Strategic Dance Keeps Investors in the BlackWed, 10/16/2019 - 18:08
Minaurum Gold’s strategy for increasing shareholder returns is like a dance whose moves are all about keeping investors in the black, says Director David Jones, adding that the right financial vehicle can provide added value for backers. “All the money we have recently received comes from investors that are in the black on their share warrants; that is, they are showing a profit on what they initially paid,” he explains. “We have done well; share prices have gone up to US$0.60 from US$0.25.”
The company’s strategic choreography has helped it attract 70 percent of its European investment on a warrant basis. “We are very happy with our European investors because they tend to think for the long term, implying a stronger financial backup for the company,” Jones says. Much of Minaurum’s recent funding comes from exercising of warrants listed on the TSX Venture Exchange. According to Jones, these offer an advantage to investors because they have the option to acquire shares at a warrant price that is well below current market value. Its financial strategy is intricately linked to its approach to finding deposits, which is where the dance takes a subtle turn. Rather than describe its focus as purely exploration, Minaurum considers itself an incubator for mineral discoveries. “The practical difference between both is that we are not interested in being merely explorers; we plan to find and discover new mines. It is a subtle distinction that relates to how we spend our money and set our goals,” Jones explains.
When setting goals, the first premise for the company is to explore without getting ahead of investor expectations. This allows Minaurum to determine the real value of a given project, a key factor because many exploration companies are eager to sell at the first discovery, which is not necessarily the most profitable option. “We always consider whether it is best for our shareholders to not sell a project too early,” Jones says. “If we have the confidence that we can increase the value of a project on our own, we will invest in taking it to the pre-production stage.” He compares this to having a piece of land: you can either sell it to someone to build a house on it or build the house yourself first and then sell it at a higher price.
Minaurum is betting on the potential of its Alamos project in Sonora to build the house itself. The company started an intense drilling program at the property in 2018 with Bylsa Drilling. “The drilling intercept we had in 2018 was about 8m of 1.8kg of silver,” Jones says. “That kind of intercept is extremely rare, especially in an area that has not been drilled before.”
While a tasty intercept can be a cause for celebration, Jones says it is a double-edged sword. “The problem with such great results is that the expectations for the project grow exponentially,” Jones says. “In the finance world, this means that stocks will go up and up until they collapse if we do not keep up with expectations.” To maintain its momentum, Minaurum relies on its team of successful geologists whose careers have been marked by the discoveries they have made. The team includes Jones and Peter Megaw, who help the company resist market pressure to keep drilling the same target at Alamos. “Big companies hate that we do this because if we go to the same vein and find better results, our shareholders will pressure us to sell the property to a major player for less money than it would be worth if fully explored. But those of us with deep experience on the exploration side can say: 'wait a minute, we have not tested it all.'”
Minaurum is buying itself the time it needs to discover the real value of Alamos by not letting expectations get ahead of it. “Instead of building expectations on one target, we will keep drilling the property to multiply our chances of success with findings at other veins,” Jones says. “From our point of view, it is better to get the money we get from people who believe in us now in order to make this project as big as we can, as fast as we can.”