Positive JV Developments Build Shareholder Value for Globex Mining Enterprises
While Globex Mining Enterprises Inc. (TSX: GMX – $0.39 & OTCQX: GLBXF – $0.30 & Fra: G1MN – €0.24) advances some of its wholly owned properties through exploration work itself, the Company is even more successful being a project generator where it farms out projects through joint venture (JV) arrangements.
The JV model is attractive because it requires partner companies to fund all the exploration activities, while Globex shareholders maintain upside leverage to potential discoveries through royalties.
Attractive New Gold Target Area Outlined for Parbec Property JV
This month, a couple of updates were issued for the Parbec Property in Quebec, which is undergoing an exploration program operated by JV partner Renforth Resources. During the most recent drill activities, attractive gold grades continued to be encountered as Renforth works to expand on the overall deposit area through step out drilling.
A total of 19 drill holes have been reported from the project during the last 6 months and all of them intersected gold zones. This extremely successful program underlines the highly prospective gold discovery potential at Parbec, while building confidence that a much larger overall gold resource will eventually be established for the property area.
A new Magnetic Diorite gold target has been defined, roughly 500 meters to the east of the main body of mineralization. Historic drill core obtained from work completed by previous operators of the property has also confirmed the presence of similar gold alteration to further validate the potential of this new discovery zone.
The significance of this new target is related to the distinct Magnetic Diorite alteration and the fact that similar mineralization has contributed to extremely large (and profitable) gold deposits that were developed and mined elsewhere in the district. This zone therefore could potentially yield a much higher total gold resource as more exploration activity is focused on the prospect.
Renforth has issued another update this week on the prospect zone, after completing additional interpretation and historic data compilation. The results show that the system remains open for further expansion beyond the limited area that has been tested through drilling so far. A review of geophysical surveying completed earlier indicates that this alteration area is of significant size. Renforth confirmed that the zone is considered to be a prime exploration target going forward.
Update on East Cadillac Property with JV Partner Chalice Gold Mines Limited
In a related note this week, Renforth also updated the status of the Denain-Pershing Property JV with its partner Chalice Gold Mines Limited. Chalice has issued payment of $50,000 to Renforth, and agreed to participate for $250,000 of an equity placement currently in process by Renforth. The cash payment contributes to the commitment of $200,000 in cash plus $1.25 million in exploration funding by Chalice in order to earn 80% of the Denain-Pershing property.
The Denain-Pershing property is one of four distinct properties that were consolidated by Chalice to form the East Cadillac Gold project. One of these was the Nordeau property, vended to Chalice by Globex. The terms for this transaction require a cash payment to Globex of $590,000 plus minimum work commitments of $2.5 million in exploration funding for that part of the project area. Globex shareholders also retain leverage to the discovery success through a 3% Gross Metal Royalty for the property.
Also included in the Renforth/Chalice agreement are three cells called the Matchi-Manitou claims on which Globex retains a 2% Gross Metal Royalty.
Therefore the ongoing successful work programs underway at Parbec and East Cadillac contribute to add value for Globex shareholders as the magnitude of the gold resources for these properties continues to build.
The flurry of news and updates this month related to ongoing JV arrangements is a demonstration of the value creation for the project generator business model. Globex has been proficient to assemble a suite of resource properties which then may be the focus of transactions with other companies to form JV deals.
The new Magnetic Diorite target that has been presented by Renforth is just one such positive outcome from this JV strategy. Additional gold discovery that may result in the future from this target will contribute to a larger gold resource for the project, and advance the property further along the value curve towards a potential mine development. This upgrade in value has not required additional capital investment by Globex as its partner Renforth is committed to the project funding to earn its share of the property.
Shareholders of Globex are thus leveraged to discovery success on multiple fronts as the Company has several JV arrangements on the go, in addition to the wholly owned exploration projects currently underway. The strategy ensures a much higher leverage to exploration, diversified across many attractive projects, than could otherwise be managed and funded by any one company independently.
As exploration projects become more likely candidates for profitable mine development, the value of these projects is increased, and the potential for a royalty payment stream is greater. These factors contribute to increase the value of Globex itself, and should support the share price going forward. Recommendation: BUY.
|Smallcaps.us Advice: Buy||Price Target: $2.87||Latest Company Report (pdf)|
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