from Will Purcell
Nicholas Houghton's True North Gems Inc. (TGX), unchanged at 10 cents on 105,000 shares, has closed an $11-million financing with Leonard Nilsen and Sonner AS (LNS). True North should now have enough cash to build its little ruby and sapphire mine at Aappaluttoq, on the southwest coast of Greenland. A 2011 dream sheet projected the capital cost for Aappaluttoq at $38-million; an earlier deal with LNS saw the latter company put up $23-million for infrastructure in exchange for a 20-per-cent direct interest in the mine. The new deal, which includes a $5-million loan and a $3-million stock buy, brings LNS's share to 27 per cent. Frode Nilsen, LNS's principal, said he followed the project closely and jumped when True North provided the opportunity for LNS to increase its participation in Aappaluttoq. Mr. Nilsen got his chance to jump after another of Mr. Houghton's backers leapt the other way: In early 2013 Australian mining financier, Joseph Gutnick, agreed to buy $15.75-million of True North stock at nine cents but he quit the deal several months later after investing just $3-million. Mr. Gutnick, usually a shrewd if not particularly patient investor, reluctantly held the 32 million shares until the stock reached a three-year high of 17 cents early this year. He then unleashed a torrent of selling that drove True North southward to a 5.5-cent low. Mr. Houghton's promotion -- and his stock -- have been slow to recover from the beating. The market could know within a year whether it was Mr. Nilsen or Mr. Gutnick who made the wiser jump. True North says Aappaluttoq should achieve production next year, presumably before another Arctic winter sets in. The profitability of the mine will depend on what the Aappaluttoq gems fetch. Unlike gold, or even diamonds, the prices for rubies and sapphires are uncertain at best, a big reason why the company's 2011 prefeasibility study projected a discounted net present value of just $17.5-million. Another reason was the small size of the proposed mine, which is based on the very high grades at Aappaluttoq and the limited quantity of gems that True North can foist upon the small ruby and sapphire market without triggering a Gutnick-esque drop in prices.