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  • Cash Pile Eastern Platinum Pops 135% On Deal

    Eastern Platinum (OTC:ELRFF)is selling its PGM assets in South Africa to Hebei Zhongbo Platinum Co. Ltd. for US $225 million in cash.

    Here is a link to the news release.

    The market was clearly undervaluing the assets, as the company had a roughly $89 million market cap this morning, whilst sitting on roughly $81 million in cash.

    The windfall means the company, which was trading at $0.95 this morning with 92.8 million shares, could have as much as $3.25 cash per share.

    Please note there is uncertainty regarding how much of the $225 million will be net to Eastern Platinum, with Black Economic Empowerment and other partners likely a part of the picture.

    According to the news release, "The consideration received by Eastplats will be net of the amounts payable to certain minority interests, which amounts remain to be settled."

    Hebei Zhongbo will acquire the company's primary assets which are:

    1. an 87.5% direct and indirect interest in Barplats Investments Limited ("Barplats"), whose main
      assets are the Crocodile River Mine ("CRM") located on the Western Limb of the BC and the
      Kennedy's Vale Project located on the Eastern Limb of the BC;
    2. an 87% direct and indirect interest in Mareesburg Platinum Project (the "Mareesburg Project"),
      located on the Eastern Limb of the BC; and
    3. a 93.4% direct and indirect interest in Spitzkop PGM Project ("Spitzkop"), also located on the
      Eastern Limb of the BC.

    The deal is expected to close in the next 3-6 months and does have a $11.25 million break fee.

    "The entire resource sector is under considerable pressure and PGMs have been disproportionately impacted as a result of a number of factors unique to the sector. The capital required to advance the Eastplats assets into production is not available in the public markets at this time and we are very encouraged by the ability of Hebei Zhongbo to deploy its resources in this regard. This foreign capital and the creation of much-needed jobs will contribute to the ongoing socio-economic development in areas surrounding the mine and projects," said Ian Rozier, president and chief executive officer of Eastplats. "Closing the transaction will leave Eastplats extremely well capitalized to take advantage of the considerable opportunities in this weak market."

    We called the company for colour on the news release, and the receptionist told us to call back next week.

    This is not investment advice. Author is extremely biased and bought shares at the resumption of trading.

    Read: Eastern Platinum to sell S.A. PGM business to Hebei

    Tags: ELRFF, platinum
    Nov 07 3:43 PM | Link | Comment!
  • What You Need To Know About Canada's Latest Energy IPO: Seven Generations Energy (VII:TO)
    The second largest IPO in the Canadian energy space this year was completed this week by Seven Generations Energy (TSX: VII). This IPO proves investors still have a strong appetite for energy stocks, even with energy prices sliding recently. $51.75 million shares were issued at $18 per share, raising a total of $932 million for the company.

    Seven Generations operates out of Calgary and focuses on the liquids rich natural gas area of the Montney shale in Northwest Alberta. Current land position totals over 350,000 net acres in the Kakwa region (330,000 of those in the Montney). Production has been determined viable and Seven Generations is looking at a multi-decade development program in the area.

    Production for the third quarter was 35,400 barrels of oil equivalent per day which is up 400% year over year and a 48% increase quarter over quarter. The company is profitable and earned net income of $41 million in the second quarter (3rd quarter results yet to be released).

    A July 1, 2014 reserve estimate by McDaniel shows gross proved plus probable reserves of 649 MMboe (570 MMboe net of royalties). 10 drill rigs are currently active on the property with 5 more expected to be added in 2015.

    Management has disclosed in the prospectus that production in 2015 is expected to average between 55,000 and 60,000 barrels of oil equivalent a day.

    Seven Generations is led by CEO Pat Carlson who founded the company with $300 million from investors. He has a proven track record of building successful private junior oil companies. Marty Proctor was recently appointed Chief Operating Officer, a position he formerly held at Baytex Energy (BE:TT).

    Major shareholders include the Canada Pension Plan Investment Board (14.8%), and private equity funds Arc Financial Corp (11.6%) and KERN partners (8.2%).

    Initial signs appear promising that the stock will trade above the IPO price. Shares of PrairieSky Royalty (PSK.T), Canada's largest IPO this year at $1.5 billion, are trading at $34.80 up from the $28 IPO pricing in May.

    A strong growth profile is expected for Seven Generations which is always exiting for shareholders in the energy space.

    Symbol: VII.T

    Share price: $21.20

    Shares outstanding: 192.39 M

    Market cap: $4.78 B

    I have no position in any of the stocks mentioned. This is not investment advice. As always please do your own due diligence.

