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Cloudbreak Discovery Comes Off Peaks – What Of Icefall?

Tim Worstall
Tim Worstall trader
Updated 9 Mar 2022

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Key points:

Cloudbreak Discovery (LON: CDL) shares are some 30% off their peak at present. As we’ve said before Cloudbreak is going to be a volatile valuation. The reason being that they’re, in essence, acting as a small investment bank in the junior mining world. So, the negotiation of a good deal, or a change in market prices of a target mineral, can have a significant effect on the Cloudbreak share price.

The proposition at Cloudbreak Discovery is that the junior mining industry – that’s companies not mining or producing as yet, but exploring and preparing for production – is inefficient. In that, each company is working alone, without a useful infrastructure to guide them to deals and or capital. So, a team of experts sitting in the middle of the nexus can add money simply by knowing more than any particular team or individual. From that, it is possible to create value additive deals to the benefit of all – of which a slice remains with Cloudbreak.

Also Read: What To Do During A Market Sell-Off

As a concept, it has its merits. But of course, the proof is in the pudding of creating value additive deals from such a nexus or even plan.

The current announcement is a useful example of the concept at least. Icefall is an exploration project in Canada. The area has been investigated before, there has been production in the area as well. But as we’ve also pointed out before mining technology does advance. Both in exploration and also in processing. Meaning that it might be possible to find economic deposits that were missed before, also that previously uneconomic deposits have become economic.

So, as that technology advances it is worth going back over old ground and suitable prospects to see not whether the deposit has changed, but the viability of it. This is a very common technique and there are armfuls of listed junior miners doing exactly this.

Where Cloudbreak sees itself as being that little different is that it claims to be a “natural resources project generator”. That is, like that miniature investment bank specialising in this sector. Putting together the varied players required to make exploration and investigation up to production possibilities work.

The details of the deal here for Icefall aren’t quite the point. BCCo will spend a certain sum on exploration of Icefall, issue stock to Cloudbreak, and earn in on the project by doing so. Those details will matter if and when a decent prospect is found. But at the moment the point is that the property will be explored at no cash cost to Cloudbreak. By bringing in the partner with both the cash to do so and the expertise to do so as well of course.

The long-term future for Cloudbreak depends both upon creating a continual pipeline of such deals and also how well the deals work out – in the end, as ever with mining, it matters that you make a strike.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.