The standard practice, when starting a mining company, is to raise as many millions as you can up front, stick a few holes in the ground until those millions are gone, and hope the holes demonstrate why you should be given more millions to make more holes.
And maybe, if after three years of poking holes enough shiny presents itself, you’ll raise a few hundred million more to get mining permits and build a mill and maybe take the top off a mountain and everyone gets ‘buy a small Filipino family to keep the pool clean’ rich.
I’m generalizing, but not really.
Mining is a world in which the only rush is to close a financing, where paperwork takes forever and bureaucracy does its best to get in the way and fish and first nations and missing with the drill conspire to stop you from achieving your dreams, if your dreams are to get all Deslaurier Brothers’ed up and have your initials embroidered on your shoes so you can make an impression when you step out of your white Lambo, which also has your initials embroidered on it jus’ cuz’.
Now, I’m not saying there’s anything wrong with being ‘write off your unpaid Donald Trump loans as a tax loss’ rich. I’m not even saying there’s anything wrong with paying yourself mid-six figures to run a company that is unlikely to make any money for at least five years, maybe more, maybe never, who knows, probably not. There’s a reason that’s what so many have done before us, and that reason is, “Because people will still throw money at that plan.”
But there are variations on the theme. Integra gold (ICG.V) is my common example of a group breaking with tradition, who moved into a project that may well be a big one, but opted to drill small and cheap and low risk and right where they knew where the gold was so they could actually start taking some of it out, rather than stepping out every quarter in the hope that they could one day crank out a motherlode NI 43-101 and name a private jet Goldy McGoldface.
Equitas Resources (EQT.V) is no Integra. Not in size, success, or market cap. But there was a time, not so long ago, that Integra was an Equitas.
For those who haven’t been playing along at home, Equitas was all about their nickel play a few months back, but said nickel play unfortunately came up closer to Nickelback than it did nickel bonanza.
Now, some have said Equitas should have raised some cash and gone back in for another look-see for that nickel, like a bear plunging into a raging torrent looking for salmon. And it’s true, chances are they could have found what they were looking for the first time around. After all, it’s not like they didn’t find nickel, but they didn’t find enough to excite the market and share prices duly dropped.
But Equitas broke with tradition; instead of going back to look for more random salmon, management found there was a salmon production line on the other side of the river, and that production line was looking for some public vehicle love.
What’s happened to poor, beaten down old Equitas is, they’ve fallen ass backwards into a producing gold property in Brazil.
Yes. Producing. Gold.
This is like falling backwards off a cliff and landing in a pile of Charlize Theron’s.
Or maybe a pile of Amy Adams’. Either way, I’ll take it.
Now, we’re not talking ‘I’m not sleeping well so I’ll bail out Michael Jackson’s doctor and put him on retainer’ gold levels just yet. In fact, if there’s a knock on the Equitas gold play right now from some in the Canadian mining space it’s, “Meh.”
Sure, the upside on a small producer in Brazil that will pay for drilling with the ore it’s bringing out in Home Depot buckets on the back of a donkey named Phil isn’t likely a sixty-bagger.
But it’s also nothing to sneeze at. The risk is next to nothing – Equitas has a few million in the bank but is looking to preserve it by paying for future resource expansion through the ore being yanked out of the ground currently. They figure they can upgrade the existing mill with maybe $300k spent, and will be doing just that shortly. And while they’re doing that, they’re able to look closely at the property, drill where they’re already finding the yellow, and pay ridiculously cheap Brazilian prices for that exploration.
I mean, Brazil’s economy isn’t Honey Boo Boo poor, but it’s filling its milk with water to squeeze a few more bowls of cereal out of it, if you know what I mean. The President, Dilma Rousseff, is being impeached left and right and, if she does keep her job, will be on a very short leash.
You want specifics on that Brazil property? Here’s what the company said this morning:
The exploration program will focus on expanding and identifying additional mineral resources in the Baldo Target Area (“Baldo”) at Cajueiro. Baldo is host to widespread gold mineralization, and a virtually untested mineralized structural corridor delineated over an 820m strike length on surface. An exploration program targeting the structure has commenced, and will include diamond drilling, trenching and bulk sampling.
Chris Harris, President and CEO, stated “Having closed the acquisition we are now focused on moving towards expansion of our flagship Cajuiero resources. We have just started our exploration program which is focused on the prospective oxide zones. When considering the high grade results achieved from surface sampling over the last 18 months, we have identified solid potential to add quality resources to the project.”
Okay, so if you’re jazzed about those words, you spend way too much time looking at mining news. I hate mining reports because they’re written for geo pointyheads and when you start talking ‘grinding kinetics’ and ‘Inductively Coupled Plasma Optical Emission Spectroscopy,’ I start thinking of that huge pile of Amy Adams’ again.
Most of all, mining reports are not a reliable market indicator or future upward stock price mobility.
You know what is? Other people buying. Yep. Straight up old ‘game theory.’
And right now, people are buying. In fact, since we’ve been talking about EQT at Equity.Guru, about six weeks ago, it’s moved up from $0.045 to $0.075. Volume is cranking, with 8 million shares traded on April 1 alone.
Nobody riding that train is thinking there’s a $300m market cap coming inside three months. Instead, it’s looking like something akin to a dividend play. Buy it, leave it, let it build consistently and spend your days doing Sudoku and growing cabbage.
For mine, Equitas management have done exactly what they should have done. Going back for a nibble on a nickel play that had already seen the stock take a 75% haircut? Why? Who’s got three years of farting about in the dirt to look forward to, when you could be actually producing revenue in Brazil, for pennies on the dollar costs-wise, as gold starts its upward march?
They’ve taken this property from inherently risky to of very limited risk. Admittedly, the upside has gone from ¯_(ツ)_/¯ to ( ͡° ͜ʖ ͡°), but if my money has already gone up 75% in six weeks, and the company doesn’t need to dilute my stake, and over time it’ll just keep adding to the NI 43-101 as it kicks rocks about the property and backhoes every time it sees a glint over yonder, this is less and less a gamble and more and more an investment.
Some will shrug and say it’s not big enough for them. Those high risk-high reward guys will jump all over every lithium fart and make bank and maybe lose bank and at the end be looking for the next big thing, while my thinking is the Equitas crew have another few x’s to come without having to raise too much hell doing it.
Snart money is moving into Equitas and is multiplying in doing so. I’m following that trend.
FULL DISCLOSURE: Equitas is a site sponsor, I’m a consultant to the company, and I own stock that I bought with my own damn cash. I’m conflicted as all get out, so do your own due diligence.