A Prospective Project Generator
Richard (Rick) Mills
As a general rule, the most successful man in
life is
the man who has the best information
Junior exploration companies raise money to acquire and
explore a property while praying/hoping the first drill hole, or maybe the next
one, is the big discovery everyone’s looking for. Without internally generated
positive cash flow our juniors are money-eating machines constantly having to
go to the market to raise capital through equity offerings. But for an investor
the resulting share dilution to acquire and explore property after property,
continually looking for that discovery, means your return on any such eventual
find is diluted down with each financing.
However there are companies in this sector doing things a
little different than the mainstream, they’re called “Project Generators.”
Project generators, after finding and securing a property, do the initial
mapping, sampling and maybe a small drill program. Upon making a discovery,
basically finding something of interest, they turn it over to a joint venture
partner who puts up the money and or it’s own shares to earn into the property
over a number of years while investigating the discovery.
Yes the project
generator’s shareholder’s eventual ownership of a discovery is diluted, BUT,
their ownership in the prospect generating company is not diluted because there
is very little dilution of the generators outstanding shares. This is because
the exploration/development expenses are paid by the partner, not the
generator.
Unfortunately most
junior sector investors tend to believe that the company is selling the farm
and giving away the chance of a multi times return on their investment. A
property ownership dilution business model is not as well liked as the much
more common share dilution model.
The typical joint
venture deal requires the incoming partner to spend a certain amount of dollars
over a fixed period of time to initially earn a 50-60% piece of the property.
In an ideal situation (advancement of the property down the development path
towards building a mine), the JV partner earns themselves an increased interest
by completing certain milestones within the negotiated timeframe. Our prospect generator
is thereafter required to fund a smaller portion, say 30%, of the development
costs or further dilute their interest. This 30% of a defined resource has cost
investors relatively little in terms of share dilution and the bang for their
buck is the same or greater than if their company had repeatedly gone to the
market for equity financings. But our prospect generator offers two other
things that should be considered….
- The project
generator could take this approach time after time on different projects, at
the same time, with relatively little dilution. Prospect generators do not have
to concentrate limited resources and stretch themselves to cover one or two
projects. And if one of their projects does go bust, well they always have a
few more simmering on the front burners.
- If at first you
don’t succeed try and try again, the same project may be joint ventured many
times, each new company trying a different geological model and approach before
success is ultimately achieved.
The more projects
found and partnered off, the more likely project generator shareholders are to
participate in a big discovery while their company successfully preserves the
treasury and keeps share dilution down to a minimum. This is the power of, and
how, the joint venture model is supposed to work, exploration and hopefully
future development of project after project is funded using OPM - other
people's money.
Most investors in
project generators do so because they understand searching for a deposit and
actually building a mine with it is a long, difficult and extremely expensive
road to travel and that the trip can take many years and many millions of
dollars, sometimes tens of millions of dollars.
But investors in
project generators can take a business like approach to maximizing their
exposure to many different quality projects that offer the opportunity for the
much coveted and sought after multi times return on invested capital while
preserving close to their original ownership interest. And that’s an attractive
proposition!
Cariboo Rose CRB.TSX-v
Cariboo Rose is a project generator and is, in the authors
opinion, a logical choice for further due diligence by investors looking to
participate in gold and copper exploration in Canada, specifically the Province
of British Columbia’s Quesnel Trough.
In the last three years, Cariboo Rose and its joint venture
partners have spent more than $ 6.0 million on exploration—75% of this
money has been funded by its partners. That means for every dollar spent on the
company's properties it has only used 25¢ of its own money. Over the life of
the company, partners have funded over 80% of the exploration costs.
Quesnel Trough
The Quesnel Trough is a large regional depositional belt extending
over 1200 kilometers through the central part of the province of British
Columbia, Canada. It encompasses most of the operating mines in the province as
well as most of the projects at the pre-feasibility and feasibility stages of
development. The region hosts several large tonnage copper-gold porphyry type
deposits including Imperial Metal’s Mt. Polley Mine, Terrane Metal’s Mt.
Milligan deposit and Northgate’s Kemess Mine. In addition, Taseko’s Gibraltar
Cu-Mo mine lies just outside the Quesnel Trough.
The lion’s share of exploration dollars in the province is being
spent in this geological belt. The Quesnel Trough has become one of BC’s most sought-after
exploration/developmental targets due to the large number of porphyry copper-gold
and skarn occurrences.
Centerfold Project
The Woodjam copper-gold-molybdenum project is in south central
British Columbia approximately 50 kilometers east of Williams Lake.
