TNR Gold Spin Out ILC Looks Attractive

By: Richard Mills | Thu, Jun 17, 2010
Print Email

As a general rule, the most successful man in life is the man who has the best information.

TNR Gold Corp (TSX.V:TNR) is a project generation company active in precious, base metals, Lithium, rare metals and rare earth elements (REEs).

Project generators, after finding and securing a property, do the initial mapping, sampling and maybe a small drill program. Upon making a discovery, basically finding something of interest, they turn it over to a joint venture partner who puts up the money and or its own shares to earn into the property over a number of years while investigating the discovery.

Yes the project generator's shareholder's eventual ownership of a discovery is diluted, BUT, their ownership in the prospect generating company is not diluted because there is very little dilution of the generators outstanding shares. This is because the exploration/development expenses are paid by the partner, not the generator.

A property ownership dilution business model is not as well liked as the much more common share dilution model.

But our prospect generator offers three other things that should be considered....

TNR Gold Corp already has many compelling reasons for it to be on investors radar screens, notably - 18 active projects in three groups:

There's also Los Azules - one of the largest copper deposits in the world - TNR retains a 25 per-cent back-in right on the northern half of the property plus has 100% ownership of Escorpio IV. The Los Azules Cu-Au-Ag deposit contains a 43-101 inferred resource of 11.2 billion lbs Cu grading 0.55%, with a high grade core of 2.3 billion pounds grading 1% Cu. TNR served their back-in notice in April 2010. Minera Andes rejected the back-in notice and the validity of said back in notice and Escorpio IV ownership is the subject of a legal dispute. TNR has a C$5m loan facility that can be drawn down to support its legal claims.

But add in the imminent spinoff of its lithium properties into International Lithium TSX.v - ILC (and the eventual possible spinoff of its Alaskan properties into another newco) with the benefit of shares + warrants that have no hold period - initial share price of ILC is valuated at $0.25/share @ 60 million shares outstanding - and the case becomes, in this author's opinion, more than compelling.

The meeting date is June 22, 2010 for shareholder approval of the previously announced (April 27, 2009) spin-out of TNR's lithium and rare metal assets into its wholly-owned subsidiary - International Lithium Corp. TSX.v - ILC. TNR shareholders of record on the date of the spin-out, planned for July 2010, will receive one share and one fully tradeable warrant of International Lithium Corp. for every 4 shares of TNR held.

TNR Gold will transfer the following properties into ILC:

The parent company and shareholders should retain ~87% of ILC, and there will be a C$2.5m IPO. The year one exploration budget will be in the range of C$1m-$1.5m.

ILC's initial focus will be on the Mariana project. ILC will have a 100% ownership option on 120 sq km covering the entire salar. A resource estimate could follow drilling in 2010 (currently there is a three hole drilling program, out of a total 20 hole program, underway).

ILC will also advance brine projects covering 5,285 hectares in the area of Clayton Valley, Nevada which is home to North America's currently only producing Li mine. Chemetall-Foote's Clayton Valley operation has been producing lithium brine since 1967 and ILC will have three active lithium brine projects in this area.

The pegmatite projects for lithium and the rare metals (e.g. tantalum, niobium and the REE's) include the Moose project located in Canada's North West Territory (NWT). Moose is a past high-grade producer of Li and Ta (some of the highest grades of Tantalum in Canadian pegmatites were found here - also 2.07 wt% Li20 over 6.7m.

TNR's Mavis Lake Project has returned channel samples which include 5.3m grading 1.24% Li2O. Sampling has recently extended the litho-geochemical anomaly by 1.1k and significant potential exists on the property for additional discoveries.


International Lithium Corp. TSX.v - ILC Highlights

"International Lithium will bring a great deal of additional value to existing and potential TNR shareholders because they get to participate in a company poised to capitalize on the growing demand for lithium and rare metals, while still retaining their exposure to our high quality portfolio of precious and base metal assets through TNR." TNR CEO Gary Schellenberg


Corporate structure's TNR & ILC

TNR Gold Corp. TSX.v - TNR
Shares Issued: 120,567,641
Options: 10,090,000
Warrants: 26,259,829
Fully Diluted: 156,917,470
Cash: $1.6 M
Debt: $0
Insider/Mgmt: 52%
Institutional: 15%

International Lithium TSX.v - ILC
Shares Issued: 60,000,000
Fully Diluted: 120,000,000
Cash: $2.5 M
Debt: $0
Share ownership: TNR 30%, TNR insider/managements: 26%


Lithium

The world's future energy course is being charted today because of the ramifications of peak oil and a need to reduce our carbon footprints.

A whole new industry - a global wide automotive and industrial lithium-ion battery industry - is going to be built. As a result of lithium-ion battery demand for hybrid-electric and elctric cars the increase in demand for lithium carbonate is expected to increase four-fold by 2017.

Lithium-ion batteries have become the rechargeable battery of choice in cell phones, computers, hybrid-electric cars and electric cars. Chrysler, Dodge, Ford, GM, Mercedes-Benz, Mitsubishi, Nissan, Saturn, Tesla and Toyota have all announced plans to build lithium-ion battery powered cars.

