Date: September 20, 2017Author: Ken Kuchling
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I recently attended the Money Show here in Toronto to learn a bit more about current investing strategies, ETF’s, and see what’s up with the latest stock analysis software. Along with speakers at the show, there was a trade show but only one mining company booth was present. This definitely wasn’t the PDAC. Interestingly there were about five marijuana company booths, so that seems to be where the promotion is today.
The lone mining company was Globex Mining, here is their website. They referred to themselves as a “mining bank”, so this was something that peaked my interest.
Speaking with their president, Jack Stoch, he gave me an overview on their business model. As I understood it, GLOBEX’s model is to acquire a lot of mineral properties, enhance their value by undertaking some limited geological work, and then option, JV, or sell the property while retaining a long term NSR royalty.
Mr. Stoch told me that Globex currently has over 140 land packages in their inventory. Their properties may include resource estimates, mineralized drill intersections, mineral showings, untested geophysical targets, or combinations of these. They are focusing their acquisitions on lower risk jurisdictions like Quebec, Ontario, Nova Scotia, New Brunswick, Tennessee, Nevada, Washington, and Germany. They try to acquire historical mines that have old shafts and workings, following the adage the best place to find a new mine is next to an old mine. They even have some industrial mineral properties in their portfolio.
Globex’s only NSR revenue producing property right now is a zinc project in Tennessee that can generate a seven-figure royalty each year, when that operation is up and running. Unfortunately for Globex the zinc operation has not been in consistent operation over the last few years.
Overall I like the concept that Globex are promoting. I like the idea of having a one-stop shop that collects and then options out exploration properties to junior mining companies that are looking for new projects to take on. I also like the idea of trying to consolidate land packages in an area to minimize the patchwork of claims with different ownership that can hinder advanced development. They hope that by putting time and effort into a suite of properties a few of them will pay off big. If they can generate sufficient NSR revenue, the company may get to the self-sustaining stage.
The idea of companies involving themselves with a portfolio of early stage prospects isn’t new. This has been being done by EMX Royalty Corp (formerly Eurasian Minerals) for mineral properties around the globe. Abitibi Royalties is also doing something vaguely similar, whereby they would help fund prospectors in exchange for a long term royalty on a property. First Mining Finance is another “mineral bank” player. There is a high risk to being successful but the cost of entry is relatively low.
It will be interesting to follow Globex over the longer term to see how many properties they can acquire and how many of these will pay off. Spending a bit of money on mapping and exploration on a property may pay off for them by increasing value in the eyes of potential partners.
Statistically mineral exploration is a high risk game but by limiting expenditures and diversifying the portfolio, some risk can be mitigated. Diversification… that’s the same advice the ETF sales people were giving me.