SAN FRANCISCO -- I was, just an hour ago, with three Halifax long-time Africa explorers ... on a freezing Nob Hill.
Their June appearance here comes with the prerequisite SF fog, the mist and 50-degree (fog-wind chill, 38F) temperatures. Sting, the pop singer and bass player, was shivering the other night, playing at an America's Cup concert on the SF Bay. (Photo: Nob Hill view from Mark Hopkins hotel -- Thom Calandra)
Still, minerals prospectors, like the SF Giants across town, who are playing the Toronto Blue Jays in baseball this evening, are drawing crowds.
In the case of gold, rare earth minerals, oil, practically anything, qualified investors are slowly returning to hotel lobbies and restaurant foyers to hear miners chop-shop their wares. As long as the principals have lengthy and formidable track records.
I am one of the listeners. Even in this 28-month losing streak for metals equities. I have to be. I invest almost entirely in resources, with two (biomedical and merchant bank) exceptions. At this point, I continue to purchase resource equities and physical metal.
Today's meeting was not haphazard. Namibia Rare Earths' triumvirate sat down with me because I happen to know one of their largest, and newest, investors: Bill Price. Mr. Price is a former SF banker, and an active philanthropist and resources investor.
The Namibia Rare Earths (TSX: T.NRE and NMREF in USA) team is into the heaviest and rarest of the rare earths, and like most resource executives, they are battling equity and elemental headwinds as fierce as the blowing SF fog winds.
Like gold, many heavy rare earth elements and their attendant prospectors have come way off their highs.
Still, prices for these elements, among them NRE's terbium, europium, yttrium and dysprosium, are still two to three times their 2006-ish lows: about what has happened to precious metals.
"This decline has shocked everyone," says Gerald J. McConnell, a 68-year-old Nova Scotia lawyer who is CEO of Namibia Rare Earth Elements. (It hurts: my tantalum investment in Mozambique almost triggered a post traumatic stress incident; now that the piece of tanta-junk is almost at zero, my emotional attachment is diminished.)
Gerald and NRE President and geologist Donald M. Burton, age 59, have been developing Africa minerals properties in 7 nations since 1994.
Alluvial diamonds in South Africa, gold at Etruscan (now Endeavour Mining) in West Africa, and others. Mr. Burton headed exploration at NovaGold Resources in Africa for 11 years.
They're getting good crowds in a few USA cities, thanks to both their pedigrees and the cheap stock price. It is surely not the blustery West Coast weather that is bringing out the investors. (Dislike California/It's cold and it's damp)
The two are accompanied by their general counsel, Janice A. Stairs, who takes mental notes on everything.
The question I have to ask, not being a rare earth buff, is what the driver will be for the shares. I know some of the rare earth analysts, like Luisa Moreno in Toronto. I know a few of the execs and geologists, like Don Bubar of Avalon. I have met geologists and execs from Great Western, which is active in South Africa; from Molycorp, which is active in California; from Matamec, active in Quebec; and so on.
But I have to double-check the spelling of most of these elements, and their uses: solar panels, magnets, lasers and so on. Namibia is one of the few places in Africa I have not been; the country is a large uranium producer and sits just below Angola and next to Botswana. Rio Tinto is there; so is Areva; so is Swakop Uranium; so is De Beers.
(My people in Africa say Namibia is their favorite place on the continent for minerals exploration, with the possible exception of hunting spice on Zanzibar and digging for seashells by the Cape Town seashore.)
As for investors' motivation, the answer, from Mr. Burton and Mr. McConnell, is this: a looming metallurgical report from their already resourced Lofdal property in Namibia. "That comes in September," says Mr. Burton. "We hope to see high concentrate levels and good to excellent results on the removal of thorium."
At that point, CEO McConnell says he looks to unveil, as soon as he can, a non-China partner that will own part of the Area 4 asset of heavy rare earths and also build a processing plant at the site.
I see it slightly differently, excuse me. (I have yet to purchase the shares, but almost surely will after this report is out.)
I mean, I have heard the here-comes-the-partner story so many times, I kind of blank out on it. Months become years. I must say, I respect Mr. McConnell for telling me flat out, "No MOUs, they are meaningless posturing. No exchange of shares. This is about the sale of part of an asset to an entity that already has demonstrated it knows how to process these elements," he says.
My side-take comes after a chat with that Luisa Moreno, who now analyzes rare earths for EuroPacific in Toronto. I have known her for a couple of years and met her first in China. She is a well-read researcher who knows all of the 50 or so real rare-element projects that are brewing on our planet. She also knows most of the principals in the REE business.
"All of the REE equities are so crushed, yet let's face it, the prices of the elements themselves are holding up this year," she says. "The unknown factor is China. Do they put the plug in again on heavy rare earths, like they did in 2010?"
If that happens, as export-conscious China proved in 2010, "something like NRE could go to $1 in a day," she says.
China provides most of the world's heavy rare earth elements. As our NRE triumvirate here in foggy SF demonstrate with piles of reports and studies, more than 90 percent of the value of rare earth elements in terms of critical need for defense and sustainable supplies, is contained in four elements: yttrium, dysprosium, terbium and europium.
More than 80 percent of Lofdal, at 0.3 percent cutoffs, appears to manifest those four elements.
As an investor, I look for stock-price drivers. Ones that will take months, not years.
China, says Ms. Moreno, is not so much a wild-card as a when-card. "China knows heavy rare earths are not sustainable within its borders -- too toxic, too unregulated (mom and pop miners), too volatile," she says.
