Donner Metals Ltd. (TSX-V: DON) is a Canadian development and exploration company focused on base and precious metal projects in Québec. Donner’s flagship project is a partnership with Xstrata Canada Corporation in the Matagami Mining Camp covering both the current development of a new mine and on-going exploration activities. The project is located in the Abitibi region of central Québec and it is supported by Xstrata’s existing mine infrastructure, a highly experienced workforce and an operating 2,950 tonne per day mill. As well, the area is serviced by highway, power, airport, railway and town site infrastructure.
WARNING: Information contained in Donner Metals Ltd. (the “Company”) press releases, web site information and corporate displays, among others, may contain forward looking information and future oriented financial information as noted and described in specific detail below. The use of forward-looking information and forward-oriented financial information related to future performance of the Company carries risks typically associated with mining ventures as well as risks related to the Company’s ability to fund its share of financial obligations related to such activities. Such risks are discussed below.
The Company’s core project is the Matagami Project located in central Québec. Donner shares a participating interest with Xstrata Canada Corporation (“Xstrata”) in five separate joint ventures in this location.
By accessing this website and other Company information, you agree to be bound by the following terms and conditions:
Under no circumstances should any material in the Company’s press releases, web site information and corporate displays, among others, be construed as an offering of securities or of investment advice. The materials contained in the Company’s press releases, web site information and corporate displays, among others, constitute information only regarding Donner Metals Ltd. The reader should consult with his/her professional investment advisor regarding investments in securities. Junior public mining and exploration companies should be viewed as speculative investments. Such companies by nature carry a high level of risk. Anyone who cannot accept a risk of total and sudden loss of their capital should not own such securities. Speculators should also be aware that these stocks are subject to swings in price (both positive and negative) and liquidity that are not always related to the fundamentals of the underlying business.
Certain statements and/or graphics in the Company’s press releases, web site information and corporate displays, among others, constitute “forward-looking information” Forward-looking information is information that includes implied future performance and/or forecast information including information relating to, or associated with, exploration and or development of mineral properties. These statements or graphical information involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company to be materially different (either positively or negatively) from any future results, performance or achievements expressed or implied by such forward-looking statements.
Forward-looking statements are identified by wording such as “scheduled (future sense)” “intend(s)”, “plan(s)” “expect(s)”, “believe(s)” “will” “estimate(s)”, “forecast”, “anticipate(s)”, “expect(s)”, , “may”, “should”, “goal”, “target”, “aim”, “may”, “would”, “could” or “should” or, in each case, the negative thereof, other variations thereon, comparable terminology or wording/graphical information that implies anticipated future results or deliverables.
You are cautioned not to place any undue reliance on any forward-looking statement.
Forward-looking statements or information related to Exploration.
Relating to exploration, the identification of exploration targets and any implied future investigation of such targets on the basis of specific geological, geochemical and geophysical evidence or trends are future-looking and subject to a variety of possible outcomes which may or may not include the discovery, or extension, or termination of mineralization. Further, areas around known mineralized intersections or surface showings may be marked by wording such as “open”, “untested”, “possible extension” or “exploration potential” or by symbols such as “?”. Such wording or symbols should not be construed as a certainty that mineralization continues or that the character of mineralization (e.g. grade or thickness) will remain consistent from a known and measured data point. The key risks related to exploration in general are that chances of identifying economical reserves are extremely small.
Forward-looking statements or information related to Matagami Infrastructure
The geological prospectivity of areas which surround, or are adjacent to, deposits from which current production is occurring does not imply that future discoveries will be made, nor does it imply that, should a discovery be may, it will be economically produced. Current production from Xstrata Canada Corporation’s wholly-owned Perseverance mine and future statements relating to use of existing infrastructure and future benefits of existing infrastructure are forward-looking with respect to the impact on new discoveries. The record of past production in terms of metal and/or produced resources does not provide any increased likelihood that new discoveries will be made or that new discoveries can be economically developed. Historical estimates (non NI 43-101 compliant), related to undeveloped deposits, do not provide any increased probability that new discoveries will be made or that new discoveries can be economically developed. Therefore, there is no certainty that new discoveries will be commercially viable based on existing infrastructure and comparison with current operations, past production or historical resources.
