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Hello from New Orleans!

Sorry for the dearth of postings of late! Subscriber commitments have consumed me: a new weekly posting format, notes from a site visit, and news from Maven companies.

I am also currently en route to the New Orleans Investment Conference, one of the longest-running resource conferences around. Generally focused on gold, New Orleans attracts strong speakers and active investors, and I am looking forward to talking shop and trading ideas with other resource folks. Hopefully I will see some of you there!

Last but not least, the new format for my subscriber missives also means a new format for these weekly articles. I had been sending articles and portfolio updates when news warranted, but the result was variable – sometimes several articles a week, occasionally nothing. I also found the format did not give me space to discuss everything that deserved mention.

Now subscribers get a Maven Letter every Wednesday, with at least three sections:

  • In The News: comments on resource sector news of note. Not limited to Maven companies – there are lots of explorers, developers, and miners out there doing interesting things!
  • Macro Observations: analysis of the latest moves in metal prices, currencies, rates, bond yields, or whatever other macro moves matter
  • Maven Company Updates: a guide through news from companies in the portfolio. What they said and what it means.

And when they arise the letter will also offer new recommendations and site visit notes. It’s everything I used to offer, just in a consistent weekly package.

For those of you who have not tried the Maven subscription service on for size: why not? Click here to sign up for a free trial.

This weekly non-subscriber article will also continue, but will now be an excerpt from the Maven Letter. Sometimes it will be macro, sometimes it will analyze resource news, sometimes it will let you know what I saw out in the field. Again: the same as before, just in a more consistent package.

This week I’m including the first two sections of last week’s Maven letter in their entirety. I hope you enjoy.

Thanks always for reading.

For those of you who have not tried the Maven subscription service on for size: why not? Click HERE to sign up for a free trial.

From the Maven Weekly: Oct. 21, 2015...

In The News…

The deal of the week is definitely Alamos Gold’s (TSX: AGI) offer for Carlisle Goldfields (TSXV: CGJ). A major taking over a junior at a 117% premium?? Really?!?

Yes, really. And while you can knock Carlisle for agreeing to a deal at the bottom, I say step back and grab some perspective. Carlisle shareholders are getting $0.60 worth of Alamos shares for CGJ share held. CGJ hasn’t been worth $0.60 since early 2013.

Sure, Carlisle reached heights of $2.50 in 2011, but so did many. More importantly, those days are long over and waiting for them to return would have been a lesson in dilution for CGJ shareholders.

Alamos was earning in to Carlisle’s Lynn Lake project in Manitoba, which is home to five near-surface deposits with 2.75 million measured and indicated ounces in 40.5 million tonnes grading 2.11 grams gold per tonne (g/t). Inferred resources add 2.28 million oz. in 51.8 million tonnes at 1.37 g/t.

A February PEA that considered two of those deposits outlined a mine producing 145,000 oz. gold annually for 12 years, at an estimated all-in sustaining cost of $644 per oz. The economics looked good: using a US$1,100-per-oz. gold price, the proposed mine generated a 26% after-tax IRR.

The earn-in deal had Alamos spending $20 million and delivering a feasibility study to earn 60% of Lynn Lake. Had that happened – and Alamos was on track in terms of spending, having put $10 million into the ground already – then Carlisle would have had to step up and deliver its share of development costs.

That would have been dilutive and difficult for CGJ. And the deal makes good sense for Alamos too. The company already owned 19.9% of Carlisle. Excluding those shares and net of Carlisle’s current cash holdings, the deal is worth $28.5 million.

So spending $28.5 million in shares now gives them 100% of Lynn Lake, including all the exploration ground around Lynn Lake that was excluded from the JV. Sure, following thru on the deal would have meant another $10 million in the ground but it would have provided only 60% ownership, and only if Alamos produced a feasibility study by late 2017. Two problems there: another $10 million would not have sufficed to get to feasibility and I’m assuming Alamos is pretty prospective on Lynn Lake, which likely means they would rather continue exploring than rush into feasibility work.

Also, CGJ shareholders are also getting a nice sweetener: 0.0942 of a three-year Alamos warrant, exercisable at $10. The warrants are not included in the $0.60-per-share deal valuation but they are definitely valuable, especially as they will be listed. More generally, Alamos shares (and warrants if exercised) give CGJ shareholders exposure to three good operating gold mines – Young-Davidson in Ontario and Mulatos and El Chanate in Mexico – in a company with a reasonable debt load that is well positioned to maintain free cash flow at current (or even slightly weaker) gold prices.

