All that Glitters is Gold for Carlyle Commodities Corp.
- The rally in the price of precious metals has attracted the attention of investors
- Prior to 2020, there was a decline in investments in mining projects across Canada
- Carlyle Commodities Corp. has been actively seeking projects even when the prices were depressed, and this has reduced the acquisition cost for the company
- The Newton Gold-Silver project is expected to be a significant breakthrough for the company due to its undervalued resource estimate, strategic location, and access to skilled labor at an optimum cost
- Carlyle has also looked to leverage upon the expertise of Amarc Resources and The Hunter Dickinson Group, a company and group that had already developed and explored the property from 2009–2012
- Technological advancements in the mining sector will also work in favor of the company with an improvement to data collection and understanding, specifically as it relates to Resource Estimates
- The attractive valuation of Carlyle should also work in favor of the company considering the already overheated market, making it difficult to find opportunities available at such a reasonable entry point
- Carlyle also boasts of shareholders and strategic advisors who have decades of experience and success in the Canadian mining industry
The bull run in the commodities market in 2020 has drawn the interest of investors. Since 2012, precious metals like gold have been underperforming when compared to other asset classes.
The recent surge in the price of gold has reinstated the mojo of precious metals as investors look for opportunities to exploit.
This was not the case a few years ago. While Canada continued to draw investments from investors across the globe, volume had dwindled along with the lull in the commodity cycle.
Now that the prices are up significantly in precious metals, and inflation prints are at 13-year highs, momentum is finally back in favor of the mining industry. So, how does one find value in this apparently heated market?
Carlyle Commodities Corp. (CSE:CCC) (FSE:1OZA) (OTC:DLRYF) is one of the companies that has been in the fray for the last year or so and offers a unique investment proposition to investors at an enticing valuation. It seems to have followed the adage “Be fearful when others are greedy. Be greedy when others are fearful” and has managed to procure projects when the price was reasonable. As the price of gold and other precious metals remain elevated, the acquisitions that Carlyle has made are set to yield dividends for investors.
A look into Carlyle
Carlyle is a mineral exploration company focused on acquiring, exploring, and developing mineral resource properties in North America. The management team comprises members having rich experience in capital markets with deep ties in the mining industry. Leveraging upon these relationships, the company has made inroads into the mining industry within Canada and Mexico.
Other key features of the business model include:
- Precious metals focused
- Targeting high-grade gold-silver projects
- Favorable jurisdictions
- Assembling district scale plays
- Low capital cost exposure
- Leverage to commodity prices
- Deep exploration upside
What makes Carlyle an attractive bet?
Carlyle has managed to acquire 100% ownership of the Newton Gold-Silver Project, which is the flagship project on which the company is currently focused. A significant reason why the Newton project is so attractive is the fact it has had more than $15,000,000 in exploration costs incurred, including more than 30,000 meters of drilling. The project could be compared to and considered a miniature version of Artemis Gold’s (TSXV:ARTG) Blackwater Gold Project approximately 180 km’s north, which at a 0.20 g/t AuEq cut-off, the total Measured and Indicated Mineral Resource is estimated at 597 Mt at 0.65 g/t AuEq, 0.61 g/t Au, and 6.4 g/t Ag for a total of 12.4 million AuEq ounces. Of the total Measured and Indicated Mineral Resources, 75% are in the Measured category. The Newton Project has a historic NI 43-101 Resource Estimate of 1.6 million ounces gold and 7.7 million ounces silver at an average grade of 0.44 g/t Au and 2.1 g/t Ag (see the table below).
The gravity of Newton in the scheme of Carlyle and its key advantages
a. Provides historical evidence of success: Carlyle can and has leveraged the experience of the previous owner of the Newton Project. The site was explored and developed between 2009–2012, and the mineral patterns have been studied using the historical samples collected.
This saves considerable time for Carlyle, and the company can directly initiate drilling campaigns. The company has also been able to bring in key personnel from The Hunter Dickinson Group who happened to have worked on the Newton Project in the past. The fact that some of the senior members have chosen to return to the project is quite a promising sign.
b. Improvement in technology: Newton continued to be an attractive project until 2012, after which the price of gold fell, thereby rendering the project not as appealing. In a decade, not only have precious metals reached favorable levels but there have also been advancements in mining technology. As a result of this, Carlyle plans on utilizing such technology by updating The Newton’s resource estimate in due course.
c. Managing costs: While one can get obsessed with the price of precious metals in determining profitability, costs play a significant role in the mining industry. One way to reduce costs would be to leverage upon the previous drilling experience and project development by Amarc. Carlyle also expects labor costs to be low on account of uncertainty in the labor market. The combined effect of these factors should make the project more cost-efficient and less reliant on price to generate higher returns for shareholders as the Company advances Newton’s growth.
d. Location: The project is located at a site characterized by plateau lands and rolling hills. It is 180 km south of Artemis’ Blackwater Project and 50km northeast of the Taseko mines Prosperity Deposit. The district supports year-round mining activities with access to transportation, power, infrastructure, and a skilled workforce.
The Cecilia Project
Carlyle has been able to establish Mexico as a jurisdiction that can generate a good return for shareholders. While much of the emphasis is on Canada, the role of the Cecilia project cannot be discounted, considering the progress made in 2021.
