Dundee Corporation | DC.A (TSE)

Dundee Corporation is a Toronto based diversified holding company with investments in wealth management, resources, agriculture and real estate. Dundee Corporation is a public Canadian independent holding company, listed on the Toronto Stock Exchange under the symbol DC.A.

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Commodity Focused Merchant Banking

Dundee is currently in the process to streamline its portfolio in order to reposition itself as a merchant banking operations specialized in commodity businesses. This involves the following steps:

  1. Streamline the investment portfolio, by right-sizing it.
  2. Non-core assets have been moved outside of the portfolio
  3. The management has moved decisively to reduce expenses. As an example, the office space has been reduced by 75%. Head office count has also been reduced drastically, to about 70 persons.
  4. Focus on Capital Allocation discipline. More focus is being placed on capital allocation at the corporate level. Investments are being evaluated on their merit and their ability to be self-funding and to generate positive cash flow.

The company sees the Junior Mining Sector as a highly attractive and unique market opportunity at the moment. A disconnect exists between commodity prices and the
current valuation of a majority of companies in the junior mining sector. Since 2011, the equity valuations for junior mining companies have decreased by more than 80 per cent. The company believes that the market dynamics that have created this valuation disconnect have not been seen since the financial crisis of 2008 and 2009.

Investment Portfolio

Dundee Corporation invests in a wide range of assets in the commodity sector. This includes investments in publicly traded stocks, private companies and fixed securities. Their biggest investments are in Dundee Precious Metals (DPM), Dundee Sustainable Technologies (DST), United Hydrocarbon International Corp. (UHIC) and Parq Holdings.

Dundee investments

Goodman & Company Investment Counsel

Dundee aims to leverage its historic brand and build a merchant banking capacity that works to guide and finance commodity companies through the de-risking process from the point when they are acquiring a prospective land package and all the way through the value creation phase to ultimately operating an asset that generates cash flow.

Goodman & Company Investment Counsel is a 100%-owned private subsidiary registered as a portfolio manager and exempt market dealer across Canada and an investment fund
manager in Ontario, Quebec and Newfoundland. This subsidiary also includes the activities of Dundee Global Investment Management Inc. through which the Corporation previously explored certain wealth management strategies

Dundee Precious Metals

Dundee’s largest single holding remains Dundee Precious Metals Inc. (DPM) a Toronto based precious metals producer. In 2017 DPM produced nearly 200,000 ounces of gold and just over 35 million pounds of copper. The company produces the gold in mines based in Bulgaria, with all current production coming from the Chelopech mine.

Dundee Sustainable Technologies

Dundee Sustainable Technologies (DST) is a 63%-owned publicly listed subsidiary developing patented sustainable precious and base metals extraction processes. The company is listed on the Toronto Stock Exchange.

United Hydrocarbon International Corp

United Hydrocarbon’s (UHIC) is a private junior oil exploration company that owned land packages in Chad. In late 2017, in order to derisk their investment in United Hydrocarbon’s (UHIC), Dundee sold the land packages in Chad to Delonex, a private energy company with expertise in sub-Saharan Africa.

Today,  cost structure has been significantly reduced with Delonex funding exploration going forward, with UHIC eligible for future bonuses for oil production and a royalty agreement that provides Dundee with attractive optionality on what has the potential
to be a world-class producing asset.

Eurogas International

Eurogas International (CNSX: EI) is 54%-owned publicly listed subsidiary engaged in oil and gas exploration with a mandate to identify, pursue and develop large-scale, high-impact energy projects worldwide.

Currently, the Corporation’s major assets are a 45 percent working interest in the 1-million-acre Sfax permit offshore Tunisia, now under development, and a 45 percent interest in Innovative Production Services Ltd., which owns and operates a mobile offshore production unit. The financial statements of Eurogas are a sight onto itself, with less than 5,000 in cash and a negative equity of 50 million.

Dundee Energy Limited

Dundee Energy Limited (DELP) is a public, non-listed 58%-owned subsidiary in the oil and gas industry. Although DELP continues to generate positive cash flows from its assets in southern Ontario, and it continues to remain in compliance with the financial covenant requirements of the credit agreement, the volatile commodity price environment has, in the view of DELP’s lender, eroded the value of DELP’s assets in southern Ontario, and it has therefore also eroded the lender’s underlying secured interest in such assets.

