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.
In 1900, two prospectors spotted a copper outcrop in southern Alaska below the Kennecott glacier, later confirmed to be the richest copper occurrence in the world.
The project attracted backing from two of Wall Street’s most prominent financiers, JP Morgan and Daniel Guggenheim, and was brought into production by 1909 despite considerable logistical challenges.
Five Kennecott mines were built and in operation until 1938. They were fabulous wealth creators for their owners, and became the cornerstone of Kennecott Copper Corporation (1915). Kennecott was one of the leading mining firms of the 20th century, and later merged with Rio Tinto.
A century later, a new high-grade mining story in Alaska is emerging and has quietly attracted an incredible list of backers including Electrum Group, Paulson and Co, Baupost Group, and Resource Capital Funds.
Trilogy Metals Inc. commences trading today under the symbol “TMQ” on the TSX and NYSE.
Trilogy was formerly called NovaCopper, and was spun-out of NovaGold in 2012. The new name better reflects its metal diversity, and is a new beginning for an under-the-radar story that quietly developed its projects during the 2011-2015 mining downturn.
The company controls the 100% owned Upper Kobuk Mineral Projects in Alaska’s Ambler mining district. It’s a 353,000 acre and 70 mile long district known to contain deposits rich in copper, zinc, lead, gold and silver. Trilogy has already delineated two significant deposits, Arctic and Bornite.
Arctic, the more advanced project, is a high-grade copper, zinc, lead, gold and silver VMS deposit being advanced towards pre-feasibility. The 2016 field program at Arctic included 3,000 meters of diamond drilling as well as engineering and environmental studies.
Bornite is 25km southwest of Arctic. It’s a large scale copper exploration project with expansion potential to the north and east. According to the company, Bornite has geological similarities to the African Copper Belt and the Mt. Isa district in Queensland, Australia, two of the world’s most significant mining areas.
Together, the Arctic and Bornite mineral resources contain over 8 Billion pounds of copper and over 2 Billion pounds of zinc and precious metals, more metal than was mined at Kennecott. Still, Trilogy’s ground is considered very prospective for additional discoveries.
Trilogy’s projects may have already been developed were it not for their remoteness. AIDEA, the Alaska Industrial Development and Export Authority, has approved funding for and is currently permitting a road to connect the Ambler mining district to the year‐round port at Port Mackenzie. The permitting timeline for the road is 2-3 years. Trilogy’s management is optimistic completion of the road will dovetail with higher metal prices later this decade.
The company is led by Rick Van Niewenhuyse, an accomplished mining entrepreneur who worked on Trilogy’s Projects as a young field geologist. Rick later founded NovaGold ($2.5B mkt cap). He’s been involved with several significant discoveries and earned a reputation for responsible mineral development. Rick was awarded the Colin Spence Award for Excellence in Global Mineral Exploration at the AME BC Roundup conference in January 2016.
Trilogy had $13.1 million in cash at March 31, 2016 according to SEDAR. It recently sold the non-core Titiribi project in Colombia for 5 million Brazil Resources shares worth roughly $13 million at press time.
TMQ has 105,262,508 shares out and last traded at 73 cents CAD, for a market cap of approximately C$75 million.
The 2016 bull market in mining ventures is making it harder for speculators to find value. Trilogy Metals has yet to receive the attention it deserves for following Kennecott’s footsteps.
Do your own due diligence on Trilogy Metals. Author is long TMQ.TO at the time of writing and biased. Trilogy’s predecessor Novacopper was a CEO.CA sponsor. This is not investment advice of any kind. Seek professional Investment advice prior to making financial decisions.
