Aldebaran Resources - Copper Gold bought cheap with Regional Scale (Transcript)

November 15 2019, 16:03 GMT

The third company from Regulus Resources' management team, Aldebaran Resources is an "exciting" copper-gold play based in San Juan Province, Argentina. Their flagship project, Altar, is a large copper-cold site obtained for a discounted value from a different mining company.

Aldebaran, in conjunction with precious metals mining company, Sibanye Stilwater, are currently in the process of re-evaluating the project. Drilling began in January 2019, but time must be taken for exploration and the conduction of a logging program. While the well-established track records of the Regulus Management team will instill confidence in many a prospective investor, the financials are slightly concerning. Share price has been as high as 90, but this year it's plummeted down to 35. The company is also sitting on significantly less cash than it was in February, which begs the question: if the value of shares has gone down, how has Regulus used its cash reserves to add value? Another concern will be the priorities of the management team. With so much already on their plates with Regulus, is Aldebaran a fledgling project that will find itself neglected? John Black offers some reassurance; a drill program on another Aldebaran project has begun in Aguas Calientes, and the primary asset, Altar, demonstrates immense potential, with over 2.5 billion tonnes of low-grade copper-gold mineralisation, and the promise of significant zones with a much higher grade. The Route 1 group are significant shareholders with nearly 50% ownership of Aldebaran. This can provide long-term stability but for retail investors, there will be concerns regarding such high ownership levels from a single group. Will Route 1's priorities align with the remainder of Aldebaran's shareholders? What did you make of John Black? Is Aldebaran Resources a promising prospect, or is it more of a pipe dream? Comment below.

Interview highlights:

  • Company Overview
  • Company Financials and the Share Price Drop of 2/3: What Happened?
  • Getting the Share Price Up: Will it be Possible?
  • Challenges and Opportunities for Raising Money
  • History of Aldebaran and its Potential

Click here to watch the full interview.

Matthew Gordon: We recently spokeabout Regulus. Want to talk about the spin out which is Aldebaran. Could yougive a one-minute summary for people new to this story, please?

John Black: Aldebaran is the third company fromour same management team. Our first company, Antares Minerals, was sold toFirst Quantum in 2010 for about $650MIL. From that, we formed Regulus, whichhas the exciting Anta Kori Copper Gold project in northern Peru. And then werecently identified the opportunity for another exciting copper gold projectcalled Altar, which is in San Juan Province in Argentina. And that forms theflagship project for Aldebaran. And it's a large copper gold project. It's onethat was drilled out and previously purchased by a mining company. It was not agood fit with that company. And we identified an opportunity to pick it up forpennies on the dollar. We've captured that. We're in the process right now ofre-evaluating the project ourselves. And in the very near term, you'll begin tosee us demonstrating the full potential of this project.

Matthew Gordon: Beautiful. Thanks, John. Let's start with the money side of things. So, you're sitting on quite a bit of cash at the moment to develop the Aldebaran project, somewhere in the region of 11-12MIL bucks, is that right?

John Black: Oh, no. We're actually at about $5MILon the project right now.

Matthew Gordon: OK sorry. You’reright, that’s from February 2019. Good. Just sticking with the financials, shareprice, it’s been as high as 90, this year's down at around 35 at the moment.What do you put that down to?

John Black: Well, when we captured this project,what we did is we had projects in Argentina as part of Regulus Resources thatwe had parked while we focused on the Anta Kori project. But we realized we hadvalue in those. But we needed a little bit more to form a solid package of projects:a solid portfolio projects in Argentina. So, when we saw the opportunity toacquire Altar, we saw the opportunity to spin out and form a new company inAldebaran. And we spun that out at a set price that was based on what ourprincipal investors were willing to put in to get that setup at. And then themarket settled that price down into where the market saw that, at that time. It'sa new project or a project that hasn't been seen for some time on this. It's inArgentina, which is a little bit less of a mining country. And so, we've seen anatural drift off on this as many of the investors that received Antares sharesas spin offs, decided that they wanted to cash those shares out and put themoney to work on projects that maybe had a more immediate opportunity to. Andso, we're now in the in the phase where we're quietly putting together the Altarproject and we'll begin to reveal that value on the project over the course ofthe next year or two. And we've also just set up to begin to drill on our AguasCaliente phase. So, a lot of the drift off has just been it's a new company.There are projects that have not really seen much news on, as we’ve set it upin the years, it’s kind of in that initial stage where we're consolidating andputting everything together, but we're now in a position to begin to put outnew drill results with the Aguas Caliente drilling. Aguas Caliente is a high-gradecup or high-grade gold silver opportunity that we see in Argentina, thatdrilling will start on in the next few weeks and we'll soon be able to revealhow we see the Altar project and what the potential value is. And so, it's agreat time to get into a quiet story that's just not really noticed by themarket.

