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Goldbrook
Ventures Inc. (TSX VENTURE: GBK) is successfully expanding its assets in the
world-class polymetallic Raglan Nickel District in the Cape Smith belt of
northern Quebec. The acquisition of a controlling interest in Canadian
Royalties Inc. (TSX: CZZ) by the Jien Canada Mining Ltd. joint venture, which
Goldbrook has a 25% interest, greatly increases its position along a
mineralized trend and secures an interest in the fully permitted and
construction ready Nunavik Nickel Project. Under the terms of the joint
venture, Goldbrook is not required to provide capital for either the
acquisition or construction of the project.
Jien
International Investment Ltd., their joint venture partner, is responsible
for fully funding both the Canadian Royalties acquisition and construction of
the Nunavik Nickel Project. Upon reaching full production, and repaying their
share of acquisition and construction, Goldbrook will be entitled to 25% of
the project’s cash flow. Considering the highly prospective profile of
the Nunavik Nickel Project, in combination with itheir own adjacent land
holdings, and the positive, long-term demand for the nickel-copper-cobalt-PGE
ores, Goldbroook’s presence and participation in mining in the Raglan
district looks to be a highly positive, and very long-term venture. Clearly,
through years of productive deal-making and partner selection, Goldbrook
management should be recognized for having delivered a significant
opportunity for its investors.
Canadian
Royalties Acquisition Tees Up Production in 2012
Jien Canada Mining Ltd is a 25-75 joint venture between
Goldbrook and Jien International Investment Ltd., a wholly owned subsidiary
of Jilin Jien Nickel Industry Co., Ltd., the second largest nickel producer
in China. Jien Canada is completing the process of acquiring shares of
Canadian Royalties at a price of C$0.80 per share and debentures at an offer
of C$800 per C$1,000 of the principal amount, in a deal valued at C$192
million. Canadian Royalties management supported the transaction following an
increase from an earlier offer for shares at C$0.60 per share and debentures
at C$600 per C$1,000 of the principal amount. On November 10, 2009, Goldbrook
announced that 76.66% of outstanding shares and 70.81% of outstanding
debentures had been tendered, satisfying all conditions necessary to acquire
Canadian Royalties.
The
Nunavik Nickel Project was designed to process 3,500 tonnes per day, or about
one million tonnes per year, with total capital costs of about C$465 million,
but once the takeover is completed these plans will be subject to engineering
review. The Nunavik Nickel Project was placed on care and maintenance during
the recent global economic turndown. Approximately 25% of the project budget
has already been spent in acquiring materials and equipment, completion of
the construction camp and preliminary mill foundations, plus some pit
development. Construction by Jien Canada may recommence in the late spring or
early summer of 2010, with production possible two to three years later.
The
Nunavik Nickel Project has a NI 43-101 compliant indicated resource estimate
of 21.3 million tonnes with a feasibility report, based on a previous and
smaller resource estimate, which indicated a mine life of at least 8.5 years
by processing over a million tonnes per year. Information available from
Canadian Royalties indicates a total resource on its land holdings in excess
of 30 million tonnes which, if available for processing, suggests a potential
operating life of about 30 years. Considering that Goldbrook is already exploring
prospective exploration targets on its own adjacent property in a separate
existing 50-50 option-joint venture with provisions for Jilin Jien Nickel
Industry Co., Ltd. to acquire up to 75% by funding all feasibility and
construction of an eventual mining operation. These Goldbrook projects have
potential for supporting additional stand-alone mill operations.
Canadian
Royalties Builds Upon Goldbrook Project Joint Venture
Goldbrook began assembling the Raglan property land position in
2003 through numerous acquisitions of blocks containing a total of 8,863
individual mineral claims, comprising 360,720 hectares, or about 891,329
acres. The property is located in Nunavik, in northern Quebec, about 1,500
miles (1,700 km) north of Montreal. The assembled blocks include the Wakeham,
Ungava, Masuparia, Nuvilik and Belanger properties. The “Belanger
trend” or “Southern trend” extends about 75 km and is the
primary focus of Goldbrook’s exploration. Goldbrook’s property,
in combination with Canadian Royalties, dominates the mineralized trend to
the south, and brackets both the east and west ends of the mineralized Main
Raglan trend supporting Xstrata’s low-cost Raglan mine.
