Back on January 7th I wrote a post about ‘sleuthing’ for microcaps and my investment in Orefinders Resources.
Well its been an interesting 3 months for little Orefinders. They’ve continued to explore and are reporting decent drilling results . They are preparing to spin out a subsidiary company (American Eagle Gold) to shareholders. And, just this week they announced a major development – A strategic partnership with Kirkland Lake Gold, a major gold producer (13.8 Billion dollar market cap) and neighbour in the Kirkland Lake district of Ontario.
Kirkland lake is acquiring 9.9% of ORX (24.4 million shares @ 0.10 cents per share) and gets an option to acquire up to a 75% interest in its Mirado, McGarry and Knight projects in return for spending $60 million in exploration and development on the Projects.
In my opinion this is a necessary and smart move. It partners ORX with a VERY established and credible local major. It forestalls any further share dilution to current shareholders by having Kirkland foot the E&D costs. I think it creates some real runway for the company and puts it in the best position for success, albeit at a price. And that price was going to have to be paid, one way or another.
The deal hasn’t been a share price driver (yet) and I don’t think it was designed to be. It’s strategic and gives the company a better chance to succeed.
Back on January 7th I commented “This is a highly speculative position and my entry point was such that I think the risk has been mitigated as long as the company’s stock maintains a reasonable degree of liquidity.”
I think the risk has been mitigated more.
The mining exploration sector is fraught with nonsense and peril. Investors need to be prepared to lose money. There is a lot of risk in investing in junior explorers. But, in my humble opinion with ORX, so far so good!
Full Disclosure: At time of writing the DTM5 does NOT hold any ORX shares. The position was sold in late January at a reasonable profit, to purse a more time sensitive opportunity in another sector. However, ORX is still on the DTM5 bench and I’m very happy the share price has come down. I’m considering building a new position.
GLTA
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