An IP study performed in 2007 gave evidence that a large
intrusive/hydrothermal complex measuring approximately five kilometers by six
kilometers underlies the Woodjam property, with at least three large IP
chargeability anomalies.
This geophysical survey data dramatically expanded the area of interest for
exploration on the Woodjam property and suggested a much greater potential for
discovery than previously envisioned. Northeasterly trending geologic features
have long been considered important in determining the location of large
mineralizing systems in the generally northwest trending Quesnel Trough.
Interpretation of this data suggests that such a feature is present and is
aligned with the known mineralized areas on the property.
The Woodjam project is a joint venture between Fjordland
Exploration Inc. with a 60% interest and Cariboo Rose with a 40%
interest. The land holdings measure up to 40 kilometers east/west and 30
kilometers north/south encompassing approximately 48,000 hectares.
Mineralization is calc-alkalic porphyry style with higher than
average grades for a Quesnel Trough porphyry. Chalcopyrite is the dominant
copper mineral but boronite is also present. Gold mineralization is directly
correlated with copper, where there’s copper there’s gold.
The Woodjam property has four large mineralized target areas that
cluster together within a 4.0 x 3.0 kilometer area.
Megabuck: Hole 04-32 intersected 274 meters of 0.14% copper and
1.03 g/t gold and hole 04-37 intersected 233 meters grading 0.14% copper and
1.01 g/t gold. This zone is prospective for a large,
near-surface gold-copper deposit. There is a high gold to copper ratio.
Deerhorn: A new discovery in 2008. Hole 08-93 intersecting 0.25%
copper and 0.62 g/t gold over 51 meters. The first 2 drill
holes tested an 800 m by 400 m geophysical anomaly and intersected copper and gold mineralization with similarities to
the Megabuck
Takom: Hole 08-87 intersected 71 meters of 0.34% copper and 0.60
g/t gold. The Takom is a large copper-gold mineralized area with limited
drilling. A 2008 IP survey significantly expanded the target zone to the
southwest.
Southeast Zone: Hole 08-84 drilled 201 meters of 1.01% copper,
0.44 g/t gold and 0.002% molybdenum. This zone has extensive copper-gold-molybdenum mineralization. Drilling has intersected mineralization from bedrock to end of
hole in all 18 holes
The over 48,000 hectare property is located east of Williams Lake
near the town of Horsefly in a low elevation terrain with moderate topography,
is bisected by a well-maintained network of logging roads and is amenable to
drilling on a year-round basis.
All needed infrastructure - power,
water, rail, supplies and major highways are close by. There are many operating mines in the area and locals are very
receptive to resource extraction as a way to make a living. There is an
experienced trained labor pool to draw from in the nearby towns of Likely,
Williams Lake and 100 Mile House and supplies are easy to access.
On their Woodjam property Cariboo Rose is targeting mineralization
similar to what occurs at Cadia Hill in Australia (Newcrest Mining Limited) and
the Kemess deposit in British Columbia (Northgate Minerals Corporation). Cadia
Hill commenced production in 1996 with a resource of 210 million tonnes grading
0.72 g/t gold and 0.18% copper while Kemess commenced in 1999 with a resource of
200 million tonnes grading 0.22% copper and 0.63 g/t gold.
Both Cadia Hill and Kemess started production in a time of much
lower metal prices than today’s.
Other Projects
The Cowtrail property is in the Cariboo Mining district, adjacent
to and north of Cariboo Rose’s Woodjam property. The Cowtrail is under option
to Dajin Resources Corp., who may earn a 65% interest in the property.
There is potential on the property for a gold-rich porphyry style
mineralization.
The Carruthers Pass copper-zinc-silver property is in north-central British
Columbia, approximately 70 kilometers south of the Kemess gold-copper mine and
200 kilometers north of Smithers. Initial work by past junior partners has
outlined numerous targets. A block of massive sulphide with significant values
in copper, zinc, silver and gold was discovered protruding from a talus apron
on the property by Phelps Dodge Canada. Hawthorne Gold conducted a program at
Carruthers Pass in the summer of 2008 to follow up on the source of this
boulder with results still pending.
The Pat property is in the Cariboo Mining district and adjacent to the
company's Woodjam property. It was recently optioned to Astorius Resources Ltd.
The Pat claims cover a porphyry copper-gold target centered on a strong
airborne magnetic anomaly similar in size and intensity to that at Imperial
Metals Mt. Polley mine The property claim also covers a peripheral induced
polarization anomaly defined by Cominco Limited in 1991. Astorius will be
conducting a drill program on the Pat property in 2009.
