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Focused On Saskatchewan, Which Is Blessed With Some Of The Greatest Resources In The World And Where The Government Has Become More Mining Friendly, Creating An Awakening, 49 North Resources Inc. Is Well Positioned With Multiple Investments |
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49 North Resources Inc. is Saskatchewan's first resource investment, financial and managerial advisory and merchant banking company that invests in the Canadian resource sector, with an emphasis on junior and intermediate mineral and oil and gas exploration companies with activities in Saskatchewan.
President/CEO 49 North Resources Inc.
Mr. MacNeill is the Founder, President and CEO of 49 North Resources Inc., a Canadian resource investment company headquartered in the Province of Saskatchewan. (TSX-Venture symbol FNR). As the first entity of its kind in the Province’s history, 49 North is a pioneer in what is rapidly becoming one of the world’s most renowned resource jurisdictions.
A graduate of the University of Saskatchewan (Economics/Geology) Mr. MacNeill is also a Certified General Accountant (CGA) and holds a Chartered Financial Analyst (CFA) designation. Mr. MacNeill’s extensive knowledge of Canadian capital markets has been gained through experience as a Management Accountant within the mining industry, Investment Advisor with a major Canadian brokerage firm and Chief Financial Officer of a Canadian Trust corporation.
As a third generation resource developer with over 25 years of direct experience in resource investment and corporate finance, Mr. MacNeill has extensive connections both in Canada and internationally. Tom is a well-respected member of the resource industry and part of a worldwide network of exploration professionals and resource developers which enables him to source and structure projects.
Within Saskatchewan, the MacNeill family can be credited with founding the longest running gold mine in the Province’s history operated by Claude Resources, as well as developing the world’s largest diamond exploration joint venture between Shore Gold and Newmont Mining.
Mr MacNeill’s focus on Canadian junior resource opportunities and more specifically Saskatchewan’s resource potential provides investors with the seasoned leadership necessary to create value. His expertise in capitalization and management can be seen across the economic resource spectrum through involvement with companies such as Athabasca Potash, (potash development), Goldsource Mines and Westcore Energy (coal exploration), Prairie Hunter (Oil & Gas) and many other early stage projects.
As a strong supporter of the Canadian Mining Community and with his passionate focus on Saskatchewan’s resource potential Mr. MacNeill is a frequent speaker at business, investment and mining conferences.
Interview conducted by: Lynn Fosse, Senior Editor, CEOCFOinterviews.com, Published – July 9, 2010
Mr. MacNeill: We have a pretty unique history, certainly unique for North America. If you look at the political background of Saskatchewan, it has been a hard-left leaning political environment for a little over half a century. In 1944 we elected the first socialist government based on a socialist platform ever in North America and that was quite striking at the time. That had a long-lasting impact on how things got done or didn’t get done in Saskatchewan, and that ties into our economic picture. We are blessed with some of the greatest resources in the world. We are the world leaders in potash development, as we have over half of the world’s mineable potash, which is a nutrient that is absolutely critical for crop growth. We have the richest uranium deposits on earth and we supply about a fifth of the world’s reactor grade uranium. We have the largest diamondiferous kimberlite field in the world. We have a sea of oil and gas and other carbon related elements in the earth here in Saskatchewan and most of that hasn’t been developed; it ties back into our political history. When the rest of the world was getting busy developing resources given the population growth and the need for basic materials, we were developing Government run enterprises. This means that we had government oversight in the resource business that came to a head in the 1970’s when we actually created Crown Corporations, namely Saskatchewan Mining Development Corporation, Potash Corporation of Saskatchewan, and Saskoil that got their fingers directly in the resource development pie. Now what that did was stop development dead in its tracks. That is an activity much like Hugo Chavez has been doing in Venezuela where government expropriates resources and causes other capital to flee the jurisdiction. Flash forward to 2010 and we have a situation that over the last decade it has become less the case as we have very little government oversight in resource development, and we have responsible royalty structures and a very pro business government. What we have is a whole bunch of resources that are still in the ground because they didn’t get developed properly in that half century of hard-left political thinking. So what that means is right now in the history of Saskatchewan has shown to be the best jurisdiction in the world bar none for resource developers such as myself at 49 North Resources.
