Ivanhoe Mines Ltd (Symbol: IVAN – Trades on NASDAQ)
Canadian mineral exploration company headquartered in Vancouver, British Columbia, whose projects are located in Africa. (Formerly) known as IvanPlatts Ltd. 19 Years as a private company. Run by Robert Friedland, the MOST successful mining entrepreneur on the planet. Operates in two jurisdictions that people hate, South Africa and Congo. Why invest in Congo or South Africa while you could invest in friendly jurisdictions like British Columbia or Neveda? The company is spending $20 million a month. It will take five years for Ivanhoe Mines Ltd to get into production. To put their three mines into production it will cost $7 billion. The company is involved in three projects and the third best project is Kipushi Mine in D.R. Congo. Although it’s the companies third best project it without argument the single best Zinc and Copper deposit in the world bar none. In other words the worst property in this company is the best property of its type in the world. The Kamoa Copper Project in Congo is the most important copper discovery in the last 40 years. The Katanga copper belt is without doubt the best copper belt on the planet contains a large undeveloped copper deposit where the surface expression is about the same as the real estate covered by the city of London. The other deposit is the Platreef deposit in South Africa which is the most important platinum and palladium discovery in the last 80 years. So in one company you have absolutely world class discoveries. The company has a market cap of $1.2 billion, they have $300 million cash which is dwindling quickly, so that means current enterprise value is $900 million. Just look at Robert Friedland’s track record – Far Banks been in production for the last 15 years, Voici Bay, Turquoise Hill. His record is quite astounding and he has two new one’s in one vehicle.
JockMeck which is an arm of the Japanese Government paid $200 million of the Platreef deposit in Ivanhoe. If 10% is worth $200 million , the total overall deposit is arguably worth $2 billion. It’s worthy to note that they paid the $200 million two years ago when the deposit was half it’s present size, so let’s assume it hadn’t grown by half let’s assume it is what it was, that means that Friedlands 90% of the deposit is worth $1.8 billion but it’s valued at $900 million and you get the best copper, palladium and platinum disovery in the last 40 years for free. Free is a very good number. Il give you one more reason not to buy it – the last time I checked their were 1.2 million shares looking to be bought and their were $41 million shares looking tobe sold. So in the short term, the number of sellers greatly overhauls the number of buyers. You shouldn’t pay too much attention to the near term because you have the ability to buy $15 billion of assets for $900 million and you must have the willingness to own it for 3 or 4 years.
Lydian International (Symbol – TSE:LYD}
3 reasons to sell. The project is in Armenia and it doesn’t have any mining laws. It’s located in the far south with unsavoury neighbouring countries like Iraq. The company is currently is in feasibility stage and everybody knows they’re going to need to raise equity to put them in production. But nobody knows at what price and nobody knows when, so there is resistance in the market associated with the timing of the next equity raise. The management are explorationists, they have no particular expertise in mine building. Why would you buy Lithium? Mainly because the feasibility study from my point of view shows it to be worth $4.50 a share. This is a project with a +30% internal rate of return, a payback of three years or less and very high capital efficiency. Although there are political risks in Armenia, they are less than the political risks in either British Columbia or California simply because Armenia needs mining and richer jurisdictions do not. One of the risk’s is the company’s president Tim Coughlin doesn’t know a damn thing about building a mine and he might need to be replaced. If they build the mine and they don’t get taken over he’s going to have to fire himself.
Sprott Inc (Symbol – TSE:SII)
Sprott Inc. It is an independent asset management company. The Business operates through 4 fully owned subsidiaries, Sprott Asset Management LP, Sprott Consulting LP, Sprott U.S. Holdings Inc amd Sprott Private Wealth LP. Here are some of my initial concerns. Why would you want to buy shares in a company where the thought leaders – Mark Faber, John Embry, Eric Sprott + Rick Rule are 71, 70, 68 and 60 years old respectively. The business is 100% dependent on natural resources. Why would you buy a money manager in a sector that is currently out of favour? Also the stock has fallen from $10 to $3, your suppose to buy stocks that go up not down. The positives – The company has no debt unlike so many of its competitors. Rick Rule and Eric Sprott run this business for a 100% equity slice. As for poor recent performance you need to put that into context, Eric Sprott’s 20 year record prior to 2011 is unbelievably. The company’s in the short term may be out of favour but in the long term the investmentsthey’ve made will turn to be correct in the future.