®
Message from the CSE
W
elcome to the inaugural issue of Public Entrepreneur magazine! The launch of a new publication is both bold and exciting. For followers of the Canadian Securities Exchange (CSE), however, this is not the first time they’ve witnessed the launch of a publication by the Exchange. Prior to the Public Entrepreneur (PE), the CSE Quarterly served as the CSE’s platform to highlight the unique and inspiring personalities that do business on Canada’s“Exchange for Entrepreneurs.”And, as entrepreneurs are inclined to do, with the launch of our newest publication, we are positioning for further growth. The Exchange has grown considerably in size and profile since the launch of the CSE Quarterly in 2014. With over 350 securities now listed on the CSE and more joining every day, share turnover measured in the billions and innovative new services, like tokenized securities being brought to market, we believe PE will chronicle the next chapter in the CSE’s storied commitment to public entrepreneurship. While PE will continue the Quarterly’s publication cycle and still showcase stories JAMES BLACK of inspiring entrepreneurs who propel the CSE forward, it will also profile the issues, Editor In Chief opportunities and personalities that shape life in the public markets. One of our initial Public Entrepreneur goals with the new platform is to deliver content in a more conversational format, and I feel we have made positive steps with that goal (e.g. more interviews!). Of course, the business of exploration and mine development are as entrepreneurial as it gets. So, it is especially fitting that we launch the first issue of Public Entrepreneur as a “Special PDAC Issue”—a reference to the iconic Prospectors & Developers Association of Canada Convention which takes place annually in Toronto and which means so much to the CSE and our issuers. The energy, traffic, and business (and social) activity that accompanies this convention reflect its importance to the mining and capital markets communities. In good markets or in bad, PDAC has always provided the pulse of where entrepreneurs can seek out opportunity and capital in the natural resources space. As this issue of the magazine highlights, entrepreneurship in the natural resources sectors takes many shapes and forms. For example, this issue highlights the growing influence of drone technology and its use in the mining industry. And, innovation doesn’t just apply to exploration either. Our interview with Canamex Gold is a crash course on the potential benefits of tokenization and blockchain for mining companies—a must read! Don’t be surprised to see technology playing an increasingly important role at this year’s show. The mining sector has always served as a crucial bellwether for humankind’s continued industrial and technological advancements. The CSE believes entrepreneurs who bring mining and exploration projects to fruition are especially important to Canada’s position as a leader in innovation and value creation in this space. So, with that in mind, please enjoy this first issue of Public Entrepreneur. We invite you to connect with us at PDAC and to keep abreast of our latest entrepreneur profiles across our blog, social media channels and events. Our next issue is already in the works, which you can expect to feature a deep dive on the ever-evolving Cannabis sector! Until then, happy reading.
James Black Editor In Chief Public Entrepreneur
6 | PUBLICENTREPRENEUR • Issue 1
2018 • PUBLICENTREPRENEUR | 7
BUNKER HILL MINING One of America’s most historic mines is ready for a comeback
M
ining investment is back in a big way if the first quarter of 2018 is any indication, and it’s helping set the stage for one of the largest and most storied mines in the United States to finally come back onstream—the Bunker Hill Mine in Idaho’s Coeur d’Alene Mining District. Seasoned mining industry observers won’t be surprised to learn that the man behind the project is Bruce Reid, Chief Executive Officer of Bunker Hill Mining (CSE:BNKR). Reid has acquired, worked on and sold six mines in his career, five of which are currently in production (number six is slated to begin producing in 2020 or 2021). Bunker Hill will make seven and mark the culmination of an effort ongoing for over two decades. “I tried twice in the last 20 years to get Bunker Hill but wasn’t able,”Reid explains.“When the largest shareholder of what has become Bunker Hill Mining asked me to lead his company, I told him, ‘Go get the Bunker.’”
