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Down to $4.33, for a $157 million market cap – triple the market cap of Borealis.

B-ORE-ALIS (Get It?)

You will recall that each $11.50 share of Borealis (BOREF) represents your ownership of, among other things, one $9 share of its subsidiary Roche Bay Mining (RCHBF). So you in effect get the rest of the company – including the Chorus Motors subsidiary that owns the Wheeltug subsidiary that made the watermelon that moved the plane – for $2.50. With 5 million shares outstanding, that’s $12.5 million for the whole thing.

You can tell me Borealis is worthless or you can tell me it’s worth a fortune, but you can’t tell me it’s not the wackiest company you ever invested in. It recently issued its chairman an oddly informative ‘Resolution of Appreciation and Thanks’ signed by his son, the president. To wit:

12 May 2006
Adopted by the Board of Directors of

WHEREAS, The Board of Directors of Borealis Exploration Limited would like to formally extend our profound appreciation to Dr. Rodney T. Cox for his vision, his perseverance, and his single-minded commitment to the future of Borealis and its core mineral holding, and to our loyal shareholders for their commitment and assistance at every step of the way.

Borealis Exploration Limited was founded for the specific purpose of creating value from the Roche Bay Magnetite Deposits. The Eastern Roche Bay deposits were initially discovered in 1965, by the Geological Survey of Canada while they were doing their first helicopter-supported large scale regional surveys over the vast Canadian North. In 1965 very little was known about the iron ore prospects of Canada’s North, but the surface showings of banded magnetite on Eastern Melville Peninsula were simply spectacular. Borealis Exploration in 1965 immediately took large Exploration Permits covering the Eastern Deposits under the direction of Judge James L. Buckley. In 1967 Borealis Exploration Geologists led by Normal H. Ursel discovered the Western Roche Bay Deposits. Some of the deposits, when surveyed in the 1970’s by aeromagnetics, revealed the highest surface magnetic values ever recorded.

Borealis was chartered by Canada’s parliament in 1968 and went public in 1969.

Dr. Rodney T. Cox, who has always been an old-school Graham-and-Dodd asset based investor became Chairman and President of Borealis some nine years later. He was convinced that the Roche Bay deposits were worth billions of dollars. And in the following half decade, Borealis actually started the mega project of placing the Roche Bay Deposits in production. Borealis invested a considerable amount of time, money, and resources into understanding the geology of the property, extensive mapping, doing extensive drilling, on the Adler A and Adler B Deposits, along with one hole in the C deposits, detailed assaying, processing, marketing work, socio-economic and environmental studies and a pre-feasibility study — all with the goal of driving the mega project to production for the benefit of the Inuit Communities and Borealis’ shareholders.

Borealis was a whirlwind of activity. Borealis’ shares, which had traded for pennies in the 1970s, rose dramatically in value as work continued.

The Roche Bay runway was a typical example of Dr Cox’s innovative and imaginative problem solving. In order to do a proper drilling program without relying on very expensive helicopters, from Hall Beach, Borealis needed to build a runway for fixed-wing aircraft capable of carrying heavy equipment, supplies, as well as exploration and drilling crews.

The beaches on Roche Bay Peninsula are made of raised limestone shale. They are more or less flat, but they were unsuitable for a runway. The shale needed to be broken up, compressed, and graded. Borealis asked for Government of Canada approval to build a runway suitable to land a C-130 Hercules-class plane. Such a runway is about 70 meters wide and, and at least 1500 meters long. Typically, runways take years to plan, grade and build, and a considerable amount of specialized equipment which, which meant a huge budget of engineers and consultants. Borealis was doing this mega project on its own ticket, and did not want to wait for the sea lift to bring in the proper equipment, even if it could have afforded to build the runway ‘correctly’, or to hire the proper experts to build the strip. When the airport plans were submitted for government approval, the proposal to build a runway probably added a little mirth to an otherwise dull and dreary bureaucratic day in Yellowknife. The Government of Canada clearly felt they had nothing to lose by raising no objection to the plan. The plan was unrealistic.

Borealis did not have the proper equipment and the highly trained experts. What Borealis had was a single D-4 caterpillar tractor, a Bob Cat backhoe, and a makeshift grader which was nothing more than a pickup truck dragging an I-beam. Borealis had a couple of dozen of stubborn and very skilled Inuit, a newly imported engineer from Eastern Europe and a few southern workmen led by the stubbornest man of all. The workmen made the use of that rudimentary equipment into a high art. They worked night and day, and the runway was completed “on schedule and under budget.” Dr. Cox exemplifies Edison’s observation that genius is 99% perspiration and 1% inspiration.

The Government saw the airstrip on satellite photos and arrived when all of 200 meters were done. They arrived in force and in a rotten mood. They accosted Dr. Cox wanting to know what in the world did he think he was doing building an air strip without full approvals and without the right equipment. Dr. Cox reminded them that they had raised no objection at the time, and someone had told him to “go and build your airstrip”. It had been a joke at the time, but the airstrip was completed, and is still usable today, and can still take Hercules aircraft. Because Borealis was under budget and had the capability, the team finished up the season by also building a second smaller airstrip for smaller aircraft like Twin Otters and Britten-Norman Islanders.

