Wednesday, March 16, 2022

La Mancha to Acquire a 19.9% Stake in SRG for C$13 Million

SRG to Accelerate Development of Lola Graphite Project and Downstream Processing Strategy

Montreal, Quebec, March 16, 2022 - SRG Mining Inc. (TSX-V: SRG | OTC-GY: SRGMF) (“SRG” or the “Company”)  announced today that La Mancha Fund SCSp (the “Fund”), a fund advised by La Mancha Capital Advisory LLP (“La Mancha”), has agreed to acquire a significant 19.9% stake in SRG.

Subject to final due diligence, execution of definitive documentation, and approval from La
Mancha’s Investment Advisory Committee and the Fund’s manager, SRG will issue 22,442,941
common shares to the Fund (or its designated affiliate) through a private placement at a price ofC$0.56 per share, yielding proceeds to SRG of approximately C$13 million (US$10 million). The Fund will come to own 19.9% of SRG’s issued and outstanding common shares when the placement is completed, establishing it as one of SRG’s largest shareholders.

Upon receipt of the proceeds, SRG will have cash and cash equivalents of approximately C$17 million (US$13 million) and no significant debt. SRG intends to use the proceeds to advance the Company’s large-scale Lola Graphite Project in the Republic of Guinea, to develop a fully integrated mine-to-market solution to supply active anode material to the European lithium-ion and fuel cell markets and for general corporate purposes.

SRG will work closely with La Mancha, during the development phase of the project, to ensure the Fund’s continued participation in subsequent financings to advance SRG towards production.

We are confident that La Mancha shares our development vision and has the experience and access to financial resources to help us develop our large-scale Lola Graphite Project and second transformation strategy, creating value for SRG’s stakeholders in the Republic of Guinea, and our international shareholders,” said Benoit La Salle, Chairman of the Board.

Naguib Sawiris, Chairman of La Mancha’s Investment Advisory Committee, said: “La Mancha has seen significant successes in the gold industry, and this investment in SRG is a logical continuation of the Fund’s strategy to invest in commodities necessary to shift the energy system away from one dominated by hydrocarbons. The supply-demand dynamics for clean, future facing metals and minerals could mean we are at the dawn of a new commodity supercycle. La Mancha is pleased to support SRG with this initial investment and, depending on the outcomes of the development programme, there is the potential for up to C$50 million to follow our rights in subsequent financings to fund SRG through to production.”

The SRG-La Mancha transaction is subject to a La Mancha’s internal approval process, approval by the Toronto Stock Exchange, and other customary closing conditions. Receipt of all necessary approvals and completion of the transaction is expected on or before March 31, 2022.

Upon closing of the private placement, SRG will grant the Fund or its affiliate certain investor rights under an investor rights agreement. Among key provisions, the Fund or its affiliate will have the right to nominate two directors – one of whom will be independent – to SRG’s board. In addition, the Fund or its affiliate will be granted anti-dilution rights to enable it to maintain its SRG ownership at 19.9%.

About La Mancha Capital Advisory LLP

La Mancha advises on strategic investments made by La Mancha Fund SCSp in publicly listed gold and energy transition commodity companies with a global outlook.

La Mancha is a long-term minded investor, with a mandate to support mining companies to achieve sustained growth by providing long-term equity capital as well as operational and board level expertise, to further portfolio company performance and expansion. 

La Mancha is an Appointed Representative of G10 Capital Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 648953).

About SRG Mining

SRG Mining is a Canadian-based mining company focused on developing the Lola Graphite Project located in the Republic of Guinea, West Africa. The Lola Graphite Project has a Measured and Indicated Resource of 46Mt at a grade of 4.1% Cg. SRG aims to develop a fully integrated source of battery anode material to supply the European lithium-ion and fuel cell markets. With attractive operating costs, proximity to European end-markets and strong ESG credentials, SRG is poised to become a reliable supplier while promoting sustainability and supply chain transparency. SRG is committed to generating sustainable, long-term benefits that are shared with the host countries and communities where it operates.

For additional information, please visit SRG’s website at and La Mancha’s website at 

Matthieu Bos
President & CEO SRG Mining Inc.
SRG Mining Inc.
1320 Graham, Suite 132 
Ville Mont-Royal, Québec                                      
H3P 3C8                                                            

Vincent Benoit
Partner & CIO
La Mancha Capital Advisory LLP
14 Grosvenor Street

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

This press release contains "forward-looking information" within the meaning of Canadian securities legislation. All information contained herein that is not clearly historical in nature may constitute forward-looking information. Generally, such forward-looking information can be identified by the use of forward-looking terminology such as “drive”, “aim”, “plan”, “realise”, “growth”, “potential”, “plan”, “goals”, “aim”, “confirm”, “continue”, “advance”, “potential”, “will”, “demonstrate”, “deliver”, “believe”, or variations of such words and phrases or state that certain actions, events or results "may", "could", "would" or "might". Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to: (i) volatile stock price; (ii) the general global markets and economic conditions; (iii) the possibility of write-downs and impairments; (iv) the risk associated with exploration, development and operations of mineral deposits and mine plans for the Company’s mining operations; (v) the risk associated with establishing title to mineral properties and assets including permitting, development, operations and production from the Company’s operations being consistent with expectations and projections; (vi) fluctuations in commodity prices, finding offtake takers and potential clients or enforcing such agreements against same and other risks and factors described or referred to in the section entitled "Risk Factors" in the MD&A of the Company and which is available at, all of which should be reviewed in conjunction with the information found in this news release.

Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in the forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such forward-looking information. Such forward-looking information has been provided for the purpose of assisting investors in understanding the Company's business, operations and exploration plans and may not be appropriate for other purposes. Accordingly, readers should not place undue reliance on forward-looking information. Forward-looking information is given as of the date of this press release, and the Company does not undertake to update such forward-looking information except in accordance with applicable securities laws.

