Company Spotlight: Olivut Resources

Olivut Resources is a diamond exploration company which is utilising modern exploration techniques to explore for diamond-bearing kimberlite deposits in Canada and South America. The company is well managed, well financed, and offers huge potential upside for investors.

Olivut’s principal asset is its HOAM Project located in the Interior Plains region of Canada’s Northwest Territories. The property, which is over 142,000 acres, stretches from Great Bear Lake in the north, to the small town of Fort Simpson approximately 300 kilometres to the south. The geology of this region is considered favourable for the discovery of diamond bearing rocks know as kimberlites.

Kimberlite is a unique igneous rock formed by the violent, supersonic eruption of volcanoes that originate deep within the earth. Solidified magma forms into deep, narrow cone structures known as kimberlite pipes. These volcanic pipes are the source of most of the world’s commercial diamonds and also contain other precious gemstones and semi-precious stones, such as garnets, spinels, and peridot.

A typical kimberlite rock sample

kimberlite rock sample

Kimberlite is named after the town of Kimberley in South Africa, where an 83.5 carat (16.7 g) diamond was discovered in 1871.

Prior to Olivut’s involvement, this region was subject to little in the way of modern exploration techniques. The company has conducted high resolution, regional magnetic geophysical surveys, detailed heli-mag geophysical surveys and geochem sampling programs which have identified several favourable areas for kimberlite occurrence.

Olivut has been very successful in identifying kimberlite occurrences within the extensive HOAM project area. To date the company has made 28 kimberlite discoveries and drilling is now being focused on priority magnetic anomalies. According to an 18 July 2012 press release, “Management believes there is a strong likelihood that many of these priority targets have a high probability of being kimberlites. Drilling is anticipated to continue through summer.”

Joint venture project

Olivut is also exploring for diamonds in South America. In July 2011 the company signed an option agreement with Latin American Minerals to explore the Itapoty Diamond Project which is located in central Paraguay, South America.

The agreement gives Olivut the opportunity to complete early stage evaluation for diamonds in relatively unexplored regions without exposing shareholders to high up-front costs. The company’s intent is to “focus limited, initial expenditures on the ground to evaluate the potential for economic diamond deposits of meaningful size.” This will allow the company to conclude relatively quickly if the project warrants further corporate commitments

Why Own It?

Olivut Resources has an excellent management team, is well financed (it had $2.7 million in working capital as of 31 January 2012), and has a tight share structure, with just 33.8 million shares outstanding. If the company proves successful in its exploration efforts, it offers huge potential upside for investors.

The company’s largest shareholder, Pierre Lassonde, has spoken about Olivut’s exciting potential, stating that it’s an investment “with potential to make 100 times your money”. He went on to say, “When you buy into an exploration company what you want more than anything else is exposure. You want your money to go in the ground and to be directed at the best target that the team you have confidence in can devise” and that’s what you get with Olivut.

Mr Lassonde, who is the current chairman of gold royalty company Franco-Nevada and past president of Newmont mining, owns 18% of Olivut. Other large shareholders include Fidelity Investments who own 9%, and the company’s own management team who own 7%.

The company also trades at a steep (54%) discount to its 2011 high of $2.05.

A 3 year chart of Olivut Resources

A 3 year chart of Olivut Resources

Chart courtesy of stockcharts.com

Company information

Company Name Olivut Resources Ltd
Website www.olivut.com
Exchange / Ticker CVE: OLV
Share Price CAD$0.940
1 Year Performance -48.6%
Current annualised dividend rate n/a
Dividend Yield n/a
Market Cap 31.82M
Shares Outstanding 33.85M
Earnings per Share (EPS) -0.06
P/E Ratio n/a
Beta 0.71
52 Week Range 0.78 – 1.90

Source: Google Finance

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