Advancements Achieved by Royalty Partners May Create New Revenue Streams For Globex

With its extensive suite of exploration properties and royalty holdings, it seems there is always work underway of interest to shareholders of Globex Mining Enterprises Inc. (CA: GMX – $0.70 & US: GLBXF – $0.53 & GER: G1MN – €0.43). Ongoing exploration activity at several wholly owned properties directly contributes to value creation at the discovery level. Meanwhile, joint venture and royalty partnerships are also advancing with the potential to build further shareholder value.

This week, Globex presented an update for several active projects. The Company is currently working to advance its Laguerre-Knutson-Raven River gold project in Ontario. We understand that a previously announced program of five diamond drill holes was just completed. The drill core is being logged and split in preparation to select samples for laboratory assay. The results are expected in several weeks.

Royalty partners are also moving ahead with work to advance projects further along the value curve. Manganese X Energy Corp [MN] has announced a drilling program is now underway at the Battery Hill project. Globex retains a 1% Gross Metals Royalty on Battery Hill.



Unloading of heavy equipement at Battery Hill
A successful outcome to develop a mine at Battery Hill will open the prospect for a stream of royalty payments to Globex form all manganese or other metals produced from the property. The Company secured 2 million shares of Manganese X, after the deal to vend the project in 2017. The value of this minority share ownership continues to increase as the primary asset moves forward.

Drilling Underway at Battery Hill to Upgrade Resource

Battery Hill is considered the most advanced manganese prospect located in North America and presents the potential for mine development. Located in New Brunswick, Canada, the proposed mine is located just 12 miles from the border with the United States. Approximately 25 shallow drill holes will be completed during this phase of exploration work. The drilling is targeted towards the near surface, higher grade sections of the defined deposit area. A minimum of 3200 meters of drilling is planned in total, with each hole ranging in depth between 100 to 250 meters. These relatively shallow targets may become starter pit areas as part of a more significant long term mining plan.

It is expected that additional resource zones may be encountered within the target area. However, infill drilling is intended to enable upgrading the level of confidence for the estimated resource from the current Inferred classification.

Manganese X is also advancing metallurgical studies with sample material from the deposit. Combined with the updated resource data from the drilling, greater clarity from the performance of metallurgical studies in the resource area will be included in a pending pre-feasibility study thereafter. The objectives are in line with recommendations from the technical report for the project presented earlier this year in June. All of the work programs are geared towards creating a fast track for development of an open pit mine to produce manganese.

Development is advancing for a new battery design to power electric vehicles, incorporating manganese in the cathode. Increasing demand for manganese is leading to higher prices for the metal. A North American mine source for manganese is even more attractive to domestic manufacturers like Tesla. The successful development of this ‘Electric Gold’ would therefore create a valuable royalty stream to Globex.

Recent All-time High Gold Price Enhances Royalty Leverage and Ongoing Exploration Activity

Another Globex royalty partner is also advancing work. Nippon Dragon Resources Inc. [NIP] reported a progress update this week for its Rocmec 1 gold mine in Quebec. Nippon Dragon is now very close to commencing mining activity at this former gold producing mine.

Underground development work to open new mine zones is currently underway, using Thermal Fragmentation technology. An advanced technology for underground mining operations, Thermal Fragmentation enables extraction of precise sections of an orebody. This results in lower dilution due to waste rock. The process is therefore more efficient as it reduces transportation and processing costs for narrow vein deposits. The technology is also effective for extending underground infrastructure. Nippon Dragon holds an exclusive license for the Thermal Fragmentation process.

Development is advancing to access resource zones of the Talus vein. The vein system is variable and sometimes narrow in width. The ability to precisely control extraction to match this width variance will contribute to reducing mining costs for the project. Nippon Dragon is driving a raise starting at level 50 and extending to sublevel 39 of the mine workings. Two drifts are also underway at Level 50 to access gold resource sections of the structure.

About $33 million has already been invested towards rehabilitation of the formerly producing mine. The timing is fortuitous for this effort to resume mining as the gold price recently achieved a new all-time high. Measured & Indicated resources of 119,500 ounces of gold have been documented for Rocmec 1, plus nearly 360,000 ounces in the Inferred category of confidence.

It is not clear when active mining will begin, although all indications are that operations may commence shortly. Globex retains a 5% Net Metal Royalty on the first 25,000 ounces of gold produced from the mine, and a 3% NMR on all production output thereafter.

Conclusion

Royalty leverage is held in perpetuity. Even when a project is dormant or released by the owner, prior royalty commitments remain in effect. It is quite common for a property interest to change ownership many times before a producing mine is established. Meanwhile, the investment for further work to advance a project is funded by third party operators and does not represent a liability to the royalty owner. In addition, the underlying value of the resources may increase in the interim and therefore the royalty leverage to these resources may amount to a more significant revenue stream during the life of a mine.

Globex has demonstrated the attractiveness of royalty stream income with the revenue growth generated from the Mid-Tennessee Mines property operated by Nyrstar NV. As royalty partners like Nippon Dragon and Manganese X continue advancing their respective projects, the potential for additional high value income draws closer.

Of note, the market value for all of the metals involved with these companies, including zinc, gold and manganese, is increasing with the prospect for further gains in the years ahead. The royalty leverage then works like the gift that keeps on giving, as greater revenue streams payable to the company may continue without the demand for ongoing investment funded by Globex.

A promising resource bull market is underway. This has the effect to build value for the ownership interests controlled by Globex in addition to the direct revenue that may be generated by future property transactions and royalty income. The value proposition is further enhanced through the impressive number of high quality properties directly controlled by the Company. With one of the largest portfolios of exploration prospects among all of the junior resource companies in Canada, Globex represents the ideal profile for shareholder value creation. Smallcaps Recommendation: BUY.

Smallcaps.us Advice: BuyPrice Target: $1.07Latest Company Report (pdf)
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