Lion One Hits the Magic Spot
Every few years I come across a company that has extraordinary potential. I’ve just found another one and it may be one of the best yet.
NovaGold was the first I came across. They were about $1 when I first wrote about them in 2001. They went to nearly $20 a share. Then dropped to $.46 in the crash of 2008. I believe junior exploration companies should be thought of as a combination of a lottery ticket and a baseball trading card. The share price has an expiration date and you have to trade them as the major gold cycle goes up and down.
NovaGold is a perfect example of my thesis that if you don’t sell at a profit you are going to be forced to sell at a loss. NovaGold was both the biggest opportunity for bulls between a low of $.13 in mid-2001 and a high near $20 in 2007 and the greatest short from 2007 until 2008 as it dropped 95%. Same management, same projects.
And to date Novo Resources has been my all time favorite. I was buying at $.25 a share when the company first went public before picking up the WA assets from Mark Creasy. I saw patiently on my hands up until the summer of 2012 when I could finally write about them. In the piece I said they could go up 10 to 100 fold. Oh well, so far they only went up 20 fold from the price in that piece. And I wasn’t really sitting patiently; I was chomping at the bit to write about them.
I love Irving. I think that is obvious. I did an interview and talked about them at the end of 2016. The share price was about $.45. Irving was putting out press releases showing surface samples as high as fifteen ounce gold and three hundred ounce silver. That’s $24,000-$26,000 a ton rock depending on the price of gold and silver. The shares had managed to get up to a blistering $.70 a share.
After many trials and tribulations Irving is finally drilling in Japan. I suspect things are about to get interesting. Quinton Hennigh and his world-class crew of Japanese geologists are drilling a sinter first. My favorite target is the mine where we took the ultra-high grade samples from surface. A drunken monkey could spot those drill holes.
How could I ignore Keith Barron and his saga about the Lost Cities of Gold project in Ecuador? Keith is the brains behind the discovery of the 14 million ounce Fruta del Norte gold deposit. Barbara and I have known and loved Keith for almost twenty years after he began his series of articles about resource companies. I took the first half of the 21 articles and compiled them into a book. If you want an interesting read from one of the greats in the mining business go here. It’s fascinating to realize he got it well before he got rich and handsome.
He told us about the Lost Cities many years ago. And I’ll admit I was at first skeptical. But Keith pressed on and is drilling now. The market values his company over $100 million and he has yet to release a single drill hole. If he doesn’t hit on the first targets, I’m not at all concerned; he has 16 more bulls to shoot at.
Putting together a world-class mining company requires a lot of different pieces and like a fine Swiss timepiece; they all have to fit together to work perfectly. Let me give you a little background first.
We don’t normally think of Fiji as being home to a premier gold mine but it was. Baron de Este first discovered gold in Fiji in 1872. It took until 1934 before a real mine was established in the Vatukoula district containing the Tavua caldera named the Emperor Gold Mine. Between 1934 and 2006 the Emperor Gold Mine produced over seven million ounces of gold. The Vatukoula mine still contains an additional known four million ounces.
A coup took place in December of 2006. Emperor Mines Limited shut down at once and sold their operations to a private Australian company named Westech International. The Vatukoula Gold Mine was later sold to a Chinese group in 2009 and is now back into production. Westech morphed into Lion One Metals and retained a similar large caldera located 40 km to the South West of Vatukoula named Tuvatu.
Wally Berukoff formed Lion One Metals (LOI-V) and ended up with the assets of the former Emperor Mines after they left Fiji. After selling Vatukoula Wally retained Tuvatu that had been part of the development pipeline of Emperor. It’s a very large and potentially rich alkaline gold system similar to that of Cripple Creek (28 million ounces), Lihir (40 million ounces), Porgera (25 million ounces) and Vatukoula (11 million ounces).
