Attractive Royalty Interests Held by Globex Mining Again Demonstrate Their Value
With a large portfolio of exploration properties and royalty interests, Globex Mining Enterprises Inc. (CA: GMX – $1.07 & US: GLBXF – $0.86 & GER: G1MN – €0.69) is ideally positioned to participate in the current resource sector bull market. The strategy to acquire attractive property interests at minimal cost when the sector is at a low, is now paying off handsomely. Globex has attracted other companies to participate in transactions which have generated impressive capital gains. The royalty portfolio also creates shareholder value as properties are advanced through to mine development. Producing mines generate recurring streams of revenue through these royalties that are payable on all production in perpetuity. And the royalties may also be sold in high-value transactions.
With so many successful transactions arranged in recent years, there are many active projects underway that are of interest to shareholders. Globex has reported numerous updates and news events related to partner companies. This week, for example, the Company highlighted news from Nippon Dragon Resources Inc [NIP]. A transaction has been arranged that will enable NIP to sell its Rocmec 1 gold project in Quebec to an Australian junior, Orminex Limited. Orminex has agreed to pay $5 million in cash to secure ownership of the project. In addition, Orminex will deliver 4500 ounces of gold from the mine production to NIP.
This high-value transaction demonstrates the commitment of Orminex to resume mining at the property. Meaningful gold production at Rocmec 1 is also important for Globex shareholders. Globex retains a substantial royalty interest amounting to 5% Gross Metals Royalty (GMR) on the project for the first 25,000 ounces of gold produced from the mine and a 3% GMR payable thereafter. The revitalization of gold mining operations may ultimately contribute recurring royalty income to Globex.
Significant Transactions Updated for Other Globex Royalty Interests
Last month, Globex announced that a previously reported transaction to vend the royalty interest for the Mid-Tennessee Zinc Mines project has closed, transferring ownership to Electric Royalties Ltd [ELEC]. ELEC issued a total of $13,750,000 in cash to Globex and 8,752,860 common shares plus 5,348,970 share purchase warrants of Electric Royalties.
Another transaction involving ELEC was also confirmed, involving the transfer of a 1% GMR on the Glassville Manganese property. Globex was paid a total of 247,140 common shares of ELEC plus 151,030 share purchase warrants. As a result of this arrangement plus previously completed transactions, Globex is now the largest shareholder of Electric Royalties, owning 12 million shares plus 5.5 million warrants.
In August another royalty partner, Starr Peak Mining Ltd [STE], announced that it was increasing the magnitude of its ongoing exploration program at the NewMetal property in Quebec. This project was assembled from several property holdings including a package of land claims acquired from Globex for cash plus 1.2 million common shares of Starr Peak. Globex also retains a 2.5% GMR on these claims.
Successful exploration activity at the project this year has delivered impressive results to advance discovery of a VMS-style deposit. Attractive, high-grade polymetallic mineralization has been outlined at NewMetal. Therefore Starr Peak has chosen to increase the scale of its drilling program. The company will now commit to a total of 60,000 meters of drilling. This amounts to an extremely ambitious exploration program, entirely funded by Starr Peak. If indeed the deposit advances through to mine development, Globex shareholders will also become beneficiaries of this success. A substantial revenue stream would be generated from the retained royalty interest on the project.
Another Milestone in the Development Path for the Mont Sorcier Project Reported
Vanadium One Iron Corp [VONE] has also reported progress as it works towards development of the Mont Sorcier iron and vanadium project. In August, VONE announced that a Memorandum of Understanding (MOU) was signed with the port of Saguenay whereby both parties will work together to advance development of Mont Sorcier. Vanadium One has selected this port as the optimum transportation hub for shipment of concentrates that would be produced through a successful mine development.
The Federal Government of Canada has pledged a grant of $33 million to the Port of Saguenay, matched in another grant by the Provincial Government of Quebec. The funding will contribute to construction of a conveyor system connecting the industrial complex of the port facility. In addition, upgrades to the railway access for the marine terminal and services for large vessel loading/unloading are planned.
VONE will work with the Port of Saguenay to develop a strategic plan to manage shipments through the port for delivery to ocean-going vessels. A definitive agreement for support services including terms for commercial land lease, operational costs related to berthing ships and loading of concentrates will be discussed.
If Mont Sorcier is successfully developed into a producing mine, the outcome will create value for Globex shareholders. Mont Sorcier was one of the projects rolled into Chibougamau Independent Mines Ltd through a previous transaction reported by Globex. Globex retains a 1% GMR on iron from the property. In addition, Electric Royalties also holds a 1% GMR on vanadium production from the property through a previous transaction. Therefore Globex would benefit through its large share ownership of Electric Royalties and from any income stream payable to its partner.
A recurring theme from the flurry of encouraging news events over the last four weeks has been the value created for Globex shareholders through leverage to activity funded by royalty partners. Note that Globex often receives significant payments in cash and shares that generate capital gains at the front end of these transactions.
Starr Peak Mining Ltd has performed as a successful case study for the overall strategy. Globex is well positioned with a minority share ownership that has surged in market value. Now as the magnitude of exploration has been increased, this work funded by its partner may eventually lead to a mine development that will deliver further gains to Globex through the royalty interest.
Similarly, the Mont Sorcier project is also advancing towards a potential mine development that creates a potential royalty income stream for Globex. When the transaction to acquire the Rocmec 1 gold project closes, Orminex aspires to resume mining activity at the property. This in turn will also generate recurring income to Globex through its royalty leverage.
Meanwhile, the deal to vend the Mid-Tennessee Mines royalty netted a huge gain for Globex. The balance sheet for the Company is flush with cash. The working capital has also surged as its share ownership positions in partner companies increases in value.
Globex has delivered a series of impressive transactions in recent months that established the largest cash position in the history of the Company. Now many of these deals are moving forward to where substantial royalty income may also be realized. The pace of recent activity suggests this winning streak may continue, building further shareholder value through the success achieved by partner companies. Smallcaps Recommendation: BUY.
|Smallcaps.us Advice: Buy||Price Target: $2.10||Latest Company Report (pdf)|
|For important disclosures, please read our disclaimer.|