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The Calandra Report: Abitibi, the royalty that is roaring

Thom Calandra
4 Comments|August 9, 2014

THE CALANDRA REPORT: Sample & Subscribe
Now $129 yearly!
 
August 7, 2014
 
Important: Thanks to all renewing TCR subscribers. Please note that those who chose recurring payments via PayPal two years ago, when we relaunched TCR, will be charged the original amount on PayPal. If you have a recurring payment ahead and wish to change it or cancel it, you must contact PayPal. We cannot do that. All recurring payments will stay at their original amounts, regardless of the higher TCR subscription price, which is now $129 yearly. Thank you greatly for the outpouring of renewals.
 
Abitibi Royalties (TSX: V.RZZ, Stock Forum) continues to fulfill the promise of its Malartic properties, adjacent to Canada's largest producing gold mine in Quebec. The stock is nearly at $4 CAD for the first time.
 
Abitibi Royalties has a variety of legal and corporate developments ahead, and new president Ian Ball will be meeting with lawyers and often as he confers with geologists.
 
Abitibi Royalties' has legal claims against Agnico-Eagle and Yamana Gold on the Malartic CHL property, located next to the two's Canadian Malartic mine. Thus far, the tiny Abitibi Royalties appears to be winning each stage of the proceedings.
 
RZZ's parent, Golden Valley Mines (TSX: V.GZZ, Stock Forum), owns 60-odd percent of RZZ and thus is what they call levered or geared, to the royalty holder and CHL Malartic alliance partner. Today, GZZ stock is nearing 20 cents CAD.
 
When these legalities -- which started a few months ago -- conclude, RZZ and GZZ shareholders surely will have cash in hand from their piece of the net smelter returns from ore that will be fed into the Canadian Malartic mill.
 
The far greater valuation question is the 30 percent working interest that is part of the original Abitibi-Osisko Mining alliance. Thus far, Abitibi Royalties has won legal stays from Quebec Superior Court regarding Yamana (TSX: YRI, Stock Forum) and Agnico-Eagle's (TSX: AEM, Stock Forum) entirely pig-headed behavior in the matter.
 
Of course, that behavior began with the executives from Osisko Mining, now Osisko Gold Royalties (TSX: OR, Stock Forum).
 
Quebec Superior Court essentially rules:
 
the Malartic CHL property cannot be transferred to the Agnico-Eagle/Yamana partnership, which
acquired the Canadian Malartic mine from Osisko Mining.
 
What is more:
 
the 5% net smelter return on the Malartic CHL property and granted to Osisko Gold Royalties in the change of Osisko ownership must be removed.
 
I believe we could see OR shares take a hit because of the RZZ wins. Abitibi Royalties is contesting one Quebec ruling that it go to an arbiter with all this. What is to arbitrate when it is all signed, sealed and agreed upon more than three years ago?
 
I can say, being close to serial royalty holder and Abitibi/Golden Valley Mines founder Glenn Mullan, that original projections three years ago for RZZ's Quebec holdings at Malartic were in the range of $80 million. That's still about $40 million north of the current market worth.
 
Mr. Ball is a former Rob McEwen employee. Mr. McEwen is a large shareholder and recent financier of Abitibi Royalties. Mr. McEwen holds a quarter of the shares of his own McEwen Mining and has a conference call scheduled for today to discuss his company's interests in Argentina, Mexico and Nevada. It is MUX in USA.
 
Forgotten in the rush to Abitibi shares this northern hemisphere summer are the two other companies that Mr. Mullan of Val d'Or, Quebec, created in Canada's first three-way spinoff from a single company -- three years ago July.
 
Those are Nunavik Nickel (TSX: V.KZZ, Stock Forum) and Uranium Valley Mines (TSX: V.VZZ, Stock Forum).
 
Nunavik holds title to the Fortin Property, the Marymac Prospect, the Shoot Out Prospect and the Donnybrook and Overtime claims.
 
Uranium Valley Mines Ltd. holds a 100% interest in the Mistassini-Otish Property, as well as a 40% interest in a joint venture uranium property in Saskatchewan (the Beartooth Island Property).
 
So we have GZZ, RZZ, KZZ and VZZ.
 
VZZ -- the uranium one -- is the only one in which Golden Valley Mines does not own approximately 60%. Uranium Valley Mines has a Rob McEwen connection in that the RM/Lexam VG group holds approx. 36%, and GZZ holds 37%.
 
RZZ, or Abitibi Royalties, is a Quebec story that is three years in the making. I spent 2 years accumulating it, and I spent three years writing about it and visiting it.
 
The parent, Golden Valley Mines, has many claims and options across the Abitibi, stretching across Quebec and other neighboring provinces. These include nickel, diamonds, gold, uranium.
 
In addition, RZZ owns title to mineral property in Ontario.
 
My takeaway at TCR: At this point, GZZ is actionable at 21 cents CAD. Mr. Mullan is on record saying he intends to dividend out any cash that goes into RZZ to GZZ shareholders -- how is not yet known, even I beieve by him.
 
“How many hours are in your day?” the 57-year-old geologist and hockey-team owner said to me Thursday.
 
Owning GZZ also will give shareholders a reach into a portfolio of properties, titles, claims and options in Canada. GZZ also owns shares of companies with which it has formed alliances.
 
Fair TCR value for GZZ is about 40 cents CAD, given current developments. Fair TCR value for RZZ is about $8 CAD. I might sell a portion of my approx. 25,000 shares in RZZ at $6 CAD.
 
The boilerplate is here: Abitibi Royalties holds a 30% free-carried interest on the Malartic CHL Property. In addition, RZZ holds a 2% net smeler return, or royalty, on portions of the Gouldie and Charlie zones at the Canadian Malartic mine and full title to the Luc Bourdon and Bourdon West Prospects in Ontario.
 
Actionables: We’re entering the home stretch for this year’s landmark 40th Anniversary New Orleans Conference. Please come. ... I have been purchasing more BioCryst Pharma (NASDAQ: BCRX, Stock Forum) and more Nouveau Monde Mining (TSX: V.NOU, Stock Forum) -- graphite and diamonds in Quebec. I have been selling at steep losses Bellhaven Copper & Gold (TSX: V.BHV, Stock Forum); I own about 1 million shares still of the Colombia prospector.
 
 
 
*Ahead: A thomcalandra.com home for our expanding TCR faithful; including benefits, secrets and subscriber-only scoops. Pay no attention to the fellow behind the curtain.
 
 
THE CALANDRA REPORT
$129 yearly: Does Not Recur
 
THE CALANDRA REPORT
$129: Will Recur Yearly
 
www.thomcalandra.com
 
New ! MOTIF INVESTING -- Ruffled Resources basket
 
New Orleans conference in October: Come!


 

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Comments

TheCardinal
Oh, and Thom? Thanks for staying on top of this one. It's going to be worth the wait.
2.5 stars
August 8, 2014
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TheCardinal
I want the popcorn concession for this one! This is going to be better than the "Rumble In The Jungle" or the "Thrilla' in Manila" or Mikey taking a bite out of Evander's ear.
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August 8, 2014
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tcalandra
Correcting -- Mr. Mullan reports he is 55 years old. Apologies. -- thomcalandra.com
4.5 stars
August 9, 2014
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tcalandra
Always a pleasure! thomcalandra.com
4.5 stars
August 9, 2014
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