A BMO Capital Markets report reviewed this multinational company’s Q3/18 numbers and Q4/18 outlook.

In an Oct. 26, 2018, research note, BMO Capital Markets analyst Edward Sterck reported that due to a “slightly light” Q3/18 for Glencore International Plc (GLEN:LSE), for it to meet the lower end of 2018 guidance will require “a 6% acceleration of output in Q4/18 versus Q3/18, which is certainly possible but suggests that going above the midpoint could be a challenge.”

Sterck reviewed how key products of Glencore fared in terms of production during Q3/18. Cobalt, lead, and thermal and met coal did well. Cobalt beat BMO’s forecast by 12%, driven by stronger-than-expected output at Katanga and Mutanda. Lead was a beat, too, by 3%. Thermal and met coal were in line and up 11% over Q2/18.

Nickel, copper and zinc were misses. Nickel was 18% lower than BMO’s expectation, resulting from weaker-than-expected performance at Sudbury and Murrin Murrin. Copper missed by 4% mostly due to lower-than-anticipated output from Mopani and the Australian assets. Zinc was 3% less than the forecast due to slightly decreased production at Mount Isa and the North American mines.

Looking forward, Sterck noted, for Glencore to attain the midpoint of guidance, it needs to boost copper, zinc, nickel and coal production each, by 10%, 6%, 45% and 2%, respectively, in Q4/18.

Sterck concluded that overall, it appears the company could attain the midpoint of production guidance by year-end 2018 but likely would not surpass it. The midpoint level is a drop from Glencore’s previous guidance, which was in the upper range, of US$2.2–3.2 billion, and BMO’s projection of US$3 billion.

BMO has an Outperform rating and a £4.50 per share target price on Glencore. The miner’s stock is trading today at around £3.18 per share.

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: none. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Disclosures from BMO Capital Markets, Glencore International, October 26, 2018

IMPORTANT DISCLOSURES

Analyst’s Certification
We, David Gagliano and Edward Sterck, hereby certify that the views expressed in this report accurately reflect our personal views about the subject securities or issuers. We also certify that no part of our compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.

Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Company Specific Disclosures
Disclosure 2: BMO Capital Markets has provided investment banking services with respect to Glencore within the past 12 months.
Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from Glencore within the past 12 months.
Disclosure 6A: Glencore is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: A) Investment Banking Services
Disclosure 9C: BMO Capital Markets makes a market in Glencore in Europe.

For Important Disclosures on the stocks discussed in this report, please click here.

A Canaccord Genuity report relayed and discussed the results of this company’s recent pilot plant testing.

In an Oct. 29, 2018 research note, Eric Zaunscherb, a Canaccord Genuity analyst, reported that Critical Elements Corp. (CRE:TSX.V) successfully produced battery-quality lithium hydroxide in pilot plant testing.

The company’s ability to now produce lithium hydroxide and lithium carbonate, both having been proven through testing, “provides it flexibility based on demand by strategic partner(s) and/or offtakers during the project financing phase, a distinct competitive advantage during ongoing negotiations,” Zaunscherb added.

The analyst pointed out that lithium hydroxide and lithium carbonate are the primary end products that cathode and battery manufacturers use. Currently, lithium carbonate is preferable over lithium hydroxide but “demand appears to be shifting toward lithium hydroxide,” he said.

Zaunscherb reviewed the pilot plant program and outcomes. The testing for lithium hydroxide was conducted, using a thermal leaching process, on spodumene concentrate from a 50 ton bulk sample from Critical Elements’ Rose lithium-tantalum project located in Northern Quebec. Zaunscherb reiterated that Rose currently boasts Proven and Probable reserves of 26.8 million tons at 0.85% Li2O along with “excellent metallurgy and a 17-year mine life with significant upside.”

Testing yielded both high recovery rates and high purity of lithium hydroxide, Zaunscherb indicated. Recovery rates of spodumene concentrate to lithium hydroxide, were 93%, or 80% overall, which exceeds industry benchmarks, of 70% to 75% and 65%, respectively. The purity of lithium hydroxide produced was higher than 99%. “With fewer purification steps to produce a high-quality product, Rose ore’s highly amenable metallurgy should translate to a comparatively lower capital and operating cost profile,” he wrote.

Currently, Zaunscherb noted, Critical Elements is now working on the engineering design of a lithium hydroxide conversion facility and the completion of the feasibility study for the phase 2 lithium carbonate or lithium hydroxide plant to be built in 2020. The feasibility study is expected to be ready by year-end.

The company is trading at a significant discount to covered peers, Zaunscherb highlighted. Canaccord Genuity’s target price on the Speculative Buy rated company is CA$1.50 per share. “As Critical Elements continues to derisk the project, determine the final flowsheet and land its strategic partner(s), we believe it will trade more in line with peers,” he said. “As such, we see delivery of the phase 2 feasibility study as a potential rerating opportunity for the company.”

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: none. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Disclosures from Canaccord Genuity, Critical Elements Corp., Flash Update, October 29, 2018

Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research.

Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Required Company-Specific Disclosures (as of date of this publication):

Critical Elements Corporation currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided investment banking services to Critical Elements Corporation.

In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking services from Critical Elements Corporation.

In the past 12 months, Canaccord Genuity or any of its affiliated companies have been lead manager, co-lead manager or co-manager of a public offering of securities of Critical Elements Corporation or any publicly disclosed offer of securities of Critical Elements Corporation or in any related derivatives.

Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from Critical Elements Corporation in the next three months.

An analyst has visited the material operations of Critical Elements Corporation. No payment was received for the related travel costs.

Canaccord Genuity has been engaged by Critical Elements Corporation as financial advisor to pursue, engage and evaluate global strategic partners and investors to advance the Rose Project to production, and will receive fees contingent upon the successful completion of such financing transactions.

Disclosures are available here.

This company provided an update on its own test mining and on federal governmental actions.

Energy Fuels Inc. (EFR:TSX; UUUU:NYSE.American) reported that initial encouraging results from test mining of ore at its La Sal mines complex Utah have prompted it to conduct further study of the extent of the mineralization there and its economic impact.

To date, Energy Fuels has mined, sampled and evaluated 20 tons of material from La Sal over a three-week period. The findings revealed two key points.

One is that high-grade vanadium associated with lower-grade uranium exists there. Because of the uranium’s low grade, it hadn’t been detected or mined historically. “This material is attractive at current vanadium prices,” noted a news release. The second is that unlike in the past, the company now can identify such mineralization using the technology it has.

“If we continue to see similar results as the program advances, it is our hope that we can mine the La Sal Complex in a manner that targets vanadium during periods of elevated vanadium prices, even during periods of lower uranium prices,” President and CEO Mark Chalmers said in the release. “The ability to target higher-grade vanadium zones, separately and independently from higher-grade uranium zones, in these mines may be, we believe, a true paradigm shift in the way these mines can be mined going forward.”

Based on these results, management believes further study is warranted to delineated the extent of such mineralization not just at La Sal but, also, Energy Fuels’ other properties and determine how additional ore would impact the per-pound cost of mining vanadium and uranium from those mines.

The company is continuing its test mining program at La Sal, aiming to recover and test at least 5,000 tons of mineralized material. It plans to also conduct surface drilling there, looking for high-grade vanadium mineralization.

In other news, Energy Fuels received approval from the U.S. Forest Service and U.S. Bureau of Land Management to expand its mining operations at La Sal. This encompasses vent shaft construction and exploration drilling.

Finally, the U.S. Environmental Protection Agency, on Oct. 19, 2018, withdrew proposed legislation that “would have imposed unnecessary, duplicative and expensive additional requirements on in situ recovery facilities in the U.S.,” including those of Energy Fuels, the release indicated. The EPA’s reversal removes an additional risk factor for the company’s operations.

“Energy Fuels is also pleased to see positive news on the federal regulatory front,” Chalmers commented.

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Energy Fuels. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Sales of this firm’s fertilizer product increased tenfold year over year.

Having already sold all of the soil and plant fertilizer it can produce in 2018, Verde AgriTech Plc (NPK:TSX; AMHPF:OTCQB) announced it will add another processing plant in 2019 to meet demand.

“Though it pains us to turn away buyers because we have now reached maximum production capacity, we are even more determined to accelerate our expansion and supply an ever greater numbers of Brazilian farmers,” President and CEO Cristiano Veloso said in a news release.

During the most recent planting season, Verde AgriTech sold about 10 times more Super Greensand (called K Forte in Brazil) than it did in 2017, for a total of nearly 40,000 tons (40 Kt). To fill the rest of its existing orders by the season end in late November, the company has been running its plant around the clock every day.

Once the rainy season begins, and for its duration, through March, Verde shifts to processing and selling another of its products, Alpha, which gets sprayed on crops after they begin to grow.

Due to Verde AgriTech maxing out production capacity, it will build a second processing facility where it will be able to produce 600 Kt per year. The new plant, together with the current one that accommodates 200 Kt production, will allow for 800 Kt in total annual production. The company projects that it will attain that quantity in 2020. “Our expansions are only just beginning,” Veloso noted.

According to the release, “financing for the expansion is budgeted to be a mix of accumulated cash flow and subsidized debt from Brazil’s development bank (BNDES).”

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following company mentioned in this article is a billboard sponsor of Streetwise Reports: Verde AgriTech. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Verde AgriTech, a company mentioned in this article.

The Critical Investor presents an analysis of Adriatic Metals by Kees Dekker, a mining investment consultant.

Introduction

The Critical Investor: In this article, Kees Dekker analyzes Adriatic Metals Plc (ADT:ASX; 3FN:FSE), an Australian junior exploring a very high grade polymetallic project called Rupice in Bosnia and Herzegovina. Kees and I had our doubts as the last drill results at the border of the drill permitted area took a very long time until release, but when they did came in, the results appeared to be pretty good again. Kees does a good job calculating metal value including recovery and payability, basing his cash margin on this, and hereby maintaining a conservative stance which seems healthy for an early stage exploration play.

With the corporate tax in Bosnia and Herzegovina standing at a very cheap 10%, and a potential operation dealing with very small tonnage and thus low capex, there is no doubt in my mind that this could be a very profitable mine someday. If I would take a 2Mt resource for the entire mineralized envelope (Kees takes 1.58Mt for the deeper part only), a decent 10-year life of mine (LOM) would deliver a 570tpd (350 days per annum) operation, and using an average small scale underground capex/tpd of US$80,000/tpd, the total capex would come in at US$45.6 million. Let’s use some margin of error and take US$50 million and add 50% of capex as sustaining capital to opex as underground development seems relatively limited. Using the calculated cash margin of US$290 million (without sustaining capital) of Kees as a base, this would result in a NPV8 of US$80 million, and the calculated cash margin of US$370 million would result in a NPV8 of US$120 million. This is all very conservative, and considering the current market cap of about US$40 million and exploration ongoing there is a lot of upside. This could be a small gem.

Next up is the analysis itself by Kees Dekker.

All presented charts/tables are provided by Kees Dekker, unless stated otherwise.
All pictures are company material, unless stated otherwise.

1. Executive Summary

Adriatic Metals Plc (ADT:ASX; 3FN:FSE) is a recently listed Australian company with two complex base metal–precious metal deposits in Bosnia and Herzegovina. Its share price has shown a spectacular appreciation over the past few weeks. However, at its current share price Adriatic has an Enterprise Value of approx. US$37 million, assuming full dilution, which must be considered modest compared to the value of the deposits in its portfolio.

This study concludes that the company is still vary good value based on the cash operating margin one can expect from mining the resources of one deposit (called Veovaca) and the volume of the deeper portions of an ore shoot at another deposit (Rupice), derived from published drill results.

The deeper, very high-grade portion of the shoot at Rupice, defined over an estimated 200 m plunge, 40 m width and 55 height, has the potential to generate a total operating cash of US$370 million (assuming that its BaSO4 content can be upgraded to a drill mud additive product) and US$290 million (without BaSO4 sales). Each 50 m additional plunge extent established from further drilling would increase the cash margin by US$90 million (incl. BaSO4 sales), or US$70 million (without BaSO4 sales).

This study arrives at prospective at-mine revenue from Indicated Resources at Veovaca of at least US$260 million based on at-mine revenue of US$56/t in-situ, which as an open pit mine could well generate cash from operations of at least US$130 million. This assuming that the BaSO4 content in the resources can be concentrated to a marketable product. If not, this deposit is of little to no value.

There are a number of upsides to Adriatic apart from adding to the deposits dimensions, being the value of the shallower portion of the Rupice shoot, exploring targets in the vicinity and at the same stratigraphic level, and upgrading the BaSO4 concentrate to a higher grade product for which the sales price is a multiple higher than the drill mud additive product.

The main risks are related to test work showing poor metallurgical performance for the mineralization and the difficult and ambiguous legislative environment in the jurisdiction, which complicates obtaining the necessary rights and permits to advance projects and securing the rights to new discoveries.

This share being an exploration play is definitely not for widows and orphans, but, for the less risk adverse, constitutes an attractive opportunity on a risk/return basis.

2. Introduction

Adriatic Metals (ASX.ADT) is an Australian company with a number of complex base metal–precious metal deposits in Bosnia and Herzegovina. The company was listed on the Australian stock exchange in May 2018 and its price has since risen spectacularly from A$0.20 to peak at A$0.585 on 29 June 2018. On that day it announced a parallel listing on the Frankfurt Stock Exchange (under the code FSE:3FN).

According to an announcement dated 23 May 2018 the company has 82.95 million shares currently quoted and another 47.85 million shares in escrow for 18 months. Total shares therefore amount to 130.80 million to which must be added 19.5 million share options, of which 18.5 million are currently in the money. Fully diluted the market capitalization is A$65.6 million at the share price on 19 October of A$0.44. When deducting the A$5.4 million cash raised from exercising the options and the cash balance of A$8.5 million in October, the Enterprise Value on a diluted basis is A$51.7 million, or US$37 million.

The following sections will show that this valuation is very low for what the company has already proven by drilling and the prospects for additional discoveries.

3. Review of the Mineral Prospects

3.1 Background

The information, wording and illustrations presented in this section are derived from:

  • A prospectus dated 27 April 2018.
  • Press releases with drill results dated 12 June, 22 June, 16 July, 17 July, 29 August, 28 September and 19 October 2018.
  • A press release dated 22 June 2018 with drill results.

The Adriatic key asset is the Vares Polymetallic Project, comprising the Veovaca and Rupice deposits, which is situated in Bosnia and Herzegovina. The projects were acquired from Balkan Mining Pty Ltd in 2017 while Adriatic was a private company. The project is located near the town of Vareš, which was a historical mining and industrial center with infrastructure including sealed roads, grid (coal/hydro) power, heavy duty rail and blast furnaces. Figure 3.1_1 extracted from the prospectus shows a map putting the two deposits into a regional context.

Figure 3.1_1

Location of the Rupice and Veovaca Deposits Within the Balkan Region

The two deposits are located in approximately 17 km apart (refer to Figure 3.1_2 which has also been extracted from the prospectus).

Figure 3.1_2

Regional Geological Map for the Area Around Rupice and Veovaca

The above map also identifies the mineral rights areas secured by Adriatic, which cover the two deposits proper, and the numerous other targets, their names identified in green. The concessions acquired through the acquisition of a bankrupt entity are of very limited size: 83 hectares (ha) at Rupice and 191 ha at Veovaca.

Geologically the deposits are situated in a block of ground that has been thrust on top of much younger rocks. Polymetallic mineralization is predominately hosted in the matrix of a polymictic breccia of banded shale, siltstone or sandstone clasts, both overlain and underlain by a succession of sandstone, siltstone, shale or limestone. The mineralization seems to be semi-comfortable with the lithology.

The technical report postulates that the mineral field is of the Besshi-style type, which implies that the metals are of sedimentary exhalative origin. Figure 3.1_3 from the Adriatic Metals prospectus shows schematically the setting for Besshi-type deposits.

Figure 3.1_3

Geological Setting of Besshi-type Deposits

Getting a handle on what specific type of deposits Adriatic is dealing with has implications for regional prospecting. For example, Besshi-type deposits form in clusters along stratigraphic horizons and can be restricted in aerial extent. This means that there could be many more Rupice and Veovaca type deposits at the same stratigraphic level in the project area.

3.2 The Rupice Deposit

The Rupice deposit is known from exploration activities, which commenced in 1952 and continued intermittently until 1990, initially focusing on barite (= the mineral with chemical formula BaSO4) mineralization and later on the polymetallic mineralization. The change is understandable in the light of very high BaSO4 grades at shallow levels with low base metal values, but with deeper drilling encountering much higher base metal and precious metal values. Mineralization at Rupice, and Jurasevac-Brestic almost one kilometer to the southeast, have induced polarisation (IP) geophysical anomalies associated with them (see Figure 3.2_1, extracted from the prospectus).

Figure 3.2_1

Plan of IP Anomalies Over the Rupice Tenement Area

Interpretation of drill results at Rupice concluded that the mineralization appears to be dominantly strata-bound and hosted within brecciated sediments in a shoot dipping approximately 50 degrees to the east. Whereas the prospectus still suggested the shoot to plunge to the northeast, in later press releases the interpretation of the plunge direction was changed to north (see Figure 3.2_2)

Figure 3.2_2

Drill Location Map Showing Interpreted Dip and Plunge Directions of Mineralization

The red traces show the direction of the dip and the arrows the direction of the plunge, which is due north.

Whereas drill results from June 2018 onwards have successfully tracked the plunge over considerable vertical extent all the way up to the northern concession border, successive cross section interpretations show a considerable reduction in the dimensions perpendicular to the plunge direction. As one example, figure 3.2_3 illustrates the progressive reduction in interpreted horizontal dimension of the high-grade shoot oblique to the plunge as extracted from the various press releases.

Figure 3.2_3

SE-NW Cross Section Over Borehole BR 5-18 – 17 July 2018 Press Release

SE-NW Cross Section Over Borehole BR 5-18 – 28 September Press Release

SE-NW Cross Section Over Borehole BR 5-18 – 18 October 2018 Press Release

The development over time of the cross sections would have been cause for concern about the continuity of the mineralization, but on the other hand consistent intersections along plunge of the deposit, where it is developed widest, give much comfort. Figure 3.2_4 shows the geological interpretation along the interpreted plunge of the high-grade shoot, extracted from the October press release.

Figure 3.2_4

Geological Interpretation Along Plunge Direction of the Rupice Shoot

According to this interpretation the shoot plunges at 60 degrees from surface for approximately 150 m after which it abruptly levels off to 30 degrees and shows a considerable increase in dimension vertically.

This illustration also clearly shows the dramatically improving base and precious metals grades with depth whereas the BaSO4 grade remains high, but with a declining trend.

According to the 22 June news release, mineralization in holes BR-2-18 and BR-3-18 is very visible and consists of galena (PbS), sphalerite (ZnS), chalcopyrite (CuFeS2) and barite. There is no mention of tetrahedrite ({Cu,Fe}12Sb4S13), which according to the prospectus is present in minor quantities. As tetrahedrite is a copper mineral containing some antimony, appreciable quantities of the mineral could result in penalties imposed by off-takers of the copper concentrate.

Table 3.2_1 summarizes the drill results for this deeper, higher-grade portion of the shoot with the holes listed in the order from shallower to deeper down plunge.

Hole BR76-89 was drilled before Adriatic’s involvement and was not assayed for copper and precious metals. The holes are over a plunge distance of 200 m, define the deposit over a vertical height of 55 m (see Figure 3.2_4) and in cross section at least 40 m wide (see Figure 3.2_3). This amounts to a volume of at least 0.44 million cubic meters.

With the high specific gravity of 4.5 for barite and at a content of BaSO4 in the middle forties an average density of at least 3.6 can be expected, especially considering the density contribution of the sulphide minerals. The defined deeper portion of the shoot would therefore contain at least 1.58 million tonnes.

3.3 The Veovaca Deposit

Similar to Rupice, Veovaca is a sediment-hosted deposit with mineralization present in a brecciated zone within a folded sediment package. This sediment package and the breccia zone appear to be steeply dipping to the northwest and plunging to the northeast.

Figure 3.3_1 shows a geological map of the immediate surroundings of the deposit and indicating interpreted potential down plunge, extracted from the prospectus.

Figure 3.3_1

Geological Map for the Veovaca Deposit

According to the technical report in the prospectus 19 holes at the Orti prospect over an area of 500 m x 150 m indicated potential for resources there grading 1.2%–1.4% Pb, 1.7%–2.1% Zn and 21%–26% BaSO4.

Figure 3.3_2, also extracted from the prospectus, shows a longitudinal section along trace X-X’ on Figure 3.3_1 to illustrate the deposit outline and potential at depth and down plunge.

Figure 3.3_2

Longitudinal Section Through the Veovaca Deposit

On the longitudinal section are also indicated due diligence boreholes drilled by Adriatic in 2017. Table 3.3_1 summarizes the results of these holes over a strike length of 100 m listed in sequence from west to east. The deeper holes further east, with spotty intersections, have been ignored.

The results are attractive for an open-pittable deposit with low strip ratio, but the holes were clearly sited along a favorable drill fence in the center of the deposit as the grades for many of the other 11 holes are clearly lower. This is also evident from the average grades of a resource estimation carried out by CSA Global in February 2018 based on 48 historical drill holes and the 16 drill holes drilled in 2017 by Adriatic, some of which twinned historical holes.

According to CSA Global, the combined drill-hole density of approximately 30 m x 30 m closing in places to 20 m x 20 m, provided sufficient data points to model the polymetallic (lead, zinc, silver, gold and barite) lenses over a strike length of approximately 550 m, and the silver and gold over 250 m of the 550 m strike.

Mineral resources were reported using cut-off grade of 0.5% ZnEq, and separately for the deposit area where gold and silver assays were taken and used, and outside of the area where there are no assays for gold and silver (see Figure 3.3_3, extracted from the prospectus, for relative location of the two resources).

Figure 3.3_3

Relative Location of the Areas With and Without Resources With Precious Metal Grades

Table 3.3_2 gives the resources reported as of Indicated category confidence level, ignoring 2.6 million tonnes Inferred resources, because these have grades that will unlikely be economical. The cut-off grade of 0.5% ZnEq is probably too low given the low net payability of zinc, which is usually between 50% and 60%, which converts the 0.5% threshold to approx. US$15/t.

4. Economic Potential

4.1 Introduction

The projects are still at a very early stage and no economical value can be “calculated,” but at best estimated using broad-brush assumptions. This section will apply such to the estimated deposit sizes to give an indication what can safely be assumed as established to place the current Enterprise Value in perspective and the sensitivity of the deposit values to success in extending their dimensions.

Table 4.1_1 shows the spot metal prices at 19 October and broad brush assumptions used for metallurgical recovery and net payability after off-take terms and all realization charges.

The assumptions have been purposefully kept conservative. For example, according to the technical report all elements at Veovaca had a historical recovery of 90%. Given the low grades for Pb and Zn and the absence of numbers presented (elsewhere in the prospectus it is mentioned that there are no historical production statistics), much lower recoveries have been assumed. The net gold payability reflects the relatively low gold grade, which can be expected for the Cu-concentrate.

The spot price for BaSO4 is not generally available and reference was made to press release of Mountain Boy Minerals Ltd dated 18 April 2018, which states “barite is currently selling from US$120 to US$180 per ton depending on the location.” It should be noted that low grade barite concentrate that is used as an additive to oil drilling mud has certain maximum criteria for mercury (i.e., 1 ppm), cadmium (3 ppm) and lead (1,000 ppm) content. Given the association of the barite with lead mineralization, it still has to be proven that lead minerals can be sufficiently separated to yield a marketable product. However, the Veovaca mine has reportedly sold BaSO4 when in operation.

4.2 The Potential of the Rupice Deposit

The approach to gauge the potential of the Rupice Deposit is to calculate the at-mine value of the material that has until now been delineated. Table 4.2_1 gives the derivation of this.

The calculation above indicates that the value of the deeper higher-grade portion of Rupice is US$332/t, assuming that the barite can be concentrated to a marketable product. Zinc, silver and lead are the products of most economical interest, accounting for more than 62% of the total value.

Even without barite the calculated value amounts to US$283/t.

Based on the minimum amount of 1.58 million tonnes in the deeper, higher-grade portion of the shoot, as derived at the end of Section 3.2, prospective at-mine revenue is US$525 million with barite as a saleable product and US$448 million without. This revenue would be earned at a very high cash operating profit margin, because the deposit would lend itself for bulk underground mining and total cost per tonne treated would probably be lower than US$100/t–US$125/t, with the higher number accounting for very complex metallurgical processing. If applicable the cash margin would therefore be US$290 million (without barite sales) and US$370 million (with barite sales).

The above values are for the dimensions 200 m plunge direction, 40 m width and 55 m height. It is unlikely that further drilling will affect the height much, but width and especially plunge length can be extended from additional drill results. Each 50 m additional plunge extent would increase the cash margin by US$90 million (including barite sales), of US$70 million (without barite sales).

In conclusion, only little exploration success from what is currently known will have a dramatic impact on the value of Rupice.

4.3 The Potential of the Veovaca Deposit

The approach to gauge the potential of the Veovaca Deposit is similar to that for the Rupice Deposit. Table 4.3_1 gives the derivation of this.

To also arrive at a more realistic value for the Indicated Resources that were reported without precious metal grades the average silver grade was estimated based on the relative lead grades, as the silver is most probably included in the mineral galena (PbS). The gold grades has been ignored as it may well be associated with pyrite (FeS2) and therefore of no value.

The table shows that the at-mine value per tonne of Veovaca resources is US$56 assuming that barite concentrates can be sold. It would be only US$38/t without barite as a marketable product. For an open-pit operation a value of US$56/t is attractive. Unfortunately, no information is available about the prospective strip ratio associated with the resources. As long as the strip ratio is below 4.3 the cash operating profit margin will be 50% or more, assuming mining cost of US$3/t, processing cost of US$15/t and G&A cost of US$5/t treated.

Given the illustrations in Section 3.2.3 it seems highly likely that the strip ratio is moderate. Therefore, assuming barite can be concentrated to a marketable product, the at-mine revenue of the Indicated Resources at current prices would be approx. US$260 million and generate operating cash of US$130 million.

Should it not be possible to sell barite the Veovaca deposit has no to little value.

5. Upsides and Risks

5.1 Upsides

In addition to adding to the delineated Rupice and Veovaca deposits there are a number of other upsides, being:

  • Proving up the high-grade Rupice shoot down plunge after obtaining expansion of the concession, which has been approved by the municipal authority and the Ministry of Mining, subject to a public review process, which is expected to be completed in November 2018. Figure 5.1_1, extracted from the October 2018 corporate presentation, shows the proposed new concession area.

    Figure 5.5_1

    Proposed Extension of the Concession Area Around Rupice

  • The above assumptions have erred on the conservative and ignored any value for the shallower portion of the Rupice deposit, which has very high BaSO4 grades and grades for Pb and Zn in percentages and material precious metal credits.
  • The numerous other targets, shown in Figure 3.1_2, along the same stratigraphic horizon as Rupice and Veovaca and with historical exploration results showing Pb-Zn mineralization. In particular Bresic-Jurasevic at close proximity to Rupice is of interest with Adriatic having sampled dumps there, assaying high base metal and precious metal values.
  • Given the substantial BaSO4 content and grades Adriatic may well explore a processing route to concentrate the mineral to a high grade (i.e. +98%) instead to a product for drilling grade barite, which must have a density above 4.1 (therefore >78% BaSO4), and selling at prices that are a multiple of the product price assumed in the above estimations.

5.2 Risks

The main risk associated to the value of Adriatic are:

  • The lack of information on the metallurgical performance of the mineralization. Whereas polymetallic deposit can be of very high grade such as indicated at Rupice, they are usually also metallurgically complex with relatively low recoveries and deleterious elements that find their way in concentrates resulting in penalties. One of the obvious metallurgical risks is inability to keep mercury, cadmium and lead contents in barite concentrate below maximum thresholds for marketing purposes.
  • The high-grade plunge may well be offset by a major fault just north of the current concession border.
  • Any application for adjacent areas and other new mineral rights is complex, requires involvement of many stakeholders and is uncertain to be granted. Mineral rights are regulated at all legislative levels, at national government level and the level of 10 Cantons composing Bosnia and Herzegovina. The project area falls in the Zenica-Doboj Canton.

This ends the full analysis of Adriatic Metals by Kees Dekker. If you have an interest in contacting Kees Dekker, this is possible through using the contact form on my website www.criticalinvestor.eu. Stay tuned for more analysis by Kees coming soon. -The Critical Investor

I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter on my website www.criticalinvestor.eu, in order to get an email notice of my new articles soon after they are published.

The Critical Investor is a newsletter and comprehensive junior mining platform, providing analysis, blog and newsfeed and all sorts of information about junior mining. The editor is an avid and critical junior mining stock investor from The Netherlands, with an MSc background in construction/project management. Number cruncher at project economics, looking for high quality companies, mostly growth/turnaround/catalyst-driven to avoid too much dependence/influence of long-term commodity pricing/market sentiments, and often looking for long-term deep value. Getting burned in the past himself at junior mining investments by following overly positive sources that more often than not avoided to mention (hidden) risks or critical flaws, The Critical Investor learned his lesson well, and goes a few steps further ever since, providing a fresh, more in-depth, and critical vision on things, hence the name.

Kees Dekker is a freelance mining investment consultant, holding BSc, MSc (both Geochemistry), BCom and MBA degrees, and has more than 35 years of experience in the mining industry, ranging from geologist to mineral economist to management appointments. Since 2012 Dekker has been a freelance consultant involved in technical reviews of, among others, the Stillwater Mining Company operations and projects, Nevada Iron Limited, New Chris Minerals, and for private equity funds such as QKR, Casablanca Capital (Cliffs Natural Resources) and Blackstone Special Opportunity fund (Talvivaara mine in Finland and the Renard diamond project of Stornoway).

