Sunday 23rd October 2016

Resource Clips

Generating opportunity

Prospect generator Zimtu Capital works with multiple companies to minimize risk, maximize potential

by Greg Klein

Diamonds, gold, graphite.

Fluorspar, tantalum, niobium.

Potash, rare earths, silica sand and silver—the list goes on. They add up to a cornucopia of commodities, opportunities and risk. The projects range from early prospects to pre-development. Managing all that is the work of Zimtu Capital TSXV:ZC, a prospect generator whose business model differs not only from explorers but from other prospect generators.

It’s an approach not all investors are familiar with, according to director Ryan Fletcher. “But people who’ve been through the ups and downs of two or three market cycles understand it, invest in it and support it,” he tells

The basic exploration model, Fletcher points out, involves finding a good prospect, building a team and diluting shares to raise money while searching for a discovery. “The potential can be huge but the odds are against you,” he says.

Prospect generator Zimtu Capital works with multiple companies to minimize risk, maximize potential

“The prospect generator takes a different approach, using a team that’s not only skilled in identifying opportunities but also in creating value either through joint ventures or by vending properties to other companies and getting an interest in shares, cash or royalties.”

The advantage to investors is exposure to multiple projects, companies and commodities. “But you don’t have the expense of exploration, which is typically funded through dilution. Most prospect generators on average have a higher chance of success and they’re able to maintain their share structures.”

“We demonstrate that at Zimtu,” he continues. “We have an advantageous share structure of about 11.2 million shares. We generate projects, sometimes ourselves but typically with partners. Those partners are different firms, prospectors or other individuals who find properties for our team. We give our shareholders exposure to those prospects but we also help build companies, sometimes seeding them. And in doing that, we give our shareholders early exposure that they couldn’t otherwise get.”

“That’s one thing that distinguishes us from other prospect generators,” Fletcher emphasizes. “We’re very creative and flexible in how we get involved. Sometimes we’re involved as a seed shareholder. Normally the public is cut out of the pre-IPO or seed stage. Zimtu can provide exposure to opportunities that usually exclude the public.”

The company also generates revenue from management, marketing and corporate development services for issuers, he adds.

Another Zimtu distinction is the company’s long-term vision for its holdings. “We get involved early but stay on for a successful outcome like a merger, acquisition, takeover or production. That’s a multi-year process to support and sustain a company.”

Altogether Zimtu has a stake in nearly 50 companies, although its core holdings number about a dozen. Fletcher cites two of them to provide different examples of how Zimtu helps support companies.

Western Potash TSX:WPX began with a group who saw opportunity in the fertilizer market but needed money to acquire their first project in Manitoba. “So Zimtu wrote a seed check for around $200,000, others came in and about a year later it IPO’d for $20 million at a dollar,” he says. “The first project didn’t get the results they wanted, but then they moved into Saskatchewan. They’ve taken their Milestone potash project all the way to full feasibility. It’s fully permitted and they’ve brought on CBC (Canada) Holding Corp as an equity and offtake partner. Western’s board and team have evolved as the company has developed. Western operates independently but we collaborate a lot. The company’s been about as successful as you can get—the next thing they need to be ultimately successful is to have someone fund them to production or take them over.”

More recently Zimtu has backed Lakeland Resources’ (TSXV:LK) foray into the Athabasca Basin. “When we started it was trading at three cents. The concept was to get into uranium while it’s undervalued. Lakeland transformed its board, added an expert advisory team, raised $4 million in the last 12 months and acquired 16 properties. We’ve seen Western develop over the last five years and Lakeland will be a lot different five years from now.”

We get involved early but stay on for a successful outcome like a merger, acquisition, takeover or production.—Zimtu Capital director
Ryan Fletcher

The relationships are reciprocal. Zimtu benefits from the experience and expertise of the companies it helps build. Zimtu also has “well over a decade-long relationship” with Dahrouge Geological Consulting, a group that’s been involved in several high-profile discoveries. “Sometimes they manage projects within our portfolio, sometimes we generate targets together with them,” explains Fletcher. “We also have relationships with independent prospectors and geologists and other consulting firms. But certainly the strongest and longest has been with Dahrouge.”

In late March Zimtu created a new advisory board with three initial appointments: mine developer and metallurgist Michel Robert, project generation and exploration geologist Ian Graham and project management and exploration specialist Jenna Hardy. “They’ve always been supporters of our organization and believers in what we do,” Fletcher says. “They’re experts in their fields, which basically cover everything from the beginning of exploration through to production. We wanted to formalize the relationship by bringing them on as advisers.”

In a venture market that offers potentially high return at the cost of high risk, Fletcher sees a compelling case for Zimtu. “You get exposure to diverse companies, projects and areas of the market that you normally wouldn’t get as an independent investor,” he says. “If you invest in Zimtu you’re not investing in one commodity, one jurisdiction, one stage of project. You’ve got more chances of upside and more chances to protect you on the downside.”

Disclaimer: Zimtu Capital Corp, Western Potash Corp and Lakeland Resources Inc are clients of OnPage Media Corp, the publisher of The principals of OnPage Media may hold shares in those companies.

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