a good lock back to Year 2019Cited: By James Kwantes (Resource Opportunities Nov. 3,2019)
Cantex Mine Development (CD-V) Cantex is banking on the ATAC road to go through so they can connect it to their remote North Rackla zinc-lead-silver project. Cantex shares have slid from $4.92 when I published my bearish site visit report on Sept. 8 to the current $3.53 (I sold my shares in the mid-$4s). Judging from the amount of drilling that has taken place at North Rackla and the amount of silence from the company, it looks as if the stock could go lower still. At this share price, Cantex still sports a $162-million market cap. That’s down considerably from the peak MC of $310 million ($6.75) but still very elevated for an exploration play, even if the prize is large. The September 10 news release -- following up on the sparse Sept. 5 NR that raised red flags a day ahead of my site visit -- announced the new gossan discovery that we flew to by helicopter. It also disclosed the existence of a post-mineralization dike swarm that affects 300 metres of the interpreted mineralized strike -- and five holes. The drill results for the remainder of the holes not reported on Sept. 5 were underwhelming, aside from some high silver values. I suspect the structural complexities at North Rackla extend beyond just the dike swarm. Cantex had already drilled 15,000 metres at the time of my site visit in early September, and the total by now is likely above 20,000 metres, including at the area of the gossan. The company must have a lot of assays in hand and has not disclosed any results since Sept. 10. Cantex’s disclosure is dreadful on several levels -- the deck on its website dates back to February, when the stock was at 80 cents. Poor disclosure requires trust on the part of investors, a big ask in this sector. All will be forgiven if Chuck Fipke delivers for shareholders again, as he did with Dia Met. But investors need to be cautious of anchoring bias for Fipke plays. Plenty of them have not worked out -- I still have some Northern Uranium (UNO-V) shares languishing at half a cent in a brokerage account. And it’s not a good look for a public company, albeit one mostly owned and controlled by a hands-on, wealthy operator who happens to be a mining legend. A huge assay 10 dump at the end of the season will allow Cantex to play up the favourable assays and downplay the negative ones. The next NR is going to be a long one -- or it should be, at least. There’s one other thing about the run-up and subsequent drop in Cantex’s share price that has been bothering me. It’s the raft of insider sales at elevated prices by virtually the entire Cantex team besides Fipke. CEO Chad Ulansky sold more than $1.15 million worth of Cantex stock -- most of his shareholding -- at prices from $5.05 to $6.38 between July 31 and Aug. 13. I asked him about the sales on site and he said they were done for family planning purposes and completed through an automated share disposition plan. Under such a plan, the seller sets a sell level and specified time period and the sales are completed by a broker (who is unknown to the seller). It wasn’t only Ulansky. CFO Jennifer Irons sold $600,000 worth of stock at $5 a share -- her entire shareholding -- in July. Vernon Frolick, a Cantex director and Crown prosecutor in the Okanagan, sold $375,000 worth of shares at $6.30 over two days in August. And COO Keiven Bauer banked more than $500,000 selling stock at $4.20 to $4.30 -- virtually his entire shareholding -- in July. Most recently, 10% holder and Fipke friend Rob Cudney -- who has been one of Cantex’s biggest backers including through public-market purchases, announced (on Twitter) that he planned to go under the 10% ownership threshold. At that point, he would not have to disclose share sales. Again, the lack of disclosure and insider sales are a bad look, especially for a stock that remains extremely volatile and can move hard on relatively small volumes. For example, on October 18, less than $170,000 worth of trading moved Cantex’s market capitalization (up) by about $30 million. If North Rackla does not shape up to be the type of Broken Hill style sedex deposit that is being touted, Cantex shares may never get close to the levels at which many of those sales took place.