The Exploration Investment with Multiple Opportunities for Discovery
The discovery of gold and other metal-rich deposits has captured the imagination of whole societies and in modern times has made it possible for common people to become unimaginably wealthy in dramatically short periods of time. This imagination has given rise to the mass-exodus of fortune seekers to uninhabitable lands. It is also responsible for investments of common folk into companies with legitimate new exploration ideas and others with nefarious old ideas. Like the fortune seekers of old, today’s investor rarely experiences the kind of success that the imagination conjures and compels investing in this risky marketplace.
So, how to know where to put your money? A stake in a well-intentioned mineral exploration company has potential for a huge reward but also carries high risk if they don’t succeed. In most cases, companies only explore one property at a time and hope for “the big win”. If they fail, then your investment may eventually go to zero.
It is a rare find but there is a company with a business model that breaks from the typical all-or-nothing approach: Eagle Plains Resources Ltd. (EPL:TSX-V). One of the oldest companies listed on the Toronto Venture exchange, the business has staying power. In 2022, EPL had four exploration projects drill-tested, and fieldwork on a total of eleven projects across Western Canada. The result of their approach is multiple chances for windfall profits with a single investment. Most importantly, they can back it up with a history of “big wins” for shareholders.
The latest big deal came in the form of a friendly takeover offer from SSR Mining (NASDAQ/TSX: SSRM) to acquire Taiga Gold (CSE:TGC). Taiga was spun out by EPL in 2018 with stock of the new company issued to its shareholders on a one TGC for two EPL share basis. They were successful at making multiple gold discoveries near SSRM’s Seabee Gold Operation in Saskatchewan eliciting a take-out offer from SSRM. Those who held their Taiga shares enjoyed a 36% premium on the sale based on the previous 90 day average price. Take note that many investors obtained their Taiga shares when it was spun-out from Eagle Plains at no cost resulting in a much greater premium.
In this article, we’ll break down the reasons why investors like you should jump at the chance to invest in Eagle Plains.
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Delivering Shareholder Value in Spades
Revenue Generation and Deal Flow Fund Exploration
So how can an explorer possibly hold a steady financial position and at the same time deliver huge wins for shareholders?
An important factor to consider is that EPL can control risk exposure through joint-ventures with other explorers. EPL has welcomed a number of renowned exploration partners to their wholly-owned properties over the years. The partners enter option agreements with EPL that grant them a share in property interest in exchange for cash payments, share issuances and, very importantly, commitments to exploration expenditures.
With this deal-flow, EPL is exposed to the upside potential of discovery without spending a dime on exploration. EPL is free to choose to maintain an interest in some projects or sell it and simply retain an NSR. The result of this deal flow is steady cash flow year-in and year-out with concurrent exposure to massive upside potential.
Finally, EPL takes another novel step in smooth cash-flow generation with TerraLogic Exploration Inc. In many cases, firms will contract “service companies” for exploration services. In reality, these companies may be owned by the firm’s insiders which does not benefit the shareholders. EPL operates differently, building the company with assets such as TerraLogic which is positioned as a central revenue driver for its parent company. TerraLogic is a geological consulting company providing exploration services for the industry. As a wholly-owned subsidiary, TerraLogic pads the coffers of EPL with annual profits, in 2021 this was in excess of $1.5m and estimated at $2M in 2022. This model is relatively unique as the cost of maintaining a technical team is borne by third parties rather than by the shareholders of EPL yet the necessity of maintaining this team is critical for success. Just try finding a skilled geologist, let alone a team of them at the height of the market, it’s just not going to happen.
The Next Win?
Eagle Plains currently operates over 50 gold, critical-metal, REE and uranium projects across stable jurisdictions in Western Canada. As a result, the company can shift focus to bull-market metals at will. In June 2022, SSRM finalized the purchase of EPL’s latest spin-out, Taiga Gold, in an all-cash deal with the express purpose of extending the life of mine at Seabee. Shareholders received cash payments for their Taiga shares including Eagle Plains who received a $3.18M cash injection to its treasury.
