The Gold Report: Why don't we start with your macro overview on the mining and metals arena and which companies you like?
Scott Koyich: As I have been the investor relations counsel for Canadian producer Kirkland Lake Gold Inc. (TSX:KGI) for eight years, I have always been a goldbug and believe in gold on a go-forward basis. As the world economy becomes more volatile, we uncover more uncertainties around countries like Greece, Spain, Italy, Japan and Portugal. Also, as the U.S. goes through its quantitative easing (QE) program—affectionately known as "QE lite"—a common solution is to expose investment portfolios to gold.
TGR: Are you a fan of equities, as well as metal?
SK: As we tread carefully in this equity environment, it becomes even more important to narrow down your choices for investment. It has become a stock-picker's market!
A company I would like to bring to your readers' attention is Sunward Resources Ltd. (TSX.V:SWD). We just signed this client four months ago. Management has done a great job of establishing a relationship with a well-known, Colombian-based mining family. The family, Swiss by origin but with three generations in Peru and Colombia, has amassed a spectacular inventory of resource opportunities. One opportunity now in Sunward is the Titiribi project, located 70 km. southwest of Medellin. The asset has an inferred resource of 3.7 million ounces (Moz.) at .50 g/t gold—low grade but large tonnage.
TGR: That's a copper-gold project?
SK: Yes, there's a copper equivalent of .20%. The latest drill hole came in much higher than the historic resource. It included north of 250 meters of .86 g/t gold .33% copper and 104 meters of 1.17 g/t gold and .38% copper. Very encouraging results in the beginning phase of the 10,000-meter drill program.
TGR: So, good assets. What else draws you to Sunward?
SK: We like the strong management, share structure, shareholder base and the amount of cash in the bank. They have four drill rigs going right now on the Titiribi project, which, hopefully, will produce steady results over the coming months. David Boehm, formerly of Ivanhoe Capital, is very well known in the Hong Kong and Singapore financial circles. He cofounded Sunward with ex-Casey Research Analysts Phil O'Neill and Dave Forest and sits on the board of directors.
TGR: Tell us a little bit about the lineage of the stock.
SK: Earlier this year, Sunward did a $5M, $0.35 a share pre-public round to some very well-known resource investors, including Lukas Lundin and Robert Friedland. The Colombian family also put $2M of its own capital into this round. Once public, the company was able to raise $25M at $1.20 a share in a bought-deal financing through Bay Street boutique financier Cormark Securities.
Fast forward to today, the market is a different place and the company is facing free trading pressure holding the equity at a humble price of CAD$0.75. At the current trading price, Sunward has a roughly $55M market cap with around $25M in the bank. Sunward is a great value and presents an opportunity to buy wholesale as opposed to retail.
TGR: Excellent. Any comments on the base metals?
SK: I'm a big fan of copper. We may see a short-term correction in the commodity, but I'm bullish long term. I feel the demand in China is very strong, with alleged reports of the country building the equivalent of a 500 MW facility every quarter. There are cities in China with north of 5 million people who don't have access to an airport.
TGR: Who do you like in that space?
SK: A company that comes to mind is Antares Minerals Inc. (TSX.V:ANM), with its strong management, board of directors and shareholder base. A majority of the players in Antares was behind QGX Ltd. getting taken out in Mongolia (coal assets). The larger shareholders include Farallon Capital Management (31%), a large endowment fund based in San Francisco and the International Finance Corporation (13%).
Antares has picked up its liquidity as of late, as well as a great inventory of research coverage that includes CIBC and Wellington West. Recently, Antares released a preliminary economic assessment (PEA) on its Southern Peru Haquira project. Haquira has 11.7 billion pounds of copper, with a net present value of $1.1 billion at a US$2.25/lb. copper price. One of the critical comments overhanging the story was its proximity to infrastructure. Now Xstrata PLC (LSE:XTA), potentially, laid this criticism to rest. The company announced a spend north of $4 billion on two projects in close proximity to Haquira. Antares is another example of value, trading well south of the takeout market caps of its copper peer group—both recently and historically. If you look at the investment checklist, you are buying value, copper, strong management and a board with prior experience in monetizing assets; it is also institutionally well covered. A great checklist.