Forward-looking statements or information related to mineral resources
The Company has published measured, indicated and inferred mineral resources and proven and probable mining reserves for the Bracemac-McLeod Deposit that conform to National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”). Under the definition of “Mineral Resource” (CIM Definition Standards on Mineral Resources and Mineral Reserves), a resources is “a concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction.” The later part of this definition implies a forward-looking statement.
Statements relating to “mineral resources” (measured, indicated and inferred) for Bracemac-McLeod involve estimates and assumptions that the mineral resources described exists in the quantities, continuity, grade and thickness predicted between known data points. The designation of mineral resources as “inferred mineral resource”, “indicated mineral resource” and “measured mineral resource” follow the definitions under the Canadian Institute of Mining, Metallurgy and Petroleum – Definition Standards on Mineral Resources and Mineral Reserves as referenced under NI 43-101 Historical resources, where noted, are qualified following guidelines under NI 43-101.
The likelihood of exploring for, discovering or developing a deposit on the Matagami Project is subject to many risks. External risks associated with mineral projects are fluctuations in metal prices, adverse government policy changes, and adverse developments in the financial markets generally. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these factors are interdependent.
The Matagami Joint Ventures
Donner is a partner with Xstrata Canada Corporation in five joint ventures on the Matagami Project where mine development and exploration activities are conducted.
Bracemac-McLeod Feasibility Study: The feasibility study on the Bracemac-McLeod deposit, authored by Genivar Limited Partnership (“Genivar”) and Xstrata Canada Corporation – Xstrata Zinc Canada Division (‘Xstrata Zinc’), contains forward-oriented financial information and project timing assumptions. Details and risks related to the use of such information are discussed below.
Information contained in the Company’s press releases, web site information, corporate displays, and postings on “SEDAR”, among others contain forward-looking information and future-oriented financial information regarding results and financial projections contained in the feasibility study on the Bracemac-McLeod deposit. This study was produced by Genivar and Xstrata Zinc. The Perseverance Mine (wholly-owned by Xstrata) The Matagami mill complex is operated by Xstrata Zinc. Xstrata Zinc and its predecessors (Falconbridge Limited, Noranda Inc, among others) have been operating at Matagami since 1963.
The forward-looking information and forward-orientated financial information are:
Forecast mining resources and reserves are determined by standards governed under NI 43-101 and the experience of Xstrata Zinc as operators of the project. Measured and indicated resources and proven and probable mining reserves were prepared by Xstrata Zinc mining group. The proven and probable reserves calculated in the feasibility study includes two levels of confidence (measured and indicated based on density of drill hole intercepts). For the Upper Bracemac, Bracemac and Bracemac Key Tuffite zones, as well as the upper half of the McLeod zone, spacing of drill intercepts is approximately 25 metres, whereas the spacing of drill hole intercepts in the lower portion of the McLeod zone is at approximately 50 metres. The reader is cautioned that geometry of the mineralized zone and the distribution of grade within the zone may cause both the volume and grade of the mining reserve to vary (either positively or negatively) from the calculation under the feasibility study.Cut-off grade for mining reserves was established by natural cut-off (mineralized versus unmineralized rock) and on a net smelter return (NSR) basis. The use of an NSR cut-off is forward looking as it relies on future looking metal prices, mill recoveries and smelting and treatment charges. These are discussed below.Inferred resources for the McLeod Deep Zone and the West McLeod zone are reported in the feasibility study but are not a component of the financial analysis. The reader is cautioned that inferred resources have the lowest level of confidence under NI 43-101 and future upgrading of the resource or incorporation of these resources in future mine planning have not been considered under the feasibility study. There is no certainty that these resources will be mined due to proximity to underground infrastructure planned under the Bracemac-McLeod feasibility study.
