In the investment banking business people talk about “deal flow”. Putting one deal together, closing it and moving on to the next deal. Peter Clausi, CEO of CBLT (V.CBLT) brings the concept of deal flow to the junior mining space.
“There can be more money made with a pen than a drill,” said Clausi. With CBLT’s announcement that it would acquire a 70% interest in Global Energy Metal’s Werner Lake Copper-Cobalt-Gold Project we see Clausi using a fraction of the proceeds of one transaction to embark on the next.
“Werner Lake was perfect,” said Clausi. In the press release Clausi elaborates, “Given the pandemic and border closures, it is important for us to acquire quality assets in jurisdictions to which our team can travel and work safely. Ontario is a great mining jurisdiction that meets those criteria which helps de-risk the project.”
“This is one of the highest grade cobalt properties in North America,” said Clausi. “We have the capital to attack Werner Lake.”
That attack will be informed by multiple years of exploration on the property and over 1 million dollars spent by a partner of Global Energy on infill and expansion drilling to acquire a 30% interest in the property. There is a NI43-101 compliant resource estimate for one sector of the property.
As I write, CBLT is doing its technical due diligence on the property. Clausi is optimistic that the deal will close by the end of December.
“Global’s business is evolving,” said Clausi when asked why Global was willing to sell Werner Lake. “They will get cash and five million CBLT shares as well as 3.5 million warrants so they will continue to have exposure to the property.”
Clausi points out that the shares and warrants are not dillutitive. Quite the opposite, “This is accretative because the price of the shares and the warrants is higher than the shares have been trading at,” said Clausi.
Clausi plans to do a flow through financing to cover the costs of a drilling program at Werner Lake. “With flow through, because the investor gets a tax write off, the price of the shares is higher than the common,” said Clausi.
Paying attention to capital structure and liquidity has meant that CBLT has not had to do a financing since 2016. “We have 72 million shares out and we have nine, soon to be ten, mining assets.”
Combining M&A with tactical exploration positions CBLT to take advantage of what Clausi believes will be a flow of cash into the junior resource sector.
“I see a wave of cash coming from Millennials who are taking a beating on cannabis and crypto,” said Clausi. “But it will not be a rising tide to lift all boats. It will focus on juniors with tight capital structures.”
Clausi sees “technical metals”, cobalt, nickel, copper, chromium as a rising sector in the junior resource world. In fact, in the release announcing the Werner Lake acquisition, CBLT states, “Copper and cobalt are two of the most important metals for the Green Revolution. Under current technological parameters, the world will not be able to ‘greenify’ without additional sources of cobalt and copper.”
At the same time, there is nothing wrong with having gold exposure and CBLT updated the progress on its agreement to sell its 55% joint venture interest in the Northshore Gold Project in Ontario to Omni Commerce for cash and shares.
Omni is in the process of changing its name to Ready Set Gold Corp and listing on the Canadian Securities Exchange. It has also been raising money. “Omni disclosed it had raised $2,595,337.20 at $0.60 per share, in addition to flow-through financing for $240,000 at a price of $0.75, for an aggregate of $2,835,337.20. To CBLT this is especially impressive as Omni had earlier disclosed its target financing was $1,500,000.”
Which is excellent news for CBLT shareholders as their company is almost certainly the largest shareholder of the soon to be listed gold explorer. That shareholding means that CBLT retains its exposure to the Northshore Gold project but no longer has any cash exploration costs. Essentially, the CBLT team has created a large carried option on a highly prospective asset.
This is where the pen really is more profitable than the drill.