8 | PUBLICENTREPRENEUR • Issue 1
By Peter Murray
Sure enough, he got it, although the deal originally agreed with the heirs of the longtime owner was re-written in August 2017, shortly after Bunker Hill Mining began trading on the CSE. The Bunker Hill mine went into production in the mid-1880s and remained in operation until 1981. For many years early in its life it was said to be one of the largest mines in the world. “Bunker Hill leads the way as one of the most important mines ever in American history,”says Reid.“It produced over 35 million tons of highgrade lead-zinc, about 8.5% lead, 4.5% zinc and 2 to 3 ounces of silver. When it closed it had resources and reserves of over 60 million tons, or almost twice what had been mined. “Collectively, it has about 9 million tons of 5.5% to 6% zinc, 2% lead and a little more than an ounce of silver left in stopes that are already open and not flooded.” That is a major amount of rock waiting to be harvested, and the cost of getting the mine back up and running is far from astronomical. Just $15 million would re-launch operations at 1,000 tons per day, and scaling up to 3,000 tons per day, as plans call for within two years, could make Bunker Hill the largest lead-zinc-silver mine in the United States outside of the gigantic Red Dog mine in Alaska, according to Reid. Why, then, if all that ore is just sitting there has the mine remained inactive for so long? The owner at the time proved hard to convince and the US Environmental Protection Agency (EPA) was heavily involved as well, running a wastewater treatment facility onsite to deal with acidic effluent. While the mine itself was not involved, the associated lead-zinc smelter caused significant pollution in the entire Silver Valley and the district was the site of a billion dollar cleanup through the EPA Superfund. That is mostly completed now as the Valley is in much better condition. The deal now in place with the mine owners is a 24-month lease under which the project can be purchased for $25 million over 10 years. Another $20 million would go to the EPA, this
2018 • PUBLICENTREPRENEUR | 9
“
People want to see the mine back in production for a number of reasons, one of them being jobs. BRUCE REID
10 | PUBLICENTREPRENEUR • Issue 1
By John Harrington er payload capacities and longer flight times than a typical commercial-grade multi-rotor UAV. As a small progressive company that keeps abreast of industry trends, Global UAV President James Rogers thinks their products and services will keep them “ahead of the pack.” The company also has a division, UAV Regulatory Services, which provides an online service called Easy SFOC. This service assists clients with the preparation of special flight operation certificates (SFOCs). These certificates are required for the operation of recreational and commercial drones in Canada. “It can be a fairly complex process to apply for that [an SFOC], so UAV Regulatory essentially offers a consultancy service to consumers who are interested in starting their own business. We can guide them through the regulatory requirements to help them get their licenses,” explained Michael Burns, CEO of Global UAV. Together, these four businesses within Global UAV provide a fully integrated profile of manufacturing, services and regulatory compliance unique to the UAV industry and its customers. “Right now, the main revenue-producing component of Global UAV is our services division, consisting mainly of photogrammetry and geophysical surveying,”Burns explained. “The geophysical surveying services have been very lucrative for us. We have been the leader in this commercially since 2014 when we really brought this technology to market. We set ourselves up as a commercial supplier of the UAVMAG services through Pioneer Aerial,”Burns continued. “We’re able to offer to our customers either a full-service package, where they can hire us to come and do the work, or we can also do a sale. If a customer would like to purchase the equipment and get set up as a user, we can sell them a drone, train the customer and set them up with all the regulatory framework.” Burns added that it is a very attractive model for small companies. A chart of quarter-by-quarter sales for Global UAV shows the sort of vertical take-off one might expect from the company’s drones. In the first quarter (the three months to January 31), sales were C$22,386; in the second quarter they soared to C$181,204; and in the third they rose to C$333,529. The third quarter—to the end of July—saw the company move into the black, with net income of C$154,956. A NOVAerial drone typically sells for US$30,000 to US$40,000. Therefore, the company does not exactly need the manufacturing clout of General Motors to keep that top line moving north at a rate of knots, especially as a high-margin business that gets the bottom line heading in the right direction as well. According to auditing and consulting services provider PwC,“the drone revolution is disrupting industries ranging from agriculture to film making.” PwC values the emerging global market for business services at US$127 billion, with infrastructure (US$45.2 billion) and agriculture (US$32.4 billion) the two biggest markets, while mining, where Global UAV is already strong, is valued at US$4.3 billion. In conclusion, the market opportunity is enormous. As James Rogers observed, however, North America is not awash with listed pure-play UAV companies, with big names such as Facebook, Google, Amazon and Boeing certainly having their fingers in the pie. “Global UAV offers a ground floor entry opportunity to get into the drone sector.”
“
We’re able to offer to our customers either a fullservice package, where they can hire us to come and do the work, or we can also do a sale. MICHAEL BURNS
2018 • PUBLICENTREPRENEUR | 13
M
ake no mistake: with the electric vehicle revolution upon us, and the rapid transition to clean energy, the demand for lithium-ion batteries is set to skyrocket. For mining investors looking to capitalize on this exciting global phenomenon, tremendous value can be found in the booming lithium-mining sector. Enter Far Resources. An aggressive, angel-backed, junior mining company headquartered in Richmond, B.C. Exceptionally positioned to become a leader in the Canadian energy metals sector, Far Resources is strategically focused on acquiring and advancing properties located in secure and mining-friendly jurisdictions. At the core of its activities are two significant high-grade lithium projects. Far Resources is actively drilling its Zoro Lithium Project near Snow Lake, Manitoba, which covers a number of known lithium pegmatite occurrences. The Company has recently acquired an option on the Hidden Lake Lithium Property in Northwest Territories for which it is currently developing an exploration strategy. The Zoro Property hosts known historic deposits of lithium bearing spodumene pegmatite. There are seven identified pegmatite dykes; in the 1950s, historic resource extraction was completed on just one of these dykes, Dyke 1, leaving the remaining six open for exploration and development. A successful prospecting and sampling program in 2016 confirmed the presence of lithium in the spodumene bearing pegmatites. In 2017, Far Resources expanded their property holdings around the Zoro claim, adding adjacent claims covering the known dykes in the area 14 | |PUBLICENTREPRENEUR PUBLICENTREPRENEUR • Issue • Issue 1 1
