RE: RE: Donner Metals: President's Message to Shar Such a quiet bored. I would like to see more discussion re: SND. It is one of my favorite stocks to discuss. I have two items to discuss:
1. Other juniors SND could partner with. I'll go first. I came across quite a few, but one of the more interesting ones was USO. They have an oil sands deposit in the states (Utah IIRC) that can be developed for ~$20 million per "module". I.e. staged production. They guesstimate that they could reach 50,000 bbls/day over the next 10 years.
2. The Terrex deal. Some people have pointed out that RDA was a bad deal, and that Nolan himself has admitted this, but frankly, the numbers on RDA worked quite nicely if we assumed that RDA management wasn't terrible and could at least remain a going concern. It's the Terrex deal I don't really understand. Why did we do a deal for an EOR project when there are hundreds of juniors operating in Alberta/Saskatchewan with cardium rights that are very low risk? Spartan, Novus come to mind off the top of my head as juniors developing established, low risk plays.
I understand that EOR is a proven technology, but I can't wrap my head around it being lower risk than drilling a horizontal well in the Cardium. And now that we know that there is a question whether the EOR is even EFFECTIVE at substantially increasing oil / gas production, I'm starting to believe that EOR wasn't low risk in the first place.
Luckily for us, again we have first guarantee on the asset. TER spent ~$15 M acquiring the asset (from a quick glance at their balance sheet), and then blew our $15 M on management fees and getting the asset producing. Assuming 66% of our $15 M was "wasted", that's still another 33% or $5 mm that we can hope was spent on worthwhile improvements to the Two Creek and Strathmore assets. At the very least this asset can hopefully be disposed of for ~$15 M and we can just get our money back.
Another interesting dynamic I have noticed is that we call Donner a "home run". I disagree (although I am guilty of probably calling it a home run previously, I am trying to make another point here). The Donner deal is an example of what all the deals should look like. We make our investment, management raises the additional cash necessary (or already has the cash), they get into production, we make money. This is how it should work 95% of the time. Going forward it should be our expectation as shareholders that all of the companies we do deals with ultimately make it to production.
Donner should not be an exception, it should be the norm.