This is a little late, but hopefully you’ll agree better late than never.
We’ll be updating this and all subsequent Mining News Review posts on a more-or-less daily basis. We will add to this review chronologically with the most recent updates appearing at the bottom. If there appears to be a significant news release that we have not discussed, please feel free to bring it to our attention in the comments section (subscribers only please) and we’ll make an effort to add it to the discussion if warranted.
Endeavour Silver (AMEX: EXK; TSX: EDR)
Cream Minerals Ltd. Closes $6,000,000 Bought Deal Offering – December 22, 2010
With all this cash it now seems unlikely that Cream is going to accept Endeavour’s latest attempt to get a piece of Nuevo Milenio through a joint venture agreement. Indeed, we find Endeavour’s latest proposal to be much less attractive for Cream Shareholders compared with the all-share offer which itself has already been rejected. Looking back Endeavour probably shouldn’t have been so greedy early on, but then again it wasn’t as if Endeavour could have known that silver was about to rise 50% between October 2010 and the end of the year when making their initial offer. [Zurbo]
Amazon Mining (TSX-V: AMZ; Pink Sheets: AMHPF)
Secretary of Finance Assents Special Tax Treatment for Cerrado Verde Potash Project – December 22, 2010
More great news for Amazon. The only things we have to be upset about is not buying even more shares when it was flirting with C$1.00 in the summer of 2010.
What a beautiful chart! [Zurbo]
Franco-Nevada (TSX: FNV; Pink Sheets: FNNVF)
Gold Wheaton (TSX: GLW; Pink Sheets: GLWGF)
Merged Gold Miners to Address Warrant Issue – December 22, 2010
The possibility that Franco-Nevada might sweeten the pot for Gold Wheaton warrant holders is interesting, and we will factor in for this potentiality in our upcoming Top 10 Warrants report for subscribers of Metal Augmentor. For now here’s an explanation of how to convert the $10 strike Gold Wheaton warrant (something which has led to plenty of confusion among warrant holders):
One way to look at this situation is to determine the number of warrants that will need to be exercised to receive 1 share of Franco-Nevada. To find this first divide the current 1:1 warrant conversion ratio (i.e. you need 1 Gold Wheaton warrant to receive 1 Gold Wheaton share upon exercise) by the 0.0934 takeover ratio (i.e. number of Franco-Nevada shares received per share of Gold Wheaton held) to arrive at a new warrant conversion ratio of about 10.7 to 1 (i.e you’ll need to exercise 10.7 Gold Wheaton warrants to receive one share of Franco-Nevada). Using this 10.7 warrant conversion ratio we can determine that the Franco-equivalent strike price is $84.80 (i.e. difference between the original $10 strike minus $2.08 cash portion of takeover offer multiplied by the 10.7 warrant conversion ratio).
To sum things up, here are the new Franco-Equivalent warrant parameters:
- Strike: $84.80 (adjusted downwards for cash portion of takeover offer that would be received upon exercising the warrant)
- Warrant Price: $0.28
- Warrant Conversion Ratio: 10.7 to 1
And here’s a chart of how the Gold Wheaton warrants have performed over the past few months:
Interestingly Franco-Nevada currently has 2 warrants of its own, one of which does not expire until June 16, 2017 with an exercise price of $75 (not far from the converted Gold Wheaton warrant). We’ll have more to say in our upcoming Top 10 Warrants report.
Tanzanian Royalty(AMEX: TRE; TSX: TNX)
Tanzanian Royalty and Stamico Join Forces to Develop Advanced Stage Buckreef Mine Project – December 21, 2010
This is all fine and well, but we’re talking about a relatively small project with a 30 month development timeline for a company valued at nearly $700 million. It’s not enough to get us interested. [Zurbo]
Mines Management (AMEX: MGN; TSX: MGT)
Positive Preliminary Economic Assessment Completed for the Montanore Silver-Copper Project – December 22, 2010
Plugging the results of the PEA into our valuation model gives us a base case value using current metal prices of about $20 per share. So clearly there is plenty of upside in store for shareholders if Montanore can be brought into production. [Zurbo]
Baja Mining (TSX: BAJ; Pink Sheets: BAJFF)
Baja Closes Copper Hedging for Boleo Project – December 20, 2010
Generally we’re impressed that Baja is now full funded and moving forward with Boleo. Using current metal prices and accounting for the hedge our model generates a base case valuation target of about $3.40 per share. With that said, Boleo is going to be a relatively complex mining operation so there’s no reason to expect the company to trade at its valuation target with so much left to prove. [Zurbo]
Disclaimer: We own shares in several of the companies mentioned in this analysis (Metal Augmentor subscribers know which ones), but no compensation has been received from any of the companies mentioned. This is not investment advice; should you seek investment advice we recommend you discuss the company with a licensed investment advisor or broker.
