eResearch Corporation 78 Cameron Crescent, Suite 202Toronto, Ontario M4G 2A3 www.eresearch.ca Coronet Metals Inc. eResearch Corporation and PINNACLEDIGEST have agreed to collaborate and populate each other’s website with research reports and analyst articles. eResearch and PINNACLEDIGEST share a common mission: to provide their Subscribers and the investing public with quality investment research analysis, both written corporate research and insightful analyst articles, by ensuring that the research is a credible resource that investors can rely on. eResearch was established in 2000 as Canada's first equity issuer-sponsored research organization. We are a primary source for professional investment research, focused primarily on small- and mid-cap companies. Our research and analysis is of institutional quality, and has the potential to reach millions of global investors through our extensive electronic distribution network. PINNACLEDIGEST has fast become a leading investor portal for interesting and timely investment information. Its website hosts a weekly column, “featured company” research commentary, community blogs, the Managing Director’s personal blog, market analysis, a monthly stock challenge, IPO listings, plus a host of other investor-oriented market information. eResearch Corporation is pleased to provide a PINNACLEDIGEST report on its latest Featured Company: Coronet Metals Inc. Bob Weir, CFA Director of Research Note: All of the comments, views, opinions, suggestions, recommendations, etc., contained in the PINNACLEDIGEST articles, reports, files, documents, essays, etc., and which are distributed by eResearch Corporation, are strictly those of PINNACLEDIGEST and do not necessarily reflect those of eResearch Corporation. Third Party Research: Pinnacle Digest April 27, 2014
14
Embed
Coronet Metals Inc. - Baystreet€¦ · 78 Cameron Crescent, Suite 202 Toronto, Ontario M4G 2A3 Coronet Metals Inc. ... However, if you think gold will resume its bull run in the
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
eResearch Corporation and PINNACLEDIGEST have agreed to collaborate and populate each
other’s website with research reports and analyst articles.
eResearch and PINNACLEDIGEST share a common mission: to provide their Subscribers and the
investing public with quality investment research analysis, both written corporate research and
insightful analyst articles, by ensuring that the research is a credible resource that investors can
rely on.
eResearch was established in 2000 as Canada's first equity issuer-sponsored research
organization. We are a primary source for professional investment research, focused primarily on
small- and mid-cap companies. Our research and analysis is of institutional quality, and has the
potential to reach millions of global investors through our extensive electronic distribution
network.
PINNACLEDIGEST has fast become a leading investor portal for interesting and timely investment
information. Its website hosts a weekly column, “featured company” research commentary,
community blogs, the Managing Director’s personal blog, market analysis, a monthly stock
challenge, IPO listings, plus a host of other investor-oriented market information.
eResearch Corporation is pleased to provide a PINNACLEDIGEST report on its latest Featured
Company: Coronet Metals Inc.
Bob Weir, CFA
Director of Research
Note: All of the comments, views, opinions, suggestions, recommendations, etc., contained in the PINNACLEDIGEST articles,
reports, files, documents, essays, etc., and which are distributed by eResearch Corporation, are strictly those of
PINNACLEDIGEST and do not necessarily reflect those of eResearch Corporation.
Third Party Research: Pinnacle Digest April 27, 2014
eResearch Corporation ~ 2 ~ www.eresearch.ca
April 27, 2014
New Featured Company: Coronet Metals Inc.
Prospecting for land claims, acquiring an exploration project and then raising millions of dollars through equity, over many years, to drill an asset has been the primary model used in the junior mining/exploration industry for as long as we've been alive. Our client and Featured Company, Coronet Metals (CRF:TSXV) (CORMF:OTCQX), has a somewhat different model.
A Different Strategy
In 2011, near the beginning of what turned out to be one of the worst bear markets in junior mining history, Coronet raised approximately $10.8 million at $0.30 per unit through an equity financing. With a stout management team in place Coronet planned to go about developing a highly prospective gold exploration project in Peru, using the same model most junior miners have been following for decades. There's nothing wrong with that model, but after watching its treasury decline, and realizing that capital interest for exploration was drying up, Coronet's management team began looking for alternative models within the gold sector. As is the case in any crisis, innovation or an alternative business strategy often forms out of necessity. And after several months of research and tapping its rolodex of international gold mining contacts, Coronet's management discovered an opportunity that could differentiate the company from the majority of junior gold players on the TSX Venture Exchange.