Wednesday, August 21, 2019

Sailfish Royalty Completes Acquisition of Terraco Gold, Creating a New Growth-Oriented Royalty Company

Terraco - Sailfish Merger.JPG

"Tortola, British Virgin Islands and Vancouver, British Columbia – August 19, 2019 – Sailfish Royalty Corp. (“Sailfish”) (TSX Venture: FISH) and Terraco Gold Corp. (“Terraco”) (TSX Venture: TEN) are pleased to announce the completion of the previously announced transaction between the two companies (the “Arrangement”). Sailfish has now acquired all of the issued and outstanding shares of Terraco (the “Terraco Shares”) in exchange for consideration of 0.12 of a common share of Sailfish (each full share, a “Sailfish Share”) for each Terraco Share, pursuant to a court approved plan of arrangement (the “Plan of Arrangement”). 

Sailfish is also pleased to report that it has repaid in full the US$12,031,055 outstanding senior unsecured convertible debenture held by Solidus Resources, LLC, a wholly-owned subsidiary of Waterton Precious Metals Fund II Cayman, LP (the “Debenture”). The extinguishment of the Debenture provides Sailfish shareholders with an unencumbered royalty ownership, with no future conversion or buy back rights, of up to a 3% NSR on the multi-million-ounce Spring Valley Gold Project (“Spring Valley”).  

Akiba Leisman, CEO of Sailfish, commented: “this exciting transaction brings together our combined royalty portfolios into a new, growth-oriented royalty vehicle.  Terraco’s royalty holdings will give our shareholders exposure to one of the best known undeveloped gold mining properties in Nevada. We believe that Spring Valley is a high priority development project for Waterton which is evidenced by a recent royalty purchase Solidus made (Pershing County June 26, 2019 filing) of up to a 1% NSR on Spring Valley from a third-party. As a significant royalty holder of Spring Valley, we look forward to continued advancement of the project.”

Todd Hilditch, former President & CEO of Terraco, further added: “As a founder of Terraco, I am excited to be representing shareholders as a director in the combination with Sailfish. This is a great opportunity to continue on for further exposure to a diverse portfolio of royalties, with exposure to a multi-million ounce gold project portfolio, and benefiting from a strong financial backing and an increased capital markets profile.”

Highlights of the New Combined Royalty Platform Company

The consolidated company will hold an array of precious metals royalties, ranging from the exploration stage through to production;

Geographic diversification of the combined royalty portfolio within the Americas, including Nevada, Mexico, Brazil and Nicaragua;

Royalties with well-established property owners, including Waterton Global Resource Management, Eldorado Gold Corporation and Endeavour Silver Corp.;

Platform for additional royalty consolidation in the precious metals space; and 

Near term shareholder friendly initiatives including a possible spinoff of the Gavilanes and Almaden-Nutmeg Mountain properties into a separate exploration company or a monetization of these assets.
Former Terraco shareholders will hold approximately 37.2% of the issued and outstanding common shares of Sailfish (60,215,705).  Former registered shareholders of Terraco will be required to submit their share certificates and letters of transmittal to Computershare Investor Services Inc. and follow the instructions in the Information Circular dated July 12, 2019 in order to obtain Sailfish share certificates pursuant to the Plan of Arrangement. In addition, the outstanding options of Terraco have been adjusted in accordance with their terms and the Exchange Ratio such that 1,626,120 outstanding options of Sailfish have been reserved for exercise. It is expected that shares of Terraco will be delisted from the TSX Venture Exchange at close of business on August 20, 2019. In connection with the closing of the Arrangement, Sailfish has appointed Todd Hilditch to its Board of Directors. 

Concurrently with the closing of the Arrangement, Wexford Spectrum Trading Limited and Wexford Catalyst Trading Limited (together, the “Wexford Funds”) loaned Sailfish US$12,031,055 (the “Loan”), the proceeds of which were used by Sailfish on behalf of TGC Holdings Ltd. , a wholly-owned subsidiary of Terraco (and, following completion of the Arrangement, Sailfish), to repay the Debenture.  The Loan is unsecured, has a three year term and bears interest at a rate of 8% per annum, accruing daily and payable on maturity or prepayment, and may be prepaid at any time by Sailfish. As consideration for the Loan, Sailfish paid the Wexford Funds a commitment fee equal to 1.5% of the Loan amount. The Loan from the Wexford Funds to Sailfish was a "related party transaction" as defined in Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Loan was considered and unanimously approved by Sailfish’s independent directors, with one director abstaining due to his affiliation with the Wexford Funds. The Loan is not subject to the formal valuation requirement of MI 61-101 and is exempt from the minority shareholder requirements of MI 61-101, pursuant to the exemption contained in s. 5.7(f) (Loan to Issuer, No Equity or Voting Component)."

Royalty Portfolio

Terraco holds 100% of the following core royalty assets (image is for illustrative purposes):

up to a 3% NSR on a majority of the current resources of Spring Valley (claims above in red);
a 1.5% NSR on a portion of Spring Valley on the north side of the resource (claims above in green);
a 0.5% NSR within a one-half mile of the red claims and outlined in blue (not including the area in green);
up to 2% NSR on the Moonlight Project (claims above in white)

Tuesday, April 1, 2014

The Titanic Trend

The Titanic Trend

April Fools’ drop dead date for the Volcker Rule – what it might mean for gold
Michael J. Kosares - March 26th, 2014

"It could get to be interesting as we move into the end of the month. The Volcker Rule which limits banks’ speculative investments (including gold) goes into effect April 1, 2014. There has probably already been quite a bit of adjustment to bank portfolios, but those who have held out will need to make their moves before the deadline.

In conjunction with the implementation of the Rule, there has been an exodus of talent from the banks. The latest heavyweight departure came yesterday when Jamie Dimon’s closest aide, James Cavanaugh, left JP Morgan for the CarlyleGroup, a private equity firm. Cavanaugh was considered Dimon’s heir apparent. Says this morning’s NYTimes, “Mr. Cavanagh’s decision to give up a chance at eventually running JPMorgan signals how running a large bank has become less attractive, considering the regulatory hurdles and heightened scrutiny that have dogged Wall Street since the aftermath of the financial crisis.”