Coincident with the buyout of Taiga Gold, a completely separate company, Banyan Gold Corp., announced an inferred resource of 3.99M ounces gold at their AurMac Property located in the Keno Hill district of the central Yukon. This is a well-developed silver and gold mining camp with operators like Hecla Mining, Victoria Gold Corp. and previously, Eagle Plains. Patience has paid off as Eagle Plains held onto an NSR (Net Smelter Royalty) over much of the AurMac Property that became the location of Banyan’s gold discovery area that, as of May 2023, contains a 6.18m oz inferred gold resource. This creates risk-free exposure to potential gold production with no development or production costs.
A new business division of EPL was created to host the complete portfolio of over 50 mineral royalties, including the AurMac/McQuesten NSR, which has now been spun-out into a separate company called Eagle Royalties Ltd. and listed on the Canadian Securities Exchange (CSE) under the symbol “ER”. The restructuring is designed to improve the identification and valuation of royalty assets, and to ultimately enable ER to separately market, finance and acquire additional royalties. You can watch a video explaining Eagle Royalties’ AurMac/McQuesten royalty here.
Securities Disclosure: At the time of writing, the author holds no direct investment interest in any company mentioned in this article. I was paid by one of the companies for this article.
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Winning Fundamentals
Eagle Plains has many positive indicators that point to long-term success in their exploratory operations. Firstly, Eagle Plains has a fantastic history when it comes to shareholder returns. The company has delivered multiple ten-baggers (10x returns) since its inception in 1994. Other significant returns include the aforementioned Taiga Gold offer by SSR Mining and the 2011 sale of Copper Canyon, which netted investors a 150% premium based on the previous 90 day average price, yet again, it’s important to point out that many investors obtained their Copper Canyon shares on a one-for-one basis when it was spun-out from Eagle Plains at no cost, again, resulting in a much greater premium.
Furthermore, in proof of shareholder accountability, EPL has achieved these returns with minimal dilution and without ever conducting a share roll-back.
The second indicator of success is the company’s sound financial position. EPL carries an impressive balance sheet with no long-term debt, over $9m in cash/investments and a market cap of approximately $22m. A healthy ledger has been a mainstay for EPL since its early days.
Hunting for Mammoth Deposits
Driven by discovery potential and buoyed by the SSR Mining cash injection, Eagle Plains decided to deviate from the conservative project generator approach and self-fund drill-testing of its 100% owned Vulcan project located in the East Kootenay region of BC. This program was undertaken in order to continue the search of the extremely elusive Sullivan-style mineralization that was once the crown jewel of Teck Cominco. The backdrop to this is that the Sullivan Mine was one of the largest mines of its kind in the world, a behemoth with a gross value of over $50B using recent metals prices! These types of deposits (Sedex) occur in clusters yet no other was found in the Sullivan Camp, it’s a prize so significant that some geologists have exclusively dedicated their careers to finding another. Let’s come back to the Vulcan, in late 2022 in the second of a three-hole drill program testing well-developed targets, Eagle Plains intercepted ~260m of geology/mineralization that suggests close proximity to a lead-zinc mineralizing feeder system. This is by far the most significant intercept in the camp outside of the Sullivan deposit itself and has caused quite the stir in the geological world. Eagle Plains plans to follow up this very exciting discovery in 2023 with further drilling attempting to vector in on the feeder vent system.
Once again, remember that the aforementioned projects represent a sliver of EPL’s gold and critical-metals exposure in Western Canada. In late 2022, the Eagle Plains announced the creation of a new division within the company to host their royalty assets, Eagle Royalties. The restructuring is designed to improve the identification and valuation of specific Eagle Plains’ royalty interests, and to ultimately enable ER to separately market, finance and develop its various assets while maintaining the ability to acquire additional royalties. Given Eagle Plains’ history of corporate incubation, this new royalty division may be a candidate for a future spin-out and we all know that the previous ones have worked out quite well for investors.
Don’t miss out on the huge gains to be had with the discovery of metals! Invest in expertise and a track record that speaks for itself. Follow the latest from EPL at https://www.eagleplains.com/news or visit their YouTube channel to learn more.
2022 Drill Core from the Vulcan Project (SEDEX)
The Exploration Investment with Multiple Opportunities for Discovery