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TICKERS: FNC

Junior Is One of the Better Risk/Reward Plays, Analyst Says
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As the dust settles after an intense proxy battle, the Critical Investor looks into this junior explorer's new direction and a rare opportunity.

Fancamp Exploration Ltd. (FNC:TSX.V) currently has a very extensive exploration project and royalty portfolio, a huge cash and liquid equity position of CA$25 million, and a high-quality core investor base, and is at a pretty attractive entry point as it is trading at just a CA$17.5 million market capitalization. Because of this, Fancamp seems to be one of the better risk/reward exploration plays in the sector.

Not often do you see the rare opportunity coming by of a junior explorer with close to 90 exploration projects, numerous royalties, and a titanium recovery technology, combined with a treasury that is larger than its market cap. Fancamp Exploration unites all these remarkable features in one company, and is looking to unlock the value of all assets after having endured an intense proxy battle involving the multimillion dollar question of which strategy to follow for unlocking that value. As the share price had been side ranging basically since 2013, a growing number of people involved in the company became convinced last year that a change of course was necessary, with precious and base metal prices printing all-time highs or close to this.

Share price 10-year timeframe (Source: tmxmoney.com)

A first attempt at merging with ScoZinc, a company with a zinc mine in care and maintenance, was the catalyst for the proxy battle as lots of shareholders didn’t see sufficient value in this deal. After the dust has settled since the proxy outcome on Oct.r 6, 2021, with the ScoZinc deal off the table, investors were curious about the new direction Fancamp would take. This wasn’t an easy task, as a rigorous selection process was needed for downsizing the extensive asset portfolio. This resulted in the following initial strategy:

  • Sifting through all exploration properties, in order to hold onto and advance about five to eight selected properties, and market all other properties for optioning out, JV, sale and/or creation of royalties with the goal of building a significant royalty portfolio.
  • Doing strategic investments and acquiring advanced/development projects with potential for either monetization or near-term cash flow generation.
  • Monetizing titanium technology by developing and patenting the in-house proprietary technology, following a trajectory of forming a strategic partnership with an industry player, obtaining funding for a pilot plant, and spinning off the complete package in a separate listed company.

There are 176.52 million shares outstanding (fully diluted 189.6 million), and 13.1 million options and warrants. Fancamp has a current market capitalization of CA$16.77 million based on the March 2, 2022, share price of CA$0.095 to CA$0.10 . The current cash and equity position of Fancamp is approximately CA$25 million, and consists of over CA$6.0 million in cash and about CA$18.5 million worth of Champion Iron Ore (CIA.TO) shares (3.1 million shares at CA$5.98). Management and Board holds no less than 22% of the current shares outstanding (Director Ashwath Mehra holds  more than 18%), several close strategic holders own approximately 30%, and there are a few institutions holding an estimated 5%.

Management Includes Heavy Hitters

 

President and Chief Executive Officer Rajesh Sharma has more than 25 years of global experience in the mining and metals industry with a track record of advancing  exploration and mining projects and executing investments, M&A and JV deals internationally. He is the former CEO of Tata Steel Minerals Canada, and was an executive in residence  at one of the largest investment funds in Canada (Investissement Quebec).

Vice President of Exploration Francois Auclair is a professional geologist with more than 25 years of experience both in Canada and globally, has led mining exploration programs for several companies, including Algold, Nimini Gold, Diabras (Sierra Metals), Axmin, Rio Narcea Gold Mines, Ashanti Goldfields, and Aur Resources.

Mehra is actively involved with Fancamp strategy and financings, and is a successful investor and advisor to venture capital firms in real estate, mining, tech, and bio-tech. He was cofounder of GT Gold, which was sold to Newmont in 2021 for CA$393 million.

Director Mark Billings has been an investment banker, having raised hundreds of millions of dollars for small-cap companies, including several junior mining companies.   

Close to 90 Exploration Projects

 

Fancamp owns close to 90 exploration projects (precious metals, base metals, and strategic metals). But as part of their new strategy, Fancamp already divested several projects, made several strategic investments (NeoTerrex, Vision Lithium, and EDM Resources), and arranged drill programs for the Clinton and Harvey Hill copper projects in Quebec, with a 2,000 meter program for Clinton already underway. These two projects in northern Quebec have seen historic production with remaining, demonstrated mineral potential, including a noncompliant historic bulk sample of 114 tons at Clinton that returned 2.6% Cu, 2.5% Zn, 0.41g/t Au and 31g/t Ag, and a small noncompliant historic resource that contains 1.5Mt @ 2.02% Cu and 1.54% Zn. Fancamp completed drilling in the past, with best intercepts returning 1.79% Cu over 6.19 meters within a 14.58 meter wide zone of 1.09% Cu; 1.27% Cu, 1.14% Zn, and 11 g/t Ag over 11 meters, and finally 2.78% Cu and 16.9 g/t Ag over 24.7 meters.