Mr. Berukoff has been advancing the project at a slow but steady pace. One of the problems of giant gold projects is that they can easily consume giant amounts of money moving to production. The EIA found approval in 2013, the surface lease was complete in 2014, the Environmental Management and Operational plans were approved in 2014 and Mining Lease issued by the Fiji PM in 2016.
Wally wants to start into production small and grow both the resources and the production. A 2015 PEA using a $1300 price of gold showed a resource of 760,000 ounces of gold with production of 352,000 ounces of 11.3-g/t gold over six years at a 62% IRR with less than 10% of the project drilled.
Lion One has purchased their own drills and is finishing construction of a new assay lab to be complete early 2019. Land preparation is being done for the mine and mill and is scheduled to be finished in 2019. The project came with tens of thousands of meters of drilling from Emperor and $40 million in infrastructure. Lion One has raised an additional $63 million since 2011. All of the pieces are in perfect position. All except for one, that is.
Even though geologists have made comparisons between Cripple Creek in Colorado and the Vatukoula mine, Emperor always thought of the mine as an epithermal vein system. In general epithermal systems tend to have a short vertical component, perhaps a few hundred meters at best. But Cripple Creek isn’t an epithermal vein system, it’s an alkaline system that tends to go much deeper and get richer with depth.
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Lion One had most of the pieces in place well before now. The management is brilliant and has a long history of success in the mining business. But on March 1st they made an important addition. Wally Berukoff got together with Quinton Hennigh and appointed him as technical advisor. Quinton Hennigh is an expert on alkaline gold systems. He looked at the core from Tuvatu and data and said the company needed to stop thinking epithermal vein system and start thinking alkaline system with 5-10 million ounce potential.
Quinton soon came up with a plan for development and on the 8th of April Wally announced an aggressive plan for taking stream samples, doing a CSAMT program and additional gravity studies in order to generate a wider area and deeper drill hole program. The first goal will be to expand the resource to over 1 million ounces.
On the 11th of April Lion One made an interesting press release. They have a non-core iron asset in South Australia. The sale to Gordon Toll’s Braemar Bulk Export Project will not have an immediate cash flow benefit but the Braemar project is a planned $5 billion dollar infrastructure program for shipping over 1 billion tons of high-grade magnetite to China over the long-term. At today’s price of iron, Lion One would receive over $200 million in a royalty over time.
I cannot say enough good things about Wally Berukoff. He is to mining management what Quinton is to exploration. His CV is nearly absurd. He founded La Mancha Resources and sold for $500 million to N Sawiris in 2012, he founded Northern Orion and sold to Yamana for $1.1 billion in 2007. He sold Miramar Mining to Newmont for $1.5 billion in 2008. In seven different countries he owned and operated twenty different mines. I think Lion One will be the pinnacle for him.
Wally owns about 21% of the shares. Other insiders and funds own an additional 35%. The company has no warrants outstanding and only about 111 million shares fully diluted. They have over $11 million cash in the bank and own the Fiji project 100% with no NSR. The Chinese operating Vatukoula are running a marginal project and not producing much gold or profit. The Fiji government is behind Lion One and wants them in production soon.
People who listened to me had the chance to buy Novo and Irving at $.45 a share albeit a few years back but have profited greatly. Aurania provided another great opportunity to make money if you got in early. Lion One has about a $65 million CAD enterprise value and similar 10-100 fold potential that both Novo and Irving had years ago. You can always wait until the shares are far higher and jump in with the “I wanna get poor in a hurry” crowd. I don’t really give a rat’s ass. I made my money by buying early and cheap.
You have a great 100% owned gold project in a friendly country run by one of the smartest and most experienced guys in the business with the technical assistance of one of the best geos in the business. Now all they need is someone who can do a good job of telling the story to the market.
Hmmmm! Who do I know that could do that?
Lion One is an advertiser. I approached them, not the other way around and I never do that. I own shares and someday when they raise money, I will participate in the PP. I am biased. Do your own due diligence.
Lion One Metals