The Canadian Creek copper-gold-molybdenum property is in Canada’s Yukon
Territory, and is located approximately 300 kilometers northwest of Whitehorse
and 160 kilometers south of Dawson City. This property, which has the potential
to host a porphyry style or an intrusion-related deposit, is located to the
immediate west of and adjacent to Western Copper Corp.'s Casino deposit.
One of the most serious and
unpredictable risks facing mining operations and investor interests is
"country risk" - where the political and economic stability of the
host country is questionable and abrupt changes in the business environment
could adversely affect profits or the value of the company’s assets.
The Fraser Institute, in conjunction
with the Prospectors and Developers Association of Canada (PDAC), has just
released their excellent must read annual “Survey of Mining Companies
2008/2009.”
http://www.fraserinstitute.org/Commerce.Web/product_files/MiningSurvey20082009_Cdn.pdf
Country/political risk in British Columbia, Canada is
considered extremely low.
With the recent reelection, for the third term in a row, of
the Liberal Party, the province of British Columbia will remain open to
resource extraction and continue to be mining friendly.
Shares Outstanding (November, 2008)
Issued and Outstanding 25,498,577
Stock Options 2,545,000
Warrants 1,250,000 (expire June 2009)
Fully Diluted 29,293,577
Held by Management 5,362,308
(Approximately 18%)
Treasury
The company remains well financed with no debt and a working
capital position of approximately $650,000.
The last decade has seen a pine beetle problem that has devastated
the forest in the area. The northern part of the Provinces economy has been
based almost exclusively on logging but because of the recent Lodge Pole Pine
Beetle infestation and the resulting destruction of a large part of the working
forest the Liberal government is actively trying to diversify the northern
economy and mining is hoped to play a large part in the plans success. The
upside of BC’s pine-beetle infestation is a government rebate, the Mineral
Exploration Tax Credit (METC), a 30% rebate on exploration hard dollars spent
in declared bug kill areas of the province.
Management
Cariboo Rose is part of the Eastfield Group, (Other affiliated
companies in the group include Eastfield Resources Ltd. ETF.tsx-v and Lorraine
Copper Corp. LLC.tsx-v a family of companies with the same experienced “boots
on the ground” management team of geologists.
William (Bill)
Morton, M.Sc, B.Sc., P.Geo.
Position: President, CEO and Director
Bill has been employed as a professional
geologist for over 30 years. Prior to starting Eastfield Resources, he held
positions with several mining companies such as Giant Mascot, Sumitomo and
Imperial Metals. In 1987 Bill merged his geological consulting practice with
Glen's, and together they formed Eastfield Resources.
Glen Garratt, B.Sc.,
P.Geo.
Position: Vice President, Secretary
and Director
Glen has been employed as a geologist in
mineral exploration for over 35 years. His previous employers included several
major companies such as Placer Dome, Amoco, and Norcen. In 1979 Glen formed an
exploration and consulting firm that operated from offices in Reno, Nevada and
Kamloops, BC. In 1987 he merged his consulting practice with Bill's, and
together they formed Eastfield Resources.
Both Bill and Glen have been in the resource
industry for many decades, they have seen the good times and the bad. They know how to successfully manage the
prospect generator
model - preserve the treasury, keep share dilution down to a minimum, secure
high quality projects and the joint venture partners to work them.
If you’re the kind
of investor who is interested in taking a more business like approach to
investing in the junior sector then Cariboo Rose CRB.TSX-v is, with it’s
project generator business model, in this author’s opinion, worth spending more
of your due diligence time on.
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If you're interested in the junior resource
market and would like to learn more please come and visit us at.
http://www.aheadoftheherd.com/
Richard (Rick) Mills
Bio - Richard is host of www.aheadoftheherd.com
and invests in the junior resource sector. His articles have been published on
over 40 websites including - Wall Street Journal, Kitco, USAToday, Safehaven,
SeekingAlpha, The Gold/Energy Reports, Gold-Eagle and Financial Sense.
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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. Richard
Mills has based this document on information obtained from sources he believes
to be reliable but which has not been independently verified; Richard Mills
makes no guarantee, representation or warranty and accepts no responsibility or
liability as to its accuracy or completeness. Expressions of opinion are those
of Richard Mills only and are subject to change without notice. Richard Mills
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, Richard Mills,
assume no liability for any direct or indirect loss or damage or, in
particular, for lost profit, which you may incur as a result of the use and
existence of the information provided within this Report.
Richard Mills may from time to time, have long or short positions in, and buy
and sell the securities or derivatives (including options) of companies
mentioned in this article.
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