Adrian Day - Tue, Jan 2, 2017

Expert Calls this Explorer a Buy

Adrian DayAdrian Day of Adrian Day Asset Management describes why investors should consider this "well-run gold exploration company with downside protection and plenty of upside."


Evrim Resources Corp. (EVM:TSX.V, 0.24 X 0.25 with a limit of CA$0.25) is one of the top examples of the exploration companies known as prospect generators. These companies, as the name implies, generate prospects and find partners to spend the money in return for earning into the projects. It is a business model that allows the junior to conserve capital while building up positions in several projects. Evrim, for example, has seen $22 million spent on exploring its properties, of which 80% has been spent by partners.

Evrim focuses on western North America, with projects in British Columbia, Arizona, and western Mexico. Currently (after a new agreement earlier in December) it has five joint ventures, one exploration alliance, and an active generative exploration program. At least five of its projects—and perhaps seven—will see drilling this coming year, with at least $5 million to be spent on the properties. Evrim may do initial drilling on a 100%-owned property, a prospective gold project that has never seen drilling, though rock and soil sampling have been encouraging.

Several active projects

Among its key projects are the following:

  • Ermitano, close to First Majestic Silver Corp.'s (FR:TSX; AG:NYSE; FMV:FSE) Santa Elena mine. FM is earning 100% of the project provided production notice and permits are obtained by January 2019, in exchange for an attractive 2% royalty to Evrim. Santa Elena will need ore in coming years, and, following a discovery hole, it is difficult to imagine FM will not pursue this. Results from six holes have yet to be released. This royalty alone could be a company maker; First Majestic may want to renegotiate, but either way, it will be a winner for Evrim.

  • Cumobabi is an earlier-stage property, also optioned to First Majestic and relatively close to Santa Elena. FM has until December 2019 to earn in.

  • Ball Creek, a copper-gold porphyry in British Columbia, on which Antofagasta has an option to earn 70% by spending $31 million.

  • Axe, another porphyry target in BC, on which Antofagasta just signed an earn in.

  • Exploration alliance with Newmont Mining Corp. (NEM:NYSE), on which it spends 70% of the funding, in return for the right to option certain properties and sole fund.

In addition to another project farmed out to a well-funded junior, Evrim has other properties it has generated and on which it still owns 100%, but available for deals,

Cash, management and strong shareholders

Evrim is well funded, with $3.6 million cash, and an annual burn rate of about $1.8 million. It expects to earn about $1 million this year from management fees and cash payments on projects it has farmed out. In addition, it has a series of warrants at $0.25, which, though they do not expire until the end of 2020, do have an early exercise feature. The company is funded for the next couple of years.

It has a disciplined management team, led by CEO Paddy Nichol, with a strong exploration team, and directors including Paul van Eeden and David Caulfield. Insiders hold over 10% of the shares, while Altius Minerals Corp. (ALS:TSX.V) holds 17.5%. (Clients of Adrian Day Asset Management hold, counting the perverse way the Toronto Stock Exchange does these things, another 17.5%.) The shares are well held. The next year should see a steady news flow which will support the share price.

Buy now

With a market cap of only CA$16 million, Evrim is very inexpensive given its projects and potential. It is a buy here. Indeed, the share price jumped from 0.235 on high volume on the last day of the year, so I think you will be able to buy what you want at this price.

Given that this is an exploration story, we are counting it as part of our aggressive portfolio, though we believe the risk here is quite low.

Adrian Day, London-born and a graduate of the London School of Economics, heads the money management firm Adrian Day Asset Management, where he manages discretionary accounts in both global and resource areas. Day is also sub-adviser to the EuroPacific Gold Fund (EPGFX). His latest book is "Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks."

1) Adrian Day: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Evrim Resources. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. Funds controlled by Adrian Day Asset Management hold shares of the following companies mentioned in this article: Evrim Resources. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. Click below for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
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