Loncor JV in the DRC with Barrick
What if you gave a party and no one came? The Fed found themselves in that embarrassing position on Tuesday as they dumped a .5% drop in the Fed Funds rate onto a startled market. The market wasn’t startled at the interest rate decline, the market was startled because when the Fed spiked the punch one more time no one would drink the Kool Aid.
I’ve said for months the Fed would stick another Band-Aid on a fatally wounded financial system yet they would fail. I felt that way because I spent almost two years fighting a useless and pointless war.
You see we are all raised to believe that governments are all powerful. But if you watch a squadron of 27 B-52s each loaded with 117 bombs carpet sweep an area and your enemy armed only with a bolt action rifle gets up and shoots back at you, you begin to understand that government only think they are all powerful. There is always a limit to power. The Fed just reached it.
The Fed found that out on March 3rd. And it wasn’t even a tiny virus from a laboratory in Wuhan that defeated the Fed. It was a totally dysfunctional financial system where outright frauds such as Tesla can double in a week.
I’ll say it again. The Everything Bubble just burst, some because of the virus, some because of an out of balance useless financial system and a lot because of a now broken Just in Time manufacturing system totally dependent on China.
The metals are going to be included for a period as the margin clerks man their phones and whisper sweet words of doom to their clients. Everything is going to get sold. We are going into a massive period of deflation. At the end all those million dollar MacMansions will be going for pennies on the dollar. Gold might be $500 an ounce but will buy ten times what it does today. We have sailed off the edge of the known world.
I cannot predict the price of gold; many believe in error that they can. I can just say that after many trials and tribulations the world will realize that an honest monetary system is the only cure to what ails us. It will include a jubilee and a metals based currency.
So it would behoove investors to be looking around for production or near production stories.
Someone came to me a week ago with a compelling story of a company effectively off the radar screens of investors. Part of the reason is that the founder of Loncor Resources (LN-T) Arnold Kondrat owns 29% of the shares. Resolute Mining owns another 27% and Newmont 7.6%. With 64% of the shares in the strongest of strong hands, there hasn’t been all that much inclination to tell their story.
Loncor operates in the DRC, the Democratic Republic of the Congo. The company has such a massive land position that it’s fairly hard to understand why they have been so far off the radar of investors.
Loncor has 43-101 gold ounces of over 2.4 million. To use USD figures, at today’s stock price Loncor is worth $19 per ounce in the ground of gold. That no doubt will tend to set a floor under the price. At their stage of development they should be getting more like $50-$60 USD an ounce.
It’s pretty hard to fathom the incredible size of Loncor’s land position in the DRC. They hold 3,534 square km in the Ngayu greenstone belt with similar endowment and geology with the greenstone belt to their east in Tanzania home to several big gold mines. Within their Ngayu land position they have a joint venture with Barrick on 1,894 square km of the total property. Barrick has an active trenching and ground sampling program and is preparing to drill some of the six drill ready targets already identified. Drilling begins this month.
The JV with Barrick is interesting. First of all, Barrick knows the greenstone belt with big mines both in the DRC and in Tanzania. Barrick wants at least four million ounces and would prefer high grade. Barrick funds and runs the exploration program across the 1,894 square km all the way to completion of a pre-feasibility study.
The DRC has a 10% carried interest and Barrick will have 65% of the remainder with Loncor getting the remaining 35% of what is left after the DRC gets their cut. At that point Loncor pays their own way on their piece of the pie.
In Loncor’s fact sheet they mention something interesting. Loncor’s Ngayu Greenstone belt is home to a 130 km BIF. (Banded Iron Formation) Readers with a really good memory may recall me writing about BIF before when I was talking about where the gold showed up in the Western Australia Pilbara Basin, also near the giant iron projects of WA.
Basically the iron was dissolved in seawater. When single cell cyanobacteria began to produce oxygen some 3 billion years or so ago, as the chemistry of the water changed, the iron precipitated out of solution. Quinton Hennigh came up with the theory years ago that that is how the world’s biggest gold properties got their gold. Gold and BIF are similar in age and where you find one, you almost always find the other.
Loncor is cheap. Yes, they may get cheaper but I find them attractive enough that I bought some shares in the open market. Investors are probably going to find it difficult to pick up a large position. The shares pretty much trade by appointment. With a Barrick JV and with gold in the ground at $19 an ounce in USD I don’t expect them to remain cheap for long.
Loncor is an advertiser. I own shares. That makes me biased. I don’t share in your gains or losses so take some responsibility for your own trading decisions. It’s your money after all.
Loncor Resources Inc