TORONTO () -- Very rarely do investors in junior resource stories have the opportunity to participate through one vehicle, in land positions directly adjoining companies that have spawned three of the hottest area plays of the day - and potentially biggest discoveries of the cycle to date.
Certainly not for a market capitalization of just C$35 million when associated forerunners, Noront Resources Ltd. [TSX-V:NOT] C$6.41, Kodiak Exploration Ltd. [TSX-V:KXL] C$3.35, and VMS Ventures Inc. [TSX-V:VMS] C$1.64 have a collective market value in excess of C$1 billion.
Mantis Minerals [CNQ:MINE], with 54 million shares fully diluted, closed today at 70 cents, and is just beginning to garner attention for its portfolio of promising properties (corporate presentation 38 megabytes) in the hottest geological areas being explored in Canada right now.
Mantis has been held back, we believe, because it trades on Canada's newest stock exchange - the CNQ. Nobody has heard of this company, and some have difficulty figuring out that if you want to buy stock and you are trading through an online broker, you probably have to do it over the phone. All of the broker-dealers and online platforms allow you to buy shares on the CNQ, but often you have to call and the trader will execute the order manually.
The good news is Mantis is preparing to move back to the TSX Venture Exchange, though this process could take six months. In the meantime MINE may be swallowed, or have accomplished enough to move directly to the TSX proper. Here's why we believe that to be the case.
Noront, investors are no doubt aware, saw a market capitalization increase from C$40 in August to C$700 million today based on its discovery in the James Bay Lowlands.
Mantis' Tamarack property in the James Bay Lowlands, in which they are currently earning a 51% interest from Probe Mines [TSX-V:PRB], is situated along the same geological horizon, 26 kilometres from Noront's Double Eagle discovery.
Unlike other players in area, MINE has already hit VMS mineralization on the project, with drill results from Probe's work program last year including 3.1% copper over 7.8 metres, and 2.4% copper over 6 metres.
The company has drill ready targets already identified and intends to drill right down the throat of the mag-high alterations identified by its survey.
Tamarack has a drill indicated strike length of 2.3 kilometres today, and potentially up to 6 kilometres.
When one looks at comparables in the area like Macdonald Mines [TSX-V:BMK] with an C$80 million market capitalization, one has to wonder why MINE is trading at a valuation of just C$35 million given that its properties are arguably just as good, or better, and that this is just one of the proximity are plays in the Mantis vehicle.
Kodiak is developing a very interesting property known as the Golden Mile in the Beardmore-Geraldton Gold Camp. Kodiak has recently experienced a market capitalization increase from C$35 million in mid-September to C$250 million today, on the back of very exciting drill results at that project.
Perhaps the best way to understand the potential magnitude of this play is to watch a video about the property on the Kodiak website, linked here.
In any event, Mantis is a central player in this camp with its Orphan property, which sits on a historic mine, and is 10 kms from the Kodiak discovery hole 'Hercules'. Historic results at Orphan include 0.75 ounce per tonne material all over surface and consistent 1 oz/t material pulled out and mined at a depth of 250 metres. The Golden Mile trend continues right through the Mantis property.
One other player in the area with arguably a much less desirable land package than Mantis is Sage Gold Inc. [TSX-V:SGX], which has been getting a lift from Kodiak. Sage has a market capitalization of C$60 million. Go figure how much longer Mantis shares will be changing hands at these levels based on these obvious comparables.
VMS Ventures [TSX-V:VMS] just saw its market capitalization explode from C$15 million in mid-September to C$200 million post-financing, at today's close.
This was based on the discovery of 4.38% copper over 43.05 metres, including 10.50 metres of 11.19% copper at its Reed Lake property in the Flin-Flon-Snow Lake belt, Manitoba.
Mantis, unbeknownst still to the market, controls approximately 10,000 acres of land directly surrounding the VMS discovery, with adjoining claims that lay just 2.4 kilometres from the discovery hole! This means that MINE is the closest explorer to the Reed Lake discovery and VMS is now staking to the North of Mantis.