Resources and reserves can be affected by obtaining grades different from expected grades, obtaining lower quantities of mineralization, encountering deposit geometries that vary from expectations and encountering higher than expected mine dilution rates.
Forecast capital costs under the feasibility study have been estimated by Genivar with the assistance of Xstrata Zinc. Cost estimates are based on expected capital charges and pricing with support from Xstrata’s recent experience with the development of their wholly owned Perseverance deposit which was developed between 2006 and 2008. Realized capital costs for the Bracemac-McLeod project can vary (either positively or negatively) on the actual realized costs of equipment and materials purchased, development advancement rate, and overall efficiency of the development process. Ground conditions in particular can profoundly impact capital costs.
Forecast operating costs are provided by Genivar and estimated on the basis of Xstrata Zinc’s experience with current mine and mill operations at Matagami. Variables which may affect operating costs (either positively or negatively) are mine and mill efficiencies, metallurgical variations as well as mine production rates, rates of mill throughput and transportation charges.
Forecast metal prices over the current 4 year life of mine for Bracemac-McLeod are based on industry consensus price based on published forecasts (Brook Hunt, Bloomberg and CRU); these forecasts do not necessarily reflect Xstrata Zinc’s vision of long-term commodity prices. Metal prices can have a profound effect (either positively or negatively) on the financial characteristics of the Bracemac-McLeod deposit as described under the base case analysis in the feasibility study. Constant metal prices are forecast over the life of mine, however these are expected to vary over the planned production period. Metal prices are not in the control of mine operations and are subject to changes in worldwide supply and demand.
Forecast mill recoveries are based on results of tests conducted at Xstrata’s Process Control Group in Sudbury, Canada. Parameters that may affect mill recoveries (either positively or negatively) are changes to expected mineralogical characterizes of ore from Bracemac-McLeod and mill efficiencies.
Forecast treatment charges are based on industry consensus of anticipated treatment and refining charges (“TC/RC’s”) over the life of mine (Brook Hunt, Bloomberg and CRU); theses forecasts do not necessarily reflect Xstrata Zinc’s vision of long-term treatment and refining charges. TC/RC’s can vary on the basis of realized TC/TR contract charges over the life of mine which are negotiated on an annual basis.
Forecast exchange rates are forecast over the current 4 year life of mine for Bracemac-McLeod on industry consensus rates and on published forecasts (Brook Hunt, Bloomberg and CRU). Exchange rates are not in the control of the mine and will fluctuate on the basis of forces external to those controlled under the mine operation; theses forecasts do not necessarily reflect Xstrata Zinc’s vision of long-term foreign exchange rates.
Forecast mine production rates are determined by Genivar based on the resource estimate and block model provided by Xstrata. Ground conditions, geometry of sulphide mineralization and changes in development patterns can impact mine production rates.
Forecast impacts of permitting on the development and mining of Bracemac-McLeod are determined by Genivar with input by Xstrata Zinc. Permitting requirements are not expected to change over the life of mine based on current regulations. However, changes in environmental and other laws and regulations, may impact construction and mining which could affect capital and operating costs. Adverse government policy changes with respect to mineral exploration and exploitation, including changes to taxes or royalties will negatively impact the project.
Note: Fluctuations in prices and unfavorable currency exchange rates constitute uncontrollable parameters.
The feasibility study on Bracemac-McLeod contains forecasts that can impact (either positively or negatively) the financial characteristics of the Bracemac-McLeod deposit as assessed under the feasibility study in terms of expected mine life, projected cash flows , projected internal rate of return, and realized value in relation to calculated Net Present Value.