Financial Times reports this morning that the big banks have been hit with nearly $100 billion in costs and settlements related to the lending scandals. Those costs come before the banks face the even bigger potential problems associated with various market manipulations, including the forex markets, interest rates and gold...

...  The big trading banks traditionally have occupied the short side of the paper gold market. Some feel those positions will be handed off to the hedge fund business so things won’t change much. On the other hand, hedge funds are not considered too big to fail, thus their bets could be placed more evenly on either side of the market.

Presumably, hedging activities offered by the banks as brokers are still allowable under the Volcker Rule, and it will be up to regulators to determine whether or not a trade is speculative or a hedge placed in behalf of a client. That might be easier to do than some think in that regulators might look closely at the net position of banks by the end of any given trading day. The position of the bank should be flat — and provably so.

All of this makes the upcoming April Fools’ Day 2014 something of a watershed for Wall Street and trading business. Whether or not the banks truly give up the speculative activity remains to be seen, but the wholesale exit of traders to the hedge funds and private equity firms might provide a clue as to what is going on behind the scenes and what the big guns are thinking. (Cavanaugh is just one example.) Once again, the important factor is that the hedge funds will pay their losses out of pocket without the benefit of the government and Federal Reserve’s safety net — at least that’s the intent of the Rule. We will see how that aspect of the plan works out the next time the financial sector toes the cliff, but between now and then we could see a slow evolution of a more balanced approach to the gold market than many expect."

JPMorgan to cut up to 17,000 jobs by end of 2014
David Henry – Reuters February 27th, 2014

(Reuters) - "JPMorgan Chase & Co (JPM.N) said on Tuesday that it plans to cut 17,000 jobs by the end of 2014, representing about 6.6 percent of the company's overall workforce, as the bank sheds staff that helped it deal with bad home loans...

... That hiring will be more than offset by job cuts in areas like mortgage servicing and retail banking, where the bank is positioning for a recovering housing market and new forms of branch banking. The net impact of the additions and cuts will be 17,000 fewer employees on the bank's payrolls...

...  The profit scenario also depends on the bank not being hit by another trading debacle like the $6.2 billion loss last year on derivatives trades placed by the London Whale, the nickname given a London-based JPMorgan trader for the size of the positions.

Chief Executive Jamie Dimon acknowledged that many of his top lieutenants who spoke to investors on Tuesday were in new jobs after changes he made last year in his management team and the bank's divisions..."

What Really Happened to Bear Stearns?

“  Six years ago the well-known investment bank Bear Stearns imploded. In February 2008, Bear Stearns stock traded as high as $93; by mid-March the insolvent company agreed to be taken over by JPMorgan for $2 a share (later raised to $10 after class-action lawsuits). In the annals of Wall Street, there was hardly a more sudden demise than the fall of Bear Stearns. The cause was said to be a run on the bank as nervous investors pulled assets from the firm. Bear Stearns was said to be levered by 35 times, meaning it had equity of $11 billion and total assets of $395 billion. This is a very small cushion if something negative suddenly appears.

Something negative did hit Bear Stearns in the first quarter of 2008; although there are remarkably few details of what went wrong. Since Bear had a significant presence in sub-prime mortgages and that market was in distress, it is assumed the fall of the firm was mortgage related. That may be true, but there was no general stress in the stock market through mid-March 2008 reflecting a credit crisis. Was there instead some specific trigger behind the company’s sudden collapse?

I believe that sudden and massive losses and margin calls of more than $2.5 billion on tens of thousands of short COMEX gold and silver contracts were the specific triggers that killed Bear Stearns. Let’s face it – Bear was so leveraged that a sudden demand of more than $2.5 billion in immediate payment for any reason could have put them under. Bear Stearns’ excessive gold and silver shorts on the COMEX are the most plausible reason for the sudden demise. Bear Stearns did fail and due to a sudden cash crunch was acquired by JPMorgan for a fraction of what it was worth two months earlier. Bear Stearns was the largest short in COMEX gold and silver at the time. The day of Bear Stearns’ demise coincides precisely with the day of the historic high price points in gold and silver. That is also the same day the biggest COMEX gold and silver short would experience maximum loss and a cumulative demand for upwards of $2.5 billion in cash deposits for margin. It was no coincidence the music stopped for Bear Stearns that same day.

Gold prices rose from under $800 in mid-December 2007 to $1,000 in mid-March 2008, a gain of more than $200. Silver prices rose from under $14 in mid-December to $21 when Bear Stearns failed on March 17, 2008. That was a gain of $7. This was the highest price for silver and close to the highest price of gold since 1980. Obviously, a $200 rise in the price of gold and a $7 rise in the price of silver is not good if you are the biggest gold and silver short.

The concentrated short position of the 4 largest short traders in silver was at an extreme level of more than 300 million ounces. In contrast, the concentrated long position of the 4 largest long silver traders was a bit above 100 million ounces. In COMEX gold, the big shorts held two and half times what the biggest longs held. Since we know that Bear Stearns was the largest short in COMEX silver and we also know how much gold and silver prices rose in that time period, all that has to be established is how many short contracts Bear Stearns held. That would tell us how much money they had to come up with in margin money. All market participants on the COMEX, including the leading clearing member (which Bear Stearns was), must deposit additional funds daily to cover adverse price movements.

Thanks to historical Commitments of Traders report (COT) data from the CFTC, in the relevant time period (December 31, 2007 to March 17, 2008) the net short position of the 4 largest gold and silver shorts on the COMEX averaged 165,000 contracts and 60,000 contracts respectively. My analysis indicates Bear held 75,000 net gold contracts short and 35,000 net silver contracts short. Those are minimum numbers, as I think Bear’s position could have been higher.

