De-dollarization continues to remain a primary theme within the east most notably in Russia.
Russia recently announced that its National Wealth Fund would ditch all U.S dollars while increasing euros, Chinese yuan, and gold holdings.
This comes at a time when in April, China opened its borders to gold by permitting domestic and international banks to import large amounts of gold into the country.
China is the world’s biggest gold consumer, gobbling up hundreds of tons of precious metal worth tens of billions of dollars each year.
After receiving the green light, China’s net gold imports via Hong Kong jumped in April from the previous month to the highest since June 2018. These are significant developments for the gold industry considering that China recently banned cryptocurrency mining which caused the major sell-off as China’s mining accounted for over half of global bitcoin production.
With all these interesting events going on, I continue to focus on development resource companies.
As my readers know, I continue to be bullish on Cornerstone Capital Resources (TSX-V: CGP) due to its interest in Cascabel which is a world class asset located in Ecuador.
Cornerstone is the founding partner of Cascabel, the only available Tier 1 copper-gold asset in the world not owned by a global, multi-national mining company and owns a 21% effective interest in the project.
The Alpala deposit is the main target in the Cascabel concession, which is located in the northern section of the heavily endowed Andean copper belt, renowned as the base for nearly half of the world’s copper production.
The Alpala deposit at Cascabel hosts a world-class resource, but for my new readers, please see below:
This offers investors tremendous optionality to copper, silver, and gold due to the mineral wealth in the ground, especially at the company’s present valuation.
Cornerstone currently has a market capitalization of $150 million Canadian. At its present valuation, investors have an opportunity to accumulate a position at a significant discount as where the company’s top 3 shareholders acquired their shares at (C$8.60).
No one has a right of first refusal on TSX-V listed Cornerstone, which means a major mining company or smelter could gain a strategic position in Cascabel by acquiring Cornerstone.
As my readers who have followed this story know, SolGold made an unsuccessful all-share hostile bid for Cornerstone in 2020 at what Cornerstone considered an unfair exchange ratio, as well as being unacceptable for other reasons. This was followed by some Board and Management changes at SolGold.
In early June, SolGold and Cornerstone came out with a very positive joint news release indicating the partners have had a reset in their relationship. The news release said that the companies would explore and evaluate a range of strategic and financing options focused on maximizing value for their respective shareholders with respect to the Cascabel Project, in tandem with completing work on the Pre-feasibility study.
Liam Twigger, Chairman of SolGold, and Greg Chamandy, Chairman of Cornerstone jointly stated: “We are committed to fostering a positive working relationship between SolGold and Cornerstone for the benefit of our respective shareholders. Our focus remains on maximizing shareholder value by cooperatively advancing Cascabel with the input of both of our respective management teams and pursuing all potential value enhancing initiatives.”
Brooke Macdonald, President and CEO of Cornerstone, added: “Our focus is aligned with respect to lowering the development risk at Cascabel and accessing the high-grade core at Alpala that currently has 442MT at 1.40% CuEq in the measured & indicated category including 359MT at 1.47% CuEq in the measured category alone based on MRE#31.”
Franco-Nevada has provided US$100M for feasibility study funding to SolGold in return for a 1% NSR royalty on SolGold’s share of the project. This does not affect Cornerstone’s 15% interest, which is fully financed by SolGold through to completion of a bankable feasibility study and repayable at Libor plus 2% out of Cornerstone’s share of earnings from a mine.
This further showcases the leverage Cornerstone has and how appealing this could be for a major coming in to acquire a strategic position in the project.
In April, the company announced that the Alpala Project Team and the Project Committee are making good progress studying potential Alpala mine plans while addressing a number of mine development and metallurgical enhancements and potential upsides, are continuing to target the release of the PFS in late 2021.
Cornerstone is optimistic that the revised mine plan currently being studied as part of the PFS process could deliver similar metal production while mining significantly less material. This could result in potentially significant cost savings.
Anticipated benefits of the revised approach being studied include lower expected execution risks, lower expected pre-production capital and significantly reduced time to first potential production.
The beautiful part about Cornerstone’s business model, as my readers know, is that it aims to maximize value by minimizing risk with its project generation approach. The company leverages its expertise to make a discovery with the hopes of joint venturing the project to reduce dilution of its equity structure, which significantly de-risks shareholders of constant dilutions to advance projects to production.
Cornerstone owns the following projects in Ecuador:
I encourage my readers to visit the company’s website to review these assets as many of them are undergoing work programs by its partners.
I would like to draw particular attention to the company’s Bella Maria Au-Cu property as I continue to be very excited about this project which is still 100% owned by Cornerstone, available for farm-in and joint venture, with drill targets to be finalized in Q4 2021.
I did a deep dive on the project in 2021, but I recommend my new readers to review it here.
Bella Maria is contiguous to the Greater Cangrejos project where Lumina Gold has outlined a 16+ Moz resource (10.4 Moz in the Indicated category and 6.3 Moz in the Inferred category).
Bella Maria is located along the NE extension of Cangrejos (regional NE mineralized trend) and shows extensive Au-Cu anomalies at surface. It never has been drilled.
I continue to be a big believer in Cornerstone due to its strong portfolio of assets, particularly with its interest in the world-class Cascabel project endorsed by BHP, Newcrest, and Franco-Nevada, and the discovery potential at all its other assets.
It is going to be an exciting remainder of the year as I expect:
- Further updates from joint venture partners on work programs, including the start of a 15 hole/6,000 meter drill program at the Caña Brava project in Ecuador funded by Newcrest;
- Advancements at Cascabel, including assay results from drilling at satellite targets; and
- The completion of the Pre-feasibility study at Cascabel by the end of the year.
I will be doing an interview with the company’ CEO, Brooke Macdonald, in about four weeks for another update.
If you want me to ask anything in particular, please tweet or email me.
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