In spite of friction over airstrips and the like, the Canadian government strongly supported the project by renewing the leases and a good working relationship continues to this day. The Inuit communities, both individuals and more recently in the form of the Government of Nunavut, have also consistently supported the Roche Bay project.

By the mid 1980s Roche Bay failed to attract and hold the attention of a major player. No major players followed, and work stopped on Roche Bay. Later Dr Cox was to discover that Exploration und Bergbau, the iron exploration and delivery arm of much of the German steel industry, had been telling potential Roche Bay purchasers that the Borealis ore was no good, based entirely on a misunderstanding — the first page of a technical report on the ore which dated to 1971. The first page of that report had identified the deposits as hematite deposits not magnetite deposits. The initial work the Germans did was to test magnetite using Humphrey Spirals. The Borealis deposits are magnetite and they cannot be processed as hematite using Humphrey Spirals. While subsequent pages of the report did report tests for magnetite, using simple magnetic separation, nobody ever read that far in reaching their conclusion. A simple technical mistake may have led to decades of business frustration when potential suitor after potential suitor declined to move ahead with Borealis, in the latter stages of due diligence. Other iron prospects were developed when Borealis deposits were not.

By the mid 1980s iron markets had collapsed and in the words of one of the industry leaders, “iron” had become a four letter word. As a company, Borealis started moving on to other things, but Dr. Cox’s commitment to the Melville Peninsula properties was not shaken. He refused to believe anything other than that the rest of the world was wrong and he was right. It is a lonely position to take, but as even he often reminded the Board there is often a very thin line between idiocy and genius, and between failure and success. Besides, nobody had ever started a mega-project in Canada, failed, and still owned the project. Borealis held this dubious honour.

So for years, against the advice of every expert in the field, Dr. Cox refused to abandon the iron ore. Lease payments were always given the highest priority, and in both good times and bad, they were made on time. The Graham-and-Dodd value investor refused to walk away from an asset of the magnitude approaching the value of the Swedish Iron ore Deposits which were first mined in 1130, just because nobody else seemed to think it was worth anything. On the contrary, he became ever more convinced of the value of the assets, including not only iron ore, but the precious metals which appeared in sizable quantities in a single segment of an extracted drill core and showed up in one-step processed tailings.

As years passed, Borealis moved on to the development of new technologies. Yet Dr. Cox, aided by our shareholders, always kept those iron leases for the company, secure in his conviction that 5-20 billion tonnes of ore, along with whatever gold and other precious metals found within the deposits, weren’t going anywhere. And Borealis continued, on a smaller scale, its work on exploration, beneficiation, and feasibility.

In the late 1990s, Borealis restructured its assets, again investing considerable time, money and expertise to ensure that the Roche Bay property — when it was developed — would be poised to return maximum value to Borealis shareholders. The Roche Bay Deposits were transferred in 1997 to Roche Bay plc. Dr Cox and Borealis never forgot Roche Bay, and when it was suggested that Benjamin Cox take over the operational management of Roche Bay, Dr. Cox was an enthusiastic supporter. As the recent announcement of a major agreement between Roche Bay plc and one of the world’s largest metal producers has shown, that decision has proven to be auspicious.

Now that Roche Bay is springing to life and there is a development pathway and timeline in place to put Roche Bay into production, it looks highly likely that Dr. Cox’s unflagging vision will be fulfilled. And we would like to credit that vision. To our knowledge, there are no junior mining companies in the world which have been in business for 41 years, let alone any mining company of any size which has held an undeveloped property for 41 years.

On the contrary, among the major mines in production today, the average property was owned by no less than 6 previous owners. In other words, for every successful mine today, there were six executive teams who decided to cut their losses and walk away before someone else finally made their property into a money-spinner. Indeed, an interesting article in Skillings Mining Review noted that among the 10 most profitable mineral finds in North America, at least half had been abandoned at least once and some more than once.

To add to this, it must be made clear that Borealis has, to an astonishing extent, been blessed by some of the most loyal and superb shareholders ever found. Dr. Cox has been supported by thousands of shareholders over the years who have trusted him and his vision. The list of shareholders is too long to include here, but several key shareholders must be singled out for their extraordinary contributions, specifically:

Homer H. Harris, who provided the initial funding and our first group of outside shareholders over a period of almost 50 years.

Daniel E. Gershenson, who worked on the project as long as he was able and provided us with his worldwide academic network.

Forest M. Robinson, who is the most persistent supporter of our work. Out of our approximate 4000 shareholders in all our companies, Forest is responsible for probably 1000 of them.

Joseph Monteith, who is a relatively newcomer having been involved with Borealis for the last 15 years or so. Joe is a huge supporter of all of our technical work and our mining projects:

NOW, THEREFORE, WE, the Board of Directors of Borealis Exploration Limited, have adopted this Resolution of Appreciation and Thanks on 12 May 2006, and do formally extend our profound appreciation and thanks to our loyal shareholders, and to Dr. Rodney T. Cox for his vision, his perseverance, and his single-minded commitment to the future of Borealis and its core mineral holding; and

THAT the Roche Bay property is set to reward the shareholders of the very first company to claim the mineral rights is among the most astonishing stories of what Dr. Cox himself would call down home pig-headedness that the mining industry has ever seen. For that, we as a Board salute Dr. Rodney T. Cox, and our shareholders.

The Board of Directors
Borealis Exploration Limited
By: Isaiah W. Cox, President


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