A $200 adverse price move on 75,000 COMEX gold contracts would result in a mark to market loss and margin call of $1.5 billion. A $7 adverse price move on 35,000 COMEX silver contracts would result in a mark to market loss and margin call of $1.2 billion. Bear Stearns had to come up with $2.7 billion because gold and silver prices rose sharply in the first quarter of 2008 and the company bet the wrong way. That it couldn’t come up with all the margin money for the losses in gold and silver, is the most visible reason it went under.

What happened to Bear Stearns was exactly what I had warned the Commodity Futures Trading Commission (CFTC) about continuously for the twenty years before the event. Aside from the manipulative impact that a concentrated market corner would have on price, the biggest risk was what would happen if the largest short ran into trouble. The facts in the case of Bear Stearns indicate that the worst did occur. The biggest short did go under. During the relevant time period, I was in private email contact with CFTC Commissioner Bart Chilton who indicated that the Commission was considering silver matters closely and that there would be a finding published soon. The subsequent CFTC finding was released on May 13, 2008 and completely denied anything was wrong on the short side in COMEX silver due to large traders.

Here’s the problem – the report lied. It conveniently ignored the failure of the largest COMEX gold and silver short seller, by only considering events through Dec 31, 2007 and not through the March 17, 2008 date of Bear Stearns’ failure, a clear lie of omission. How could the CFTC issue a report on large traders on the short side of silver and overlook that the largest short trader of all went under because of that short position? It has taken me some time to see all this in the proper perspective. What I now see is deeply disturbing, but it answers many questions. Even though I petitioned the CFTC about the illegality of the concentrated short position in COMEX silver for decades, they disregarded those warnings. Then Bear Stearns went under for precisely the reasons I warned about. Subsequently, the CFTC kept it quiet and denied all allegations.

Any regulator worthy of the name should have known that a lopsided, large trader mismatch was dangerous on the short side. Having misjudged just how dangerous the situation was, the CFTC and the CME Group put in motion a scheme to save the shorts and punish gold and silver investors. By arranging, with the Federal Reserve Chairman and Treasury Secretary, to have JPMorgan take over Bear Stearns’ silver and gold short positions, the US Government embarked (or continued) on a journey of allowing price manipulation, in stark violation of commodity law.

Since Bear Stearns was a failure that threatened the financial system, it necessarily invited the involvement of the nation’s highest regulators, the Treasury Secretary and the chairman of the Federal Reserve, as the historical record indicates. Both had to be aware of the gold and silver margin problem at Bear Stearns. Additionally, since Bear Stearns was the leading clearing member of the exchange, you can be certain that the CME Group was more than aware. The CME was the one issuing the margin calls to Bear. Also, there is no way that JPMorgan wasn’t aware of Bear Stearns’ gold and silver predicament. Yet none of this was made public.

These facts indicate that everyone at the top had to be aware that excessive gold and silver shorting was at the center of the Bear Stearns fiasco. Since the Feds requested JPMorgan’s assistance, there can be no question that JPMorgan demanded (and received) permanent immunity from future gold and silver allegations. This explains how they have been able to establish market corners in gold and silver today that commodity law prohibits. Had not the U.S. Treasury Secretary, the Fed chairman, the CFTC, and the CME agreed to JPMorgan’s takeover of Bear Stearns’ gold and silver positions, the excessive market concentration and manipulation in these markets could not have continued.

The interference of the U.S. Government in the Bear Stearns affair explains what was previously inexplicable: why the CFTC couldn’t find anything after investigating a silver manipulation for five years, and why the CFTC and CME were deathly quiet in reaction to the giant price smashes in gold and silver, particularly the two 30% price smashes within days in silver in May and September of 2011.

What baffles me today is that no well-known journalist from outside the gold and silver world has yet picked up on what is an easy-to-document story of epic historical proportions. It’s the story of why Bear Stearns went under, and how the gold and silver price manipulation continued since the day JPMorgan took over Bear. I think the story has Pulitzer Prize written all over it.”

JPMorgan Agrees to Sell Commodities Unit for $3.5 Billion
By Andy Hoffman and Hugh Son March 19, 2014

JPMorgan Chase & Co. (JPM) will sell its physical commodities unit to Mercuria Energy Group Ltd. for $3.5 billion, ending a five-year foray into owning and storing raw materials amid pressure from regulators to leave the business.

The deal, disclosed in a statement from New York-based JPMorgan today, takes the bank out of industries such as petroleum products and power while cementing Mercuria’s standing among the world’s biggest commodity traders. JPMorgan will continue to provide services and products tied to commodities including financing, market-making and the vaulting and trading of precious metals, the bank said.

“Our goal from the outset was to find a buyer that was interested in preserving the value of JPMorgan’s physical business,” Blythe Masters, head of the company’s global commodities operations, said in the statement. “Mercuria is a global leader in the commodities markets and an excellent long-term home.”

JPMorgan is selling amid concern among regulators that banks could control prices if they own commodities as well as trade them, or suffer catastrophic losses that would endanger the financial system. The Federal Reserve said in July it might force insured lenders to get out, and JPMorgan agreed later that month to pay $410 million to settle claims that it manipulated power markets, without admitting wrongdoing...

Warehouse Operator

Mercuria also gets Henry Bath & Sons Ltd., a 220-year-old metal-warehouse operator based in Liverpool, England. The firm was a founding member of the London Metal Exchange, with products today that include aluminum, steel and copper as well as cocoa and coffee, according to its website...

Trading Surge

...JPMorgan’s commodities trading surged with the 2008 acquisition of Bear Stearns Cos., which included an energy-trading platform. To compete with Goldman Sachs and Morgan Stanley (MS), JPMorgan bought UBS AG (UBSN)’s global agriculture and Canadian commodities units in 2009, and part of commodities trader RBS Sempra in 2010. That deal brought JPMorgan the Henry Bath unit...

Scaring Competition

... A day earlier, the Fed said it was reviewing a decade-old decision that allowed lenders including JPMorgan and Citigroup Inc. into the business because physical commodities were “complementary” to banking.

