Stuhini Exploration Ltd (TSX-V:STU) CEO David O’Brien gladly points out he only makes $24,000 a year.
O’Brien’s low salary underscores the junior miner’s focus on tamping down expenses to ensure that as much capital as possible flows into its four precious and base metal properties in western Canada. It is a template he would like many in the industry to follow.
“For sure $24,000 per year is an unrealistic salary in this day and age, but it’s more a statement that the junior mining model is broken when early-stage companies are charged six-figure management salaries before any value has been created as this leaves little or no money left for exploration. Once we create value, then our salaries will be more in line with companies with a comparable market capitalization,” said O’Brien, who owns about 2 million shares in Stuhini.
“The main point is I have skin in the game, and I only do well if the share price appreciates - we are aligned with the interests of the shareholders. And by skin in the game, I don’t mean cheap founders shares, shares for debt, or a pile of options - I write personal cheques in all financings. How can I expect investors to buy shares when I won’t?”
O’Brien, a prolific mining industry investor and president of a top fly-fishing business in British Columbia, founded the company in 2017 with exploration and drilling veteran (and fly-fishing enthusiast) Barry Hanslit who developed the popular A4 portable diamond drill rig.
They decided to create Stuhini, O’Brien said, based on “our backgrounds in property acquisition, understanding valuations." He aaded: "We’re both businessmen living off our own money and we are very ethical and honest.”
Company business model
The company’s business model - maintaining a tight share structure with no warrants and debt so as not to dilute Stuhini’s stock value while obtaining undervalued properties with resource and development potential - has attracted the attention of famed billionaire investor Eric Sprott. He holds an 11.3% interest, indicating his faith in the company’s management and properties. Company insiders, which include O’Brien, Hanslit, and Sprott, hold 38.4% all told.
That said, the company heads into the remainder of 2021 well-capitalized as it develops its four properties - significantly its flagship 28,631-hectare, road-accessible Ruby Creek Project in northern British Columbia that co-founder Hanslit’s Global Drilling Solutions optioned to Stuhini. The company has the right to earn a 100% interest on the property.
Its second flagship property is the 4,243-hectare Que Project in the Yukon Territory, an underexplored greenfield exploration target that is also road accessible. Numerous gold targets exist across the property, which Stuhini optioned directly from the Lindsay family whose father first staked it in the mid-1960s. Subsequent exploration has discovered anomalous gold in soil and stream sediment silt samples along with gold-bearing quartz veins. As well, the company has the option to earn a 100% interest on the property.
Stuhini recently added to its Ruby Creek Land Package by purchasing the Island Claims from Brixton Metals Corporation (TSX-V:BBB, OTCQB:BBBXF) and the Big Ledge Zinc prospect in south-central British Columbia. The company in 2021 also staked seven Mineral Exploration Licenses (MELs) within the southern extent of the Thompson Nickel Belt in Manitoba.
Going after molybdenum
But while Stuhini explores for gold and silver, the company is shifting focus at Ruby Creek to the development of molybdenum, or moly for short.
“As a result of the dramatic bump-up in molybdenum prices over the past year, we are now changing our focus from early-stage greenfield exploration for gold and silver with a call option on molybdenum to now where we are advancing the molybdenum project, possibly toward redoing the feasibility study,” he said.
Molybdenum is a key component of the steel industry as all steel contains the element, much more so in cases where hardening, corrosion resistance, high-temperature exposure, or stainless steel are desired qualities. It is also valued as a specialty high-performance lubricant and a component in flame retardants, fertilizers, and even vitamin supplements. And it has the potential for future use in batteries that will be needed to run electric vehicles and other applications.
Ruby Creek hosts the historic Adanac/Ruby Creek Molybdenum resource and has an intact British Columbia Mines Act permit. The historic deposit, which contains over 560 million pounds of molybdenum reserves and resources, was first discovered in 1966 but has never been put into production due to extreme market price fluctuations. Stuhini co-founder Hanslit purchased the resource out of bankruptcy in 2016. The historic resource has yet to be verified by Stuhini.
“We've been exploring for gold and silver there while we sort of incubate the moly with the attitude that one day, moly will wake up, but it's a valuable, very advanced deposit,” O’Brien explained.
In fact, moly is waking up. Demand for the mineral is on the rebound after its price (up dramatically to $20 a pound today from $8 in 2020) crashed in 2008, effectively shuttering any development of the resource.
Calling the moly deposit “best in class,” O'Brien said Stuhini is contemplating updating the 2009 resource report on the project, which has been subjected to more than 69,000 meters of drilling. The company in the meantime has hired a team to examine updating the resource and whether to launch a new updated feasibility study. It has also partnered with a broker with strong connections to China’s steel industry.
Looking ahead, O’Brien said the company is strictly concentrated on Ruby Creek with a focus on moly and accessing cheaper sources of energy like natural gas or even an eventual tie-in to the site C dam, which is now under construction, which helps make the economics of opening a producing mine more attractive.
“The drilling and assaying have been done. The bulk sampling, the metallurgy, and the feasibility study have all been done and the road has been built. It all has been done,” he concluded.
Contact the author: patrick@proactiveinvestors.com
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