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November 18, 2023

Equity.Guru

Investment information for the new generation

Brascan Resources (BRAS.C) – New CEO, properties sold off, and all for what?

Brascan Resources (BRAS.C) has given a corporate update about some of the places in Brazil it was been planning to look for lithium and, as someone who takes pride in not feeding his audience bullshit, my fucking ears are up on this because what I was told about these properties is they’re beauties, and what’s turned out with them is Brascan has flipped them for walking around money.

Firstly, they’re happy to let everyone know that they’ve handed over their rights to explore two properties at Minas Gerais in Brazil to someone else – an arm’s length third party, apparently – in return for those companies to take on all the ensuing exploration responsibilities and pay Brascan low six figures per property (of two) in return. If they find enough lithium (>1%) in the spodumene rocks they test, they’ll give Brascan basically the same again. 1% is definitely achieveable, as it’s on the low end of what’d be necessary to keep working the property.

In total, BRAS gets around $250,000 for its interests, with a chance to get another $200,000 in total, one day, maybe, if the 1% is hit.

No spin-out deal, as former CEO Bal Johal suggested to me a few months ago, and no Net Smelter Return (NSR) percentage. It’s a walk away. Brascan will not darken Brazil’s door again.

If you think that’s a shrug as far as news goes, it gets more shruggy – Brascan had to hand over an interest in itself to its former Brazilian partners for this deal to happen. BHBC and RTB get $75k in BRAS stock for the first deal, and $150,000 for the other. How this deal is considered arm’s length in this situation is beyond me.

So if you’re keeping up at home, Brascan took $250,000 in return for those two properties and coughed up $225,000 worth of stock in itself, seemingly as a finder’s fee. I’m in the wrong game. 

There’s other news in that Brascan has decided to stop exploring for gold in Para State in northeastern Brazil. They’ve stopped because, let’s be honest, they haven’t turned over a rock there in a long time and weren’t planning to follow that dog in the current empty market for new financing.

What sucks is I was in on the last financing round. If I’d known I could have taken two lithium properties for effectively $25k, I would have done much better out of the deal than buying far too much stock.

The person in charge of Brascan now is Johan Shearer, with Bal Johal having taken paid leave (I’m eager to find out what’s happening there and will report back asap). Shearer is no rube, he’s got a decent career in finding value in the ground behind him and, presumably, he’s done this deal to help right the ship. The market for early stage lithium properties in Brazil isn’t great, so Shearer is going to focus more on other places, especially in Quebec, and we may see them sell some other properties to keep the home fires burning.

Look, when we do business with a pubco at Equity Guru and enter into a marketing agreement, as we did here, we tell the company before any agreement is signed that if things are good, we’ll yell it from the rooftops, but if things go wrong, if promises aren’t kept and the shareholder isn’t looked after, we’ll make the company – and their management team – famous for it. We remain good on that promise.

Ex-CEO Bal Johal is definitively unconventional – that’s something we laid out in great detail as both potentially a concern, but also potentially an asset, because it’s the crazy ones that can find things nobody else would think to look for.

But there’s got to be some actual looking for that to happen.

Bal, you’re on the clock. Are you a rockstar, or a target?

— Chris Parry

FULL DISCLOSURE: See above, bruh. Client. Hold stock. Pissed off and potentially vengeful.

 

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