TGR: Does the price of copper have to rise for Antares to go up, or does the demand in China just need to maintain at current levels?
SK: That's a great question; I believe both have to happen. If China continues at this pace, it should be more than enough to maintain and increase the interest levels in Antares. Obviously, we would like the news out of China to stay positive on a copper-demand basis because the market trades on a perception. We would also like copper prices to go up and stoke demand for copper projects around the world. Again, on a perception basis, it helps when copper prices go up; it results in media stoking the retail fires and the investment community promoting Antares on the streets. Ultimately, both lead to Antares' price appreciation.
TGR: Alright Scott, any other news you'd like to share?
SK: We just signed Pacific Wildcat Resources Corp. (TSX.V:PAW). This client was referred to us through PAW Board Member Terry Lyons, who also sits on the board of directors of Canaccord Financial Inc. (TSX:CF). We like this deal not only because it is trading at approximately CAD$0.20, but also because of its management expertise and properties. The CEO, located in Perth, Australia, has assembled two great plays located near infrastructure. The first property is quick to cash flow in Mozambique. They are forecasting this project will be up and producing tantalum by February 2011. Management has stated this property will earn $2M–$3M a year at full ramp up.
TGR: Tantalum, you say?
SK: Yes, and they also have a rare earth-niobium project in Kenya. You couldn't ask for better infrastructure near your properties with strong management. We haven't taken this company on the road yet because they are in the middle of a $0.22 non-brokered financing. Watch for this hidden jewel—another example of potential leverage in 2010-2011.
TGR: Terrific. Thanks, Scott.
Scott Koyich is a Calgary-based entrepreneur with over 10 years of experience in the investor relations industry. He is the president and CEO of DSK Consulting Ltd. and chairman of Brisco Capital Partners, both of which provide high-level advisory and strategic communications advice, investor relations and communication services. They are private firms representing various publicly traded companies that are listed on the Toronto Stock Exchange and the TSX Venture Exchange—including a number in the resources sector, such as Antares Minerals, Bellatrix Exploration, BioExx Extraction Technologies, Bridge Resources, Canadian Energy Exploration, Dynasty Metals & Mining, Galway Resources, Sea Dragon Energy, Sunward Resources, Tonbridge Power, TransGlobe Energy, Vero Energy and Ucore Rare Metals. Scott also has a passion for life that often crosses over into other business environments; he is a partner in two of Western Canada’s top restaurants, Il Sogno (Calgary, AB) and Cabana Grille (Kelowna, B.C.) and also co-producer of Hollywood and Vines, starring his business partners and Canadian celebrities, Terry David Mulligan and Jason Priestley.
Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Expert Insights page.
DISCLOSURE:
1) Karen Roche and Gordon Holmes of The Gold Report conducted this interview. Karen personally and/or her family own shares of the following companies mentioned in this interview: None. Gordon Holmes: From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.
2) The following companies mentioned in the interview are sponsors of The Gold Report: None.
3) Scott Koyich, DSK Consulting Ltd. (DSK): DSK is an investor relations firm. DSK provides, for remuneration, corporate communications and investor relations services to client companies represented in this interview. The information contained in this interview is based on existing disclosure documents or other publicly available information. Neither DSK nor the above-mentioned client(s) are offering securities, advising or soliciting the purchase or sale of securities. Information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. This material is not an offer to sell or a solicitation of an offer to buy any securities, nor is it an endorsement of the companies by DSK. DSK is not responsible for any claims made by the companies. Investors should independently investigate and fully understand all risks before investing. Statements included may contain forward-looking statements within the meaning of the Private Securities Litigation Reform ACT of 1995. Such statements may involve a number of risks and uncertainties. Further information on potential factors that may affect each company's financial results can be found in their specific financial reports, which are filed with the Securities and Exchange Commission (SEC) and/or the British Columbia Securities Commission (BCSC).
