I'm not sure why HudBay sold it to them for a song, but they agreed to the deal in 2005 when zinc was at .70 and had been discussing it for a while before that. I'm not even sure if the mine would have been economically viable at .70 zinc -- what's clear cut at $2.00 zinc was not so clear at .70 and lower zinc.
Apparently, Ontzinc had bought it the year before for $2 million before they became HudBay(http://press.arrivenet.com/industry/article.php/275907.html ), so they made a nice profit selling to ADA for $7.5 million. Keep in mind HudBay was a much smaller company in 2005, with the stock trading in the 2's and 3's (why would someone sell HudBay stock so cheaply last year? <G>). I doubt they'd sell it even for several times that price today. If HudBay is worth 5 times last year's price now, it's not unreasonable that ScoZinc should be worth more than 5 times last year's price today, and much more next year when it goes to production.
Below, the ADA CEO discusses the history of the acquisition (from a February meeting with the Nova Scotia House of Assembly Resources Committee -- gov.ns.ca ):
I had originally approached another company called ONTZINC which had this prior to Hudson Bay. What happened was I was speaking to ONTZINC, now, all of a sudden, ONTZINC did a deal with Hudson Bay Mining and Smelting, whereby HudBay became a publicly-traded company by taking over ONTZINC. So that put the whole scenario of mine negotiations on the shelf while they figured out what they all had and what they were going to do with it all. So that, basically, resulted in my putting it off until December of this year until I got a deal done with HudBay.
MR. CHAIRMAN: Okay.
MR. FELDERHOF: But I recognized at the time, though, when I did the deal that there was considerable potential there for lead-zinc as well. At the time I did the deal, I think zinc was at 70 cents. So, I mean, you can be sure I did my own numbers. I knew what the resources were here that were reported by ONTZINC publicly in a press release on January 21, 2004. That's on SEDAR. I'm sure you're all aware of this regulatory filing site called SEDAR. Every public company must file their press releases and material change reports, et cetera, on this regulatory site that's in Ontario called sedar.com.
So I looked back in HudBay and went back to the original company called ONTZINC and they had a press release there outlining the resources on this particular project. Then they reported - and these are not 43-101 compliant resources, these are historical resources, but nevertheless, done by professional people. I take that to be very reliable when I see the source of it. They reported 5.5 million tons of 5.5 per cent zinc and 2.45 lead.
They indicated prior to that - they called it a reserve which was minable, so I did my own numbers on that which obviously are not numbers that are releasable but are numbers that a company and a president like myself would look at and say, this is something that is worth acquiring for my shareholders. I was, obviously, bullish in the price of zinc going up and proved to be correct because I did the deal on 70 cents and now zinc is at 90 cents-plus. |
