The Toronto Venture Composite Index has bounced about 50 points in the past four days after dropping in 20 of 22 trading days to levels not seen since the market collapse in late 2008. Safe to say, junior resource plays, which dominate the exchange, have faced significant headwinds throughout 2014 as the Venture index is off by about 12% this year, even with the rebound the past few days.
There have still been some bright spots on Venture-listed companies, including Highbank Resources Ltd. (TSX-Venture:HBK), which came off a double bottom technical chart pattern to hold its 200-day moving average around eight cents in January to bust loose to as high as 38 cents in July. For those keeping score, that’s a move of 375% from bottom to top. The stock has continued to hold the vast majority of the gains, finding support around 25 cents and resistance at 31 cents as the stock has been trading sideways since August.
Highbank, a Vancouver-based aggregate exploration and development company, has earned a 100% interest in, and has obtained a NI 43-101 Resources evaluation of a 72 million tonne tidewater aggregate gravel tenure called the Swamp Point North deposit in northwestern British Columbia. Highbank also holds a net smelter return interest in two molybdenum/copper properties in Ireland. When most people think of mining, metals like gold, silver and copper spring to mind, not aggregate (a wide category of particulate including gravel, sand, etc.), but aggregate is one of the most mined materials in the world for its litany of high-volume uses.
The Swamp Point North deposit is about 80 miles from the Port of Prince Rupert in British Columbia that is undergoing a massive infrastructure project, with the Canadian government spending $1.2 billion to expand the port. In 2013 alone, the Port of Prince Rupert expansion used $90 million in aggregate, according to Highbank consultant Greg Shafransky. Additionally, Highbank notes that there are more than $30 billion in liquid natural gas (LNG)-related projects announced for northern British Columbia that will require millions and millions of tons of aggregate for construction.
Highbank feels it has an edge on competition to capitalize on the rapid growth in B.C. because of the location of its property on the Portland Canal fjord at tidewater and year-round access to deep water ports. This means that while many other companies are forced to truck their aggregate, Highbank can ship product via high capacity barge.
Development at the Swamp Point North operation is progressing on pace, including the completion of the load-out conveyor and mooring dolphins earlier this month as well as the conveyor sections and receiving hopper being set in place. On Tuesday, Highbank said stripping above the gravel deposit is continuing and crushing, washing and screening equipment is being prepared, aligning the company to hit a milestone for the first production at Swamp Point North. Loading of the first barge with aggregate is expected within two weeks, sending one-inch crush the 72 miles to Prince Rupert.
The company said it has submitted quotes for one million tons of material related to pipeline construction, 600,000 tons related to harbor expansion and 600,000 tons for the first phase of LNG infrastructure. Looking to the future, Highbank says it’s in talks to supply two million tons of aggregate for a pipeline project slated for late 2016/early 2017.
Given the pending orders and other quotes submitted, Highbank provided guidance on October 14 that it sees gross revenue of $27 million in fiscal 2015 from Swamp Point North. Pre-tax profit for the first year of production is estimated at $11 million. The guidance didn’t do much for the stock price, but the corporate developments certainly seem to have generated quite a bit of attention for HBK shares. Trading at 28 cents per share on Tuesday equates to a market cap of $24.4 million for Highbank.
