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Thoughts arising from the failed floating of Alliant Gold (from IKN619)

A note from yesterday’s edition. However, we stress that the piece on bees was better than this.

Thoughts arising from the failed floating of Alliant Gold

The news last week that their deal to sell the Ana Paula project in Guerrero State, Mexico to the nominally private concern AP Mining (for $30m cash, plus shares and an NSR) makes official a deal that was a dead man walking ever since the AP Mining financial backers, Pinehurst Capital II (PINH.p, a Canadian capital pool company), pulled out on March 10th. Here’s AR.to’s CEO, Pete Dougherty (12):

“Our current growth strategy is focused around the Magino project and secondarily around the Cerro del Gallo project. We felt we had entered into a win-win agreement on the sale of Ana Paula whereby we could bring some value forward and also maintain upside to the project through an equity ownership and royalty. Unfortunately, the acquiring company was not able to fulfill its obligations and after extending the agreement once already, we feel we are better off pursuing other options for Ana Paula at this time. We believe Ana Paula has the ability to be a foundational asset in time and are excited about having exposure to the project. We expect to be in a position to publish an update pre-feasibility study for the Ana Paula project during the second quarter of 2021, which we feel will demonstrate a relatively low capital cost, low operating cost, high-grade open pit project with future underground potential.”

In other words, it’s still up for sale.

AP Mining is (or perhaps was) Bruce Bragagnolo, who has followed the Ana Paula project through several companies over the years like a lost dog. This time, his plan was to spin it into his own junior, call it Alliant Gold and develop it into a mine (or something). For this, AP Mining approached Argonaut and AR.to was all-too happy to do a deal and get the über-high political risk Ana Paula off their books. However, that was September and when the hot market started to cool, the problems began. First, we had all sides agreeing on January 4th to an extension of the deal window in order to satisfy terms, then the news early March which was caused by the most direct of reasons; they couldn’t raise enough money. Not only has gold’s market sparkle worn off, but the newsflow out of Mexico mining does not align with FDI and it’s no surprise that previously soft-offered capital decided to pull out.

The bonanza times of 2q20 and 3q20, when any old company or private mine could get financed to listing, are now history. However, the window gets tighter for harder sell stories such as Ana Paula (not just the politics, the rock has refractory issues) which is something to keep in mind. Financiers are getting cold feet over ESG, that is not good news for the LatAm mining and developer sector. As an example, the aforementioned Pinehurst Capital II (PINH.p) is still keen to go public. Since walking away from AP Mining and Ana Paula it has turned its attention to SMBI, a private concern with the Silver Bullet mine in Arizona USA (13). That deal looks as though it will happen but even here, PINH has asked for and received an extra month from the vendors in order to raise the capital and close the deal (now set to close April 30th). Even the hot combo of silver + AZ USA is finding it tough to raise a few million in the pool market.

To wrap up, this is not the only example of new exploreco failing to get their dream listing on the back of their speculative project as the market cools. For example, thoughts turn to Mantaro Silver, the hastily thrown-together junior that wanted to list on the TSXV and raise cash for its silver project in Central Peru (that have “best sold to a gringo while the market is hot” written all over them). Their poor execution of the prospectus and offering stage meant the company’s plans hit big delays at the wrong time; now as they re-start the IPO process (14), the market is a lot tougher and it’s telling that the original CEO (looking for an easy payola) has now pulled out.

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