Therefore, on January 31, 2017, Dundee Energy Limited Partnership (DELP), a subsidiary of Dundee Energy Limited (Dundee Energy), entered into a forbearance agreement with its lender, pursuant to which the lender had agreed, provided that certain ongoing conditions were met, to forbear from exercising its enforcement rights and remedies arising from DELP’s failure to reduce the amounts borrowed pursuant to the credit facility, to amounts that correspond to, or fall below the borrowing base available to DELP, until the earlier of May 15, 2017.

On April 20, 2018, the Corporation announced that a purchaser for substantially all of the assets of DELP had been identified. On June 12, 2018, the transaction was ratified and approved by the Ontario Superior Court of Justice.

Blue Goose Capital Corp

Dundee Corporation owns 90% of Blue Goose Capital Corporation,  a privately-held, Canadian-based protein and organic food company. In December 2017, Blue Goose endured a catastrophic fire at its Tender Choice processing plant in Burlington, Ontario. Tender Choice was acquired in late 2016 by Blue Goose Capital Corporation and was expected to be a catalyst for growth for the Blue Goose poultry business. Instead, the fire decimated the business and it was put into receivership in late 2017.

AgriMarine Holdings

AgriMarine Holdings Inc. is a Canadian-based producer of sustainable fish and a designer and developer of proprietary fish farming Clean Technology, managed by an experienced team of aquaculture technology pioneers. The company is a wholly owned subsidiary of Dundee Agricultural Corp.

Union Group

In 2017, Dundee wrote down the carrying value of its investment in Union Group. As a result, Dundee recorded a loss of $44.6 million to its income statement in the 2017 financial year.

The Union Group investment is currently recorded at an $11.4 million valuation on the balance sheet of Dundee Corp. This represents Dundee’s share of Union Group’s investment in ICC Labs, less a 30 percent discount to reflect current escrow arrangements and possible costs associated with the investment.

ICC Labs is a company based in Uruguay and listed on the TSX Venture Exchange. The company is focused on the cannabis industry and is licensed to cultivate and sell recreational cannabis in the Uruguayan market. ICC has been expanding its reach
by focusing on CBD oil.

Parq Holdings Limited Partnership

In late September 2017, Parq Vancouver was opened. Located in downtown Vancouver, the Parq resort offers a unique and unparalleled combination of gaming, hospitality and food and drink experiences. At the heart of the complex is a 24/7 gaming operation with 600 slots and 75 table games, offering something for all levels of gamblers. Complementing this is 511 rooms split between two high-end hotels managed by Marriott under their premium brands.

Upon opening, the resort was not fully operational. While gaming and some food and beverage facilities were open, construction of the hotels was not yet complete. By the start of 2018, all facilities were fully operational.

Early 2018, Dundee provided guidance for EBITDA of between $50 and $75 million for Parq Vancouver in 2018. Later in 2018, Dundee communicated that it may take slightly longer than originally anticipated to achieve that level of EDITDA. Due to this fact, the capital structure of Parq needs to be reorganized for longer term viability. Currently, Dundee and its two equity partners in the project, PBC Group and Paragon Gaming, are exploring alternatives that could result in a debt refinancing or other changes to the capital or ownership structure

During the first half of 2018, Dundee Corporation purchased $17,411,000 of Class F convertible preferred units and $15,500,000 of a promissory note of Parq Equity Limited Partnership, the limited partnership structure that ultimately owns the Corporation’s interest in Parq.

Dundee 360

Dundee 360 is a 100%-owned private subsidiary engaged in the development and management of international hotel, resort, residential and commercial real estate projects.

Dundee Sarea Fund

Dundee has invested an aggregate amount of $21 million into the Dundee Sarea Fund. Dundee Sarea Fund’s sole investment consists of a 100% ownership in Redecam Group S.p.A, an Italian-based designer, manufacturer and installer of air filtration equipment
and flue gas treatment systems for air pollution control.