Canex Metals (CANX) - Early-Stage Arizona Gold Explorer

Canex Metals is a Canadian Junior Exploration Company with an experienced exploration team focused on identifying, acquiring and developing high potential exploration projects. CANEX is focused on a new gold discovery at the Gold Range Project in Arizona where ongoing work has identified a 5km long fault zone containing numerous mineralized zones and exploration targets. 

Canex Metals’ c.$13M market cap has recently seen a bump. They restructured the company a couple of years ago using money from Altius Resources. With $400,000 to spend on drilling at the Gold Range project over the next month, the market should have a much clearer idea of the Canex value proposition that is on offer in the near future. If they hit gold, they should raise more money.

We discuss:

2:34– Company Overview

3:22– The Foundation: History & Track Record

6:36– Relationship with Altius Minerals Corp: Raises and Cash Position

8:11– Team Experience

8:42– Acquiring the Asset: What’s There?

17:25– Management Shareholding, Remuneration and Cost Mitigation

19:19– Plan for Money Allocation: Drilling and Expectations

24:22– Value Creation & Exciting the Market: Means of Minimising Dilution

28:31– Thinking of Partnerships

Canex is excited to be getting into a new area with lots of widespread Gold mineralisation but not a lot of past exploration and a lot of good opportunities, so essentially a new zone with big potential.

History and track record

Shane Ebert is a geologist and did degrees in Canada and Australia. He studied in Nevada and has worked through Nevada, Mexico from Alaska to South America. He tells us that he has been involved for about 12-years in the company which was restructured a few years ago and Altius Minerals came in as a founding partner and have been a really strong supporter. Altius put in a few thousand dollars initially and since then Canex have raised over USD$1M and right now have USD$1.2M cash and equivalents.

Canex was looking for new projects, and an opportunity came up in Northern Arizona where they went looking for opportunity. Ebert states that Arizona is clearly one of the premier first-world mining jurisdictions being in a great location with Nevada to the North and Mexico to the South and the geology continuing through the two. He says that the management team loved the jurisdiction, saw good early-stage opportunity where Canex could use their skill sets and add value quickly through low cost but good science on the ground, and bring to investors high-grade, near-surface targets that there could be some scale in.

The Canex management team is also made up of JP Jutra, a geologist with a technical background in addition to a couple of directors with a financial background.

Acquiring the asset

Canex were alerted to a new Gold discovery by a prospector in Arizona about a year ago and decided that there was enough potential to start a project there. They now have 145 claims in that area and have incorporated four or five small-scale past-producing Gold operations dating to the 1880s and including a small-scale heap leach operation dating from the 1980s. They started to see the scale and widespread veins but Ebert stated that some of these veins were small and discontinuous and not quite what they were looking for, but put together as the whole package, they gave them a really good idea of what’s going on structurally, and that’s what they’ve been focussing on.

Location of the Gold Range Project  - CANEX Metals September 2020 Corporate Presentation

Despite Gold being present, Canex needed to decide whether to go further with the exploration and needed to mitigate the associated risks and look at certain criteria and check certain boxes in the exploration stage. One of those criteria is grade. Ebert explains that although you can have lots of mineralisation, grade is hard to replicate. They needed to see the potential for a bigger scale system.

Canex started on this project with no information and now have over 2000 soil samples and over 500 rock samples. They have flown a high-resolution airborne magnetic survey with drones which is a very low cost survey and provides extremely good, high-quality information. Structures can be mapped and traced on a surface and extended with a geophysical survey. All these data sets can be combined and Canex could decide whether the mineralisation there has size potential or not but Ebert likes what they see. Ebert himself is committed to the project and has a few USD$100,000 of his own money tied up in it.

Gold Range Property rock sample location Map showing gold values and target locations  - CANEX Metals September 2020 Corporate Presentation

Out of the USD$1M, Canex are spending around USD$350,000 to USD$400,000 p/a in G&A. Ebert states that they run a tight ship. They share offices, have low overheads and do a lot to control costs, and a lot of this is regulatory compliance. Ebert himself says he takes a modest wage and options and that he is in it for the big picture.

Capital allocation

Canex are planning to spend about USD$400,000 on this drill program and have spent about USD$300,000 getting to this stage with the surface work and the geophysics. Then there will still be about USD$600,000 in the bank post program and as they have success and move forward like any junior, they need to raise money to keep things going forward.

Drilling and sampling

Canex assures us that there will be regular weekly updates once drilling has commenced. He realises that everyone wants to see results and they hope to have drill results to the market in the next few weeks. Ebert tells us that they can see a lot of Gold in the veins and that it is hard to analyse and get a good representative result. But that they are drilling big size drill holes and taking big samples to get the best samples they can. He explains that when they release the samples, they’re including samples of high-grade veins and samples of the wall rock adjacent to the vein which could have low-grade mineralisation or no mineralisation so that they include zero value and the best value.

The drill program should be about 21-days long if all goes well and smoothly.

Shareholders

Ebert is sure that Canex can raise the money, especially in this market and especially on the back of positive results. Then they need to decide what to give to investors after this project. A lot will depend on what is found. They already have a planned phase two where they already have six or eight drilling targets. They are continually bringing on new targets and testing those targets and the discovery phase with the drill is where most value is added to any project in any company, according to Ebert.

The problem with raising more capital means that dilution for the current shareholders is inevitable but Ebert assures us that they will be adding value along the way and that their capital costs keep coming down but that they need more capital. Canex need to raise more money through stages of the project and develop the resource too. There are different ways of raising capital in the exploration phase and Ebert says they might look to bring in partners and that Canex are a true exploration company where they want to identify good targets that can add value before bringing in the capital. Other companies may look for targets and bring in other people’s capital to do the risky drilling and exploratory work.

Another thing Ebert wanted to point out is that they’ve got more money coming in as they move forward, with USD$$230,000 worth of USD$0.10c warrants due in October that are expected to be exercised, that money will come in. And Canex are going to receive about 125,000 shares of Canadian Nickel Corp through a deal they have with Spruce Ridge in holdings.

So that is almost USD$500,000 coming in, which will more than cover the drill program which means they are going to have some money in the bank following this to move forward to the next level.

Partnerships

Ebert concludes by saying that Canex are explorers rather than mine builders or developers and these have very different skill sets to each other. They recognise that and want to focus on what they are good at which is identifying, exploring, defining the resource. As they move forward and get to those decisions that may or may not need a partner, they will then make those decisions. He says that eventually they will potentially try to monetise the asset to a mine development group or other, but as they move forward, they’ll look at those opportunities and do what’s best for shareholders.

Canex are testing lots of targets and currently have five or six different targets where they are testing multiple holes into each. Ebert is keen to see what holds but is excited that the drill is finally turning and they are going to get a good look at what is there. Then he says they have got some new, big ideas coming together, which can add value down the road. 

Company Page: https://www.canexmetals.ca/