Ann: Quarterly Activities/Appendix 5B Cash Flow Report, page-8

It's amazing. A project the company bought off a vendor which is partly owned by a major shareholder and director turns out to be a dud.

At the Mityana Project they had rock chip samples up to 0.3% Li2O, and supposedly massive spodumene crystals. Spodumene is tricky to identify, so clearly something went wrong.


The sum total of assay information for the project is comprised of the list of samples released upon the acquisition announcement (17/10/24). The best results are from assays completed by Alex Stewart laboratories, Rwanda. The remaining assays released at the time are SGS assays. See screencap, below.

It is interesting that prior to drilling, no Blaze rock chip samples appear to have been taken. In the acquisition announcement it says "No systematic exploration has been undertaken on the project and earlier rock chip samples were only analysed for lithium which was the focus of exploration activities at the time. Lithium oxide values of up to 8.13% Li2O were assayed by Gecko Uganda from amblygonite boulders in waste dumps from historical tantalite mining activities."

The following clanger was missed by myself at the time. None of the Mityana samples actually came from the Mityana license. Whoops. In fact, no sampling of Mityana appears to have been taken on the Gecko Uganda tenements.




The majority of the samples are from Ntugamo, even though the Project column is not updated for most of the data (this is the QAQC you pay 0.02c for!), which can be discerned by looking in the longitude column; Mityana is 32.22 south and Ntugamo is 30.33 south.
There are some decent results from Ntugamo, but these are extraordinarily rare. These are amblygonite boulders. Even though the phosphorus content isn't shown in any of the assays (which would have told you it's not spodumene) the fact the grab and boulder and other samples are >6% Li2O is a pretty good indication. Premium spdumene concnetrates run 6.0% Li2O (the fabled SC6 grade) so anything above that is going to be amblygonite. Which means, one can infer that these highly selective and opportunistic samples, are likely all amblygonite - a refractory mineral.

The other sampling (G 7XXX) sampling, where annotated 'spodumene' demonstrates their workers couldn't identify spodumene if it hit them in the face.






In their presentation on the project (18/12/24), they showed kaolinite (supposedly after spodumene) and claimed result of up to 0.26% Li2O from Ntugamo, drill results still TBD at the end of Quarter. Note that the photos of the rock chips in the presentation were those in the initial release.
So, what can you expect from Ntugamo? In my estimation, you are more than likely to see no significant assays, based on the preponderance of the reported rock chip, grab, channel and composite samples reported to date being basically NSA's already. I believe that the drilling will likely merely confirm this. If one were to average the lithia content of the rock chip sampling from the acquisition announcement, the Li content would approximate 0.05%.

Was this photo from the October presentation the company's DD visit to the project? Or was this just a happy snap? In it we see Mr Walker, a vendor, Mr Gasson, another vendor, and perhaps the African fellow is Allan Agumya (I'm not sure) another vendor, with a random geologist or field assistant or two. Clearly none amongst them can identify spodumene in the field.



Did the company do any due diligence sampling? Or did they just look at a list of samples provided by the vendors, and fail to average out the Li in the column, and fail to realise it was going to be closer to zero than 5%? Or even 1%? When your channel samples are duds, no matter how they were taken (and channel samples are difficult), then it's probably a clue that the pegmatite isn't great.


To be clear, there's nothing wrong with directors introducing assets to the company upon which they have an interest in, because the transaction should be arms-length, and the Board should consider it on its geological merit. That's what one hopes the board of a company does: sets aside the obvious self-interest in an asset coming in via the director, decides for the interests of the shareholders which are not the director who stands to gain from the asset sale, and perform some independent checking. This is what in fact happened:


RSM concluded the deal was "fair and reasonable"




I guess one should consider that RSM was appointed as an independent expert to satisfy the objective, and one comment I would make is that RSm said it was reasonable in the absence of any higher bid. This is interesting, because as a related party transaction with a director who abstained correectly from making a recommendation, there was no other bids. So, in the absence of other bids, can it ever be reasonable to pick up a project whatever the price? Bit of a poser, that one. Guess we better look at the downsides RSM identified;

I guess we cannot expect RSM, a bunch of accountants, to understand the geology, but still, this is a massive hit to the existing non-associated shareholders. Messers Prentice and Coxhell clearly considered that this was in the best interests of shareholders.

So what do the geologists reckon? Geos Mining was appointed by RSM to value the project;



Geos ultimately valued the project on comparable transactions (70% of valuation) and Modified Replacement Value (30%).

Their list of comparable transactions should have been restricted entirely to early stage exploration. However, Geos doesn't do any digging into these other transactions in any detail, just downloaded a list off S&P and tots it up. The upper range of the value of Mityanga and Ngutamo is up to $2.6M per license which is the 100% value of PR15623 acquired by AJN Resources Inc in the DRC. The majority of the value of that transaction appears sustained by AJN Resources having the strike extension of Manono, also in the DRC, and the vendor (MEK) getting 5M shares in AJN at the time.




Geos Mining assessed the Modified Replacement Value (see pp 33 of their report) which is a methodology of just adding up what Gecko paid for the licenses and spent on the licenses, and then doubling it with a Market Factor of 2.0, and a Prospect factor of another 1.5 to 1.9.

