Junior miner sizes up carbon trading market – by Ian Ross (Northern Ontario Business – January 25, 2013)posted in Ontario Mining |
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A Toronto mineral exploration outfit is dipping its toe in the carbon credit pool. Noble Mineral Exploration has hooked up with Mikro-Tek, a Timmins-based forest biotech company, to evaluate the carbon credit potential of the trees on its exploration property northeast of the city.
Mikro-Tek and IBK Capital have produced some preliminary numbers on the carbon sequestration values of Noble’s massive 60,700-hectare gold and nickel play, known as Project 81.
A baseline estimate indicates that the forest on Noble’s property has a present-day net credit value of $100 million based on a price of $15 per tonne of carbon dioxide (CO 2).
For Noble president H. Vance White, that’s a better alternative than raising capital by cutting down trees to turn into two-by-fours.“This timber asset will generate far more in revenues, based even on a $10 per tonne basis, than it would ever do by harvesting the timber,” said White.
The Project 81 property was heavily logged by a succession of forestry companies, ending with Abitibi-Bowater. A report shows the spruce, balsam and poplar on the property can absorb about 3.1 million tonnes of carbon dioxide.
If allowed to regenerate over 20 years, that could grow to 12.5 million tonnes when some analysts predict carbon credit prices could exceed $25 per tonne.
These days, junior miners are hearing crickets when attempting to raise money for early stage exploration by conventional means on capital markets.
“The grassroots (financing) is pretty much non-existent,” said White. “If we can do something on the carbon credits, then we have a royalty stream down the road.”Noble holds the mineral, surface and timber rights to one of the largest freehold land packages in Canada. The property borders Xstrata’s Kidd Creek Mine.
The company acquired the land from Abitibi-Bowater in 2011 when the Montreal-based forestry giant began shedding assets after emerging from bankruptcy.
While the jury is still out on what’s been historically considered a low-grade nickel deposit, some promising drill results taken by Noble warrant a follow-up.
An airborne survey identified 1,800 mineral targets, but with exploration funds being tight, no drilling is scheduled this winter. In closing the Abitibi deal, “we were trying to figure out how to monetize the asset in a risk-adverse junior resource market,” said White.
A solution was not far away when White was introduced to Mark Kean, president of Mikro-Tek, through a mutual acquaintance at IBK Capital.Compared to the surrounding Crown forest, Kean said Noble is in a special position.
“They own the trees so it’s a unique system where they can monetize those carbon credits and sell those to industry.”
Carbon credits, also known as offsets, come from emission reduction projects – such as tree plantations – that large industrial players can buy to counteract the tonnes of airborne greenhouses gases they emit elsewhere.They can also offset the carbon footprint of an access road, pipeline project or any industrial development where forests are cut down.
To get the most bang for its carbon credit buck, Mikro-Tek employs a proprietary technology to help trees grow faster using natural soil microbes, known as mycorrhizae, to enhance tree growth in seedlings.
The biotech company has spun out its success to tree plantations in Chile.
As project developers, Mikro-Tek works with forestry partners toward generating carbon credits for the international emissions trading market.“We sign an agreement with the landowners and share the credits,” said Kean. “They take care of the forestry side of the operation, and we take care of the carbon monitoring aspects and increasing the growth rates.”
Mikro-Tek was one of the first Canadian companies to engage in these fully-audited projects, but because Canada is not a signatory to the Kyoto Protocol, there is no developed carbon trading system here.White said most Canadian analysts and investors are still struggling to comprehend how the carbon trading market works.
“They don’t understand it,” said White. “We’re all going through a learning curve ourselves. But this is enough of a starter to tweak major emitters, interest.”White said they’re still investigating the steps and related costs with Mikro-Tek in how to go about entering the carbon trading market, which would require a more detailed feasibility study of the property and an intensive third-party audit.