Possible Vale/Cantex JV bullish for gold?
Greetings investors.
Cantex Mine Development Corp. (CD.TSX-V) resumed trading little changed yesterday morning after announcing a jv with an investment subsidiary of Vale, the world’s largest iron producer.
There were unsubstantiated reports on an Arab news website ealier in the week that Cantex had entered into an agreement with Vale, known originally as CVRD ( Companhia Vale de Rio Doce). The company made headlines last January over an aborted takeover of its angloswiss rival, Xstrata.
I was hoping to see some interest from the Brazilian metals giant in CD’s gold projects in the Republic of Yemen, but Vale seems more focused on nickel, copper, and cobalt. They’ve agreed to spend a minimum of $2 million on exploration by next August.
Cantex has been active over the past nine years in The Republic of Yemen, which is the nly republic on the Arabian Peninsula. The country borders Saudi Arabia.
Initially I thought Vale as a rather strange bedfellow for a junior gold seeker on the shores of the Arabian Sea. However, the company announced earlier this month that it was cutting back on its iron ore production by 10%, due either to slackening demand or surplus production (I’m not sure which, probably both) … and that was followed almost immediately by the cancellation of a proposed mid year price hike of 12% to the Chinese. So if this looks like Vale is scrambling to try and keep up with a rapidly shifting supply/demand scenario, it’s because it is.
No matter what such a jv may mean for Cantex and its shareholders, it wouldn´t hurt the case for gold bugs if the world´s largest base metals producer were shifting its focus to the yellow metal. As it turns out, Vale is more interested in CD’s non gold assets there, notably the Suwar and Wadi Qutabah areas which contain elements of nickel, copper, cobalt, and platinum.
I’ve had trouble following Chuck Fipke´s prospecting over the past year or so. There´s been very little news since last January, when Cantex announced it was letting its Greenland exploration licences lapse. Around the same time it announced that assays from the last of its 77 drill holes on the Al Hariqua gold prospect in Yemen were pending, though I have yet to see them. However, added to the release was the statement that ´…a very progressive gold miner visited Al Hariqua in December of 2007, and ´…another large company is scheduled to visit in January of this year.´ I suppose that is Fipke-ese for ´…something big is brewing´, but he has certainly kept his shareholders in suspense.
Many investors followed Fipke to Yemen from the incredibly profitable diamond fields of Canada´s NWT, which he discovered and pioneered in the early 90s. Initially, Cantex had the exploration rights to a whopping 38,600 square kilometers of ground, (go big or go home seems to be Fipke´s motto). By 2004, that had dwindled down to a little more than 1,000 square kilometers, deemed to be of the greatest strategic interest to the company.
The Government of Yemen is entitled to an NSR plus 36% of the net profits from any commercial production there. It also has the right to acquire an undivided interest of up to 49% of the Cantex Exploration License.
It is also worth noting that the country is trying to diversify away from its dwindling oil resources. In 2006 it began an economic reform program that raised about $5 billion for development projects.
The BarkerLetter on November 19th 2008 in Commodity investing, PGMs
