David vs. Goliath
Recently someone brought to my attention an interesting David vs. Goliath situation going on in Ontario between tiny Sanatana Resources (STA-V) with a market cap of $4 million and giant IAMGold (IMG-T) with a market cap of $1.59 billion.
Sanatana did a JV with Augen Gold Corp in February of 2011 on the Watershed Project in Ontario. Terms called for Sanatana to issue 5 million shares and pay $150,000 to Augen in addition to a $5 million dollar work commitment to earn 50% of the 7904-hectare project. STA can earn an additional 1% by finishing a prefeasibility study.
Sanatana has actually spent $9 million on the project in ground mapping, magnetic surveys, airborne mag and over 17,000 meters of core drilling to complete their 50% earn in.
In November of 2011, Trelawney bought Augen for $65 million. In June of 2012, IAMGold picked up Trelawney for $608 million. So now Sanatana has a new JV partner on the Watershed Project named Trelawney/Augen but owned by IAMGold.
Sanatana has a undivided interest in 46 mining claims and another 20% carried interest in an additional 3 mining claims as well as first right of refusal on 9 more claims. Sanatana protected their interest by insisting on an area of interest (AOI) of 1 km from any part of the Watershed project.
The Watershed property is entirely surrounded by IAMGold. IAMGold bought Trelawney/Augen to acquire their Cote Gold Project with some 8 million ounces of gold.
IAMGold wants the ground off Sanatana. IAMGold says they need an easement for their mine development to use for water diversion, waste dumps and transmission lines. Sanatana seems to feel they paid for it and it’s theirs and if IAMGold wants it, they should pay for it. IAMGold wants it for free.
This isn’t moose pasture in the middle of nowhere. Even the charts from IAMGold seem to indicate the gold mineralization extends onto the JV property of Sanatana. See Watershed Project Map here.
Mining law and a recent similar case seems to support the case of Sanatana Resources. Under Section 51 of the Mining Act, a mining claim holder has a prior right to surface use for prospecting and the efficient exploration, development and operation of the mines, minerals and mining rights.
Like the Cliffs case where Cliffs wanted an easement of claims held by Canada Chrome Corporation, it’s a David vs. Goliath situation. Goliath wants the use of David’s land for free. But we all know how that ends.
The risk in Sanatana is limited to $.035. They can run out of money and go teats up or lose the case. Or they can prevail and let Goliath off the hook in exchange for a check that will be a lot more than $4 million. Given that the company has already spent $9 million on the project, I don’t look at the mediation hearing taking all that long to conclude.
I do not hold any share position in either company and I do not have any financial interest in the outcome. I have no financial ties of any kind with either company. It’s interesting and potentially worth investing in. I always encourage investors to be responsible for their own investment decisions.