This all used to be part of one property package that Noranda was exploring in the 1990s and it is believed that VTEM will expose targets on MINE ground the way it has just done for VMS.
We cannot find an appropriate comparable in this play but we believe that Mantis' now unmatchable proximity to the discovery puts it in a league of its own. Only 2 kilometres from the discovery hole, C$40 million seems like a fair number for 'optionality' given that VMS has a C$200 million market capitalization already.
The Rottenstone property in Saskatchewan is not a hot area play. Nevertheless, Rottenstone could be a company maker and could actually dwarf the size of the other projects.
In the 1960's Inco essentially sliced 40,000 tonnes of 3.28% nickel, 1.83% copper and over 9.60 g/t platinum group elements (PGEs) out of an area with greater topographical relief than the majority of the property.
That is roughly $1,800 rock value at current metal prices. Mantis has hired a world renowned nickel geologist who specializes in this area and who believes that a deep penetration VTEM-b airborne survey should uncover the large feeder source for this.
There could potentially be a mountain full of hundreds of millions of tonnes of nickel, copper, and PGEs here. This is a high-impact mega-tonnage target that could very quickly become a company maker.
The company also holds the Thorburn, Oke, King Dodd, and Cree Lake projects, each of which has shown promising results from ground work, and is drill ready. These projects for a normal explorer could make up the composition of a whole company, but Mantis has so many large targets that we are leaving out the detail here. Suffice it to say, these projects will be drilled for very little money in the New Year, and could also yield exciting grades.
Pinetree Capital Ltd. [TSX:PNP] has put its stamp on Mantis, acquiring a total of 15.8% of the company - and this is of critical importance. We understand that Pinetree is extremely excited about this situation and we believe that means that they will bring both institutional orders and institutional credibility to this story, beginning very shortly.
The likes of Noront, Kodiak, and VMS all, to some extent, have an institutional imprimatur on them now, as evidenced by the daily volumes, and the broker-dealers who are generating those volumes.
Given Mantis' exposure to all 3 of these plays, its paltry relative valuation, and Pinetree's institutional relationships, we believe that MINE will be next.
In this market when one looks for an exploration shot there are certain criteria that are helpful. Mantis possesses them all. In no particular order:
- Mantis has properties situated in areas that are already garnering a lot of attention - this puts the wind at the company's back when attempting to generate excitement and tell their story.
- Mantis has 3 shots in hot area plays with excellent properties that have already hit grades. One whiff and the market capitalization will multiply.
- Mantis has comparables with huge market capitalizations. More success for these companies will bolster MINE as well.
- Mantis has an institutional shareholder that has an interest in telling this story - and has the right audiences listening. This means that they are not forced to go the typical junior route, cap in hand, holding their nose through the Vancouver retail brokerage community - engineers of the perpetual overhang.
- Mantis will be drilling all of these properties in the next few months.
Given Noront's valuation at something like C$700 million including in-the-money options and warrants, Kodiak's valuation at C$250 million, and VMS' valuation at C$200 million post-financing, Mantis with direct and quality exposure to all 3 plays should be trading at a substantial premium to current levels in order to reflect its optionality to these discoveries.
We believe that when one considers the valuations of the forerunners in these area plays mentioned above, and even other juniors in the plays whose land packages:
- Have not hit grades;
- Are not sizeable;
- Are not in direct proximity to the recent discoveries.
Mantis should be trading at around C$3.00, immediately.
This would represent a market capitalization of roughly C$150 million - or C$40 million in optionality on the Noront play, C$40 million in optionality on Kodiak, C$40 million in optionality on VMS, C$20 million for the huge potential at Rottenstone, and C$10 million, or essentially shell value plus plus for the other interesting, drill-ready projects in the company's portfolio. Relative to area player peers, these numbers are certainly not stretching things and arguably still low given MINE's superb land positions.
And if in the next 4 months Mantis gets a whiff of a big hole on any of its 5+ anticipated drill programs, MINE could have a market capitalization the size of Noront, and a share price in the double digits.
The author is long Mantis Minerals all in accordance with the