Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
ThreeD Capital – (CNSX:IDK, FRA:B5K1)
Current Price: C$0.19
Shares Outstanding: 39.3 million
Market Capitalization: C$7.5 million
52-Week Range: C$0.05 – C$0.225
Cash: ~C$0.6 million
At its peak, Sheldon Inwentash’s Pinetree Capital commanded a market cap north of $1 billion and owned 400+ names in its portfolio. Pinetree Capital revolutionized the resource investment model, and today has left its mark. Pinetree alum are spread across Toronto, churning out deals, raising hundreds of millions of dollars, and running successful funds and mining companies themselves.
(Sheldon Inwentash, Source: Cantechletter)
Since its inception, Pinetree generated incredible shareholder value by seeding companies such as: Queenston Mining (acquired by Osisko Mining Corp. for $550 million), Aurelian Resources (acquired by Kinross for $1.2 billion), and Gold Eagle Mines (acquired by Goldcorp for $1.5 billion).
Pinetree’s share price reached a high of $24.50 (post stock split in 2007) on March 27, 2007, and according Q1 financials, had $700 million of investments spread across 393 names, sitting on a hefty consolidated gain of 60%. No other publicly-traded company has been able to replicate Sheldon’s model, and no other person has been able to put together homerun after homerun, all while raising over $1 billion dollars for his issuers.
This was achieved by having a clear mandate of scouring the markets for companies with inherent value of its resource; proven management with clearly-defined objectives and a strong technical and support team; future capital requirements to develop the full potential of its business; anticipated rate of return versus the level of risk; and exit strategies.
In May 2011, the strategic decision was made to issue $75M in convertible debt to continue acquiring undervalued securities, which at this point were plenty. Unfortunately, the market would be mired in one of the longest bears in history, and debt covenants were broken along with the bottom of the markets. Pinetree’s fall was hard and fast.
Sheldon retired from Pinetree in 2015 after 23 years at the helm, but began incubating another company almost immediately after, waiting for the markets to stabilize and emerge from the bear market.
ThreeD Capital, previously called Brownstone Energy, was the oil and gas investment focused arm of Sheldon’s empire. However, the company is now described very much like Pinetree once was, a venture capital firm focused on opportunistic investments in companies in the junior resources, technology and biotechnology markets.
While still in its infancy, ThreeD Capital is Sheldon Inwentash’s foray back into the mining sector. The company recently closed a $620,000 financing and in a corporate update, announced significant investments in Palisade Resources, a land bank focused on gold and uranium in premium jurisdictions, as well as Goldspot Discoveries, an investment company that has developed a machine learning algorithm for mineral exploration.
Before we continue, we would like to emphasize ThreeD Capital is invested in two companies Palisade Global Investments also has large stakes in, and in turn Palisade Global is an investor in ThreeD Capital.
We obviously know both Palisade Resources and Goldspot Discoveries intimately. However, being private companies, the market has no idea what ThreeD Capital should be worth. We will outline the value drivers for both companies, and demonstrate why early entrants of ThreeD Capital are poised to leverage not only the resource bull market, but also the premium someone like Sheldon brings to the table.
Read full articles: Palisade Research
