February 23, 2015
Take These Zeds & Buy 'Em: GZZ | RZZ | KZZ | VZZ
IT'S BEEN 3 years and 7 months since I toured Quebec's
Canadian Malartic with Glenn Mullan of Golden Valley Resources.
At the time, this Val d'Or collector of gold mine royalties and claims-staker across the
Abitibi Gold Belt controlled part of Osisko Mine's Canadian Malartic properties -- a small part of one of Canada's largest gold mines.
Today, Glenn and his CEO,
Ian Ball, along with investor
Rob McEwen of McEwen Mining, saw their legal and negotiating efforts deliver a "transformational" pact for their little Abitibi Royalties. RZZ in Canada and ATBYF in USA.
Their
press-release writer today borrowed that 'transform' verb from me.
See Thom's July 2011 article. (And more recently at thomcalandra.com --this article on Abitibi Royalties.)
Abitibi Royalties (as of today, anyway) achieved what it said it would do. The Monday details of the transformation are explained clearly in a pact that has four or more moving parts.
See today's release.
Back in July 2011,
Glenn J. Mullan hat-tricked a three-way Toronto stock market spinoff from his geology shop,
Golden Valley Mines (GZZ in Canada). Glenn is from
Val d'Or, which is about 30 clicks (km) from the town of Malartic.
"We want to be transaction minded," the English and Quebecois-French speaking geologist said then. (
See photo from my report in 2011.)
Since then, there have been downs and ups. Most recently: ups. Glenn and his team, with legal eagles and bankers, have been in tricky negotiations and Canada court manoeuvring with the large gold companies that now control Canadian Malartic:
Agnico-Eagle and Yamana Gold.
Oh yes, what Glenn and recently fresh CEO Ian Ball, said they were out to accomplish? That was: to start collecting royalties and dividends; to get cash into Abitibi; to exploit the area's Odyssey zone and other gold targets Abitibi Royalties controls; most importantly: "to get the stock higher," says Mr. Ball from Quebec.
The shares Monday are trading at their all-time high and give
Abitibi Royalties a stock-market value of about $45 million CAD.
Here is the takeaway: this stock market price appears in light of the stock and royalty infusion to be some 15% or more beneath fair value. In this just-revealed "transformation," an additional royalty in exchange for Abitibi's so-called 30% free-carried interest could become what many net smelter return collectors often dream: an annuity for life.
That recent Abitibi Royalties investor, Mr. McEwen, a Canada success story and a firebrand in mining circles, provided Glenn Mullan and team with the cash they needed via an equity placement to bridge the rocky chasm created by the legal dispute and some cross-fire press releases.
"Rob is very supportive of the transaction and believes it creates a clear path to create value on the Malartic CHL project," Mr. Ball says. Ian Ball used to work with Mr. McEwen.
"He felt it materially strengthens the base of the company and is looking forward to seeing Malartic CHL move forward."
By the way, the first thing you see from Rob McEwen in his mining materials -- here for instance at
McEwen Mining -- are these words: "Rob owns 25% of the outstanding shares. No salary."
Mr. McEwen, like another of our rare, winning gold investments, Angkor Gold,
front-runs his community work in Sinaloa, Mexico, where MUX's (ticker in USA) El Gallo mine produces. That is, he leads with corporate social responsibility in the miner's practices, its literature and its community building: computers, libraries and the like.
Back in Quebec, Canada,
Malartic CHL is Glenn Mullan's word-play on Agnico-Eagle/Yamana Canadian Malartic spread of properties and monstrous mill. The CHL stands for Canadian Hockey League, of which Mr. Mullan is a team co-owner (junior team
Val d'Or Foreurs).*
Some of the dividend money from the newfound Yamana and Agnico-Eagle shares, and net smelter returns, from this pact could go to shareholders. At least shareholders (
I am included -- yay, finally: a gold winner) hope so.
See details of royalties, stock and exploration plans.
Like any well-trained geologist (Concordia University in Montreal), the mid-50s Mr. Mullan is sure to be spending some of his Agnico-Yamana booty on exploration. This is because the Canadian Malartic operation ALWAYS needs ore for its nonstop mill.
Rich ore. Mediocre ore. Low-grade ore. You name it. This is reality when you are producing, or hope to be producing, 600,000 gold ounces a year for the next decade and a half.
Glenn and Ian already have marked $3.5 million CAD toward gauging both Odyssey North and South deposits on the CHL and Canadian Malartic properties.
Glenn Mullan says today, "These buyers are committed not just to being aggressive on the new Odyssey North zone, but also on the Jeffrey, Barnat Extension, Gouldie Zones (all part of the actual Mine Plan)...and then there are many other exploration targets: Norrie, Shaft Zone, Geo, North Geo, Hal Zones."
?The premise behind Golden Valley Mines and its sister companies, including Abitibi, is to collect royalties, collect other companies' shares as well -- in exchange for grass-roots digging across parts of Quebec and Ontario. Saskatchewan, too. -- This has ever been so -- since July 2011.?
I am holding my 17,000 or so shares of this fresh manufacturer of minerals prospects. Abitibi Royalties. I am telling our
TCR family, including at least one professional hockey player from Quebec who is playing now in Europe, to do the same.
For our larger audience, I will note: this transaction might bode well for the other equity parts of the Quebec franchise that Glenn Mullan has assembled over many years: parent Golden Valley Mines, which owns almost two-thirds of the Abitibi RZZ shares;
Nunavik NickelMining and Uranium something or other -- oh yes,
Uranium Valley Mines. Their tickers all end with a zed.
I am guessing the nickel one could become actionable in coming weeks. Hey, I like owning these (way overused term) minerals generators. Now, I have a real royalty (
two of 'em) in Quebec; a real gold royalty in NE Cambodia with Angkor Gold; and some fat ones on the way with Eurasian Minerals (EMXX in USA).
Angkor Gold: You might not want to miss two photo-logs of our Cambodia tour:
https://plus.google.com/101338642857105186354/stories/c766c3a8-b72e-3882-8910-a3967201073314b6d9b5259
and
https://plus.google.com/photos/112863437369602803884/albums/6118420782567263377
-- Thom Calandra
* Perhaps we need rename those two large gold miners Agnici (rhymes with amici) and Yamane (rhymes with nothing)?
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Thom Calandra & TCR are researchers and investors. They are not registered investment advisers. The research and material they offer to subscribers are meant as editorial opinion.