Revitalized Fancamp Exploration Trading At 0.7 Times Cash & Equity

Preview:

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

1. Company

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 (in this case multi-)million dollar question 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.

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 October 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 on to and advance about 5-8 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, obtain funding for a pilot plant and spin off the complete package in a separate listed company.

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

2. Management

President and CEO Rajesh Sharma: over 25 years of global experience in mining & metals industry with a track record of advancing  exploration and mining projects & 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).

VP Exploration Francois Auclair: professional geologist with over 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, Aur Resources, etc.

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

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

3. Projects

Fancamp owns close to 90 exploration projects (precious metals, base metals, strategic metals), but as part of their new strategy, Fancamp already divested several projects, made several strategic investments (NeoTerrex-REE’s, Vision Lithium-lithium, EDM Resources-zinc), and arranged drill programs for the Clinton and Harvey Hill copper projects in Quebec, with a 2,000m program for Clinton already underway. These two projects in Northern Quebec have seen historic production with remaining, demonstrated mineral potential, as for example a non-compliant historic bulk sample of 114t at Clinton returned 2.6%Cu, 2.5% Zn, 0.41g/t Au and 31g/t Ag, and a small non-compliant historic resource contains 1.5Mt @ 2.02% Cu and 1.54% Zn. Fancamp completed drilling in the past, with best intercepts returning 1.79% Cu over 6.19m within a 14.58m wide zone of 1.09% Cu; 1.27% Cu, 1.14% Zn, and 11 g/t Ag over 11m, and finally 2.78% Cu and 16.9 g/t Ag over 24.7m.

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/t at the moment, so with some concentrating the in-situ metal value would quickly surpass US$4B, which is comparable to a 1Blbs 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 C$616.9M. Although the Ring of Fire is 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.

4. Key points

• Fancamp Exploration is in the process of revitalizing itself, by selecting just 5-8 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 C$6.0M in cash. Besides this, Fancamp also holds 3.1M shares in Champion Iron Ore, worth C$18.5M at the moment, causing the stock to trade at a market cap of 0.7 times cash & equity, which is very rare. At a current daily average volume of 627k shares per day the Champion Iron Ore position is easy to divest when needed.
• The 3-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 2,000m 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 their investments in Neo Terrex, Vision Lithium and EDM Resources, which could provide lots of cash in case of exploration/development success.

  5. 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 9-12 months, and after this Fancamp should be well on its way creating substantial value for shareholders. Stay tuned!

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Disclaimer: 

The author is not a registered investment advisor, and currently has a long position in this stock. Fancamp Exploration is a sponsoring company through a third party. 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.