Demand for lithium powered vehicles is expected to increase fivefold by 2012. The worldwide market for lithium batteries is estimated at over $4 billion per year.

Lithium carbonate is also an important industrial chemical:

Demand today is in the range of 120,000 tonnes of lithium carbonate equivalent (LCE) annually. Lithium is not traded publicly - and is usually distributed in a chemical form such as lithium carbonate (Li2CO3) - instead it's sold directly to end users for a negotiated price per tonne of Lithium carbonate (Li2CO3).

Production figures are often quoted in lithium carbonate equivalent quantities. By weight approximately 18.8% of lithium carbonate is lithium. Therefore 1kg of lithium is the equivalent of 5.3 kg of lithium carbonate.

"We are projecting 40% Li demand increase by 2014, with batteries accounting for 34% of use, the largest single end-use segment." Jon Hykawy, analyst Byron Capital Markets

Lithium-ion batteries are quickly becoming the most prevalent type of battery used in everything from laptops to cell phones to hybrid and fully electric cars to short term power storage devices for wind and solar generated power. At present, 39 per cent of lithium-ion batteries are produced in Japan, 39 per cent in China and 20 per cent in South Korea.

"With forecast 10% to 20% penetration rates by 2020 for pure and hybrid electric vehicles, we expect an incremental increase in demand of 286,000 tonnes of lithium carbonate equivalent, significantly outstripping current supply." Canaccord Adams analyst, Eric Zaunscherb

"Our electric vehicle investment is not one-car innovation, it is a new way of looking at our industry. This is the beginning of the story." Carlos Ghosn, Nissan chief executive officer


Rare Earth Elements (REE)

REEs comprise 16 chemical elements which are uniquely able to retain their physical properties at high temperatures. REEs are used for everything from:

Rare earth elements are as abundant as nickel or tin in the Earth's crust but economic concentrations are extremely rare - hence the name.

China - the largest producer of rare earth elements - supplies more than 90 per cent of the global market. But China has recently been cutting back exports, and promises further cutbacks, to ensure it has enough rare earths for its own use.

One online source this author found said the following - "demand grew from about 85,000 tonnes, or about $500-million (U.S.) in 2003, to 124,000 tonnes or $1.25-billion in 2008. By 2015, demand is estimated to be 200,000 tonnes or US$2.3-billion." The Industrial Minerals Company of Australia predicts global demand will grow from about 112,000 tonnes in 2008 to approximately 180,000 tonnes by 2015.

Either set of numbers you care to use leaves plenty of room for potential, new, western based suppliers.

"We've been doing quite a lot of research on rare earths and lithium in particular, and have developed a diverse rare metals project portfolio. We didn't feel we needed to be restricted geographically or deposit type so our first acquisitions were primarily pegmatites in Canada followed by application for a large pegmatite belt that was available from the Irish government. Our real goal was to have a diversified portfolio of world-class lithium and rare metals properties off both brines and pegmatites which will allow us to become a serious rare earth and lithium explorer." TNR CEO Gary Schellenberg


Conclusion

After the spin-out, TNR Gold will remain committed to advancing its portfolio of gold and copper projects in Argentina and through its wholly owned subsidiary, Bristol Exploration, continue exploring it's two, prospective for gold and copper, properties in Alaska. TNR and ILC should be on every investor's radar screens.

Are they on yours?

 


 

Richard Mills

Author: Richard Mills

Richard (Rick) Mills
www.aheadoftheherd.com

Richard Mills

Richard lives with his family on a 160 acre ranch in northern British Columbia. He invests in the resource and biotechnology/pharmaceutical sectors and is the owner of Aheadoftheherd.com. His articles have been published on over 400 websites, including: SafeHaven.com, WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Beforeitsnews, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTreport, Vantagewire, Indiatimes, Ninemsn, Ibtimes, Businessweek, HongKongHerald, Moneytalks, SeekingAlpha, BusinessInsider, Investing.com and the Association of Mining Analysts.

Please visit www.aheadoftheherd.com

Moderated investor friendly forums - Ahead of the Herd is powered by Community Intelligence.

Free highly acclaimed newsletter featuring today's investable junior resource companies.

If you are interested in sponsoring Richard's site please contact him for more information, rick@aheadoftheherd.com

Legal Notice / Disclaimer: This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

Ahead of the Herd.com Media Group Inc.a division of Ahead of the Herd Holdings Inc. All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Ahead of the Herd.com does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment. The publisher, editors and consultants of Ahead of the Herd.com may actively trade in the investments discussed in this website and newsletter. They may have substantial positions in the securities recommended and may increase or decrease such positions without notice. Neither the publisher nor the editors are registered investment advisors. Subscribers should not view this publication as offering personalized legal or investment counseling. Investments recommended in this website and publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question. Unauthorized reproduction of this newsletter or its contents by Xerography, facsimile, or any other means is illegal and punishable by law.

Copyright © 2009-2017 Richard Mills

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com