Recent interview with Robin Goad

By Kevin Michael Grace

“We are a complicated story, no question,” declares Fortune Minerals Ltd President and CEO Robin Goad. He adds, “Both of our assets are a little bit complicated, too. Having them together is also somewhat unusual in a development-stage company. But I would say that the largest and most successful mining companies, those that generate the strongest returns, are diversified companies, like Teck, Anglo American, BHP Billiton and Rio Tinto.

Of course this $170-million market cap junior is hardly in the same league as the giants above. However, Fortune does have two significant projects which, after much logistical strategizing, should be in production within three years.

Nico is a gold-cobalt-bismuth-copper-deposit north of Yellowknife in the Northwest Territories. According to a January 43-101 estimate, it has 4 million gold equivalent ounces: a 16.4-million tonne proven reserve of gold at 0.97 grams per tonne and a probable reserve of 14.6 million tonnes at 0.83 g/t, totaling 907,000 ounces. It has 82 million pounds of cobalt, 27 million pounds of copper and 109 million pounds of bismuth. “It is the largest bismuth deposit in the world,” Goad says.

But this estimate does not include data from the most recent drilling program, which generated strong results. Highlights from December 3 include 4.74 g/t gold over 8 metres, including 35.9 g/t over 1 metre, 11.59 g/t over 3.4 metres and 4.84 g/t over 5 metres. Highlights from September 9 include 2.22 g/t over 51.3 metres, including 4.93 g/t over 13 metres and 4.68 g/t over 4 metres. Goad comments, “The new reserve estimates are in preparation, and they will be coming out in fairly short order.”

Mining will be a combination of underground and open pit. Goad explains, “For cash-flow scheduling purposes, we will mine the high-margin gold first. About 68% of our mill feed will come from underground sources in the first two years, then it goes entirely open pit for the remainder of the mine life, which is 18 years.”

Post-mining is when Nico gets interesting. The ore will be concentrated in NWT and then shipped by rail to a refinery, the Golden Giant Mill, which was bought in Ontario and disassembled for shipment to the West. “One of the very attractive attributes about Nico,” Goad explains, “is that the ore is concentrated very well. We will process ore at 4,650 tonnes per day, and that gets reduced to 180 tonnes of concentrate: almost a 20:1 ratio, using a very inexpensive flotation process. Our processing costs, power costs and labour costs will be much lower in Saskatchewan.”

A 2008 feasibility study of Nico estimated a pre-tax $361 million net present value at an 8% discount rate, with a 32.3% pre-tax internal rate of return. “This is out of date,” Goad admits. “We have new economics coming out that will reflect the improvements in development, a larger reserve, higher throughput and the much-higher recoveries and commodity prices. But the capital costs will be substantially higher, as the scope of the project has been significantly expanded.”

Fortune’s Mount Klappan anthracite coal project in north-central BC hosts 2.8 billion tonnes, “one of the largest undeveloped assets in the world,” Goad says. A November feasibility study estimates a 20-year mine life (consuming only 3.6% of the resource), an initial capital outlay of $768.4 million for the mine surface facilities and railway, a pretax internal rate of return of 25.4% and a $1-billion net present value at an 8% discount rate, at a base case of US$175 per tonne. The coal will be shipped by rail to Prince Rupert. Goad adds, “We have recently engaged Deloitte & Touche to find a financial partner for Mount Klappan, and discussions are at a very advanced stage.”

Goad projects that Nico will go into production at the “end of 2013,” and Mount Klappan will start producing “sometime in 2014.”

Goad admits that Fortune’s complicated nature, “is one of our challenges” and that this has adversely affected its share price, currently at $1.59, down from a recent high of $2. He concludes, “Investors needed to see that we could actually accomplish our goals of advancing these two very important projects, now significantly derisked, which collectively will have about $1 billion in capital costs. We’ve essentially got all the ingredients: the assets, the people, we’re relatively well financed and soon to be even better financed, if we can successfully navigate the partnering process. I believe there is huge opportunity for further share appreciation.”