Toronto mine builder is on the prowl

Thom Calandra
0 Comments|September 27, 2011

Washout in metals equities is over

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KELOWNA, Canada – Some 150 investors are here in this idyllic valley for a private conference of resource opportunities. All of them are praying the metals-equities washout is behind them.

DSC_0099.jpgA washout is when folks throw in the towel on their portfolios, or get margin calls and are forced to sell. Or get physically sick watching their (in this case) metals equities vanish in value.

“We are a mine builder, so we can’t do much about the equities market,” says Gerry McCarvill, chairman of Norvista Resources, a Toronto merchant bank with properties in Colombia, Mexico and Quebec. “We are working on possible iron ore projects in Brazil and we like countries where there is an established rule of law.” (Photo: Mr. McCarvill at sister company Calvista Gold’s (TSX: T.CVZ, Stock Forum) project near Bucaramanga, ColombiaPhoto Gwyneth Price-Phillips)

There is no rule of law in commodities markets these days.

R. Michael Jones, CEO of Platinum Group Metals (TSX: T.PTM, Stock Forum and AMEX: PLG), calls this past summer “silly season.” His company, developing a mine in South Africa, has seen its shares lose about 65 percent of their worth from the stock’s high point in December 2010.

“I have been in the business for 26 years and this is the first time I have felt relaxed and confident through a market debacle,” Mr. Jones says. His WBJV Project 1 Platinum mine is “on time and on budget” and some $50m through a $100m construction project.

http://www.stockhouse.com/charts/BasicChart.aspx?sd=9/27/2010&ed=9/27/2011&ticker=PLG&t=0&w=384&h=280&sl=0&i=0I own shares of Platinum Group Metals, and every time I average down, the stock goes lower. Silly season sucks. Just see the PTM/PLG chart here.  

Today (Tuesday) there is light at the end of the valley of shadows. “It’s like the gold sector just got Roto-Rootered this morning,” says Quinton Hennigh, a Colorado geologist and consultant to several Canada prospectors active in Ontario, eastern Europe and Wyoming, among them EurOmax Resources (TSX: V.EOX, Stock Forum).

The Norvista investing-in-natural-resources conference I am attending in this tranquil patch of British Columbia wine and golf country is a winner in one sense at least: stunning beauty amid spa-induced aromatherapies and cold sauna treatments.

When the Vernon, B.C., gathering concludes Wednesday, the individuals here, including former Newfoundland Premier Brian V. Tobin and Colombia ambassador to Canada Clemencia Forero Ucros, likely will have recovered the serenity they need to profit from the washout. (Photo below: View of Okanagan Valley from conference hotel – Thom Calandra photo)

If the washout did occur on Monday (I believe it did), with gold and silver especially rebounding smartly, the bankers, miners and deep-pocket investors at this private gathering almost surely will demand tremendous returns with the pain they have endured this year.

“At this point in the cycle we are looking for faster rates of return for our clients,” says David Meyer, a former Toronto equities analyst, banker and rock-kicker for Norvista Resources. Mr. Meyer, a managing director of Norvista, is known as Dr. No for declining something like four of every five minerals prospects he views.

IMAG1403.jpgRapid returns are something Mr. Meyer and his team recognize. Mr. McCarvill’s Consolidated Thompson sold for $4.9 billion cash on the third anniversary of its first iron mine drill holes.

“You are going to wake up one morning and China buys BHP (BHP), and we want to feed into that consolidation,” says Mr. Meyer.

Mr. McCarvill’s Norvista harvests long-term capital from many of the investors who benefited from that almost $5 billion sale of Consolidated Thompson, a Montreal-based iron-ore developer, to Cliffs Natural Resources in May 2011.

Mr. Tobin, the former premier, was the chairman of Consolidated Thompson when the $4.9 billion Canadian transaction occurred. The China angle there: Chinese steelmaker Wuhan Iron & Steel Corp. “rescued” Consolidated Thompson with a $240 million infusion after the 2008 financial meltdown.

“I think we saw Gerry (McCarvill) turn water into wine with Consolidated Thompson,” says Mr. Tobin, a business adviser to law firm Fraser Milner Casgrain. “Part of that was not a pleasant ride, going from a $10 stock to something like 88 cents.”  He added, to a murmur of approval from this audience, “There are a lot of Consolidated Thompson investors in this room, and they all know the allure of iron ore.”

Norvista’s Mr. Meyer and his team are searching for large-scale iron-ore properties in South America. Norvista is privately held for now. Its portfolio companies include Highvista, Aurvista and Solvista (TSX: V.SVV, Stock Forum). (See previous coverage.)

At the conference, there was buzz about the group’s pending projects, which may or may not include potash in Canada, iron ore in Brazil and copper and gold in Panama and elsewhere. Paul Crath, Norvista’s legal counsel and a managing director, said he believes we will see China investors get much more active in North American commodities in coming months.

Several mining executives I know are working feverishly on bringing more China capital into their public and private portfolios. One of them, Glenn Mullan of Quebec’s Golden Valley Mines (TSX: V.GZZ, Stock Forum), called in from Africa today. Mr. Mullan is coordinating a China-backed venture with commodity interests in several African nations.

“The Quebec government has a trade mission arranged for mining companies to Burkina Faso, Mali, Senegal and Guinea next month,” Mr. Mullan says. “We’ll see afterwards how it all shakes out but there is a lot of interest in connecting China investors with projects in Canada, in Africa and elsewhere,”

As for Norvista, all eyes are on that Dr. No fellow, Dave Meyers. Odds are one of these days he is going to say yes. “I’ll want rapid and outsized returns in stable jurisdictions,” he says.

I like the way that sounds. I am tired of being underwater. Now that metals equities appear to be poised for a splash, I think I’ll wait for the Okanagan fog to clear and take a dip in the salt-water pool.

own shares of Platinum Group Metals. I own shares of Solvista. I own shares of Golden Valley Mines.

NOTES: I will be speaking at Brien Lundin’s New Orleans Investment Conference in late October. You can click on this link to get a deep discount on the entrance fee. …  I am a partner of Torrey Hills Capital, which is in Del Mar, near San Diego. That investor outreach firm lists EurOmax and Golden Valley Mines as clients. Other Torrey Hills clients referenced in this report: Platinum Group Metals.

Stockhouse members – the service is free – can see my entire portfolio online. It is under the portfolio function and my user name, which is TCALANDRA. There is nothing in my portfolio suitable for risk-averse investors. I am not a financial adviser. Owning any of these securities could result in your participation in the crying game. Please see my comments on Stockhouse about the benefits of holding securities and physical metals for long spans of time.

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