Yesterday was a horrible trading day for Sanatana Resources (STA.V) which owns a land claim near IAMgold’s (IMG.TO, NYSE:IAG) Coté Lake gold project in Ontario, Canada. In what seems to be another move by Pinetree Capital (PNP.TO) and its CEO Sheldon Inwentash (at least that’s our guess, we are waiting to see the insider filings for final confirmation), Sanatana’s share price lost half of its value on an incredibly high volume.
Sanatana’s Watershed property is of utmost importance to IAMgold as it has filed an easement procedure which was subsequently withdrawn by IAMgold last month as the company seemed to have been scared to continue the procedure only to see it dismissed by the court. Withdrawing the easement procedure obviously weakens IAMgold’s judicial case and it has become increasingly likely that IAMgold will have to work something out with Sanatana Resources in order to gain access to the Coté Lake project. As the gold project is unviable at today’s gold price anyway there’s no certainty IAMgold will do something fast, but it’s also possible it sees the current weak gold price environment as an ideal timing to acquire Sanatana’s stake in the surrounding property on the cheap.
Also keep in mind that IAMgold is forced to spend the $500M proceeds from the NioBec niobium mine sale on new acquisitions within the year (or otherwise it has to pay back the senior debt in full if it fails to do so). The main question now obviously is how much IAMgold wants to spend to make this issue go away but at the current share price of C$0.035, Sanatana’s market capitalization is just C$4.5M and the company can look forward to getting some cash in the treasury as IAMgold has to repay Sanatana’s legal fees for the easement procedure which it withdrew.
At this point in time, Sanatana is a binary bet on the outcome of the IAMgold dispute and at a market capitalization of C$4.5M it might be interesting to initiate a position. Also keep in mind that the company closed a private placement just a few months ago at C$0.12/share, which is 243% higher than the last closing price.
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Disclosure: The author holds no position in Sanatana Resources. Please see our disclaimer for current positions.
