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BTR - Bonterra Resources


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What am I missing? Please my fellow Canadian gold bugs, please poke holes in my investment idea.

 

It is essentially long gold beta, so maybe could be part of a" LONG that is in fact a market SHORT" hedging strategy: I mean, finding trades that could benefit the crash when it comes after the epic rallye and hysteric bubble all around.

 

Bonterra Resources, $BTR.V. Bonterra is a late exploration junior gold miner, which translates into: a few quarters from starting proper mining.

No debt, excess cash.

Market cap at CAD1.25 is 125 million and is entirely covered by strategic infrastructure assset they own: a mill ready to run, fully permitted, worth say 60 (they spent 100 to build it) to maximum 200 million CAD (current price to rebuild today a new facility, before permitting that takes several years), this "Bachelor" mill is the only one in their camp  (Urban Barry) so a HUB for all the junior miners surrounding them.

 

This strategic infra asset constitutes our margin of safety: essentially you get FOR FREE the gold resources.

Last reserve report (2019) was 2.1 million oz, that is maybe 1 to 2 CAD per share, depending where you value them- the range, looking at peers is very wide, 50 to>100 $ per oz.

 

Bonterra are drilling like crazy, so next report due after April could show up to 3 million ounces. So potentially reserves are worth up to 3 CAD per share, 300 million.

 

Last November they turned down a CAD 1.6 Buy Out from a competitor....and raised some money at CAD 1.15 and started the current drilling program to highlight true hidden value.

 

I would say adding the mill+reserves, come next April, fair value could reach CAD 3.5 to CAD 4-no wonder it gets other gold miners excited at 1.25!

 

I suspect the bidder could come back with a BO at CAD 2 or more in H1 or H2. Most shareholders have a higher entry cost.  I have to add, they seem supportive of the drilling program and long term potential. more than 60% is held by institutions, which is rare in the space. Main stakeholders are US HF Wexford Capital, Kirkland Gold (where the previous CEO went), Sprott, Ruffer, Van Eck...all safe hands, .

 

So you get long gold, you buy at crazy discount to peers (EV/oz), you benefit from a margin of safety thanks to the mill infrastructure, and hopefully this ends up x2 or more in 2021.

 

Reasons for today's discount: $BTR.V is one of the worse performers in the junior gold space in Canada since 1 year and 3 years, and past management overpromised and underdelivered; the company needs to fund upcoming underground development/exploitation and extension of mill facility (from 800t to 2400 t per day, plus tailings facility). Very much a "show me " story. But I like the odds.

 

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they have a long history of overpromising and underdelivering, of never achieving their goals and of diluting their shareholders, that's probably why they are trading so low today

the only way I see this changing if another company comes in, does a bid, and replaces management; the fact that they had a bid at $1.60 is definitely interesting, I would agree that a bid of $ 2 or more would probably persuade most shareholders to hand over their shares and forget the difficult past few years

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