Matthew Gordon: Okay. I think as denoted by me getting the cash position wrong, your PowerPoint is from March 2019. You talked about starting to tell the story and I know you've got a PR presence, foreign personnel on board to start doing this. And you spent clearly 6-7MIL bucks since we last spoke. So, what are you going to be able to tell people about what's happened to date?

John Black: We've recently just come out with thedrill results from the field campaign earlier this year at the Altar project. Andso, we drilled four long holes into the system, discovered a brand-new zone onthe system, and have announced some very long consistently mineralizedintervals. We're talking about intervals of 800-1000-meter intervals of a +.5%copper equivalent with higher grade zones within those. So, that drilling wasdone to help us understand better the geometry of the mineralization in thesystem. We're currently relogging the existing 115,000 meters of drilling that hadbeen completed previously on the project, and with the new drilling and our re-evaluationof the old drilling on this, we'll be able to present to the market over thenext several months how we see this project really looking. It's known as avery large but low-grade deposit and we view that that is what it is. Butwithin that, there are distinctly higher-grade zones. And we want to reveal theimportance, the economic importance of those higher-grade zones within thedeposit. So, there's a lot of geologic work we have to do in the background onthis. We have put some of those results out quite recently. And they're therefor those that want to look for a good opportunity like this. But we'll be ableto show that in better ways in terms of how those higher-grade zones look inthe in the course of the next few months.

Matthew Gordon: Right. So, it is interesting bit for me as a shareholder, I make money by share price going up. The share price has been hit, there’s been some resetting, I think you've called it, also maybe some market conditions, market nervousness around trade wars. And as we spoke with Regulus, you spent 6-7MILbucks within the last six months. You've no sense of whether you've got a dollar for dollar return there or not because the share price is down. What do you think you're going to be able to do with the next 5MILbucks, which is going to drive to share price back up, or is that just not going to be possible for you?

John Black: We wouldn't be spending this moneyif we didn't think it was a good investment. We think of this money as our ownmoney. We're heavy investors. And keep in mind that as management we own nearly18% of Aldebaran. And so, we think very carefully when we put this money in. Ourbusiness model is predicated on us identifying opportunities that we cancapture at a bottom in the market, either due to lower prices in the market orin the case of Altar it was a project that was held by a company where itdidn't fit, and they were willing to part with that project. So, we capturedthis project for much less than it would cost to drill out, what's known on itright now. And then it takes us many times a number of years for us to eitherdrill the project out or in this case, to partially drill it out, but partiallyre-evaluate and identify clearly more economically viable portions of the project.So, this project is one of the larger copper resources that's out there in thehands of a junior, potentially available for a major mining company to acquire.Major mining companies are not finding these projects themselves. And many ofthem are very optimistic that there will be a necessity for a lot more copperin the future as we see further electrification of vehicles and other thingsthat drive copper price on this. And so there will be, I believe, in the nextfew years be an increased demand for these large copper projects. And we've putour hands on a great one right now. And a lot of times when we do that, when weinitially acquire, this is not the first time we've done this. With the Hickory project we suffered through a couple of yearswhen our market valuations were really low, even though geologically we knew wewere on a great project. The same thing happened with Anta Kori and Regulus.And now we're beginning to reveal the value on this one. I just view withAldebaran right now, we're in that early stage where we've put our hands onsomething at a great acquisition opportunity on this. We're beginning to investthe money into it to reveal, but sometimes the full reveal of that valuedoesn't come until just a little bit later on in the project. But there's notan instant X number of dollars increase in price of our business. A lot oftimes you're putting that money in. You're working on showing the fullpotential of a project and then that potential gets revealed when we can showthe project in its full potential on that. And that just takes us a littlewhile to set up.

Matthew Gordon: Sure. So, you’ve got 5MIL bucks on the current run rate. That suggests another five months burn, right? Is that about right?

John Black: No, it's very lumpy in this companyright now because that's very dependent on when we're drilling on this. And so,what our plans are right now is, is that we will be drilling the AguasCalientes and Aldebaran, we have the Altar project, which is our flagship project,the large copper gold play opportunity. But we also have a series of other projects atearlier stages and one in particular has caught our eye called Aguas Calientes.We have very encouraging high-grade copper or high-grade gold silver materialon the surface and we'll be drilling this for a high-grade gold silver epithermalvain opportunity in the course of the next few weeks. So that's a relativelysmall drill program. We'll spend about a $1MIL Canadian on that, which willresult in the potential for a new discovery on this and results to come outsoon on that. And then in the background, we're putting everything together tobe able to define what the next stage at Altar project is. Probably the firststage of that is to reveal the full potential of it. So, people can begin tosee what that opportunity is. And that will determine how much drilling we'dneed to do. We have a lot of drilling in Altar already. We have a lot of datathere. So, it may be simply having us reveal what's there by being able tobetter present in a different light the information that we already have.