Johnston-Sequoia Commentary:

“The first step toward success is taken when you refuse to be a captive of the environment in which you first find yourself.”
--- Mark Caine
We truly live in interesting times - Never before in human history have we had such incredible technological advancements, ease of sharing information and the ability to collectively arrive at a global compromise.  However, simultaneously we're facing the biggest financial hurdle since the fall of the Roman Empire.  As most of our readers know I believe in cyclicality, innovation, social justice & graduating to a higher level of consciousness - as such, the probability of repeating the past from a cyclical perspective is extraordinarily high; but due to the advancement and innovation of communication we have the capability of making different decisions than those that have plagued our society over the past 2,500 years.  The key of course is information.  
The purpose of this piece is not to point fingers at those that have caused the situation we find ourselves in but rather to prepare those potentially effected by a possible breakdown in our financial system.  For the record, I do not believe that the system is currently collapsing; however we must begin to understand the implications of the system that we have grown accustomed to eventually breaking down.  Please use the information to create your own thoughts and opinions and take steps to protect yourself and your family accordingly.    
American Proverb - where there's smoke there's fire:

  • In February 2008, Bear Stearns stock traded as high as $93; by mid-March the insolvent company agreed to be taken over by JPMorgan for $2 a share
  • Bear Stearns was said to be levered by 35 times, meaning it had equity of $11 billion and total assets of $395 billion
  • Massive losses and margin calls of more than $2.5 billion on tens of thousands of short COMEX gold and silver contracts were the specific triggers that killed Bear Stearns
  • March 2014 - Jamie Dimon’s heir apparent James Cavanaugh, left JPMorgan for the Carlyle Group, a private equity firm
  • Banks face the even bigger potential problems associated with various market manipulations, including the forex markets, interest rates and gold
  • The Volcker Rule which limits banks’ speculative investments (including gold) goes into effect April 1, 2014
  • All of this makes the upcoming April Fools’ Day 2014 something of a watershed for Wall Street and trading business
  • JPMorgan is selling its commodity business amid concern among regulators that banks could control prices if they own commodities as well as trade them, or suffer catastrophic losses that would endanger the financial system.
  • JPMorgan profit scenario depends on the bank not being hit by another trading debacle like the $6.2 billion loss last year on derivatives trades placed by the London Whale
  • Fed said it was reviewing a decade-old decision that allowed lenders including JPMorgan and Citigroup Inc. into the business because physical commodities were “complementary” to banking
  • Where does this leave Western financial Institutions? & more importantly its unsecured lenders (i.e you & I)?

“ We warned that the banks have turned the corner when their cycle finished last year. The NY Post has come out stating that being a banker is not so great anymore... They are hated perhaps even more than politicians. Their proprietary trading has destroyed the industry and been the worst public image that any sector can have.”

Former Bank of Canada Govenor Mark Carney (Current Bank of England Govenor) says "policy-makers are working diligently to devise an international "bail-in" regime to prevent big bank failures, but he offered no guarantee global depositors would be protected under all circumstances."

The March budget announced that Canada intended to implement a "bail-in" regime for systemically important banks to ensure that in case of failure, there would be no need for governments to bail them out. In Canada, those banks are the Royal Bank, Scotiabank, the Bank of Montreal, the Canadian Imperial Bank of Commerce, Toronto-Dominion and the National Bank."

--- The Canadian Press - Source April 18, 2013

At the end of the day where does this leave us?  Please consider using April 1, 2014 as the beginning of an observational model for a change in trend.

As always please do your own due diligence

Wednesday, December 4, 2013

Klondex Acquires Newmont's Ken Snyder "Midas" Mine and Mill Complex

Klondex Acquires Newmont's Ken Snyder "Midas" Mine and Mill Complex 

"Vancouver, British Columbia - December 4, 2013 - Klondex Mines Ltd. (TSX: KDX | US: KLNDF("Klondex" or the "Company") is pleased toannounce that it has entered into a definitive agreement to acquire the Midas mine and related ore milling facility located in the State of Nevada (collectively, "Midas") for approximately US$83 million (the "Acquisition") from a subsidiary of Newmont Mining Corporation ("Newmont").

The purchase price, which is subject to customary adjustments, is comprised of (i) approximately US$55 million in cash, and (ii) the replacement of Newmont surety arrangements with Nevada and federal regulatory authorities in the amount of approximately US$28 million. In addition, Klondex will issue to Newmont 5 million common share purchase warrants of the Company with a 15-year term, subject to acceleration in certain circumstances, and an exercise price to be specified on the closing date of the Acquisition.

Paul Huet, President and CEO of Klondex, commented, "This acquisition is transformational for Klondex, during a pivotal point in our company's development.  I am confident that Klondex's management team can leverage past experience, with some of the core leadership team having previously worked at Midas, to vastly benefit from the synergies and to unlock continued value in Klondex for shareholders going forward.  Our team is extremely pleased to be working alongside Newmont to bring together two excellent epithermal deposits with a high-quality central mill."

Please click on Image to view corporate video

The Acquisition is anticipated to close in early 2014, subject to the fulfillment of various closing conditions, including the receipt of requisite regulatory approval and other third party consents, and entry into certain ancillary arrangements with Newmont for the provision of transition services. 

In addition to acting as exclusive financial advisor with respect to the Acquisition, GMP Securities L.P. has also been engaged by the Company to coordinate the financing of the Acquisition, which is expected to consist of a combination of equity, secured notes and a secured gold loan. Further details on the financing of the Acquisition will be provided once determined..."

A replay of the conference call will be available until January 4, 2014.

Conference Call Replay Numbers:        1-800-319-6413
Canada & USA Toll Free:                     1-604-638-9010
Code:                                                3599#

Johnston-Sequoia Commentary:

I first met President & CEO Paul Huet at the 2013 Las Vegas Money Show while assisting the only other gold company at the show (Terraco Gold Corp.).  After spending time with Paul, learning of his (and equally as important his teams) past experience and success I quickly became intrigued.  Paul was the Mine Manager, Mine Superintendent & Chief Engineer at The Ken Snyder "Midas" Mine dating back to the early 2000's.  He was also the General Manager of the Hollister Mine for Great Basin Gold and Chief Operating Officer for Premier Gold Mines.  