Forward-looking statements or information related to Donner’s ability to finance its share of costs under the Matagami Joint Ventures pursuant to the Matagami Lake Joint Venture Agreement with Xstrata Canada Corporation (Xstrata)
The Company is currently operating under the Matagami Lake Option and Joint Venture Agreement (MLOJVA) relating to its participating interest in five joint ventures with Xstrata. Donner is required to fund its share of the joint venture expenditures. The funding requirements are subject to many risks such as:
Substantial expenditures are required to explore for mineral reserves;
The junior resource market, where the Company raises funds, is extremely volatile and there is no guarantee that the Company will be able to raise funds as it requires them;
Although the Company has taken steps to verify title to the mineral properties it has an interest in, there is no guarantee that the property will not be subject to title disputes or undetected defects; and
The Company is subject to the laws and regulations relating to environmental matters, including provisions relating to reclamation, discharge of hazardous material and other matters. The Company conducts its exploration activities in compliance with applicable environmental protection legislation and is not aware of any existing environmental problems related to its properties that may cause material liability to the Company.
In specific relation to participation by Donner Metals in the construction of the Bracemac-McLeod mine or other capital intensive programs, Donner’s ability to finance its share of the project can be impacted by negative changes to forecast assumptions under the feasibility study and by adverse developments in the financial markets generally that may result in Donner’s inability to fund/finance exploration, mine construction, development and operations.
Although the Company believes that the expectations expressed in such forward-looking information and future-oriented financial information are based on reasonable assumptions available to management at the time the assumptions were made, such statements or information do not guarantee future performance success and no assurances can be given as to future results, levels of activity and achievements. New risk factors may arise from time to time and it is not possible for management to predict all of those risk factors or the extent to which any factor or combination of factors may impact realized results. Actual results or developments may differ materially from those in the forward-looking statements/information and may require achievement of a number of operational, technical, economic, financial and legal objectives. The forward-looking information and future-oriented financial information published by the Company are expressly qualified by this cautionary statement. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.
Cautionary note to U.S. investors – This web site contains information about adjacent properties, specifically in relation to the Perseverance Deposit (owned 100% by Xstrata Zinc), on which we have no right to explore or mine. We advise U.S. investors that the SEC’s mining guidelines strictly prohibit information of this type in documents filed with the SEC. U.S. investors are cautioned that mineral deposits on other properties are not necessarily indicative of mineral deposits on our properties. In addition, we advise that the Company is not an SEC registrant.
We disclose additional information regarding resource estimates and feasibility studies in accordance with NI 43-101. These disclosures can be found on our website and on SEDAR.
– See more at: https://www.visualcapitalist.com/portfolio/donner-metals-company-snapshot#sthash.EJptEXr2.dpuf
How to Avoid Common Mistakes With Mining Stocks (Part 5: Funding Strength)
A mining company’s past projects and funding strength are interlinked. This infographic outlines how a company’s ability to raise capital can determine the fate of a mining stock.
A mining company’s past projects and funding strength are interlinked, and can provide clues as to its potential success.
A good track record can provide better opportunities to raise capital, but the company must still ensure it times its financing with the market, protects its shareholders, and demonstrates value creation from the funding it receives.
Part 5: The Role of Funding Strength
We’ve partnered with Eclipse Gold Mining on an infographic series to show you how to avoid common mistakes when evaluating and investing in mining exploration stocks.
Part 5 of the series highlights six things to keep in mind when analyzing a company’s project history and funding ability.
View all five parts of the series:
- 1. Common mistakes made with the team
- 2. Common mistakes made with the business plan
- 3. Common mistakes with the jurisdiction of the project
- 4. Common mistakes with the project and technical risks
- 5. Common mistakes with raising money
Part 5: Raising Capital and Funding Strength
So what must investors evaluate when it comes to funding strength?
Here are six important areas to cover.
1. Past Project Success: Veteran vs. Recruit
A history of success in mining helps to attract capital from knowledgeable investors. Having an experienced team provides confidence and opens up opportunities to raise additional capital on more favorable terms.
- A team with past experience and success in similar projects
- A history of past projects creating value for shareholders
- A clear understanding of the building blocks of a successful project
A company with successful past projects instills confidence in investors and indicates the company knows how to make future projects successful, as well.
