RE: RE: RE: RE: DM Top pick by Brent Cook on BNN t Below is an excerpt from Brent Cook's website piece on DM, writtent by Quinton Hennigh. green24, if you don't even know whether this prospect is a strip or underground mine, I would suggest you are in n o position to call anyone a fool.
DM, The Basics
To gain a better understanding of the company, I spoke with both Dean Peterson and DM’s CEO, Christopher Dundas. Most of our discussions surrounded their exploration program, but I also learned more about their JV with ANTO. ANTO is earning 40% of the TM JV, which covers the large, multi-billion tonne bodies of lower grade nickel-copper-PGM mineralization discussed above, by spending $158.6 million to move it toward bankable feasibility (BF). Right now, DM has no obligation to contribute money. Should ANTO need more than $158.6 million to reach BF, DM must contribute at a rate of 35%. Mr. Dundas indicated that BF is about 2.5 years out and he does not see DM needing to supply funds now, but they may have to provide some down the road.
Once BF has been reached, ANTO has the right to acquire an additional 25% of the project by paying DM 25% of the net asset value at the time of BF. DM plans to apply this money to cover part of its share of capital expenditures at the time of development. Mr. Dundas said that if extra capital is needed, ANTO has agreed to allow DM to piggyback on any necessary debt financings. Debt will be paid back by forward sales of metal or profits from production.
The Investment Thesis
I like big targets, and this is about as big as anything I have seen. DM has approximately one square kilometer of high density rocks targeted for exploration. To put things in perspective, this could host hundreds of millions of tonnes of massive sulfide (Voisey’s Bay is about 124 million tonnes). Nevertheless, this is still a high risk target. It is possible that this gravity anomaly might be caused by something else, say a large block of iron formation. Or the targeted rocks may be deeper than thought. Geology is an imprecise science, but I think this is one of the most studied and best conceived targets I have seen in recent history.
Based on the fact that ANTO is expending $158.6 million for 40% of the TM JV, DM’s 60% is worth ~$240 million. DM has $20 million in the bank; therefore, the current value of the company (~$260 million) is pretty close to the current market capitalization of about $270 million. I am not buying DM based on their current assets since they appear fully valued at this time. I do, however, want exposure to their exploration. Voisey’s Bay (discovered by Diamond Fields) sold for about CA$4.3 billion. Considering DM has a reasonably solid asset, I see low downside risk, but should its exploration be successful, I see lots of upside.