from stockwatch 2023-01-05 16:54 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score on Thursday was a mediocre 91-88-131 as the TSX Venture Exchange added one point to 571. Owen King's True North Gems Inc. (TGX), down one-half cent to 6.5 cents on 1,000 shares, nearly became a ruby miner in Greenland before bankruptcy of its subsidiary nearly -- and still might -- kill it off. Now, however, the company is upping its pursuit of lithium in Canada.
True North has acquired two lithium properties in the Abitibi region of northwestern Quebec from Glenn Griesbach, a prolific local prospector. The first, Decelles, is just south of Cadillac, a historical gold mining town in the area, while the Nabikok property lies about 50 kilometres southwest of Val d'Or. To acquire both properties, True North must pay Mr. Griesbach a total of $100,000 in cash and issue him three million shares of Laval Critical Elements Inc. (LCE), which is a wholly owned subsidiary of True North.
Or at least it was until now. True North set up LCE in June as a vehicle to acquire a 50-per-cent interest in the Cyr-Kapiwak lithium property in the James Bay district of Quebec from Lithium One Metals Inc. (LONE: $0.50). That arrangement saw True North issue one million of its own shares to Lithium One and it also promised $250,000 in exploration over a two-year period.
That arrangement, completed in late October, presumably left LCE holding True North's Cyr-Kapiwak option, but with True North owning all the LCE shares. Unfortunately, investors do not know how many LCE shares that might have been and so the market is equally unaware of just how much of LCE Mr. Griesbach will be acquiring with the three-million-share payment.
Why this complex corporate maneuvering, you ask? Well, recall that when True North's plan to mine rubies at Aappaluttoq in western Greenland through a subsidiary joint venture blew up into a hasty transfer of assets from the bankrupt joint-venture subsidiary to True North's lesser partners, True North was left with a significant financial liability. That sum has now ballooned -- courtesy of a 2-per-cent-per-month interest rate -- to nearly $5.4-million, most of the company's looming $6.4-million debt.
So, with less than $640,000 in assets and with $6.4-million in liabilities at the end of September, the company's auditors cringe along with the market when assessing True North on a going concern basis. The creditors are cringing as well -- they have agreed to postpone all principal and interest payments until the end of 2023. Not so willing will be Canada's taxman: True North appears to have spent just a sliver of the $600,000 on Canadian exploration it was to have incurred by the end of 2022.
Despite its crushing debt, True North did have $550,000 in the bank at the end of September, and the company managed to spend over $90,000 on preliminaries at Cyr-Kapiwak last year. True North presumably has enough cash to get started on its two new lithium prospects and indeed, Mr. King, president and chief executive officer, says that his company -- True North, not LCE -- has contracted for geophysical surveying across both properties ahead of a field program next summer.
Meanwhile, True North's frustrated long-term shareholders undoubtedly ponder the what-might-have-been scenario at Aappaluttoq. The small but rich deposit of corundum -- ruby being the top-of-the-line gem form of the mineral -- reached production in 2017, mere months after True North's Greenland-based subsidiary declared bankruptcy, a move followed in quick succession by True North's co-venturers successfully bidding for and winning title to the project, and then by a ribbon-cutting exercise that capped one of the fastest -- and murkiest -- bankruptcy actions on record.
By all accounts the little mine is doing well, and for the next few years True North continued a legal vigil for Aappaluttoq, grousing that its "management and corporate counsel believe the bidding process was mismanaged, needlessly expedited, unfair, biased and potentially in contravention of Greenlandic bankruptcy laws." That snippet of lawyerese hardened to boilerplate with no sign of action, then disappeared in early 2020. Unfortunately, while True North now has a new focus on lithium, its past still looms large on its balance sheet.