2. Well-balanced Financing: Shareholder Friendly vs. Banker Friendly
Companies need to balance between large investors and protecting retail shareholders. Management with skin in the game ensures they find a balance between serving the interests of both of these unique groups.
- Clear communication with shareholders regarding the company’s financing plans
- High levels of insider ownership ensures management has faith in the company’s direction, and is less likely to make decisions which hurt shareholders
- Share dilution is done in a limited capacity and only when it helps finance new projects that will create more value for shareholders
Mining companies need to find a balance between keeping their current shareholders happy while also offering attractive financing options to attract further investors.
3. A Liquid Stock: Hot Spot vs. Ghost Town
Lack of liquidity in a stock can be a major problem when it comes to attracting investment. It can limit investments from bigger players like funds and savvy investors. Investors prefer liquid stocks that are easily traded, as this allows them to capitalize on market trends.
- A liquid stock ensures shareholders are able to buy and sell shares at their expected price
- More liquid stocks often trade at better valuations than their illiquid counterparts
- High liquidity can help avoid price crashes during times of market instability
Liquidity makes all the difference when it comes to attracting investors and ensuring they’re comfortable holding a company’s stock.
4. Timing the Market: On Time vs. Too Late or Too Early
Raising capital at the wrong time can result in little interest from investors. Companies in tune with market cycles can raise capital to capture rising interest in the commodity they’re mining.
Being On Time:
- Raising capital near the start of a commodity’s bull market can attract interest from speculators looking to capitalize on price trends
- If timed well, the attention around a commodity can attract investors
- Well-timed financing will instill confidence in shareholders, who will be more likely to hold onto their stock
- Raising capital at the right time during bull markets is less expensive for the company and reduces risk for investors
Companies need to time when they raise capital in order to maximize the amount raised.
5. Where is the Money Going? Money Well Spent vs. Well Wasted
How a company spends its money plays a crucial role in whether the company is generating more value or just keeping the lights on. Investors should always try to determine if management is simply in it for a quick buck, or if they truly believe in their projects and the quality of the ore the company is mining.
Money Well Spent:
- Raised capital goes towards expanding projects and operations
- Efficient use of capital can increase revenue and keep shareholders happy with dividend hikes and share buybacks
- By showing tangible results from previous investments, a company can more easily raise capital in the future
Raised capital needs to be allocated wisely in order to support projects and generate value for shareholders.
6. Additional Capital: Back for More vs. Tapped Out
Mining is a capital intensive process, and unless the company has access to a treasure trove, funding is crucial to advancing any project. Companies that demonstrate consistency in their ability to create value at every stage will find it easier to raise capital when it’s necessary.
Back For More:
- Raise more capital when necessary to fund further development on a project
- Able to show the value they generated from previous funding when looking to raise capital a second time
- Attract future shareholders easily by treating current shareholders well
Every mining project requires numerous financings. However, if management proves they spend capital in a way that creates value, investors will likely offer more funding during difficult or unexpected times.
Wealth Creation and Funding Strength
Mining companies that develop significant assets can create massive amounts of wealth, but often the company will not see cash flow for years. This is why it is so important to have funding strength: an ability to raise capital and build value to harvest later.
It is a challenging process to build a mining company, but management that has the ability to treat their shareholders and raise money can see their dreams built.
How the World’s Top Gold Mining Stocks Performed in 2020
The GDX is an ETF that tracks the performance of the top gold mining stocks. How did the GDX and its constituents perform in 2020?
How Top Gold Mining Stocks Performed in 2020
Gold mining stocks and the GDX saw strong returns in 2020 as gold was one of the most resilient and best performing assets in a highly volatile year.
But picking gold mining stocks isn’t easy, as each company has a variety of individual projects and risks worth assessing. This is why the GDX (VanEck Vectors Gold Miners ETF), is one of the most popular methods investors choose to get exposure to players in the gold mining industry.