Disclaimer:

The author is not a registered investment advisor, and currently has a long position in Adriatic Metals. Kees Dekker is also not a registered investment advisor, and currently has a long position in Adriatic Metals as well. All facts are to be checked by the reader. For more information go to the websites of the mentioned companies and read the available company information and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.

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As lithium is declared a “critical metal” in the U.S., a young, NASDAQ-listed company is forging ahead to bring a lithium deposit into production in North Carolina.

Lithium is essential for electric vehicle and energy storage batteries. Much of the world’s lithium supply comes from Argentina and Chile, but both countries present obstacles. As Argentina experiences economic uncertainty and high inflation, the government has imposed taxes on mineral exports. Mines in Chile face headwinds with high government royalties and challenges with water.

In the United States, the supply of lithium has become a national security issue. In May 2018, lithium was included on a list of 35 minerals critical to the U.S. This list was a result of an executive order President Trump signed in December regarding “A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals.”

Against this backdrop, Piedmont Lithium Ltd. (PLLL:NASDAQ; PLL:ASX) is moving quickly to define lithium resources in North Carolina and bring the deposit into production. The state was the home of two large, historical lithium mines run by FMC Corp. and Albemarle Corp., and Albemarle, the number one global lithium player, is headquartered there. FMC has spun out its lithium unit just this month, forming a new company called Livent Corp. Albemarle and Livent both maintain significant lithium processing facilities in North Carolina.

Piedmont Lithium’s project—the Piedmont Lithium Project—includes 1,199 acres in the Carolina Tin-Spodumene Belt, the area that produced much of the world’s lithium from the 1950s until 1990. It is a spodumene—hard-rock—project, in contrast with the brine projects of Argentina and Chile.

“The Piedmont Lithium Project has unique strategic value being the only major U.S. lithium spodumene project.” – David Talbot, Eight Capital

Piedmont’s President and CEO Keith Phillips told Streetwise Reports that the state of North Carolina is an ideal location for the lithium mine. “Forbes in 2017 rated North Carolina the number one state in the country for business,” Phillips said. “There are no state mining royalties, a 23% corporate tax rate and the state’s historical lithium production means there is an experienced work force that we have been able to tap.”

In June, the company announced a maiden mineral resource for its Core property of 16.19 million tonnes at 1.12% lithium oxide, containing 182,000 tonnes of lithium oxide or 450,000 tonnes of lithium carbonate equivalent (LCE).

The company has announced that it plans to convert the mineral directly to lithium hydroxide from spodumene; lithium hydroxide is in demand for battery use and commands a higher price than lithium carbonate, which is what most mines produce.

“Demand for lithium hydroxide for batteries is forecast to increase 20-fold, from current demand of 20,000 tons per year to 400,000 tons per year by 2027, as EV sales accelerate,” Phillips stated. “Tesla’s Model 3 was the bestselling car in the U.S. in August by dollar volume, with nearly $1 billion of sales.”

The company released a scoping study in July on the vertically integrated lithium project. The study estimates annual production of 22,700 tonnes per year of lithium hydroxide, an initial 13-year mine life with two years of concentrate sales and 11 years of integrated operation, and initial capex of $91 million for the mine and concentrator, with the second-stage chemical plant largely funded by cash flow.

Piedmont plans to increase the economics of the project by mining byproducts quartz, feldspar and mica, which provide significant byproduct credits. According the company, the mine will have estimated “first quartile spodumene concentrate costs of US$193/t and lithium hydroxide costs of US$3,112/t, both net of by-product credits and inclusive of royalties” with an “estimated NPV8% of US$888mm and after-tax IRR of 46% with ~2-year payback.”

Piedmont is investigating extending the projected 13-year mine life. In addition to the Core property, Piedmont has also been exploring its Central and Sunnyside properties, with results yielding “significant intercepts of high-grade lithium mineralization, including 34.0m at 1.04% Li2O of continuous mineralization across one pegmatite in Hole 18-CT-002 and 20.9m @ 1.42% Li2O of continuous mineralization across one pegmatite in Hole 18-SS-001.”

CEO Phillips stated, “We are exceedingly happy with the initial results from Central and Sunnyside, with Hole 18-CT-002 in particular being the widest intercept encountered to date. We have delineated a world-class resource of 16.2Mt @ 1.12% Li2O at our Core property, supporting a project life of 13 years as reported in our recent Scoping Study. These initial results at Central and Sunnyside indicate the potential for a significant project life extension.”

Piedmont Lithium has caught the attention of industry analysts. Joe Reagor, an analyst with ROTH Capital Partners, wrote on October 18, after Piedmont’s release of the Central and Sunnyside drill results, “We were encouraged by the initial results and believe the company will look to expand upon these in the near future.”

Regarding the intersection of 34 meters on the Central property, Reagor commented, “We view this as encouraging as it is a long continuous intercept of high-grade lithium, while the company’s flagship Core property did not have continuous intervals of this magnitude. If the company is able to expand upon these results, it is possible the Central property could overtake the Core property in the project development Queue, in our view.”

ROTH increased its target price to US$36 from US$34 per ADR.

Eight Capital does not have Piedmont Lithium under formal coverage, but on October 18, analyst David Talbot wrote, “We believe this early stage lithium developer is in a unique position to leverage its position as a first mover in restarting lithium production within the Carolina Tin-Spodumene Belt (TSB), a historic lithium camp.”

He also noted Piedmont’s “ideal location: The Piedmont Lithium Project has unique strategic value being the only major U.S. lithium spodumene project, shielding investors from emerging market concerns. Low-cost lithium hydroxide conversion direct from spodumene is to take advantage of a Li compound with faster growth prospects and potentially higher prices versus Li carbonate.”

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5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Piedmont Lithium, a company mentioned in this article.

Disclosures from ROTH Capital Partners, Piedmont Lithium Ltd., Company Note, October 18, 2018

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Greg Johnson, chairman and CEO of Metallic Minerals, sits down with Maurice Jackson of Proven and Probable to discuss his company’s silver exploration in the Yukon.

Maurice Jackson: Joining us today is Greg Johnson, the CEO and chairman of Metallic Minerals Corp. (MMG:TSX.V), which is known for high grade silver in Canada’s Yukon Territory.

Today’s interview will be the first of a three-part series, introducing the value proposition for the Metallic Group of Companies comprising Metallic Minerals, Group 10 Metals and Granite Creek. These are three separate leading exploration companies, each with a different metal of focus, but with a common approach to business under the proven management of the Metallic Group.

Today, we will focus on Metallic Minerals, a leading explorer of high-grade silver in the Yukon Territory. Mr. Johnson, for someone new to the story, who is Metallic Minerals? What is your flagship project? What is the thesis you’re attempting to prove?

Greg Johnson: Metallic Minerals is a leading explorer for high-grade silver, and we are exploring in the Keno Hill silver district of Canada’s Yukon territory. This famous silver district is one of the highest-grade silver producers in the world, producing over 200 million ounces of past production and hosting over 100 million ounces of current resources.

Over the past two years, Metallic Minerals has consolidated the district adjacent to Alexco Resources, and we are undertaking exploration along the extensions of the known productive structures that continue onto our land holdings. We believe that the Keno Hill Silver District has the potential to be a billion plus ounce silver district, and geologically is very similar to the Coeur d’Alene District in Idaho, which has produced over 2 billion ounces of silver from very similar style veins.

Maurice Jackson: Please share where in the Yukon the Keno Silver Project is located and provide us with some historical context.

Greg Johnson: The Keno Silver Project is located in the central part of the Yukon and was discovered after the famous Klondike Gold Rush with dozens of producing mines developed in the district over the years since the 1920s to the present.

Metallic Minerals has consolidated what was previously very patchwork land ownership, with more than 40 different owners in the district. It’s largely now Alexco and ourselves, with eight past-producing, high-grade mines on our holdings, giving us excellent exploration potential.

Exploration of the Keno District over the past few years has seen some major new discoveries including the Bermingham silver deposit by Alexco, which is probably one of the best new silver discoveries in the industry, by grade and quality. It really demonstrates the remaining potential in this proven high-grade district for new discoveries.

Maurice Jackson: Mr. Johnson, we’ve covered some good background on the Keno Silver Project. Walk us through the project.

Greg Johnson: I think a good way to start is by taking a look at a map of the lower part of the Yukon. You can see on this map, the Keno District is right in the middle of the Yukon, located on the highway. There’s grid power on site with a mill operated by Alexco Resources. The Silver Trail highway from the Keno area connects to the Klondike highway leading through the capital, Whitehorse, and down to existing port shipping facilities, in Skagway, Alaska.

All the infrastructure that’s needed to build a mine is already here in the Keno District. This project also sits within the traditional territory of the Nacho Nyak Dun First Nation, who have comprehensive cooperation benefits, agreements in place with both Alexco and some of the other most advanced projects in the region. It’s really an excellent place to be exploring.

If we take a look at a regional map of the district you’ll see the Alexco holdings in the light green and the Metallic Mineral holdings in the golden brown color, that really forms the core part of the Keno Hill Silver District, where these high grade silver veins occur.

Within the region, there are additional players, such as Victoria Gold Corp. (VIT:TSX.V), which is developing a large open-pit mine that’s currently under construction. To the north, Atac Resources, partnered with Barrick Gold on the Rau Trend property, which is adjacent to our Mackay Hill project, another high-grade silver project that we’ll talk about a bit later.

On this map you can more clearly see the road access in the area, with Keno city and the Keno Hill mill in the center of the district. This infrastructure gives accessibility to the entire property and will really facilitate a development of any resources in the future.

Alexco Resources built the current mill in 2010. You’ll see that the average grade is between 840 and 930 grams per tonne for the current mine plan for Keno Hill. This is the highest grade of silver in its class. At 3.5 to 4 million ounces per year, this would make this a top 10 silver producer in terms of silver production levels among listed companies.

You’ll notice that the capex for the new mines is quite low at $27 million dollars, with an exceptional IRR, and that’s because these deposits are quite shallow. These deposits are very high grades, and the relatively low tonnage and near surface depths make for a low capital investment to bring these to production.

If we take a look at grade of the Keno District versus grade of the other primary silver mines in the industry, this chart compares the mine grades of those various projects.

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What you’ll see on the far right are a number of relatively low grade mines, then a large group of mostly underground, medium grade deposits. Then on the far left of the chart it highlights six silver mines that truly stand out in terms of their grade.

Keno Hill, is the second highest total grade, and the highest in terms of silver grade with the new mine plan of any of those deposits. What also stands out in this comparison is that it is located in Canada. It’s one of the few Canadian silver projects and thus among the lowest political risk.

The style of deposit and the style of the veining that we see at Keno occurs as high sulfide, silver, lead, zinc veins. These are structures that form in the key host rocks, such as the Keno Hill quartzite and greenstones. What you can see in this image is underground at the Bellekeno Mine and is fairly typical of the mineralization that you would see in the Keno District.

These are structurally controlled deposits and for exploration it is key to understand where the structures are. This tabular zone shown here would continue towards the surface, and it would continue at depth varying in terms of its overall width. These are very high-grade silver veins and that can run over 5,000 grams per tonne in the in the Keno District.

If we take a look at the geologic map of the entire Keno Hill District from Silver King on the West to Cobalt Hill on the East, it measures about 35 kilometers from end to end. The lines on map represent the 12 known mineralized structural trends and in the orange circles are the past producing mines that occur along those major trends like “pearls on a string.” You can see in yellow the recent new discoveries in the district, which highlights some of the new mines that we expect to see going into production in the near future. The small red circles represent high grade past producers that occur on the Metallic Minerals holdings.

Our lands are dominantly to the East, which is the lesser explored part of the district, but also continue to the South and West and in places internal to the Alexco holdings. We have focused on acquisition of key blocks of ground that have shallow past production and have potential for resource development.

Looking at a cross section across the district from West to East allows us to look at a slice through the geology and to see the regular nature of these deep seated structures that have formed vein deposits in the district.

The red stippled ellipses represent the mineralized zones particularly in the brittle quartzite host rock, which is shown in light purple. The Keno Hill quartzite is an excellent host for these structures to form these Keno type deposits.

It’s believed that underneath the Keno District we had metal rich intrusive bodies that were the source of the fluids that drove these vein deposits. As you move from west to east, you see a general decrease in the amount of exploration and production that we’ve seen in the district. The Bermingham Trend is the most developed with 160 million ounces of past production plus current resources, while the lesser explored adjacent Elsa and the Husky trends have about 35 million ounces each. As we continue to the east, you have the Flame & Moth Deposit, which is a new discovery in the district with about 50 million ounces, and then Bellekeno at about 25 million.

As you progress further east the areas had some shallow historical mining but, as mentioned, were these were mostly held privately and have not generally seen modern exploration. These areas have been subsequently consolidated under Metallic Minerals and have the same style of geology as on the western side of the district where most of the past production was focused. We are now exploring in these less explored areas as part of our Keno Silver Project.

Looking at a long section along the vein on the Bermingham Trend, we get a sense of the types of geologic settings and deposits that form across the district. In the center of this section are the Hector-Calumet Mines, which were the largest producers in the district at over 100 million ounces, of very high grades in excess of a 1,000 grams per tonne silver.

Notably, Alexco recently discovered the Bermingham deposit along this major structural trend, in an area of relatively modest past production just 1 kilometer from the Hector-Calumet mines. That deposit has now grown into some 50 million ounces, it still remains open at depth, and it has the potential to become perhaps even the largest deposit in the district.

As an exploration geologist you get quite excited when a deposit of this quality and size is being found right near surface and only a kilometer from the largest producer in the district. This is a strong indication that this is a district that has excellent potential for new discoveries, as we continue to explore a lot on these trends.

As you go to the east from the Hector-Calumet, you get out of the quartzite hosted vein systems and into the greenstone hosted vein systems. This is a second brittle host rock that provides an excellent setting for developing high grade mineralization, and the Sadie Ladue mine is an example of a greenstone hosted Keno deposit.

These styles of deposits are the same styles that Metallic Minerals is looking at in on our ground in the other parts of the district. We have ground that is both east and west of the Bermingham Trend, and we have been prioritizing among various targets to pick the ones that we believe have the best potential to advance the most rapidly towards resource development.

We have three priority categories of targets at Keno that are at different stages of development. The most advanced targets are at the resource delineation stage, where we have high grade mineralization at surface, with trenching and shallow drill holes that indicate we have a mineralized system similar to the setting seen in other parts of the district. We’ve been drilling along those structures to determine the scale and potential of those targets at the Caribou, Homestake and Formo deposits.

We have six other targets where we have high-grade mineralization at surface with trenching and surface sampling, but these have not yet been drill tested. These targets are now refined enough that we’re ready to go in and drill test them as part of our 2019 program. Initially, we’ll probably drill four to six holes on these targets looking to determine whether or not these have potential to become large vein systems, similar to what we see in other parts of the district.

In addition, we’ve got about 20 earlier stage targets, where we are developing and refining our understanding of the system through tools such as a geophysics and soil sampling, trenching and mapping. These will be targets that we’ll be looking to advance to a drill targeting stage. Coming out of this program in 2018, we’re quite excited to be continuing our work, refining the targets that we have drilled and getting these initial step out drill test completed, on some of these already identified target areas.

Maurice Jackson: Mr. Johnson, you’ve demonstrated that Metallic Minerals is exploring for high grade silver in a world class district. Compare and contrast how shallow your deposits are compared to similar districts like the Coeur d’Alene District, Idaho, which was the start of many of the best-known silver miners like Coeur and Hecla.

Greg Johnson: This is an excellent point, Maurice. When we look at the Keno District, as I mentioned it is very comparable in terms of style geologically with Coeur d’Alene, but in the Keno district the deepest mining to date is only to about 300 meters from surface. The deepest drilling is in the new Bermingham discovery at 400 meters of depth.

By contrast, in the Coeur d’Alene District they’ve recently completed a new shaft to 3 kilometers of depth and region has produced over 2 billion ounces of silver. This highlights the potential in the Keno District as we continue to explore a long trend in depth and to really grow this similar style district beyond the 200 million ounces of past production and current 100 million ounces of total resources.

Maurice Jackson: The Keno Silver Project is considered a large brownfields exploration property, for the members of the audience that may not be familiar with the term brownfields. Please explain why this should matter to them.

Greg Johnson: A brownfield exploration property is a term that we use when you’re exploring an area that has had significant past production and discoveries. Many people may not realize that the majority of the exploration dollars that are spent each year in the mining industry actually go into expiration in and around existing mines, because that is one of the best places to make discoveries that can be rapidly developed and produced using the existing infrastructure in the area. The adage in the mining industry is the best place to find a mine is right next to an existing one.

In this case, in the Keno District, we’ve consolidated our landholdings alongside an existing mine operator, Alexco Resources, and we are exploring on those same productive geologic structures. This dramatically increases the probability of exploration success, and for making new discoveries. It also would allow us to utilize existing infrastructure in the district to facilitate rapid development of low capital cost mines.

Maurice Jackson: Metallic Minerals has another silver property in your portfolio, McKay Hill, where is it located from the Keno Hill Project and please provide us with some historical background.

Greg Johnson: The McKay Hill property is an earlier stage property, but it’s an opportunity that we see for another potentially district scale, high grade silver-lead-zinc property similar to Keno. It’s about 50 kilometers to the north up near Atac Resources’ ground; it was historically a high-grade producer back in the 1930s and the 1940s. What our work over the last couple of years has shown is that we’ve got a large number of veins in the area, that these come right to surface, and with the sampling that’s been done to date, we see the opportunity to develop a second project with significant potential here. We completed a work program in parallel to our Keno Silver Program this year on the property, and we’re expecting to be able to release results from that very shortly.

Maurice Jackson: How has the work gone this year at McKay Hill?

Greg Johnson: Well, it’s been an exciting year this year. This is a follow-up year from last year’s program where we did initial sampling in some of the known historical prospects. This year, our work expanded out across the property using geophysics, geochemistry and prospecting. We did work in new areas that hadn’t been previously recognized and expanded the known zones. What was exciting is that we had several new vein discoveries that we uncovered this year and we significant expanded the size of the historical central zone now approximating a kilometer in length and 250 meters in width. It really looks like we’ve got the potential for something that’s coming together as a bulk mineable target, as well as a number of other high-grade vein occurrences on the property that really justify additional work.

The results that we received last year showed similar types of mineralization to Keno with silver equivalent values over 1,000 grams per ton, and sometimes gold values exceeding 10 or more grams per tonne in some select samples. This is again a polymetallic system, it’s silver, lead, zinc, copper and gold. It’s an exciting opportunity earlier stage, and is indicating that this regio shows excellent potential for creating value, as we continue to explore and advance this portfolio projects.

Maurice Jackson: All right sir, now you’re wrapping up exploration for this season at the Keno Silver and McKay Hill Silver Projects. When should we expect to see the next results from this year’s drilling and target development work?

Greg Johnson: Much like last year, we would anticipate being able to release results over the next couple of months, as we receive them. Last year based on putting those numbers out, we saw quite a good response in the market and are encouraged as we continue to advance and highlight the potential on the property. We expect to have a series of news releases ahead for the company, and we look forward to being able to lay out those results and indicate the potential, the number of targets we’ve got and the opportunity going forward on these properties.

Maurice Jackson: Lastly, Metallic Minerals is also building a portfolio of alluvial gold production royalties in the Klondike Gold District. Can you tell us about that?

Greg Johnson: This is a fairly new opportunity for the company. Last year, we had a chance to pick up a large block of ground in the Klondike Gold District, the historical Gold Rush area where alluvial or placer production of gold in gravels was discovered in the 1890s. Since that time, production of gold has continued in the region, with large bucketline dredges through the 1970s, and later open pit mining along the major drainages. To date there’s been about 20 million ounces of gold produced in the region.

The Indian River drainages are now the single largest producer in the Klondike District, producing about half of all the alluvial gold in the Yukon. Metallic Minerals has been able to acquire a large block of land in this area, with the opportunity to be able to invite experienced placer mining operators to option this ground where we receive a 10% to 15% royalty on their production.

We completed two options last year and have already received some initial royalties from test mining in 2017 and 2018. This year we have leased another 6 miles out of 27 miles with exploration activities happening this year on those new leases.

We see this as an opportunity to start to build a production royalty business, that though modest to start with, over time we think can be fairly substantial for the company. It could allow us to build sustainable and cash flow while we continue exploration as one of the leading silver explorers in the Yukon.

In particular, the opportunity on Australia Creek is an interesting one, as this area was not historically mined and it is one of the few areas in the region where land packages of scale are available to be developed. These initial leases have established infrastructure that then allows additional high quality operators to come in to the upper parts of the stream. We are currently in the permitting process on three new operating areas, and we’ll have the potential for another 10 operators here in the next year or two. We are in discussions currently with a number of parties who are interested in acquiring ground in this highly prospective area.

It’s an exciting development for the company, and I think it has the opportunity to provide sustainability and potential cash flow for the company going into the next couple of years.

Maurice Jackson: I am quite impressed with the 10% to 15% production royalty that you’re receiving here. Share with us how are we able to accomplish this?

Greg Johnson: It’s a point that’s worth noting since, in the hard rock mining business royalties are often range from 1% to 3% range, the difference here is that the cost to run an alluvial mine in terms of the equipment and the operating cost and capital is much, much lower.

This means that operators can afford to pay a higher royalty for alluvial production because there’s not as much capital investment and the timeline to permit one of these projects is months as compared to years for hard rock deposits. That allows the opportunity for both higher royalty payouts and a faster pathway to production on these in comparison with a royalty for a hard rock deposit.

Maurice Jackson: This really speaks to the business acumen of Metallic Minerals. What is management’s philosophy? Are you looking to build mines or are you focused on exploration?

Greg Johnson: On the silver side of the business, we’re very much focused on the opportunity to make discoveries and to rapidly advance those to resource definition. We think that this stage is one of the greatest periods for value creation and represents opportunity for investors to benefit by being part of it. It’s not uncommon that the value that’s created in that initial discovery and resource development phase may not be exceeded again until these projects actually go into production, often times many years later.

This is a team that’s been serially successful, in terms of finding large deposits and developing name those and advancing those. We really see that as the opportunity for our investors to participate in that process.

On the alluvial gold business, what we’re focusing on is acquiring large land packages, getting them permitted, and then inviting experienced operators to come in and pay us a royalty on production. So it’s really a combination of both value creation through new discoveries and production royalties that define the opportunity with Metallic Minerals.

Maurice Jackson: Switching gears, I learned from Rick Rule and Doug Casey that the people running the business are equally, if not more important, than the latent material on the ground. Mr. Johnson, please introduce us to your board of directors and the management team and what unique skill sets do they bring to Metallic Minerals?

Greg Johnson: I think this is really an exceptional group of explorationists and professionals. We’ve worked together in the past with other companies. Many of us worked with the well-known large producers such as Barrick Gold and others, and were key members of leading explorer/developers such as NovaGold, Trilogy Metals, Wellgreen and Northern Free Gold. This is a group that has been credited for the discovery and advancement of some of the largest deposits in North America, including the Donlin Creek Gold Deposit in Alaska, now over 40 million ounces of reserves; the large Galore Creek Copper, Gold, Silver Deposit in British Columbia; and the Wellgreen Platinum Nickel Copper Deposit in Yukon. This is also a group that has been involved in permitting mines in Yukon, and has been recognized for its environmental stewardship and our approach to business.

It’s exceptional to see an explorer have the depth of experience that we have in this team with many people having 20 to 30 years or more experienced in the industry. I think it really was an opportunity for a great group of people who’d worked together in the past to be able to come together to work on some truly exciting projects. Where they saw the potential to create value, to be an equity shareholder and to have some fun working on some really exciting projects.

Maurice Jackson: Let’s talk about the stock, tell us about your share structure, options, warrants and cash position.

Greg Johnson: The company is a relatively new company, founded in middle of 2016. Now, we’ve got 61 million shares outstanding, and with options and warrants, it’s about 87 million fully diluted. Current market capitalization is approximately $15 million and we’ve got about $1.3 million in cash as of our last quarter, and we’ve got about $1.8 million in callable warrants that are deep in the money, and we are debt free. We’ve got a good tight share structure, we’ve got probably trading something on the order of about 1 to 2 million shares a month.

On a relative trading basis, you will see that the Metallic Minerals has held up well against both the Silver ETF as well as the GDXJ shares, the Junior Miners ETF. I think that’s largely because our shareholders recognize the long-term value in the Keno Silver district and the potential opportunity to participate in that discovery process. I think that we’ve been able to demonstrate value creation despite a very challenging market, through the results we’ve had to date and look forward to continuing to deliver on those kinds of results.

Maurice Jackson: What was your budget this year on Keno Silver and MacKay Hill?

Greg Johnson: We spent about $2 million at Keno Silver, and about $500,000 at Mackay. At McKay, we are advancing towards a drill targeting stage and should be ready to drill for 2019. At Keno, a combination of target development and refinement, and drill testing at the three most advanced targets on the property, where we’ve done step out drilling to continue to understand the scale and potential of those opportunities.

Maurice Jackson: Tell us about your burn rate.

Greg Johnson: Our burn rate is quite modest. One of the benefits with the Metallic Group of Companies is that we’re sharing an admin team and office space. We’re really focused on keeping costs low, terms of running the company, being able to focus money in the ground. We’re probably running at about $50,000 a month, including our technical team, to run the company, and we’ve got some opportunities to reduce those numbers further. This is really all about trying to focus funds on doing value creating activities, and that’s really money in the ground and money at the drill bit.

Maurice Jackson: Do you have institutional investors at this point?

Greg Johnson: Even though we’re a relatively newer company, we do have several mining focused institutional funds. We’ve got one group out of Europe already and two of Toronto, making up about 11% of the shareholders, and then we’ve got about 30% of the shares held by high net worth individuals, and management and board is one of the largest holding groups at 25%.

Maurice Jackson: What is the float?

Greg Johnson: We are probably looking about 30 million shares and probably significantly less as the actual available stock that’s out there for trading. It’s fairly tightly held, though we have pretty good liquidity for a smaller company in the sense that we’re trading at a couple of million shares a month on most months.

Maurice Jackson: All right, sir, you survived, multilayered question here. What is the next unanswered question for Metallic Minerals? When can we expect results and what will determine success?

Greg Johnson: The next few months should be an exciting period for the company. We’re expecting news results from both Keno Silver and MacKay Hill coming out over the next couple of months, similar to last year. There has been considerable progress on both projects and we continue to develop and advance new targets at both.

In addition, with the expansion of the resource at Bermingham that was announced recently by Alexco, and with them advancing that into production very shortly, that should draw attention to the district over the next six months and should be a positive catalyst for Metallic Minerals.

The Keno Silver project is an ongoing opportunity for value creation. It’s a very large land package, in 2019 we’ll have nine targets that are a drill ready, including the three that are at the early resource delineation stage. We’ve got another 20 targets that were advancing towards drill testing. This is a property that’s got a long history of discovery and production and we will continue to be focused on building out that value for our shareholders.

We’re also very bullish on the silver price. Looking at where we are in the metal price cycle, and the historic returns that have been seen particularly in the silver sector coming out of these market bottoms, we think this is an excellent time for investors to be looking at high quality names in the precious metal space, and particularly in silver.

Maurice Jackson: Mr. Johnson in the introduction we alluded to the Metallic Group of Companies, please introduce us to them.

Greg Johnson: In early 2018, Metallic Minerals and Group Ten Metals announced they were forming a collaboration as part of the Metallic Group of Companies, with some common directors between the companies and a similar approach to business. Group Ten Metals is focused on platinum and palladium along with nickel and copper, in the Stillwater District, of Montana. In October, we announced the newest company to join the group, Granite Creek Copper, as a newly launched copper focused exploration company with an exciting project right next door to a high-grade copper producer in the Carmacks District of the Yukon.

These three companies share a common philosophy and approach to business; all three have focused on acquiring large blocks of brownfield holdings during the low part of the metal price cycle next to operating mines so that the infrastructure and facilities are already in place. All of these show multiple targets that have potential for new discoveries, with targets that start at surface.

With these operating mines next door, it really provides an opportunity to be able to fast track development on these targets by utilizing the existing infrastructure in their respective districts. There is the potential for partnering with those operators or if we’re successful in discovering very large scale deposits, which we believe is the potential in these properties, to be able to see perhaps even the entire district become a target for consolidation by even larger companies.

The Metallic Group of Companies are reducing costs by having a common admin group and CFO, as well as allowing us to have a deeper technical team with some specialists that can be shared across the group.

It’s an exciting group of companies with a common philosophy. Our objective is to build real value for the Metallic Group investors going forward.

Maurice Jackson: What did I forget to ask?

Greg Johnson: Well, I think that was a pretty comprehensive discussion. One last point that’s probably worth mentioning is regarding our newly launched copper exploration company, Granite Creek Copper. We have just announced that we are undertaking an initial offering on Granite Creek Copper, and interested accredited investors can contact us if they would like to get additional information on that private placement opportunity.

Maurice Jackson: If one wants to get more information on Metallic Minerals, please share the website address.

Greg Johnson: Our website is http://www.metallic-minerals.com.

Maurice Jackson: As reminder, Metallic Minerals trade the TSXV symbol MMG, and on the OTCQB symbol MMNGF. For direct inquiries, please contact Chris Ackerman at 604.629.7800 Ex.1, he may also be reached at [email protected].

Last but not least, please visit our website www.provenandprobable.com where we interview the most respected names in the natural resource space. You may reach us at [email protected].

Greg Johnson of Metallic Minerals, thank you for joining us today on Proven and Probable.

Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.