ADVERTORIAL
expanding the property from .5 km2 to 3 km2. Three drill programs have been completed to date, delivering high-grade lithium assays from all drill holes. Far Resources plans to further assess the amount of highgrade lithium spodumene in Dyke 1 through a winter drill program, reaching the dyke’s deeper levels (>150 m). Far Resources’ 2018 winter drill program will expand to Dykes 5 and 7 where they will test the historic high-grade lithium drill intersections and the recent assay results from trench and outcrop sampling on both dykes. Far Resources is expanding its land holdings via a letter of intent on an option to acquire up to a 90% interest in the high-grade lithium Hidden Lake Project in Northwest Territories. The Hidden Lake Project is owned by 92 Resources Corp. (“92 Resources”) and consists of five adjoining mineral claims spanning over 1,659 hectares within the Yellowknife Lithium Pegmatite Belt, located approximately 40 km east of Yellowknife. In 2016, a 92 Resources exploration program at Hidden Lake brought in samples of 1.9% Li20 and up to 3.3% Li20. Both the Zoro Lithium Property and the Hidden Lake Project are road accessible. In addition, the Zoro Lithium Property boasts well defined infrastructure including a hydro line just 5 km south of the property and a 30 km distance to the rail line at Wekusko ready to transport the lithium to market. Keith Anderson, President and CEO, has consistently emphasized the miner’s mantra: “Infrastructure, infrastructure, infrastructure—it’s the most important aspect for any junior company,” Anderson states. “You can have the best project in the world, but if there is no road or rail, or power or water, it won’t matter.“ Far Resources has attracted the attention of leading experts in the
lithium space and is building a nimble, knowledgeable and unparalleled management and advisory team to move its projects forward. The president and CEO, Keith Anderson, is a former Vice President of Canaccord Capital and brings over 25 years of experience in capital markets, finance and wealth management to the company. His expertise has allowed the company to operate lean and bring in the resources necessary to move its exploration program forward. Mr. Anderson has assembled a world-class technical team that includes Dr. Mark Fedikow, P. Eng and P.Geo, and directors of the board Lindsay Bottomer, P.Geo, Shastri Ramnath, P.Geo, and most recently Toby Mayo, formerly with Rio Tinto and Invanhoe Mines. With its first-rate leadership team, two very promising lithium properties in two of the premier mining districts in the world, solid infrastructure, and the will to go the distance, Far Resources is ready to stake its claim as a leading Canadian junior lithium company. Most importantly, its lithium projects will contribute to the reduction of world carbon emissions, which will ultimately help fight climate change. Surely, a win-win for both Far Resources and investors.
1 (833) 327-7377 201-2691 Viscount Way Richmond, BC V6V 2R5 corpcom@farresources.com
20182018 • PUBLICENTREPRENEUR • PUBLICENTREPRENEUR| | 15
CANAMEX GOLD Gold-backed tokens are just the start of this company’s cryptocurrency revolution
16 | PUBLICENTREPRENEUR • Issue 1
Interview by Peter Murray
C
ryptocurrencies remain a hot topic in financial markets in the opening quarter of 2018, and Canamex Gold (CSQ) is moving to become the first company to issue a crypto-token backed by gold, and from its own project in Nevada no less. The team is also looking at working with other companies in or near production to help them finance with crypto-token gold and silver royalty streams, instead of traditional debt and/or equity financing. It is a new concept and takes some explaining, but the potential to eliminate further dilution for equity holders and create new models for valuation is both vast and fascinating. Canamex Gold Chief Executive Officer David Vincent recently gave Proactive Investors a look inside this new funding paradigm. Canamex Gold is literally taking currency back onto a gold standard with the introduction of its gold-backed token with an offering currently underway. We’ll get to your pioneering business structure in just a moment, but first, the Bruner gold project underlies the token. Tell us about Bruner and the plans there. We’ve got Bruner to the stage where we need to complete the engineering studies, the environmental permitting and then we should essentially be at the Preliminary Feasibility Study stage, for a mine financing decision. We hope to be at that point around the fourth quarter of this year. At that time, we will make a funding decision to construct the operation. The intention is to use the crypto-token model as the funding mechanism for the mine construction, which means it would be a non-dilutive financing for shareholders. So instead of doing a traditional equity and/or debt financing, we’ll be doing a crypto-token financing, backed by a gold royalty stream off the project It’s a win-win situation for shareholders and for token holders. Token holders will be buying the tokens at a significant discount to the spot gold price, and the tokens will be tradeable on the Ethereum blockchain, potentially at a significant premium to their issue price, including a speculative premium that we can’t define until it’s actually trading. This is a pioneering concept and has not been done by anyone else to my knowledge. Where did the idea come from? It came from looking at gold streaming royalty models, which traditionally is an agreement between two parties: one is the project owner and the other is the royalty buyer. Royalty buyers include such companies as Franco Nevada, Silver Wheaton Precious Metals and Royal Gold. Our concept is to take a gold royalty on the Bruner property, which has a small portion of the PEA defined resource, and tokenize it. Instead of the royalty being purchased by one party, it is purchased by many parties who hold the tokens and these will then have liquidity on the Ethereum blockchain. You announced an offering earlier this month for US$5 million. Are you at liberty to give us some insight on how that is going? It is going very well. There is a lot of interest, particularly out of the United States and Europe. We are receiving application forms and cheques. We’ll keep the private placement offering open until the full amount is raised and then launch a pre-ITO (Initial Token Offering) on the back of it. The advantage of coming in on the token offering now is that the buyers get a priority allocation into the pre-ITO at a discount. 2018 • PUBLICENTREPRENEUR | 17
