Metanor Resources

Good post from Raffles at SH.

He is looking for any others that may be able to confirm his thinking.

I am unable to provide the expertise he desires but I like the concept that he has presented. - panamax

JV / Takeover Merger candidate?

I have already indicated that, in order to propel Metanor into full exploitation of its mineral assets, it may need more capital than it is presently capable of supplying, at the right price / and with minimal dilution. However, in order to enable Metanor shareholders to attain a win win situation, a candidate, such as Agnico, which is active in the Val D’Or region and with a capitalisation of about $10b, would swamp Metanor shareholders $65m, by a dilution factor of 150:1. The result would be that Metanor shareholder would no longer effectively participate in the Bachelor & Barry growth potential.

I agree with Quixotica’s company valuation post, when he said that gut instinct play a part in any investment. These always play a major part in investment decisions, otherwise frequently important “X factors” would never be reflected in valuations.

There is every possibility that Richmont Mines, with a market capitalisation of about $115m, combined with Metanor, would become an intermediate producer, with a higher rating than the individual parts, very quickly. My initial encounter with Richmont was as a shareholder of the 45% JV partner in the former Richmont operated Patricia Mine in Ontario, which was taken over by Richmont. There were a number of reasons why I sold my Richmont stake in the first quarter of this year and one was that it was low on mineral resources and the new 20% shareholder chairman was seeking acquisitions. I would prefer to be a shareholder in a takeover candidate.

Richmont: Richmont’s interests include 2 operating mines and a third dewatered mine, Francoeur, due for production in H1 2011. All these mines are narrow vein underground mines. In addition, it owns the Camflo mill. This year, Richmont has appointed, Greg Chamady (20% shareholder) as its new Chairman together with additional directors to his team. As a businessman, Mr Chamady built up a company from 3 to 6000 employees and a market capitalisation of $1.5b and he is now Chairman of a bank and wealth management trust for high net worth individuals. Although capitalised at $115m, Richmont has $30m cash reported in its June 2000 Q accounts. Part of this cash related to a $5 share issue at about the time the following press reports were being made by Richmont :-

"We're actively looking to invest in late-stage properties or partnerships to enable us to meet the 200,000-ounce milestone," they said. Richmont has $25 million in the kitty and no debt and it has hired investment bankers to help.

"We have a long experience working underground in the Cadillac Fault that crosses from northeastern Ontario through northwestern Quebec and more gold lies at the lower levels down to 10,000 feet as Agnico-Eagle has shown at LaRonde," Rivard said.

"This is an established mining camp. What was near-surface has mostly been discovered, but there is a lot of potential underground," says Martin Rivard, chief executive of Richmont Mines Inc.

The companies active in the region today are convinced that more gold will be found. They point out there are many projects that are economic now that were not when gold was below US$300 an ounce. New technology is also helping them identify ore bodies missed in the past.

"We're in a new paradigm in the gold price environment now, where we're clearly above US$1,000 an ounce," says Bill Biggar, chief executive of North American Palladium Ltd., which operates the Sleeping Giant mine in the area.

"It's unleashing a new era of exploration in Val d'Or."

The undisputed leader in Val d'Or gold mining is Agnico- Eagle Mines Ltd., which has been there since the 1960s and has three mines in the region. The company stayed throughout the lean years in the 1990s when many rivals left for greener pastures, and it continues to find more gold.

CEO Sean Boyd agrees with Mr. Rivard that the next frontier at Val d'Or is going deeper underground, which the company has done successfully at its flagship LaRonde operation.

"When the mines in that area were first put on the drawing board, ever yone thought they were all going to be shallow deposits. We proved everybody wrong with LaRonde," he says.

Many others agree, and the region is now full of little companies that have popped out of the woodwork to pick over old deposits and find new underground gold.

That creates plenty of M&A opportunities, and Mr. Biggar expects to be one of the consolidators.

"Inevitably, there has to be consolidation. There is not an interest on the part of institutional investors today to invest in these illiquid junior gold companies," he says.

But the market should also watch Richmont for M&A activity. It has been in Quebec since the early 1980s and knows the region as well as anyone.

"We're on the trail for potential acquisitions, and we're having a very good response because of our profile in the Quebec market," says chairman Greg Chamandy.

pkoven@nationalpost.com

In order to be in a position to interpret what could be taking place in the background, then one’s antennae needs to be alert to be able to consider and assess potential beneficial scenario’s. In this regard, Metanor could be in discussion with a number of companies and the directors have already said that a number of geologists have viewed Barry with interest, regarding its expansion prospects. This usually takes place when due diligence is being conducted between companies in JV / Merger talks…….

If Metanor and Richmont were to be considering a financial linkage, then a merged group would have far more financial clout (especially if the Chairman also headed a bank!). Synergies which may be relevant could include the following:-

· Both companies have French Canadian roots.

· Richmont has low resources prospects at its narrow vein mines, but has underground mining expertise which could add expertise in order to assist with the development of Metanor’s Bachelor mine.

· Metanor has significant potential for increasing reserves at Barry, in order to complement the high grade underground mines.

· Both companies operate around the Val D’Or region.

It may be relevant that, at the time that the 43-101 was due to be released at the end of May 2010, Metanor was shorted for some months. A purchasing company would seek to depress the price of its target. Also, as I said in a previous post, Metanor may not wish to limit its scope by way of an early release, if it were to seek to challenge proposals which may be contested, by upgrading its 43-101 with 2010 drillings. With regard to the 43-101, we have received the response from the directors that they are waiting for the 43-101 from the independent mining engineers. However, if it suited directors, they could require additional information which would [intentionally] delay the 43-101 until it suited them and Metanor.

I would be interested to hear any observations relating to this potential scenario for Metanor and in particular from anyone with local Val D’Or knowledge of Richmont's, Quebec properties, or any other potential suitor in the locality.

At the present time it may be appropriate to give Metanor directors the time to report to shareholders, when they are ready. They must be aware that the silence is not assisting in the short term.

Raffles