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Disclosure:
1) Maurice Jackson: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. 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. Proven and Probable disclosures are listed below.
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Lithium is the lifeblood of batteries for electric vehicles and alternative energy storage, and use of both is predicted to skyrocket in the coming years. Against this backdrop, a small-cap firm that is moving rapidly with a strong partner to develop lithium projects in Argentina has caught the attention of Goldman Sachs and industry analysts.

More than a million electric cars have been sold in Europe, a milestone that China reached last year. By year-end Europe is predicted to sell a cumulative total of 1.35 million electric vehicles, as growth is speeding up. EVs appear to be an unstoppable force: China has declared that by 2025, 20% of sales must be “new energy” vehicles; India has decreed that end of diesel and gas cars by 2030, and Japan has mandated that by 2030, 50-70% of vehicles sales be “next generation.” All of this means more batteries and more batteries mean more lithium.

Vancouver-based Advantage Lithium Corp. (AAL:TSX.V; AVLIF:OTCQX) is positioning itself to take advantage of this burgeoning demand for lithium.

The company has five properties in Argentina, with Cauchari, located in Jujuy province, serving as its flagship asset. The Cauchari-Olaroz Basin is a major lithium center and the world’s second largest brine producing basin, behind the Atacama in Chile.

“Drilling over two phases has confirmed high grades and good chemistry to greater depths than previously discovered elsewhere in the basin.” – MacMurray Whale, Cormark Securities

Advantage acquired a 50% interest in the Cauchari project in 2017 and at the end of that year increased its stake to 75%. Its 25% partner, Orocobre Ltd., is a CA$912 million market-cap lithium producer that is producing lithium from the Olaroz JV brine project adjacent to Advantage’s Cauchari property. The Olaroz lithium brine production facility sits about 10 km north of Cauchari.

Also in Advantage’s neighborhood is a Lithium Americas/Ganfeng lithium project.

Advantage has a close relationship with Orocobre. It owns 31% of Advantage’s shares and CEO Richard Seville sits on Advantage’s Board of Directors. Through this partnership, Advantage has access to Orocobre’s geological knowledge as well as production experience.

Advantage is moving rapidly to delineate the Cauchari resource. In a year, the company has drilled 15 holes, completed pump tests on five of them, released a resource update, released a preliminary economic assessment (PEA) and initiated phase 3 drilling to expand and update the resource. The company anticipates releasing a definitive feasibility study (DFS) in early 2019.

The PEA, released in August, based on 20,000-tpd standalone plant, estimates a US$827 million after-tax NPV 8% discount, an internal rate of return of 24.3%, and a pre-production capex of US$401 million.

“Advantage’s “strategic relationship with Orocobre should reduce any future exploration, operating and construction risks.” – Rupert Merer, National Bank of Canada

Advantage has engaged Goldman Sachs to evaluate strategic partnerships and financing alternatives for its portion of the capex for the Cauchari JV. Advantage CEO David Sidoo told Streetwise Reports, “Goldman Sachs has been involved with major battery and lithium manufacturers in Asia, including CATL (Contemporary Amperex Technology Ltd.), Tianqi Lithium Corp. and Ganfeng Lithium Co.”

Sidoo noted that Goldman Sachs was interested in a small-cap like themselves “because of the asset and the PEA; the firm is confident that it can introduce us to the right strategic partner.”

The strategic partner, according to Sidoo, would likely do two things: provide Advantage with some equity at a premium to the market to take a small piece of Advantage—10 to 15%—to provide the company with the $400 million project funding needed to build the facility that would produce 20,000 tons of lithium carbonate annually for the next 25 years.

Second, a partner could eventually have the appetite to buy the company out or consolidate the entire basin, Sidoo noted.

Advantage’s position has also caught the attention of a number of analysts. Matthew O’Keefe, an analyst with Cantor Fitzgerald, commented on Sept. 18 that Cauchari is a “large resource with upside,” the phase 3 drilling has the potential to add 1.4–3.0 Mt LCE. The current resource is 3.0 Mt LCE. He also sees the partnership with Orocobre as a plus, as the neighboring producer can provide Advantage “the benefit of its experience and access to its development team, which should allow it to fast track Cauchari to production.” Cantor has a Buy rating and CA$1.50 target price on the firm.

Cormark Securities initiated coverage on Advantage on May 30. Analyst MacMurray Whale noted, “Over the past year, Advantage’s flagship project, Cauchari, has rapidly evolved with drilling, pump tests and other development work that has led to the release of an updated resource estimate. . . “Drilling over two phases, in the NW and SE sectors, has confirmed high grades and good chemistry to greater depths than previously discovered elsewhere in the basin. Rigs have been mobilized to explore beyond 400 m, suggesting that Cauchari could host a much larger resource.” Cormark has a Buy recommendation and a target price of CA$1.85.

David Talbot of Eight Capital on May 29 commented that Galaxy Resources’ sale of non-core assets to South Korea’s POSCO “underscores the value of lithium deposits to end-users. . .We believe this news has potential to directly impact the value given by investors to Advantage Lithium. . .We reiterate Advantage Lithium with a BUY and a C$2.50/sh target price based on a recent resource update of 3.0 MM t LCE, and our new exploration target of 4.4 MM t LCE (+50%) as Phase III looks to target depths of 450m to 600m.”

National Bank of Canada initiated coverage of Advantage on March 26. Analyst Rupert Merer observed that Advantage’s “strategic relationship with Orocobre should reduce any future exploration, operating and construction risks.” He also noted that “relative to its peers, AAL is closer to infrastructure and two existing lithium operations that include large and well capitalized partners. Some consolidation of the three unique assets with shared boundaries could make sense.” National Bank of Canada has an Outperform rating and a 12-month target of CA$1.90.

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Disclosure:
1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an employee. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Advantage Lithium. Click here for important disclosures about sponsor fees. An affiliate of Streetwise Reports is conducting a digital media marketing campaign for this article on behalf of Advantage Lithium. Please click here for more information.
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4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Advantage Lithium, a company mentioned in this article.

Disclosures from Cantor Fitzgerald, Advantage Lithium Corp., Corporate Update, Sept. 18, 2018

Potential conflicts of interest: The author of this report is compensated based in part on the overall revenues of Cantor, a portion of which are generated by investment banking activities. Cantor may have had, or seek to have, an investment banking relationship with companies mentioned in this report. Cantor and/or its officers, directors and employees may from time to time acquire, hold or sell securities mentioned herein as principal or agent. Although Cantor makes every effort possible to avoid conflicts of interest, readers should assume that a conflict might exist, and therefore not rely solely on this report when evaluating whether or not to buy or sell the securities of subject companies.

Disclosures as of September 18, 2018
Cantor has not provided investment banking services or received investment banking related compensation from Advantage Lithium Corp. within the past 12 months.
The analysts responsible for this research report do not have, either directly or indirectly, a long or short position in the shares or options of Advantage Lithium Corp.
The analyst responsible for this report has visited the material operations of Advantage Lithium Corp. No payment or reimbursement was received for related travel costs.

Analyst Certification
The research analyst whose name appears on this report hereby certifies that the opinions and recommendations expressed herein accurately reflect his personal views about the securities, issuers or industries discussed herein.

Disclosures from Cormark Securities, Olaroz-Cauchari Basin , May 30, 2018

Analyst Certification: I, MacMurray Whale, hereby certify that the views expressed in this research report accurately reflect our personal views about the subject company(ies) and its (their) securities. We also certify that we have not been, and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) in this report.

Disclosure Statements and Dissemination Policies: A full list of our disclosure statements as well as our research dissemination policies and procedures can be found on our website.

Disclosures from Eight Capital, Advantage Lithium Corp., Comment, May 29, 2018

Conflicts of Interest: Eight Capital has written procedures designed to identify and manage potential conflicts of interest that arise in connection with its research and other businesses. The compensation of each Research Analyst/Associate involved in the preparation of this research report is based competitively upon several criteria, including performance assessment criteria, the quality of research and the value of the services they provide to clients of Eight Capital. The Research Analyst compensation pool includes revenues from several sources, including sales, trading and investment banking. Research analysts and associates do not receive compensation based upon revenues from specific investment banking transactions.

Eight Capital generally restricts any research analyst/associate and any member of his or her household from executing trades in the securities of a company that such research analyst covers, with limited exception.

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Each Research Analyst and/or Associate who is involved in the preparation of this research report hereby certifies that:
• the views and recommendations expressed herein accurately reflect his/her personal views about any and all of the securities or issuers that are the subject matter of this research report;
• his/her compensation is not and will not be directly related to the specific recommendations or views expressed by the Research Analyst in this research report;
• they have not affected a trade in a security of any class of the issuer whether directly or indirectly through derivatives within the 30-day period prior to the publication of this research report;
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• they are unaware of any other potential conflicts of interest.

The Research Analyst involved in the preparation of this research report does not have any authority whatsoever (actual, implied or apparent) to act on behalf of any issuer mentioned in this research report.

Additional disclosures available here.

Disclosures from National Bank of Canada Financial Markets, Advantage Lithium Corp., Initiating Coverage, March 26, 2018

Research Analysts – The Research Analyst(s) who prepare these reports certify that their respective report accurately reflects his or her personal opinion and that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views as to the securities or companies.

NBF compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of NBF including, Institutional Equity Sales and Trading, Retail Sales, the correspondent clearing business, and Corporate and Investment Banking. Since the revenues from these businesses vary, the funds for research compensation vary. No one business line has a greater influence than any other for Research Analyst compensation.

Click on this link to see the company specific disclosures.

Additional Company related disclosures

A redacted draft version of this report has been shown to the issuer for fact checking purposes and changes may have been made to the report before publication. The analyst attended a site visit to Jujuy, Argentina on November 8, 2017. A portion of the analyst’s travel expenses were paid for by the issuer.

This company released initial assays from its new properties.

The first drill results from Piedmont Lithium Ltd.’s (PLLL:NASDAQ; PLL:ASX) Central and Sunnyside properties show the company encountered the widest intercept to date: 34 meters (34m) at 1.04% lithium oxide (Li2O). This was in hole 18-CT-002.

The drill bit hit another significant intercept of high-grade lithium mineralization, 20.9m at 1.42% Li2O, in hole 18-SS-001.

These assay results were among those Piedmont recently reported on, from seven Sunnyside holes and three Central holes, totaling 1,411m. The two properties are located in the Carolina Tin-Spodumene belt in North Carolina.

“These initial results at Central and Sunnyside indicate the potential for a significant project life extension,” President and CEO Keith Phillips said in a news release, referencing the existing resource at Piedmont’s Core project where a scoping study estimated 16.2 Mt at 1.12% Li2O, supporting a 13 year project life.

The company plans to conduct follow-up drilling at both sites. To identify additional targets, it intends to analyze together the pending results from the more than 650 soil samples collected and the 33 line kilometers of magnetometer geophysical surveys.

Piedmont Lithium has noted that the Carolina Tin-Spodumene Belt “has been described as one of the largest lithium provinces in the world and is located approximately 25 miles west of Charlotte, North Carolina. It is a premier location to be developing and integrated lithium business based on its favorable geology, proven metallurgy and easy access to infrastructure, power, R&D centers for lithium and battery storage, major high-tech population centers and downstream lithium processing facilities.”

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Piedmont Lithium. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Piedmont Lithium, a company mentioned in this article.

Sector expert Michael Ballanger explores the impacts of several historic market crashes.

Q: How do you get your broker out of a tree?
A: Cut the rope.
—Common joke from October 1987

It was 31 years ago, on Oct. 19, that I watched a $300,000 stock portfolio begin to vaporize, with a Monday loss of 35% morphing into a 93% amputation by the end of the week, the remaining cash balance totaling slightly over $16,000.

The $125,000 margin debt had to be cleared when the highly diversified portfolio of gold and silver stocks ignored the $80/ounce advance in gold prices that week and decided instead to behave as “stocks” rather than “gold,” proceeding to plunge in a wave of pure panic the likes of which had not been experienced since fifty-eight years prior. I recall staying at the office most of the evening talking to my devastated clients, trying my utmost to calm them, to reassure them, to convince them that stocks were far superior to real estate or bonds or money-in-the-bank, but with the 23% loss in the Dow Industrials, it was all in vain. They wanted out and they wanted a check and they never wanted to hear any of it. It was the most emotionally draining moment of my life, with a close second being 10 years later, when the now-infamous Bre-X Fraud was revealed, resulting in a similar crash in Canadian stocks the very next morning.

I bring up the topic of the Crash of ’87 only because of the incredible impact it had on the psyches of millions of investors around the world. Forgotten is the fact that, a little over two years later, the Dow Jones Industrial Average broke out to all-time highs as the baby boom generation finally forgot about love beads and VW vans and fell wildly in love with capitalism—and, of course, stocks.

What followed was the era of the disinflationary ’90s and the revolutionary arrival of the Internet, led by market darling America Online, whose January 2000 merger with Time Warner marked the pricking of the biggest market bubble in history. Then, eight years later, after a half-decade of uproarious lending policies had driven the banks to bubble territory, another Crash arrived—only this time greeted with a massive rescue effort by the central banks and treasury departments of almost every nation on the planet.

Ten wondrous market years (and some $14 trillion of credit creation) later, here we are in the autumn of 2018, with stocks ahead over tenfold from the lofty peak of the Summer of ’87, when the Dow hit 2,722. While the chart below would suggest it was a relatively minor event, the Crash of ’87 will be indelibly etched into my personal memories in the same way as the Kennedy assassination and the lunar landing—we all know where we were when it happened.

There has been a great deal of discussion in the financial blogosphere about the future course of the stock markets around the world, and while it is pretty obvious that the technical picture is clouded at best, it is important everyone remembers what constitutes the glue that is keeping the market from shattering into a thousand molecules. It is faith.

Faith in the Fed that “has our backs”; faith that the economy is “incredibly strong”; faith in our leaders who are friendly to the stock markets; faith in the fact that long-term ownership of common stocks has been a reliable strategy (see chart). It is faith in the certainty of “favorable outcomes” that has so many people forging through life anchored to the notion that the two main assets that “always recover” are housing and stocks.

It was Ronald Reagan who decided to create an entity called “The Working Group on Capital Markets” through Executive Order 12631 in March 1988, a mere six months after the ’87 Crash. As omnipotent as that may have appeared at the time, the group was nonetheless powerless to stop the Asian Crisis of 1998, and the two crashes mentioned earlier. So when I see stick-save recoveries like we saw last week, first in the U.S. and on Friday in Beijing, the reality is political leaders realize stock markets are now bellwethers for legacy control, and no leader, whether it is Trump, or Putin, or Xi Jinping, wants to go down in history as the leader who ruled while his country’s stock market collapsed.

It is also a morale issue. It is a known fact that during WWII, the Japanese and German stock exchanges were without a trace of volatility because of government intervention. It is also true that the day before 9/11, massive put option volumes were recorded in airline stocks and in the S&P. The level of financial market sophistication in both government and terrorist camps is now without argument, so to think that you or I are able to use conventional means to time the market or accurately handicap the risk (or lack thereof) in any asset or asset class is simply without foundation. And that is precisely why the “Thirty-Somethings” are able to use the current stock market environment as a quasi-ATM, by simply adhering to the government-sponsored meme that “stocks are good” while “gold is bad.”

So when I am asked if one should “Buy the Dip” currently seen in the vast majority of global merket averages, I say “Yes,” only because those that have adhered to the notion have prospered far more than the fear-mongers that peddle mayhem.

The COT
This COT represented a return to normalcy as the totally insane “pile-on” shorting by the algobots since July was totally rebuffed by the big rally earlier in October. The volume on the $34 Thursday pop was about 10 times normal volume, which completely explains the massive swing that occurred between the Large Specs (“algos”) and the Commercials (“bullion bank behemoths”), whereby the (Large Spec) software ordered the position be covered only because it was moving against it. No rhyme; no reason; no reality.

Now, and this is important, if the Commercials have been successful in turning the Large Specs into “pile-on” buyers after being serial sellers since June, chances are they are now serial “pile-on” buyers until the positions once again revert to the extremes of late 2016, where Commercials were massively short against the Large (algo) Specs’ massive longs. While I warned of a short squeeze a few weeks ago, we actually got it Oct. 11, but the exciting part is that it might just be a “long hissing fuse” type of squeeze that takes until February to unwind, all in favor of those that are long.

As I have opined for most of 2018, I believe gold stands a realistic shot at a close north of $1,400 before New Year’s Day, but we want to see the Commercials get out of the way and let the velocity of the short covering frenzy accelerate, which they certainly did not allow in COT week ended Tuesday, Oct. 16. Mind you, they were moving from an historically bullish position, one not seen since the dark days of 2002, when gold resided under $300. By moving back to their normalized net short position, they simply covered all of the sub-$1,200 per ounce acquisitions and by doing so, cemented the $1,167 bottom from Aug. 16.

On a final note, vanadium ticked up to $29.90 per lb. on Friday, making it a 900% increase since 2016. In discussion with Western Uranium & Vanadium Corp. (WUC:CSE; WSTRF:OTCQX) CEO George Glasier, I learned that it is his intention to embark shortly on an aggressive drill program at two of the five mines that are part of the Sunday Mine Complex, with the purpose of increasing his vanadium resource to in excess of 50,000,000 lbs. from the current 35,000,000. At current prices, that would value the vanadium just under US$1.5 billion. Adding the uranium value, you get a resource worth $3.7 billion for a company capitalized at $62.6 million, which means that WUC has a substantial amount of blue sky ahead of it given the outlook for these two energy-related metals. I have a six-month target price of US$3.40/share, which will be under review once drilling begins.

I eagerly await the arrival of trading this week, as we are headed into both tax-loss season and the best two weeks of the year for buying stocks beaten down by October’s weakness. Despite the technical damage caused by the global selloffs, the rich and powerful like markets that appease the masses, and therein lies my bullish bias and my cynicism.

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

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Disclosure:
1) Michael J. Ballanger: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Western Uranium & Vanadium Corp. 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 referred to in this article: Bonaventure Explorations Limited is owned by me and my wife and has earned consulting fees from Western Uranium & Vanadium in the past. I determined which companies would be included in this article based on my research and understanding of the sector. Additional disclosures are below.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Western Uranium & Vanadium. Please click here for more information. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Western Uranium & Vanadium Corp., a company mentioned in this article.

Charts courtesy of Michael Ballanger.

Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.

This company continues working toward updating its mineral resource.

SRG Graphite Inc. (SRG:TSX.V) recently reported the results from 162 boreholes drilled at its Lola graphite deposit in Guinea, West Africa.

The highlights included:

  • Hole LL36-262441: 50 meters (50m) at 8.92% graphitic carbon (Cg), including 48m at 10.07% Cg
  • Hole LL42-112057: 10m at 8.62% Cg, including 21.4m at 17.61% Cg
  • Hole LL48-177588: 85m at 11.38% Cg, including 12.85m at 12.94% Cg.

These results cover about 60% of Lola’s surface footprint, the news release noted. Drilling so far has only been done in the weathered rock, which constitutes, on average, about 30 feet from the surface. Therefore, Altamira will drill the unweathered rock with 10 boreholes, testing for the presence of graphitic carbon there.

At Lola, to date, SRG drilled 557 boreholes over 18,037m, and more, constituting the third phase, are in progress. “These drill results should help further understand the reach and depth of the deposit and provide additional basis for the mineral resource update to be included in the feasibility study expected for H1/19,” according to the news release.

In other news, SRG chose EEM Sustainable Management, a Montreal-based consulting firm with experience in Guinea, to revise and update the environmental and social impact assessment for Lola.

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: SRG Graphite. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of SRG Graphite, a company mentioned in this article.

Peter Epstein of Epstein Research discusses whether the lithium market is oversold and profiles one lithium company that he follows.

Despite overwhelmingly positive lithium market news—growing demand from Electric Vehicle and Energy Storage markets—Wealth Minerals Ltd.’s (WML:TSX.V; WMLLF:OTCQX) share price has had a rough year, down 72% from its 52-week high. Surprisingly, that’s only moderately worse than the rest of the lithium sector! In the chart below, sorted by market cap, one can compare Wealth’s share price performance to 30 peers that are down an average of 58%.

Is Wealth Minerals oversold? I think so, but first I will address another question—is the lithium sector oversold?

Natural resource stocks, precious and base metals, plus investable battery metal juniors in cobalt, graphite, manganese: everything’s down a lot. Lead, zinc, silver and copper are down (on average) 16%year-to-date. Yet for lithium, contract prices are up and underlying demand is as strong as ever. I’ve not seen a single forecast by any consulting group or industry pundit suggesting that lithium demand for Electric Vehicles (EVs) or Energy Storage Systems (ESS) will be weaker than previously expected.

In fact it’s the exact opposite. All year, industry pundits that have been making compelling arguments about lithium demand that some industry experts and sell-side analysts are probably failing to appreciate. For instance, although municipal bus fleets are starting to get included in demand forecasts, what about electric bicycles, scooters and motorcycles? Delivery and mail trucks? School buses and garbage trucks? What about long haul trucking fleets? Combined, demand from these electrified vehicle categories could require hundreds of thousands of tonnes of incremental Lithium Carbonate Equivalent (LCE)/year for the next decade.

Lithium-ion battery endusers are starting to figure this out. Chinese lithium producer Ganfeng Lithium recently signed a five-year strategic cooperation agreement with BMW. This comes weeks after deals signed with Tesla and LG Chem. Simon Moores’ group at Benchmark Mineral Intelligence tracks lithium supply and demand in a number of interesting ways. One of the most compelling is its tracking of the number of global battery mega-factories in the pipeline. That figure just hit 50, likely requiring roughly 800k-900k tonnes of LCE/yr at full capacity by the mid-to-late 2020s. That’s about 4x current LCE consumption.

There’s a huge disconnect between lithium demand fundamentals and underlying company share prices that I can’t explain. Perhaps the problem lies on the supply side? That’s certainly an actively debated theory, promulgated by Morgan Stanley’s infamous industry report in February that said lithium contract prices would fall below US$8,000/tonne by 2021. NOTE: {the latest contract price reported by SQM was ~US$16,500/tonne}

Since Morgan Stanley’s (MS) report, quarterly contract prices reported by companies including Albemarle Corp. (ALB:NYSE), SQM (SQM:NYSE), FMC Lithium Corp. (FMC:NYSE) and Orocobre Ltd. (ORL:TSX; ORE:ASX) have been up year over year. SQM’s second quarter lithium price was ~US$16,500/tonne. Lithium producers expect contract prices to be flat or possibly down modestly in the second half of 2018, a far cry from the collapse MS is calling for. When MS released its industry report, contact prices were around US$13-14,000/tonne.

100% of the analysts and industry consultants that I trust most believe the MS report should not be relied upon. Without diving into it, I think it’s wrong because it included in the analysis massive lithium supply additions from Chile’s Atacama salar that look increasingly uncertain in size, and especially uncertain in timing.

The Drama in the Atacama (Chile) Continues

It doesn’t take a rocket scientist to recognize that Albemarle and SQM do not have great relationships with the main interested parties in Chile. One needs to be on sides with 1) local communities, 2) mining and governmental agencies, 3) in some cases, CORFO (a state-controlled entity), 4) CCHEN (another state-controlled entity) plus 5) local and national-level politicians…. all the way up to the president. Just this month Albemarle announced that regulator CCHEN denied an application it had submitted in March to increase its production quota. Albemarle and SQM have had, and continue to have, challenges with one or more of these key constituencies!

Even if Albemarle and SQM can improve critical relationships in Chile, there’s still a huge challenge few seem to be talking about. Albemarle and SQM are attempting to greatly increase production (for instance SQM from 50,000 tonnes/yr to 180,000 tonnes/yr) without increasing the volumes of lithium enriched brine being pumped. They are working with black-box technologies to increase evaporation pond recoveries (yields). And, they claim to have other tricks up their sleeves to more than triple production. Yet, if the recovery of lithium from ponds in the Atacama salar is currently around 40%-50%, how could production possibly triple without increased pumping? That would mean recovering >100% of the in-situ lithium?!?

So, if the world is not going to be flooded with a tsunami of new Chilean lithium supply in 2019, or in 2020 for that matter—AND all evidence suggests that EV and ESS demand is trending higher, not flat or down—what does that mean for contract pricing? I believe that prices will hold above US$12,000/tonne for at least the next five years. Once this realization sinks in, beaten down lithium shares could stage a meaningful rebound. If Wealth Minerals were to gain back half of what it has lost (from C$2.34/share), the stock would increase ~130% to ~C$1.50/share.

A long-winded answer to my opening question, is the lithium sector oversold? Yes, I think it is, due to irrational fears about global lithium prices collapsing. While it’s true that a select few lithium spot prices in China have fallen quite a bit this year, those prices are not indicative of the overall contracted market. The concern about industry pricing is in the process of being debunked. Where does this leave Wealth Minerals? {please see new, October corporate presentation}

Wealth is not immune to uncertainties regarding the circumstances under which lithium from Chile will be allowed to be produced, and a large portion of it exported. Like Albemarle and SQM, Wealth needs to get along with a number of interested parties. Management has made considerable progress on that front, most notably by agreeing to partner with State-controlled ENAMI(National Mining Company of Chile) to develop their two primary projects. By partnering with ENAMI, Wealth has significantly de-risked its property holdings. But, the market is not focused on the de-risking provided by ENAMI, all eyes are on drilling Wealth’s giant, (46,200 hectares) 100%-owned, royalty-free Atacama project.

Readers may recall that management had a setback last month when locals did not allow drilling in the Atacama to start as planned. Management now believes that it will gain access to two sites and begin drilling three shallow and three deep holes within the next 30 days. Turnaround time for the drill results from the shallow holes is expected to be fairly quick, so we could see results in November.

Wealth Hires Chilean Lithium Brine Expert

It’s widely known, and is causing increasing anxiety among lithium juniors, that experienced, well-respected lithium brine technical professionals are very hard to find. Wealth Minerals just landed one of the top available technical people in the world. Executives with Cesar Jil’s credentials are very highly sought after. Mr. Jil was most recently the manager of lithium extraction technologies at Albemarle.

He’s an expert in the latest technologies and methodologies regarding lithium beneficiation from natural brines and worked for Albemarle in multiple areas: the Atacama, Argentina’s Antofalla salar and at Nevada’s Silver Peak. Prior, Cesar was a process engineer for Sociedad Chilena de Litio, a world leader in processing lithium to lithium carbonate and lithium chloride for the global chemicals industry.

There simply are not that many operating brine fields in Argentina and Chile where technical people have learned enough to become true experts. FMC and Orocobre have active brine facilities in Argentina, and there’s Albemarle and SQM in Chile. But, there are only a few other smaller and/or private operations, probably under 10 active operations in the entire Lithium Triangle. Therefore, the number of expert, (non-retired), lithium brine technicians globally could be as few as just 20 or 30. Of that select group, only a small handful are looking for new positions at any given time.

In my opinion, this is a tremendous vote of confidence in Wealth’s Atacama project. There are dozens of lithium brine projects around the globe, many in great need of someone with Cesar’s excellent credentials. I’m confident that Cesar could have found a senior role at a number of more advanced lithium brine projects in Chile or northern Argentina. Choosing Wealth’s Atacama project suggests to me that Cesar is fairly confident in the prospective geology, in the ability to work collaboratively with locals and the ability of Wealth’s team, working with ENAMI, to advance its flagship project.

While it’s somewhat speculative (pre-drilling) to rely on the salar comparison chart on the right, the size of the prize is enticing. As management points out, if drill results were to show lithium values that are half as robust at that of Albemarle’s and SQM’s in the southern part of the salar, (1,840 ppm Li) that would still be higher grade than any other project or producing mine (outside of Chile) on the planet.

Although the start of drilling has been delayed, management has not been sitting idle. The company followed up on positive geophysical surveys at the Atacama project by completing a comprehensive re-interpretation of the results and identifying a sizable 100 sq. km area of anomalous data. Wealth’s expert technical team, now led by Mr. Jil, believes that this area represents high-salinity brines at depth. Given this enhanced view, management started another geophysical survey, including surrounding ground that Wealth is now in discussions about acquiring.

Additionally, management continues to work on a third-party PEA for its 100% controlled (by option), royalty-free Laguna Verde project.

Management is busy on other fronts as well, for the past year they have been evaluating cutting-edge lithium extraction/processing technologies. These third-party technologies are unproven at commercial scale (for lithium). However, there’s a growing feeling that the use of evaporation ponds could be a thing of the past, not imminently, but the construction of new ponds could be forbidden sometime next decade. New technologies that eliminate the need for costly, complex, unpredictable, time-consuming evaporation ponds promise far less water consumption, faster cycle times and much higher lithium recoveries.

Conclusion

I believe the lithium sector is oversold and I think Wealth Minerals (TSX-V: WML)/(OTCQX: WMLLF) has substantially more upside from C$0.64/share than it does downside. It might take a rebound in the sector to really get Wealth shares moving higher, but with the start of drilling as soon as this month, and drill results possibly in November, news flow could be impactful.

Peter Epstein is the founder of Epstein Research. His background is in company and financial analysis, and he is a Chartered Financial Analyst (CFA). He holds an MBA degree in financial analysis from New York University’s Stern School of Business.

Disclosures: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Wealth Minerals, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Wealth Minerals are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.

At the time this interview was posted, Peter Epstein owned shares and/or stock options in Wealth Minerals and the Company was an advertiser on [ER]. Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.

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Streetwise Reports Disclosure:
1) Peter Epstein’s disclosures are listed above.
2) The following companies mentioned in the article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Charts and graphics provided by author.

David Morgan, publisher of The Morgan Report, discusses two companies that have come up with groundbreaking technologies that hold the potential to change the way E-waste is processed and the way mining is conducted.

