Globex Mining Enterprises is Off to a Strong Start in 2018
With an extensive portfolio of more than 160 property holdings, Globex Mining Enterprises Inc. (TSX: GMX – $0.44 & OTCQX: GLBXF – $0.34 & Fra: G1MN – €0.27) investors usually do not have to wait long for news and updates regarding recent activity. This week the Company reported three separate news releases, each involving positive outcomes to build shareholder value.
Significant Cash Payment Realized from Royalty Stream
Probably the best illustration of the effectiveness of Globex’ strategy is demonstrated by the royalty stream related to the Mid Tennessee Mines zinc project. This project, comprising three mines, was taken offline, mid-2015 by Nyrstar NV (OTC: NYRSF) due to low zinc prices.
In September 2016 however, Nyrstar announced that as a result of increased zinc prices it would restart its Mid Tennessee mining and processing operations.
Nyrstar is required to a pay a royalty of 1.4% royalty when LME zinc prices are at or over US$1.10 per lb, and a 1% royalty when the zinc price is between US$0.90 and US$1.09 per lb. The royalty is based on the total mine output and the average monthly price of zinc.
As zinc prices have been trending higher to achieve multi-year highs, Nyrstar has also been successful in increasing total production output at the mines, and the total royalty payable has been increasing in tandem. Globex reported that it received the highest monthly payment so far in January, amounting to USD $177,179.
While the royalty will vary from month to month, the trend is certainly positive and this cash stream is a solid contribution to the healthy balance sheet for the Company. Globex estimates it will receive net revenues of more than CDN $2 million just from the Nyrstar royalty in 2018.
Successful Exploration Results Achieved in Quebec
Another attractive transaction completed by Globex was an option deal with Renforth Resources (CSE – RFR) for the Parbec property, located in Quebec. As a Quebec-based company, Globex was very much aware of the appeal for the Abitibi Greenstone Belt, one of the most productive gold districts in Canada. The Company was able to secure 100% ownership of Parbec within this premium exploration district, in part due to its ‘home field advantage’ and the experience of management and local geologists.
After holding the project for several years, Globex optioned Parbec to Renforth Resources in 2015. The terms of the deal included the payment of $500,000 in cash plus 2 million shares, and an exploration commitment of $4 million to move this project forward.
Renforth has been an ideal partner for the Parbec property, as it has established an NI 43-101 compliant gold resource through successful exploration work, defining a deposit of 33,595 ounces (Indicated) and a further 514,108 ounces of gold (Inferred) as of March, 2016.
Several rounds of work have been completed to follow up on this early success, outlining new gold zones and expanding the limits of the defined deposit area. This week another batch of drill core assays were reported, contributing further upside potential to the total resources at Parbec, including one interval of 32.6 meters that averaged 1.23 g/t gold. Through drilling that was ongoing in December and January, Renforth punched a total of 14 drill holes and all of them encountered gold zones that will count towards an increase in the gold resource. Renforth has reported that it will follow up immediately with another program to drill targets further along strike, and to greater depths, as it aspires to continue its track record of discovery.
Once Renforth has completed the commitments under the option agreement to earn 100% of Parbec, Globex shareholders remain leveraged to the property through ownership of Renforth shares acquired through the option deal, plus a retained Gross Metal Royalty (GMR) up to 2% for any production that may eventually be established at the project. Considering the magnitude of the payments in the pipeline from the Nyrstar royalty, this royalty should not be dismissed in terms of the longer term potential.
Transaction Announced for Certac Property
Yet another deal was reported by Globex this week, as the company announced a property purchase arrangement with Osisko Mining Inc. (TSX: OSK) for the Certac Property claims, located in Quebec. Osisko Mining is another company with a very successful track record for exploration and development within the Abitibi Greenstone Belt. Osisko holds claims that adjoin Globex’ Certac claims and therefore was a natural candidate to purchase Globex’ asset such that both companies win in the deal.
This transaction serves to consolidate a larger overall land package including extensions of known copper and gold zones that will improve the potential for further discovery. The sale generates $250,000 in cash to Globex, in addition to a GMR of between 2.5% and 3% depending on the price of gold, for any production which may eventually be established at Certac.
Once again, this latest transaction serves to create value for Globex shareholders, both through the receipt of a cash payment for the property itself, and the potential royalty leverage that may be realized in the event a mine development is completed at the project. Globex currently retains royalty leverage on more than 40 properties.
Each of the individual news releases issued this week confirms that Globex is achieving positive results from good strategic decisions plus the ability to attract solid partners with its diversified base of properties. Cash payments that are generated through these transactions provide the funding to build the next level of growth for shareholders.
One of the greatest risks for smaller exploration companies is the fact that it requires a great deal of money to achieve a discovery and build value from an early stage project. During bear market cycles that money is not easy to secure. By attracting stronger partners, Globex is able to ensure that exploration work continues at these properties with the potential to build greater value, funded by other companies.
Combined with exploration commitments of its partners through option deals, Globex is also able to invest directly in exploration work and advance other property assets to the point where they may eventually become the focus of future transactions.
With several positive updates already reported at this early stage of 2018 Globex is off to a very good start. As a specialist in securing acquisitions, with its strong balance sheet, the Company should continue to be effective in restocking its property portfolio to build for the future. Recommendation: Buy
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