For those new to the cryptocurrency world and the concept of this offering, can you walk us through the steps? An investor commits to the current private placement offering and you are talking about an ITO. How do the two fit together? They are similar in many respects. The current private placement offering is more of a traditional financing mechanism under the current regulations and instead of being issued gold royalty crypto-tokens they will be issued a gold royalty token certificate. The names and details will be held in a register. Then the difference with the ITO is that the certificates can be converted to crypto-tokens at a price discount into the pre-ITO, and then they become tradeable on the Ethereum blockchain. And at that point the tokens have liquidity. So, chronologically, you close the offering and then there is an ITO. What happens next, and what will you use the proceeds for? The intention is to close the offering and go into pre-ITO, which would be priced accordingly and dependent on the spot price of gold at the time. But again, the pre-ITO offer price will be at a significant discount to the spot price. Looking at the monthly price chart of gold it appears very bullish. We expect that the price of gold could be over $1,400 an ounce in two or three months, then it means the pre-ITO price would be higher than the current private placement offering. Perhaps 10% higher. So, coming in now has distinct early mover advantages. The funds from the private placement and pre-ITO will be used to fund the company for the balance of this year to get to the mine financing stage in Q4. We may not do the main ITO 18 | PUBLICENTREPRENEUR • Issue 1
until the third quarter. The advantage is that by that time we will know what the speculative premium is for these tokens on the blockchain, and then we can price the tokens according to the market price, and not the spot gold price. If there is a significant speculative premium the price of the tokens in the ITO won’t be anywhere near the levels we are offering in this private placement. Investors coming into the current placement are coming in at what could prove to be a very low price. The work you have done on the token to date affords you rights to do this for other asset owners, does it not? Correct. We are looking at a number of possible business models. We might set up a subsidiary newco, for example, that becomes like a royalty company and it raises capital via crypto-token issues. It might have a number of royalty streams in North America and other safe jurisdictions and the capital raised to purchase those royalties would be via crypto-token issues, backed by the gold and silver royalty streams. We’ve already deployed six exclusive token names on Ethereum. They have been deployed but not issued yet. So, we could use those tokens to fund additional royalties in the future through a royalty aggregation model. You are also a highly respected technical analyst of financial markets. What do you see for gold, and why? I look at long-wave analysis and currently we are in what is called a fifth K-wave, which is a Kondratieff wave. K-waves last 60 years, so we are on the fifth one of the last 300 years. This wave should peak in 2027, which is where I expect this
current gold bull cycle to start topping out. We should see a mid-cycle correction in 2023. I suspect the price will move up toward the previous high of around $1,900 over the next five years, correct and then in the last part of the cycle into 2027 move much higher than $1,900. Basically, a full-on bull market. The fifth wave of the fifth K wave, which should generate a big move higher. And if you look at the fundamental background it is not good. Interest rates have been too low for too long and there is lots of debt out there, much of which will not be paid back, so defaults are on the horizon. Interest rates thus rise because of a global debt default scenario, where lenders demand a higher interest rate risk premium. What’s this going to do to the gold price? And silver is even more undervalued than gold. Silver has greater leverage to the upside. You could see Canamex launch a silver crypto-token before long, again using a royalty streaming model.
DAVID VINCENT
Aside from Bruner, are there any projects in the Canamex portfolio investors should be aware of? We have the Silverton gold exploration project. It has similar geology to Newmont’s Long Canyon in Nevada. Long Canyon is a dolomite breccia. Our geologist Greg Hahn, who has built three mines in his career, thinks Silverton has tremendous upside and part of the money raised in this placement will be used for an initial drill program on the Silverton project. Any other insights from the intersection of cryptocurrencies and hard assets before we bring our discussion to a close? Just that I think we have tremendous value inherent in Canamex Gold. We have three pillars to the business model: the Bruner gold development project, the Silverton gold exploration project and the cryptocurrency model for funding. Based on our updated Preliminary Economic Assessment, which came out in January 2018, the net present value (NPV) at the current gold price of Bruner is about $1.60 per share, using the current shares on issue. 2018 • PUBLICENTREPRENEUR | 19
MGX
MINERALS Helping the world transition to renewable energy is just part of the mission
M
GX Minerals Inc. (CSE:XMG) CEO Jared Lazerson is creating a lot of value for his shareholders by capitalizing on the global transition from fossil fuels to renewables. His company plays multiple roles in the process, all predicated on a long-term vision that guides deployment of resources to opportunities that will have the biggest environmental benefits, the best returns on capital, and the clearest path forward. MGX has a variety of advanced projects in its portfolio. Let’s look first at lithium and the battery space. From battery technologies, to lithium processing technologies, to lithium projects, MGX covers a lot
20 | PUBLICENTREPRENEUR • Issue 1
of bases. Break down your various activities in lithium for us, and how do you formulate and execute a strategy this comprehensive? We are joint ventured in lithium hard rock but primarily focused on brine. That is one way to assess things—by considering hard rock and brine. Our joint ventures are in Ontario and cover five properties owned by Power Metals. We own a 20% interest, with a right to own 35%, and then we also have an option to acquire up to 10 million shares of Power Metals at $0.55. That’s our hard rock side and it’s probably one of the two top prospects in hard rock lithium in North America. We are pleased with the exploration of that project.