CEOCFO: How has 49 North Resources been taking advantage of this great opportunity in Saskatchewan? Mr. MacNeill: We looked at Saskatchewan in late 2005, which was its 100th anniversary as a province, having been in the resource business my entire life, I noticed we didn’t have any capital market locally in Saskatchewan. With the exploration that has been burgeoning five and tenfold in the last decade, very little money for exploration is raised locally here because the government was socialist bent, which kept us from developing a proper capital market. Therefore, 49 North Resources is the initial foray into a true capital system in Saskatchewan with regards to resource development. Now we have an institutional capital market that is less than half a billion dollars in strength in Saskatchewan. So when we created 49 North, it was designed to encourage local investors to get involved in the development that is happening, which would thereby accrete wealth to the citizens of Saskatchewan. It would help the companies that are locally here that were having a tough time raising money for projects because we didn’t have the capital market, so we are the first entrance of that kind in the province’s history and still the only entrance. What that means is as a gatekeeper for junior resource exploration and development in the province, we need to see all the deals well before the street or the market gets to see it. In fact, we create our own projects, so we have no shortage of projects to put together. What we have is a shortage of management skill to wrap around the extensive resource base that we have in this province.
CEOCFO: What kind of attention have you been getting? Mr. MacNeill: Quite a bit; most of it is organic in nature. We don’t go out of our way to advertise what we do or spend a lot of money on publications. Therefore, people more or less hear about 49 North Resources through word of mouth. We are starting to get quite a bit of attention worldwide because Saskatchewan is the place to be and we are the number-one economic jurisdiction in Canada. We came through the recession with virtually no hiccup with regards to employment and GDP (Gross Domestic Product) growth. Canada is renowned as the best place in the last financial turmoil to be, and Saskatchewan is the best place in Canada because we are a resource-laden province, that means that for resource developers we are the best of the best. The world has been looking at us and when they look they see the financial landscape is pretty empty and 49 North crops up. So we are getting that kind of attention organically worldwide, and we are very proud of that. We in the past year have grown from about $5 million in assets to about $60 million in assets and expect that this is just the very beginnings of a long-term development strategy for 49 North, its shareholders and the resources that we bring forward.
CEOCFO: Please tell us about the projects that you have under your umbrella! Mr. MacNeill: They are quite expansive; we do everything from hydrocarbon, to conventional oil and gas. We are a bit of a hybrid in that 49 North invests in the shares and other instruments of third-party companies, but also we develop our own projects. We got a portfolio of assets under the shares of other companies and we go out and stake our own projects and develop our own in-house properties and either move them into a publicly traded vehicle or sell them or joint venture them. So we run the full gamut from energy to base metals, precious metals, uranium, rare earth elements, potash, really any economic resource. And Saskatchewan is truly blessed with just about every economic material known in astonishingly large quantities. A good example of what we do is our relationship with Athabasca Potash as the initial sponsor for API about four years ago when the company had a market capitalization of several hundred thousand dollar, so we were there with the early stage seed capital. We supported them with every financing that they did and ultimately this year that company, which has some of the best prospective potash ground in the world and a very advanced development project was sold to BHP for $ 341 million. So we took our portion of the shareholdings that we had and we reinvested back at the beginning of the conveyer belt in not similar early stage resource projects.
CEOCFO: What is your criteria? Do look at projects on an opportunistic basis, or is it a particular mix you are looking for? Mr. MacNeill: We are never looking for a particular mix. We look at the commodity cycle. Usually we will be investing in things when they are out of favor. When copper prices came off, they came off hard and that is when we started investing in projects. When you go through a recession and diamond prices come off, that is where we start adding a position in diamonds because usually when everyone else is selling it puts severe pressure on it, but it doesn’t change the rocks in the ground and eventually the commodity sector moves forward. So you have to be in the right place at the right time and position yourself early. As far as entering a particular position, we tend to be contrarians. Say for example, with regards to oil and gas, when other people are selling we are buying and we can be very patient. We have gone through a hiccup and managed to acquire some excellent assets of what we consider to be significant. A long answer, but no we are not looking for a specific mix. We are opportunists and we move our capital around depending on how we feel about the commodity, the macro economic cycle, the prospects of a particular company, its management and where they are in the development cycle. One observation I have is that we are early-stage investors, so by the time something is proven up to the point that it looks like it could go into production, we are usually gone by then.