As an investor, I probably know a lot more about NRE's paper than its elements in that Lofdal carbonatite complex.
The paper, all 83 million shares, trade roughly at the value of the $15 million NRE has in its treasury. On the main Toronto board.
Mr. Price and other recent investors at 18 or 19 cents a share Canadian saw blocks of NRE become available from the principals who were associated with Endeavour Mining and the Etruscan purchase some three or so years ago. Those trades happened just a few of weeks ago.
The NRE folks from Nova Scotia believe they have enough money in that $15 million to run another 24 months, with zero intention (their words) of raising more cash. Ever. Lucky for them, the first raise for NRE's Lofdal was around 50 cents a share ... and the April 2011 initial offering of public shares was at 80 cents.
Bill Price, with 11 percent, Adrian Hickey with 8 percent and Obernforf Enterprises with 30 percent believe they know a profitable set-up when they see one. I believe they will hold NRE to that never-ever vow on share dilution.
Another block of Namibia-RE shares, as much as 6 million of 'em, is likely to cross soon from a Toronto trader whom I know. His asking price likely will be 20 cents Canadian. Wek that happens, er, when that happens, I do not know.
After that trade, without a 2013 China driver for the price, those folks from Nova Scotia will be calling the metallurgical and deal-making shots.
For more on Namibia Rare Earths, see Adam Graf's report from Cowen Securities and Mike Niehuser's report from Beacon Rock Research. Or give Luisa a call at EuroPacific in Toronto.
EXTRA: Please take a look at fresh takes on Solvista Gold and Waymar Resources. Paul Harris' Colombia Gold Letter is the best look at miners and prospectors published in that country (my view). Paul publishes CGL out of Medellin with original reporting.
On Solvista (SVV in Canada and SVVZF in USA), Miller O'Prey and Jeffrey Brooks, both geos, are zagging where other prospectors zig. They are leaving no stone unturned, figuratively, at Caramanta. Many explorers worldwide have recast their strategies and emphasized short timeline to producing mines -- all as they try to cope with the worst investment market possibly EVER.
Not Solvista. I asked Miller and Jeff, and I quote: "whether they intend to carry on with their blanket drill-hole coverage of Caramanta." Absolutely is their answer.
Paul Harris in his letter was the first to put SVV's exploration strategy in perspective. Essentially, when drill rigs start turning again this summer at the Caramanta porphyry, the goal is to find more relatively high-grade gold (and copper) at multiple porphyry targets. "We don't want to miss anything big," says Mr. Brooks.
I am a fairly large owner of SVV shares, which are one of our TCR 8 atThe Calandra Report.
On Waymar: If you recall about four or five weeks ago, we gave you CEO Pablo Marcet's explanation of why the consolidating licenses at Waymar's Colombia project was important.
The Waymar team worked for about three years to consolidate five exploration licenses, two mining contracts and two mining licenses into a unified contract that covers 6,738 hectares of the company's 23,100 hectares at Anzá. If you recall, Waymar got this property from Continental Gold, which has nearby Buritica.
Mr. Marcet is fortunate to have mining licenses for underground and open-pit operations at Anza, which is a working gypsum mine. The integrating of these licenses and contracts allows for one turn-this-key and let-her-rip if Mr. Marcet and his board decide to 1) sell the asset; 2) begin producing polymetalics, especially gold; or 3) bring in a partner. Waymar is probably the cheapest single thing -- or second-cheapest -- in Colombia right now when it comes to active precious metals exploration. I own it.
Speaking of cheap, I am back on the Bellhaven beat. Resource Venture Partners of Hawaii just increased its stake in BHV to something above 10 million shares. That happened last week. Activity in BHV (Canada) and BHVCF (USA) shares are active Monday and Tuesday (today).
CEO Julio Benedetti says the next round of assays from La Mina in Colombia will be by early or mid-next week.
Bellhaven Copper & Gold is into fresh drilling at La Garrucha, a newly acquired target at La Mina.
I hear the results at this porphyry could be splendid, given the history of the parcel and the existing BHV resource at La Mina. We'll see.
I am under water on my 2.2 million or so BHV shares and I have little choice but to purchase more, just as geologist Paul Zweng's RVP appears to be doing.
Dr. Zweng is a consultant to BHV; he also is a managing partner for the small Honolulu fund RVP. Paul also is developing a nature conservancy on the island of Oahu.
For those who are long time followers of TCR, or our work for Stockhouse and for Ticker Trax years ago, we remember that Dr. Zweng, a geologist, was interim CEO of Bellhaven a couple of years ago and got La Mina in gear, along with co-founder Julio Benedetti of Panama. I was part of that process in a small way. So was Patrick Abraham, another co-founder and a Panama and USA broker.
La Mina's new drilling easily could boost the gold and copper resource to well above 4 million ounces (equivalent in all categories) -- over time. Maybe more. I purchased more shares last week, as did RVP. If the precious metals rally continues and BHV reports anything close to some of its better gold-copper assays from La Mina, the stock easily could triple or better from 6 cents Canadian (now 8 cents) muyrapido.
This shapes up as a quick-payoff, and neither RVP, I believe, nor other large owners of shares, including me, shall be selling on any assays results, good or mediocre.
Events also might be forthcoming from the administrative hold status BHV faces on copper-gold properties/concessions in Panama. No guarantees on that end from Panama City, if you know what I mean. But BHV shares are moving, and I think it is because of next week's La Garrucha assays.
We shall see.
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