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Electrum Strategic Resources LLC

Electrum Strategic Resources LLC
Based in New York, Denver
Active in Colombia, Romania, Alaska, British Columbia, Australia
Targeted base metals, precious metals

Electrum Strategic Resources LLC and Electrum Strategic Holdings LLC are based in New York, and members of the privately-owned Electrum Group of Companies which, through Electrum Ltd, in 2009 purportedly had one of the largest and most diversified portfolios of precious metals' exploration projects in the world [Marketwire 2 February 2009].

As of 2010, the firm declared that this portfolio comprised "over 100 projects located in 16 countries in the Americas, Africa, Asia and Eastern Europe".

In April 2011, the Group somewhat modified this figure with a statement that it held "over 90 properties comprising over 1.8 million hectares in the Americas, Africa, Asia and Eastern Europe.

These included a "strategic" interest in Gabriel Resources, amounting to 61,420, 739 shares; and "a substantial interest" (51,916,412 shares) in NovaGold Resources Inc.(see below). It also had stakes in Sunshine Silver Mines Corporation (located in Idaho); as well as "significant silver properties in Central America"; and, through Electrum Strategic Acquisitions LLC, owned "a significant interest in Sunward Resources Ltd., a company focused on the exploration of gold/copper porphyry projects in Columbia" [Businesswire 15 April 2011].

Electrum Strategic Holdings LLC is also said to "own[s] a strategic stake in a portfolio of exploration and development properties in Eastern Europe"; while Electrum USA Ltd., headquartered in Denver, Colorado, manages exploration and development activities for the Electrum Group.

Yet another Electrum "clone" - Electrum Strategic Metals LLC - has figured as the Group's named agent in at least two important mining acquisitions over the past two years. According to Bloomberg, it "operates as a subsidiary of Electrum Strategic Holdings, L.L.C."

Already we may harbour some suspicion that the Electrum Group of Companies is not as transparent as it should be. Bloomberg (as of 26 December 2010) records that "Electrum Strategic Holdings LLC [is] a wholly owned subsidiary of GRAT Holdings LLC...located at 1370 Avenue of the Americas, 19th Floor, New York, NY 10019".

And, indeed, the two concerns are not only registered at the same address, but a Mr William Natboy is officially designated Chief Executive Officer of GRAT, as well as both Electrum Strategic Holdings and Electrum Strategic Metals LLC. . "GRAT" is an acronym for "grantor retained annuity trust" - a financial instrument, commonly used in the USA, "to make large financial gifts to family members without paying a U.S. gift tax" [wikipedia, accessed 26 December 2010]. It might seem surprising that Electrum would openly advertise its propensity to evade a form of taxation which ordinary citizens could find difficult to avoid.

However, there's little doubt who stands to benefit from the operations of GRAT in this instance: the man actually controlling Electrum Strategic Holdings and profiting from it, 48-year old Mr Thomas Kaplan.

Just who is Thomas Kaplan?

Born in the USA, but educated in Switzerland and Britain, as a student Kaplan started analysing Israeli hedge funds [Wall Street Journal 22 May 2010], before moving to New York to begin trading in earnest, and marrying a serving soldier in the Israeli Defence Forces [MoneyWeek 24 September 2010]. Later, Kaplan set up an investment vehicle called the Tigris fund which has $2bn invested globally, according to the The Wall Street Journal [See also: Forbes Magazine, 21 April 2010].

The UK's Daily Telegraph in mid-2009 characterised Mr Kaplan in the interrogative: "Who could have predicted that a mild-mannered Oxford-educated historian, with a PhD in the politics of colonial Malaya, would make an absolute killing from mineral extraction, with assets valued at billions of dollars?"

The newspaper went on to mention Kaplan's Panthera Corp, which endeavours to save "big cats" from extinction: "Who then could have predicted that, while still in his mid-forties, the billionaire minerals magnate would channel his energies and business acumen into saving big cats from extinction?" [Daily Telegraph 11 August 2009].