Matthew Gordon: So, here's the question. You’ve got 5MIL bucks left. You outlined some of the ways you can spend the money and I guess you'll prioritize that in the way that your experience tells you to prioritize that. You expect some of those things to have an effect on share price. If they don't, your market cap stays the way it is. You're going to need to raise some capital. It's going to cost you what it's going to cost you. How are you going to approach that? I know you're going to tell us story in the market. Really, really well. You’ve said you’re going to start telling the market really well. How do you approach the fund raise when you've done these things deliverables on your three projects and the market doesn't appreciate it yet? They're not listening to you. Just go ahead and raise small amounts or do you try and say I need to raise 12 months’ worth. What’s your thinking?

John Black: Well, our thinking really on this we'rejust as I mentioned, we're just kicking off a drill program in Aguas Calientes,so we'd like to see what those results are. They have the potential todramatically change the situation on the project. We will be able to betterreveal the full potential of the Altar project as we complete our reloggingprogram and can present that in a little different light. I think what you'llsee us showing is the higher-grade portions of the deposit, which are stillextremely large. The current resource is over 2.5BIL tonnes of low-grade coppergold mineralization. On this we view that within that 2.5BIL tonnes there aresignificant zones of much higher grade that form a deposit by themselves, ifyou will. And so, we're in the process of being able to put that together toreveal that. When we show the results from the program at Aguas Calientes wewill show our full thoughts on where we're going with the Altar project. Webelieve that will warrant an adjustment in the share price on this, which wouldallow us to raise capital with less dilution.But the important thing is that we move projects forward on that. So, we dohave the capability of raising capital somewhat independent of the share priceon this. It's just always best for ourselves as current shareholders and all ofour other shareholders to do it at increasingly higher prices.

Matthew Gordon: What does that mean? What do you mean we can raise this independent of share price?

John Black: Well, we have some very supportiveshareholders. This is a bit of a different structure to a company on this inthat we have a group called Route 1 that's been a strong backer for our teamall the way back to the Antares days and they’re strong supporters for Regulusand they own nearly 50% of Aldebaran. Sibanye, the company that we acquired theproject from has 20% of the project and his management, and we have 18. So,it's fairly concentrated shareholders on this. And there's alignment amongstthe shareholders on this that the important thing is to move the projectforward. Ideally, we'd love to do this. Our goal is to increase the value inthe company, certainly by the end game, which we view as monetization andselling the projects to a mining company at the end of this. But we're focusedmore on that end game than we are on day to day on this. But we do believe thatthe results from Aguas Calientes have the opportunity to bring us back on themap, if you will, on this. And we believe that when we're in a position toreveal our full vision on what Altar is and what the full potential is, that that'slikely to result in an increase share price. But there are other factors thatare beyond our control, like copper price or other things that could affect usas well. So, we have some time on this. And when we're in a position where wedon't like our share price on this, the important thing is to roll outadditional information, so people can understand better what we have and to becautious. You don't spend as much, you don't raise as much on this when yourlower share prices. But it’s important that you keep the company moving forward.

Matthew Gordon: But isn’t that kindof your problem. Based on that maths you’ve got 12% of free-floating shares,haven’t you? You’ve got 50, 20 plus 18. Liquidity’s the issue here, right?

John Black: You'll notice that many of the companies that do well, this is notterribly different than some structures of, say, some of the Lundeen companiesand others where you have large concentrated holdings from groups that are verycomfortable in the long term on this. It almost becomes a little bit more likea private company structure on this. And sometimes when you're in a marketbottom, that's a little easier structure to have than when you have a lot ofliquidity in a tough market. Liquidity is your friend when the market's robustand going up, but your enemy when it's going down on this. And so right nowwhat we focus on is setting the project up, acquiring the project which we'vedone, and then setting it up and getting ready to begin to reveal that. And aswe reveal that, and we raise additional capital, that's where we anticipatewe'd be bringing in new investors and increasing that liquidity. But the nicething is it doesn't take too much interest in us to move us pretty quicklyright now, too, because it's there not very many shares available. So, if wedeliver the results that we believe these projects will deliver, a little bitof demand will have a sharp increase in our share price.