    Post originally appeared on

    Tags: SVRGF, oil
    Nov 07 2:04 PM | Link | Comment!
  • Goldcorp`S Next Takeout Could Be Detour Gold

    Detour Gold (OTCPK:DRGDF) reported a small loss after the bell today of $800,000. Gold production for the quarter was 115,334 ounces meeting management expectations. Cash costs came in at $941 per ounce sold which is within the company's guidance for the year of between $900 and $975. The asset is one of the best in the gold space with 15.5 million ounces in mineral resources and a projected mine-life of over 21 years.

    Detour continues to ramp up production at the mine and I believe it will be the next producer in Canada to receive a takeover offer, likely from Goldcorp (NYSE:GG).

    What's the hold up on the offer? Well, despite the weak gold price, the company has struggled to ramp up the giant mine. Although they sold 106,334 ounces this quarter at an average realized price of $1,278, they did so losing money because it cost them $1,296 to sell each ounce they produced (including $350 per ounce in depreciation expense).

    A gold hedge is in place from August to December covering 100,000 ounces at a contract price of $1,287 per ounce which should help protect Q4 earnings a bit despite the declining gold price.

    A positive operational sign this quarter was that the mill was running above nameplate capacity of 55,000 tonnes per day (tpd) for 44 consecutive days. The company maintained full year guidance of 450,000 to 480,000 ounces of gold.

    At full-scale production, the mine is expected to produce 660,000 ounces of gold at average cash costs of $723 per ounce (life-of-mine).

    Detour still has a lot of work ahead of them and expect to end the year spending between $125 and $135 million on the project. They have to increase the mining rates which were at their lowest for the year this quarter as a result of low drilling productivity and delays in explosive loading which, the company says, impacted shovel productivity and utilization.

    The mill availability also needs to be improved as shut-downs have been common in order to replace and/or fix equipment.

    "Overall, our third quarter operational results were in line with our forecast with gold production standing at 339,864 ounces for the first nine months of the year. Based on the current ramp-up progress, we remain on track to be within our production and total cash costs guidance for 2014," said Paul Martin, President and CEO. "We are extremely satisfied with the recent performance of the plant and remain confident in further improving mill availability during the fourth quarter. Our focus is now on the mine operations to further increase mining rates."

    (click to enlarge)

    A wild 2 year price chart for Detour investors with a high of $27.50 all the way down to a low of $2.88 late last year.

    I believe Detour will be taken over by Goldcorp, once management has worked through the ramp up 'growing pains'.

    Goldcorp attempted a bid on a similar size company, Osisko, in early 2014 but lost out to Agnico-Eagle (NYSE:AEM)and Yamana (NYSE:AUY) in a very public bidding war after they Goldcorp initiated a hostile bid. Osisko was acquired for its Canadian Malartic mine in Quebec which produces 600,000 ounces of gold annually and hosts a global resource of +10 million ounces of gold.

    Osisko was jointly acquired for $3.9 billion. The current enterprise value of Detour is less than half of that, or approximately $1.5 billion.

    The next logical move for Goldcorp would be to make a bid for Detour and this could happen as early as next year if Detour can continue to show operational consistency at the mine.

    Goldcorp brought a couple new mines on-line this year and will have increased cash flow generating capacity in 2015 as capex requirements slow down.

    I believe Goldcorp will be in the market for a long-life, large-scale asset in a stable jurisdiction and Detour fits this bill.

    Detour does have $760.2 million in debt and interest of which $500 million in principal associated with a 5.5% convertible note is due in 2017. A sliding gold price is something to watch as this is a low grade, bulk-tonnage asset (<1 gram per tonne).

    The 20 analysts that cover Detour have an average target price of $15.41 per share and nobody believes the company is worth less than $11.25 per share (October 14, 2104).

    Shares have outperformed the Market Vectors Gold Miners ETF (NYSEARCA:GDX) this year, trading up 27% versus the index's negative return of 21%.

    Paulson & Co, the hedge fund led by Wall Street legend John Paulson, owns 14% of the company's shares.

    Management will host a conference call on Tuesday, November 4, 2014 at 10:00 AM E.T. The details of the conference call are as follows:

    • Via webcast, go to and click on the "Q3 Results Conference Call and Webcast" link on home page
    • By phone toll free in Canada and the United states 1-800-319-4610
    • By phone International 416-915-3239

    The conference call will be recorded and playback of the call will be available after the event by dialing toll free in Canada and the United States 1-800-319-6413, or internationally 604-638-9010, pass code 1532 (available up to November 30, 2014).

    Symbol: DGC.TSX
    Share Price:$6.68
    Shares outstanding: 157.8 M
    Market cap: $1.04 B
    Net debt: $470 M (as of Sept 30th)

    Read: Detour Gold Reports Third Quarter 2014 Results

    I have no position in any of the stocks mentioned. This is not investment advice. Thoughts in this article are my opinion and should be taken as is. As always please do your own due diligence.

    Orginal post from

    Tags: GG, DRGDF, gold stocks
    Nov 07 2:04 PM | Link | Comment!
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