As some will suggest it was the Ken Snyder "Midas" Mine that kept Newmont profitable in the early 2000's even at $250-$350 per ounce gold.  This, as many of our readers know is because of the freakishly high grades of these low-sulfidation, epithermal, hot spring type systems.  

In the humble (33 year old) opinion of this writer - Paul and his team are simply put the best operators of these types of systems anywhere on the planet and I would encourage our readers to keep an eye on this emerging small cap company.  

As an aside - these types of grades become more and more important the longer this current market environment exists.

I own shares in Klondex Mines Ltd. - however, I am not an advisor of the company.

I own shares in Terraco Gold Corp. and am an advisor of the company - Johnston-Sequoia owns shares in Terraco Gold Corp. 

As always, please do your own due diligence.

Thursday, September 19, 2013

The Economic Renaissance of Côte d’Ivoire, West Africa

Le Plateau District - Abidjan, Côte d’Ivoire
The Economic Renaissance of Côte d’Ivoire, West Africa
The revolution in the economy of Côte d’Ivoire

Rafael Araujo, from Abidjan September 11th, 2013

"For the second year, growth reaches 9% and the country recovers with the improvement in the economic environment and new investments in oil production, infrastructure and agriculture.

With a high forecast of 9% this year, the economy of Côte d’Ivoire is among the fastest growing in Africa. This growth projection ranks it in fourth place among its African peers, behind Libya, Sierra Leone and Chad, according to a survey conducted by the Organization for Economic Cooperation and Development (OECD). Côte d’Ivoire leads the West African economic bloc, ahead of neighboring Ghana that should advance 8.4% this year. The significant growth, comes, however, from a small base. The nominal value of $24.6 billion GDP (Gross Domestic Product) puts Côte d’Ivoire in 101 in the world ranking.

In 2012, the Ivorian GDP has already shown a performance above expectations, with 9.8 % high in the previous year, marked by a serious political crisis in which the economy shrank 4.6%.

The resumption of mining contributed to the acceleration of economic activity
Photo: Kambou Sia / AFP (Click on Image to Enlarge)

It is clear that the end of the civil war and the return to normality had a mechanical effect on the chart, but other factors have contributed to accelerate the economic activity in a sustainable way: the resumption of mining (gold, oil and gas), the investment in infrastructure and the improvement of the business environment.

In June this year, the government signed four new sharing contracts for exploration of oil and gas along the coastline. Only one of the blocs has an estimated investment of $120 million. Although oil production has decreased, the extraction of mineral gas is expanding, rose 9% in 2012 and, by June of this year, surpassed last year’s production on the same period by 30%. This increase is partly due to investments in the sector, but mainly to the increasing demand for electric power generation. The energy generated in power plants is around 60% of total national consumption and the surplus is exported to neighboring countries.

The investment increase also helped boost the economy. The investment rate increased from 2.8% of GDP in 2011 to 4.9% in 2012, and can close the year at 7.8% of the total wealth produced in the country. Even highly indebted, is the state investment that has led the growth of Côte d’Ivoire after the political crisis, benefited by the plan of expanded access to credit from the International Monetary Fund (IMF) and the debt relief mechanism for poor countries.

The minister of economy Nialé Kaba believes that, with the program of debt reduction, investments may reach 23.5% of GDP in 2015, close to the level of the first 20 years of Côte d’Ivoire as an independent nation. At that time, known as ‘ Ivorian miracle ‘, the average rate of GDP growth was 8%.

Investments can reach 23.5% of GDP and mostly goes to infrastructure works
Photo: Rafael Araujo 
(Click on Image to Enlarge)

Most of these investments go to construction of urban infrastructure. The construction industry recorded an increase in the activity of 52% last year in the wake of the recovery process and public buildings vandalized during the conflict, as was the case at the University Félix Houphouet – Boigny , which took the name of the first Côte d’Ivoire president. The cost of the university rehabilitation was estimated at $220 million.

In the service sector, the effects of the economic recovery are already being noted. The occupancy rate of the hotel came to 57% last year and generated revenues of $110 million. The transit of passengers on commercial flights increased by 46% in the same period and urban transport and road also recovered, a phenomenon observed in the increase in fuel consumption of 55.4% in the year.

More jobs

Mason Mamadou Doumbia receives equivalent of $ 70 per week
Photo: Rafael Araujo 
(Click on Image to Enlarge)

Since 2010 a temporary worker, the confectioner Laurent Kouakou-Diby, 35, has just been hired by one of the four star hotels in the Plateau – the central district of Abidjan, where businessmen and international missions usually stay. Kouakou-Diby is one of 35 thousand hiring made by the private sector since the end of the crisis, in April 2012. Including the public sector, the National Fund for Social Security reported 49 thousand new jobs in this period and now has 742 thousand subscribers.

This number of formal jobs seems negligible compared to the total population, estimated at 20 million people. It turns out that most of the occupation and income comes from informal work, unregistered, including in the government’s great infrastructure projects construction work.

The mason Mamadou Doumbia, 28, receives 36 thousand CFA francs ($ 70) per week to work , without a contract, in the construction of the third bridge overpass intersection. With an estimated cost of $300 million, the bridge is an alternative to the choked traffic to central Abidjan, who grew up around a pond. Satisfied with your new job possibilities, Doumbia and his colleagues face the delay in wages. The subcontractor of the Iranian construction company responsible for the construction is not paying the workers in the right time.

Strength of the agricultural sector

Despite the good results, economic analysts have shown skepticism about the direct impact of investments in construction work in people’s lives. In the economist Souleymane Ouattara view; the agricultural sector has greater ability to translate the increase in wealth in real improvement in people’s everyday lives. In a recent reform of the coffee and cocoa sector, the government reinstated a presale program that guarantees a minimum sale price for the farmer. In the 2012-2013 harvest, reserve price stabilization secured $160 million more in income to the farmer.