Interview by Peter Murray
But our main focus is lithium brine, and process design in particular. It is all based on leveraging our existing technology, which is filtration technology that allows us to inexpensively, and with low energy consumption, extract lithium and other minerals from brine. We can also take out oil, silica clay, or magnesium—things that would otherwise make the brine non-processable. Within the lithium brine space, we are looking to leverage our processing technology in a variety of ways. We have 2 million acres of lithium brine oil claims throughout North America, and we are also involved in many testing and analysis agreements. In addition, demonstration projects are ongoing and we are negotiating joint ventures with existing high-grade brine sources. We started using a pilot plant for our extraction process in July and have tested dozens of water samples from across North America. I’m pleased that we were able to completely mitigate magnesium, which has been a real issue within the space, as evaporation does not deal with it very well. We just finished testing of our first commercial system, 750 barrels per day.
That’s been flowing water for about a month now, so the big piece here is moving toward commissioning deployment soon and we have a variety of scenarios and will narrow them down to the most profitable ones. We are considering natural lithium brine related to geothermal, some petrolithium brines, and some other wastewater stream brines, such as from brine tailings. What outlook for batteries and lithium do you apply in developing the company’s business strategy and allocating its human and capital resources? I’ll speak to fundamental concepts here. The focus we have is in the new energy industry, and in particular the transition between fossil fuel-oriented transportation and new energy electric and renewables. And not just renewables and battery-related commodities, but also being involved in the clean-up aspect. Connecting to the future is important, but we also have to consider how to clean up the existing fossil fuel industry, because it is not going away. Remember, the by-product of our lithium extraction technology is clean water.
With this concept in mind we look to commit resources to the path of least resistance. Traditional mining has always been a bit stubborn:“If we have this deposit then we’ll develop this deposit and do what we have to do to advance this project.” We are much more flexible. In fact, with our lithium technology we are somewhat resource-agnostic. Low-cost mass storage with our zinc-air battery is important as well. We focus on projects that will be the most profitable, advance the fastest, and we welcome working with other companies to draw on their scientific, technical and financial expertise. This is all in the context of the path of least resistance but understanding that what drives this is the transition from fossil fuels to renewables. In terms of managing resources, we have teams that are project-oriented, so there are separate teams for specific commodities. We frequently use consultants and that has worked extremely well. It is fairly easy to manage from a project perspective, as we have focused project teams. This is really the key to keeping overhead low. You are not hiring dozens of engineers and other staff but engaging consultants on an as-needed basis. 2018 • PUBLICENTREPRENEUR | 21
MGX was recently recognized as a member of the CSE25 Index
MGX is heavily involved in the silicon space as well. Tell us about your silicon projects and how they fit with the rest of the project portfolio. Silicon we like and are ramping up to test the metallurgy. The mining side is straightforward. All of our deposits are high-quality quartzites, not to be mistaken with frac sands or sand silica. So really, metallurgy is the key. We want to know if the silica is in a form that we can create metallurgical grade quartzite silicon, or whether it can go all the way to solar grade. It is important to be close to infrastructure, and most of our deposits are close to infrastructure. We don’t see demand for silicon slowing down either. One of MGX’s first projects was Driftwood Creek, and you have a PEA (Preliminary Economic Assessment) underway there. It’s another MGX project at an advanced stage in a safe jurisdiction. What can investors expect from Driftwood in the coming months? We are expecting the PEA this month. Magnesium oxide is a basic commodity for fertilizer and wastewater treatment, a commodity that has an application in the environmental space. Worldwide demand is strong at about 10 million tons per year. We are looking at making an announcement on a scoping study to move ore to metallic grade magnesium. The concept, again, is advanced materials. Magnesium is lighter than aluminum and stronger. If you want lighter cars and aircraft, you need to use more magnesium. MGX common shares have been up by as much as 80% since the beginning of 2018, trading now around $1.55. What drove that increase in performance, and are you sensing a general return of investor interest to the mining sector? The key is that the broader markets have been extremely strong. The economy in the US is good in terms of jobs and the biggest concern in the market right now is not economic growth but in22 | PUBLICENTREPRENEUR • Issue 1