Read on in the next section of the letter for more on why I think companies like Alamos will outperform big miners in the early stages of gold’s return, but the short version is I think they will.

So a good deal for Carlisle shareholders and a good deal for the sector. There are some who grumble that all the good assets are going to get bought up at rock bottom prices, leaving us with nothing real to ride through the upswing, and they might point to this deal as an example. Except that it isn’t. Alamos already had a solid foot in the door at Lynn Lake, with a stake in CGJ and in the property. This was not an asset that was really open to offers.

So what a deal really does is show that Alamos thinks it is time to buy, which is another vote for the bottom being in. And it puts a good asset in the hands of an experienced mine builder.


Integra Gold (TSXV: IGC) provided an update on its progress at Sigma Lamaque, where the company is preparing to drive an adit to enable underground exploration. There are some great pictures of the work available HERE.

Integra is one of the busiest juniors in the market this year, with 90,000 metres of drilling underway, the underground program progressing, the Gold Rush Challenge to manage, and an updated resource estimate for the Triangle and Parallel deposits due out within a month. For a backgrounder on this company and its Quebec gold project, HERE is an article I wrote in August, right after Eldorado Gold bought 15% of the company for $14.6 million.

I am interested to see the updated resource because it will incorporate Integra’s enhanced understanding of Triangle, where the company has now identified steeply dipping C structures that are thicker and carry better grades than the T veins that also run through the deposit. This structural understanding, supported by a significant drill program, should result in a bigger, higher grade, and more confident resource.

The updated resource estimate will feed two goals. First, it will finalize plans for the underground work. Second, it will act as the basis for a preliminary economic assessment due out in the first half of 2016.

Prep work for driving the adit seems to have gone well, with surface works 80% complete on time and on budget. For companies actually doing this kind of work the downturn is an advantage: contractors are available and want work, so bids are competitive and workers experienced, especially in a mining city like Val d’Or.

On another note, Integra’s Gold Rush Challenge is off and running. This is the content where anyone can sign up to access the 6 terabytes of data covering historic work at Sigma Lamaque and search through the data to identify the best target to find a million ounces of gold. There is a million dollars worth of reward on the table (provided by sponsors) and, with entries due on December 1, there are now 1,080 people or teams entered in the contest.


NovaCopper (TSX: NCQ) also announced drilling results, which as much as anything served as a reminder that the company’s Arctic project is one of the highest-grade copper projects in the world. The deposit consists of stacked and folded lenses of volcanogenic massive sulphide mineralization, subparallel to topography and starting 100 to 150 metres below surface. Designed to upgrade the resource from inferred to measured and indicated, the drill program returned such results as:

  • 21.7 metres grading 3.86% copper, 0.86 g/t gold, 71 g/t silver, 1.15% lead, and 5.36% zinc
  • 32.1 metres grading 6.67% copper, 0.52 g/t gold, 31.4 g/t silver, 0.2% lead, and 3.38% zinc
  • 9.1 metres grading 7.36% copper, 2.34 g/t gold, 219.3 g/t silver, 0.77% lead, and 5% zinc

Those are some seriously impressive grades, especially in a project that offers open pit options. NovaCopper has in fact already completed two PEAs at Arctic: one contemplated an underground operation and the other assessed an open pit mine. Both generated good economics, largely because grade like those at Arctic make many challenges – even being located in northwest Alaska – manageable.

Also on NovaCopper’s side: a stellar management team and US$23 million in the bank. Rick Van Nieuwenhuyse is president and CEO and the board is stacked with present and former management of companies like Kinross, Barrick, and Ivanhoe. This is a group with the experience and connections needed to advance a remote project like Arctic.

NovaCopper’s share price did not budge on its drilling news today. I guess the market wants better grades…

Macro Observations

Gold moved up. Yay! Now what?

Good question. There are so many factors at play. To wit, a quick run through…

  • US dollar: There are several valid reasons to expect the dollar to weaken, relative to its recent run, in the coming months. There’s the Federal Reserve not raising rates, signaling to the world that the US economy is not all that strong. There’s murmurs that Japan and the EU do not want to print any more money to promote growth, something that had been weakening those currencies and by contrast strengthening the dollar. There’s strengthening in emerging markets; the rate cut in India, for example, strengthened the rupee. And there’s inflation. Of course, despite all of that the greenback remains the cleanest shirt in the dirty laundry pile of world currencies, a contrast that continues to provide strength, but these other forces are pushing back.
  • Seasonality: Gold is a strange beast relative to most commodities, but it does have its seasonal patterns. Gold’s October surge was a little late relative to its usual rise in August and September, but not far off. We are now in a seasonal holding pattern, with the next hot period for gold kicking off in January.

