Posted by: ProspectingJournal on Jan 26, 2011
TOP STORY - ProspectingJournal.com – January 26, 2011 - VANCOUVER, BC – A week ago today an announcement hit the wires with less fanfare it deserved, regarding the $4 million non-brokered private placement of 1,000,000 shares of Providence Capital [PV – TSX.V] at a price of $4.00/share by Teck Resources Limited [TCK - TSX]. But as the dust settled upon its release, the weight of this story remains. Our interpretation of the result of this deal is that Providence has now all but solidified the means to earn a 60% interest from Eagle Plains Resources [EPL - TSX.V] on its Iron Range Project through a joint venture deal that was launched in the first half of 2010.
According to Providence Director Vince Sorace the terms of the joint venture are clear and attainable. “Providence has a JV signed with Eagle Plains, that we have every intention to earn into,” says Sorace. “The earn-in is for 60% of the Eagle Plains Iron Range Project upon Providence's expenditures of $3 million, $500k in cash payments and the issuance of 1 million shares over four years.”
Prior to the Teck deal, Providence had already begun its journey towards attaining its earn in. “We've spent about $700k prior to the new year, so we've got $2.3 million left to spend on the earn in,” says Sorace. “The latest drill program that we've announced is budgeted for $1.6 million, so my guess is that we'll be earning in pretty quick this year.”
With approximately $2 million in the bank prior to the financing, the deal leaves Providence with approximately $6 million with which to perform its duties of the earn-in. But on top of the money, which undoubtedly helps Providence hit its mark, the injection of geological expertise from Teck which is the owner and operator of nearby Sullivan Mine is the real sweet spot of this story.
"With the combination of Teck's historic knowledge and experience within the surrounding area and the skilled geological personnel of our partner Eagle Plains, we have a world class exploration and development team that will now be well funded throughout 2011," stated Steve Bajic, President of Providence in the press release.
Tim J Termuende, President and CEO of Eagle Plains, also stated in the press release, "We welcome the participation of Teck to this exciting project. The confidence shown by Teck's current involvement coupled with its considerable financial and technical capabilities can only serve to significantly benefit the project as it moves forward."
At this point, the Prospecting Journal can only add our outside speculation to the deal. Teck knows the area, has the expertise to aid in Iron Range's development, and is now privy to Iron Range data with the establishment of a Technical Advisory Committee which includes members from Teck, Eagle Plains and Terralogic Exploration Services to go over work programs, budgets and results.
But, what ultimately can't be missed in this story is the price paid by Teck to acquire their position. Last May when the ball began to roll on the Eagle Plains/Providence JV, Providence stock was languishing at a $0.10 level. By the first week of December, when drilling updates started to pop up through favourable press releases, the stock surged to $2.70 from the $0.37 level it was at to end November. That's a massive jump, with the lowest drop since being a dip to $1.60 prior to Christmas. Today, the stock is trading at just under $2. Thus the implication given by Teck's payment of $4 for a $2 stock proves that Teck has seen enough data to warrant the confidence us outsiders only could previously speculate up to this point. Thus, through Teck's indicative showing of their hand, there is still confidence in the surging value remaining upon Providence's journey ahead.
About the Iron Range Project (from the Press Release):
The Iron Range deposits were originally staked in 1897, and were covered by Crown Grants held by Cominco Ltd. and the Canadian Pacific Railway. Eagle Plains staked the current claims immediately after the Crown Grants reverted in 2000, and have been exploring the property since then. Exploration work to date includes geological mapping, geochemical surveys, diamond drilling and a 690-line-kilometre airborne geophysical survey. The Iron Range project is owned 100 per cent by Eagle Plains and holds no underlying royalties or encumbrances. An additional 35,800 hectares of claims were added to the existing land package, resulting in a total of 56,200 ha -- an area approximately 11 km by 50 km. The land package now covers over 30 km of the Iron Range structure, most of it unexplored.
G. Joel Chury
Editor in Chief
DISCLAIMER: The author of the article does not currently own shares in any of the companies mentioned in the article. The author reserves the right to purchase any of the stocks mentioned in the article upon 6 weeks elapsed after the article's release.