Resource World Magazine

mining True North's Arctic rubies by David Forest It's lonely in the Arctic. Especially so when you combine working in an out-of-theway northern locale like Greenland with a focus on rubies – a market few investors understand. This is the story of True North Gems Inc. [TGX-TSXV], a company whose unusual project focus is poised to make it a one-of-a-kind producer. Any skepticism that persisted over True North's Aappaluttoq ruby project in southwestern Greenland was largely swept aside in November, when the company announced a $23 million financing deal for mine-building at the site. The scale of the investment is equally impressive as the people behind it: expert Arctic logistics and mining services provider Leonhard Nilsen & Sonner A/S. Hailing from Norway, this is an outfit that knows projects like Aappaluttoq. The deal with True North will see them engineer and build mine buildings, roads, power plants, port facilities and pit prestripping for the project. In return for this work Leonhard isn't asking for a penny. The expert miners are so impressed with Aappaluttoq, they're looking to take direct equity in the project giving the mine a sizeable valuation, over $100 million, by agreeing to take a 20% interest in return for their $23 million inkind contribution. These are significant numbers in light of True North's slim $18 million market capitalization (and that's following a 55% increase in share price since the announcement of mine-building deal). As True North's CEO, Nicholas Houghton, observes, the company's current valuation reflects investors not having any comparable with which to judge what pulling rubies out of the ground might be worth. "We have the opportunity to do what De Beers did when they took the diamond industry by the scruff of the neck," Houghton says. Indeed, it's easy to forget that the high profile, enjoyed by diamonds 66 www.resourceworld.com today, amongst investors and the world at large, is a product of a very successful marketing campaign run by De Beers. Diamonds, as a product at the time, were largely an unknown quantity. Were Aappaluttoq a diamond project – with a project finance and construction deal in place – it would almost certainly command a higher valuation. But as Houghton points out, the ruby market may be equally prospective, if somewhat less evolved. "Years ago, before diamonds, the world wanted colored gems," he notes. "And to get a ruby was, and still is, extremely rare." Rubies are rare indeed and notoriously difficult to produce. The world's largest supplier of the red gems has historically been Myanmar, a nation where questions remain about the politics and legalities of purchasing rubies. Supply from Greenland would almost certainly be more palatable. But bringing online a new source of global output has had its challenges for True North. Since acquiring Aappaluttoq in 2004, the company has been writing the playbook as one of the only Canadian-listed companies pursuing non-diamond gems with a NI 43-101 compliant resource estimate for a gemstone project (over 265,000 tonnes mineralized with corundum, the mineral name for rubies and pink sapphires). Perhaps a greater undertaking for True North has been assessing the market for its potential product. Unlike gold or copper, a ruby's value depends on subjective factors like color or the cut a polishing facility is able to put on the raw stones before sending them to market. To learn how gem-cutters might be able to shape Aappaluttoq's stones, True North actually had to put rubies under the knife. The company forged partnerships with cutting facilities in China and Thailand, sending batches of rough stones to be dolled up into a saleable product. The cut stones – dome-shaped "cabochons" and higher-value faceted cuts – were then sent february 2013

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