David Morgan, the well-respected publisher of The Morgan Report, has decades of experience with precious metals investing. He began investing at the age of 16, and was influenced by Jim Dines, the force behind The Dines Letter, who sold Morgan on the need for monetary reform. Morgan also studied under William O’Neil, the founder of Investor’s Business Daily, and an extremely astute investor.

Morgan founded The Morgan Report to help investors protect their wealth regardless of the economic outlook. Morgan realized early on that a lot of companies have great stories, but that does not mean they will succeed. To help investors allocate their investments, he divides the portfolio into three tiers: top tier, midtier and speculative. Over the years, top-tier portfolio companies such as Pan American Silver, Silver Standard, Agnico Eagle, Franco-Nevada and Silvercorp Metals have made large gains. Some more speculative stocks, such as Western Silver, were takeover targets, and The Morgan Report prides itself on the number of speculative juniors it has recommended that have become mines.

Streetwise Reports sat down with David Morgan to talk about the precious metals market and several companies that are among his top picks.

The Gold Report: Gold and silver have been trading sideways for some time. What’s your crystal ball telling you about precious metals?

David Morgan: Nothing fundamentally has changed in the global financial system. The 2008 financial crisis really hasn’t been repaired. What they’ve done is they’ve taken a debt-based economy on a global basis and it has been brought further and further into debt, nation-state by nation-state. The Eurozone has problems, the U.S. has a bigger debt than ever. And the whole problem is that this debt cannot be paid back.

So from a big picture perspective, the fundamental reason to own some gold or gold stocks (or both), or silver in your portfolio is for the very fact that there’s never been a fiat currency that has survived the test of time, which means—and we’re seeing it right in front of our eyes— we’re seeing failures of currency, or what I call a currency crisis. Venezuela, Brazil, Iran, Turkey, these are subsets of the bigger picture, which is the U.S. dollar, the reserve currency. Which means that the dollar will continue to get stronger and stronger. So I expect the dollar to look very, very good relative to other currencies globally for a while.

But at some point, that “Aha” moment will take place, meaning that other nations and other individuals will realize the U.S. cannot pay back its debt. Nations like Russia and China have already backed away from the dollar a great deal in the last few years, and that trend will accelerate. When that happens, you’ll see a run to gold and tangibles. It will be primarily gold; silver will be a subset of that, and it will be tangible assets, what we’ve already seen on the real estate side. Once that floodgate opens, I think you’re going to see a big move; I fully expect to see the biggest up move in the precious metals ahead of us. I wrote a book with David Smith called “Second Chance” that talks about the final upcoming rush in the precious metals.

TGR: Would you tell us about a few companies that you’re excited about right now.

DM: There are a couple of companies that I’ve been talking about on my free list on the Internet called “The Big Reveal.” Two that I want to highlight are Enviroleach Technologies Inc. (ETI:CSE; EVLLF:OTCQB) and Mineworx Technologies Ltd. (MWX:TSX.V; MWXRF:OTCQB); they work hand in hand. In fact, these two companies have formed a joint venture for E-waste processing ventures.

I knew Duane Nelson from Silvermex Resources. Through a company that was bought out by Iberian Minerals (now Mineworx) in 2015, Duane created what he called a mobile mill. It’s a water self-contained gravity feed milling unit and this unit can be placed in hard-to-access areas. We visited a location in Arizona where he test ran it for a few days and we watched it work. It did work and I became very, very excited about it, and I started writing about it in The Morgan Report.

Then Duane asked me to take a look at an inert formulation that precipitated gold and other metals. He did all the due diligence you would expect, using a couple of different labs, and the formulation did work. Amazingly, it is an alternative to cyanide and strong-acid processes currently used for the extraction of precious metals from mineral ores, concentrates and invariably electronic waste.

So, once the solution proved to be valid, Mineworx made the decision in early 2017 to spin-off the leach technology into a separate public company, EnviroLeach Technologies, a move that gave Mineworx a free sub-license in perpetuity, enabling it to use the leach in the traditional mining sector. In addition, Mineworx entered into a joint venture (JV) relationship with EnviroLeach for a 20% equity stake in the JV for ongoing pursuits in the E-waste recycling industry. Premium members of The Morgan Report who bought Mineworx when we recommended it received shares of EnviroLeach in the spin-off. The story didn’t get a lot of legs in the investment community, but it certainly did in the electronic-waste community. A company known as Jabil—a $4.25 billion company—got involved and it started working with EnviroLeach on perfecting this formula.

Like any startup in this type of situation, there have been ups and downs. Some things take longer than you expect. But it’s well along the road right now. And both companies have the ability to use the EnviroLeach formula, which makes Mineworx’s patented HM X-tract mobile mill and its HM X-mill portable grinding unit a great story, and makes it more impactful than when it was just a self-contained milling operation. I like both companies and own both. I’m very, very excited.

TGR: Right now, there’s a great concern about green recycling of E-waste such as old cell phones and computers. How do EnviroLeach and Mineworx fit into that narrative?

DM: It fits 100%. The joint venture of EnviroLeach and Mineworx each recently put out press releases about their new E-waste concentration plant in Vancouver. The process is able to separate and extract and monetize basically every step of the process. It takes E-waste and separates it into four streams: a copper-based precious metals concentrate that will be sold to refiners, a ferrous metal and aluminum stream that will be sold to recyclers, a precious metal stream that will be processed using EnviroLeach’s formulation, and the remainder material that will be used in construction materials.

As a test, the joint venture processed about 10 tonnes of printed circuit boards at a rate of 900 kg per hour, and projects an initial production rate of 10 tonnes per day. By adding a second shift it could process 20 tonnes a day. They have secured a supply of 40 tonnes of printed circuit boards and 400 tonnes of low to mid-grade circuit boards, cable boxes, modems, PC/power supplies, etc., to process. In fact, one could now state that the Vancouver plant has begun the ramp-up that will lead to commercial production. The companies plan to use the Vancouver E-waste plant as a model to partner with industry and recycling groups in order to secure supply at advantageous pricing, as well as sourcing international business opportunities.

This operation is one of those things that we are all very happy to see, to be able to reuse things we know, help benefit everyone and do it in a green manner. To quote from the news release, “This new utilization of the tailings combined with the reduction of carbon emissions from smelting plus the EnviroLeach formula’s reusability will create the world’s only zero emission E-waste recycling process.”

There are green funds that are looking for sustainable projects and projects that are friendly to the environment. This is a huge leap forward because of the cyanide situation, which a lot of mining people use, and there are states and countries that do not allow any cyanide. So this will be very beneficial for those areas and the industry at large; it’s a very well-known story for Morgan Report subscribers and a couple others. But the story really hasn’t been in front of the resource investing community or the investment community at large.

Rather than just make it a big hole in the in the earth and fill it in with used iPhones and computers, Mineworx and EnviroLeach are able to take those materials and reuse and repurpose them, extracting the precious and base metals like gold, copper and aluminum, and make construction material from the remainder.

TGR: Would you talk about Mineworx’s self-contained unit that could be moved to a remote location to process ore in a place where cyanide is not allowed or where it is not economic to build a freestanding mill?

Mineworx’s Mobile Mill

DM: Yes, I know once the E-Waste side of the operation is up and running commercially they want to pursue the traditional mining applications of their technologies. This is where I get the most excited. The factors you mentioned are extremely valid and important. But, let’s say you have a junior mine and you have pretty good tailings, for an example. But all the juniors have basically the same problem, it’s always a money problem. Because if they really have the goods, they have to raise money, which dilutes the shareholders. And so that’s a conundrum that no one can really get around.

And now, if you really have the goods, you can have the mobile mill on the premises and start mining and self-fund. So any junior miner worth its salt really should be jumping up and down and wanting to get on board the mobile mill. They might locate the mobile mill on their property and start to extract gold from the project, take that gold, sell it in the marketplace and not dilute shareholders and build a capital base that will allow their mining project to get to the next phase of its development program.

It’s something that could be a catalyst for the junior mining industry.

TGR: What size is the mobile mill? Would it fit on the back of a truck?

DM: You’re looking at two 18-wheeler trucks. The technology is proven, but it hasn’t been implemented on a large scale yet.

TGR: Is there else you want to add before we sign off?

DM: Our entire team at The Morgan Report is devoted to find the best of the best for everybody who is involved in the resource sector. I would like readers to consider getting on our free list, which is at TheMorganReport.com. Every week, you will receive every interview I do, and you will get very usable information for investors. I always try to give a wealth tip once a month to keep people on track. I answer questions. And of course, you will have access to any of the webinars that we do for free once you’re on the list.

TGR: David, thanks for your insights today.

Would You like to Receive Samples of The Morgan Report? Submit Your Info Here

David Morgan is a widely recognized analyst in the precious metals industry; he consults for hedge funds, mining companies, depositories and individual investors. He is the publisher of The Morgan Report, author of the book The Silver Manifesto, and a featured speaker at investment conferences in North America, Europe and Asia. As a public service, he provides a free weekly e-letter available at The Morgan Report.

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Disclosure:
1) Patrice Fusillo conducted this interview for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this interview are billboard sponsors of Streetwise Reports: Mineworx Technologies. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with EnviroLeach Technologies and Mineworx Technologies. Please click here for more information. An affiliate of Streetwise Reports is conducting a digital media marketing campaign for this article on behalf of EnviroLeach Technologies and Mineworx Technologies. Please click here for more information. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) David Morgan: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Mineworx and Enviroleach. I am, or members of his 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 interview: None. I determined which companies would be included in this article based on my experience and understanding of the sector. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview. 4) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of EnviroLeach Technologies and Mineworx Technologies, companies mentioned in this article.

The company released off-the-charts assay results from rock samples.

British Columbia’s Golden Triangle has grabbed most of the mining exploration attention this summer, but geology doesn’t fall into neat geometric shapes. Casa Minerals Inc. (CASA:TSX.V) is exploring three gold, silver and copper projects in British Columbia that fall outside the Golden Triangle. The company just announced the discovery of a network of polymetallic mineralized veins in the Golden Dragon prospect of its Pitman property.

The Pitman project is located about 20 kilometers north of Terrace and around 10 kilometers from Casa’s Keaper property. Pitman’s five contiguous mineral tenures cover 4,255 hectares. The project includes several historical prospects, including the Pitman copper-molybdenum-silver prospect and the Gold Dome and Paddy Mac gold-base metal prospects. Some parts of the property have only recently become accessible as a result of the retreat of glaciers and permanent snowfields.

The Golden Dragon veining network, the company noted, was “discovered by Casa’s field crew that was prospecting and sampling in the area of the historic Paddy Mac and Gold Dome gold prospects. The system includes multi-level semi-parallel veins of apparent east-west attitude that have been traced intermittently over an approximate distance of 500 meters.”

Initial rock samples released by Casa Minerals include:

  • Rock chip sample A0007218, from a 2 foot wide vein returned assays of 574.42 g/t gold and 109 g/t silver plus 0.1% copper, 1.56% lead and 0.23% zinc.
  • Rock chip sample A0007221, from a 3 foot wide vein assayed 268.86 g/t gold and 127 g/t silver plus 0.2% copper, 2.95% lead and 0.04% zinc.
  • Rock chip sample A0007219, from a 1 foot wide vein assayed 50.83 g/t gold, trace copper, 0.21% lead and 0.02 % zinc.

The company noted that it is continuing with geologic mapping, prospecting and soil sampling “in order to better understand the geology and mineralization of all parts of the Pitman property.” It also plans to conduct an airborne geophysical survey.

At the end of September, Casa released rock and soil analyses from the company’s 100%-owned silver-copper-lead-zinc Keaper project, located about 20 kilometers northeast of Terrace, B.C. The rock and geochemical surveys returned values as high as 1,152 g/t silver, 13.9% zinc and 1.19% copper.

Casa Minerals noted that the fieldwork at Keaper has confirmed and extended the Nelson prospect. It has also identified a new prospect, Lucky Crew.

The company also announced that it has received a drill permit for the project.

The Keaper project itself was identified in 2008 by British Columbia Geological Survey geologists; it was a greenfield discovery. The project is located in the Stikinia Terrane, the formation that hosts many of the Golden Triangle projects.

“One sample that the British Columbia government tested in 2008 returned assays of 2,232 g/t silver, 1.12% copper, 1.28% lead and 10.94% zinc,” Casa President and CEO Farshad Shirvani told Streetwise Reports.

The company has held claims on the Keaper property since 2008; it now controls 3,602 hectares.

Casa Minerals is helmed by an experienced team. Farshad Shirvani, founder, president and CEO of Casa has over 22 years of experience in mineral exploration. He is the president of Doubleview Capital Corp. and Terracad Geoscience Services Ltd. and has served as a member of the board of directors of several junior mining companies, including Barkerville Gold Mines Ltd. (BGM-TSXV) for more than seven years.

Erik Ostensoe, P.Geo, is a director and chief geologist. He has 50+ years of experience in mineral exploration in British Columbia and elsewhere, including the discovery of the Hat gold-copper porphyry deposit, early-stage work at the Valley of Kings and KSM areas, the Schaft Creek copper-molybdenum deposit of Copper Fox and Teck, and the Chu molybdenum deposit near Vanderhoof, B.C.

Casa went public in December 2017 and has 36 million shares issued and outstanding, of which around 90% are closely held. The company’s market cap is approximately CA$6.15 million.

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Disclosure:
1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an employee. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Casa Minerals. Please click here for more information.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Casa Minerals, a company mentioned in this article.

Precious metals expert Michael Ballanger discusses the stock market volatility of the last week and what it may mean for precious metals.

When asked about the dominant theme for the markets last January, I said that the one thing I looked forward to was a return of “VOLATILITY” as the Federal Reserve Board moved to “normalize” the interest rate structure, now commonly referred to as quantitative tightening. What has actually transpired since then was a brief volatility spike in February during which the UVXY tripled in ten days but other than that, markets screamed higher, hitting new high after new high with annoying complacency and irritating certainty while “VOL” collapsed.

Despite the U.S.-China trade friction, rising yields, weak overseas markets and increasing geopolitical tensions, the NASDAQ has been on fire while Canadian weed deals have dominated water cooler conversations for most of 2018. Volatility has been largely absent – until last week, when it snuck into the upstairs bedroom under cloak of darkness and removed all cash and jewelry from the room. The S&P 500 (after Thursday’s close) had given back 7.2% from its 2,940 peak seen in September when every anchor or commentator in the financial media was breathless with glee. S&P began the Friday session up a mere 2.05% YTD, which is still positive for the year, and remains superbly superior to gold’s 6.24% decline since 2018 arrived.

In February and in May, gold and stocks were neck and neck but once the Donald decided to ratchet up the trade war, interventions became epidemic and the S&P quickly took off with gold doing the reverse. The gold gurus point to the “China Peg” as the bogeyman in the precious metals bedroom but the reality is that the algobots picked up the correlation and as they did with the gold-yen and the gold-euro pairs in earlier times, they tend to stay with the correlation “that is working” for longer than you can say “rational.” I will refrain from debating whether it is a Chinese “policy” peg or an “algo-gone-anal” peg but the reality is that IF the West wants the Chinese currency UP versus the U.S. dollar, all it needs to do is move gold to $2,000 per ounce and the currency issues will be summarily corrected. (As will my net worth issues as well.)

Thursday’s $34 move in gold was a reaction of classic proportions to stock market routs occurring around the world with alarming frequency but what was bothersome was that silver failed to catch the slightest of bids closing up a tad despite the impressive move in gold. As you all know by now, precious metals advances that have “teeth” include silver outperforming gold and the miners outperforming the metals so Thursday’s action was incomplete in firing up the adrenalin. I tweeted out my intention to add to my holdings on Friday in selected junior explorcos as well as buying the GLD Dec $115 calls for under $3.00. I wanted to see the silver market outperform the gold market Friday (which it did) AND I needed my trusty canine Fido to come out from under the tool shed (which he did) in order for my bravery level to allow me to pull the trigger on these positions.

Back on August 27, I published my letter under the title of “Back up the truck…” in response to the terrific technical action of gold as it was coming off the $1,167 lows since from August 16 with a proviso that I needed the market to remain above the $1,200 level for more than a millisecond in order for me to go “ALL-IN.” For the next five weeks, gold meandered over and under $1,200 a dozen times with the lows being in the mid-$1,180s while the omnipotent COT Report (tongue firmly planted “in cheek”) failed to ignite anything more than a yawn despite the more-than-often-right Commercials actually long gold for the second time in 20 years and amazingly long silver for the first time ever.

Coupled with record shorts held by Large Speculators in both gold and silver, the potential for a short squeeze was high and rising then and even higher and rising now. However, I still need to see the dips be bought and the rallies left alone in order to convince myself that this is finally the point where money flows back into the U.S.-dollar denominated price of gold, which in turn will send the stock jockeys piling into the Junior and Senior Miner ETFs as well as the little explorcos. I believe this is an ongoing process that will accelerate as returns in the NASDAQ fade and money moves in search of alternative returns as happened in 2002 and late 2015. In Canada, as soon as the weed deals get crushed, money will also gravitate back to mining so the right course of action is to accumulate physical gold and silver in advance of this “Great Rotation” out of paper assets and into hard assets.

This past week’s highlight was Thursday’s big rally in gold but as of Tuesday, the bullion banks had accumulated the largest long position in gold futures since the CME began reporting the COT numbers. Up until this week, COT structure extremes had gone largely unnoticed as the algobots continued to press their short bets while the Commercials were tickled pink to accommodate. Thursday’s action was terrific in that I got a chance to witness what happens when a large amount of emotion spills over into the relatively miniscule precious metals markets and catches the ‘bots on the wrong side. Being devoid of emotion, the ‘bots simply follow the signals and if it is time to cover shorts or initiate new longs, they do it “at market” and will keep at it until either the software commands it or the price managers pull the plug.

To have a $6 pullback after that massive move on Thursday was a large “NOTHING” but next week I will need to see (and EXPECT to see) a follow-through surge with silver coming out of the starting blocks on fire. I cannot stress enough the significance of this COT report; it is historic. The net long position of the always-short Commercials is 42,617 contracts and that compares with the December 2015 bottom at $1,045 when they came in at a wildly bullish net short of “only” 2,911 contracts. What followed was a truly massive rally in bullion (37%) and a 280% advance in the HUI. We are coming off an August/2018 low that is $122 above the December/2015 low with the HUI 54 points above the January 2016 capitulation low of 99.17.

With sentiment so drastically negative, the potential exists for a multi-quarter advance that can resemble that spectacular eight-month rally in 2016 but if you want to know the truth, I say it will be more akin to 2002, where those positioned in silver at $10 even after it was up 300% saw another 500% advance by 2011. As for the outlook for the miners, Goldcorp was a $4 stock in 2002; it peaked at over $45 in September 2011. Think about it.

If we get a move north of the 100-dma at $1,240 next week, the stage will be thoroughly set for an advance to 200-dma at $1,295 where it will need to spend a great deal of time consolidating as the magic $1,300 was a major area of support in May until it got crushed on June 21. For now, I am confident that the mid-August lows are your stop-loss floor and the assault on $1,400 is now officially underway. I backed up the proverbial truck and filled up the bed back in August-September but with the weekly chart looking so positive, it is finally time to find something with a tad more cargo space and just to give you an idea of how bullish I am for Q4/2018 and beyond, the appropriate vehicle to be loaded this time is a large ocean liner or an oil supertanker.

One final note: You may have noticed a trace of exasperation in my writings of late and if indeed you did, you are distinctly on the money as there is no question that my affinity for gold hit a career low last month but it had nothing to do with gold or silver. It had to do with an almost perverse sense of regret in recommending and investing in Western Uranium. I have consistently made above-average returns in trading gold and silver since I entered the securities industry in 1978 but the recent arrival of the algos into the gold pits have taken away from me the ability to use gut feel or tape sense or pit instincts to make decisions and execute. I liked Western Uranium in 2016 after meeting the principal investors in the deal but the timing was wrong and I saw my $1.70/unit investment go into terminal crash-dive mode as uranium continued its death spiral to $18/lb. I assisted with the financing effort six weeks ago at $0.68 per unit (including a half-warrant at $1.15) and watched with amazement as investors decided out of nowhere that vanadium was undervalued and then followed it up with a similar revelation for uranium.

Call it morbid curiosity or outright cynicism but I have become so engrained with the dismal action in gold and silver and the miners that to see WUC scream out of the gate and quintuple eight weeks after the placement closed put me squarely into a state of disbelief. Since the financial crisis of 2008, we have watched no fewer than twenty-five events that should have taken gold through $2,000 per ounce but constant interventions and manipulations continually to plagued precious metals price performance in truly maddening fashion. As gold investors, when was the last time that we had a gold stock go from $0.68 to $3.32 in two months on a valuation reset? Therein lies the root of my angst. After all I have tried to convey over the years, when was the last time a gold (or silver)-related security actually became a brilliantly successful trade? A few have, but the majority are usually doomed to the mediocrity of shitty markets or shitty management, both of which I deem a most-convenient cop-out.

The frustration I feel lies in the truth that underlies the 2018 landscape; the elite class want the bankers, politicians and regulators to ignore 5,000 years of history. They would instead prefer to demand that their appointed central banker like Greenspan or Yellen or Powell simply follow the plan that was originated after the 1987 market crash and ensure that markets behave according to the carefully crafted script, which means gold and silver are the enemy, stocks are our saviors, and bonds don’t count. As stated earlier, the bullion banks that have been pointed to as the major culprits in the gold and silver rigging scheme are now heavily positioned for an up move and have been since August. The inevitability of the Commercials crushing the hedge funds is the reason I expect the miners to begin to perform like the uranium/vanadium stocks, where REAL supply and REAL demand ex-interventions create a free and natural upward hydraulic so absolutely critical to properly-functioning markets.

This coming week will tell us whether can welcome a new paradigm for the precious metals or whether we simply devolve back into the status quo. Stay tuned and cross your fingers.

It is time.

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

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Disclosure:
1) Michael J. Ballanger: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Western Uranium & Vanadium Corp. 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 referred to in this article: Bonaventure Explorations Limited is owned by me and my wife and has earned consulting fees from Western Uranium & Vanadium in the past. I determined which companies would be included in this article based on my research and understanding of the sector. Additional disclosures are below.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Western Uranium & Vanadium. Please click here for more information. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Western Uranium & Vanadium Corp., a company mentioned in this article.

Charts courtesy of Michael Ballanger.

Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.

A Fundamental Research Corp. report relayed this company’s investment highlights.

In an Oct. 9 research note, Fundamental Research Corp. analyst Siddarth Rajeev indicated that Golden Arrow Resources Corp.’s (GRG:TSX.V; GAC:FSE; GARWF:OTCQB) recent share price drop represents a current buying opportunity. Fundamental has a CA$0.98 per share fair value estimate on Golden Arrow; the company’s stock price is now around CA$0.29 per share.

The average enterprise value:resource ratio of the other junior silver companies in Fundamental’s coverage universe has decreased to CA$1.63 per silver equivalent ounce from CA$2.29 since May, when the research firm initiated coverage on Golden Arrow, due to the decrease in silver prices. Golden Arrow’s shares are trading at CA$0.54 per ounce, much lower than the average.

Aside from its current valuation, Golden Arrow is an attractive investment, in part, Rajeev pointed out, due to its joint venture partnership, with SSR Mining, in Puna Operations Inc., which is composed of the Chinchillas and Pirquitas projects. Golden Arrow owns 25% of Puna; SSR owns 75%.

This year, 3 to 4.4 million ounces of silver are to be produced at Chinchillas, according to SSR Mining estimates. “GRG will receive a 25% share of the net profit,” Rajeev emphasized. Ore from Chinchillas will be processed at Pirquitas, and that should begin soon.

Also, Golden Arrow owns the Antofalla project in Argentina, which recently yielded “encouraging” drill results, indicated Rajeev. They included 3 meters of 191 grams per ton silver, 1 meter of 283 grams per ton silver and 2.1% zinc.

Rajeev reiterated that Golden Arrow is rated Buy.

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Disclosures from Fundamental Research Corp., Golden Arrow Research Corp., October 9, 2018

The opinions expressed in this report are the true opinions of the analyst about this company and industry. Any “forward looking statements” are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts will materialize. Actual results will likely vary. FRC and the Analyst do not own shares of the subject company. Fees were paid by GRG to FRC. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. Our full editorial control of all research, timing of release of the reports, and release of liability for negative reports are protected contractually. To further ensure independence, GRG has agreed to a minimum coverage term including an initial report and three updates. Coverage cannot be unilaterally terminated.

A BMO Capital Markets report reviewed this Denver, Colo.-based company’s quarterly sales.

In an Oct. 9 research note, Andrew Kaip highlighted Royal Gold Inc.’s (RGLD:NASDAQ; RGL:TSX) reported sales from its streaming agreements. Gold sales and silver and copper deliveries during Q1 FY19 were “higher than estimated.”

Gold stream deliveries were 46,000 ounces (46 Koz) versus BMO’s estimated 43.5 Koz, and gold inventory dropped to 20 Koz from 22 Koz. Silver and copper stream deliveries were 544 Koz and 0.7 thousand tons (0.7 Kt), respectively, compared to BMO’s expectations of about 456 Koz silver and 0.5 Kt copper.

During the quarter ended Sept. 30, 2018, the company’s streaming revenue is estimated at $69.5 million, which would exceed BMO’s $62.7 million forecast. At the same time, costs were down, coming in at an estimated $16.4 million versus BMO’s anticipated $19.8 million. “We expect a positive revision to our estimates,” Kaip indicated.

As for average metals prices, they were lower in Q1/19, quarter over quarter. Gold was $1,221 per ounce ($1,221/oz) versus $1,314/oz one quarter earlier. Silver was $15.25/oz compared to $16.55/oz. Copper was $5,800 per ton, down from $6,847 per ton.

Cost of sales during the quarter were $288/oz of gold equivalent, down from $349/oz in Q4/18.

Royal Gold is scheduled to release its Q1/19 results after the market close on Oct. 31, with a conference call to follow at noon Eastern Standard Time on Nov. 1.

BMO has an Outperform rating and a $98 per share target price on Royal Gold, whose stock is trading currently at ~$77.93 per share.

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Disclosures from BMO Capital Markets, Royal Gold, Oct. 9, 2018

IMPORTANT DISCLOSURES

Analyst’s Certification
I, Andrew Kaip, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.

Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Company Specific Disclosures
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Royal Gold.
Disclosure 6C: Royal Gold is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services.
Disclosure 9B: BMO Capital Markets makes a market in Royal Gold in United States.

For Important Disclosures on the stocks discussed in this report, please click here.

The report provides support to proceed with development plans.

Advantage Lithium Corp. (AAL:TSX.V; AVLIF:OTCQX) announced the filing on SEDAR of its Preliminary Economic Assessment (PEA) report following summary results announced on August 14, 2018.

The company stated that the PEA report provides support for Advantage Lithium to “proceed with development plans for 20ktpa capacity stand-alone Lithium Carbonate plant located at its Cauchari Joint-Venture project in the province of Jujuy, Argentina.”

The company noted the following key points:

  • US$830 Million after-tax Net Present Value at 8% discount rate and Internal Rate of Return of 24.0 % for 20,000 Tons per year production of lithium carbonate. (Pre-Tax Net Present Value – $1,321 Million)
  • Pre-production Capital Expenditure estimate of US$ 401 million for a 20,000 Tons Per Year operation
  • Operating Expenses of $3,667/ton of lithium carbonate average after production ramp-up
  • Processing facilities design based on proven solar evaporation technology and conventional lithium brine processing, leveraging JV partner Orocobre Ltd.’s (ORL:TSX; ORE:ASX) project development experience
  • Mine life of 25 years including a 3-year ramp up for 20,000 tons per year production scenario based on conversion factors applied to 3 Metric Tons resource published in May 2018
  • Cauchari resource conversion to Measured and Indicated well underway with DFS to commence imminently with completion scheduled in Q2 2019, both fully funded by the AAL/Orocobre Joint Venture
  • The resource is open to the south and at depth, with potential to add significant tonnage with additional exploration, including in the deep sand unit

David Sidoo, CEO and founder of Advantage Lithium, commented, “We are very pleased that we have advanced our Cauchari JV from exploration through to a completed PEA in just over a year. The positive results first summarized in our news release of August 14 are now backed up with an independent study report that reflects the rapid advancement of the project engineering supported by Worley Parsons.”

Sidoo noted that this “confirms the potential of Cauchari JV as a robust project with operating costs expected to be in the lower quarters of the industry cost curve.”

The company also reported that it is progressing on schedule with phase 3 drilling and well testing programs. “The results from this work are required to support resource to reserve conversion and to achieve our target Definitive Feasibility Study which will commence in early October and planned for completion by Q2 2019,” Sidoo stated.

The company noted that the economic results for the project have been updated to reflect an improvement in the tax regime in Argentina with lower tax rates that were not reflected in the initial PEA announcement of August.

“The economic analysis is based on brine grades and lithium volume estimated from the company’s published Inferred Mineral Resource only,” stated the company. “Mineral resources that are not mineral reserves do not have demonstrated economic viability. There is no certainty that the Cauchari project evaluation envisioned by the PEA will be realized. The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves.”

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Disclosure:
1) John McPhaul compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an employee. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following company mentioned in this article is a billboard sponsor of Streetwise Reports: Advantage Lithium. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Advantage Lithium, a company mentioned in this article.

Some precious metals ratios are out of whack, says Andy Schectman of Miles Franklin Precious Metals Investments in conversation with Maurice Jackson of Proven and Probable, and explains why he believes now is a good time to rebalance.

Maurice Jackson: Joining us for a conversation is Andy Schectman, the president of Miles Franklin Precious Metals Investments.

We have some important topics to address today regarding physical, precious metals. Before we begin, for first time listeners, who is Miles Franklin, and what type of services do we provide?