Regarding the GLW.WT warrants that are causing so much contention, they should just relist them as the longdated FNV warrants, after converting them to the consideration. Or just give them the same due date as the longdated FNV warrants. So much for my two-bits.
Also, will Metal Augmentor be revaluating FNV in its merged-GLW form? I would like to see what numbers your model spits out for the new FNV.
Thanks. Great service
Zurbo or Tom:
Hopefully, this is an appropriate place to enquire about Genco/Silvermex.
Unfortunately, I bought some Genco just before the merger agreement was announced.
I should have sold immediately, of course, but other things were going on in my vicinity.
Now, I cannot even get a stock quote for either GGC.TO or SMR.V at http://ca.finance.yahoo.com/, and only know that the price for GGC.V was CN $0.69 back in early December.
I don’t even know what symbol to ask my broker to sell, although both GGC.TO and SMR.V now return the name Silvermex Resources Inc.
Can anyone shed any light on this issue?
Thanks, and have a Happy New Year even if you cannot.
Larry
@Larry
There shouldn’t be anything unfortunate about this since Genco is currently 100%+ above where it was when the merger was announced. What broker do you use? Your broker should have automatically exchanged your Genco shares into Silvermex shares according to the terms of the business combination on a 1.1 to 1 basis (i.e. if you originally purchased 1,000 shares of Genco your account should now show 1,100 shares of Silvermex). If they didn’t and they can’t give you a straight answer then it is definitely time for you to consider getting a new broker. Do you still see shares of Genco in your brokers account? If so, you have a problem, and it is the fault of your broker. You should see shares of Silvermex in your account. If you do, then then you should be fine. Let us know if you need more need figuring this out.
@Larry
Thanks for the comment strannick. In the future your comments will appear immediately. We simply need to monitor everyone’s first comment to fight against spam.
I’m not sure how relisting the GLW warrants as the longdated FNV warrants after converting them to the consideration would work in practice, but sounds like a reasonable idea. Extending the expiration to 2017 would also certainly be nice for GLW warrant holders.
Our model actually makes it relatively easy to evaluate mergers so we’ll definitely be looking at this in our next update. I would expect the transaction to be accretive to Franco-Nevada, but given their relative sizes I wouldn’t expect any drastic changes compared to the pre-Gold Wheaton valuation.
@Larry
As well Larry, Silvermex is now on the TSX with the symbol SLX.
This article got me thinking palladium. http://seekingalpha.com/article/240878-new-palladium-paradigm-shift-coming?source=dashboard_stocks-sectors
I did a search and didn’t find anything current insofar as a favourite way to play this metal.
Has MA given any thought to PAL or SWC or any others.
@kjm – If you want to speculate on the metal directly there’s an ETF for Palladium – PALL
Re TRE, this link provides some interesting background on why Iamgold dropped the Buckreef:
http://www.theeastafrican.co.ke/news/-/2558/683114/-/qx4p5kz/-/index.html
(…)preliminary metallurgical studies indicate only low to moderate recoveries from heap leaching(…)
@kjm
I have been keeping a bloodshot eye on SWC, as I own 2 juniors with an SWC connection.
You might find this recent commodity report of Scotiabank’s Patricia Mohr of interest – notably, p2. Palladium is one of her top picks for 2011
http://www.scotiacapital.com/English/bns_econ/bnscomod.pdf
Thanks guys…..looks like a lot is going to depend on whether China engineers a soft landing or not.
@Zurbo, @kjm
Thanks for the help. At http://ca.finance.yahoo.com, when SLX.TO is entered, now at least returns a December 31 price for ‘Genco Resources Ltd Com’. So manybe they will eventually twig to the fact that it has become Silvermex in name as well as in code.
I deal through a financial institution in a part of Europe known for its advanced banking laws, so am not able to directly contact the broker. However, I will be abler to confirm that I now have 1.1 times the number of stocks that I originally purchased.
Since it is now up nicely, is it now a hold, or would you trade it in for one of your better suggestions, such as Eastmain Resources? I am of course NOT asking for financial advice.
@Larry
The “mining news review” articles and comments are public, so you should avoid telling about the premium content of Metal Augmentor, such as the best suggestions about companies to own.
Are you really sure about Genco-Silvermex being a “hold”?
@Larry
We’ve sold our position, redeploying profits elsewhere and/or adding to our cash position, see: http://www.metalaugmentor.com/eforum/?p=5410
Hi everybody,
A while ago a stock called IBC Advanced Alloys popped up in my portfolio with an entry price of 0.01 CAD. I never bought it consciously so it must be a spin off of one of my other positions but I can’t find any information on it. Any of you have any idea what this is?
Bob
Did you hold Vangold shares? If I’m not mistaken they distributed some IBC shares to their shareholders.
Best, Peter
@Peter
Peter,
Yes I did. Thank you for the clarification!
Best, Bob