Scott Koyich: As I have been the investor relations counsel for Canadian producer Kirkland Lake Gold Inc. (TSX:KGI) for eight years, I have always been a goldbug and believe in gold on a go-forward basis. As the world economy becomes more volatile, we uncover more uncertainties around countries like Greece, Spain, Italy, Japan and Portugal. Also, as the U.S. goes through its quantitative easing (QE) program—affectionately known as "QE lite"—a common solution is to expose investment portfolios to gold.
TGR: Are you a fan of equities, as well as metal?
SK: As we tread carefully in this equity environment, it becomes even more important to narrow down your choices for investment. It has become a stock-picker's market!
A company I would like to bring to your readers' attention is Sunward Resources Ltd. (TSX.V:SWD). We just signed this client four months ago. Management has done a great job of establishing a relationship with a well-known, Colombian-based mining family. The family, Swiss by origin but with three generations in Peru and Colombia, has amassed a spectacular inventory of resource opportunities. One opportunity now in Sunward is the Titiribi project, located 70 km. southwest of Medellin. The asset has an inferred resource of 3.7 million ounces (Moz.) at .50 g/t gold—low grade but large tonnage.
TGR: That's a copper-gold project?
SK: Yes, there's a copper equivalent of .20%. The latest drill hole came in much higher than the historic resource. It included north of 250 meters of .86 g/t gold .33% copper and 104 meters of 1.17 g/t gold and .38% copper. Very encouraging results in the beginning phase of the 10,000-meter drill program.
TGR: So, good assets. What else draws you to Sunward?
SK: We like the strong management, share structure, shareholder base and the amount of cash in the bank. They have four drill rigs going right now on the Titiribi project, which, hopefully, will produce steady results over the coming months. David Boehm, formerly of Ivanhoe Capital, is very well known in the Hong Kong and Singapore financial circles. He cofounded Sunward with ex-Casey Research Analysts Phil O'Neill and Dave Forest and sits on the board of directors.
TGR: Tell us a little bit about the lineage of the stock.
SK: Earlier this year, Sunward did a $5M, $0.35 a share pre-public round to some very well-known resource investors, including Lukas Lundin and Robert Friedland. The Colombian family also put $2M of its own capital into this round. Once public, the company was able to raise $25M at $1.20 a share in a bought-deal financing through Bay Street boutique financier Cormark Securities.
Fast forward to today, the market is a different place and the company is facing free trading pressure holding the equity at a humble price of CAD$0.75. At the current trading price, Sunward has a roughly $55M market cap with around $25M in the bank. Sunward is a great value and presents an opportunity to buy wholesale as opposed to retail.
TGR: Excellent. Any comments on the base metals?
SK: I'm a big fan of copper. We may see a short-term correction in the commodity, but I'm bullish long term. I feel the demand in China is very strong, with alleged reports of the country building the equivalent of a 500 MW facility every quarter. There are cities in China with north of 5 million people who don't have access to an airport.
TGR: Who do you like in that space?
SK: A company that comes to mind is Antares Minerals Inc. (TSX.V:ANM), with its strong management, board of directors and shareholder base. A majority of the players in Antares was behind QGX Ltd. getting taken out in Mongolia (coal assets). The larger shareholders include Farallon Capital Management (31%), a large endowment fund based in San Francisco and the International Finance Corporation (13%).
Antares has picked up its liquidity as of late, as well as a great inventory of research coverage that includes CIBC and Wellington West. Recently, Antares released a preliminary economic assessment (PEA) on its Southern Peru Haquira project. Haquira has 11.7 billion pounds of copper, with a net present value of $1.1 billion at a US$2.25/lb. copper price. One of the critical comments overhanging the story was its proximity to infrastructure. Now Xstrata PLC (LSE:XTA), potentially, laid this criticism to rest. The company announced a spend north of $4 billion on two projects in close proximity to Haquira. Antares is another example of value, trading well south of the takeout market caps of its copper peer group—both recently and historically. If you look at the investment checklist, you are buying value, copper, strong management and a board with prior experience in monetizing assets; it is also institutionally well covered. A great checklist.