Andy Schectman: Miles Franklin is a precious metals company that’s been in business in Minneapolis since 1990. We’ve operated almost 29 years without a customer complaint, ever. We have an A Plus rating with the Better Business Bureau, and are one of fewer than 30 companies in America to ever be approved by United States Mint as an authorized reseller of its product. And more than anything, in a federally non-regulated industry, Maurice, that stands for something.

We’ve seen so much fraud in this industry, typically centered around the low-priced online retailers. In fact, we’ve never had a customer complaint is something we’re very proud of. But the state of Minnesota takes it one step further. We’re the only state in America that regulates the precious metals industry. We are beholden to the Commissioner of Commerce with the surety and background checks annually of every single one of our employees.

“Silver is probably one of, if not the buying opportunity of a generation.”

That continuing education, compliance, surety bond is enough to make the majority of our competitors throughout the country boycott the state of Minnesota, as they too would be subservient to the same set of regulations that we are. And what it basically means is anyone buying precious metals from a company domiciled in Minnesota would have arguably the safest, most secure transaction in the country, because the state regulations all but guarantee it.

Maurice Jackson: You and I had an offline discussion regarding the opportunity of a lifetime that you see in silver. Let’s discuss the value proposition before us regarding silver. Please share, what has your attention at the moment, and why.

Andy Schectman: When I look back over the years and try to identify the moments or the trends that have shaped our success, and the calls that we have made as a company that have panned out, they typically center around anomalies or distortions in the price market. We can take a look at the position of the most sophisticated, well-funded, well-informed traders in the globe, the commercial banks, and in particular JP Morgan, and see something very illuminating.

First off, JP Morgan has amassed over 800 million ounces of physical silver in its house account. That is eight times what the Hunt Brothers tried to accumulate in 1980. It is, in fact, the largest physical position the world has ever seen at one time. And more significantly, it has used the suppressed paper price to accumulate the physical. Since it inherited Bear Stearns’ short position in 2008, JP Morgan has been net short. And the largest short position on the COMEX market. And believe it or not, have never had one losing day. Not one losing trade, ever, in its short book since 2008. It’s almost mathematically impossible.

A lot of investors wonder about this short position, and think that this could go on forever. JP Morgan has proven, with the success of it shorting the paper market, that it does not need to accumulate 800 million ounces of physical silver in order to manipulate the price. Quite to the contrary. I think it manipulated the paper price in order to accumulate 800 million ounces of physical silver.

And what has really gotten my attention is that for the first time since JP Morgan inherited Bear Stearns short position in 2008, and for only the third time in the last 45 years, the commercial banks have gone long in the futures market. Including JP Morgan. It has reversed course, and has gone long on the COMEX markets. So the combination of reverse course in the most sophisticated, well-influenced, well-funded traders on the globe, going long on paper, you see the world’s largest ever accumulation of physical silver in its house account.

I think the two combined are really very, very intriguing to me. If nothing else, people should stand up and take notice of what the big boys are doing right now.

Maurice Jackson: Andy, just to clarify, because sometimes there’s a lot of ambiguity regarding the actions of JP Morgan. Talk to us, is the relationship between the proxy SLV (iShares Silver Trust) and JP Morgan?

Andy Schectman: Yes, it is. JP Morgan has the ability to pull silver out of SLV, and take possession of it. But by doing so, it allows it to take possession of silver without it being recorded. So Ted Butler would tell you that’s one of the ways that it has accumulated vast amounts of physical silver, sort of off the books. So yes, I think the ability for JP Morgan to take possession of silver out of SLV is one of the vehicles that it has used to accumulate vast amounts of silver without it being recorded through the normal channels of taking metal off the COMEX Exchange.

Maurice Jackson: Now for the individual investor, Mr. Schectman, let’s talk about what actions they can and should do regarding silver prices currently.

Andy Schectman: I think you don’t have to look any further than the ratio between gold and silver right now. If you go back literally 45 years, there’s been but one brief moment, and that was in 1993, where trading your gold and silver would’ve netted you more silver. In fact, what’s interesting now, Maurice, if you look at the last 50-years worth of price action, pretty much the average ratio between gold and silver has been about 40 or 45 to 1. Right now, we find that world ratio north of 80 to 1.

So when you put it all together, other than a brief moment in 1993, in the last five decades there’s never been a better time to trade gold for silver. In fact, at this ratio, one could expect to trade gold for silver right now, and then in a few years’ time or less, if the ratio just simply finds its way back to the mean, to the average, double the amount of gold.

In other words, you trade at 80 to 1, hope it goes back to the mean or to the average if not below, of 40 to 1. Convert back into gold and double the amount of gold that you started with.

When I look at a ratio that is this far out of wack, over 80 to 1, double what it’s been on average for the past 50 years. Plus the positioning of the most sophisticated traders on the globe, going long for really the third time in 45 years. The first time that I can remember. Along with accumulating the largest physical position of silver the world has ever seen at one time. And coupled with the fact that you don’t hear about any of this through any mainstream channels. It really makes me think that silver is probably one of, if not the buying opportunity of a generation.

I try to say that, Maurice, with all sincerity and objectivity. I can’t see a better investment when you’re able to buy something right now, that is a third of what it was in 1980, and costs more to pull it out of the ground right now. And you’re seeing the most sophisticated traders on the globe amass huge amounts of it. If I were a gambling man, I’d like to say that’s a bet I’d like to take.

Maurice Jackson: Andy, I appreciate your veracity. I know you personally, and you’re a man of integrity. One of the things I noticed here in all of your comments is that you’re not making a specific statement regarding the price of silver, will reach price X. You’re focused more on ratios. And that’s very important for our audience to understand, to use the ratios to your advantage.

Now let’s switch gears on to platinum. Talk to us about the enormous potential here. What can you share with us?

Andy Schectman: I love the way you phrase that, Maurice. Ratios and the law of averages are very, very important tools. In fact, I would say, it’s probably the most important gauge that I’ve used in the past 30 years to direct me, as it pertains to exploiting and identifying anomalies and market distortions that typically don’t last.

And you could say the exact same thing right now between the gold and platinum ratio. In fact, you can go back 45 years or more. On my data right now that I’m looking at goes back 43 years. But there was one little spike in 1981 or 82, where the gold to platinum ratio was maybe where we are right now, or slightly higher by a tick. Right now, we are 1.45. In other words, you can trade one ounce of gold for 1.45 ounces of platinum based upon the spot prices.

The average over the past 50 years has been closer to, 0.7 instead of 1.45. In other words, you trade an ounce of gold, you’d be lucky to get three quarters of an ounce of platinum. For most of the last 50 years, platinum has been priced much higher than gold, always at a premium. And a few times I can remember, 2011 or so, where one ounce of gold was $800 or $900. And platinum was $2,300.

So bottom line is here we go again. We have a ratio. We are at the highest level, or almost the highest level in the last 50 years. And it’s almost identical to the gold to silver ratio. Where here again, you could trade gold for platinum, and have nothing other than the average price between the two is reached, you can double the amount of gold that you traded into.

You can say the same thing about the platinum to palladium ratio. There has never been a time where you could trade palladium and get more platinum. Typically, you would get 4 ounces of palladium for 1 ounce of platinum. And right now, you get three-quarters of an ounce of palladium for one ounce of platinum. These are ridiculously skewed ratios. You’re not talking a small sampling of time here. You’re talking four, five decades of data, where all of a sudden things are upside down.

Now I’m not here to tell you why things are upside down. Simply to tell you that they are upside down. And when you look at the law of averages, to me it is a very, very, very powerful tool. Mathematical ratios are there for a reason. They’re time tested and true. And so when we talk about opportunities, there are tremendous opportunities. If I own palladium right now, I would run as fast as I can to trade it to platinum. If I were looking to acquire platinum, the first place I might consider is trading some gold for it, rather than writing a check for it.

If there’s the ability to trade some gold or some palladium for platinum, to play the law of averages, to consider trading it back when that law comes back or those numbers come back to the mean, which they will, you’ll double the amount of gold you started with. Whether it be trading gold to platinum, palladium to platinum, or gold to silver. Again we are exploiting a disconnection or an anomaly in the ratios that go back 50 years.

Is there an opportunity? I’d say, heck yes. And I would say this with all sincerity; these opportunities are as good as I’ve ever seen in the 30 years nearly that I’ve owned Miles Franklin.

Maurice Jackson: About two years ago, you shared with me, “Maurice, watch out for platinum here. The price is going to go down.” And you shared the very same sentiments right here. Look at reducing your positions in gold and palladium. We did exactly that. And the ratios were tighter at that time. But here’s the difference as well. You have to be fundamentally and educationally prepared that what you just shared, that the price may even go lower. And as the price of platinum has gone lower, we’ve actually added more and more positions to our platinum because we understand exactly what you’re sharing, that we would get more ounces of palladium and or gold. We’re just using the ratios to our advantage.

So thank you for those words of wisdom, because I think what happens sometimes is the thesis makes sense for something, but then the price continues to drop and two years pass, and we get discouraged and we give up. And this is the time where individuals like yourself and those that have been serially successful in this industry, this is what they do. They buy low, and they will sell high.

Andy, before we leave, last question. What did I forget to ask?

Andy Schectman: Bottom line is this: there are opportunities to be found. You don’t have to write a check out to find opportunities. I will honestly say to you that one of the keys if you’re in this for the long run, if you see the reasoning to hold precious metals. You see that a trillion seconds ago was 31,688 years ago. You see a $22 trillion debt, and $150 trillion unfunded liabilities and a world that’s getting somewhat crazier by the day probably isn’t long-term sustainable. And you want to hold some metals for these reasons.

Then it’s imperative to realize the legitimacy of playing these ratios. Of moving in and out. And physical metals sometimes are not the best vehicle for doing so. Because you have to pack it up and send it. It doesn’t diminish the importance of exploiting and taking advantage of them. If you can get past the inconvenience, boxing things up and sending, which we’re very adept at helping people with, then I think these are really truly opportunities of a generation that I’ve never seen before, these types of distortions. And if we do nothing other than come back into focus with reality, with what we’ve seen for the past 40, 50 years, these are opportunities where we’re talking of doubling a position. That’s not something that you hear very often in this industry.

So I think the only thing that I would add to what we’ve talked about is that if we exploit these ratios of trading palladium for platinum, or trading gold for platinum, or trading gold for silver, we also have to keep in the back of our mind the possibility of going back to gold. Or going back to palladium, perhaps. And that’s kind of what I’m getting at here. Is that there have been times in the past 29 years where we have made these switches and switched back. The one thing that’s different this time, and it’s kind of been the central theme for the past year, and we talked about this before, is that there are more of these happening simultaneously than I can ever remember.

I can think of two or three or four instances in 30 years where we had price anomalies that we took advantage of. And they are few and far between. But to see three or four of them right now, at the exact same time, just like we talked before about the numismatic market anomalies all over the place. To see them happening at the same time is what is vastly different. And to the extended degree that we see things is even more startling. And I guess I’d leave your listeners with one piece of, I don’t know, solace or commiseration. And that is simply that, yes, it has been frustrating. There hasn’t been a correlation between logic and outcome. But in the end, I can tell you looking back on the last 30 years that mathematics and economics have a way of playing themselves out. It takes longer than people would like. This is a high stakes game.

Don’t lose faith, have strong fingertips. Be able to hang on, and see the importance of a position in physical precious metals, and see the relevance in maneuvering them to take advantage of these anomalies and these opportunities. Which for me to say to someone this is as good an opportunity I’ve seen in 30 years, takes a lot for me to say that. But I do honestly believe it. Trading gold for silver right now is as good of an opportunity as I have ever seen in the 29 years I’ve owned Miles Franklin. And I would say the same thing about palladium to platinum. Right now if you own palladium, you’re out of your mind if you don’t trade it for platinum.

So again, these are interesting times, and we are here to help people navigate it, and maximize their holdings in precious metals. I can’t tell you how much I appreciate you helping get the word out there. Because that’s just as important, too. Letting people know, and for everyone out there reading, Maurice Jackson, is as honorable as a man I’ve ever met in all my years at Miles Franklin. He does as he says, and so for what it’s worth, Maurice, we appreciate you very much as well.

Maurice Jackson: Well I’m honored to hear that, sir. Thank you so much. Mr. Schectman, thank you for sharing your wisdom and insights. For someone that wants to get more information regarding Miles Franklin, please share the website and phone number.

Andy Schectman: MilesFranklin.com, 1-800-822-8080. And I can be reached by email at [email protected].

Maurice Jackson: As a reminder for our audience, we are licensed brokers to buy and sell gold, silver, platinum, palladium and rhodium. That’s correct, rhodium. Offshore storage accounts and Precious Metals IRAs. If you wish to have a conversation with me, please email [email protected], or call 919-274-5680. And last but not least, please visit our website ProvenandProbable.com, where we interview the most respected names in the natural resource space. You may reach us at [email protected].

Andy Schectman of Miles Franklin Precious Metals Investments, thank you for joining us today on Proven and Probable.

Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.

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Disclosure:
1) Andy Schectman is the owner of Miles Franklin Precious Metals Investments.
2) Maurice Jackson is a licensed representative of Miles Franklin Precious Metals Investments. Proven and Probable disclosures are listed below.
3) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
4) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
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A mining analyst with decades in the industry, Kees Dekker, in this interview with The Critical Investor, discusses not only his experience as an analyst in the field, but also numerous criteria that he recommends for investors to use when doing their due diligence.

Once in a while I run into countrymen in the mining business, and as a Dutchman this doesn’t happen too often. Notwithstanding this, I was connected to a gentleman named Kees Dekker through a mutual contact, and it appeared soon enough that Kees shared a preference for critical analysis with me. Having worked a long career in the mining business when located predominantly in South Africa and Namibia after graduating in the Netherlands but doing projects all over the world, he now aims to work as a freelance mining analyst. I am more than happy to provide him with a platform to introduce himself, as examples of his analysis indicated to me that he could be of great value for anybody who’s interested in thorough research on a mining company. Some of these sometimes very extensive examples will be published, starting shortly after this interview, to give a good idea of the level of Kees’ analyzing capabilities. For now, it is time to introduce Kees Dekker, so here we go. – The Critical Investor

The Critical Investor: Thank you, Kees, for participating in this interview. It is a pleasure to get to know a countryman who knows his way around the mining industry and who also likes to analyze mining companies. For starters, can you tell us your background and experience?

Kees Dekker: Let me first begin with some basics. I am 64 years of age, and currently reside with my wife in Namibia, the country where I started my career after obtaining BSc and MSc degrees in Geochemistry (BSc, MSc) in Utrecht, Netherlands. I subsequently got BCom and MBA degrees from South African universities. We returned to Namibia after our two adult sons left for Germany to pursue careers there.

My career started back in 1979 as an exploration geologist for a subsidiary company of Gold Fields of South Africa (GFSA), which was at the time the third largest global gold producer, but also controlling a number of major base metal and coal companies. In 1983 I was appointed senior geologist at a large base metal mine, the Black Mountain Minerals mine in South Africa.

After completing an MBA in Cape Town, sponsored by GFSA, I joined head office in 1986 as a senior mineral economist at Gold Fields in the Coal and Base Metals Evaluation Section. There I was involved in the annual valuation of Group Companies, coordinating feasibility studies and carrying out project evaluations.

In 1988, I was appointed Section Head of the Coal and Base Metal Valuation Department, managing and mentoring five analysts. In 1990 I was appointed to Group Economist when I managed economists involved in macro-economic analysis, monitoring commodity market development and producing metal price forecasts, as well as advising the pension fund trustees on equity investments and supervising a country risk analyst.

In 1992, I was appointed as Assistant Manager of the GFSA Group, when I had reporting to me an Architectural Section, a Quantity Surveying Section, a Project Management Section and a Property Administration Section, which also looked after the assets of Gold Fields Property Company, listed on the Johannesburg Stock Exchange. The position was often used by GFSA to provide commercial exposure before moving to a more senior position elsewhere in the Group.

In July 1995, I was appointed Regional Manager in Quito, Ecuador for Latin America, except for Brazil. Unfortunately, following the severe downturn in 1999 in the mineral industry and with Gold Fields doing particularly poorly, new management decided to retrench many people including myself.

In 2002, I was appointed as New Business Manager by Oryx Natural Resources, focused on finding diamond projects in Africa. Oryx offered me a job in 2003 as President of its operating diamond mine in the DRC. I left this job after I concluded that the operation did not have the chance to ever be feasible, and I joined another diamond-focused company called Matikara Limitada in Angola, as Chief Operating Officer. Matikara was a JV company between the second largest diamond producer in South Africa, Transhex, and Lev Leviev, who had the monopoly for marketing Angolan diamonds for a long time.

After this, in 2006 I joined RSG Global, a reputable mining consultancy, which got acquired by Coffey Mining in 2007, as Manager for southern Africa. Because of a very different corporate culture I decided to follow my former Manager – Audits at RSG, Mick McMullen, and joined Lachlan Star, one of his companies, in May 2008.

CMD gold mine, Chile (credits: Kees Dekker)

At Lachlan Star I was coordinator of a pre-feasibility study of a gold project in Zambia, followed by the review, acquisition and resource expansion of a gold mine in Chile until the summer of 2012.

Since 2012 I have acted as a freelance consultant involved in technical reviews of among other, the Stillwater Mining Company operations and projects, Nevada Iron Limited, New Chris Minerals and for private equity funds such as QKR (acquisition of the Navachab mine in Namibia), the Casablanca Capital (Cliffs Natural Resources) and Blackstone Special Opportunity fund (Talvivaara mine in Finland and the Renard diamond project of Stornoway). I have also visited projects in many other exotic places like India, Eritrea and Zimbabwe. Right now I am looking to intensify my work as a consultant as I feel too young to retire yet.

Sandawana Emerald mine, Zimbabwe (credits: Kees Dekker)

TCI: That’s an impressive resumé in mining, and you seem to have covered a variety of fields, from doing exploration yourself to managing studies to managing large exploration projects to acquisition of assets. What would you consider your field of knowledge and expertise as a mining professional?

KD: I see myself as a generalist, a bridge between technical and commercial functions, and one of my strengths is having strategic insights. I also belief that I am good at identifying critical success factors and risks. I do not simply accept numbers and information provided to me and will always re-crunch the numbers to verify whether these are correct and credible.

TCI: That makes sense looking at your experience. Tell me, over the years you must have encountered some mining celebrities, or have some nice anecdotes from the industry at least?

KD: As an old hand many of the people I worked with are retired.

  • Robin Plumbridge – ex-Chairman of Gold Fields of South Africa
  • Alan Wright – ex-Chairman of Gold Fields Limited
  • Neil Gregson – ex-colleague now portfolio manager at JP Morgan Asset Management
  • Mick McMullen – my ex-manager Audits at RSG Global, entrepreneur and ex MD of Stillwater Mining Company
  • Alex Black – came across him when Rio Alto visited our mine in Chile to see whether we could do a deal together. He came across as very astute.

One year after I had joined head office, GFSA decided to list its Namibian subsidiary on the Johannesburg Stock Exchange as Gold Fields Namibia. I was made responsible to value the three mining operations and the Tsumeb smelter to draft the technical report for the listing and in support of the listing price. My superior at the time who accompanied me was called Ian Blackie. You can imagine that we were immediately referred to by the locals as Black and Decker.

In Africa I have seen some stupid deals. The JV company in Angola had a 35% beneficial interest (split between two partners!) for which it had to make all the upfront investments and undertake the work plus pay for a local office staffed with Angolan partners that cost US$50,000 per month and were only obstructive. The diamonds produced during exploration (for an evaluation of a diamond project one needs to mine between 0.5% and 5% of the deposit to arrive at a representative sample in terms of grade and value) were all kept in “trust” by the government, only to be released when a mine was actually developed. Any analyst worth its salt and familiar with these projects would know that this cannot ever give a decent return to the investor unless the project is exceptional. Experience at Transhex has shown that, once a mine was constructed, the Angolan governmental diamond mining company, Endiama, and other Angolan partners took control and (over)staffed the operation with friends and family, absorbing any free cash flow. The subsequent financial performance was just so that operations could finance themselves, but not a cent was earned that could leave the country as dividends.

My experiences in the DRC and Angola have strongly coloured my views about investing in Africa. I would not touch projects in those countries with a barge pole, and avoid other projects in almost all other African countries.

TCI: I can imagine that DRC and Angola are particularly prone to the “African discount,” but I have made money on the likes of True Gold and Endeavour, so jurisdiction risk is elevated but I wouldn’t discard the continent completely for investments. After such a career, why did you develop an interest in being an analyst?

KD: It plays into my strength of having technical and commercial insight at the same time. I have an analytical mind and the work I do is to review a project/company holistically, not just focused on a particular field. Delving into the business plans of the main assets gives a view of the longer-term prospects for a company, which other analysts usually not provide as being too laborious, or too far outside their scope of knowledge.

Another reason for being a mining analyst is that I love to travel. My freelance work has taken me to such exotic places such as Goa in India (for a due diligence on an iron ore company) and the Danakhil Depression in Ethiopia (potassium project), the Atacama desert in Chile (gold and copper projects), Palm Springs (iron ore project), etc.

TCI: I have seen this delving in examples of your analysis. You have sent me examples of models of producing mines that were quite extensive, many spreadsheet pages, hundreds of rows. I have never seen this level of detail before, and I am convinced you can model entire projects as producing mines. However, when you are dealing with economic studies as source material you don’t have quite granular data, which is required. How do you deal with this when analyzing juniors with just economic studies at different stages of detailed engineering, for example just a PEA?

KD: When valuing projects/companies one can only model the available information. It has little to do with PEA, PFS, etc., but with the level of detail provided by the companies. The only difference between PEA and other studies is the level of confidence one can attach to the input parameters. I do not like to tackle valuations where I have to fill in gaps in information, but the NI-43-101 reports must adhere strictly to certain minimum disclosure criteria, which are usually adequate for my purposes. The main reason why I hardly ever look at purely Australian and UK listed companies is the lack of disclosure they can get away with. It does not help me much to read conclusions of studies only without being able to independently determine whether these are reasonable and credible.

TCI: I also noticed your critical mindset. How did you develop this?

KD: My critical attitude is a basic trait, further groomed when working for GFSA in its Mineral Economics Division. The people working in this division were used by executive management to provide the information required for strategic decision making: optimizing operations and supporting acquisitions/disposals. The interaction with directors and general managers teaches one to look at information with a helicopter view and to dig deeper into aspects that are critical to the success of the project or company. One had to motivate in the reports to the executive the validity of the arguments and conclusions.

TCI: Which stages of a project do you feel you can analyze best (grassroots exploration, delineation, PEA, PFS, FS, permitting, financing, construction, production) and why?

KD: I feel I am best qualified to evaluate the prospects of a project that has advanced beyond the grassroot and delineation stages with studies that have resolved the quantity of resources available, the amenability to upgrading to a saleable product. As I indicated above, there is no real difference between the various economic analyses, just the level of detail provided and confidence one can attach to the inputs. There is essentially little difference between reviewing a PEA, PFS and BFS or actual production, only that one can rely more on the conclusions of studies supporting such business plans or reviewing actual production performance measures. Permitting is difficult to judge for foreign jurisdictions and requires direct interaction with parties on the other side of the table of the company. Similarly, construction is difficult to independently determine when relying only on company’s progress reports and without visiting the site.

TCI: I agree about the limitations of desktop studies versus getting a complete picture including a site visit. Could you tell us a bit more about how you work as an analyst?

KD: Sure, I review the available documentation and follow the production process, starting with tenure, geological model, resource estimation, assumptions underlying conversion to reserves, production schedule, cost inputs. In parallel I start cash flow modelling, which often raise questions about the critical input variables and validity of assumptions. The review and modelling activities complement each other by pointing to issues to dig deeper into. At company level it is useful to review the actions of performance of management over the last +5 years to get a feel about how they deliver on promises, how they reward shareholders and themselves and whether this is not lob sided to themselves. I am a great believer of doing reality checks by means of benchmarking. Whereas every project and company has aspects unique to them, benchmarking gives an indication about whether the assumptions are credible, or not. The problem with cost estimates based on first principles (an estimation from bottom up based on estimation of employees, consumable, fuel, etc. and their cost) is that they only can quantify what is considered. By definition this means that these estimates are too low because items not considered are not quantified. This is probably one of the main reasons for economical studies almost always being too optimistic compared to actual performance. Benchmarked costs are preferably derived from actual operations, not suffering from underestimation or having overlooked certain activities, services and items in studies.

TCI: You talk about cash flow modelling which is something I think is very important when analyzing any project on economics, let’s address this further in a moment. Another aspect of your research is company management. What is your experience regarding management in general?

KD: The most usual issue encountered for a share’s underperformance with producers is the management priority of extending the life of mines and pursue company growth at all cost. Management’s agendas are inclined to differ from shareholder’s interest in that they wish to extend their tenure and optimize remuneration.

The consequence of this management’s agenda is that it will use/force “independent” consultants to use unrealistically favorable inputs to pull the project over the line. The more marginal the project is, the more unrealistic the input parameters are inclined to be. This is another reason to favour high grade projects with high internal returns, not only are they inherently less economically risky, one can rely more on the inputs used as the consultants are allowed to use more conservative assumptions. Low-grade projects with returns bordering on being economic are often doctored beyond viability.

TCI: Interesting. Did you have to deal a lot with management that tried to force you to use unrealistic inputs, and when this was the case, how did you deal with this? How standard is this practice in the mining industry these days you think?

KD: This is still going on these days I’m afraid. As for myself, I have personally experienced that the chairman of a company developing a mine in southern DRC was livid with our conclusions about the risks associated with its project. He placed great pressure on us (Coffey Mining) to rate the project low to medium risk. As we had been appointed by a bank considering providing project financing, it was much easier to withstand the pressure than if we had been appointed by the company itself. Banks will incorporate covenants in the loan agreement to address identified risks.

Other examples are the independent technical review of two platinum group metal projects in South Africa for banks considering giving project finance. One project assumed the use of a so-called Efficient Cut, which limited dilution and gave a higher plant feed grade than what the normal mining width (based on a chromite layer that preferentially parted the rock) would give. We differed in opinion with management as we thought that in normal mining conditions—not the heavily supervised test mining conditions—this would not be achieved. This proved to be the case.

The other project failed to give attention to timely develop the underground infrastructure in order to fill the plant once the 18 months open pit material was depleted. We considered the open pit phase as unnecessary (apart from the scar to the landscape for precious little value), complicating the plant performance by feeding partially oxidized material, which would complicate stabilization of plant performance, and interfered with underground development. The two banks involved took our advice and avoided the loss that Macquarie Bank incurred when it took over the financing of the project.

TCI: Interesting, I can imagine working at the side of a project financier is much more independent regarding analysis. What puzzles me in this regard is that once in a while you read about failed projects, taken through FS stage so assuming at least decent engineering work has been done, where financiers with solid reputations apparently took on huge risks. In the end some of those projects appeared to have failed on pretty basic causes. Do you have any idea, assuming these financiers’ capabilities of doing thorough due diligence, why they pursue to fund these projects nevertheless and lose huge amounts of money when projects go into bankruptcy or have to be refinanced at high costs for financiers?

KD: Management will try to pull projects over the line no matter what the real merits are, and sometimes they manage to convince financiers. Whereas financiers have a totally different agenda than management, equity investors should not rely on that. Project finance will be serviced before any dividends and it is almost always fully secured by the assets. Project finance is therefore of much lower risk. Financiers also often rely on technical advice given to them by outside consultants. I have seen enough consultants who are not critical enough and which lead institutions up the garden path.

TCI: There has been quite a bit of talk about the viability of a Preliminary Economic Assessment (PEA) in recent years, and some mining professionals even compared the usefulness of a PEA with toilet paper. I still think it is a good first indication, with a high margin of error, of economics, depending on the engineering firms doing it. What is your opinion about a PEA in general?

KC: A PEA has a role to play, when it is seen to establish a prima facie case for development, better still when it compares various options for development. Once this has been determined, more detailed studies have to prove up the input parameters at a higher confidence level.

A clear warning sign for investors is management giving the go-ahead to projects based on a PEA instead of a feasibility study (FS). PEAs are very often notoriously overoptimistic in parameters used and also, for example, include too much material in the life of mine by incorporating inferred resources with a low level of confidence.

TCI: Yes, we have seen that with Rubicon Minerals and its Phoenix project failing completely, building it from a PEA. When I noticed the company wanted to build it from a PEA I didn’t even look at it again. What could cause financiers to fund the capex of such risky projects? These projects will always be severely discounted for valuation anyway because of the low level of confidence in resources and mine plan, besides the inherent execution risks. What could be their rationale behind such a risky strategy? As if mining wasn’t risky already.

KD: This isn’t always obvious. A reason could be that the perceived economics are so compelling that company management believes that any risk of disappointments are more than covered by the robustness of the project, and in turn they somehow managed to convince the financiers of this idea. I am of the opinion that this also happened to TMAC with its Hope Bay project, which was developed on the basis of a PFS, but with metallurgical studies that were very skimpy and should not have qualified as sufficiently detailed for a PFS. The initial financing of US$120 million must have looked modest to the financiers as the after-tax discounted value was calculated in the study at C$478 million (US$406) using a discount rate of 7.5%.

TCI: Have you seen typical characteristics of projects that got constructed just based on a resource or a PEA?

KD: I have seen management typically opt for project go-ahead based on PEAs on deep, steeply dipping and narrow deposits where the costs of carrying out a feasibility study are extra high. A feasibility study requires drilling the resources to a level of confidence that would allow it to be included in a mine design required for the feasibility study. The required density of drilling and narrow nature results in very high cost per tonne in resources. Naturally the temptation of a short cut is then very high.