Then, despite noting the collapse in lithium prices, Geos throws Walker (representing Blaze in this matter) a bone with a Market Premium;

This is layering value upon value upon value uplift!


I also noticed that Geos Mining did not discount the upper range of the transaction of $2.6M by 40% to account for the 60% beneficial interest in Gecko Uganda that Blaze stood to aquire. By not doing this, it valued the Gecko Uganda 100% project value at $4.3M for each of the projects. Whoops, I guess.

It is worth reiterating that Geos Mining methodology was quite generous, doubling the value of the expenditure of the vendor (the Market Factor of 200%) and then increasing it again by 150-190% (Prospect Factor). This is how, for example, Gecko Minerals Limited spent $150K, but got it values at up to $1M.

And yet, the value of the projects expenditure was $680-860K for Ngutambo and $227-280K to Mityana. That's 600-800% uplift for the vendor's expenditure on the project at Ntugambo and 610-750% for Mityana.

It is worth noting Geos Mining did not explicitly assess the exploration data of the project, which I guess is good, because what is assay information in the value of a mineral project? Less than the value of comparable transactions and hectupling or octupling the vendor's sunk costs in a related party transaction!

The result is not a good look for this deal's fairness or reasonableness.

Apparently RSM considered Geos Mining's report to be quality stuff, paying 17,400 whole australian dollars for it, and never picking up the lack of value discount based on the 60% of the project Blaze would acquire, nor the fact that the sunk cost value uplift was 600-800% and should also have been slashed to the project interest being acquired.

Is it fair and reasonable that the acquirer commissions an independent report into an entity in which a Director is a 19% shareholder, and who stands to gain from the transaction in two ways, firstly by getting shares in the acquirer, and secondly by (one would argue) dumping his risk in the project at 600% to 800% of the price of the money put in to the Ugandan assets?

If we could all get 600-800% of the value of money sunk on exploring, in poart, other people's tin mines (as happened at Mityana), this would be a fantastic market.

The Javelin Deal

I noted that javelin Minerals Limited had a bite at this asset in 2023, and apparently did some DD, and then pulled out of the deal 13th october 2023. Going back to their notice of acquisition 6th September 2023, this bit leapt out;

The Klaus Eckhoff connection was not mentioned in Blaze's documentation. However, Matthew Walker is noted in the Bid Implementation agreement between Gecko Minerals Limited and javelin Minerals Limited.

At the time of Javelin entering into its agreement, the only sampling information available appears to have been;


It is interesting to ponder whether Javelin took the G series of samples, sent them to SGS for assay, got the results, thought "F this, it's worthless", and pulled out. This seems logical. At the time JAV took a run at this, Gecko's licenses were still in application;


Consider that JAV's CP signed his life away that the UL series of samples were the only information he had to hand in September 2023, and that no G series samples were reported. And then Blaze reports a whole bunch of trash samples in 2024 when it seeks to get shareholder approval. When were the G-series samples taken and assayed at SGS? Some time between July 2023 and September 2024.

RIP The Deal?
Gecko Minerals Limited had 52M shares. Mr Walker held 10M shares in Gecko (19.2%). Gecko got 625M shares, so Mr Walker got 100M BLZ shares, and Gecko Minerals Ltd keeps 125M BLZ. Gecko got rid of its shares in Gecko Uganda, so it's free of the Ugandan assets.

What can we learn? Well, RSM relying on the Geos Mining valuation was a bit how ya goin'. The Geos mining valuation has the right methodology, but it's very generous to the vendors by giving them a 600-800% uplift in the sunk costs of exploration.

This cake recipe seems to be;

Take one part other people's tenement, sample it. Get some lithium values.
Try to sell to a listed entity at the peak of the lithium boom.
Entity does DD (probably some sampling) and pulls out a month later.
Let mixture sit for 1 year and accrue $150K in expenditure.
Recycle asset to a related party, using all your old sampling and (as seems probable) the due diligence sampling by the old ASX entity
Appoint an independent expert (accountancy) who appoints an independent geologist to value your project
Somehow forget to discount to the percentage of the project you are acquiring
Pay 600-800% value for the sunk costs of exploration by applying market rates and prospect factors that multiply the value of actual expenditure
Declare it is fair and reasonable
Related parties resile, and other directors (including a geologist) wave it through
....
Drill a whole bunch of diamond holes, which turn up duds (or are quite likely to be duds).

The lesson is that independent expert methodology in valuing mineral properties should be read and understood, because it;'s an absolute joke if your valuation is based solely on sunk costs.

Let's take a hypothetical. Blaze spendsa $1M here, drilling complete dusters. Can it now sell these projects for $2.6M a pop, plus $8M for the market value (2.0x) and prospect value (1.5-1.9x) of $1M of drilling? Sure seems that way!

It also reflects upon the board of Blaze Minerals for maybe not doing their DD well enough and independently enough on this one. Or doing anything prior to drilling these holes. Did anyone at Blaze even look at this data, do some checking and sampling and mapping (especially on Mityana, outside of the excised tenement from which all the samples came from!), prior to mobilising the drills?

Guess the next one will be the winner.