Xstrata’s
Raglan mine contains a resource of about 40 million tonnes and processes
about one million tonnes of ore annually. Xstrata’s resource at Raglan
is characterized as a sulfide nickel polymetallic deposit containing copper
and cobalt, with some gold platinum and palladium. The resource at
Xstrata’s Raglan mine is of a similar style and grade of mineralization
as that identified by both Canadian Royalties and Goldbrook. This suggests
that there is good potential for a similar low cost operation at the Nunavik
Nickel Project. Because Goldbrook has enjoyed success in its exploration
projects and the Belanger trend is early in its development, Jilin Jien
Nickel Industry Co. entered into a joint venture on Goldbrook’s
property.
In
June of 2008, Jilin Jien Nickel Industry Co., Ltd. entered into an
option-joint venture partnership with Goldbrook for the exploration and
development of its properties in the Raglan district. This agreement required
Jilin Jien Nickel Industry Co., Ltd. to fund C$45 million in exploration of
the district over a three-year period. By funding C$12.5 million, C$15
million, and C$17.5 million in years 2008, 2009 and 2010, respectively, Jilin
Jien Nickel Industry Co., Ltd. would earn a 50% interest). Jilin Jien Nickel
Industry Co., Ltd. could earn another 10% interest by funding and completing
a pre-feasibility, an additional 10% by funding and completing a feasibility
study, as well as an additional 5%, for a total 75% interest, by funding
Goldbrook’s share of financing for construction. After Goldbrook repays
its 25% share of construction financing out of cash flow, it is entitled to
its share of net cash flow.
The
acquisition of a controlling interest and eventually the complete takeover of
Canadian Royalties by the Jien Canada joint venture accelerates its timeline
to production and builds upon the existing joint venture between Goldbrook
and Jilin Jien Nickel Industry Co., Ltd. with substantially the same terms
and structure. The Nunavik Nickel Project is highly reminiscent of the
Xstrata’s Raglan mine including both the size of resource and
geological characteristics as well as the scope of the operations and cost
profile. This provides a comparable operation for valuation of Goldbrook and
visible pathway to recognize value creation in the near term.
Attractive
Geologic Profile and Belanger Exploration Update
Nickel sulfide deposits, such as those under Goldbrook’s
control, are generally rare. Nickel sulfide deposits are also relatively more
attractive than more common nickel laterite deposits. Nickel sulfide deposits
are of higher grade and are less costly to process than laterite deposits,
which contain silicate, a byproduct which complicates smelting. While other
older nickel camps are being depleted, the Raglan camp is one of the few
remaining large underexplored and underdeveloped nickel sulfide belts.
The
Raglan project area is underlain by rocks of the Cape Smith (Raglan) Belt
that extends for 375 km across the Ungava Peninsula of Nunavik, northern
Quebec, Canada. The Ni-Cu-Co-PGE mineralization occurs within two currently
defined east-west geologic horizons. The Raglan North horizon, located at the
base of the Chukotat Group, hosts many of the economic nickel deposits in the
Cape Smith Belt. The other includes the Delta-Belanger (or south) horizon,
located within the Povungnituk Group.
The
Goldbrook Ni-Cu-Co-PGE bearing deposits are comprised of disseminated, net
textured and massive sulphides hosted in east-west elongate mafic and
ultramafic bodies, most commonly occurring at basal margins of the intrusive
bodies. Net textured sulphides that form the largest mass of the deposits in
the South trend are very important economically. Goldbrook has focused
extensively on the geology of these deposits and has completed extensive
geophysical and other geoscience surveys to aid in planning their exploration
program which is seeking new nickel-copper-cobalt-PGE sulphides in the
region.
Inspecting Core Samples
Source: Goldbrook
Goldbrook
reported on November 12th, 2009, that it had completed over 87 drill holes
along the Belanger trend totaling more than 16,180 meters of its planned
15,000 meter program for 2009. This program was to follow up on the 2008
Mystery discovery, ten kilometers west of Goldbrook’s Getty-Sylvie
deposits. In the process of better defining the Mystery discovery, Goldbrook
discovered a separate mineralized zone 75 meters to the north. In addition to
this discovery, drilling extended the known depth of the Mystery Main zone
from 300 to 375 meters from the surface and it remains open to the east and
west and at depth.
On
October 6th and 19th of 2009, Goldbrook also released results for its Timtu
zone in which it confirmed the discovery of a significant nickel-sulphide
zone which although complexly folded, extends over 200 meters in depth and
along strike for at least 150 meters. The Timtu zone remains open to depth
and along strike and will be a priority target for additional drilling in
2010. The information released for Timtu from the 2009 drilling indicates it
has become a significant asset for Goldbrook’s exploration efforts.
