Evrim
Resources Corp. (EVM, CN, 1.49) received this past week its eagerly
awaited permit to drill the Cuale project, and has already got crews on the
property ready to commence the drilling. Evrim is planning a minimum of 3,000
meters comprising 10-15 holes.
Initial drilling will focus on the La Gloria deposit which was the site of
the spectacular trench results in the spring, to test the depth of the
high-grade mineralization. Drilling will also test four step-out areas.
It could be big!
High-sulphidation systems such as Cuale can grow rapidly. If drilling
confirms the high-grade results of the trenches, if the mineralization
continues to depth, and if any of the step-outs suggest another
high-grade deposit (the last two adding volume to grade) then Cuale could
attract interest very quickly. Many senior miners are watching closely. Given
the excellent infrastructure and strong political jurisdiction, the
100%-owned project (subject to a 1.5% royalty on precious metals and 1% on
base metals) would be worth a multiple of current value if the drilling is
successful. We should have results before year end.
Before the permit was received, Evrim has released additional trench
results that extended the La Gloria zone both to the northwest and east with
consistent mineralization. Soil sampling indicated a larger footprint. All
these results were very positive; the "truth machine" (aka known as
the drill) now takes over!
Lots of activity on other fronts
Separately, Evrim has been busy on other fronts. Initial drilling has
begun at an under-explored project, Cerro Cascaron, in Chihuahua, Mexico,
which hosts several gold and silver mines. Junior Harvest Gold is earning
into the project by paying for the program.
The company has also reached an agreement with First Majestic on its
Ermitaño and Cumobabi projects whereby the options have now been exercised
with First Majestic owning 100% of both projects, while Evrim owns net
smelter royalties, 2% and 1.5% respectively. First Majestic paid Evrim US$1.5
million as part of the settlement. Drilling at Ermitaño has proven an
inferred 40.8 million silver-equivalent ounce resource very close to the mill
on First Majestic's Santa Elena mine, where ore is running out. First
Majestic said Ermitaño "has the potential to become a near-term source
of production."
Evrim remains a buy particularly if you do not own it or on any dips.
Remember, exploration is by its nature speculative; if the drill program were
a complete dud—highly unlikely—the stock would fall back rapidly to its
pre-Cuale price, losing half its value overnight. However, the C$125 million
market cap is backed by C$14 million cash, the royalty on Ermitaño (with a
back-of-the envelope valuation of around $30 million), plus other
joint-ventures and wholly owned properties giving Cuale a valuation of C$60
million at most. Success would value it much higher.
Waiting until the fat lady sings
Nevsun
Resources Ltd. (NSU, NY, 4.41) and prospective acquirer Zijin Mining have
mailed circulars to shareholders in connection with the latter's tender offer
for Nevsun at C$6 per share. Closing has been set for December 31. Under
certain conditions, the closing period can be significantly shortened. Absent
that, we have requested that the company extend the closing date into 2019 so
U.S. shareholders can postpone their tax bill.
If you need the funds for some other purpose, by all means sell now
(though I'd wait for a bounce back to the mid-C$4.40s). But, though the
possibility of another bidder is remote—and becomes more remote with each
passing day—the shares are below the tender price (C$5.73 vs C$6), with
minimal risk of the transaction not closing. So there is upside in holding,
particularly if the closing date can be extended into next year.
The phoenix arises
Reservoir
Capital Corp. (REO, Toronto, 0.03 x 0.04) has resumed trading following
an eight-month halt following a restructuring. At the beginning of the year,
Reservoir withdrew from its Serbia hydropower projects and entered into an agreement
with a company owning part of Nigeria's leading hydro company. The net result
is that Reservoir now owns a 1.3% economic interest in the company owning two
operating plants on the Niger River. Reservoir's CEO said the company's focus
was on producing hydropower investments in frontier regions and that this
transaction represented "an important first step" in this strategy.
Hold for now.
Top buys following recent market turmoil: Gladstone
Investment Corp. (GAIN, Nasdaq, 10.56, 8.8% yield); Ares Capital
Corp. (ARCC, Nasdaq, 16.37. 9.5% yield); Loews
Corp. (L:NYSE); Franco-Nevada Corp. (FNV, NY, 66.01); Royal Gold Inc.
(RGLD, Nasdaq, 77.55); and Lara Exploration Ltd. (LRA, To., 0.57).
Adrian Day, London-born and a graduate of
the London School of Economics, heads the money management firm Adrian Day
Asset Management, where he manages discretionary accounts in both global and
resource areas. Day is also sub-adviser to the EuroPacific Gold Fund (EPGFX).
His latest book is "Investing in Resources: How to Profit from the
Outsized Potential and Avoid the Risks."
[NLINSERT]
Disclosure:
1) Adrian Day: I, or members of my immediate household or family, own shares
of the following companies mentioned in this article: Evrim, Nevsun, Lara
Exploration, Franco-Nevada, Royal Gold, Gladstone Investment, Ares Capital. 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. Funds controlled by Adrian Day Asset Management hold shares of
the following companies mentioned in this article: Evrim, Nevsun, Reservoir
Capital, Lara Exploration, Franco-Nevada, Royal Gold, Gladstone Investment,
Ares Capital, Loews. I determined which companies would be included in this
article based on my research and understanding of the sector.
2) The following companies mentioned in this article are billboard sponsors
of Streetwise Reports: None. Click here
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is for informational purposes only and is not a recommendation to buy or sell
any security.
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4) This article does not constitute investment advice. Each reader is
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any action a reader takes as a result of information presented here is his or
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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
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5) From time to time, Streetwise Reports 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 (including members of their household) own
securities of Evrim, Nevsun, Reservoir Capital, Lara Exploration,
Franco-Nevada and Royal Gold, companies mentioned in this article.