flation. Rising interest rates are something we have not dealt with in a very long time, and that could factor into broader markets. In terms of MGX specifically, we consolidated around the $0.90 level for a long time, and it was meaningful technically. Also, we have invested a huge amount of time and money in development of our assets and this has been crystalized in the acquisition of the zinc-air battery technology. That began to lay out the fact that MGX is not specific to commodities but is really in the energy space. We are clean-tech on the technology side, so you have a dual portfolio for an investor. The increase in share price is really a recognition that MGX is a dynamic company. We are ready to capitalize on any reasonable opportunity. And we raised $10 million in December quite smoothly. I think it is worth pointing out also that in Canada we don’t have the traditional venture capital or private equity that exists in the United States. We have small public companies, and when you are at a point where you can raise capital at a decent valuation, it creates opportunity. There is a tremendous amount of technology in Canada at universities and small companies. There are unique opportunities close by, and the mechanism really is that once you exceed the $1.00 per share price level the cost of capital decreases dramatically and the return on equity you can get on capital can really be substantial. The financial markets have shown they are willing to back MGX. How much money has MGX raised since the beginning of 2017 and what observations do you have on the current state of capital markets as they pertain to mining exploration and development companies? In 2017, MGX raised over $20 million. The financial markets are back, and I think banking is back to being quite profitable. I get contacted by a mid-level investment bank or funding group every week. We have been approached by one of the top investment banking and M&A groups on Wall Street. I take that as
a great sign, even though we have not made a move yet. What’s really driving this is liquidity. I think liquidity in stocks for institutions is more important than the price they start at, and we typically trade over a million shares per day. Sprott has invested and holds about 4% of the company and I would say we are now 80% institutional. Any closing comments for shareholders and others watching MGX’s progress? We are in deployment mode for our lithium extraction technology, and exploration on silicon, we expect our PEA and to move to pre-feasibility on our magnesium, and the battery mass storage company we acquired in Phoenix really is at the forefront of low-cost mass storage technology. It’s fascinating that this is a fuel cell technology tied to separation between storage and fuel, or power. You can increase the size of the fuel tank, as it literally is fueled by a zinc electrolyte. So, you have charged zinc going into a fuel tank, and that tank can be however large you need it to be, and that is your storage. But that is separate from the fuel cells, which is an electrolyte that gets pumped through and produces your power. We anticipate reasonable revenue, at least from the lithium area. There is already a contract in place for our water treatment company, PurLucid—a couple of million dollars a year in the oil sands to get our feet wet in the water treatment side. I would say again that the big theme we see going on in the energy space is transition. Tremendous legislation and change occurred last year in terms of a commitment to end the internal combustion engine. We like the transition to renewables and it will take a long time for a multi-trillion fossil fuel industry to get to a multi-trillion renewables industry. Let’s figure out how to monetize this transition, either investing in renewables or in cleaning up existing fossil fuels.
“
Connecting to the future is important, but we also have to consider how to clean up the existing fossil fuel industry, because it is not going away. JARED LAZERSON
2018 • PUBLICENTREPRENEUR | 23
INTERNATIONAL COBALT
I
Idaho projects, acquisition strategy take shape following $10 million financing
nternational Cobalt Corp. (CSE:CO) focuses on primary cobalt projects, and while it has a couple of good land packages under its control in Idaho, a recently closed $10 million financing means the company now has the wherewithal to consider additions to its portfolio as well. Chief Executive Officer Tim Johnson explains the outlook for cobalt, why supply constraints are here to stay, and how International Cobalt is positioning itself to take advantage of the favourable supply/ demand environment. What outlook for the cobalt market do you hold at International Cobalt and how does that shape your strategy in terms of project acquisition and allocating human and capital resources? We think prices will remain strong both near term and long term. Basically, we just cannot see anything on the horizon that’s really going to change the amount of cobalt coming on line. In December 2017, Glencore announced it was going to double their production in the DRC (Democratic Republic of the Congo) and there was no effect on the market whatsoever. As long as the battery space stays strong, we think cobalt will stay strong. This environment really puts us into acquisition mode—we are actively looking for new projects in the space. Exploration in the cobalt space is not very mature at all, and there are going to be a lot of discoveries and news releases from various companies over the next few years. We want to be right in the middle of the mix.
24 | PUBLICENTREPRENEUR • Issue 1
Walk us through the components of your project portfolio. What has you the most excited and what work is upcoming? We’ve got two projects in the Idaho Cobalt Belt and we bracket eCobalt Solutions’ advanced project. Although there has been a fair amount of historic work done on our landholdings, the majority of it by Noranda in the 1980s, our team has not really had boots on the ground yet except for a site visit. We anticipate doing a full geological work-up on both projects, to include extensive soiling and mapping. I’d say half of our Blackbird project has not been mapped geologically. So, we are excited to get to work on the projects and because there are many companies in the belt, including us, there is going to be a lot more exploration. It is a world class belt as far as cobalt goes, so you are going to see lots of news coming out of it. You mentioned that you are in acquisition mode. What types of additional projects would appeal to you, and how do you assess them? We are looking for primary cobalt. We are not as interested in nickel secondary cobalt or silver secondary cobalt. Primary cobalt projects are few and far between and we are doing a lot of digging to find good ones, looking mostly in North America. We have feelers out in Africa as well, but any acquisitions we make in the near term are likely to be North American. Cobalt really is an underexplored mineral. It is not like the molybdenum days of the early 2000s, when once moly started to rise in price everyone had a near-term moly mine. A lot of work will be needed to bring supply on line.