Production-Focus First, Exploration Second
Coronet's well-rounded management and directors, which consists of a group with experience in exploration, mining production and investment banking, wanted to do things a bit differently. Their plan was to find a potential cash-flow producing asset - and with that vision they found a potential opportunity to process third party precious metal concentrates. High precious metals prices have given rise to the re-opening of historical and other past producing mines, but there is a shortage of processing capacity. This processing issue was even addressed in the US Senate (click here for report). Additionally, there is a plethora of exploration projects out there chasing the same financing buck to drill out projects. The mineral exploration industry is saturated, but there is demand for precious metal processing facilities. Coronet sought to differentiate itself by trying to fill some of that processing void; but, in order to service some of that market, it would need a permitted facility - a rarity for any junior to control in this day and age. Building a precious metal processing facility from scratch would be a cumbersome task financially and also daunting from a regulatory standpoint. Building such a facility could take years, and there would be no guarantees that it could be permitted.
So how did Coronet navigate through this challenge? Given that Nevada is responsible for nearly 80% of US gold production every year, and it is routinely near the top of the list of the most mining friendly regions in the world, rated by the Fraser Institute, Coronet decided to make it its operational home base. If it wanted to become a precious metal concentrate processor for third parties, management figured there was no better place to do this than in Nevada. Through much negotiation, in February 2013 the company entered into a 4 year Lease Agreement with an Option to Purchase the fully permitted 50 tons per day Liberty Precious Metals Testing and Processing Facility (the "Liberty Facility") located in the Amargosa Valley, 2 hrs. North-West of Las Vegas, Nevada, on 40 acres of private land. Liberty has a State of Nevada, Division of Environmental Protection ("NDEP"), Permit Number NEV2010101 (the "Liberty Permit").
Liberty Processing Facility, Las Vegas, NV
The Liberty Facility (Liberty) is permitted to process up to 50 tons per day of precious metals feed material from permitted Nevada and out-of-state facilities. Liberty is permitted to use chemical processes (including cyanide) for leaching material that is not recoverable through gravity or flotation. This lease with option agreement propelled Coronet into a unique position; it had entered into a particular segment of the gold industry with few competitors. It is important to note that Coronet aims to process precious metal concentrate, not head ore - we'll explain why. With the Liberty facility under lease, Coronet's plan is to service third party miners/mining companies who need further precious metal processing that cannot be accomplished with their particular circuit.
The Company is processing third party concentrates that they either buy out-right or on a commission basis. Any potential cash flow generated at Liberty could later assist the company with development plans at its other Nevada project (more on this project shortly) and corporate overhead.
Leach circuit at Liberty
After locking in the lease and option agreement for the Liberty Facility, Coronet's work had only just begun. There were many twists and turns along the way before getting the facility up and running. It took several months to negotiate supply agreements with independent parties and roughly $2.5 million spent on upgrading the Liberty facility, infrastructure, and utilities in order for Coronet to custom process precious metal concentrate. Finally, on November 14, 2013, roughly nine months after the lease and option agreement was announced, Coronet had achieved its first gold pour at its Liberty Processing Facility in Nevada. Mr. Theo van der Linde, President and CFO of Coronet stated that day: "This first gold pour at Liberty is a major milestone on Coronet's path to becoming a profitable gold producer. Over the coming months, the operations team at Liberty will be ramping the facility up to full initial capacity while seeking to secure additional supply contracts to support expansion within the existing permits. As production rates increase, Coronet expects Liberty to produce strong cash flow that will support organic growth for the company." Full release here.
Related news: Coronet Metals Inc. Completes Construction At Liberty, Commences Commissioning
Gold dore produced at Liberty
Gold-Focused
If you don't believe gold is likely to rebound in the near future then this investment opportunity may not be of interest. However, if you think gold will resume its bull run in the near future, read on. Coronet is a gold company with a unique business model, extensive business relations in Nevada and minimal competition in its particular segment of the precious metal industry.
