As a
general rule, the most successful man in life is the man who has the best
information.
TNR Gold Corp
(TSX.V:TNR) is a project generation company active in precious, base metals,
Lithium, rare metals and rare earth elements (REEs).
Project
generators, after finding and securing a property, do the initial mapping,
sampling and maybe a small drill program. Upon making a discovery, basically
finding something of interest, they turn it over to a joint venture partner
who puts up the money and or its own shares to earn into the property over a
number of years while investigating the discovery.
Yes the project
generator's shareholder's eventual ownership of a discovery is diluted, BUT,
their ownership in the prospect generating company is not diluted because there
is very little dilution of the generators outstanding shares. This is because
the exploration/development expenses are paid by the partner, not the
generator.
A property
ownership dilution business model is not as well liked as the much more
common share dilution model.
But our prospect
generator offers three other things that should be considered....
·
The
project generator could take this approach time after time on different
projects, at the same time, with relatively little dilution. Prospect generators
do not have to concentrate limited resources and stretch themselves to cover
one or two projects. And if one of their projects does go bust, well they
always have a few more simmering on the front burners
·
If
at first you don't succeed try and try again, the same project may be joint
ventured many times, each new company trying a different geological model and
approach before success is ultimately achieved
·
Eventual
possible spin outs of properties into new companies to achieve increased
shareholder value
TNR Gold Corp
already has many compelling reasons for it to be on investors radar screens,
notably - 18 active projects in three groups:
·
Argentina
gold/copper - High quality copper/gold projects in Argentina with $5 million
spent on exploration over the last few years. Among the 5 active projects are
El Salto (13,300 hectares) and El Tapau - both early stage projects that have
potential for Au-Cu-Mo porphyry discoveries. El Salto has a 6 x 1.5km
chargeability anomaly and El Tapau has three target areas - exploration
includes grab sampling averaging 2.2g/t Au over 4.5km of strike length and
limited drilling (including 82m @ 0.49% Cu). Both projects will be the
targets of geophysics and follow up drilling.
·
Lithium
and rare metal projects - TNR has nine early stage lithium brine and rare
metal projects in all the right areas: Lithium brine in Argentina, lithium
brines in Nevada, and rare metal/lithium pegmatites in Canada and Ireland.
·
Alaskan
gold - TNR has 50% of Shotgun, a breccia-hosted Au target with a non 43-101compliant
inferred resource of 980,000 oz Au grading 0.93g/t and having drill ready
targets (In 2006 DDH 06-43 returned 210m of 1.29 g/t Au). The Iliamna Project
lies less than 80k from the giant porphyry-hosted Pebble Deposit (18.8billion
lbs Cu, 31.3million oz Au, 265 million lbs Molybdenum). Recent geochemical
analysis and interpretation reveals geological similarities to the Pebble
deposit and has identified targets previously unknown.
There's also Los
Azules - one of the largest copper deposits in the world - TNR retains a 25
per-cent back-in right on the northern half of the property plus has 100%
ownership of Escorpio IV. The Los Azules Cu-Au-Ag deposit contains a 43-101
inferred resource of 11.2 billion lbs Cu grading 0.55%, with a high grade core
of 2.3 billion pounds grading 1% Cu. TNR served their back-in notice in April
2010. Minera Andes rejected the back-in notice and the validity of said back
in notice and Escorpio IV ownership is the subject of a legal dispute. TNR
has a C$5m loan facility that can be drawn down to support its legal claims.
But add in the
imminent spinoff of its lithium properties into International Lithium TSX.v -
ILC (and the eventual possible spinoff of its Alaskan properties into another
newco) with the benefit of shares + warrants that have no hold period -
initial share price of ILC is valuated at $0.25/share @ 60 million shares
outstanding - and the case becomes, in this author's opinion, more than
compelling.
The meeting date
is June 22, 2010 for shareholder approval of the previously announced (April
27, 2009) spin-out of TNR's lithium and rare metal assets into its
wholly-owned subsidiary - International Lithium Corp. TSX.v - ILC. TNR
shareholders of record on the date of the spin-out, planned for July 2010,
will receive one share and one fully tradeable warrant of International
Lithium Corp. for every 4 shares of TNR held.
