From Project-Rich Junior to Producer Almost Overnight
London, Ont.-based
Fortune Minerals Limited (
FT.TO) (
FTMDF) is likely to become one of North America's newest precious metal producers with its recent $65 million (U.S.) staged acquisition of Colorado's active Revenue Silver Mine along with multiple other major projects poised for production in the next three to five years -- Fortune Minerals is in line to become one of North America's newest, diversified, mid-tier, integrated metal and minerals producers.
The acquisition of the mine in May is "transformational" for Fortune Minerals, said David Davidson, an analyst who covers the company for Paradigm Capital, a Toronto-based investment dealer. "This takes the company from a project-rich junior to producer status almost overnight," he noted. "This will also help them with their effort to source funding for the NICO project."
Located 11 kilometers south of Ouray, Colo., and 490 kilometers southwest of Denver, the fully permitted and constructed Revenue Silver Mine is ramping up to full production, providing the company with ready cash to help complete its other projects. The mine will be a significant silver producer with about 400 tons of ore per day to be processed in an underground mill on the property. Through a contractual arrangement, Fortune will sell the silver containing concentrates to mining giant Teck Resources for processing at its smelter in Trail, B.C. A gravity gold concentrate will also be produced and sold to Johnson Matthey Plc at its facility in Salt Lake City, Utah.
The historic Revenue Silver Mine produced 14 million ounces of silver between 1880 and 1912, when a fire in the mill forced its closure. The site is still considered to be one of the highest grade silver deposits in North America, says Fortune Minerals President and CEO Robin Goad, and there is excellent potential to expand the mine beyond its initial lifespan. Significant portions of the property have seen little exploration and are known to be mineralized, he noted. There is also ample opportunity to reprocess old material and to acquire other silver-mining properties in Colorado and in neighboring states.
Fortune Minerals investors have welcomed the addition of a producing mine to the company's portfolio, said Investor Relations Manager Troy Nazarewicz. "What every investor is ultimately looking for is cash generation," he noted. "Our shareholders have seen a lot of investment going into our projects to get them where they are."
For the late-stage NICO gold-cobalt-bismuth-copper project in Canada's Northwest Territories alone, Fortune has invested more than $110 million since it was discovered by the Company in 1996. The project has already successfully passed environmental assessments for the mine and mill in the Northwest Territories and the refinery near Saskatoon. A positive feasibility study was updated earlier this year. Fortune Minerals is currently in discussions to secure $600 million in financing aimed at bringing the project to production by late 2017.
Cobalt chemicals are a key component in rechargeable, lithium-ion batteries, and the company is positioned to be the only fully integrated North American supplier. Fortune believes it could become a key supplier to the rechargeable battery industry including companies such as Tesla Motors Inc., which plans to establish a $5 billion lithium-ion "gigafactory" in the U.S. Southwest by 2017. The facility is expected to eventually turn out batteries for 500,000 vehicles a year, and Tesla has stated its preference for North American suppliers to minimize environmental impacts and material costs. An estimated 61 per cent of world cobalt mine production currently comes from the Democratic Republic of the Congo, and 42 per cent of refinery production comes from China and this is a concern for security of supply.
Fortune Minerals anticipates a high demand for bismuth, which is used as an environmentally friendly lead replacement. The NICO project is the world's largest deposit of bismuth and is expected to produce about 1,700 tonnes a year. A growing body of legislation in the United States and Europe is banning lead from potable water sources and a wide variety of products from electronics to cosmetics. Bismuth is also used in automobile windshield frits, pearlescent paints and undercoatings. About 80 per cent of the world's supply currently comes from China and again presents an opportunity for Fortune as a planned reliable vertically integrated North American source of supply.
Fortune's significant potential has prompted strategic partnerships with two, global industry leaders: South Korea-based POSCO, one of the world's largest steelmakers, has a 20-per-cent stake in the Arctos project, which is considered one of the world's premier metallurgical coal developments. Arctos has a positive feasibility study and is currently in the environmental assessment process.
In June 2013, Vancouver-based Procon Resources Inc. paid $11.7 million for a 19.4 per cent ownership stake in Fortune Minerals. Procon's majority owner is Beijing-based China CAMC Engineering Co. Ltd., a leading provider of international engineering, procurement and construction services that purchased Procon to establish a platform for growth into the North American resource industry.
One of the company's key strengths is its management team, said Davidson of Paradigm Capital. With 25 employees in Canada and 90 in the United States, Fortune's roster includes four mining engineers, two process engineers, geologists and permitting and environmental experts, and a seasoned finance and administrative staff. Having such deep mining expertise in-house helped the company acquire the Revenue Silver Mine in relatively short order. And the company's home base in London, Ont., with its attractive lifestyle, lower housing costs and easy access to Toronto, has also helped it attract talent. "Mr. Goad," added Davidson, "has successfully assembled a talented group of professionals rarely seen in the ranks of junior companies."
"It's the wave of the future", says Fortune Minerals President and CEO Robin Goad, because brands of every stripe are increasingly emphasizing supply chain transparency. All of our assets are in safe jurisdictions which has always been paramount for the Management team at Fortune. "Consumers are demanding to know where the materials being used to manufacture goods are coming from," the veteran geologist and mining executive said in an exclusive interview with Financial Press. "They want to be sure nothing is being used to finance a war in Africa and that the commodities they use are from a sustainable supply chain."
Fortune Minerals Limited's (FT.TO) (FTMDF) share price on the Toronto Stock Exchange currently sits at 30 cents.