Matthew Gordon: Potentially. I think that's a kind of fine balance. We've seen a few companies over this side of the pond who’ve had too much in the hands of one or two shareholders and it’s killed their share price, it had the opposite effect. It’s a balancing act. I appreciate that. But also, it gives me an insight into how you guys are thinking in terms of taking this forward. You know, you believe you've got the ability through your current shareholders to get you to a point where you're comfortable to go out to market and it put some more shares in the market. Understood.

John Black: Keep in mind one thing on this, ifwe had a project that required a lot more drilling to reveal the full potentialon it and a lot more investment on it, that would be one challenge. But here weacquired this project under very good terms, but it's a project that actuallyhas quite a lot of drilling to it. The Altar project was drilled out by ajunior company like ourselves called Peregrine Metals and sold to theStillwater Mining in 2011 for almost $500MIL U.S. cash at the time. It thenstalled. The company that purchased it was not a good fit for the project andit disappeared off the map. So, we acquired it for much less than that. So, youknow, right now, when you take a look at our market cap and the size company wehave, we have the option to turn 80% of a project that at one point was valuedin cash at over nearly $500MIL U.S. and when the copper market was robust. If wereturned to that type of a copper market on this, we believe we can show thatthere's more to this project than was even known then. And much of that we cando from simply relatively low-cost work to re-examine this and recast theinformation that's there so people can better understand that this is notsimply an enormous low-grade deposit, but there are distinctly economicallymore attractive higher-grade zones within it. That's what we want to reveal tothe market. That won't cost us too much money to do that. That's a lot ofgeologic work. We did spend some money this year for the drilling to gatherinformation to better evaluate what we have. But we're now in a position wherewe can reveal quite a bit of information about this project without a particularlylarge spend on it to go forward. And we believe with that information on thetable, we're likely to see a different valuation.

Matthew Gordon: So how much money has gone into this company in total then?

John Black: The way we structured this is as Imentioned at Aldebaran was a project that was acquired by Stillwater Mining for$487MIL in 2011. We acquired the option to pick up 80%. So, we had the optionto earn 80% of the project for $15MIL U.S, which has been paid and for Sibanye,which was the new owner of the project after they acquired Stillwater, has 20% ofAldebaran as part of the process. And we need to spend $30MIL over the courseof 5 years to acquire 60% and $25MIL additionally to go to 80% on the project.So, over the course of the next 8 years, we need to spend $55MIL total toacquire 80% of the project. We're well ahead on this, we've just completed ourfirst year on this and we've spent approximately 7 or $8MIL into that workcommitment. So, we don't have to work at that pace right now. We can a littleslower as markets a little bit slower on this. But we anticipate we'll spendthat money to acquire the 60% interest within the next four years. So, we havewe have time to do that. What we need to do now is to better demonstrate to themarket what the potential of this is first. And then we anticipate over thecourse of the next few years, we'll see, most likely, an increased interest inthese type projects from major companies. And that will likely come as apredicted supply gap in copper emerges and we start to see copper prices moveup. And so that will provide us a better environment to raise money at lessdilutive costs.

Matthew Gordon: So, you don’t feel you’re under any pressure with regards to money as it stands because you can control the pace at which you move forward.

John Black: We can control the pace of it and wehave good supporters on it and we're on a great project with much more valuethan is currently revealed in our share price on this. But we don't want tospend all of our effort just trying to get that up in the short term. We reallywant to set the fundamental situation so that the end game is there. We focuson that maximum value at the point that we would monetize this project byselling it to a major mining company.

Matthew Gordon: Okay. Look John, Ithink that's a great reintroduction to what's going on with Aldebaran.Fascinating. I think if people can pick shares up, might be worth having alook. Well, stay in touch. Let us know what's going on. Sounds like a bit moredrilling to happen as those results come out. Give us a call. Let us know howyou're getting on.

John Black: Yeah. Keep an eye on these AguasCalientes. That's a second project in there that has potential to emerge assomething pretty exciting on this. And then the real fundamental part of thecompany to watch is how we reveal that value in Altar. And we've discussed alittle bit on where the share price is right now. But in our previous twocompanies, we suffered through these same points where even though we knew wewere on a great project, a lot of times takes a while for the market to seethat. And the important thing is, is that we will be able to move the projectforward. We will have access to the capital we need. We're no risk of concerns thatway.

Company page: https://www.aldebaranresources.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Club Waitlist CTA
Share this article

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Crux Investor does not verify information provided by contributors or video interviewees on this site, and makes no assurance as to the adequacy, completeness or accuracy of any such information. Crux Investor steadfastly disclaims any liability or responsibility for the outcome of any investments made by users of this site or our branded affiliates. Users of this site (and our branded affiliates) should consult with their own financial advisors to assist them in making investment decisions. By accessing this site and our branded affiliates, you agree to the terms of service and privacy policy.