While the GDX and gold miners can generally offer leveraged upside compared to gold during bull markets, in 2020 the GDX returned 23%, just a couple of points shy from spot gold’s 25.1% return.
This graphic compares the returns of gold, the GDX, and the best and worst performing gold mining equities in the index.
Understanding the GDX ETF and its Value
The GDX is one of many index ETFs created by investment management firm VanEck and offers exposure to 52 of the top gold mining stocks.
It provides a straightforward way to invest in the largest names in the gold mining industry, while cutting down on some of the individual risks that many mining companies are exposed to. The GDX is VanEck’s largest and most popular ETF averaging ~$25M in volume every day, with the largest amount of total net assets at $15.3B.
In terms of its holdings, the GDX attempts to replicate the returns of the NYSE Arca Gold Miners Index (GDM), which tracks the overall performance of companies in the gold mining industry.
How the Largest Gold Miners Performed in 2020
As a market-cap weighted ETF, the GDX allocates more assets towards constituents with a higher market cap, resulting in larger gold mining companies making up more of the index’s holdings.
This results in the five largest companies in the GDX making up 39.5% of the index’s holdings, and the top 10 making up 59.3%.
An equally-weighted index of the top five GDX constituents returned 27.3% for the year, outperforming gold and the index by a few points. Meanwhile, an equally-weighted index of the top 10 constituents significantly underperformed, only returning 18.4%.
Newmont was the only company of the top five which outperformed gold and the overall index, returning 37.8% for the year. Wheaton Precious Metals (40.3%) and Kinross Gold (54.9%) were the only other companies in the top 10 that managed to outperform.
Kinross Gold was the best performer among the top constituents largely due to its strong Q3 results, where the company generated significant free cash flow while quadrupling reported net earnings. Along with these positive results, the company also announced its expectation to increase gold production by 20% over the next three years.
The Best and Worst Performers in 2020
Among the best and worst performers of the GDX, it was the smaller-sized companies in the bottom half of the ranking which either significantly over- or underperformed.
K92 Mining’s record gold production from their Kainantu gold mine, along with a significant resource increase at their high-grade Kora deposit nearby saw a return of 164.2%, with the company graduating from the TSX-V to the TSX at the end of 2020.
Four of the five worst performers for 2020 were Australian mining companies as the country entered its first recession in 30 years after severe COVID-19 lockdowns and restrictions. Bushfires early in the year disrupted shipments from Newcrest’s Cadia mine, and rising tensions with China (Australia’s largest trading partner) also contributed to double-digit drawdowns for some Australian gold miners.
The worst performer and last-ranked company in the index, Resolute Mining (-36.9%), had further disruptions in H2’2020 at their Syama gold mine in Mali. The military coup and resignation of Mali’s president Ibrahim Keïta in August was followed by unionized workers threatening strikes in September, slowing operations at Syama gold mine. Outright strikes eventually occurred before year’s end.
How Gold Mining Stocks are Chosen for the GDX
There are some ground rules which dictate how the index is weighted to ensure the GDM and GDX properly reflect the gold mining industry.
Along with the rules on the index’s weighting, there are company-specific requirements for inclusion into the GDM, and as a result the GDX:
- Derive >50% of revenues from gold mining and related activities
- Market capitalization >$750M
- Average daily volume >50,000 shares over the past three months
- Average daily value traded >$1M over the past three months
Gold mining stocks already in the index have some leeway regarding these requirements, and ultimately inclusion or exclusion from the index us up to the Index Administrator.
What 2021 Will Bring for Gold Mining Stocks
The GDX has had a muted start to the new year, with the index at -2.3% as it has mostly followed spot gold’s price.
Gold and gold mining stocks cooled off significantly following their strong rally Q1-Q3’2020, as positive developments regarding the COVID-19 vaccine have resulted in a stronger-than-expected U.S. dollar and a rise in treasury yields.
This being said, the arrival of new monetary stimulus in the U.S. could spur inflation-fearing investors towards gold and gold mining stocks as the year progresses.
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