A $35 million investment round in Fortune Minerals (FT) by Lascaux Resource Capital will see the junior become a producer, and is testament to the quality of management at the London, Ontario based Fortune.
The investment allows Fortune to purchase 100% of the Revenue Silver Mine (“RSM”) in south west Colorado. This is a transformational time for management and shareholders as Fortune is now a producing company to go along with two advanced stage development projects.
The Revenue Silver Mine is a historical producer of over 15 million ounces and is currently in the advanced stages of ramping up and commissioning. The mine is expected to ramp up to 400 tons per day when in full production. Once the ramp up is complete estimated annual production is 1.86 million ounces of silver. Small amounts of gold, zinc, and lead will also be produced.
Fortune had previously acquired a 12% stake in the mine in May and has been operating it since.
The company will be using the investment from Lascaux to:
- purchase 100% of the mine;
- make operational improvement;
- general working capital.
Investors should be aware that this a production metal prepay deal with Lascaux. The structure is a fixed monthly metal unit repayment schedule that is tied to the mine production schedule. Fortune will deliver a portion of the metal produced monthly for 5 years to repay the facility.
Operational improvements have been underway since Fortune acquired the 12% stake in May.
A 2% NSR (net smelter return) in favor of the former owners is part of the transaction and will be capped at $9 million.
The economics at the mine are robust with the PEA showing a NPV of $69.6 million (6% discount rate) and an after tax IRR of 76.2%.
*The PEA uses a $22 silver price assumption
The current measured and indicated resource is 16.3 million ounces of silver and an inferred resource of 10.1 million ounces. Management believes the area and claims surrounding the mine are very prospective to find more resources.
Previous investments by Lascaux Resource Capital include Appalaches Resources Inc (APP.V) whose stock was halted before the open pending news. Appalaches is in small scale production at the Dufferin mine in Nova Scotia.
Robin Goad, Fortune’s President and Chief Executive Officer commented, “Our ability to arrange financing and close this purchase of the Revenue Silver Mine in a challenging capital market is a testament to our team. We look forward to completing the changeover of operations and are delighted to welcome the employees of the mine to Fortune as we continue with the ramp up to 400 tons per day and cash flow from operations.”
Arctos Anthracite Project in British Columbia
The Arctos Anthracite Project is an 80% owned joint venture with POSCO Canada Ltd., the Canadian subsidiary of Korean steel producer POSCO. Arctos will produce anthracite coal used in steel manufacturing, metals processing and other products such as carbon filters for water purification. The Tahltan Nation strongly opposes the development of this project and permitting is currently suspended until December 1st.
NICO gold-cobalt-bismuth-copper project in Northwest Territories & Saskatchewan
The NICO project comprises a proposed mine and mill in the NWT that will produce a bulk concentrate for shipment to the planned Saskatchewan Metals Processing Plant for processing to final products. NICO will stand out as a fully integrated producer of cobalt chemicals needed to manufacture rechargeable batteries used in portable electronic devices and electric vehicles. Tesla Motors’ decision to build a $5 billion lithium-ion battery “gigafactory” in Nevada highlights the importance of being a proposed reliable North American source of this critical resource. NICO also contains 12% of global bismuth reserves, a metal with growing use in the automotive industry and as a non-toxic, environmentally safe replacement for lead. Both cobalt and bismuth have supply concerns due to the dominant world production coming from the Congo and China. The gold reserves at NICO also provide a countercyclical hedge.
Fortune is moving forward and has achieved its goal of becoming a producer with the acquisition of the Revenue Silver mine. The acquisition was completed in a very tough mining market and was minimally dilutive to shareholders. Fortune will be a stock to watch in 2015 as production ramps up and work continues on its development projects.
Share price: $0.22
Shares outstanding: 194.6 million
Market Cap: $42.8 million
No positions in any of the companies mentioned. Always do your own due diligence.