TGR: Does the price of copper have to rise for Antares to go up, or does the demand in China just need to maintain at current levels?
SK: That's a great question; I believe both have to happen. If China continues at this pace, it should be more than enough to maintain and increase the interest levels in Antares. Obviously, we would like the news out of China to stay positive on a copper-demand basis because the market trades on a perception. We would also like copper prices to go up and stoke demand for copper projects around the world. Again, on a perception basis, it helps when copper prices go up; it results in media stoking the retail fires and the investment community promoting Antares on the streets. Ultimately, both lead to Antares' price appreciation.
TGR: Alright Scott, any other news you'd like to share?
SK: We just signed Pacific Wildcat Resources Corp. (TSX.V:PAW). This client was referred to us through PAW Board Member Terry Lyons, who also sits on the board of directors of Canaccord Financial Inc. (TSX:CF). We like this deal not only because it is trading at approximately CAD$0.20, but also because of its management expertise and properties. The CEO, located in Perth, Australia, has assembled two great plays located near infrastructure. The first property is quick to cash flow in Mozambique. They are forecasting this project will be up and producing tantalum by February 2011. Management has stated this property will earn $2M–$3M a year at full ramp up.
TGR: Tantalum, you say?
SK: Yes, and they also have a rare earth-niobium project in Kenya. You couldn't ask for better infrastructure near your properties with strong management. We haven't taken this company on the road yet because they are in the middle of a $0.22 non-brokered financing. Watch for this hidden jewel—another example of potential leverage in 2010-2011.
TGR: Terrific. Thanks, Scott.
Scott Koyich is a Calgary-based entrepreneur with over 10 years of experience in the investor relations industry. He is the president and CEO of DSK Consulting Ltd. and chairman of Brisco Capital Partners, both of which provide high-level advisory and strategic communications advice, investor relations and communication services. They are private firms representing various publicly traded companies that are listed on the Toronto Stock Exchange and the TSX Venture Exchange—including a number in the resources sector, such as Antares Minerals, Bellatrix Exploration, BioExx Extraction Technologies, Bridge Resources, Canadian Energy Exploration, Dynasty Metals & Mining, Galway Resources, Sea Dragon Energy, Sunward Resources, Tonbridge Power, TransGlobe Energy, Vero Energy and Ucore Rare Metals. Scott also has a passion for life that often crosses over into other business environments; he is a partner in two of Western Canada’s top restaurants, Il Sogno (Calgary, AB) and Cabana Grille (Kelowna, B.C.) and also co-producer of Hollywood and Vines, starring his business partners and Canadian celebrities, Terry David Mulligan and Jason Priestley.
Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Expert Insights page.
DISCLOSURE:
1) Karen Roche and Gordon Holmes of The Gold Report conducted this interview. Karen personally and/or her family own shares of the following companies mentioned in this interview: None. Gordon Holmes: From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.
2) The following companies mentioned in the interview are sponsors of The Gold Report: None.
3) Scott Koyich, DSK Consulting Ltd. (DSK): DSK is an investor relations firm. DSK provides, for remuneration, corporate communications and investor relations services to client companies represented in this interview. The information contained in this interview is based on existing disclosure documents or other publicly available information. Neither DSK nor the above-mentioned client(s) are offering securities, advising or soliciting the purchase or sale of securities. Information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. This material is not an offer to sell or a solicitation of an offer to buy any securities, nor is it an endorsement of the companies by DSK. DSK is not responsible for any claims made by the companies. Investors should independently investigate and fully understand all risks before investing. Statements included may contain forward-looking statements within the meaning of the Private Securities Litigation Reform ACT of 1995. Such statements may involve a number of risks and uncertainties. Further information on potential factors that may affect each company's financial results can be found in their specific financial reports, which are filed with the Securities and Exchange Commission (SEC) and/or the British Columbia Securities Commission (BCSC).
