ATHABASCA MINERALS’ ANNUAL MEETING OF SHAREHOLDERS
We attended the ABM annual meeting yesterday and came away feeling very good about the prospects for the company and its stock.
Some highlights: A group of large shareholders (including yours truly) had earlier demanded more ownership by the board, in particular two directors who owned no stock. Neither bought any, and one of them resigned Friday when it was clear the votes showed that he’d lost the support of the owners. The other has committed to buying significant stock in the next 90 days. The board also changed its compensation policy for directors whose fees will now be paid in shares until they own at least a year’s worth of fees in stock. Some directors and management, incluidng the chairman and CEO, also committed to buying more stock through the exercise of warrants and options. These are obviously positive developments and to have big shareholders remind the board who owns the company should be comforting. I believe we are blessed to have this team of directors and management. They are outstanding, particularly for a small company.
There was also some talk of funding the Aggregates Marketing platform at the subsidiary level with the possible aim of partially spinning it off into a listed entity that Athabasca Minerals’ would continue to control and own a large piece of. Again, large shareholders are in favour of this, because we believe Aggregates Marketing would trade at a good price and potentially have a bigger market cap than the parent company currently does, which of course would pull the ABM stock price higher. It’s quite possible, if not probable, that shares would be dividended out to ABM shareholders should the board decide to follow through.
On the financing front it appears the company is making good progress. Details were scant but it seems there are two interested parties well into due diligence and negociations. We may hear before summer is over, we were told. That will be an exciting piece of news if it transpires.
We also got an update on the lawsuit, and it’s clear that both sides want a friendly solution. ABM has offered to give Syncrude gravel that is part of the Susan Lake deposit but sits on or near Syncrude land. Syncrude likes the idea but wants to make sure the deal doesn’t include any reclamation liability. There is an October court date and both sides would have to go through discovery if no resolution is reached before. No one wants to go into discovery, especially at Syncrude, and lawsuits are often settled just before parties have to go through this grilling process, so we think October is the latest the suit is settled, and likely earlier. That, in our view, will move the stock as many investors simply won’t buy shares of companies that are the subject of litigation, no matter how frivolous.
The big news we’re all awaiting is the NI-43101 report on the Duvernay frac sand deposit. Management has a draft and seemed very cheerful when discussing it, so that may be very good news once released. That should happen within a month. That too could move the stock price.
The company also recently signed a deal to manage a large gravel pit owned by the Montana first nations (in Alberta). No financial terms were disclosed but it shows that the company can leverage its expertise to create revenue without having to lay out any investment, or little investment at any rate.
All in all we came away from the meeting feeling very bullish about the prospects of this company. We feel the risk/reward dynamic is very attractive because we believe the current market cap reflects only the gravel business and offers next to nothing for frac sand or aggregates marketing