Regarding the exploration assets, the most advanced asset seems to be the 50% interest in the Koper Lake project (KWG Resources owns the balance). A large chromite project in the Ring of Fire, Koper Lake has a 85.9Mt @ 34.5% Cr2O3 (chromite) 2015 Inferred resource, which is NI43-101 compliant. To give you an idea of value, the price for 42% Basis CIF China is about US$200/ton at the moment, so with some concentrating the in-situ metal value would quickly surpass US$4 billion, which is comparable to a 1 billion pound copper deposit or 2Moz gold deposit.

The property is surrounded by Noront ground, which was the focus of the very recent bidding war between BHP and Wyloo, resulting in a buyout price of CA$616.9 million. Although the Ring of Fire has been waiting for substantial infrastructure investments for a long time now, Wyloo seems convinced it can singlehandedly kickstart these investments. This is not unrealistic as Wyloo is backed by one of the richest men in Australia, billionaire Andrew Forrest, founder and major shareholder of Fortesque Metals Group, one of the largest iron ore producers worldwide, who mentioned building out the Ring of Fire as one of his focus points for the near future.

Some Key Points

 

  • Fancamp Exploration is in the process of revitalizing itself, by selecting just five to eight projects from the very extensive asset portfolio holding about 90 projects and royalties, and market all other properties.
  • The company has an impressive treasury, holding over CA$6.0 million in cash. Besides this, Fancamp also holds 3.1 million shares in Champion Iron Ore, worth CA$18.5 million at the moment, causing the stock to trade at a market cap of 0.7 times cash and equity, which is very rare. At a current daily average volume of 627,000 shares per day, the Champion Iron Ore position is easy to divest when needed.
  • The three-pronged strategy doesn’t only downsize and optimize the extensive project portfolio, but also involves doing strategic investments/acquiring advanced projects, and the monetization of their titanium technology.
  • Fancamp arranged drill programs for the Clinton and Harvey Hill copper projects, with a 2,000 meter program for Clinton already underway.
  • Fancamp owns 50% of a substantial Ring of Fire asset, a region which became instantly more attractive after powerful Wyloo recently acquired Noront.
  • Fancamp management is very much aligned with shareholders, as Director Mehra owns over 18% of outstanding shares.
  • A wildcard for Fancamp are its investments in NeoTerrex, Vision Lithium and EDM Resources, which could provide lots of cash in case of exploration/development success.

Conclusion

 

Although Fancamp has started a process of selective downsizing of their asset portfolio, it is still a remarkable and versatile combination of a huge pile of cash and equity, lots of good exploration projects, a growing royalty portfolio, numerous future JVs, several strategic investments, and a proprietary titanium technology. I expect this process to take another nine to 12 months, and after this, Fancamp should be well on its way creating substantial value for shareholders. Stay tuned!

This article is also published on www.criticalinvestor.eu. To never miss a thing, please subscribe to my free newsletter, in order to get an email notice of my new articles soon after they are published.

I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter on my website www.criticalinvestor.eu, in order to get an email notice of my new articles soon after they are published.

All presented tables are my own material, unless stated otherwise.

All pictures are company material, unless stated otherwise.

All currencies are in U.S. Dollars, unless stated otherwise. 

Please note: The views, opinions, estimates, forecasts or predictions are those of the author alone and do not represent views, opinions, estimates, forecasts, or predictions of Fancamp Exploration or Fancamp Exploration’s management. Fancamp Exploration has not in any way endorsed the views, opinions, estimates, forecasts, or predictions provided by the author.

The Critical Investor is a newsletter and comprehensive junior mining platform, providing analysis, blog and newsfeed and all sorts of information about junior mining. The editor is an avid and critical junior mining stock investor from The Netherlands, with an MSc background in construction/project management. Number cruncher at project economics, looking for high-quality companies, mostly growth/turnaround/catalyst-driven to avoid too much dependence/influence of long-term commodity pricing/market sentiments, and often looking for long-term deep value. Getting burned in the past himself at junior mining investments by following overly positive sources that more often than not avoided to mention (hidden) risks or critical flaws, The Critical Investor learned his lesson well, and goes a few steps further ever since, providing a fresh, more in-depth, and critical vision on things, hence the name.


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The author is not a registered investment advisor, and has a long position in this stock. Fancamp Exploration is a sponsoring company. All facts are to be checked by the reader. For more information go to www.fancamp.ca and read the company’s profile and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.

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