Post by
motowngold on Apr 06, 2020 9:12am
I spent a half hour on the phone with Morien Resources
I spent a half hour on the phone with Morien
Resources President and CEO Dawson Brisco
Disclaimer, this is my own interpretation of the
conversation, and I am not acting as a rep of the
company.
Dawson Brisco, was very cordial and personable,
very interested in the shareholders, and invited
me to call him back at any time. I was quite
impressed with his knowledge and his persona. He
is a professional geologist, and knew all aspects
of the business, not just some talking head. He
answered everyone of my questions, and also added
some of his own information to our conversation. I
think the company is in good hands.
The Donkin mine, is the largest coal mine in
Canada, is extremely important for the region. The
setback of being closed down for now is real, but
many coal mines are being put in care and
maintenance due to Covid, also gold and silver
mines as well by the way. The difference is, quite
a few of those coal mines will never be started
back up, Morien's Donkin mine will. I used the dip
in price to essentially double my position. As I
said, this is a long term hold for me, not a short
term flip.
Here are some high points from my conversation.
The rock fall, which is extremely common in coal
mine, happened in just a small area of the mine,
and it was predicted to happen, not some
catastrophic surprise. Rock falls will happen in
most coal mines, this one is no different, and is
manageable.
American inspectors, which are needed to approve
and appease the Canadian government regulators,
were at the border and ready to come to the mine,
but were told they would have to quarantine for 14
days first and decided to not to cross into
Canada. This greatly influenced closing the mine
but is a temporary problem.
Low coal prices due to Corona greatly influenced
closing the mine, but, the mine is on 'hot
maintenance', to keep permits in place and at
great cost to the operator of the mine, close to
200,000/ month to do so. This in itself is a very
bullish fact going forward.
Morien, the royalty holder, is not the operator,
and not incurring any of those costs. Their cash
burn rate is very low at Morien, and they have
enough for 4 years without having to raise any
more money.
Mining will not be restarting in 2 months but it
will not be 2 years either. Probably best guess
would be 6-12 months out.
Long wall plan is almost certainly the way the
mine will be processed, this is the 'double
economic benefit' scenario that I have hinted at
where the range of dividends being talked about is
in this huge range of of roughly 7-25 cents. This
would make the mid to upper end of that scale more
plausible and likely to happen.
Close to 90% of the coal leaving Donkin recently
was graded and sold as Metallurgical coal, which
is roughly double the price of thermal coal
normally. This will likely also play into the
higher dividend scenario as well.
Much cash for infrastructure has been invested by
the operator, and they are committed to the
project. Also from outside of the company, a lot
of money has been spent for plans to service.
Politics is part of the picture unfortunately, and
getting the Canadian government more involved is
needed and wanted to have a person assigned to the
project permanenty so they are more involved on a
daily basis, instead of just showing up at rock
fall events. This way, they would be aware of the
preparations and predictions of problem areas that
have been known about before other rock falls, and
give timely input. Also a a side note, there is
First Nation interest in the mine, and that could
help politics to improve and help the mines
success as well.
Coal prices will be impacted into quarter 1 next
year, but then pent up demand may really kick
in as many mines being shutdown now may never come
back online. There are in fact quite a few coal
mines that are marginal at best currently and
economically struggling, and the Covid crisis
gives them an excuse to just shut down
permanently.
The mine is on 'hot maintenance'as I said, and can
be turned back on very quickly, which is the
intent. The reports from the media using words
like permanenty closed, for sale and adverse
geology with respect to the mine and the rock
falls were simply wrong, misleading, and the
company has put out a pressrelease pointing this
out which I recently shared.
More information from the company going forward
will be forthcoming as new info comes
available, and the company will be very proactive
on this front.
People always ask me, tell me just one mining
stock you like. I always tell them, no, but I will
give you ten. Mining is a risky business, and you
should never have all your eggs in one basket.
Politics, commodity prices, geological problems,
grades, can all come out of nowhere to impact any
mine and this is why I tell people invest in ten,
not one company. Morien had a geological event, I
used it to double my position with the extremely
overreacted share price fall, which I intend to
hold going forward and is the best information I
can share as to what I think about the recent
situation.