Since March, the entire commodities market has showcased its resilience as monetary and fiscal policy globally has run rampant as the coronavirus has inserted unprecedented economic uncertainty globally.
Most notably, precious metals such as gold and silver have gone on significant runs as investors flock to assets to preserve their wealth. In U.S denominated terms, gold is up nearly 30% over the past year, and silver is up nearly 50%. The outlook remains extremely bullish as federal spending alongside the federal deficit continues to smash records to coincide with an exploding Federal Reserve balance sheet.
In fact, today, the Fed’s balance is over $7 trillion. In March, it was just over $4 trillion, which showcases how aggressive the central bank has had to be to keep the market afloat.
The chairman of the Federal Reserve Jerome Powell has gone on record saying that the fed will let inflation run higher, indicating that interest rates will remain low for years to come. This only serves as a significant catalyst for precious metals such as gold and silver but also for commodities such as copper.
Cornerstone Capital Resources Inc. (TSX-V: CGP) is poised to unlock shareholder value in this environment due to its vast portfolio of assets, including the world-class copper-gold Cascabel asset.
The company owns 21.4% of the largest copper-gold deposit in the world not controlled by a major. The Alpala deposit is the main target in the Cascabel concession, located on the northern section of the heavily endowed Andean copper belt, the entirety of which is renowned as the base for nearly half of the world’s copper production.
The Cascabel Asset
As showcased on the Cornerstone infographic (please click here to view), the Cascabel project has delivered some of the most impressive drill results ever released.
Cornerstone’s joint venture partner in the asset is SolGold, which recently tried to acquire Cornerstone in a hostile takeover bid. This is the second time in 2 years that SolGold has tried unsuccessfuly to acquire the company.
In a recent rebuttal to SolGold’s offer, Cornerstone made the following points:
• SolGold’s offer is 56% less than the C$8.60 share acquisition price of Cornerstone’s top three shareholders
• BHP’s 13.6% interest in SolGold, acquired in 2018 and 2019, implies a C$11 price for Cornerstone
• Newcrest’s 13.6% interest in SolGold, the last part of which was acquired by block purchase in December 2018, implies a C$13 price for Cornerstone
• Precedent transactions for projects of Cascabel’s scale have averaged $0.07/lb. copper-equivalent, which would imply a C$18 valuation for Cornerstone
Additionally, at the company’s AGM, President and CEO Brooke Macdonald talked at length about Cornerstone’s deal with SolGold and debunked some of the myths about the deal out there on the chat rooms. (Watch the video here)
This is an exciting time to be following the company as a critical date is emerging. On October 19, BHP’s “standstill” agreement with SolGold expires.
BHP is a leading global resource company with a USD market capitalization of $125.4 billion. BHP owns 13.6% of SolGold. The reason why October 19 is a significant date is because currently the standstill agreement prevents BHP from acquiring any shares in Cornerstone without SolGold’s consent unless a third party makes a move to acquire control of Cornerstone before October 19, which would allow BHP to bid.
A separate standstill also expiring October 19 prevents BHP from acquiring additional shares of SolGold or colluding with anyone to acquire control of SolGold.
After that date, BHP will be free to make a move on Cascabel…which could potentially result in a takeout of Cornerstone at a much higher share price than it’s trading for today. This was highlighted in the “Golden Opportunities” newsletter a few weeks ago.
One thing is clear, assets such as Cascabel do not come around often and Cornerstone’s interest provides an attractive opportunity for a potential acquirer to secure a strategic position superior to any other SolGold shareholder at present valuations.
I strongly encourage readers to review:
The Gold Telegraphic Cornerstone Infographic: http://www.goldtelegraph.com/company-spotlight-cornerstone-capital-resources/
The Cornerstone Factsheet which includes the top 10 reasons to invest in Cornerstone: http://www.cornerstoneresources.com/i/pdf/Presentations_CGPFS.pdf
We will be following up and doing another interview with the CEO and President Brooke Macdonald in a couple of weeks.
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