TCI: That rings a bell or two, one very nice example of a narrow deposit that didn’t even see a PEA before construction, not even a resource estimate, and broke down on extensive water issues (and had much less ounces than projected) was Serra Pelada by Colossus Minerals. Management was always very upbeat on the project and didn’t want to hear anything negative. What is your general experience when communicating with management when analyzing their projects? I have found it to be difficult when you have a critical standpoint, but nevertheless with good and professional management I almost always have constructive discussions, and management can often elaborate on things that are not always obvious to a non-insider of a project like myself and everybody else outside the company or engineering firm.

KD: To be honest, with not publishing my work to a wide audience I normally do not bother to send the reports to management for comment. When I have been in contact with management on critical reports, they were without fail defensive and accused me of being wrong, threatening to sue me or did not respond at all. This is not really surprising; management’s role is to promote their project and by definition will not support dissenting voices.

TCI: Could you name a few examples where practice showed that economic studies aren’t always realistic?

KD: Sure, and a lot of these failed projects had to do with inappropriate resource estimates, like the one we mentioned earlier, the Phoenix project of Rubicon Minerals, and Hope Bay of TMAC. The Santa Rosa project of Red Eagle Mining Corp. (R:TSX; RDEMF:OTCQX; R:BVL) had geotechnical issues and used very optimistic grades and operating cost, and I consider the Black Fox project of Primero (since purchased by McEwen Mining) as having used far too optimistic inputs.

TCI: Resource estimates are often key, I also think that Pretium Resources Inc. (PVG:TSX; PVG:NYSE) isn’t out of the woods yet as there was a lot of controversy about its resource estimate, and Strathcona still doesn’t think all gold is there as projected by Snowden. What is your opinion on Pretium? And have you heard about the Aurizona mine of Equinox (former Luna Gold)? This one ran into cash flow problems when the milling and crushing circuits didn’t operate well, and the operation was burdened by the heavy Sandstorm stream. It had to be completely refinanced; do you think this was the result of taking shortcuts during geotechnical drilling for example?

KD: Both consultancies involved with the Brucejack project of Pretium are very reputable and the difference of opinion essentially revolves around whether the very high grades that push up the average grade are representative and should be given the influence that Snowden awarded to them. Whereas I am by no means a resource geologist I had sympathy for the Snowden approach given the very dense drill spacing and numerous assays that constituted the database. This resulted in the histogram becoming very close to a population curve with the high grades properly represented. It will be interesting to see how this plays out after another 18 months production at Brucejack. The deposit is fairly unique and the lessons there learned will have a great impact on estimation of similar deposits, should these be found in future.

I haven’t looked into the Aurizona mine so I cannot comment on this unfortunately.

TCI: On the contrary, let’s talk about solid studies, if there are some in your view, can you mention some?

KD: Well, in my mind there are no really solid, good studies issued by junior companies. I have seen realistic studies in large mining companies developing projects using in-house resources not requiring outside capital. However, to stay with the subject, the better studies of junior companies are the Morelos Project of Torex Gold Resources Inc. (TXG:TSX) and the Yaramoko Project of Roxgold Inc. (ROXG:TSX).

For open pit mining at Morelos conservatively high mining losses (5%) and dilution (15%) were used and the unit operating cost for Morelos at US$2.11/t mined is comparatively higher for Mexico as is the processing cost of US$16.32/t.

For Yaramako internal dilution of 18% at 2.4 g/t was assumed with external dilution assuming 35 cm on either side of the stope design plus another 3% dilution from backfill. This combined with operating cost of US$144/t, that gives due cognizance of African conditions, gives comfort. When I reviewed the project, production was ramping up and initial capital sunk.

TCI: That is quite a statement to say about juniors, but everything is relative I suppose. Nevertheless, an analyst has to review those studies, too. When doing due diligence, to what subjects should investors pay attention in your view?

KD: That will not be a quick answer I’m afraid. I will try to list some criteria per stage:

  • Exploration
    • selective reporting of drill hole results with gaps in borehole numbering
    • the true width of the intercepts and siting and direction of holes relative to targeted intersection (some companies purposefully intersect obliquely, i.e., Nighthawk, Marathon Gold)
    • the reasonableness of interpolation provided
    • the possibility of another geological model
  • Resource Estimation
    • The drill spacing on which the estimate is based. There are no hard and fast criteria for drill spacing as these differ for the type of the deposits and the dimensions of such a deposit and a high-grade deposit needs (much) smaller spacing than a low-grade bulk deposit. Statistically one would want a drill spacing that does not compare too wide to the dimensions of the blocks used for grade estimation. For example, Detour used a drill spacing of 40 m and a block dimension in that direction of 10 m.
    • Whether grade capping was used. The average grade of a deposit can be overestimated when the influence of a few very high grades are not limited either by capping their value to a value that is considered more representative (determined for each deposit separately using certain statistical techniques) or by limiting the extent to which it influences the grade in blocks further away, or using both.
    • How conventional and straightforward was the estimating technique used. Grade estimation is not straightforward and the experts will use their discretion in deriving a resource that they consider representative. The more convoluted the approach used, the more risk is associated with the result.
    • The level of confidence awarded.
  • Preliminary Economic Assessment (PEA)
    • What proportion of the plant feed is from Inferred Resources? The higher the ratio of Inferred Resources the higher the risk.
    • The reasonableness of input parameters with opex and capex provisions, benchmarked against those of actual, similar operations.
  • Prefeasibililty Study (PFS) and Feasibility Study (FS)
    • The reasonableness of input parameters with opex and capex provisions benchmarked against those of actual, similar operations.
    • To what extent have non-technical issues such as environmental permitting and community relations been addressed? The degree of attention is highly determined by the jurisdiction, the sensitivity of communities towards mining, whether projects/operations in the near proximity have been applying for permits/ mining successfully without trouble.
    • Does the economic analysis incorporate all cash outflows such as investments in working capital (especially important for base metal projects), corporate overheads for a one-project company, tax on repatriation of profits, mixing positive with negative cash flows by having start of production halfway through a year (thereby understating peak financing requirement)?
    • Has the economic analysis been on a full equity basis or introduces financial leveraging? This is not relevant for NI-43-101 studies, but can be for disposal/acquisition between two companies.
    • Has the economic analysis discounted negative cash flows as well, thereby understating peak financing requirement?
    • What upside is there for extensions of life of mine and what is the effect on the value per year added life?
  • Going Operation
    • How much of the reported costs have been pushed into “growth” capital expenditure thereby understating on-going cash cost of production? Many companies artificially reduce All Inclusive Sustaining Cost (AISC) by charging some of the stripping cost to growth capital, never to be brought back into the cost. Similarly underground mines can push some of the on-going capital expenditure to access new ore blocks to non-sustaining capital cost. These “growth” investments have usually nothing to do with production growth, but sustaining operations over the full life of mine. Reallocation of such expenses is an artefact to present a favorable picture in terms of implied profitability per tonne.
    • Does the economic analysis incorporate all cash outflows such as investments in working capital, corporate overheads, etc.?
    • What upside is there for extensions of life of mine and what is the effect on the value per year added life?

TCI: That was an interesting list of criteria, I also, like you, believe benchmarking of costs and key input metrics is the most important thing you can do as an investor, although keeping in mind that no two projects are the same. Now we have discussed analysis and a few companies, could you name a few cases which you did forecast correctly in your analyses and why?

KD: I take pride in forecasting in 2016 that the best was past for Centamin, in 2016 that Primero was overvalued, in 2016 that Sabina Gold & Silver Corp.’s (SBB:TSX; RXC:FSE; SGSVF:OTCPK) underrating based on permitting problems would be temporarily, in October 2016 that GoGold Resources Inc. (GGD:TSX) was overvalued, in February 2017 that Red Eagle should be shorted, in February 2017 that Roxgold was a case of irrational exuberance, in April 2017 that Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) sits on a massive project that probably only sees the light of day for our grandchildren, pointed out in October 2017 that Nighthawk Gold Corp. (NHK:TSX.V) severely overrepresented its drill results, in May 2018 that Nevsun Resources Ltd.’s (NSU:TSX; NSU:NYSE.MKT) management was correct in rejecting Lundin/Eurosun’s bid.

TCI: On the other hand we as analysts (I very loosely categorize myself as one too here) also had to endure some failures. Two of my biggest misses were Red Eagle and Midway, as I didn’t know back then how important drill grid spacing and clayish ore were among other things. Lessons learned in that regard for sure. Could you name some of your failures and why?

KD: Yes, I seem to underestimate the impacts of non-technical issues. My biggest failure in this regard has been Lydian International Ltd. (LYD:TSX) with its Almusar project in Armenia, which I highly rate on a technical/economical level, but which is now affected by a blockade of a certain section of the community, after the previous leader of Armenia, an autocrat, had to step down. Another is Continental Gold Inc. (CNL:TSX; CGOOF:OTCQX) with its Buriticá project, but which had its share price drop sharply after a number of exploration geologists at its Berlin prospect in Colombia were kidnapped and murdered. Another one was Torex Gold, which also experienced blockades in Mexico.

TCI: This seems connected with the level of trust you can have in management, as I frequently encounter management understating jurisdictional risks. Sometimes they are lucky and nothing happens, but other times stuff happens anyway. How important is management in your analysis?

KD: Management is all-important, not only in terms of competency, but especially if they have proven to be trustworthy (accepting some promotional hyperbole) and looking after the interest of its shareholders.

TCI: Talking about trust, are there people in the mining industry you could trust completely, as in that they always do as they say?

KD: I think you can only fully trust a person in the mining industry when you have worked on a number of projects together with this person, saw how he or she manages these projects, especially when things get tough, and saw/heard him or her talk about those projects to investors or financiers for example.

I can only give you one example of a person I trust in the mining industry and is somebody I heard making statements that I knew where honest based on my own intimate knowledge of the project/company: Mick McMullen. Not to say that he would voluntary open up on issues not asked about!

Except for Mick, all other people I worked for and know to be honest were in my mining house years, and who are now all retired. I knew Howard Stevenson from my Gold Fields days as an honest colleague, but that was many years ago. I have no idea how much he knew about the troubles with the community around the Almusar project of Lydian before the blockades started in May 2018.

TCI: I don’t know Mick McMullen personally, but I do know that Stillwater was run very well. Stevenson was a bit of a strange case, his resignation was buried in a news release handling a quarterly update on operations, without as much as an acknowledgement of his services. Enough about people, what kind of projects or companies do you rate highly and why, could you name a few companies?­

KD: There are a few companies I like a lot:

Trilogy Metals Inc. (TMQ:NYSE.MKT; TMQ:TSX), advancing the very high grade Arctic deposit with strong economics plus having a much larger, lower grade but bulk mineable deposit nearby. It has been very restraint in approaching shareholders for funding .

Another is Midas Gold Corp. (MAX:TSX), which seems to handle the environmental sensitivities in Idaho well, has a reasonably attractive project, which recently enticed Barrick to take a strategic interest.

Bluestone Resources Inc. (BSR:TSX.V), which acquired the Cerro Blanco deposit in Guatemala cheaply. The share is cheaply priced because of concerns about the community, similar to what Tahoe is experiencing. It is Guatemala, but the community is, however, reputedly supportive and does not include indigenous groups, and in Guatemala communities and NGOs represent by far the biggest part of jurisdictional risk.

Gold Resource Corp. (GORO:NYSE.MKT) is a producer I like; it did repay its shareholders in the first year of production, it has since consistently paid dividends, and owns a good gold project in Nevada for growth.

TCI: I am usually more into juniors with more upside, but I regard Trilogy as a solid copper play, although it is not really clear to me why it would need to go to an open pit operation in such a Nordic location; I might ask management soon. On the other hand, are there projects or companies you don’t like as an investment and why?

KD: On the companies I don’t like as an investment, this is actually the vast majority but I will name a few individual companies:

Nighthawk has been issuing press releases that, in my opinion, do not reflect the true nature of the drill intercepts in terms of true width and overall size.

Harte Gold Corp. (HRT:TSX) is developing a relatively low-grade, underground mine focused on narrow structures with short strike length for a very high development cost per tonne plant feed. It has no chance for success, in my opinion.

Argonaut Gold Inc. (AR:TSX) has a track record of continuously tapping shareholders for funding, always holding it out to be for company growth, whereas it is essentially ensuring steady state production. In the Magino project, in my opinion, it has a sub-economic project that will likely destroy value should it be given the go-ahead without a much higher gold price than currently prevailing.

TCI: We have come to the end of our interview, Kees. It was a pleasure. As a closing statement, could you tell us what your take is on metals like gold, copper and zinc (or other metals which you have a strong view on, like uranium, diamonds, iron ore, lithium?), and on mining sentiment in general?

KD: From my time as Group Economist of GFSA I have learned not to forecast prices. Nobody can sensibly forecast these. What is, however, possible is to see turns in the supply/demand situation. There are many indications that we are close to peak gold, and mined supply should start dropping in the medium to long term. I similarly am of the opinion that the uranium price will recover in the next few years as production curtailment will make itself felt. Copper will benefit from the move to electrical cars and further economic growth. Zinc will benefit from the lack of new large projects. I am no fan of diamonds and believe that long-term synthetic diamonds constitute a major threat.

TCI: I am a believer in copper and uranium myself, major issue for me is when exactly the ongoing developments (closure of mines, Cameco buying on the spot market, new funds buying on the spot market, Japan recovering, etc.) result in higher long-term contract prices, as nobody knows the agenda and stockpiles of utilities who do this long term buying.

Thanks, Kees, for this extensive interview, it provided me and hopefully also the readers with useful insights on analyzing mining stocks.

KD: The pleasure was all mine, and hopefully this interview shows how interesting and multi-faceted analyzing mining stocks can be.

TCI: As promised in the introduction, several examples of Kees’ analyst reports will be published shortly. The first one will be about a well-known ramping up producer, and I choose to have two rounds of feedback with the company and Kees, which increases the length of the analysis but also provides the company with a platform to defend its case, and gives insights in the way this company engages with critical analysts, and adds additional insights.

I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter on my website www.criticalinvestor.eu, in order to get an email notice of my new articles soon after they are published.

The Critical Investor is a newsletter and comprehensive junior mining platform, providing analysis, blog and newsfeed and all sorts of information about junior mining. The editor is an avid and critical junior mining stock investor from The Netherlands, with an MSc background in construction/project management. Number cruncher at project economics, looking for high quality companies, mostly growth/turnaround/catalyst-driven to avoid too much dependence/influence of long-term commodity pricing/market sentiments, and often looking for long-term deep value. Getting burned in the past himself at junior mining investments by following overly positive sources that more often than not avoided to mention (hidden) risks or critical flaws, The Critical Investor learned his lesson well, and goes a few steps further ever since, providing a fresh, more in-depth, and critical vision on things, hence the name.

Disclaimer:

The author is not a registered investment advisor, and currently has no position in any of the named companies. Kees Dekker is also not a registered investment advisor, and currently has a long position in Lydian International, Trilogy Metals and Cameco. All facts are to be checked by the reader. For more information go to the websites of the mentioned companies and read the available company information and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.

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Streetwise Reports Disclosure:
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Images provided by the author.

With gold prices moving sideways, the Golden Triangle of British Columbia—and several companies exploring there—continue to provide a bright spot for gold exploration.

Three different gold rushes and some of Canada’s greatest mines have been found on the Golden Triangle, located just inland from the Alaska Panhandle.

The mines include Premier, Snip and Eskay Creek. Other significant and well known deposits located within the Triangle include Brucejack, Galore Creek, Copper Canyon, Schaft Creek, KSM, Granduc and Red Chris.

Rick Mills of Ahead of the Herd noted, “After decades of productive mining and some big discoveries, the Golden Triangle went dormant. Isolated from major infrastructure, the area was expensive to conduct sampling, surveys and drill programs in, and due to its harsh winter climate, was only accessible for half a year. Not much news came out of the Golden Triangle during the 1990s and 2000s. When gold prices weakened to about $400 an ounce, several mines shut down, unable to make a decent margin against fixed costs.”

Over 130 million ounces of gold, 800 million ounces of silver and 40 billion pounds of copper have been found in the area, but experts believe this is only the tip of the iceberg.

“The BC Geological Survey database has identified over 900 mineral occurrences, 67 of which have documented mineral resources,” said Mills. “Lately there has been a resurgence of interest in the Golden Triangle, with something of a staking rush going on there as juniors position themselves for the next discovery hole. So what changed? The excitement is being driven by five factors.”

These factors, according to Mills, are:

New Deposits: Pretium Resources Inc. (PVG:TSX; PVG:NYSE), Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) and Imperial Metals Corp. (III:TSX) all made multimillion pound strikes.

New Infrastructure: “New road and power infrastructure built by the British Columbia (BC) government includes the paving of the Stewart-Cassiar Highway north from Smithers; port facilities for export of concentrate opened at the town of Stewart; and most importantly, a $700 million high voltage transmission line to bring power to mining properties previously inaccessible to the grid and reliant on diesel-powered portable generators,” according to Mills.

Declining Snow Cover: The retreat of glaciers reveal rocks never before seen.

New Geological Theory: A new twist is that most of the Golden Triangle’s deposits are found within a few kilometers of a contact zone (Triassic-Jurassic unconformity).

Higher Gold Prices: Low gold prices shut down several operating mines in the Golden Triangle during the 1990s and early 2000s, and also squelched exploration. “Since then a tripling of gold prices has injected gold fever back into the area, and combined with a new geological theory and the above factors, breathed new life into the possibility of discoverers hitting the next Valley of the Kings or KSM,” Mills asserted.

Against this backdrop, gold explorers including Golden Ridge Resources Ltd. (GLDN:TSX.V), Aben Resources Ltd. (ABN:TSX.V; ABNAF:OTCQB) and GT Gold Corp. (GTT:TSX.V) continue to report impressive results.

Mike Blady, CEO of Golden Ridge Resources, said its recent discoveries in the heart of the Golden Triangle set the company apart from the crowd.

“We are one of the few companies to make a new discovery this year, so that sets us apart from the rest of the companies in the area,” Blady told Streetwise Reports. “We discovered a new gold-copper porphyry called the Williams Zone that was discovered by our team using geophysics and geochemistry, and we confirmed it with drilling.”

The company acquired the Williams Zone property in 2014 from Barrick Gold Corp. (ABX:TSX; ABX:NYSE) and performed an aerial survey of the area in 2015.

“So it all started back in 2014, there was an airborne survey flown on the project in 2015, which found a single point anomaly on the north side of the project,” Blady noted. “Single point anomalies generally turn out to be nothing,” but subsequent exploration confirmed the company had struck pay dirt.

“In 2016, we did some reconnaissance geochemistry on that part of the property and were pleasantly surprised with a strong copper-gold anomaly. The following we year we came back and used ground-based geophysics to further delineate the Williams zone. The anomaly was covered with overburden and dense forest, so our next move was to strip back the overburden by hand and sample the bedrock, which turned out to be the first rock samples ever taken from the Williams zone,” Blady said.

“The first Williams Zone hole was the culmination of the last three years of slow, methodical exploration work that led to the success we had: HNK-18-001, 327 meters grading 0.31% copper, 0.35 g/t gold, 1.94 g/t silver, which we released on August 14. An initial discovery hole of this magnitude is very exciting for our geologic team and company. Deposits in the Golden Triangle need to be large and high grade to be of economic value; this discovery is a huge step in the right direction.”

In September, Golden Ridge announced its drilling continues to intersect broad intervals of copper-gold mineralization at Williams, with holes HNK-18-005 and HNK-18-002 intersecting similar geology to HNK-18-001: 326 meters grading 0.36 g/t gold, 0.29% copper and 1.92 g/t silver for HNK-18-005 and 276.15 meters grading 0.31% copper, 0.24 g/t gold and 2.33 g/t silver on HNK-18-002.

Chris Paul, vice president of exploration for Golden Ridge, noted, “The continuity of grade and thickness at the Williams Zone is very encouraging, as are the increasing grades toward the east. The abrupt change in grade across the fault to the east suggests a portion of the high grade has been displaced, possibly downwards, and the true thickness and grade of the Williams is yet to be seen.”

Golden Ridge is also conducting Induced Polarization (IP) surveys, and in late August reported successful results.

“The IP survey successfully delineated a strong chargeability anomaly which is coincident with the porphyry mineralization drilled in the Williams Zone in 2018,” stated the company. “Two 3-km-long IP lines were completed during the Phase I survey and the anomaly is open along strike to the north and south and at depth.”

The company noted that the data shows “high chargeability values at the Williams Zone which merge with high to very high chargeability values in the Lower Alteration Zone (LAZ), suggesting connectivity of the two zones.”

As for what is the next step in Golden Ridge’s exploration plans, Chris Paul stated, “The results so far have been excellent and once all the IP data, assays and geology are compiled, we plan to design additional step-out drill holes and continue targeting the extensions of the system along strike and at depth in the next phase of drilling.”

Meanwhile, several other companies are reporting significant strikes in the Golden Triangle.

Aben Resources reported it had discovered the South Boundary Zone of its Forrest Kerr Golden Triangle project, and in late August provided an update on its exploration drill program currently underway at the property.

The company announced it had intersected mineralization 1.5 km south of the North Boundary Zone in the newly discovered South Boundary Zone area.

The majority of drilling has taken place at the North Boundary area, the location of high-grade precious and base metal mineralization discovered in 2017 drill holes, as well as the site of the first reported drill hole of 2018. Hole FK18-10 “has four separate high-grade zones with the best zone returning an interval of 38.7 g/t Au over 10.0m including 62.4 g/t Au over 6.0m starting at 114 meters downhole.”

“This new discovery of mineralization 1.5km south of the North Boundary Zone is a major development for the Company and further highlights the robust discovery potential at the Forrest Kerr Project,” said Jim Pettit, president and CEO of Aben Resources. “The mineralizing system at the property is apparently widespread and well-developed with high-grade mineralization being discovered at shallow depths over a large area. We believe we have only just scratched the surface at the newly discovered North and South Boundary Zones and an expanded drill program is currently underway with assays pending for most of the holes drilled to date.”

Aben has followed up with the announcement that an eight-hole stepout drill program at the North Boundary Zone intersected “shallow, high-grade gold mineralization” and included highlights of 5.08 g/t Au over 12.0m in hole FK18-12; 23.3 g/t Au over 2.0m in hole FK18-13; and 10.62 g/t Au over 3.0m in hole FK18-17.

The company also noted that so far it has received assay results for about 3,000 meters out of a total of 10,000 meters of drilling conducted this season.

GT Gold Corp. (GTT) has also been announcing summer drill results. On Sept. 10, GT Gold reported the discovery of a major new gold-copper-silver porphyry at the Saddle North target on the Tatogga property.

“Commencing at just 79 metres down-hole, hole TTD085, the first Saddle North hole of the 2018 season, intersected a very broad interval of sheeted vein, vein stockwork and disseminated style Au-Cu-Ag mineralization, centered on a monzodiorite intrusion with common strong potassic alteration,” the company stated.

Charles Greig, vice-president of exploration for GT Gold, commented, “These terrific hole 85 results, and visual intercepts in holes 90, 93 and now hole 98, indicate possibly the most important new copper-gold-silver porphyry discovery in the northern part of the Golden Triangle since the discovery of the nearby Red Chris deposit, which is within sight of our property. The scale and grade of the Saddle North intrusion is outstanding, and we believe the best of it is intact, at surface beneath thin glacial sediments, and to depth.”

“We see tremendous upside for expansion, and again, as was the case with Red Chris, further grade increases at depth. The Company now has enviable options before it: near-surface bulk-tonnage and potential deep high-grade underground-style gold at Saddle South, coupled with a massive new copper-gold-silver porphyry system right next door,” Greig added.

According to the company, additional assays are pending, drilling is continuing, the system remains open along strike in both directions and at depth.

Earlier announcements involved the Saddle South target. On Sept. 4, GT Gold announced the continued rapid expansion of the Saddle South discovery, with new high-grade gold intercepts east, west, south and to depth along 1,000 meters of east-west trend and to 350 meters of north-south width.

Those intercepts included 9.55 g/t gold over 40.89 meters from 534.00 to 574.89 meters in hole TTD079.

And on August 8, the company reported the intersection of high-grade gold in stepout drilling both to the east and west of its 2017 Saddle South gold discovery and, additionally, the discovery of a new and deeper high-grade trend to the south.

“We are very pleased with the early success of the drill program at Saddle South this season,” said Steve Burleton, GT’s president and CEO. “All holes have hit mineralization as we step out to the east and west, and our deep drilling encountered high grades and strong widths along a new and well-mineralized trend not far south and east of the area drilled in 2017. . .We look forward to further demonstrating the true potential of the Saddle discovery area—both North and South.”

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Disclosure:
1) John McPhaul compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an employee. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Aben Resources, Pretium Resources and Seabridge Gold. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Golden Ridge Resources. Please click here for more information.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Golden Ridge Resources, Pretium Resources and Aben Resources, companies mentioned in this article.

The close proximity of two properties offers promise of synergies for these firms.

With an eye toward partnering in a joint venture (JV), Cypress Development Corp. (CYP:TSX.V; CYDVF:OTCQB; C1Z1:FSE) signed a nonbinding letter of intent with Dajin Resources Corp. (DJI:TSX.V; DJIFF:OTCPK) concerning Dajin’s Alkali Spring Valley lithium property in Nevada, 12 kilometers from Cypress’ Clayton Valley lithium project.

Under the agreement, Cypress gains the exclusive right and option to acquire a 50% interest in Dajin’s 145 unpatented mining claims at Alkali Spring Valley, as well as its application for 1,000-acre-feet per year of water rights in Nevada’s Esmeralda County.

In exchange, Cypress will give Dajin 150,000 Cypress shares plus $50,000. Cypress has two years to complete its earn-in, which requires issuing another 150,000 Cypress shares to Dajin, and spending $200,000 on exploration at Alkali Spring Valley in year one and $250,000 in year two. Following that two-year period, the two companies will establish the JV.

If Dajin does not want to participate in the JV at that point, it may “dilute to a 10% net profits’ interest on the value of the JV property in Alkali Spring Valley,” a news release explained.

The next steps are for Cypress to perform due diligence on Dajin and draft a definitive agreement for the deal. Once those are done and the TSX Venture Exchange approves the transaction, Cypress will compensate Dajin with the above mentioned shares and cash.

After the JV is in place, Cypress and Dajin will “share proportionally in property development if lithium brine resources are discovered,” according to the release.

“We look forward to working with Dajin on the exploration of the Alkali Spring Valley lithium property, and we appreciate its work to date toward obtaining related water rights,” Cypress’ CEO Bill Willoughby said in the release. “We particularly welcome the prospect to explore synergies with our Clayton Valley lithium project.”

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Cypress Development. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Two analysts relayed the relevant background of the newly appointed executive and shared their thoughts about the timing of the replacement.

In a Sept. 27 research note, Eric Zaunscherb, a Canaccord Genuity analyst, reported that eCobalt Solutions Inc.’s (ECS:TSX; ECSIF:OTCQX; ECO:FSE) president/CEO, Paul Farquharson, was retiring as of Oct. 1, 2018, and Michael Callahan was assuming those positions. Farquharson, however, will be present through year-end 2018 to assist through the transition.

“Callahan’s appointment comes after several months of planning, and he is taking the helm at a pivotal time for eCobalt as it advances the Idaho cobalt project toward production,” Zaunscherb noted.

The new president and CEO, an Idaho native, will oversee the release of the optimized feasibility study (OFS) of Idaho, expected in October, and resume project financing discussions.

“Going forward, Callahan will oversee the release of the optimized feasibility study, planned for October 2018, and continue project financing discussions,” wrote Zaunscherb.

As for Callahan’s experience in the mining industry, he most recently was the president of Western Pacific Resources, moving into the CEO role in 2014. While there, he “oversaw restructuring activities in a challenging market as the company focused on rehabilitating and exploring the Deer Trail Mine in Utah,” Zaunscherb relayed.

Prior to that, starting in 2009, Callahan, as president, grew Silvermex Resources Inc. from a $12 million junior explorer into a $175 million gold-silver producer, and left when First Majestic Silver acquired it in 2012.

For the 20 years between 1989 and 2009, Callahan worked at Hecla Mining, holding various finance, accounting and corporate development positions. One highlight was his appointment in 2000 as president of the company’s mining operations in Venezuela.

As for Callahan’s predecessor at eCobalt, Farquharson, he spent more than a quarter-century at the Idaho-based cobalt company, fostering its growth through acquisitions and advancing its Idaho project.

Canaccord Genuity has a Speculative Buy rating and a CA$0.90 per share target price on eCobalt, whose stock is currently trading at around $0.78 per share.

Like Zaunscherb, analyst Craig Hutchison with TD Securities wrote, in a Sept. 27 research report, that indeed eCobalt’s president/CEO substitution is taking place at a critical juncture in the company’s development.

For one, it is about to release the OFS for its flagship project, Idaho, in October, which represents a further postponement beyond the initial Q2/18 and subsequent Q3/18 targets. The extra time affords Callahan the chance to “review the model and projected economics prior to its release,” Hutchison indicated.

Also, the company is in the middle of ongoing dialogues regarding potential financing and offtake agreements. In fact, since pilot-level testing finished, eCobalt has been providing potential offtake partners with a sample of the clean cobalt concentrate it intends to produce. While the company has not indicated when such agreements might be finalized, TD Securities estimates they could take about a year.

As for the appointment of Callahan, his experience with Silvermex will be especially beneficial to eCobalt, Hutchison noted, as it evolves from an explorer/developer into a producer.

Like Canaccord Genuity, TD Securities has a Speculative Buy on eCobalt. Its price target on the company is CA$1.35. Again, eCobalt’s current share price is CA$0.78.

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: eCobalt Solutions. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Disclosures from Canaccord Genuity, eCobalt Solutions Inc., Flash Update, September 27, 2018

Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research.

Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Required Company-Specific Disclosures (as of date of this publication):

eCobalt Solutions Inc. currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided investment banking services to eCobalt Solutions Inc.

In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking services from eCobalt Solutions Inc.

Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from eCobalt Solutions Inc. in the next three months.

Disclosures are available here.

Disclosures from TD Securities, eCobalt Solutions Inc., Flash Note, Sept. 27, 2018

Analyst Certification: Each analyst of TD Securities Inc. whose name appears on page 1 of this research report hereby certifies that (i) the recommendations and opinions expressed in the research report accurately reflect the research analyst’s personal views about any and all of the securities or issuers discussed herein that are within the analyst’s coverage universe and (ii) no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the provision of specific recommendations or views expressed by the research analyst in the research report.

Full disclosures for all companies covered by TD Securities can be viewed at here.

This Canadian company’s feasibility study remains on target.

SRG Graphite Inc. (SRG:TSX.V) announced that fieldwork is “either well underway or completed ahead of schedule or on time” for the feasibility study on its Lola graphite project in Guinea, West Africa. As such, the management team believes the target date for completion of the study will be met.

“Our local team and our technical partners are dedicated and hardworking, which is yielding results. It’s exciting to finally move toward civil geotechnical and mine design studies,” said Raphaël Beaudoin, SRG’s vice president of operations, metallurgy and process design, in the news release.

Specifically, the mine and civil geotechnical fieldwork is done, preliminary results from which should be available by year-end 2018. The mine geotechnical study, being conducted by Mine Design Engineering, will assess soil composition at the deposit, which is critical to design of the open-pit mine. The civil geotechnical study, piloted by Sahara Natural Resources (SNR) and DRA, will help determine the location for the plant.

Hydrogeology fieldwork, also being done by SNR and DRA, is in progress with four of the six projected wells already dug. The groundwater results will be important to the environmental impact study and the mine design.

Also advancing is Epoch Resources’ study concerning tailings, from which results are expected by the end of 2018. The firm is now evaluating which of the nine potential sites it pinpointed is ideal for the tailings storage facility. Then it will define the best method of managing the tailings.

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: SRG Graphite. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of SRG Graphite, a company mentioned in this article.

Source: Michael J. Ballanger for Streetwise Reports  (10/2/18)

Precious metals expert Michael Ballanger explains why he believes the stars are aligning for vanadium and uranium.

One glance at the two charts below is all that is needed to see why Western Uranium Corp. (WUC:CSE; WSTRF:OTCQX) implemented a special resolution to add “& Vanadium” to its corporate moniker. On September 27, the company put out a news release updating the market on a number of developments, the most interesting and appropriate being the name change that will take effect in early October.

Vanadium, for those who need a refresher, is used in the hardening of steel (90%) with the residual 10% being deployed in vanadium flow batteries, integral to the electric car movement. However, the main price driver for vanadium lies in new Chinese building code requirements pertaining to the need for high-strength steel in the construction industry. That coupled with air quality requirements has served to shift China from net exporter to net importer of vanadium. Hence, vanadium closed the session at $22.30/lb up 21.8% since I first wrote about the company on August 30th.

In addition to the big move in vanadium, uranium is ahead 5.3% in the same time frame, which has contributed to a stellar move and technical breakout in WUC. The decision to highlight vanadium in the new company name lies in its 35 million pound resource, the bulk of which is situated in the Colorado-based Sunday Mine. With the Section 232 investigation into uranium imports, domestic uranium resources are certain to favor U.S. developer/producers.

The company also announced that 983,000 options were priced at $2.15 per share and while these are modestly in-the-money, they certainly could have been priced earlier given the 200-dma sits at $0.94. I view this as an extremely shareholder-friendly action by management and one which enhances the optics for the prospective new shareholder as well as solidifying loyalty for existing ones.

I am adding a chart courtesy of John Newell of Fieldhouse Capital Management simply to provide readers with an independent assessment of the technical position of WUC. The old 2016 high at $2.75-2.80 is formidable resistance but once through there, the 2015 price range is certainly attainable.

Chart courtesy of John Newell and Stockcharts.

We are entering into a seasonally powerful time of the year for the uranium space and as the chart of Cameco shown below would illustrate, from now until late February should be a high-performance window for the uranium space and those with the all-important vanadium “kicker” such as WUC should be exceptional performers.

Lastly, the company is embarking on a series of investor conferences and private meetings commencing in October with the intention of eradicating the deep discount that exists when compared to peers. With a 97.8-million-pound of uranium-equivalent resource, the current market capitalization of US$39.1 million is absurdly low when compared to Fission Uranium’s 140.5-million-pound resource and $306 million market cap. A similar market cap to share price ratio would have Western Uranium and Vanadium Corp. trading closer to US$215 million or US$8.30 per share. For those interested in viewing an analysis of 30 uranium developers and producers, contact me and I will be pleased to send it along. Submit Your Info Here

Chart courtesy of Haywood Securities.

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

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Disclosure:
1) Michael J. Ballanger: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Western Uranium Corp. 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 referred to in this article: Bonaventure Explorations Limited is owned by me and my wife and has earned consulting fees from Western Uranium in the past. I determined which companies would be included in this article based on my research and understanding of the sector. Additional disclosures are below.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Western Uranium. Please click here for more information. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Western Uranium Corp., a company mentioned in this article.

Charts courtesy of Michael Ballanger.

Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.

With graphite an in-demand metal for lithium-ion batteries and other uses, Dan Weir, executive chairman of DNI Metals, in conversation with Maurice Jackson of Proven and Probable, discusses the supply and demand situation for graphite, his company’s recent settlement with Cougar Metals, and DNI’s production plans.

Maurice Jackson: Joining us for a conversation is Dan Weir, the executive chairman of DNI Metals, which has established itself to become one of the world’s leading graphite producers.

We have some important topics to address today for current and prospective shareholders regarding Cougar Metals and production. Before we discuss that, what is graphite, where is it used, what are the global supply and demand fundamentals, and what is the unique value proposition that DNI Metals presents to the market?

Dan Weir: Thanks for asking that question, Maurice. It is good to provide an update on our view of the graphite situation around the world. I consistently talk to a lot of people in the industry. And here’s our view. Now, our view is going to be very different than many other graphite projects in the world. But I like to inform people about what’s going on in the world, specifically in the graphite space, because everybody starts jumping up and down and talking about batteries and excitement and everything else. That is very important in the graphite space. But I want to explain some other fundamentals that are happening out here in the market.

I would like to provide a brief history lesson about DNI, and what our game plan is going forward in the graphite space and why we think we can be one of the leaders in the world in the graphite space. In 2015, we came in and took over DNI Metals. It was basically a shell; it had a very large polymetallic deposit in Alberta. The capex on that was $3.9 billion. It didn’t make a lot of sense. The previous management knew that it couldn’t raise the money to do anything, and we came in and took over DNI.

DNI has been around since about 1954 and has been public for many of those years. I’m very lucky now to be the CEO and chairman of the company. The reason why we came in to DNI was to refocus the company specifically on graphite. Our group, which includes some of our directors and other people who we work, with have done a lot of work in the graphite space, built graphite mines in both Canada, Australia, Sri Lanka. One of our directors operated mines in Sri Lanka and Canada as well.

We know and understand the graphite space. We knew that in order to take advantage of the graphite space, in order to be a producer and be profitable in the graphite space, you had to go look for deposits that are in this weathered-type material called saprolite and laterite. You find it in climates that are hot and have lots of rainfall.

We first went to Brazil and searched for the right deposit. We tried to buy a couple deposits there. We realized Brazil is a very difficult place to do business; it’s extremely bureaucratic. What was exciting about Brazil was that it is the second largest producer of graphite in the world behind China. I’m going to come back to China in a minute.

DNI decided to go from Brazil and look to other places that had that same saprolitic type of material. Certain parts of Madagascar had been producing graphite for over 100 years, and I want to emphasize that the area in which we are, 50 kilometers from the port, is an area that’s fairly close to the ocean. There is a ridge that runs along the east coast of Madagascar; it’s like a mountain range close to an ocean. So, think of Vancouver where the winds coming off the ocean, they climb up a plateau, or up a mountain, and they dropped a lot of rainfall in a certain area. That’s what we have in Madagascar.

In and around us there is a company called Ambatovy. It is owned by Sherritt International Corp., a nickel producer in Canada; Sumitomo Corporation, a very large Japanese firm; and the Korea Resources Corp. (KORES). It spent $8 billion in our area developing a nickel, cobalt deposit in these laterites, or this weathered type material. The advantage of this weathered material is you can go in with an excavator, dig it up and process it. DNI’s costs will be significantly lower as compared to hard rock deposits that you find in China, and specifically Canada, Germany, Sweden, other places in the world that would have these hard-rock type deposits.

It is critical that investors understand specifically why we’ve gone to Madagascar. We know that the costs for production are lower than what we would have found throughout the world. And this is precisely why we’ve strategically identified Madagascar for our operations.

We all know graphite is in pencils. We all know that graphite is a great lubricant. We put it on our bicycle chains. However, what most people don’t understand is that 50% of the world’s graphite is used in the steel-making industry (not batteries). It has a very high heat tolerance and you can line all the crucibles, or all the molds, to produce steel.

The other area that is growing is the lithium ion battery area. Up to 30% of a lithium ion battery is made up graphite. So, by comparison, everybody starts talking about nickel, cobalt and lithium, only 2% of a lithium ion battery is actually lithium. So, you can see here that one of the largest components of a lithium ion battery is graphite.

Audi has come out here recently talking about new electric cars. In fact, I saw a commercial on TV last night, it has got a new four wheel drive SUV that’s being launched. Porsche’s doing the same thing, Volvo’s talking by 2019 or 2020 that it will be all electric. GM has multiple models coming out. The world is becoming more and more interested, let’s say, or there’s a bigger demand for electric vehicles in the world. A lot of that revolves around the battery and demand for the battery. To put it in perspective, in the larger size Tesla, there can be 100 to 200 kilograms of graphite.

We know that’s where the growth demand is in the world. I mentioned that China is a big producer of graphite; it produces 60% to 70% of the world’s graphite. The demand in China is growing exponentially. It will produce a majority of the lithium-ion batteries going forward in the world. It is throwing billions of dollars at research, not only in batteries, but also electric cars. China is the leader in the world right now in electric cars, and I can’t see that changing anytime soon.

Graphite, when it’s mined out of the ground, has to be upgraded and processed. There’s a four-step process. It includes refining it, or purifying the material. Then shaping the material or curling it into a ball. Another term used for that is spherization. The next thing that they do is they code it. A lot of the coding technology is done in Japan.

So, comes out of the ground. We sell it to somebody who is going to do some of the upgrading. There are not many groups in the world that do all of those four steps: purification, micronization, spherization and coding. It tends to be different companies or different countries doing different things to the graphite before it actually goes into a lithium-ion battery. I want to emphasize this, currently in the world, over 99% or even maybe even close to 100% of the spherization or shaping of the graphite is done in China.

So, here’s our view. A lot of the Chinese graphite is going to go to the lithium-ion battery. I’ve been to Korea; I’ve met with different groups in Korea, in different places in the world. There are groups in Korea that want to do some of the spherization as well. Japan and Korea currently do over 50% of the coding. So, they’ll buy the spherized graphite, they’ll do the coding themselves. They want to do some of the spherization. But again, China still is doing the majority of that.

Our research indicates that most of the graphite produced in China will be used in the lithium-ion battery. Why is that significant? Why is that a huge opportunity for DNI? If most of the graphite now is then going to the lithium-ion battery, the Chinese graphite, where traditionally it was sold to the different steel companies around the world, that leaves a deficit that the steel companies now start scrambling trying to get material from other places.

DNI Metals could in fact try to compete with China and try and get deals and sell all of our material, grind it all up, this large-flake, high-quality material that we will produce, and sell it to the battery industry. But that wouldn’t be in the best interest of revenue and shareholders. Why? It’s because the material that’s sold to go into the battery industry is probably sold for $500 to maybe $750 a ton depending on the purity of it.

And in the best interest of our shareholders would rather sell material for $1,200, $1,300, or even the large flake, which we could sell up as much as $1,800 a ton to other industries. Whether it’s lubricants, whether it’s the steel-making industry, whether it’s different areas making foils that need the large flake graphite. You can see here where DNI Metals is so excited about the battery industry, because we know the Chinese materials are going into the batteries, and it opens up a big void that DNI Metals can fill, and we can sell material at much higher prices, mostly because our quality of our material is, I believe, far superior than the Chinese, and we can fill that void at much higher prices.

So, yes, we are very excited about the battery industry. But I want current and prospective shareholders to understand that that’s not our focus. DNI’s focus is to sell material at much higher prices to other industries around the world.

Maurice Jackson: I want to add on to that if you would. So, you’re selling the material, talk to us about offtake agreements. And for someone who’s not familiar with that, what is an offtake agreement?

Dan Weir: Okay, so let’s look at the graphite industry because there’s a lot of misnomers regarding graphite. If you’re a gold producer, zinc, copper, nickel, there are exchanges that you can sell that material into. You’ve got the LME, the London Metals Exchange, or into China, different places. There are quoted prices on that material every single day. You can sell into that. Everybody, every day looks at what the gold price is. It’s right around $1,200. I think yesterday it was up $1, $1,204 or so.

Everybody looks at that and they know that the gold producers can sell any day into that market and get that price. Graphite is not sold that way. Industrial minerals are not sold that way. The whole key to selling graphite is being able to have customers and sell to those customers. It takes some time to get those customers. They will want a one-kilogram sample, they’ll want a one-ton sample. And then they likely want a 20-ton sample, which is a 20-foot container full of graphite so that they can do the testing on their machines to fit your material.

So, good and bad, that can take some time to get those customers. But once you have those customers, they tend to be long-life customers. They’re going to modify their machinery to fit your material, and if you continue to supply that material on a consistent basis, then they will buy it from you. Also very, very critical to understand, that there are hundreds of different types of material that we will sell. It’s sold by flake size, and the purity of the material, but then they also look at things like the ash content. They’ll look at what other sorts of other impurities are in your material. And that can change. We’ve seen it on our Vohitsara property where one zone can be quite a bit different than another zone. We’ve seen the same thing over on the Marofody property where the materials can be the same in certain zones, and it can be quite a bit different within certain zones, or within certain veins that we find these in.

So, it’s very important to understand, I have been to Brazil. I’ve been to the largest processing plant in the world, which produces about 40,000 tons a year, and it has about nine small mines that it pulls material in from and then mixes and matches depending on what the customer wants. It’s very, very important to understand that. That graphite isn’t all about just getting an offtake, as you said, and I’ll explain what an offtake is here in a minute, and selling the product. Because you have hundreds of different products, and that product has got to be qualified by the end user.

So, back to what an offtake is. You will have many groups or companies around the world looking for material. They want specific material. If you can supply that specific material to them, they’ll say, “Okay, we’re going to give you an offtake agreement. We’ll buy X amount of tons per year from you if you can supply that material. It’s basically like a long-term contract if you want to think of it that way.

That’s what everybody’s looking for. Investors want to see that you have offtake and that you have customers as you’re putting the money into building plants and moving forward. So, we understand that, we have been working very hard at different offtakes over time. And you will see we have signed a few customer agreements. I think, over time, you’ll see a lot of offtakes come out of us as well.

But again, I emphasize it takes time, and it takes a lot of work, and you need material to be able to supply to those customers in order to do that. Hence the reason why we’re building this pilot plant so that we know that we can supply the material, whether it’s 20 tons, 40 tons, hundreds of tons for testing and get these long-term contracts. It’s very important to be able to do that. At the same time, you’re selling the material to them and making a little bit of money as you’re doing that.

Maurice Jackson: All right, we’ve covered the graphite fundamentals. Let’s get to company specifics. What can you share with us regarding the arbitration involving DNI Metals and Cougar Metals?

Dan Weir: I have to be very careful what I say here. We have signed confidentiality agreements that we won’t talk about each other’s companies, that we won’t go out and do postings, again, about the arbitration or anything else. I can talk about what has been publicly released. Any information that I give here will be information that you can find in press releases either from DNI or what Cougar has press released.

So, let’s start a little bit on what we did with Cougar and the settlement with Cougar so that we can move on. I think most of our investors know that we signed an agreement in March of 2017 with Cougar Metals out of Australia, which is publicly listed on the Australian Stock Exchange, where Cougar had the ability to earn into one of our properties, the Vohitsara graphite deposit in Madagascar. There were certain criteria that Cougar had to meet to earn into that. Part of that was completing a drilling contract, completing a resource study and a PEA.

We at DNI provided Cougar with extensions to do so. The timeframes weren’t met. So, what we did is we put them in default of the contract. Cougar argued that and over the last, call it nine and a half, ten months we have been working towards going to an arbitration hearing where the arbitrator would hear each other’s side of the story and make a decision on that, and award either to DNI or to Cougar the outcome of that arbitration. That hearing, and again, this is public, was to take place the week of September 24th through the 28th. After that the arbitrator would make a decision. We don’t know how long that decision would have taken. It could have taken weeks. But in all likelihood, it was going to take multiple months in order to get a decision out of the arbitrator.

DNI, within that arbitration, we looked at all the good, the bad, what advantages DNI had to complete the arbitration, or was it better to settle this arbitration and just move forward with our business. Myself, being on the board, and the Board of Directors took all of that information that we could get from our lawyers, and we had an expert team of lawyers that gave us advice on all of this. We were able to negotiate with Cougar a settlement. The terms we put in the press release that we announced on Sept. 24.

The terms are set up that it’s paid over about two and a half years. We plan to have the pilot plant up and running, hopefully very, very soon. It’s not going to hinder DNI so that we can hopefully pay a lot of that out of the cash flow. Again, that’s all in the premise that the pilot plant is up and running and going forward. I’m keeping my lawyers happy by throwing that in there as we go forward.

So, our plan is to get the pilot plan up and running. There is no other hindrances on the project, and we can move forward. The last thing that we’ve always talked about are the permits. We are working on the environmental permits. The environmental permits should be completed very quickly here now, and we’ll be moving forward getting into production and moving forward with the project.

By agreeing on a settlement we have taken the uncertainty out of our stock. Shareholders do not like uncertainty in a stock. We’ve taken that uncertainty out of the stock and we’ve done it in a way that we believe won’t hinder the operations of DNI.

Maurice Jackson: All right. Well, Dan, let me ask you a couple more questions here. You’ve addressed production and the environmental permit. In the meantime, what will DNI be working on?

Dan Weir: There are a number of announcements that we plan to make over the next little while. I know I’m being a bit of a politician and not directly answering your question. There are many things happening within the company. I think everybody’s going to be happy as we move forward with this company. I’m extremely excited. I have told everybody many, many times, I am going to get this into production. I believe that it’s one of the best graphite deposits in the world.

Last week, I had one of our investment bankers with us in Madagascar. We also brought one of our directors, Keith Minty, a mining engineer; he’s operated mines in Canada and Sri Lanka. We had our process engineer, the man who has designed the pilot plant. He came with us as well. He was very excited about the project. He’s blown away that we’re 50 kilometers to a port, that we have some of the roads that are put into the property. The material as he said, and I think I can quote them on this, at surface, he saw where we took the bulk samples that it looks fantastic seeing these large flakes at surface and everything else. He doesn’t see any issues with us moving forward and getting this done.

As I’ve said before, this plant is engineered, it’s designed. We have quotes out of China to build all of the machinery. We’re ready to go. Once we receive our permits, we’re set, we’re ready to go and we’re very excited to move this thing forward.

Especially, for me. I love being there, I love working with the local people. Actually, there’s another point here I want to make is that we were on the property, we met with the local people, our investment bankers saw all of them, the local presidents, I met with them, shook their hands. They’re eager to get going and seeing development happen on this property as well.

Everybody kept saying that we have all these issues with locals. We did not have any resistance when we’re out there on the project. People are happy and they want to see this developed. They’re looking for jobs, and they want to move forward.

Maurice Jackson: You referenced engineering there, Keith Minty, for those that are not familiar with the name. That is a name that you want to follow as one of the serially successful members in the natural resource space. Wherever Keith goes, you’re bound to find success. So, shout out there to Mr. Keith Minty. Dan, what keeps you up at night that we don’t know about?

Dan Weir: Capital markets are always the toughest thing when you’re running a junior mining company. I worked for some of the best brokerage firms as a stockbrokers for almost 13 years in Canada. I managed an institutional equity sales desk. For companies, the toughest thing is making sure you have the right amount of capital, and getting that capital as you move forward.

One of the reasons why we picked Madagascar is for its low capex, because we can get this pilot plant running, and once we do, we can start making some cash flow from that pilot plant. Remember, the main purpose of the pilot plant is to provide samples and sell samples to potential customers, but at the same time, we’re going to be selling that material and selling it at a profit. So, that is key in what we’re doing. But you’ve got to make sure that the capital that you’re raising is low enough that it makes it so that you can be profitable as you’re moving forward.

Some of the biggest problems you see, especially in the graphite area, is that guys try and make these massive projects, 50,000, 70,000 tons a year, that they want to start at. You’re not going to get the customers as you do that. You’ve got to grow with the customer. If you can have a low capex, build your customer base, grow a lot of your business, partially from cash flow, maybe from capital infusions, from offtake people, or other groups, you have a winning strategy to make this go forward.

Again, it’s always the biggest concern is, what are the markets doing? Do people care about graphite? Can you raise the money? That’s always the toughest part in any of this. I think the way we have moved this forward and our strategy moving forward and the people that we have in place to make this all happen, I think we have a winning combination, and have an opportunity here to not only get into production, but be a leader potentially in the future, in the graphite space.

Maurice Jackson: Last question, what did I forget to ask?

Dan Weir: I’m not sure. Maurice, you’ve been to the property, you’ve met the people that we’re working with at the property. You’ve met our mining engineer, Keith Minty, as you said. I think you’ve checked a lot of the boxes. You’ve been there again, firsthand and seeing how amazing this is. You’ve felt that graphite in your hand. You have seen how important it is to have this saprolitic-type deposit, and how much cheaper the production can be from the saprolite versus the hard-rock deposits that you find in North America. So, you know what, I don’t think there’s much else that you can ask at this point in time.

Maurice Jackson: I’ve actually been there twice, Dan, if you don’t recall. But I also have the graphite from the first site visit. Everything that you’ve shared regarding DNI Metals, we are proud shareholders and we look forward to growing with the company. Dan, if investors want to get more information about DNI Metals, please share the contact details.

Dan Weir: Yes, you can always get a hold of me. Email is probably the best at [email protected], or can get ahold of me on my cell phone at 416-720-0754.

Maurice Jackson: DNI Metals trades on the CSE, symbol DNI. And on the OTC, symbol DMNKF. DNI Metals is a sponsor of Proven and Probable and that we are proud shareholders of DNI Metals for their virtues conveyed in today’s message. Last but not least, please visit our website www.provenandprobable.com where we interview the most respected names in the natural resource space. You may reach us at [email protected].

Dan Weir of DNI Metals, thank you for joining us today on Proven and Probable.

Dan Weir: Thank you Maurice.

And last but not least, please visit our website www.provenandprobable.com where we interview the most respected names in the natural resource space. You may reach us at [email protected].

Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.

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Disclosure:
1) Dan Weir: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: DNI Metals. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: DNI Metals.
2) Maurice Jackson: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: DNI Metals. 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: DNI Metals is a sponsor of Proven and Probable. Proven and Probable disclosures are listed below.
3) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: DNI Metals. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with DNI Metals. Please click here for more information.
4) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
5) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
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The company outlined the next steps for its lithium operation.

Cypress Development Corp. (CYP:TSX.V; CYDVF:OTCQB; C1Z1:FSE) filed an NI 43-101 compliant preliminary economic assessment (PEA) for its Nevada-based Clayton Valley lithium project, which CEO Bill Willoughby called “a significant milestone,” in a news release. The project advanced from the initial drill hole through the PEA stage in fewer than two years.

The company had announced the results for the PEA on September 6. As a reminder, the PEA for Clayton Valley outlined a 32.7% internal rate of return, a $1.45 billion net present value 8% and a 2.7-year payback period. It projected the mine would produce 15,000 tons per day of lithium carbonate for 40 years and initial capital costs would be about $482 million over two years.

The report, prepared by Global Resource Engineering (GRE) in Denver, Colo., is available at SEDAR and on Cypress Development’s website.

According to Cypress, next for Clayton Valley is a prefeasibility study, which will include additional infill drilling and various tests and studies—metallurgical, geophysical, hydrological and geotechnical—all aimed at fleshing out Clayton Valley’s economic assumptions.

“Our next steps have the potential to unlock shareholder value as we continue with infill drilling, further metallurgical studies, and a prefeasibility study to provide more detailed information related to the project’s economic assumptions,” Willoughby added.

The goals of metallurgical testing, already underway, are to define ideal leach conditions, configure the processing plant and “demonstrate production of high purity lithium carbonate suitable for battery usage,” the company stated.

With infill drilling, scheduled to start in one to two months, Cypress aims to upgrade resource categories and optimize the mine production schedule.

In the PEA, GRE recommended additional efforts. They include testing to determine the potential to mine, as byproducts, rare earth elements, most notably those identified during the PEA, scandium, neodymium and dysprosium. GRE also suggested Cypress evaluate different processing methods, such as membranes and ion exchange resins, and conduct “trade‐off studies related to capital and saleable electrical generation for the acid plant,” noted the news release.

The prefeasibility study, whose estimated budget is about $800,000, is expected to be finished in Q1/19.

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Cypress Development. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Today’s vanadium prices are such that with this shift, the energy firm could generate significant cash flow.

In mid-November, Energy Fuels Inc. (EFR:TSX; UUUU:NYSE.American) intends to begin a new undertaking, producing vanadium from the pond solutions at its White Mesa mill, where 4 million pounds of the element are estimated to be recoverable.

With this endeavor, Energy Fuels will become North America’s only primary vanadium producer, according to the company, and because it owns the only mill that can process conventionally mined vanadium ore, it likely will maintain that status for some time.

“This position brings the potential for the company to generate significant cash flow in today’s strong vanadium price environment, especially with the steel industry recovering in the U.S.,” said President and CEO Mark Chalmers in a news release.

The median vanadium price as of Sept. 23, 2018, was $22.63 per pound, according to Metal Bulletin, whereas it was $9 a pound about a year earlier. This reflects a 150% price increase over that period.

To prepare for the production launch, Energy Fuels retrofitted and upgraded the mill’s vanadium recovery circuit. “While the mill has never to date attempted to commercially recover vanadium dissolved in the ponds, extensive on-site test work indicates that the project has a high probability for success,” noted the release.

Once the enterprise reaches a steady state, Energy Fuels hopes to produce around 200,000–225,000 pounds of V205 per month for 16–20 months. If the mill can put out a high-purity vanadium product, as it did in the past, this could translate into higher returns. Another benefit of the mill-based project is it can be stopped and started quickly if need be, due to changing market conditions.

Along with the ponds, Energy Fuels plans to start limited vanadium production at its La Sal complex of uranium-vanadium mines in Utah. In advance, it will carry out test mining to include using XRF technology to pinpoint areas of high-grade vanadium. The objectives of the program, which is expected to take about six months to complete, are to boost productivity and mined grades and decrease vanadium and uranium mining costs. “If the program is successful and vanadium prices remain strong, the company may continue mining beyond the planned campaign,” Chalmers added.

Also at La Sal, Energy Fuels plans further exploration and infill drilling to potentially add to the known vanadium resources there.

Chalmers concluded, “Over the longer-term, we are hopeful that today’s real-time mining technologies will provide for a possible paradigm shift that has the potential to improve the economics of future vanadium and uranium mining in this well-known and prolific high-grade district.”

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following company mentioned in this article is a billboard sponsor of Streetwise Reports: Energy Fuels Inc. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

The technology for which the Notice of Allowance has been issued is the company’s “HM X-tract mobile modular mining/extraction process.”

Mineworx Technologies Ltd. (MWX:TSX.V; MWXRF:OTCQB), a provider of non-toxic precious metals extraction solutions to the E-Waste and mining industries, announced that the U.S. Patent and Trademark Office recently issued a Notice of Allowance for the Mineworx patent application for “A Portable Mining Apparatus and Methods of Use.”

The technology for which the Notice of Allowance has been issued is the company’s HM X-tract mobile modular mining/extraction process.

Greg Pendura, CEO of Mineworx stated, “Our HM X-tract proprietary mining technology, combined with a unique operational system, results in an environmentally responsible, non-toxic process for precious metal reclamation which requires no tailings ponds and consumes 80% less water. The system is capable of high efficiency recoveries from both alluvial and crushed hard rock deposits as well as being able to process old tailings for remaining value. The new technology allows us to deploy rapidly, process efficiently and decommission quickly in an environmentally sound manner with little capital expenditure and significantly reduced permitting process.”

The company stated that the HM X-tract will target:

  • Deposits previously not minable due to environmental concerns.
  • Smaller deposits where large capital expenditures are not justified.
  • Deposits in areas where permitting and lack of water prohibit mining.
  • On site cleanup of contaminants and hazardous metals such as lead and depleted uranium on military sites and firing ranges.
  • Cleanup of any other metallic solids soil contamination.

Mineworx also announced that it will be applying to the TSX Venture Exchange for approval to extend the expiry date of 10,491,667 outstanding common share purchase warrants that were issued as part of a non-brokered private placement completed by the company in January 2014.

The warrants can be exercised for common shares of Mineworx at a price of 26 cents per share and were previously extended to the current expiry of November 7, 2018.

The company proposes to extend the expiry date of the warrants to 4:30 p.m., Edmonton, Alta., time on January 7, 2019.

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Disclosure:
1) John McPhaul compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an employee. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Mineworx. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Mineworx, a company mentioned in this article.

