Cloudbreak Discovery is not your father’s mining company. Nor is it a mining investment trust. It combines the best of both worlds in our view, a company with an experienced mining exploration and corporate finance team in situ that is acquiring undervalued assets across a number of different commodities and jurisdictions.Cloudbreak Discovery: Summary
- London-listed company with focus on generating new mining projects across commodities and jurisdictions
- Experienced resources team exploring new projects to support electrification and the green revolution
- Several projects already in hand, with bias at the moment to Canada
- Works with partners to develop compelling early stage exploration opportunities
- Retention of economic interest by a variety of means including equity and royalty agreements
- Diversification will reduce jurisdiction and project risk
You do see mining explorers with multiple projects, but in most cases they will focus on one or two jurisdictions and will generally be active around a single commodity. Cloudbreak Discovery has ongoing initiatives to identify mining projects of merit around the world and then select strong partners to advance the assets and thus reduce single project risk to Cloudbreak.
Typically Cloudbreak Discovery will be working with eight or nine projects at one time. It has already realised over $23m in value from less than $2m in project investments and has a portfolio of active projects in hand with ongoing generative initiatives to grow its asset base
Partner relationships are crucial
Cloudbreak’s partner relationships are a critical part of the equation. The company sources development partners from its well-established network of explorers and developers in the mining space and receives cash and equity in the form of milestone payments while its partners advance the projects it has identified. Additionally Cloudbreak retains royalties on assets it generates.
The company is pursuing a low cost, high value creation model that draws on partner balance sheets and technical teams to move the ball forward on the various projects. Thus, for 2021 e it has partner commitments worth over $5m in exploration expenditures.
Cloudbreak Discovery does a lot of homework on projects even before it gets to the stage of partner appointments. Selection of potential projects is informed by extensive research, data mining and risk assessments of jurisdictions and commodity trend durability. Projects may require land package consolidation and additional work with prospectors and geological teams while the company determines what sort of scale a project is going to have.
To achieve this strategy, Cloudbreak Discovery looks to build a project thesis, working with exploration data and a network of leading geologists. It prioritises greenfield opportunities and prospects that sit outside the crowded, mainstream mining spaces. This means revisiting non-core projects that might have been neglected previously by larger miners and explorers.
The ultimate objective is to be able to go to possible partner firms with an attractive and verifiable exploration package, backed up by research, data and a strong thesis, which these companies are going to want to take a look at. Typically, Cloudbreak will be talking to exploration companies with the budget to get out into the field with these projects.
How does Cloudbreak Discovery monetise its projects?
The company makes its money in a variety of ways. This will include the partnerships or assets sales themselves, where the company will seek equity positions, cash and milestone payments and/or retained royalty agreements.
Secondly, there may be scope for spinning out new companies to the shareholders that have a focus on a specific commodity or jurisdiction, which again can create opportunities for a major equity position and/or retained royalty.
There is also the flexibility here for strategic alliances – e.g. a project level interest or joint venture agreement.
Listen: Podcast with Kyler Hardy, CEO of Cloudbreak Discovery
The Cloudbreak Discovery Project Portfolio
Cloudbreak Discovery already has a portfolio of projects in hand with more to come. The current focus has been on the tier 1 jurisdiction of the North American area but there is one West African project in the portfolio and we are told that the company will continue to maintain a global watching brief as it considers future opportunities.
Currently the projects have an estimated value of more than C$23m with a deemed cost of around C$1.6m. But looking at these it is possible to see how diversified the portfolio is already, which has to be one of the key strengths of Cloudbreak Discovery.
On the precious metals front it has an equity position and royalty agreements in place with TSX-V-listed Norseman Silver Corp (NOC) including a 14.5% holding, which is a silver and copper exploration play in Canada. It also has a stake in Deep Blue Trading, shortly to be listed in Canada, which is looking at epithermal gold prospects. Then there is Buscando Resources which is in the business of advancing gold exploration projects in Canada.
But outside of precious metals, there is Linceo Media Group, a private firm which is working on a quarry for high grade alumina and silica to supply the concrete industry in the Pacific Northwest. Here Cloudbreak Discovery has an 11.5% stake and a 1.5% NSR.
Imperial Helium is developing a helium project in Alberta with first production expected in late 2022 – Cloudbreak Discovery has a 1.22% equity position. And outside Canada, Cloudbreak has its only current non-Canadian project, Anglo African Minerals, which is developing a group of bauxite projects in Guinea.
Finally, there is Temas Resources Corp, which we think demonstrates the flexibility of Cloudbreak Discovery’s approach – Temas is working on more environmentally friendly processes for effective extraction of iron, titanium and vanadium. It is currently focused on two projects in Quebec and a borates project in Serbia.
This is quite a diverse range of projects already – the company says its focus will be on base, bulk and specialty metals, metals that can support the upcoming electrification revolution and mined commodities that can underpin the growth of a greener economy.
Summary
Cloudbreak Discovery brings exposure to early stage mining projects across a broad range of interesting commodity sectors. It is coming onto the market at a time when prices across several mining commodities are heating up considerably. The management team has rightly recognised that the shift to clean energy production is going to require a massive amount of mining activity to deliver the raw materials this will need.
The project portfolio approach makes a lot of sense – the company is doing a lot of the initial research, but then works with partners who will do the heavy lifting for the on site exploration. Ultimately, the objective is to deliver projects to interested end developers in the space while retaining interest in ongoing royalties. We can see how this can build up over time into something very compelling.