TNR Gold will
transfer the following properties into ILC:
- Mariana
- Forgan Lake
- Niemi Lake
- Mavis Lake
- Moose 2
- Fish Lake
Valley
- Mud Lake
- Sarcobatus
Flats
- Leinster
(Ireland)
The parent
company and shareholders should retain ~87% of ILC, and there will be a
C$2.5m IPO. The year one exploration budget will be in the range of
C$1m-$1.5m.
ILC's initial
focus will be on the Mariana project. ILC will have a 100% ownership option
on 120 sq km covering the entire salar. A resource estimate could follow
drilling in 2010 (currently there is a three hole drilling program, out of a
total 20 hole program, underway).
ILC will also
advance brine projects covering 5,285 hectares in the area of Clayton Valley,
Nevada which is home to North America's currently only producing Li mine.
Chemetall-Foote's Clayton Valley operation has been producing lithium brine
since 1967 and ILC will have three active lithium brine projects in this
area.
The pegmatite
projects for lithium and the rare metals (e.g. tantalum, niobium and the
REE's) include the Moose project located in Canada's North West Territory
(NWT). Moose is a past high-grade producer of Li and Ta (some of the highest
grades of Tantalum in Canadian pegmatites were found here - also 2.07 wt%
Li20 over 6.7m.
TNR's Mavis Lake
Project has returned channel samples which include 5.3m grading 1.24% Li2O.
Sampling has recently extended the litho-geochemical anomaly by 1.1k and significant
potential exists on the property for additional discoveries.
International Lithium Corp. TSX.v - ILC Highlights
- Ownership by
insiders and background success of the group - Mr. Klip and his UK
investor group holds 40%+ while management and other insiders hold 10%
- Institutional
ownership - RAB, Toqueville, NovaGold/Barrick, Pinetree Capital -
another 15%
- $1.6 million
in cash looking to raise $2.5M in the IPO
- Aligned
incentives - insiders and management have significant stake - Initial
ownership by TNR/Management - over 50%
- Quality 100%
owned project with reasonable property payments because ILC was an early
first mover
- Technical
group - ILC has expertise from early stage brine/pegmatite specialists -
John Harrop has done 43-101 for several Nevada juniors and is one of the
local experts on brines. Production advisor T.Currin was past FMC
advisor on brine circuits optimization and operated a private lithium
producer in Nevada
- Diversified
project portfolio - brines for quick development to production,
pegmatites for exposure to rare metals
"International
Lithium will bring a great deal of additional value to existing and potential
TNR shareholders because they get to participate in a company poised to
capitalize on the growing demand for lithium and rare metals, while still
retaining their exposure to our high quality portfolio of precious and base
metal assets through TNR." TNR CEO Gary Schellenberg
Corporate structure's TNR & ILC
TNR Gold
Corp. TSX.v - TNR
Shares Issued: 120,567,641
Options: 10,090,000
Warrants: 26,259,829
Fully Diluted: 156,917,470
Cash: $1.6 M
Debt: $0
Insider/Mgmt: 52%
Institutional: 15%
International
Lithium TSX.v - ILC
Shares Issued: 60,000,000
Fully Diluted: 120,000,000
Cash: $2.5 M
Debt: $0
Share ownership: TNR 30%, TNR insider/managements: 26%
Lithium
The world's
future energy course is being charted today because of the ramifications of
peak oil and a need to reduce our carbon footprints.
A whole new
industry - a global wide automotive and industrial lithium-ion battery
industry - is going to be built. As a result of lithium-ion battery demand
for hybrid-electric and elctric cars the increase in demand for lithium
carbonate is expected to increase four-fold by 2017.
Lithium-ion
batteries have become the rechargeable battery of choice in cell phones,
computers, hybrid-electric cars and electric cars. Chrysler, Dodge, Ford, GM,
Mercedes-Benz, Mitsubishi, Nissan, Saturn, Tesla and Toyota have all
announced plans to build lithium-ion battery powered cars.
Demand for
lithium powered vehicles is expected to increase fivefold by 2012. The
worldwide market for lithium batteries is estimated at over $4 billion per
year.