Undervalued, to say the least
Given the prospects that the projects hold, the current market price suggests that it offers an attractive entry point for investors.
The market price does not factor in the fact that Carlyle has been able to acquire projects at a very reasonable cost.
The stock has underperformed even after announcing several strategic partnerships and acquisitions, but one crucial aspect to consider is the holdings of strategic shareholders, including Amarc Resources Ltd. a Hunter Dickinson Group company of which Robert Dickinson is the Chairman, holding ~10% equity in the company. At these levels, the stock looks like it could be a value play for years to come.
1. Market sentiment risk
While the Newton project has a proven history, there is a possibility that due to the junior resource market sentiment looking ahead into the future, the value of the potential deposit in the ground may become less attractive should interest levels from junior mining speculators waiver. Similarly, one cannot rule out the chance of a disruption in the project undertaken in Mexico. Carlyle is highly dependent on these two projects, and considerable investment has been made already.
2. Impact of commodity prices on the return to shareholders
While the price of gold has shown resilience lately, there have been instances during which the price fell sharply. Low prices were a factor that prompted Amarc to focus on its core competencies in their copper portfolio and away from the Newton project. Such a fall-back option may be limited to Carlyle, and the company would have to face lower valuations if the price does not move in favor. The management team has already expressed an intention to expedite this process of expanding and growing the current resources, and investors should see results soon.
3. Limited scope for expansion
With the focus currently on the Newton project and the amount of investment made, it is unlikely that Carlyle would be setting out for any new projects in the short term. Taking on new ventures may only be possible once the Newton project starts generating growth to its current historical resource.
An Experienced Management Team
Carlyle has a good mix of professionals in the finance as well as the mining industry. The expertise in these areas has enabled the company to garner the required funding and licenses to acquire projects in a very short time.
Morgan Good, CEO, President & Director, Carlyle Commodities Corp.
Mr. Good has been in the Venture Capital space for more than 15 years with diverse experience covering finance, corporate restructuring & development and marketing. Mr. Good has been involved in raising over ~$100M over his career. He has also served on multiple boards assisting in M&A transactions.
Mike Blady, Director, Carlyle Commodities Corp.
Mr. Blady is also currently the CEO and Director of Golden Ridge Resources (TSXV: GLDN), which recently has garnered much attention and finance from its Newfoundland-based William’s Gold Project strategically located adjacent to New Found Gold Corps’ Queensway South Project. He has been part of the senior management, director, and member of the audit committees for several publicly listed companies. Over his career, he has been directly and indirectly involved in raising over ~$150M of capital.
Leighton Bocking, Director, Carlyle Commodities Corp.
Mr. Bocking has been actively involved in the mining industry as an independent Corporate Development Consultant. His career includes being a Manager of Corporate Development at Gold Standard Ventures Corp. from October 2014 through November 2015, and prior to that worked in a Corporate Development role at Timmins Gold Corp. from March 2008 through July 2013, both mining resource companies that combined raised significant capital.
Bennett Liu, CFO, Carlyle Commodities Corp.
Mr. Liu has served as Chief Financial Officer for multiple publicly traded companies (TSX Venture Exchange and CSE-listed) with a focus on the resource sector. He is currently a Partner at Red Fern Consulting Ltd., a full-service accounting group that provides financial and support services for public companies including accounting, regulatory compliance, audit management, and financial reporting.
Strong Strategic Alliances
As an investor, one needs to consider the effort that Carlyle spent developing a strong base of human capital. The advisory board includes members who have rich experience in the Canadian mining industry. The fact that some of these members are major shareholders of the company should also provide some comfort level.
Robert Dickinson, Executive Chairman, Amarc Resources Ltd.
Amarc Resources, where Robert Dickinson sits as the Executive Chairman, is one of the largest shareholders of Carlyle, commanding nearly a 10% stake. He is the co-founder of The HDI Mining Group and has pioneered the development and operation of 8 mines, having raised in excess of $1.9B for his initiatives. His contribution to the Canadian mining industry was acknowledged when he was inducted into the Canadian Mining Hall of Fame in 2012. The fact that he was heavily involved in the Newton project has helped Carlyle make rapid progress.
Sheldon Inwentash, Chairman & CEO, ThreeD Capital Inc.
Mr. Inwentash is a strategic advisor to Carlyle and has a history of successful investment ventures. He co-founded Visible Genetics in 1994 and was able to exit in 2001 to Bayer. Other investments include Queenston Mining (acquired by Osisko Mining Corp. for $550-million), Aurelian Resources (acquired by Kinross for $1.2-billion), and Gold Eagle Mines (acquired by Goldcorp for $1.5-billion).
Other key strategic advisors include Jason Jessup, Justin Blanchet, and Justin Kates who have decades of expertise in the field of mining, finance, legal, compliance, and auditing. The total mining exits commanded by all the strategic advisors are more than $6B.
Key Takeaways for Investors
The current valuation of Carlyle is attractive for prospective investors considering the quality of projects in the pipeline. The involvement of key figures in the Canadian mining industry lends credibility to the latest acquisitions. Carlyle has been strategic in its objective and could find value at a time when the precious metals market was in the doldrums. If the asset development activity, especially in Newton, goes as per plan, Carlyle could be a lucrative proposition for investors in the precious metal space. Beware the risks, yes, but the upside looks to be immense for a company with this type of management, advisors and quality properties.