the stock is cheap, its market cap supported by its cash and the value of the Ermitaño royalty. It may take a little more time for the market to give Evrim value for its other projects, but in the meantime, we have a great opportunity to buy this quality exploration company whose downside is well protected. Evrim is a strong buy here for patient investors.
GOLDCORP REDUX: Several of you have written in regard to my comments on the egregious pay to be received by top Goldcorp officers if Newmont is successful in its takeover, all supportive. Shareholders are getting tired of these shenanigans. One industry insider commented that bonuses and large compensation is for those who create value, not for when you destroy value. Amen to that. Meanwhile, the Shareholders’ Gold Council put out a release condemning the company’s board for approving these payments. Chairman Telfer, they note, “has presided over one of the most disastrous and egregious examples of shareholder value destruction in the mining industry.” They also note, which I did not, that Telfer will continue as deputy chairman of the combined company, making the payment and timing thereof all the more outrageous.
Adrian Day, London-born and a graduate of the London School of Economics, heads the money management firm Adrian Day Asset Management, where he manages discretionary accounts in both global and resource areas. Day is also sub-adviser to the EuroPacific Gold Fund (EPGFX). His latest book is “Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks.”
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Disclosure:
1) Adrian Day: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Midland Exploration, Lara Exploration and Evrim Resources. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. Funds controlled by Adrian Day Asset Management hold shares of the following companies mentioned in this article: Midland Exploration, Lara Exploration, Evrim Resources, Goldcorp and Newmont. I determined which companies would be included in this article based on my research and understanding of the sector.
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( Companies Mentioned: EVM:TSX.V,
G:TSX; GG:NYSE,
LRA:TSX.V,
MD:TSX.V,
NEM:NYSE,
)