This is high-grade manganese … no more than a meter deep and just needs to be washed, separated and trucked for sale."
A retired mathematics professor from Victoria, Canada, is looking to put his tiny Brazilian prospector on the manganese map.
Sola Resource Corp. (TSX: V.SL, Stock Forum) and CEO William Pfaffenberger are assembling a debt financing package with help from a well known London capital firm. If the 67-year-old professor has the correct formula for the transaction, Sola shares likely will rise sharply before a share consolidation occurs in two weeks.
The challenge for me, having met Dr. Pfaffenberger and lead Sola director Andrew Male this week, is not mistaking the Sola CEO for a twinkle-eyed cousin of Saint Nicholas (See photo here.)
“This is high-grade manganese,” Dr. P. says, holding a chunk of it from a property in the Rondonia Province of Brazil. “It’s no more than a meter deep and just needs to be washed, separated and trucked for sale.”
Bill P. and his partner, 43-year-old mortgage financier Andrew Male of Vancouver, Canada, have their hands full with this now-11-cent stock. They plan a name change to Cancana; partial purchases of two locally-owned Brazilian miners, Rio Madeira for manganese and Amazon Resources for diamonds; a double financing of equity and debt via London’s Vicarage Capital; a research-quality report from Vicarage… oh, and that risky 1-for-10 reverse stock split. All before month’s end.
Manganese is a steel alloy and is also used as a fertilizer for soybeans and corn. A lot of it gets used in booming Brazil. Not much of it is found in Brazil. Dr. Pfaffenberger says family-run Rio Madeira already is producing as much as 4,000 metric tons of manganese a month.
“It’s haphazard and they are doing it ad-hoc for cash flow,” he says. His director, Mr. Male, who has been on site numerous times and just attended a Paris manganese trade meeting, calls this gambit “a simple strip operation.”
Says Mr. Male, “With proper stockpiling in local towns, and putting in place a crusher for high-grade pieces like this (see photo again), we can go to 10,000 tons a month.”
Naturally, the challenges here are legion. To put manganese output in hyperdrive, the two executives acknowledge they will need railheads to reach Sao Paolo, some 1,300 miles away. Right now, Rio Madeira trucks its ore to local towns.
Mining licenses are not easy to come by in Brazil. Sala via its pending 50 percent stake in Rio Madeira will have two licenses for manganese on the 12-square-mile tract at Sao Felipe and Jaburi, not far from Brazil’s border with Bolivia. Amazon, the other Brazilian operation in this mix, is a diamond prospector; Sola owns 30 percent of Amazon.
The two Canadians also must hope a Vicarage analyst next week likes what he or she sees on site. If the roughly $6 million equity financing and $17.5 million debt facility get the Vicarage nod, there is a very good chance the financial instrument and/or the stock will serve as a hedge for manganese commodities brokers, producers and speculators. The loan itself will be backed by cash flow from manganese sales and not dilute the common stock.
Were a hedging instrument to catch hold in the sparsely-traded manganese space, I think it is a pretty good bet that shares of Sola, even before the January 21 trading halt in Canada and the ensuing reverse split, will rise smartly. How high I do not know, and I own none of them.
All told, after the share consolidation, Sola, on its way to becoming Cancana with the Canada symbol CNN, will have about 32 million shares fully diluted. Sotto voce, Mr. Male and Dr. Pfaffenberger say a fully compliant resource report sometime very soon will show at least 860,000 tons of ore.
“We figure we can make $200 a ton net from the get-go,” says Mr. Male.
Dr. P., whose family owns 10 percent of Sola, adds, “If you find the trend you can prove up resource quickly. This is digging, not drilling and new pits just cost $20,000 to build.”