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Exciting Days at the Bottom

Commodities are about as low as they can go, valuations are at rock bottom, and big picture forces are slowing turning to support metals and miners again.

It will still take time for the rebound to establish. Blame for that goes to the US dollar and US markets that keep climbing, contrasted against a resource sector that screwed up the last bull run so badly that generalist investors completely abandoned the space.

But time is not necessarily a bad thing.

Right now, mining's movers and shakers are using this time to their advantage. They are making deals, buying properties, setting up new resource vehicles, and outlining the potential in their new assets so they are ready. And they are working hard and fast, in expectation that the window of opportunity is closing.

I hear about it every day. And it's awesome. We may still be in the bear-bull lull, but look at some of the highly intriguing exploration and development deals emerging from this big bad bear market and you can see the bull is coming.

Opportunities Under Development

I don't expect gold, and the metals and mining markets in general, to make a sustained move upwards until US markets top. That moment is coming, though I know not when. Forced to guess, I would say before the end of the year.

Until then, gold will ebb and flow in response to Greece and Yellen and the greenback and physical demand and seasonality. In other words, be ready for markets to keep moving sideways for a while.

While they do, the movers and shakers of metals and mining world are setting up companies, buying projects, advancing new assets, and generally taking advantage of today's cheap prices to set up for tomorrow's run.

I couldn't possibly go through all the opportunities I see out there in the market. But here are some, to give a taste of the potential being prepared.

  • One of the few real success stories of recent years was Agnico Eagle's $205-million takeover of Cayden Resources, in a deal that paid a 43% premium on a share price that had tripled in the preceding year. Credit goes to Cayden's management team, which executed a series of intelligent moves to position itself as a target. Now that same management team – every member of it – is at Auryn Resources (AUG-V). With just 30 million shares outstanding and $9 million in working capital, Auryn is well structured and is on the hunt for acquisitions. The first deal is already done: in February Auryn signed on to earn 51% in the Committee Bay gold project in Nunavut by spending $6 million. This is a project that has already seen $100 million worth of work. Based on this management team, corporate structure, and market, I expect good things from Auryn.
  • Falco Resources (FPC-V) nabbed a great land package focused on the old Horne mine in Rouyn-Noranda, Quebec. Horne was the copper mine that put Noranda on the map of mining majors, but it also produced a lot of gold. And Noranda found much, much more gold – but since the yellow metal wasn't worth much during Horne's 50 years of operations, Noranda would record gold assays and then head off elsewhere in search of more copper. Now Falco is using all that old data plus drilling of its own to create new gold excitement in the old Horne camp. It is working – the company has attracted a veritable who's who of Quebec mining to its board and management. These guys have built or managed a long list of mines in the area and they would only be jumping on board because they see real potential for Horne to be reborn.
  • The Ivanhoe exploration team is kicking – and drilling – rocks in British Columbia, Nunavut, and farther afield under the banner of Kaizen Discovery (KZD-V). This is a very experienced and successful team testing some really interesting geologic ideas. Moreover Kaizen has established an unique relationship with Japan's ITOCHU, which provides exploration funding in exchange for a stake in Kaizen's projects. Money, ideas, expertise, and proprietary technology (also Japanese) – Kaizen's pieces fit together into a very interesting puzzle.
  • The newest company of the Hunter Dickinson group, Amarc Resources (AHR-V) is exploring a copper-molybdenum-silver system in south-central British Columbia that has serious size potential. An initial 9-hole program returned long intercepts with enough mineralization to be interesting, especially since the IKE project is reasonably close to infrastructure. Also, the best mines in BC have always been porphyry copper mines – and from Highland Valley to Red Chris, what the systems lacked in grade they made up for in tonnage. The geophysics, topography, sampling, and drilling to date suggest IKE could be similar.
  • Focus Ventures (FCV-V) is advancing the Bayovar 12 phosphate project in Peru. Phosphate is a commodity with a stable-to-positive outlook and Focus just negotiated an inventive financing deal that deserves credit. To earn a 70% interest in Bayovar 12, Focus had to pay $3 million in cash and complete a pre-feasibility study. It did not have the cash and potential Asian partners were not interested until Focus earned its stake. So management made it happen. They renegotiated the property earn-in deal, inked a $5-million loan from Sprott, and sold a 2% net smelter royalty to Radius Gold. End result: Focus has its asset and is still in business with enough funding to move Bayovar 12 forward. Interest around this asset just keeps building.
  • The classic chart sees a share price rise during discovery and deposit expansion, then decline during mine financing and development, and then climb again once the asset reaches production. Rubicon Minerals (RMX-T) has gone through all of that, with a downside slide amplified by the bear market…but now the company's high-grade Phoenix gold mine is on the verge of production. And RMX shares are c-h-e-a-p.
  • Constantine Metals (CEM-V) is preparing for a $5-million exploration program at its Palmer project in Alaska. Palmer hosts lenses of VMS mineralization bearing high grades of copper, zinc, gold, and silver and geophysics and drilling suggest CEM could outline a lot more mineralization. And the best part: Constantine's project partner, Dowa Metals and Mining, is footing the bill to earn a 49% stake, pursuant to a very well crafted deal.

I could go on and on. Uranium is a really interesting space – the spot price keeps creeping up and there are several enticing Athabasca-area explorers (FCU, NXE, REL). Diamonds are also looking good and diamond exploration and production plays in Canada and around the world are ramping up.

Then there are all the private deals being done involving all kinds of interesting projects, like a Zambian copper belt replica in another part of the world, a series of Mexican silver opportunities, interesting Quebec gold assets, and district-scale exploration efforts in places like Cote d'Ivoire, Norway, and Serbia.

I know you've heard it before. But this time really is different. The people, the teams, who have been through exploration cycles before are increasingly confident that right now, at the broad bottom, is the time to put together the vehicles they will ride back up. And the opportunities are getting exciting.

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have been investing in the precious metals space for about 20 years so I am more comfortable using your geological knowledge as a guide for my portfolio but when it comes to uranium that is an entirely new field where I am not as familiar with grades, jurisdiction value, etc. so I prefer some stability with the effort to play the market. Your reply offered just that!

-MD (February 2022)

"Gwen - I just analyzed our returns for the past month. We had a 36.7% return on our portfolio in one month! Thank you so much for your excellent, thoughtful and timely guidance. 12 of the 18 stocks in my portfolio were recommended by you. 4 were recommended by other MIF letter writers and 1 each by Eric Sprott and Rick Rule. Yes it was a good month for precious metals - Gold was up $50 and Silver $3.90 - but “our" portfolio performance more than doubled the 16% of the GDXJ"


-WJ (June 1, 2020)