by James Kwantes
Published first at Patreon on June 6
I tweeted this on May 29:
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Some juniors spend like drunken stockbrokers and get no traction in this illiquid market sector. Other stocks march steadily to the top right in the absence of any significant marketing or public awareness.
With apologies to Burton Malkiel, speculating in junior miners is a random walk down Howe Street. People and projects matter though.
The subject of the tweet was Mayfair Gold (MFG-V, MFGCF-OTC), a gold exploration and development company run by serially successful operator Patrick Evans. Mayfair has 3.3 million open-pittable ounces at about 0.8 g/t gold (mostly Indicated and some Inferred) at its Fenn-Gib deposit in Ontario's Timmins gold camp. Mayfair is nearing completion of a 140,000-metre infill and expansion drill program, with three rigs going at Fenn-Gib. The company has been finding wide intervals of higher-grade mineralization.
I've written about Mayfair in my newsletter, as well as here and here. A resource update is scheduled for this month; a prefeasibility study should be complete in the second half of this year.
CEO Patrick Evans, who specializes in identifying under-appreciated assets like Fenn-Gib and adding value, started with 212,000 shares in March 2021. He has steadily accumulated Mayfair shares and recently hit the 1-million-share mark.
Evans is not the only fan of Fenn-Gib. Three days after my tweet, Mayfair filed an "Alternative monthly report" on SEDAR announcing a new 10% shareholder: Muddy Waters. Yes, that Muddy Waters - the Texas-based hedge fund better known for its short campaigns against Chinese companies including Sino-Forest, which went bust after reaching a $5-billion valuation. Muddy Waters purchased much of its Mayfair Gold position from Toronto-based hedge fund K2& Associates.
The hedge fund bought 2.2 million Mayfair Gold shares at $1.75 in the latest financing, which raised $9 million (incl. flow-through at $2.48 per share). The purchase took Muddy Waters' position to 9,867,519 shares. Combined with the 592,174 shares held by Muddy Waters partner Freddy Brick, the hedge fund and joint actors now own 11.2% of Mayfair's outstanding shares. Brick and Muddy Waters founder Carson Block recently visited Fenn-Gib, Mayfair CEO Evans told me.
The foray into junior mining is unusual but not unprecedented. Back in 2017, Muddy Waters successfully targeted troubled Asanko Gold (now Galiano Gold, GAU-T), joining a short campaign launched a year earlier by K2.
The two hedge funds were both invested on the long side on GT Gold, going activist in a bid to replace GT Gold's executive chairman Ashwath Mehra and other board members. The dispute resolved itself when Newmont bought GT Gold for about $400 million in 2021.
Mayfair Gold is a tight ship that doesn't trade much volume. On board the shareholder registry are heavy hitters who have made money with Patrick Evans on the captain's previous excursions through M&A exits. Here's a great year-old interview in which Evans outlines his modus operandi.
Junior resource waters are murky at the best of times. The arrival of Muddy Waters, given the hedge fund's success in its only known prior junior gold long position, feels like a "pay attention" moment.
Mayfair Gold
Price: $2.01
Shares out: 93.37 million (101.5M fully diluted)
Market cap: $187.7 million
Disclosure: I own Mayfair Gold shares. No business relationship with the company.