Inside the Liberty Processing Facility
While maintaining its excellent relationships with Nevada regulators, Coronet's vision is to generate near-term cash flow, expand Liberty's processing capabilities, and eventually treat gold concentrates from small and medium mines in the United States, Mexico and South America.
You see, many placer and hard rock mines that use a gravity circuit to treat their ore produce a gravity, second and/or float concentrate that needs further treatment; but some of these operators cannot accomplish the further treatment needed because they lack the necessary permits for chemical processing and refining. This is what Coronet is basing its business model on. The company has a fully permitted and fully completed custom refinery at Liberty that processes high grade concentrates into Dore.
Coronet's management is constantly seeking ways to improve efficiency and lower costs. The company is working on new mineral processing techniques with two companies that could be incorporated into the existing Liberty facility, potentially allowing for increased output to significantly reduce costs. Coronet's goal is to produce high grade concentrates at 50TPD (50 tonnes per day) output at Liberty; the Company projects EBITDA could reach $15M-$25M per year at 50TPD. (The range is dependent on average grade, recovery, and plant and material availability)
A hypothetical situation which highlights the difference between a gold concentrate processing facility and a hard rock mine with mill on site: 50 tons of gold concentrate per day at an average grade of 5 ounces per ton (156 grams per ton) will yield about 210-250 oz of gold per day depending on recovery. For a hard rock mine to produce the same amount of gold per day, it would have to mill 5,000 tons per day at an average grade of 0.05 ounces per ton (1.56 grams per ton).
Every Project Comes With Its Challenges
On April 9th, 2014, Coronet provided an update on operations at the Liberty Processing Facility. The company explained some of the milestones it had reached, some of the challenges it has faced and what shareholders might expect from operations at Liberty in the near future. Excerpts below: "...since commencement of commissioning of the plant and the first gold pour at its Liberty gold processing facility in Nevada ("Liberty") it [Coronet] has toll-processed approximately 60 tons of concentrate from its third-party supplier in Colorado ("Colorado Feed Material"). Developing an understanding of the metallurgical issues while commissioning the plant has been challenging. Commissioning required methodically addressing grind of the feed material, water quality, agitation of material, leach time and the reliability of an older AA assay unit, among other issues. Mechanical problems with the circuit were successfully addressed and the plant is now mechanically complete and operational. However, the Colorado Feed Material has proved to be metallurgically more complex than anticipated and Liberty has not yet achieved
commercially sustainable operations. Management has now determined that this particular material cannot be economically recovered within the current circuit. Coronet has reviewed alternative processes to extract gold from the Colorado Feed Material and other complex feed material available to it. The Company is currently evaluating the commercial applicability of a proprietary process that has been very successful at the pilot plant level. The owners of the process are funding and have commenced fabrication of a 25tpd concentrating and reactor circuit. The concentrating circuit unit will be installed within the next two weeks at Liberty. Coronet plans to use the unit to re-concentrate and re-process all of the Colorado Feed Material and do a large scale test on the viability of additional material from Nevada. Coronet has successfully tested the Colorado Feed Material and the additional potential feed from the Nevada source with this alternative process on a smaller scale. Discussions with potential suppliers of material continue to support Coronet's belief that there is demand for a gold concentrate toll processing facility that can handle complex feed material. The Company recognizes that it underestimated the commissioning challenges at Liberty but believes that the fundamental business model is sound and that the challenges with the initial circuit created an opportunity whereby Liberty is now able to offer additional low-cost treatment options for a variety of precious metals concentrates. The Company is optimistic that the current commercial-scale test work using the alternative gold extraction processes will be successful and will enable it to build out its business model..." Link to full press release.
CLICK HERE FOR ACCESS TO LIBERTY PROCESSING FACILITY IMAGE GALLERY
Click here to learn about the material accepted at the Liberty Processing Facility Click here to learn more about Coronet's Operating Philosophy Click here to learn more about the Property and Circuit Click here for Liberty Receiving Requirements and Procedures Click here for FAQ's About the Liberty Processing Facility
Coronet's White Caps Project in Nevada: Second Piece of the Puzzle
The White Caps Gold Project is Coronet's second Nevada project and the key exploration element to the company's business model. Any potential cash flow generated at Liberty could assist the company with development plans at its White Caps Project.
