Eagle Plains Outshines In Stormy Markets (TSXV: EPL)
The current market downturn is a necessary evil in the junior metals sector. Tough market cycles pull back the screen and expose the true quality of a company. Savvy investors will find value in those companies that are able to weather the storm.
The storm currently underway in the junior metals sector is a mad scramble for financing in a risk-averse capital market. Meanwhile, mineral prospect generators like Eagle Plains Resources (TSXV:EPL) see times like these as prime opportunities for growth. The acquisition of new projects at depressed prices is tantamount to the business model of buying low and selling high.
Logically, you’d think that bankers and brokers would gravitate to a company prepared for an acquisition spree, especially when many companies in the mining sector are clawing for financial assistance. Not so with Eagle Plains.
EPL distinguishes itself in the sector as one of the only junior explorers with a steady income stream, which provides organic funding for growth. EPL combines its cash flows from joint-venture partnerships and income from its geological consulting subsidiary, Terralogic, to sustain operations and finance acquisitions without relying entirely on banks and brokerages to raise capital.
The EPL approach is a bummer for brokers, who usually take substantial fees on funds raised by private placements arranged for junior sector companies. But their loss is the gain of EPL shareholders who have never experienced a stock rollback in the prospect generator’s 30 year history.
The term ‘prospect generator’ was first coined in the mining sphere by billionaire investor and speculator Rick Rule.
“In my experience over 30 years the prospect generators have been the most intelligent way to play exploration,” says Rule, “The ideal prospect generator generates 3 or 4 investment ideas a year and then uses other people’s money to do the heavy lifting of exploration.”
Eagle Plains is a textbook example of prospect generation done right, in fact, they were employing this model before the term even existed. The company uses in-house expertise to guide the strategic acquisition of undervalued prospects and then builds a case for the mineral potential. They then option a percentage of the properties’ mineral rights to partner companies that assume most of the financial risk. In exchange for the option, partners commit to minimum exploration expenditures in addition to cash and share payments to EPL. With over 50 gold and base-metal projects across Western Canada, EPL gains exposure to an array of discovery potential while avoiding the bulk of costs associated with exploration. The below link is to a series of videos explaining this model and other aspects of the company.
The best example of the project generator model approach in recent years is the successful sale of Taiga Gold Corp. to SSR Mining (NYSE/TSX: SSRM) in 2022. Taiga’s projects in Saskatchewan near the Seabee Gold Operation were spun out by EPL in 2018 with Taiga’s flagship project, Fisher, optioned to partner SSR. Over four years, SSR did most of the heavy lifting, made multiple discoveries and incurred expenditures of more than C$12M in exploration before purchasing the package of properties outright in an all cash deal. The acquisition provided a liquidity event netting 40%+ returns for Taiga shareholders.
In the wake of a 2021 that saw revenues jump 120% from the previous year, EPL has undertaken a bullish exploration strategy. With the profits from this most recent buyout, cash payments from option partners, and income from geological services, Eagle Plains deviated somewhat from its conservative risk-averse approach to self-fund a drill program on well-developed Sullivan type targets at its 100% owned Vulcan Property.
Drilling in September 2022 at the Vulcan property located in the East Kootenay region of BC intercepted ~260m of Sullivan style geology suggesting close proximity to lead-zinc mineralized feeder system. Aggressive exploration is anticipated for 2023 to follow up this significant intercept given the strong geological similarities to the nearby Sullivan deposit, a now depleted world-class mine that was one of the largest sedex deposits in the world. See an explanation of the significance of this intercept in this video.
Eagle Royalties – A New Division of Eagle Plains
In November 2022, Eagle Plains formed a new division within the company called Eagle Royalties, that’s host to a diverse portfolio of royalty assets including the AurMac/McQuesten Royalty overlying a portion of Banyan Gold’s AurMac gold discovery of 3.99M oz. This was established to maximize shareholder value and allow the company to pursue strategic opportunities with these assets. Could this be the next Eagle Plains spin-out? The link below is to a video explaining the AurMac/McQuesten Royalty.
As a modest exploration company with relatively low G&A and more than $10 million in cash and equivalents ($10.24M as of November, 2022), Eagle Plains is poised to deliver further wins for shareholders in the coming years.
“We’re finding that there’s a contraction overall in the [market],” said EPL CEO and founder Tim Termuende at the 2022 StockPulse Silver Symposium, “For us that’s opportunity; crisis equals opportunity… so we’re now looking for opportunities that don’t come along unless you’re in a downturn.”
With big reward comes big risk but investing in the mineral exploration sector can be mitigated by:
- Diversification across a wide spectrum of properties and minerals
- Time-tested management that has built value for shareholders over 30 years
- Historical successes marked by the sale of spun-out assets resulting in significant returns to investors
- Avoidance of share dilution or debt finance through self-sustaining capital generation from internal revenue sources
EPL provides shareholders the stability of a major company that has stood the test of time while giving exposure to the incredible upside of discovery that can generate great wealth for shareholders of a junior company. EPL does this while creating consistent significant value for shareholders through the application of the corporate incubator business model.
It is pretty much unheard of for an exploration company to have sustainable income and that’s why you shouldn’t hate a company like Eagle Plains Resources … unless you’re a banker.
To learn more about Eagle Plains, visit the Eagle Plains Resources Youtube Channel
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