Interview by Peter Murray Does that mean most of the projects are early stage? Right now, most of the cobalt supply is from secondary sources such as nickel and copper. There hasn’t really been a focus on looking for primary cobalt projects, so anything you find is quite early stage. It is not like you are going to find something that was almost a mine and didn’t make it because of prices and now it is coming back up. And if you do find that it is most likely in the DRC. You know anything you get into is going to be a long-term project and you’ll have to structure your efforts to support that. The financial markets are supporting mining exploration companies once again. What observations do you have on the current health of the market, and particularly with regard to the cobalt space? Cobalt is definitely popular. There are a lot of financial professionals we have talked to who would like to get in on the space, but there are limited opportunities to do so. It has to do with the maturity of the exploration cycle—there really aren’t a lot of high-quality projects out there and the price of cobalt does not seem to be going down. Any decent projects have high valuations, and those are the projects the money is looking for. What kind of timeline are you giving interested parties in terms of the work you have planned. And are you only interested in projects you can own 100%? We are open to looking at other opportunities, whether it be joint ventures or strategic investment. Because we are an early entrant into the Idaho space you kind of wait to see how things shake out. I think the belt will potentially see consolidation, as there are some smaller players getting good results but there are no majors there yet. Once some of the juniors have more success the majors will come knocking. Cobalt is hot and there are lots of entities jockeying for position. Are they mostly Canadian companies or are some from other jurisdictions? There are a few Australian companies in the space, and money is coming out of Australia as well. We got some backing out of Australia and other companies we have seen did as well. Some groups that had success in the DRC are starting to look for safer jurisdictions. How are you going to pay for the acquisitions and work on the project portfolio? We recently closed a $10 million financing. Our plan is that the new capital would support at least two years of exploration. We are talking all of our ground proofing this summer, a potential initial drill program in the fall, followed by another drill program in 2019. That is the plan with our existing assets, so things could change, of course, if we completed acquisitions. International cobalt has enjoyed a good start to 2018 in the markets and on the corporate front. Is there anything else you’d like to comment on? Just that we are very happy with our land position in the Idaho Cobalt Belt. The historic data we are turning up is proving our theory right. There are new reports being made available by the Idaho Geological Survey all the time and each time we find one we get excited again. Most of the work is by Noranda so we have high confidence in its quality and really want to get boots on the ground and follow up on everything.
TIM JOHNSON
“
Exploration in the cobalt space is not very mature at all, and there are going to be a lot of discoveries and news releases from various companies over the next few years. We want to be right in the middle of the mix. TIM JOHNSON
2018 • PUBLICENTREPRENEUR | 25
MURCHISON MINERALS
B
High-grade base metals deposit the highlight of a project portfolio built to last
ase metals are once again the place to be in the mineral exploration space, and Murchison Minerals Ltd. (CSE:MUR) has zinc, copper and nickel well covered with projects in Saskatchewan and Quebec. Its Brabant-McKenzie project has a NI 43-101 resource of 1.5 million tonnes indicated at 7.46% zinc and 0.7% copper, plus another 4.5 million tonnes inferred at 5.99% zinc and 0.62% copper. Murchison Chief Executive Officer Kent Pearson spoke with Proactive Investors recently and clearly Brabant-McKenzie is everything he had hoped for and more. Drill results to date include 12.12% zinc, 0.97% copper and 39.20 grams per tonne silver over 11.40 metres and additional targets are popping up that bring with them the potential to discover new deposits within project boundaries. Whilst you have some gold in the mix, base metals seem to be the focus for Murchison Minerals. Tell us why you chose base metals for the company, and how have you gone about building a project portfolio to match this vision? The main base metal asset was already in place when I joined. I was introduced to this project and was interested in it because it is a VMS (Volcanogenic Massive Sulfide) deposit, and I have some VMS in my background experience. Brabant-McKenzie is far and away the most advanced project we have within Murchison. When we looked at all the assets in the portfolio, this base metals asset was the clear choice for deploying our corporate resources. Your Brabant-McKenzie project in Saskatchewan has a 43-101 compliant resource based on some very nice grades. What has you most excited about the project so far, and what can investors look forward to over the next 6-12 months? The project has not really been sized. It has been known for 60 years and it has been picked at over that period. It really was not
26 | PUBLICENTREPRENEUR • Issue 1
until the mid-2000s when Manicouagan Minerals picked it up that someone started working toward building something there. They came up with the first 43-101 resource estimate, and when I looked at the project it reminded me of a similar one I had worked on in the Dominican Republic. First and foremost, the grade was attractive, and also the indicated resource, which is really the money grade at this point. We looked at the inferred numbers and felt that based on the drilling it probably hadn’t captured everything the project offered. We just thought it hadn’t been sized the way it needed to be and that there was probably more on the main deposit than was already there. Our thought was that we are not going to drill“press-release”holes but go in and really try to build it out, and it is either there or it is not. Last year’s program, and this year’s as well, is based on that. Last year’s program was a success, as we ended up adding tonnage from our drilling, not a rework of the 43-101. We also think we demonstrated that the project still has room to grow. In addition to that we have a large land package and there are lots of known mineralized showings up and down the property, based both on government work and some of the prospecting we did last summer. We started homing in on geophysical anomalies and worked up drill targets. We are drilling two significant targets in this campaign and have identified another target further south. There are other geophysical targets we’ve identified, a couple that really jumped out. We have a trend of 4 kilometres of strike we are going to run a major ground survey on to try to define it. These are airborne survey results and we’d like to get closer to see what is really there. In terms of potential upside, the whole land package is generally underexplored and we have tried to hit it hard and prove there could be more here than what has been thought of in the past. The results we’ve got have surprised us in a pleasant way and we have been able to expand the project beyond the main deposit.
