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From: Dale
ArtDate: 3 November 2003
Section: (WHAT WE SAY)
Remote Name: 195.92.168.167
Date: 04/11/03
Time: 00:22
A New Partnership for Minmet plc by Wendy Durham 3rd November 2003
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Monday 3rd November 2003
More corporate activity from Minmet today, as they announce a deal with Canadian junior North American Gold under which NAG can earn 60% of Minmet's Barsele project in Sweden in return for US$3.5 million of exploration expenditure over three years and 400,000 shares (approx 5%) in their own company. The deal is subject to 3 months due diligence and various approvals.
The second such deal in less than 2 months, this emphasises that Minmet's focus is swinging away from the more risky aspects of exploration and development, allowing them to concentrate on projects which will bring in revenue and profits.
Minmet's new partner, North American Gold, is part of the "Gold Group" - a loose confederation of companies put together by north American exploration and mining entrepreneurs Simon T Ridgway and Harmen J Keyser. Other members of the group are Pillar Resources, Radius Explorations and - one that should be familiar to Minmet-watchers - Mena Resources.
From a reading of their website (www.northamgold.com) and their SEDAR filings (www.sedar.com) it seems that until April this year, North American was effectively a shell. Under its previous name of Consolidated Newen Enterprises, it had been inactive (in UK parlance, this would be 'de-listed') for approximately 2 years and was laden with debt.
Then in April this year, the company was more or less re-invented: its name was changed, arrangements for liquidation of debt were made, finance was raised, and a portfolio of promising exploration projects in Nevada and Utah were acquired.
At a meeting on 26 May, Simon Ridgway, Harmen Keyser and Larry Kornze were elected to the board as directors, Keyser as President and Ridgway as Chairman. Further funds have since been raised, and according to their most recent SEDAR filing, the company had CAN$800,000 in the bank as at 31 July 2003. The share price has responded well to this reorganisation, rising from virtually zero to CAN$0.25 in April, after the details were announced, and CAN$0.62 at Friday's close.
North American's board is experienced and has huge experience of mining and exploration.
Ridgway, when president of Mar-West, discovered the 1.5 million ounce San Martin deposit in Honduras and later presided over the CAN$48 million sale of San Martin to Glamis Gold, the current operators. He has also been responsible for a number of other discoveries in Central and South America, including Cerro Blanco in Guatemala. He has a similar exploration philosophy to David Hall - find it, do the initial proving - preferably in JV - and move it along, dropping less worthwhile projects as you go. He is also a director of Pillar Resources and Radius Explorations.
Kornze is an experienced exploration geologist who spent many years at Barrick, retiring in 2001 after 6 years as the General Manager of Exploration for Mexico and Central America and International Evaluations. During his earlier 10 years as US Exploration Manager, many of Barrick's gold discoveries in Nevada's Carlin Trend were made under his supervision - Meikle, Betze etc. He is also Director of Exploration for European Goldfields, who are developing a number of projects in Romania.
Harmen Keyser has more than 20 years experience as an exploration geologist, and has been involved with gold discoveries in Honduras, Guatemala, Nevada, and Yukon. Like Ridgway, he serves also on the board of Pillar Resources and Radius Explorations.
So it looks as if Barsele will be in good hands.
The North American management have experience and street-cred, and seem to have little difficulty raising finance. Their own projects in Nevada and Utah look promising although there is little data available, and in addition to Minmet's retention of 40% of the Barsele projects, a potential 5% exposure to NAG's properties could be lucrative.
(For information on North American Gold's own projects, see their most recent SEDAR Annual information form at http://www.sedar.com/csfsprod/data36/filings/00526307/00000001/x%3A%5CNorthAm%5CAIF2003.pdf )
As a relatively new company, whose own projects are early stage exploration, NAG are likely be keen to develop the more advanced Barsele resource, and the agreed first-year spend under their 60% earn-in of US$750,000 seems to be within their means.
It seems very clear from Michael Nolan's closing remarks that Minmet are very focused indeed now on the development of Bjorkdal - AND the development of new resources for the bio-oxidation technology. The market may have overlooked the importance of the bacterial process, but it seems Minmet have not, and believe it has the potential to produce revenue.
I spoke to Mike Nolan, who was in good spirits following this announcement. "We are very pleased with this North American deal, and we see it as part of our continuing work to spread exploration risk from Minmet to third parties - whilst maintaining a reasonable position in the event of success."
"We acquired Barsele as part of the Bjorkdal assets - and the deal with NAG offers excellent value, even if you disregard the 400,000 shares in North American which we could end up holding. Barsele is a well-worked project, but a great deal of work remains to be done, and under this option deal with North American Gold, NAG now have the responsibility to fund the next $3.5m of expenditure in return for their 60%."
"We would like to put in place similar third party exploration collaborations on other parts of our portfolio - and this is our second such transaction, after the MIT deal re: El Aguila in Peru, which we announced some weeks ago. We're also looking at a number of others, but they are still works in progress, so it's too early to say whether they will come to successful conclusions."
"Canada is a good place to look for partners right now, as it's very bullish on gold and basic resources, and so currently a great location for raising development money - but we are looking at opportunities in Europe also."
"This NAG deal and others (if completed) will help to focus Minmet on production, cash flow and profit. Our "blue sky" will, we hope, eventually be managed through a series of earn-ins, joint ventures and spin off's where Minmet can vend-in properties in return for reasonably influential shareholdings in our publicly quoted partners and/or a retained percentage of the property. In this way we'll be spreading out the exploration risk, and passing the funding requirements on to a third party company; though in some instances, we would expect to provide some management and corporate direction."
Bearing in mind his mention of the bio-oxidation technology in his closing remark in the press release, I raised the question of the acquisition from EMML. "All's going well," he explained, "but the paperwork must be approved by the Irish Stock Exchange before we can proceed with an EGM and present the issue to shareholders. The documents are now all with the right people at the ISE, and as soon as they have approved them we can proceed."
It seems, therefore, that we should shortly have news of an EGM to take place some time in December.
Strange, isn't it? I defy even the most devout Minmet-watcher to have imagined that within 14 months of the company's biggest ever disaster, we would now be seeing an outfit of this nature, focused no longer on prospecting, but on production and profits.
It's a long way from Castromil, Coromandel and Cuiaba to Bjorkdal and a bunch of bugs, but Minmet are quite convinced that this is the right way forward for the future.
This is an article based on information provided by the company and my own personal researches. It is not investment advice and must not be construed as such.
Wendy Durham 3rd November 2003
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