With harvest quarterly Côte d’Ivoire is the largest cocoa producer in the world
Photo: Issouf Sanogo / AFP 
(Click on Image to Enlarge)

Ousseni Sawadogo , 32, grows coffee , cocoa , rice and yams with the help of three brothers on five acres of land 35 km from Daloa in the center – west of the country . The house is masonry, but has no electricity, refrigerator, or stove. The light comes from a fire lamp, television transmits the channel state in a connected car battery and the meat is cooked preserved in water and salt in a wood burning stove. In Côte d’Ivoire, the cocoa harvest is quarterly, with a great one in December. Summing up the production of the year, Sawadogo estimates a 500 thousand CFA francs ($1000) earning from the cocoa sale. The income is to buy fish, cooking oil and salt. Everything else needed to ensure the sustenance of the nine adults living in the property, besides children, is the land provides. At the time of Ramadan, the neighbors gather to buy an ox and split the meat.

Christine Lagarde believes in new Ivorian miracle
Photo: Issouf Sanogo / AFP 
(Click on Image to Enlarge)

Even though quite urbanized, half Côte d’Ivoire population is established in the countryside. The country remains the largest producer of cocoa in the world, but also produces coffee, vegetable oil (palm), cashew nuts, rubber, cotton, sugar cane and banana. Almost all cultures have increased production since the end of the crisis, driven by exports, but mainly by demand from the food industry represents around 5 % of GDP and gathers multinationals such as Nestle, ADM and Cargill.

The excitement surrounding the growth infected even the director of the IMF, Christine Lagarde, who announced the arrival of a second ivoirien miracle, referring to the 70′s and 80’s great prosperity in the country ‘s cocoa. The risk is that this ‘miracle’ is being linked exclusively to the exploitation of natural resources and foreign debt, leaving most of the population out of the calculation of GDP, warn the experts.”

Côte d'Ivoire: Glencore-Xstrata Nickel will be able to develop the deposits and Sipilou Biankouma

“Swiss mining company Xstrata and Glencore Ivorian government will join forces to create a joint venture in charge of exploration and exploitation of nickel deposits and Sipilou Biankouma in the west.

The exploitation of nickel deposits and Sipilou Biankouma in western Côte d'Ivoire, will finally begin. "In the cabinet of the day, the state and Xstrata Nickel, a subsidiary of mining giant Glencore Xstrata, agreed to create a joint venture in which the state has a 10% shareholding, the national society Sodemi 5% Xstrata and Glencore 85%, "said Bruno Kone, the spokesman for the government at the end of the traditional weekly meeting of the Council of Ministers. In a first phase, investments are estimated at 35 million.

Long legal battle

The agreement ends a long legal battle between the two partners. Canadian Falconbridge bought by Xstrata in 2006, continued the Government of Côte d'Ivoire since 2010 to the unilateral withdrawal of its license and exploration of nickel in the region Sipilou of Founguesso and Samapleu in the west of the country. The Anglo-Swiss company had reached March 30, 2012 to condemn the Ivorian government to pay as damages, about 200 million euros before the tribunal of Paris. According to the spokesman of the government, this agreement ends the dispute definitively.

The reserves in the deposits of nickel laterite Sipilou and Biankouma are estimated at 259 million tonnes grading 1.4% nickel.”

Glencore Xstrata (GLEN.LN) 3yr Stock Chart - Moving above 200 day MA & upper Bollinger Band
(Click on Image to Enlarge)
Johnston-Sequoia Commentary:

As many of our readers know - I've been following the development of Côte d'Ivoire, West Africa since March of 2010.  Last week I had the privilege to visit this evolving economy that has been "reset" since the dark days of 2008-2009.  It's truly remarkable to see the developments and "incubator economies" of the villages directly tied to the growth of the mineral exploration & energy expansion of Côte d'Ivoire.

The First & Perhaps a Second Ivoirian Miracle:

The Ivorian Miracle was the name given to a period of economic prosperity occurred in Côte d'Ivoire in the years 1960 - 1970.
The country benefited from several concurrent factors:
  • The rising price of commodities , including coffee and cocoa whose country was the world's largest producer.
  • The fact that France needed a showcase of its Africa policy.
  • The lack of stability of surrounding countries (slump in Guinea of Sekou Toure, instability in Ghana, etc..) which refer to the Ivory Coast economic activity.
  • Strong growth overall in industrialized countries.
  • The dismantling of the French West Africa .

Basilique Notre-Dame de la Paix de Yamoussoukro - 9th largest basilica in the world completed in 1989

(Click on Image to Enlarge)

Managing Director, International Monetary Fund
National Assembly, Abidjan, 2013

"...This brings me to my third topic this morning—how Côte d’Ivoire can fulfill its destiny.
The government already has an ambitious plan to turn Côte d’Ivoire into a full-fledged emerging market by 2020. This is not just wishful thinking—it is based on concrete policies laid out in the National Development Plan and generous financial support promised by Côte d’Ivoire’s partners and friends at the Consultative Group meeting in Paris in December 2012. Your goal is to generate enough growth to double national income by 2020.
In reality, you are seeking a second Ivoirien miracle. It can be done—of that I have no doubt...
...First, investment. This is the first building block of growth and prosperity. It is fitting that capital investment and upgrading infrastructure feature heavily in the National Development Plan...
...This country has already seen the rise and fall of its first Ivoirien miracle. Now is the time to lift the pickaxes and trowels and rebuild your nation once again, to create that second Ivoirien miracle, to do again what your forefathers have done before—with patience and perseverance, with courage and confidence, with faith and fortitude.
Let me assure you that the IMF will continue to stand with you along the way..."
--- Christine LagardeToward a Second Ivoirien Miracle
Managing Director, International Monetary Fund
National Assembly, Abidjan, 2013

As the the world's largest cocoa producer and simultaneously in the midst of a mining, energy and infrastructure renaissance - Côte d’Ivoire is on pace to be one of the fastest growing economies in the world and perhaps be considered an "emerging market" as early as 2020 according to the Managing Director of the IMF. The trajectory and velocity of the rise will of course be heavily dependent commodity prices (in particular agricultural commodities) and overall global growth.

