Dave,
Here's an article/interview on XRC. Simpson mentions that the market cap is 13.7 million but if you include all outstanding shares it is a little more than 20 million I'm sure.
Exeter Resources Corp. (XRC-V) has a double-pronged strategy: to secure cash flow for the next seven to ten years by developing an existing gold asset in Argentina while simultaneously engaging in an aggressive exploration program under a 40-property deal it has concluded with the world’s biggest producer, AngloGold Ltd.
If all goes well, Chairman Yale Simpson believes Exeter could become a $500 million-plus company in five years. It has already made confident strides.
Founding directors Simpson and President and CEO Bryce Roxburgh, both experienced geologists, resuscitated a shell company about 18 months ago.
"We did our first significant financing in August of last year [2003]," says Simpson.
"Our strategy is to have a blend of real assets (as in ounces of gold) combined with more early stage exploration plays that offer the potential for the multi-million ounce discovery. To do that we have chosen Argentina because it is the most under-explored part of the entire Americas."
Roxburgh brought to Exeter a series of properties he had been involved in for about ten years. One of these, La Cabeza, has had $5 million worth of work done on it. "La Cabeza was a deposit; it wasn't at the feasibility stage yet but the exploration risk had been taken out of it by a considerable amount of drilling. We saw this as a flagship project," says Simpson.
Exploration at LaCabeza has delineated an inferred resource containing 720,000 ounces of gold based on 12 million tonnes grading 1.8 g/t, at a cut-off grade of 0.5 g/t gold. Drilling continues and engineering and environmental studies have begun as part of a $1.1 million feasibility study.
"La Cabeza is sufficiently robust that at a relatively modest level of production – 50,000 ounces a year – the economics look really good. Cash costs are under $200 an ounce," says Simpson.
Exeter began pre-feasibility work last February [2004]. Having completed about 4,500 metres of drilling, the Company expects to create a new resource calculation this November. It has done more drilling than it intended initially, having encountered significant areas of gold mineralization that need defining.
Exeter will probably make a development decision on La Cabeza in the third quarter of 2005, depending on a final feasibility study.
While Exeter believes La Cabeza should generate significant cash flow for most of the next decade, the Company has bigger plans.
"We want more exploration upside," says Simpson. "The ultimate strategy for us is to create value as a junior, to be moving one or two properties towards development and then merge the company with another company of a similar size to create a mid-tier company. We want to be out five years from now with Exeter (or whatever it is called) with a market capitalization of $500 million plus."
Simpson says it takes a major discovery to transform a company from a market cap of $10-$20 million into a market cap of $200-$300 million.
Roxburgh revived contacts with the senior management of AngloGold to sign a major exploration deal for Exeter.
AngloGold, through an Argentinian subsidiary, controls a mine producing about 350,000 ounces of gold a year. It also controlled a large inventory of 40 properties in the Argentinian region of Patagonia, only a small portion of which had been drilled.
Exeter can earn a 100% interest in the 40 properties by spending US$3 million on exploration, with AngloGold retaining a 2% royalty interest.
"AngloGold has the right to resume the operation of any of the projects should we be successful and make a major discovery. In that case, Exeter would receive a cash payment and take a back seat with a 30% or 40% carried interest – which would be fine, we would still have a market cap of $300 million plus."
From an investor's point of view, Exeter expects to generate a flow of news by drilling new properties constantly over the next several years.
This year Exeter is spending just over $3 million on exploration in Argentina. Next year [2005], although its budget has not been firmed up, it intends to spend about $5 million.
The Company raised $4 million by private placement early in 2004 – on top of the $500,000 it already had in the treasury. By year-end it will have about $1.5 million left. In addition, it is fairly optimistic that it will raise another $4.4 million through the exercise of warrants once the new resource calculation is released. This will be sufficient to finance the Company through 2005.
With all that it has on its plate, Simpson would really like to see Exeter with $10 million in its treasury by the end of the first quarter of 2005. This probably means it will seek another financing once the warrants are successfully exercised. This could include additional public equity to boost shareholders liquidity.
Simpson says that by the early part of 2005 he expects to see our Exeter's price substantially higher, just on the assets it has. We are trading around $1 a share with a market cap of about $13.7 million.
"On the basis of the properties we have and the rate of expenditures we are contemplating, there is a far better prospect of a multiple of a share price on Exeter than most anybody else in South America. People who don’t know of us now certainly will on the basis of the successes we are generating." |