CEOCFO: With the companies that you provide capital for, do you provide advice and guidance or is it strictly the financial? Mr. MacNeill: We provide advice and guidance as well, if they need it. Obviously, companies come in all different stratas. We will go right from being the largest shareholder in a company; we will own in some cases 50% or in one case with an oil and gas company we are working with, 90% of the equity. We make sure that the management structure is there, we make sure that they are connected with the investment banking groups that we know, and that the story is well understood. We make sure that the management knows how to go about it and then we set them on their way. Quite obviously there are a lot of companies that don’t need that help, so we can be very hands-on or very hands-off depending on what is necessary at the time.
CEOCFO: What are some of the challenges that you have to be on the look-out for? Mr. MacNeill: In the world that we live in, most of the junior resource equities we invest in can be very illiquid at times. When markets get scary like they have been now you have the potential for debt default such as what is happening in Greece and Portugal right now. Spain is looking a little shaky and Ireland as well. That means that the world gets anxious and when liquidity dries up in that macroeconomic environment, junior resource stocks are the first ones to get sold off and for the bids to dry up. So that is probably our number-one concern, the exit strategy on positions given the timing. When markets get shaky, you have to be prepared to be there for quite a long time to wait until a particular situation resolves itself or a particular commodity that you are holding the equity in, rights itself. So timing is probably the number-one concern.
CEOCFO: What is the financial picture for 49 North Resources today? Mr. MacNeill: We have about between $55 and $60 million in assets, we are well-funded cash-wise, and we have approximately $8 million in cash on hand. We have just as of 2010 started to get noticed by the world, so liquidity is picking up in the trading of our stock. We traded about 30,000 shares today. We probably trade on average about 30,000 or 40,000 shares a day; the stock is trading at $2.50. It is a very under-recognized story and because of that, our stock trades at a pretty significant discount to our net asset value; something on the order of about 40%, which makes us a tremendous opportunity. We view what we are doing as very early days and we have a whole stable full of excellent projects that, as we move forward, will accrete value for our shareholders, so our financial position and our outlook couldn’t be better.
CEOCFO: What is your two-minute take on the world’s resources? Mr. MacNeill: Like most people, I believe it comes back to China; ultimately, they have the largest appetite. You've got 400 million people in China moving into the middle-class, which means they will be buying fridges and toasters, cars, and cars need roads and roads need bridges to cross the river. So that means they need cement and steel and a whole bunch of other things, including titanium to go in the steel and all of those basic materials. Also energy; there is tremendous energy demand, so that means thermal coal, of course metallurgists coal for making the steel, so the steel in the bridges and the buildings and all of that stuff. And that is not going to stop because you have to look at it a little like the 1800’s in the United States. It was considered for about forty years a golden era from 1880 to 1920, where all of America was having an industrial revolution and moving into the middle-class. That is happening on a much larger scale throughout Asia, which means that there is going to be long-term secular demand for materials. Now having said that, we have China's currency that most people believe is undervalued, which creates some short-term economic upheavals. If they raise the value of the Yen, in the long-term that is going to be very good for commodity prices, because a stronger Yen means that they can pay for it with a pound of copper or gold or anything commodity related since these things are paid in US dollars. In the short-term it will cause economic upheaval. So the short-term picture is a little sketchy. It is probably going to be a little volatile but long-term I have no fear that we are at the very beginning of a long-term commodity bull market cycle.
CEOCFO: Final thoughts, what should people remember most about 4 North Resources?
Mr.
MacNeill: First
mover status; we are it! We are here! If there is something going on in the
province of Saskatchewan regarding early stage resource development, we know
about it and probably even created it. This is the number-one opportunity
for people to get in at very early days on the ground floor in one of the
most prospective, sovereign risk free resource frontiers in the world.
Politics held us back, but now the opportunities are extraordinary.
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If there is something going on in the province of Saskatchewan regarding early stage resource development, we know about it and probably even created it. This is the number-one opportunity for people to get in at very early days on the ground floor in one of the most prospective, sovereign risk free resource frontiers in the world. Politics held us back, but now the opportunities are extraordinary. - Tom MacNeil |
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Financial
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Merchant Advisory and Managerial
Tom
MacNeill, BA (Econ.), CGA, CFA