Cocoa 5 year (weekly) Chart

It's anticipated that strong growth will occur in cities like Yamoussukro (the capital of Côte d’Ivoire since 1983), Bouake' and the port city of San Pedro not just the financial capital of Abidjan.

Photo taken in between the Presidential Hotel, the future two lane divided highway and Basilique Notre-Dame de la Paix - the site of Sama Resources future Ivorian Headquarters in Yamoussoukro, Côte d'Ivoire (Matt Johnston - Corporate Advisor, Koffi Michel Marc Kouadio - Exploration Geologist, Dr. Marc-Antoine Audet - President & CEO, Bakayoko Bouake - Exploration Manager, Bryan McKenzie - CFO)
(Click on Image to Enlarge)

Integration to the Local Community:

It is the opinion of this author that Sama Resources (TSX.V:SME | US: LNZCF) has done more for the local people of Yorodougou than any other nano-cap company operating in Africa today.  Even at pre-production/advanced exploration Sama is one of the largest employers in the Western most portion of Côte d’Ivoire.  Sama employs no expatriates and has integrated Falconbridge/Xstrata's exploration and development team dating back to the mid 1990's.  This effort has been led (as many of our readers know) by Sama's President & CEO Dr. Marc-Antoine Audet who spent 22 years with the mining giants (a large portion of which was spent developing the now Glencore project summarized above as head of exploration).  Needless to say this area in Côte d’Ivoire is very dear to Dr. Audet's heart and anyone who visits the project easily can understand why.

Sama Resources Chief Financial Officer Bryan McKenzie taking a moment with children from Yorodougou Village (Click on Image to Enlarge)

The work ethic, drive, ingenuity and warmth of the Ivorian's of the Western most portion of Côte d’Ivoire is obvious and apparent to anyone fortunate enough to visit.  What Dr. Audet's team has been able to build in just 3 years is truly remarkable.

Kate Hannan, CA greets local village children in the new Yepleu Discovery Camp
Even at the current pre-production stage of development the village of Yorodougou in Côte d’Ivoire has benefited greatly from Sama's presence in the area.  Building schools, clean water pumps, infrastructure and a waste management program.  It's fascinating to witness the incubator economy that is being developed in this remote village.

Local market in the village of Yorodougou: Côte d’Ivoire, West Africa
As a visitor you begin to sense a community and society that's becoming the beneficiary of the resurgence in exploration and development activity taking place in this area.

Local villagers playing soccer just outside the Sama Resources compound: Côte d’Ivoire, West Africa

Potential World-class Discovery in Côte d’Ivoire, West Africa:

Samapleu nickel-copper-palladium Project - Côte d’Ivoire, West Africa

Project Highlights:
  • Potential for multiple world class nickel-copper-palladium deposits
  • Near-surface massive sulphide mineralization
  • Low-cost core drilling using company’s 100% owned Coretech CSD 1300G drill rigs
Samapleu drilling intersections have returned assays up to:
  • 3.71% nickel, 2.84% copper and 2.47 gpt palladium over 6.65 metres (massive sulphide)
  • 3.65% nickel, 2.60% copper and 2.89 gpt palladium over 7.70 metres (massive sulphide)
  • 1.95% nickel, 1.95% copper and 1.50 gpt palladium over 17.60 metres (massive sulphide)

Current NI 43-101 Resource: 
  • Indicated: 14,159,000 tonnes grading 0.24% nickel (74,500,000 lbs), 0.20% copper (61,200,000 lbs), 0.29 gpt palladium (128,316 ounces)
  • Inferred: 26,480,000 tonnes grading 0.24% nickel (134,000,000 lbs), 0.18% copper (107,200,000 lbs), and 0.31 gpt palladium (256,525 ounces)

Sama Resources Compound in the village of Yorodougou Côte d’Ivoire, West Africa

Dr. Audet's team has built (from scratch) a development operation that could easily be confused with that of a major (though it currently sits with a market cap of just $21,000,000).  Using the companies 100% owned Coretech CSD 1300G drill rigs (both of which can touch depths of up to 750 metres) Sama with it's current no debt treasury can do a tremendous amount of discovery and development drilling at an estimated $30 per metre ($9.15 per foot).

Sama Resources 20,000 litre fuel tank : Côte d’Ivoire, West Africa
Thanks to the work of Dr. Audet and his team from my perspective Sama now has everything it needs to establish itself as an elite nano-cap development company. As the company is about to commence drilling at the newly discovered Yepleu Prospect (please see video below), Sama's future could prove to be very bright indeed.

Sama Resources 100% owned Coretech CSD 1300G drill rig testing one a multitude of HTEM targets: Côte d’Ivoire, West Africa
Sama has utilized innovative exploration techniques including 3D Mag, Radiometric, HTEM and InfiniTEM survey's to identify potential ultramafic targets and will begin to test these new targets this fall.

Large Anomoly HTEM targets: Côte d’Ivoire, West Africa
We've put together a short (3:45 sec) HD video to highlight the potential of the new Yepleu Prospect - hope you enjoy!:

The Yepleu Discovery Côte d’Ivoire, West Africa: HD Video (Click on image to play)

Finally, Sama's largest institutional shareholders are impressive as well - MMG Limited at 17.74% and IFC (World Bank Group) at 12.09%.  It's worth noting this is the first time the IFC has ever invested in Côte d’Ivoire is in this little $21,000,000 market cap company.

Sama Resources 3 year chart
We will watch the economic renaissance of Côte d’Ivoire, West Africa with keen interest and have front row seats for perhaps the "Second Ivoiren Miracle".  I am a paid advisor of Sama Resources Inc. and own shares in the company.  Johnston-Sequoia owns shares in Sama Resources as well.

Your editor standing near one of Sama Resources new discovery zones: Côte d’Ivoire, West Africa