Source: Michael J. Ballanger for Streetwise Reports  (9/26/18)

Precious metals expert Michael Ballanger discusses distortions in the markets.

Here is a question for any and all of you that have ever purchased a lottery ticket or played the slots or bet on a horse: If you had proof that the outcomes were all rigged, would you still play? If someone showed you a video of pit bosses stacking decks or tampering with dice, would you ever enter that establishment again? If your wife or mother or employer knew that you would constantly blow your paychecks in a rigged casino, would you ever be able to face them? The answer to all of the above-mentioned scenarios is a resounding “NO!” Yet millions of people (albeit that figure is rapidly shrinking) are still committing many hundreds of millions of dollars every week to the Crimex Casino, which has now proven that every single input into determining prices for gold and silver (Bitcoin, too) is completely controlled by the bullion banks, the Crimex bosses and the regulators.

The Transitive Quality of Equality states that “if a = b and b = c, then a = c.” The Transitive Quality of Gold Pricing is “if I buy gold based upon demand and supply, and demand and supply have no bearing upon price, then I am buying gold with no concern for price,” which is total insanity. We have seen in the past 30 years how the Crimex banks are able to use the paper markets to influence not only near-term demand but also long-term supply. By suppressing price, they are now influencing supply with no better confirmation than the paucity of new BIG gold discoveries since the 1990s.

The price managers in New York and Washington and London and Brussels and Tokyo and Beijing seem to all agree that citizens of all nations should be urged to avoid gold and trust paper currencies because of national security issues. The truth is that the paper merchants cannot charge a fee if your net worth is held in physical metal. Now that they control the Four Pillars of Commerce—banking, investments, insurance, and real estate—the big banks view gold and silver in a totally hostile view because these alternatives threaten to dissipate their power of monetary control, and if there is ANYTHING that will send a banker into a murderous rage, it is the mere THOUGHT of losing control of the “flow” of money, which they currently command and in spades.

As a young student in the 1970s, I listened to the Jesuit Fathers teaching us about “sound money” and “fiscal jurisprudence” and “inflationary spirals” and what was indelibly etched upon my early-adult psyche was that “Cash is Trash” in periods of government largesse and mismanagement. They would abandon the prescribed curriculum in favor of open debate on numerous occasions because in the 1970s a powerful new voting (and consuming) block of citizens known as the “Baby Boomers” was rapidly assuming power and influence to the extent that they were able to halt the war in Vietnam and change abortion laws, to name just a few. In that period prior to computer-assisted and software-managed trading, humans made ALL of the investment decisions irrespective of term. Decisions to hold for the long term or scalp a point or two were made by individuals and the only technology made available to them was (perhaps) a hand-held calculator or, in some cases, a slide rule.

So when the inputs in 1971 involved then-President Nixon abandoning the gold standard, what he really did was make it impossible to convert U.S. dollars into gold, which is what President De Gaulle of France had ordered his treasury department to do as U.S. Treasury bonds matured and repayment was required. Rising gasoline prices due to Middle East embargos and domestic political chaos (Watergate) forced investors to shun traditional investments such as stocks and bonds because rising inflation brought on by the credit creation from wars and budget deficits was eating away at returns. Investors chose sound money—gold and silver—and those who acted in 1971 at US$35 per ounce were handsomely rewarded; the natural flow of human interaction allowed gold’s popularity to gradually increase over the balance of the decade rising to $857 per ounce before the U.S. Fed woke up and decided that gold was an Enemy of the State, covertly at first and then suddenly.

Compared to the inputs of the 1970s, those that we track from the post-2008 Financial Crisis make war expenditures from WWI, WWII, Korea, and Vietnam pale by comparison. The costs of two world wars and the Asian wars were measured in billions of dollars while credit creation since ’08 implemented to save the American banking establishment is being measured in the TRILLIONS. However, since humans making investment decisions in the 1970s could not be programmed, gold and silver could not be controlled as they are today.

Here in 2018, the inputs that should have driven gold and silver to new highs are numerous and powerful, but the controls put in place by the global elite are even more numerous and infinitely more powerful. Just as Baron Rothschild said the year before the establishment of the First Bank of the United States in 1701, “Let us control the money of a country, and we care not who makes its laws.” Paul Volker made sure that in the 1980s and beyond that the government would never again attempt to manage a financial crisis without first managing gold. Since gold ownership by U.S. citizens undermines the very essence of banking, gold ownership has been discouraged for the past nigh-on forty years. And it is NOT about to change.

Another reason that the Western world today takes such a dim view of gold ownership is that the two most voracious accumulators of gold in the world are the two countries most at odds with America—Russia and China. Russia alone bought 224 tonnes of gold in 2017 from the proceeds of the sale of U.S. treasuries. Now we have the U.S. entering into trade wars with China and quietly tweaking the nose of the Big Russian Bear as they ramp up gold ownership and ramp down dollar holdings, which was exactly what was happening in the 1970s and which resulted in a crash in the convertibility power of dollars to gold.

As a means of managing the crisis, those who control markets decided to do away with highly volatile humans in the implementation of financial market “policy” and instead replace them with machines that could be programmed with responses to external event-driven stimuli easily controlled. In this manner, the new generation of investors do not react to the ringing of the Pavlovian dinner bell of rising inflation and domestic turmoil with gold purchases; they observe the past 10 years of gold performance versus stock, versus real estate, versus pot stocks, versus cryptocurrencies and simply jettison cash in favor of something—ANYTHING—not in the crosshairs of the central bank bazookas.

Consider the graphic shown below:

Once you have achieved the stark and brutal meaning of this cartoon, you will have gleaned the meaning and intent of this missive. As Einstein’s definition of insanity continues to swirl in the minds of gold and silver investors around the world, why exactly is it that men of education, experience and success like Eric Sprott continue to wager considerable portions of their net worth into the gold market by way of physical gold and silver, shares and, most importantly, personal credibility? What is Eric Sprott seeing that his fellow gold investors are not? Sherlock Holmes says in the cartoon seen above everything that I said in 2008, that is, it was impossible for a collapse in real estate prices to NOT vaporize the banks and when it was proven that it didn’t because the criminals stepped in and saved their banking brethren, whatever remained was a truth of another feather, a mist of reality, a misconception. The reality of the moment was that logic did NOT dictate and since unnatural results were cogenerated by faulty assumptions such that as happened in 2009 and beyond, the gold market suffered despite massively bullish inputs and the stock markets thrived despite equally bearish inputs and what we are left with is a total mistrust of the exercise of analysis and fundamental and historical valuation techniques.

An anecdote upon which to ponder: in the early summer of 2017, excited as I was on the possibility of a major light-up of the Nevada mining scene, I recommended Stakeholder Gold Corp. (SRC:TSX.V) for its then-recently-acquired Goldstorm property in Nevada located at the convergence zone of three major gold-bearing trends (Getchell, Northern Nevada Rift and the “mighty” Carlin) and adjacent to Seabridge Gold’s Snowstorm Project. In May of this year, I started calling upon friends and allies who typically might invest up to $2–5 million (collectively) in deals that I might introduce. Result? Zero interest. I usually avoid deals that have a heavy “lift” factor so with only 21 million shares issued, I was astonished at the response so I called all of them back and asked why they were passing. To a man, they all said the same thing: “We have enough gold juniors.” By contrast, two weeks later, I called the same group with an offering that I had assisted back in 2016 that has a presence in the VANADIUM (think “battery metal”) market and they bought 25% of the financing within 10 days. What does that tell you about the current state of the precious metals market?

I am the most contrary of all “contrarian investors” that you will ever encounter. I was laughing at CNBC in 1999 and shorting the NASDAQ the second that PETS.COM went “offered” below its IPO price of $11 per share, and I was shrieking wildly when AOL bought Time Warner based on the currency value of its paper. I was likewise in stitches when in 2009 when Barrick Gold announced intentions to reverse its hedge book with gold up $800/oz from the lows of 2001 where they were sellers.

However, NOTHING compares to the bubble in which we all reside relative to the FANGS. Having said that, they are all protected by TPTB because they are symbols of largess and resignation in the world of the bankers. “Just keep the masses happy!” shouts the banker to the mayor. And that, my friends, is where the illogic of financial analysis lays its illustrious hat. If the young child that watches the Emperor march down the street in his undergarments fails to shout, then the magnificent cloak upon which his vanity struts remains vibrant and alive; if the child screams in terror at the sight of bare flesh, the cloak disappears. The global arena is absolutely filled with a miasma of choking debt and currency debasement. It is like watching the masses in pre-revolution France, reaching out with starving hands as Louis XIV passes by, unabashed corpulence abounding. The canaries in the coal mine for Western economies used to be the bond market—rising yields meant certain doom—so governments “in the loop” conspire to put out fires where required (Japan, Switzerland, Greece, Italy, etc.) but today the canary is your local domestic stock market’s index, be it the Toronto Stock Exchange 300 or the FTSE or the ASX.

Investors have found a new retirement fund in stocks by way of never having to worry about losing a dime in the market. The old expression taught to me by my late-grandmother was “Buy land, Michael. It will always save you in the end.” (She was SOOOO right.) Today, the new safety is the paper solidity of the stock market and as all of my contemporaries move on to that great trading pit in the sky, I simply sit back and shake my head at the prospective outcome of so much fraud ingrained into the financial system and how it will ultimately play out. The historical roles of gold and silver have proven exemplary in countries like Venezuela, Turkey, Argentina, and Zimbabwe, but they have little meaning nor utility in countries anchored by the U.S. dollar. While I have no doubt that such conditions will change, identifying the precise time point has been, shall we say, “elusive” (at best) verging upon “impossible” (at worst) because it requires a knowledge of the welfare and intent of the “invisible hand” that controls financial markets through intervention and regulatory glaucoma.

The last two purchases I have made were Western Uranium and Vanadium Corp. (WUC:CSE; WSTRF:OTCQX) at C$0.68 and Aben Resources Ltd. (ABN:TSX.V; ABNAF:OTCQB) at $0.37, both acquired in August. The former is up 251% while the latter is down 43%. In the case of ABN, results reported on Tuesday included 12m of 5.08 g/t Au with 27 holes pending. I added an equal amount at $0.20 so my new adjusted cost is $0.285. As I mentioned a month ago, the Golden Triangle of B.C. is “elephant country” and these results did not warrant the mass exodus that is so typical of the kind of junior mining markets we are forced to deal with.

Western Uranium and Vanadium’s performance is no surprise as vanadium continues to scream ahead having touched US$21.40 this week. It is instructive to remember that when the company raised money in 2016 at C$1.70, V was trading around $3 and U was at $22 and at the time, WUC was valued at around one-third of valuations enjoyed by its peers in terms of market cap per pound. With the big price rises, the in situ metal value has risen from $2.475 billion a month ago to $2.8 billion as of yesterday’s closing prices, which explains the 52-week print at $2.44. I am moving my limit price for new positions from US$1.50 to $2.00 based on the positive outlook for uranium and will add accordingly.

When the uranium stocks move, they move BIG and the following charts shows why.

I long for the days of free markets where governments avoided market commentary and where central bankers focused on the loan portfolios of the member banks as opposed to market reactions to their “prepared remarks.” I long for the times when exploration plays had a life span longer than one day and where solid results were bought rather than sold. Finally, I seek a return to the days of yore when logic prevailed and money ebbed and flowed with a natural grace and order without the irritation and malevolence of algorithm-guided software. This is not a return to the Dark Ages; it is a return to market normality.

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

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Disclosure:
1) Michael J. Ballanger: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Stakeholder Gold, Western Uranium & Vanadium Corp. and Aben 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 referred to in this article: Bonaventure Explorations Limited is owned by me and my wife and has earned consulting fees from Western Uranium in the past. I determined which companies would be included in this article based on my research and understanding of the sector. Additional disclosures are below.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Seabridge Gold and Aben Resources. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Aben Resources, Stakeholder Gold and Western Uranium & Vanadium Corp., companies mentioned in this article.

Charts and images courtesy of Michael Ballanger.

Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.

Portfolio manager and technical analyst John Newell of Fieldhouse Capital Management charts a uranium and vanadium explorer that is showing some movement.

Western Uranium and Vanadium Corp. (WUC:CSE; WSTRF:OTCQX) has broken out of an 18-month basing pattern and met two targets from the last published chart.

Western Uranium and Vanadium has displayed remarkable technical strength and the break above the resistance in the $1.60 area makes the extended target of highs 3’s to its third target of $4.14 now possible as the shares have broken out.

When looking at other U3O8 shares, they also are beginning to show a turnaround, also suggesting the sector could be on the verge of a substainable move higher.

Chart courtesy of Stockcharts.

John Newell is a portfolio manager at Fieldhouse Capital Management. He has 38 years of experience in the investment industry acting as an officer, director, portfolio manager and investment advisor with some of the largest investment firms in Canada including Scotia McLeod, CIBC Wood Gundy and Richardson Greenshields (RBC Capital Markets). Newell is a specialist in precious metal equities and related commodities, and follows a disciplined proprietary approach incorporating equity research, analytical frameworks and risk controls to evaluate and select long and short stocks primarily from the Canadian small and mid-cap coverage. Many large, midcap and junior precious metal companies use his technical charts. Newell is a registered portfolio manager in Canada (advising representative).

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Disclosures:
1) John Newell: I, or members of my immediate household or family and friends, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company currently has a financial relationship with the following companies mentioned in this article: None. I determined which companies would be included in this article based on my research and understanding of the sector. Additional disclosures/disclaimer below.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Western Uranium and Vanadium, a company mentioned in this article.

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

John Newell has based this document on information obtained from sources he believes to be reliable, but which has not been independently verified.

John Newell makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of John Newell only and are subject to change without notice. John Newell assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.

Furthermore, I, John Newell, assume no liability for any direct or indirect loss or damage or for lost profit, which you may incur because of the use and existence of the information provided within this Report.

John Newell manages the Fieldhouse Global Precious Fund Class G.

Additional Disclosures and Disclaimer from John Newell, Fieldhouse Capital Management, September 21, 2018:

Disclosures and Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these pages will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these pages are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.
Hypothetical and historical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical and historical performance results and the actual results subsequently achieved by any trading program. One of the limitations of hypothetical and historical performance results is that they are generally presented with the benefit of hindsight. In addition, hypothetical and historical trading may not present the financial risks and returns for future trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect actual trading results.
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Neither the information, nor any opinion expressed constitutes a solicitation for the purchase of an investment program. Any further disclosure or use, distribution, dissemination or copying of this message or any attachment is strictly prohibited; such information, whether derived from Fieldhouse Capital Management or from any oral or written communication by way of opinion, advice, or otherwise with a principal of the company is not warranted in any manner whatsoever, is for the use of our customers only and may be obtained from internal and external research sources considered to be reliable.

Image provided by the author.

A Cantor Fitzgerald note reviewed new findings from this joint venture asset in Argentina.

In a Sept. 18 research report, Cantor Fitzgerald analyst Matthew O’Keefe described Advantage Lithium Corp.’s (AAL:TSX.V; AVLIF:OTCQX) recently announced results from Cauchari as “positive” and “returning good lithium concentrations and basin continuity.” The data are from the company’s phase 3 infill drilling and resource conversion program at its 75%-owned project in Argentina.

Drilling could add 1.43–3 million tons of lithium carbonate equivalent (LCE) to Cauchari’s current resource that, already “large,” stands at 3 million tons of LCE, indicated O’Keefe.

Relaying the recent findings, Kaip noted lithium brine was continuous between holes CAU07, CAU16, CAU17 and CAU18, all in the northwest sector. Brine sampling in holes CAU20 and CAU21, in the north aspect of the northwest sector, averaged 629 milligrams per liter (629 mg/l) lithium and 4,537 mg/l potassium from a 113–318 meter depth. It averaged 607 mg/l lithium and 4,691 mg/l potassium from a 125–265 meter depth.

O’Keefe pointed out that “grades and chemistry are also better than the current resource, which bodes well for a resource update,” anticipated in Q1/19. A definitive feasibility study,a “key derisking milestone paving the way for project financing,” would follow in Q2/19. With the completion of that study, “we expect the stock to rerate higher,” he wrote.

Drilling with four rigs continues, noted O’Keefe, and Advantage Lithium will continue to release results.

Also, it is developing infrastructure, including monitoring wells and pipelines, to effect 30-day pumping tests on test production wells CAU07 in the northwest sector and CAU11 in the southeast sector. The information yielded from the pumping tests, slated for Q4/18, should help estimate lithium reserves and create a project production schedule.

Cantor Fitzgerald has a Buy rating and a CA$1.50 per share 12-month target price on Advantage Lithium. The company’s stock is currently trading at around CA$0.69 per share.

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following company mentioned in this article is a billboard sponsor of Streetwise Reports: Advantage Lithium. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Advantage Lithium, a company mentioned in this article.

Disclosures from Cantor Fitzgerald, Advantage Lithium Corp., Corporate Update, Sept. 18, 2018

Potential conflicts of interest: The author of this report is compensated based in part on the overall revenues of Cantor, a portion of which are generated by investment banking activities. Cantor may have had, or seek to have, an investment banking relationship with companies mentioned in this report. Cantor and/or its officers, directors and employees may from time to time acquire, hold or sell securities mentioned herein as principal or agent. Although Cantor makes every effort possible to avoid conflicts of interest, readers should assume that a conflict might exist, and therefore not rely solely on this report when evaluating whether or not to buy or sell the securities of subject companies.

Disclosures as of September 18, 2018
Cantor has not provided investment banking services or received investment banking related compensation from Advantage Lithium Corp. within the past 12 months.
The analysts responsible for this research report do not have, either directly or indirectly, a long or short position in the shares or options of Advantage Lithium Corp.
The analyst responsible for this report has visited the material operations of Advantage Lithium Corp. No payment or reimbursement was received for related travel costs.

Analyst Certification
The research analyst whose name appears on this report hereby certifies that the opinions and recommendations expressed herein accurately reflect his personal views about the securities, issuers or industries discussed herein.

Source: Michael J. Ballanger for Streetwise Reports  (9/24/18)

Vanadium and uranium are two of the few commodities whose prices have advanced recently, and Michael Ballanger discusses one company that is developing projects for both elements.

Western Uranium Corp.
Symbol: WUC.CNX / WSTRF.US
Industry: Developer, U.S.-based uranium and vanadium
Primary Asset: Sunday Mine, Colorado, U.S.A.

Western Uranium and Vanadium Corp. (WUC:CSE; WSTRF:OTCQX) was first introduced to me by a colleague back in the spring of 2016 after which I determined that this was a classic valuation story where the fundamentals greatly dwarfed the share price and market capitalization. At the 2016 prices for uranium ($22/lb) and vanadium ($3/lb), I determined that WUC at CA$1.70 was undervalued by a factor of around 70% and set a $5.25 target price. After a number of corporate mis-starts and two years of poor pricing, the share price hit an all-time low this past summer at $0.54 despite a substantial recovery in uranium and vanadium prices. Accordingly, I decided to look more intensely at the factors inhibiting the share price and at the outlook for both commodities in light of trade wars, sentiment, demand and macroeconomic changes. As a result of this, I advised followers to consider acquiring a CA$0.68 unit financing being offered last June and later published a report entitled: “Western Uranium and Vanadium Corp.: Undervaluation Woes are Ending” (link) and set target prices at six months US$3.40 and twelve months at US$6.80.

Since then, the shares have advanced from CA$1.40 to CA$2.44, hitting a new 52-week high today. The shares appear poised for a technical breakout and continued ascent as the undervaluation continues to dissipate.

Why so bullish?

One glance at the charts of gold, silver, uranium and vanadium and you are immediately struck with the stark contrast in performance and trend between these four commodities. I view silver as gold’s high-octane little brother while vanadium is uranium’s twin counterpart. Not only do both pairs frequently occur in nature side by side, they usually have correlated price movements with silver outperforming (and underperforming) gold, and vanadium outperforming uranium. Now, if you are an investor covering gold and silver (as I am), you are considerably more inclined to take a position in uranium and/or vanadium than you are in gold and/or silver. Regardless of the fundamentals for the precious metals, they have acted horribly since April while uranium vastly outperforms gold, and vanadium absolutely smokes silver with a 600% move since the lows of 2016.

At current prices for uranium and vanadium, WUC controls approximately US$2.475 billion worth of inventory and at the current $37.5 million market cap, it is valued at a mere 1.5% of in-ground metal value with both commodities in uptrends.

Keeping the Sage: The company recently issued a press release updating its corporate affairs profile in which it terminated its LOI with Australia-based Battery Metals Resources Ltd. whereby BMR was attempting to purchase the vanadium-rich Sage Mine from WUC with cash payment. At the time, it was deemed a solid move because WUC had not yet closed its financing and the sale of the Sage was a well-thought-out fallback position in the event the funding came up short. As it turned out, the funding ended up oversubscribed and the urgency of the backstop facility was eliminated. As a result, WUC retains ownership of the Sage (and 5,000,000 lb of vanadium) with the proviso that something could still be on the horizon but at far more favorable terms given the outstanding performance of vanadium.

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No More Debt: WUC also announced that the “$500,000 promissory note which was secured by the Colorado and Utah mineral properties acquired in the August 18, 2014 transaction between Pinon Ridge Mining LLC, a wholly owned subsidiary of Western, and Energy Fuels Holding Corporation was paid in full on August 31, 2018. The San Rafael Uranium Project, Sunday Mine Complex, Van 4 Mine, and the Sage Mine Project which were formerly secured by a first priority interest are now held by the Company free and clear of encumbrances.” This leaves WUC debt-free and with the improved balance sheet, they have significantly de-risked the company, which should further serve to eliminate the deep discount in valuation that still prevails despite the quadrupling of the share price since April.

Uranium Imports in the Crosshairs: President Trump has been a champion of American businesses since his inauguration with the imposition of tariffs intended to level the playing field to the benefit of U.S.-based companies. The Section 232 Uranium Investigation is now in front of Commerce Secretary Wilbur Ross with over 800 letters having been delivered. A period of 270 days may pass now after which a report must be delivered to President Trump after which a decision will be made. This issue also carries National Security implications such that in the event of the imposition of tariffs upon uranium imports, domestic-based uranium resources are going to receive an automatic and substantial increase in valuation which in kind greatly accelerates the removal of the current discount in market capitalization for WUC.

Minuscule Share Structure and Technical Picture: With only 28,129,870 shares issued on a fully diluted basis, which includes all warrants and options, the share float is relatively small creating significant upside traction in the event that investor demand begins to accelerate. Furthermore, management and other insider control over 30% of the issued capital and this always represents positive optics for the prospective investor.

Technically, the stock needed to overcome the downtrend line drawn off the 2015 peak above $5 and the 2017 high of $2.75 that projected out to $0.90, which it did in the early summer. It then needed to overcome the 200 dma at $1.24, which it did later in the summer. The next formidable resistance is at the 2017 high at $2.75 after which a return to the 2014–2015 highs above $5 is probable.

Conclusion

The recent corporate update combined with the recent oversubscribed placements raising over C$3.6 million in new working capital continues to de-risk the company by way of debt elimination and allows the assets (75mm lb uranium and 35mm lb vanadium) to be priced appropriately and more in line with corporate peers also residing in the development stage.

History has proven time over time that companies with undervalued resources will always stay undervalued until the underlying commodity turns back up. With uranium now in an uptrend after six years of agony and with vanadium on fire as the fourth pillar in the battery metals quadrilateral, WUC has few, if any, impediments to achieving full value for its assets and a market capitalization in line with its peers. I view WUC as a bonafide acquisition candidate which will only accelerate as uranium and vanadium continue to advance.

BUY
6-mo. Target: US$3.40
12-mo. Target: US$6.80

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

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Disclosure:
1) Michael J. Ballanger: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Western Uranium & Vanadium Corp. 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 referred to in this article: Bonaventure Explorations Limited is owned by me and my wife and has earned consulting fees from Western Uranium in the past. I determined which companies would be included in this article based on my research and understanding of the sector. Additional disclosures are below.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Western Uranium & Vanadium Corp., a company mentioned in this article.

Charts courtesy of Michael Ballanger.

Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.

Lobo Tiggre of the Independent Speculator discusses the trade war and its impact on commodities, and what that all means for resource investors.

There is a widespread notion among investors, analysts and pundits that the escalating trade conflict between the U.S. and its trading partners is bad for the global economy. This is no stretch. The leap from there to it being bad for commodities is understandable, but less certain. Still, people who should know, like those running the world’s largest mining company, are saying it’s so.

Is it any wonder, then, that we’ve seen the rally in commodities that started in 2016 start to peter out?

The chart sure looks like a wave cresting—but how do we know it’s the trade conflict that’s causing it?

In truth, we don’t. But the recent downturn includes commodities facing structural supply deficits, like copper and nickel. That clearly isn’t being driven by fundamentals. This leaves “investor sentiment” as the likely cause—and that’s often driven by perception more than reality. Have a look at this chart, which zooms in on the GSCI Commodities Index since the start of the current trade conflict.

There’s no smoking gun on this chart. In fact, commodities rose after the U.S. fired the first salvos in the conflict. On the other hand, the blows kept coming, and their cumulative impact does seem to be weighing on commodities prices.

This much is largely understood. What seems to get left out of this discussion, however, is that the U.S., the EU, China, India and many emerging economies are still reporting economic growth. Problems in Turkey and Argentina do not cancel out the massive growth in so much of the rest of the world.

There’s a problem with believing that the global economy is growing and at the same time believing that there should be lower demand for the raw materials that make that growth possible. One might argue that investors are reacting now to lower demand in the future. Fine. But then why aren’t investors bailing on equities and other assets that would be hurt by the same global economic downturn?

Perhaps the answer is simply that Mr. Market is bipolar, as legendary investor Benjamin Graham once wrote. If so, there’s no use moaning about commodities being down when they shouldn’t be, or equities being up when they shouldn’t be. They are. We play with the cards we’re dealt.

But there’s another, much more fundamental and solid reality here that’s relevant: the world’s population isn’t getting any smaller. Even if global DGP growth stalls, as long as the number of people in the world keeps increasing, that’s bullish for metals, industrial minerals, agricultural commodities and everything else all those people will need. There will always be cycles in commodities markets, of course, but this underlying trend will keep pushing general demand for decades to come.

So What?

What does all this mean, in practical terms, for resource investors?

  1. It means we should be cautious about speculating in commodities, just because they “should” go up.
  2. Until the general upward trend for all commodities is reestablished, we invest only in the ones that are already going up.
  3. For metals investors, that’s uranium and vanadium this year. Vanadium has doubled this year, but it’s a tiny, more speculative market. Uranium is up about 37% this year, but that’s a stellar performance compared to other metals. This makes uranium as the best driver of value in resource stocks at present.

That said, I’m not just arguing for uranium just because it’s up. Its price remains well below the cost of production at a time when demand is increasing. China is building scores of nuclear power plants, and even Japan has plans to re-start 30 of its reactors. The world may someday abandon nuclear fission for power, but that day is decades away. This is why I have had no doubt for years that uranium must rise. What’s different now is that it’s actually happening.

Of course, a rising tide does not lift all ships equally—especially not the ones with holes in their hulls. Picking the right uranium stocks is essential at this time.

Caveat emptor.

If you’d like to be updated on the trends covered in this article, please subscribe to our free, no-spam Speculator’s Digest at www.IndependentSpeculator.com.

Lobo Tiggre, aka Louis James, is the founder and CEO of Louis James LLC, and the principal analyst and editor of IndependentSpeculator.com. He researched and recommended speculative opportunities in Casey Research publications from 2004 to 2018, writing under the name “Louis James.” While with Casey Research, he learned the ins and outs of resource speculation from the legendary speculator Doug Casey. A fully transparent, documented, and verifiable track record is a central feature of IndependentSpeculator.com services going forward. Another key feature is that Mr. Tiggre will put his own money into the speculations he writes about, so his readers will always know he has “skin in the game” with them.

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Disclosure:
1) Statements and opinions expressed are the opinions of Lobo Tiggre and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the article preparation. The author was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
2) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
3) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Charts courtesy of the author.

The project is the only near-term, environmentally permitted primary cobalt project in the U.S.

The Canadian company eCobalt Solutions Inc. (ECS:TSX; ECSIF:OTCQX; ECO:FSE) reported that construction continues to advance on time and on budget at its Idaho Cobalt Project, located near the town of Salmon, in the heart of the historic Idaho Cobalt Belt. The ICP remains the sole, near-term, environmentally permitted primary cobalt deposit in the United States.

eCobalt noted the following developments:

  • Water Treatment Plant (WTP) building completed and the placement of large components and mechanical assembly to commence September 18
  • Lining of the Tailings Waste Storage Facility (TWSF) and ponds advancing with expected completion in September for ponds and October for TWSF, including gravel topping
  • Pumpback system pipelines installation now 65% complete
  • Bulk fuel storage and distribution system complete
  • Construction of surface mobile equipment maintenance facility initiated on September 6
  • Construction of the mill building foundation commenced on September 10

“Our main priority is finalizing all environmental systems at site in preparation for underground mine development in early 2019,” stated Paul Farquharson, president & CEO of eCobalt. “This includes getting the Water Treatment Plant in place, the liner installed on the Tailings Waste Storage Facility and Water Management Ponds, and electrifying the pump back wells. These activities are part of the use of proceeds from the February, 2018 public offering and are expected to be completed in the fourth quarter of this year. I am pleased to report that we are advancing on time and on budget as our team has been working expeditiously during the summer months.”

The company noted that the evaluation of several project financing options continues, including off-take, traditional financing, bond financings and other financing alternatives to fund the development of the Idaho Cobalt Project. “Discussions continue to progress with strong interest from multiple parties in numerous jurisdictions with the aim of being finalized once the Optimized Feasibility Study has been completed.”

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Disclosure:
1) John McPhaul compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an employee. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: eCobalt Solutions. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.