Diamond & Specialty Minerals Summary for Nov. 18, 2021
2021-11-18 17:16 ET - Market Summary
by Will Purcell
Andrew Lee Smith's True North Gems Inc. (TGX) traded an odd lot of six shares at nine cents, well below the minimum 500 shares required to qualify as a quotable trade. Several years have now passed since this non-gem of a gem lost its Aappaluttoq ruby project in Greenland but the strange event still leaves an ugly bruise on the company. At the end of September, True North had a working capital deficiency of nearly $5.7-million, most of it related to a $1.61-million loan guarantee that has now ballooned to over $5.1-million through accrued interest. (Interest is the term used, although the mob's "vigorish" might be just as apt since the interest rate is 2 per cent per month.)
True North nearly spent itself to death trying to build what was to be a $20-million ruby mine, first on its own and later with the assistance of Denmark-based LNS Group and Greenland Venture AS. Late in the summer of 2016, True North's subsidiary put itself into bankruptcy when it ran out of cash amid one cost overrun after another, and in what has to be a land speed record for courts, bureaucrats and balky partners, the Greenlanders settled the matter within days, awarding the project to LNS.
"In the middle of our primal mountains, there is red," enthused LNS's geologist as the company pressed on with True North's plan to mine Aappaluttoq, leaving Mr. Smith and his lawyers seeing red at the way -- and the sheer speed -- with which the company was cut out of the venture, at least on the asset side of things. For a few years they groused lawyerly about what they might do, stating that the process was "mismanaged, needlessly expedited, unfair, biased and potentially in contravention of Greenlandic bankruptcy laws." In the end their chattering died away, but the din from the remaining creditor continues.
(LNS opened its ruby mine with some fanfare in 2017, but there have been few indications about how it is performing. This year, the mine received an $18-million (U.S.) working capital injection from the Nebari Natural Resources Credit Fund, a Miami-based entity, so it can continue mining Aappaluttoq and start looking for nearby ruby deposits once that 10-year supply is exhausted.)
In the absence of rubies, Mr. Smith and True North have been relying upon the company's True Blue rare earth elements project in southeastern Yukon. In 2019, the company granted Razore Resources Inc. (RZR: $0.105) an option to earn a 70-per-cent interest in the project, and while that arrangement continues, Razore's financial health is little better than that of its partner, and its reports reveal it is well short of completing the required $300,000 in exploration.
Beyond True Blue, Mr. Smith says that True North is "evaluating other property acquisitions" in other parts of Canada, with a focus on Quebec. Still, it will be difficult to mount a new exploration campaign with the cloud of its old one still raining on its promotion. With that in mind, Mr. Smith says that True North "will continue discussions" with Leucadia to settle the debt obligation. (New York-based Leucadia bought the mounting debt early in 2019 from LNS for just $350,000 (U.S.), so perhaps some accommodation can be reached.)