James McKeigue, writing in December 2010 for MoneyWeek, also linked Mr Kaplan's twin passions together - while placing him alongside two fellow US hedge fund supremos, John Paulson of Paulson & Co and George Soros of Soros Fund Management.

Dubbing Kaplan a "billionaire obsessed by gold and big cats", McKeigue pointed out that he set his cap at becoming the biggest shareholder in Canada's NovaGold Resources in early 2009 [See below]- a year before Soros and Paulson followed him down the same path [MoneyWeek 24 September 2010].

Kaplan has spent the past 18 years building up strategic stakes in gold mining outfits, though he has also recently invested in natural gas production. In 1993 - and backed by Soros - he made his "first defining deal" when launching Apex Silver Mines to dig for silver in Bolivia.

In 2008, Electrum Strategic Holdings LLC acquired around 20% ownership of Gabriel Resources Ltd, a Canadian company which had been forced to close its Rosia Montana gold project in Romania, following strong criticism by local,national and international environmentalists which led to the then-government withholding a permit to operate[Financial Post 22 May 2008].

Both Kaplan and Paulson & Co hold around 18% each of this still fiercely-criticised company, with the major US gold miner Newmont owning around 15% [MJ 26 February 2010].

Over the next two years Kaplan markedly strengthened his financial grip on a number of "early exploration" companies in which he already had a stake, apparently playing them as "long" bets, picking them up as the market price of gold began to rise.

On 2 January 2009, NovaGold announced a US$60 million financing agreement with Electrum Strategic Resources, under which Electrum became the company largest shareholder at around 30% in the first instance, with an option to increase its holding to 46%. Novagold owns two major gold prospects in Alaska and British Columbia.

Three months on, and Electrum Strategic Resources acquired a further 8 million common shares of Moto Goldmines Limited, an Australia-based gold exploration and development company - thus increasing its stake to 14.19% [Datamonitor Financial Deals Tracker via COMTEX, 28 April 2009].

Just a few weeks later, in May 2009, Mantra Mining (which has various minng claims in Alaska) sold US$5 million of shares and warrants to Electrum Strategic Metals LLC, bringing the holdings of Electrum and its "affiliates and joint actors" to more than 19.99% of the Toronto-listed company.

Early in 2010, Electrum did a similar deal (and for the same amount) with Tintina Gold - another outfit with precious metals claims in Alaska, and which was forseen to eventually see Electrum's shareholding in Tintina rise to more than 44% .

At the end of 2010, in a much larger transaction, Electrum (with Tocqueville Asset Management playing a minor role) agreed to pay a combined maximum of US $51.3 million to Sunward Resources, in order to advance that company's 100%-owned Titiribi gold and copper porphyry project in Antioquia, Colombia. [Canada NewsWire Group 15 December 2010; see also PDAC supplement in MJ 3-5 March 2013].

Importantly, Sunward announced that the deal would "facilitate closing of Company's earlier-announced acquisition of La Muriel Mining Corporation ("Murindo Project"), and allow the Company to pursue acquisition of additional highly prospective projects."

The Murindo project has already attracted a great deal of oppositon from inside Colombia, notably from local residents. According to an announcement by Sunward on November 19 2010, the La Muriel mining corporation and Rio Tinto agreed to withdraw from their previous agreement and replace it with a revised one.

Under this, La Muriel had sixty days in which to exercise an option to acquire a 70% interest in Murindo, possibly increasing to 80% or 100% if the huge UK mining company were ready and willing to pay up. No further move in this direction appears to have taken place.

In March 2012, Electrum said it would raise US$49 million to enlarge its stake in NovaGold to 27.55%, thus strengthening its position as the mining company's biggest single shareholder [MJ 23 March 2012].

And at the end of that year, NovaGold received proceeds of CDN$46.4 million when it exercised warrants held by Electrum, raising the holdings in the gold company by Electrum and its affiliate, GRAT Holdings LLC, to 27.2% of NovaGold's issued and outstanding shares.