The White Caps Gold Project
On October 31, 2012 Coronet announced, "...the closing of the acquisition of 100% of the outstanding shares of White Caps Gold Mining Company, Inc. ("WCGM"). Coronet now controls the White Caps Gold Project located in the historic Manhattan mining district of south-central Nevada. WCGM owns the Manhattan Mill, 2800 acres of patented and unpatented mining and millsite claims. There are historical references indicating up to 250,000 tonnes of gold-bearing tailings and dumps which Coronet believes might be economically re-processed. (These references are not NI 43-101 compliant and should not be relied on). In addition, Coronet acquired other rights, titles and interests in the Manhattan Mining District from a WCGM shareholder. This acquisition is in line with Coronet's strategy of acquiring precious metals mining projects which have the potential for both near-term cash flow and have significant exploration upside potential. Coronet believes that the Manhattan mill can be used to process additional gold materials from mining operations in the surrounding area. Coronet is evaluating other Manhattan area acquisitions which have the potential for near term cash flow and/or exploration upside potential." Read full press release here.
* The Company advises that the tonnage and grades listed above are historical in nature and have not been verified. The historical references are not supported by a technical report. A qualified person has not done sufficient work necessary to classify the historical references as a current mineral resource or mineral reserves. The Company is not treating the historical references as current mineral resources and the historical reference should not be relied upon.
Exploration Upside Potential at White Caps Gold Project
The White Caps Gold Project is located in the Manhattan Mining District, one of just the few under-developed, under explored, historic gold districts remaining in Nevada. And the project is located along the same geological trend as the multi-million ounce Round Mountain mine, a joint venture between Kinross Gold and Barrick Gold, located roughly 13 miles to the north. In 2011 alone, the Round Mountain mine produced over 350,000 ounces of gold and contained proven and probable mineral reserves of 2.8 million ounces of gold. Click here for Kinross' summary of the Round Mountain operation. Click here for Barrick's summary of the Round Mountain operation. * It is important to remember, Coronet has not yet completed a NI 43-101 compliant report on the White Caps Project, and the approximate 250,000 tonnes of gold-bearing tailings is not compliant, nor can it be relied upon. Additionally, the cost to process the tailings is unknown.
So cumulatively, what we see in Coronet Metals (CRF:TSXV) (CORMF:OTCQX) is a uniquely modeled junior gold stock trading at its 52 week low (closed at CDN$0.05 on Friday); the Liberty Processing Facility provides the potential for near-term cash flow for Coronet; and the White Caps Gold Project is the longer-term development asset with exploration upside potential. Coronet has roughly 118 million shares outstanding (non fully diluted). However, with the Liberty Processing Facility, Coronet has an asset under lease (with an option to purchase) that most juniors do not. There is a significant potential market for processing precious metal concentrates, so it is vital that Coronet can get the Liberty Processing Facility operating at a sustainable level. There are inherent and residual risks when it comes to Coronet Metals, and like many juniors, further dilution is probable. If cash flow at Liberty is not obtained by Coronet in the near-term, taking on debt or raising capital via equity seems a likely possibility for the company. We are biased towards Coronet Metals because it is a client of ours and we own shares in the company. We may also increase our share position in the company following the release of this report. At the end of the day, this is a nickel stock with a market cap hovering around CDN$6 million. It's a gamble.
CRF:TSXV One Year Stock Chart
Please take responsibility for practicing your own thorough and independent due diligence. Remember, past performance is not indicative of future performance. Just because some of Pinnacle Digest's Featured Companies have performed well, doesn't mean they all will. This marks the initiation of our coverage on Coronet Metals (CRF:TSXV) (CORMF:OTCQX). Its shares last traded at its 52 week low of CDN$0.05. The company's 52 week high is CDN$0.10. We will have further updates in regards to the Coronet story over the coming weeks. All the best with your investments, PINNACLEDIGEST.COM