Lithium carbonate
is also an important industrial chemical:
- It forms
low-melting fluxes with silica and other materials
- Glasses
derived from lithium carbonate are useful in ovenware
- Cement sets
more rapidly when prepared with lithium carbonate, and is useful for
tile adhesives
- When added
to aluminum trifluoride, it forms LiF which gives a superior electrolyte
for the processing of aluminum
- Lithium
carbonate can be used in a type of carbon dioxide sensor.
Demand today is
in the range of 120,000 tonnes of lithium carbonate equivalent (LCE)
annually. Lithium is not traded publicly - and is usually distributed in a
chemical form such as lithium carbonate (Li2CO3) - instead it's sold directly
to end users for a negotiated price per tonne of Lithium carbonate (Li2CO3).
Production
figures are often quoted in lithium carbonate equivalent quantities. By
weight approximately 18.8% of lithium carbonate is lithium. Therefore 1kg of
lithium is the equivalent of 5.3 kg of lithium carbonate.
"We
are projecting 40% Li demand increase by 2014, with batteries accounting for
34% of use, the largest single end-use segment." Jon
Hykawy, analyst Byron Capital Markets
Lithium-ion
batteries are quickly becoming the most prevalent type of battery used in
everything from laptops to cell phones to hybrid and fully electric cars to
short term power storage devices for wind and solar generated power. At
present, 39 per cent of lithium-ion batteries are produced in Japan, 39 per
cent in China and 20 per cent in South Korea.
"With
forecast 10% to 20% penetration rates by 2020 for pure and hybrid electric
vehicles, we expect an incremental increase in demand of 286,000 tonnes of
lithium carbonate equivalent, significantly outstripping current
supply." Canaccord Adams analyst, Eric Zaunscherb
"Our
electric vehicle investment is not one-car innovation, it is a new way of
looking at our industry. This is the beginning of the story." Carlos
Ghosn, Nissan chief executive officer
Rare Earth Elements (REE)
REEs comprise 16
chemical elements which are uniquely able to retain their physical properties
at high temperatures. REEs are used for everything from:
- Nickel metal
hydride batteries
- Fibre-optic
telecom cables
- Military
hardware
- Solar panels
- Wind
turbines
- Compact
fluorescent lighting
- Mobile
phones
- Computers
- Manufacturing
of super conductors and high energy magnets
- Petroleum
refining
- REEs are an
integral piece of the green technology industry - they help to improve
energy efficiency in magnets, batteries, glass and computers.
Rare earth
elements are as abundant as nickel or tin in the Earth's crust but economic
concentrations are extremely rare - hence the name.
China - the
largest producer of rare earth elements - supplies more than 90 per cent of
the global market. But China has recently been cutting back exports, and
promises further cutbacks, to ensure it has enough rare earths for its own
use.
One online source
this author found said the following - "demand grew from about 85,000
tonnes, or about $500-million (U.S.) in 2003, to 124,000 tonnes or
$1.25-billion in 2008. By 2015, demand is estimated to be 200,000 tonnes or
US$2.3-billion." The Industrial Minerals Company of Australia
predicts global demand will grow from about 112,000 tonnes in 2008 to
approximately 180,000 tonnes by 2015.
Either set of
numbers you care to use leaves plenty of room for potential, new, western
based suppliers.
"We've
been doing quite a lot of research on rare earths and lithium in particular,
and have developed a diverse rare metals project portfolio. We didn't feel we
needed to be restricted geographically or deposit type so our first
acquisitions were primarily pegmatites in Canada followed by application for
a large pegmatite belt that was available from the Irish government. Our real
goal was to have a diversified portfolio of world-class lithium and rare
metals properties off both brines and pegmatites which will allow us to
become a serious rare earth and lithium explorer." TNR CEO
Gary Schellenberg
Conclusion
After the
spin-out, TNR Gold will remain committed to advancing its portfolio of gold
and copper projects in Argentina and through its wholly owned subsidiary,
Bristol Exploration, continue exploring it's two, prospective for gold and
copper, properties in Alaska. TNR and ILC should be on every investor's radar
screens.
Are they on
yours?
Richard Mills
Aheadoftheherd.com
Richard
is host of www.aheadoftheherd.com and invests in the
junior resource sector. His articles have been published on over 60 websites including
- Wall Street Journal, 24hGold, Kitco, USAToday, Safehaven, SeekingAlpha, The
Gold/Energy Reports, Gold-Eagle and Financial Sense.
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