Fiji-bound: Lion One hunts for elephants

After 14 unsuccessful years trying to build Cuba’s grandest chain of tourist resorts, North Vancouver stock promoter Walter Berukoff has moved on to a new tropical destination: Fiji. There, he plans to explore and develop a gold project named Tuvatu, for which he has raised nearly $25 million.

Although Berukoff has spent many of his 65 years promoting penny mining stocks, he is perhaps most recognizable as the former leader of aspiring Cuban real estate developer Leisure Canada (LCN-V). 

From 1996 to 2010, he helped raise more than $46 million for the company in the hopes of capitalizing on a potential tourist boom should Fidel Castro have died, leading the United States to lift its embargo and allow U.S. citizens to finally travel there. Despite the promoter’s many years of promises and effort, Leisure Canada failed to complete even one set of hotel foundations, and Berukoff resigned as executive chairman last summer with the stock stagnating around 15¢. He remains its largest shareholder.

Last November, however, Berukoff revealed he was working on a new deal, a gold explorer named Lion One Metals (LIO-V), which began trading in late January. The company says its newly acquired Tuvatu project has “multi-million-ounce gold potential,” referring to it in corporate presentations as “Fiji’s sleeping giant.”

The property is found on the main Fijian island of Viti Levu, about 50 km from the country’s largest gold mine, Vatukoula, which has produced roughly 7 million gold oz. since the 1930s under several operators. The longest operator was formerly Australian Stock Exchange-listed Emperor Gold Mines. Looking for expansion potential, it also explored and developed the Tuvatu property, completing US$23 million worth of work there from 1987 to 2000.

That work included more than 80,000 metres of surface and underground drilling, 1,630 metres of underground workings, bulk sampling, metallurgical testwork, a feasibility study completed in 2000 and trial mining using the Vatukoula mill, where gold recoveries were reported to be up to 90%.

The feasibility study predicted Tuvatu could become cash-flow positive at US$300 per gold oz., much more appetizing given the price of gold today than it was around 2003, when gold traded around the same price.

Emperor shut down its Fijian operations in 2006 due to high mining costs, a military coup in Fiji and the large amount of sustaining capital required for an aging mine. It sold the mine and the surrounding mineral tenements (including the Tuvatu property) the next year to Westech Gold, a private Australian company, for $1 and the assumption of liabilities. According to Lion One’s technical report, “Westech, unable to finance the venture on its own, sought the assistance of Red Lion Management Ltd.,” a private company controlled by Berukoff and his family, which he calls his merchant bank.

Westech and Red Lion sold the Vatukoula mine in early 2008 to London-based River Diamonds PLC, later renamed Vatukoula Gold Mines (VGM-L), which produced 59,658 gold oz. from it in the fiscal year ended Aug. 31, 2010.

When asked in a telephone interview why he kept the Tuvatu property instead of spinning out the producing asset, Berukoff replied, “I kept the plum for myself. This is a caldera structure, and if you find one in the Pacific Rim that’s mineralized, like Porgera (owned by Barrick Gold), or any of the other large ones you can name, you’re in elephant country.”

According to the technical report, the pair of vendors were able to retain the Tuvatu property for “nominal consideration” (Berukoff says this was mainly for tax reasons) and eventually sold it to a publicly traded shell company, X-Tal Minerals, largely controlled by Berukoff, which then changed its name to Lion One. 

In all, Lion One issued 17.56 million shares to Red Lion and another of Berukoff’s companies, Laimes Global, under the terms of the deal. The shares are now worth $24.4 million given Lion One’s current share price.

Berukoff notes he “personally financed” the project over the past three and a half years, maintaining the option agreement commitments. “I needed to make sure the DNA we were thinking we were finding (could be) proven out. I know these are not geological terms, but we have identified the DNA of a major elephant here, maybe several, and we’re now mapping out the DNA and it’s coming out as planned.”

Lion One has started a first phase of exploration at the project, including mapping, sampling, 1,000 metres of trenching and the reassaying of up to 10,000 metres of historic drill core for silver and other metals not previously accounted for. Drilling is scheduled to follow up on the results.

The company describes Tuvatu as a high-grade, low-sulphidation epithermal deposit hosted in a volcanic-intrusive sequence within a postulated collapsed caldera setting. In addition to the epithermal mineralization, it says there is also evidence of porphyry-style mineralization and volcanogenic massive sulphide systems. 

An initial resource estimate completed for Lion One in October 2010 based on historical information outlined an indicated resource of 172,000 gold oz. (760,000 tonnes grading 7.05 grams gold per tonne) and an inferred resource of 480,000 gold oz. (2.61 million tonnes grading 5.71 grams gold), all at a cutoff grade of 2 grams gold.

As Berukoff sees it, “Frankly, Leisure Canada was the most unsuccessful company that I’ve been involved with. All my other mining companies have been very successful and very profitable for our shareholders.” Before putting together Leisure Canada, Berukoff founded two high-flying junior mining companies, Miramar Mining and Northern Orion, both of which were later acquired by majors.

In late 2007, Newmont Mining (NMC-T, NEM-N) acquired Miramar for roughly $1.5 billion to gain its Hope Bay gold project in Nunavut, and Yamana Gold (YRI-T, AUY-N, YAU-L) bought Northern Orion and its Agua Rica copper-molybdenum project in Argentina that same year for $1.07 billion, as part of a blockbuster three-way merger with Meridian Gold.

Nevertheless, the North Vancouver promoter had long since parted from the companies when those deals happened. Berukoff resigned from his positions at both Miramar and Northern Orion (it was a public subsidiary of Miramar at the time) in early 1999 amid little fanfare when the stocks were trading around $1.20 and 25¢ respectively. Four months after his resignation, Miramar sued Berukoff and a private company related to him named American Eagle Resources for $3.8 million, alleging the promoter had failed to pay his private company’s share of expenses on the problem-plagued Golden Eagle mine in Nevada. (The mine was a 60:40 joint venture between Miramar and American Eagle.) The parties settled out of court in 2001, terms undisclosed. 

On April 25, Lion One’s shares were trading down 5¢ to $1.39 on 53,000 shares, off from their three-month high of $2.05 in mid-March.