Monday 24th October 2016

Resource Clips

The Juniors Shall Prevail

An Interview With Zimtu’s Dave Hodge

By Greg Klein

Dave Hodge is President/Director of Zimtu Capital Corp TSXV:ZC, an investment company focused on private, micro- and small-cap resource companies. He spoke with ResourceClips writer Greg Klein April 18.

Q: Would you give us a bit of background on how Zimtu began and how it evolved?

A: Zimtu has taken a variety of forms, from an exploration company to a dot-com company. When it was a dot-com, the company spun out its mineral properties and created a new exploration company called Commerce Resources.

And after the dot-com market fell apart we realized that the best thing we ever did for Zimtu shareholders was create Commerce because they received shares in Commerce through a share dividend.

An Interview With Zimtu's Dave Hodge

Hodge (right) with Cambridge House's Joe Martin: "I surround myself with the right people."

So we reorganized the company and essentially went into the full-time business of creating junior-exploration companies through a dividend process. That was relatively successful. And to augment that, through a series of partnerships with prospectors and/or geologists, we have developed quite a transactional business where we’re involved in staking properties on a partnership basis and helping market those properties to other junior-exploration companies.

Ultimately, that part of the business works well from a company-creation aspect because what you get by buying Zimtu stock is access to that very early stage of junior exploration. And in that very early stage there is tremendous upside and tremendous potential.

Essentially it gives the public access to that very early stage that normally they wouldn’t have access to: pre-IPO in a risk-reduced manner because Zimtu is there to help back up the new company.

Q: That’s quite a distinctive business model. You’ve talked about the opportunity and risk reduction at the pre-IPO stage. There is a fair amount of risk, so how do you manage that?

A: We increase the odds of success by helping the companies in whatever area they might require, whether it’s regulatory, marketing or geological in nature. Zimtu is in a position to help where they need help, and that’s how we add benefit to early-stage companies. And when you can reduce that risk, it can make those opportunities extremely profitable.

Q: There’s a fair amount of variety in your core holdings, where you have potash, base metals…

A: That’s because we’re opportunists. Essentially, that’s what we do, and the potash holding was a result of Zimtu being in the right place at the right time. Essentially, we wrote the first check for Western Potash TSX:WPX, and that first check was what was used to tie up the initial property. They had such a strong board of directors. What we added was introducing the company to the European financial community.

And as long as a company’s operating properly and spending money in the right places, we’re quite prepared to hold its stock until there’s a major liquidity event like a discovery or buyout.

Q: How do you stay on top of all these different commodities? Everything from geology to exploration, extraction, marketing, supply and demand, it’s all different, isn’t it?

A: I surround myself with the right people and give them the authority to make those kinds of decisions. My role is just to have the right people around me, and effectively, that’s what we’ve done.

For example, we made the call on the graphite sector over a year ago. We were able to act very quickly with our staking partners. That included prospecting partners across Canada and Australia, as well as different geological firms. So when we put out the call to help find graphite opportunities, we were able to move quickly.

Q: Speaking of graphite, how did you make the call? You were way ahead of everyone else.

A: It was led by one of our directors, Ryan Fletcher. A number of factors went into that decision, from anticipated future demand to existing supply, to how the current supply chain works. China tends to be a major factor in today’s markets. So when China is the major supplier of a commodity, and is in the position of reducing supply to the world, they might do so because of their own growth and consumption. That was true with rare earths, and it’s certainly true with graphite. But, on Zimtu‘s side, a little courage and a little luck was also required.

Q: Apart from supply and demand issues, do you think there’s something else driving the enormous investor interest in graphite?

A: No question, the fact that China is reducing exports is putting pressure on the market. Technology is one of the key driving factors, and there is more graphite in lithium batteries than lithium. Those kinds of factors all come into play, but certainly we’re very confident in the future graphite market.

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