“Project Ironman” and some Quarterly Updates

Rechecking Marin Katusa's "Project Ironman" pitch, plus check-ins on some recent quarterly reports

By Travis Johnson, Stock Gumshoe, February 10, 2017

I’ve got one little teaser to look at for you in your Friday File today, and then some quick updates on the companies in the real money portfolio I manage.

The teaser pitch that several folks have asked about is the “Project Ironman” teaser from Marin Katusa, which he’s talking up as a “totally new way to invest in gold” … and, as some of you have already noticed, that same “Project Ironman” pitch was also used by Katusa back in September when he was signing subscribers up for a private placement deal.

So is this the same deal? Well, kind of. It is another private placement that Katusa is selling access to, and the heart of the company is the same, but the private placement is also coincident with a merger that is changing the nature of the company pretty significantly.

What’s the story? Katusa’s real passion is this whole idea of being “in the room, in the deal” and getting involved in early stage projects, usually that have close connections to people who are, to varying degrees, legends in the world of resource investing, folks like Ross Beaty, Rick Rule, Doug Casey, etc. And he also manages a hedge fund that is largely populated with investments by Rick Rule and Doug Casey, so he can also say that he knows, for example, what Doug Casey will have as his biggest investment this year (since he’s actually choosing that investment for Casey).

And much of Katusa’s focus has been on private placements and warrants, which give early investors a nice bit of leverage, so part of what he’s selling in his newsletter subscription (Katusa’s Resource Opportunities, which is $2,500 a year) is access to those private placements. It’s a little bit of a mushy relationship, because Katusa is not actually acting as the broker for these deals and it’s entirely possible that you may be able to get into those deals without a connection to Marin Katusa, but these deals are frequently oversubscribed these days, because financing is suddenly readily available for junior miners again as speculative fervor has started to re-heat, so perhaps getting in through folks like Katusa, who have personal connections to the deal, gives you a better chance at getting an allocation to an attractive deal (I don’t know, that’s just a guess).

The “Project Ironman” pitch last time around was for a deal window that closed on September 26, this time it’s a deal window that closes on February 26. So how is it the same company?

Well, the last pitch was for what was about to become JDL Gold — here’s a quick bit of the piece I wrote at the time:

“… the ‘private placement’ Marin Katusa has been pitching as his ‘Project Ironman’ idea is almost certainly a reference to a private placement he’s facilitating that will fund future development of a company that will be called JDL Gold. That subscription offer seems to have closed, and I don’t know what the terms were on those shares or warrants, whether they had holding periods set or anything like that, but the private placement was for prices that are about a 10% discount to where the prices are today, and it also came with a 5-year warrant, so those are decent terms if the rest of the private placement is appealing….

“There’s quite a bit of risk, of course, and you don’t have to participate in the private placement or pay a newsletter to buy the stock. JDL Gold will be created from the merger of Lowell Copper (JDL.V), Anthem United (AFY.V), and Gold Mountain Resources (GUM.V), and shareholders of each will end up as shareholders in JDL Gold. In effect, this is Lowell Copper buying those other two companies in exchange for shares — so you would receive 1.032 JDL shares for each GUM share and .774 JDL shares for each AFY share. Not surprisingly, arbitrageurs pay attention so those stocks generally trade right where they should based on the value of JDL shares, and there’s almost no chance that the deal will fail to go through (this is pretty low-profile, though, so if you’re interested perhaps you’ll get lucky and get shares at a discount if you’re paying attention — last I checked AFY, for example, was briefly trading at a 8% discount to the current value of the Lowell Copper shares those shareholders will receive).”

JDL Gold hasn’t done much since it was created — though, to be fair, it has only been about six months, and it’s a junior mining company with minimal revenue so the expectations should always be long-term in nature (and dependent on commodity prices — in this case, copper and gold). The price of the stock at the time of the deal was about C$2.14, and it has drifted lower to C$1.84 today. I was mostly unimpressed with the company at the time, largely because the combination of Ecuadorean copper, Canadian gold, and a Peruvian gold mill didn’t make particular sense to me because none of the projects were particularly advanced or synergistic — all it did was make three teensy companies into a somewhat larger one, with potential exploration upside but still no real near-term potential for production.

That’s changing a bit right now, and it’s because of another deal — the one that is being pitch