Goldbrook plans to complete additional exploration and development of
Ni-Cu-PGE sulfide targets along the Belanger and other trends.
Upside
for Goldbrook and Jilin Jien Nickel Industry Co., Ltd. Following Acquisition
The completion of the acquisition by Jien Canada provides
Goldbrook with a 25% interest in the Canadian Royalties assets including the
Nunavik Nickel Project which could commence production as early as 2012 given
ideal conditions. The project has an NPV of C$850 million assuming metal
prices of US$6.00/lb nickel, US$1.50/lb copper, US$900/oz platinum, and
US$200/oz palladium (Goldbrook’s current market capitalization is
presently about C$52 million). While this is based on a about 21.3 million
tonnes of indicated resources which could support a mine life in the order of
20 years, Canadian Royalties documents combined resources (indicated and
inferred) well over that figure suggesting good potential for a longer mine
life and significantly more robust NPV. The transaction is further enhanced
by the access to capital by Jilin Jien Nickel Industry Co., Ltd. and demand
for nickel and other metals by buyers in China. The Canadian Royalties
acquisition builds upon an already successful exploration program on the
Goldbrook properties which suggests additional concurrent mine development.
The
Canadian Royalties acquisition has been accomplished without Goldbrook being
required to fund either acquisition or the eventual construction of the
project. Goldbrook will be entitled to its share of cash flow after repayment
of its 25% share of acquisitions and construction from cash flow. While this
is several years down the road, the present value of Goldbrook’s
position remains unchanged and even enhanced as they are able to avoid the
burden of securing financing and potential dilution of shareholder positions.
This is effectively a continuation of the existing arrangement of the 50-50
option-joint venture with Jilin Jien Nickel Industry Co., Ltd. on
Goldbrook’s Belanger trend and other properties. In a mining scenario
where both the Canadian Royalties property and the Goldbrook property are in
production, Goldbrook will accrue production benefits and revenue for 25%
ownership of each property without having to raise any further funding.
The
acquisition of a controlling interest in and eventual takeover of Canadian
Royalties is within the 50 kilometer area of mutual interest as defined in
the original 50-50 option-joint venture agreement between Goldbrook and Jilin
Jien Nickel Industry Co., Ltd.. This necessitated discussion and agreement
between Goldbrook and Jilin Jien Nickel Industry Co., Ltd. to form Jien
Canada Mining Ltd to complete the acquisition and structure this mutually advantageous
transaction. In addition, Jilin Jien Nickel Industry Co., Ltd. benefits by
immediately securing a long-term source of nickel which is of strategic
importance to China. By partnering with Goldbrook, Jilin Jien Nickel Industry
Co., Ltd. benefits by securing capable management experience necessary for
understanding Quebec’s legal, legislative, environmental frame work,
and ability to engage with local Inuit communities. The acquisition of
Canadian Royalties orchestrated by Goldbrook-Jilin Jien Nickel management
teams was truly of benefit to both Jilin Jien Nickel Industry Co., Ltd. and
certainly, Goldbrook shareholders.
Mike Niehuser
Beacon Rock Research.com
Also
by Mike Niehuser
Mike Niehuser is the founder of Beacon
Rock Research, LLC which produces research for an institutional audience and
focuses on precious, base and industrial metals, and substitutes, oil and
gas, alternative energy, as well as communications and human resources. Mr.
Niehuser was nominated to BrainstormNW magazine's list of the region's top
financial professionals in 2007.
Mr. Niehuser was
previously a senior equity analyst with the Robins Group where he was a
generalist and focused on special situations. Previously he was an equity
analyst with The RedChip Review where he initially followed bank stocks but
expanded to a diverse industry range from heavy industry to Internet and
technology companies.
Information
contained herein is obtained from sources believed to be reliable, but its
accuracy cannot be guaranteed. It is not intended to constitute individual
investment advice and is not designed to meet your personal financial
situation. The opinions expressed herein are those of the author and are
subject to change without notice. The information herein may become outdated
and there is no obligation to update any such information. The author,
24hGold, entities in which they have an interest, family and associates may
from time to time have positions in the securities or commodities discussed.
No part of this publication can be reproduced without the written consent of
the author.
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