Apr 10
21
Besides my normal potential biases and conflict of interests when speaking about client companies, I also greatly favor anything the team at Hunter-Dickinson is working with. I consider them among the cream of the crop within the metals and mining industry. This belief goes all the way back to the days when I was a fund manager.
I was an investor in the IPO of Heatherdale Resources (HTR-TSX-V $1.15) and have bought and sold shares since. I currently hold a significant position and would likely jump at the chance to switch funds into HTR from another HD deal (with HTR down at these levels) if and when my hopeful takeover bid ever emerges.
After increasing about 80% from its IPO share price on very good initial drill results, the share price has come back to almost IPO levels. Given the fact that there has been only one additional round of drill results since the first batch, I’ve been somewhat puzzled by the market’s reaction. I believe HD has another tiger by the tail but the market seems to think at the moment it’s more like a pussycat.
I contacted HTR’s Chairman and Director Scott Cousens for an update and asked him if we could go on record and make his comments known. He agreed.
Q: Scott, tell me why Hunter Dickinson likes Heatherdale’s Niblack Project so much?
A: Peter, the Niblack project is a textbook HD-style transaction and fits perfectly within our core competencies:
- Low entry cost – We earn our 70% interest by spending money directly into the project thereby creating maximum value for our shareholders with every dollar we spend.
- Historic database – We benefit from $40+ million of previous expenditures. The information generated by all this historical work sits in boxes that we are in the process of compiling and digitizing. Put in this way, we have $40+ million worth of jigsaw puzzle pieces that we have just started to sort through 6 months ago. The picture is starting to come clear and we’re very enthusiastic about what we see.
- HD has made a career out of exactly this kind of project. Taking other people’s work and recognizing an opportunity where previously none was seen. We have had many of these successes; most recent examples are Northern Dynasty and Detour Gold.
Q: You took HTR public in November of 2009 so is it fair to say you’re just getting started?
A: You’re absolutely right! We’re just 6 months into our drill program and detailed geological review and the more we learn the more confident we are in our decision to undertake this project. Every hole we’ve drilled and announced has intersected significant widths of mineralization and the resource grows with each new intercept. Every day the project yields new information and, as I said, we’re very encouraged.
Q. I was taken aback by the share price decline after just the second set of drill results. It was as if they somehow were not up to snuff.
A. I like the analogy you’ve used in your writings about that. We’re maybe in the first or second inning of at least a nine-inning game. These results were every bit as important to us as the first batch and continued to prove out our geological model.
Q. What makes this project unique?
A. Good question. I would say 3 key factors:
- This is a very mature project to still be an exploration project. The Niblack project is permitted as a mine site. A 2800-ft. production scale adit into the side of Lookout Mountain provides the ideal infrastructure to cost effectively drill off a number of high-grade targets within the project.
- The mineralizing system that was at work here has created significant zones and volumes of high grade gold, copper and zinc. We’re in a market that is highly valuing both precious metal and base metal projects; often they’re counter cyclical to one another. This increases the potential audience for HTR both from the investment community and the mining/smelter companies looking for a growth asset.
- We have a 10-square-mile property that already has 6 separate zones of high-grade mineralization that have only been tickled and now require a comprehensive and systematic development plan to fully understand them and that’s what we’re doing. This is a district scale multi-deposit development plan.
Q. What would you like to leave everyone with?
A. Two things:
1. We’re just getting started here. The more time we spend with this project the better we can understand it and have the tools to change the market’s historic perception and its conservative view of its valuation.
2. The work we’re doing right now is creating more drill targets for us; so our view continues to grow regarding the resource expansion and discovery opportunity that exists for all of us as shareholders of HTR.
Sorry, Scott, but I have to have the last word: I’ve seen the HD machine do this time and time again and believe given what we now know from the drill results, the stock is cheaper now than before going public.