Interview by Peter Murray HPM in Quebec is not as advanced as Brabant-McKenzie but is still very interesting. Walk us through the highlights to date and near-term plans for HPM. That project was brought in through Manicouagan Minerals. I should point out that Murchison Minerals is the result of a reverse takeover between Manicouagan Minerals and a private company called Flemish Gold. Manicouagan had both Brabant-Mackenzie and HPM in its portfolio. HPM was a Falconbridge discovery. It is similar to Brabant-Mackenzie in a way in that companies have picked at it but not done a full-on holistic program from what we can tell. The appeal here too is the grade. The grade’s being intercepted in terms of nickel are high. The idea with HPM is to do what we did at Brabant-Mackenzie: work up a desktop study with some ground-truthing initial field work. And from there to develop a full-on exploration program and go back in. We have been so busy with Brabant-Mackenzie that HPM has kind of been on hold. We have a small program designed and may try to get in there this summer, depending how things go at Brabant. It is inexpensive and we have a team in Quebec ready to go to work on it, so if we get the opportunity we will be in there. And really, both properties reflect our focus, which is to be involved in projects that look like they will be fairly robust if we experience a down commodity market. What insight into the markets for zinc, nickel or copper do you have from your industry connections and own analysis? We pay attention to metals prices but I don’t spend time analyzing the markets. I was in London in the fall and went to a presentation by CRU and their outlook for zinc is quite positive. What I understand is that the lack of actual zinc metal is bottlenecking things and this is being reflected in zinc prices as a consequence. They also see a big bull run for copper out to 2022 or something, at prices where they are now or higher. Nickel they were bullish on, and cobalt was a big deal because of the electric car and battery revolutions. But for our company we are just feeling good about the bullish outlooks for zinc and copper. The robust prices certainly help us in the market and keep us as an attractive company because we are in the right commodity spaces. It has been part of the reason we have been able to get some financing done through some volatile times in the market.
of infrastructure. We are about six hours from Saskatoon and it is an easy drive. La Ronge is a two-hour drive if we need something. The community is really supportive and that is so heartening. We are trying to develop something for the community and we hope to leave something for them that will be a benefit. As for financings, I know people were working around the clock trying to get deals closed before the end of the year. Any closing thoughts on the outlook for the company, the metals markets or financial markets as pertains to Murchison? Our focus is to get Brabant-Mackenzie de-risked as much as possible. I’d love to get it to the point at which we can start to wrap economics around the deposit. We would also like to identify additional potential deposits within the area. Government geologists and industry people believe there is more here than has been acknowledged in the past. It is interesting because we sit in a geological belt that wraps to the east and toward Snow Lake and then down to around Flin Flon. And there are multiple mines that have been found in the Manitoba side of the belt, but when you cross the border into Saskatchewan we are the only deposit that has been identified in this area. I think the overriding sentiment is that nobody has spent time looking up here. We have a very robust deposit here in terms of grade and think it still has good expansion potential. We estimate the exploration potential for tonnage is between 9 million tonnes and 11 million tonnes based on our current geological model. There is excellent infrastructure, with a highway running right past us and power lines running past in the event of a production scenario, community support, and lots of water and access to service companies. What we need is the deposit—everything else is here. In terms of exploration potential, we are generating good targets on the property. Just over a year ago the only thing we knew about this property was Brabant-Mackenzie deposit. Now we have generated four more targets of which three are additional drill targets now. It seems every time we turn around there is another target. We are aggressively trying to move this forward, not by playing the market based on one or two holes right beside another hole. We want to try and really build something here.
Do you sense a change over the past six months in market tone and willingness to back mineral exploration? You know where we are really noticing it is the availability of service companies. We have a couple of groups that have put us in their portfolio of companies that they will stick with, so we have been fairly lucky. For example, Hy-Tech Drilling is doing the drilling on Brabant-Mackenzie. Hy-Tech seems to have put us in their A-list of projects they want to keep working with. I think one of the reasons is Brabant-Mackenzie is well situated in all ways in terms 2018 • PUBLICENTREPRENEUR | 27
Learn why more than 150 Canadian companies chose to cross-trade their securities on OTCQX and OTCQB in 2017. That’s more than all other U.S. exchanges.
Glance Technologies
OTCQB: ANTGF
OTCQX: CNNRF
OTCQB: EVLLF
OTCQB: GLNNF
Lifestyle Delivery Systems
OTCQB: GBBGF
OTCQB: ITHUF
OTCQB: PCRCF
OTCQX: LHSIF
OTCQB: RLGMF
OTCQB: LDSYF
OTCQX: WSTRF
www.otcmarkets.com +1.212.896.4459 cking@otcmarkets.com
Neither OTC Markets Group Inc. nor any of its affiliates makes any recommendation to buy or sell any security or any representation about the financial condition of any company. 28 | PUBLICENTREPRENEUR • Issue Investors should undertake their own 1due diligence and carefully evaluate companies before investing. ©2018 OTC Markets Group Inc. All Rights Reserved.