Open ground, ties and under-appreciated geology

A review of some of the notable conversations had on the floor at Vancouver's latest junior get together.

Author: Kip Keen
Posted: Tuesday , 22 Jan 2013

VANCOUVER, BC (Mineweb) - 

I won’t pretend this is a comprehensive list of totally awesome must-have junior investments rather it is a record of some excellent conversations, had over the last few days at Vancouver’s latest junior investment show, with a handful of junior management teams from companies I haven’t written much about before, if at all. 

So they’re now, here, getting some space.

Donner Metals goes first because their vice president of exploration, Robin Adair, wins first prize for best tie present at the Vancouver Resource Investment Conference. It had a colourful print, lots of pink, that showed a geological map. I forgot to ask of what, and I sheepishly sent a follow up email to inquire about the print in question.

That likely came as strange correspondence. I have yet to get a reply.

Nonetheless, you might guess it was related to Donner’s Bracemac-McLeod zinc-polymetallic discovery, made in 2006, of which it owns 35 percent, and that 65-percent owner Xstrata is now putting into commercial production in the next quarter or so. Donner was once mentioned in these pages as a potential zinc takeover target by Haywood Securities’ Stefan Ioannou.

That status, presumably, has not changed.

In brief, Xstrata has built, a 2,500-tonne-per-day zinc-copper-silver-gold mine in Quebec that is set to start production in the coming months at projected cash costs around C$0.42 per pound zinc. The mine life is, provisionally, four years, with proven and probable resources of 3.7 million tonnes @ 9.6 percent zinc, 1.3 percent copper, 28 g/t silver and 0.43 g/t gold.

But as Adair noted in his presentation, there are sizeable inferred resources, with almost as much again as proven and probable reserves, outside the mine plan. These might expand minelife to seven years (mostly in a separate VMS pod at depth). The deeps are being tested with ongoing exploration.

One way to consider the 35 percent interest in Bracemac-McLeod is this: to think of Donner as a debt free company that essentially owns a 900-tonne-per-day zinc-copper mine, with precious metals credits, now going into production for the next four to seven years (it's share of 2,500 tpd). It’s worth comparing what one thinks that’s worth to Donner’s $39 million marketcap.

One key thing to note. Donner has signed a forward sales agreement with Sandstorm for part of the copper and precious metals production to help pay for its share of costs to develop the mine. That takes away some potential profit. That said, most of the coming cash flow will be zinc related (~60 percent at recent prices). So it’s not a total revenue killer. 

As far as management goes, a lot of them are ex-Falconbridge, including CEO Harvey Keats. Old hands on the Canadian exploration scene. You would be hard pressed to accuse them of being slick promoters, in other words, and this, I think, is proven by the fact their chief geologist ties a geological map round his neck in an arena where so many junior execs dress to the nines in flashy suits and other shiny accoutrements....