  • Tax loss selling: Not a factor for gold itself, but a consideration for gold equities. Every year of this bear market we have seen downtrodden gold equities get beaten down even farther in November as investors book losses to count against other portfolio gains. This will be a factor again this year, though the impact may be somewhat muted because investors will also have losses in oil and gas equities.
  • Rotation: The underlying flow of support for gold will come from generalist investors who decide the general markets are running out of returns and so start looking for undervalued assets. Many of these investors will end up turning to gold. For now this is not happening en masse; the smart money has started rotating into gold, but the masses have not yet moved.

So gold is complicated, but with US markets still looking to me like they’ve run out of steam (financial engineering through share buybacks only goes so far), good reason to think the dollar will move sideways if not slightly down, inflation coming back into the conversation, and gold’s strong season not that far off, I am feeling fairly good about gold

If we expect strength to gradually return to gold, how best to lever? The usual route is to buy major miners, the usual pattern being that they respond first to gold’s gains. This time, however, I think things will be a bit different.

Investors still remember how badly the gold majors bungled it last time. Risky projects, massive debt loads, and poorly managed costs became share price losses that still sting. And so investors looking to play gold today are highly attuned to those factors: risky projects, debt loads, and costs.

The first factor is not that significant because majors across the board ditched risky developments, selling assets or mothballing plans. The other two factors, though, are still very relevant: gold investors are very wary of debt loads and nervous about cost creep.

The great rotation into gold is still a ways off, which means those speculating on the yellow metal today are the smart money – experienced mining investors who know well what went wrong last time. In looking to avoid those pitfalls, these investors are gravitating to mid-tier miners.

In general, mid-sized gold producers carry less debt (total, of course, but also per share or relative to cash flow) and offer lower cost creep risk. The reason for the latter is simply focus: with only one or two mines to manage, management can keep closer watch. General and administrative costs are also often easier to manage within a smaller company – legal costs, for example, can build up very easily when a company has mines scattered across multiple jurisdictions.

Sure, a major’s diverse range of operations offers protection against specific risks…but it also buffers big miners from specific rewards. A great example of that right now is exchange rates. Canadian and Australian gold miners are getting a 25% lift simply by virtue of working in a cheaper currency and selling into a stronger one. But the big boys handle so many currencies that the benefits are much less than for a mid-tier miner with one Canadian operation or two Australian mines.

Whether these smaller-is-better advantages provide long-term benefit is not the question. The question right now is: which miners should one buy today for leverage to gold in the near term? And the answer is: mid-sized miners with operations offering currency advantage.

If you are interested in picking up a stock to hold for longer, add in a third consideration: a miner that has taken advantage of major miners’ asset sales to add a quality operation to the portfolio.

Companies with these characteristics are separating from the crowd. Compare:

The first chart is Barrick Gold. Yes, Barrick offered great leverage to gold’s gains in the first half of October, rising as much as 28%. But the 52-week picture ain’t exactly great.

Detour Gold, the second chart, did not really respond to gold’s October run, but that is likely because the stock has been rising all year. Detour operates the Detour Lake mine in northern Ontario and investors have been loving its controlled costs (all-in sustaining costs were US$1,030 per oz. in Q2), its low risk operation, and its exposure to the Canadian dollar.

I could do many such comparisons.

Without diving into all the details, we’re looking at major miners on the left and smaller operators, most with exposure to currency advantages, on the right.

I expect this bifurcation to continue: mid-tier operators with low-risk assets in weak currency environments will outperform major miners. I’m not saying to exclude majors from our portfolio – they will generate good returns, but I think those returns will not really happen until generalist investors rotate into gold, which will be a while yet.

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Hi Gwen,

Thank you so much for this excellent Maven letter. Your market analysis and logic is again exceptional. Your insights, knowledge and feel have given me a wonderful couple of hours. I am now planning my activity. I look forward to seeing you tonight on the Virtual Metals forum, I am pleased that you start first as I am a morning not a night person.

I hope you and your family stay well.

Best Regards,


-CLB (May 14, 2020)

I'm one of your new subscribers (by way of and just want to belatedly thank you for the recent sell recommendation that saved me quite a bit of money. (I also follow a few other mining newsletters, and, like so many other financial analysts, they were too hesitant and biased against putting out sell alerts.) And I find your newsletters very nicely done in general.

Kind regards!

-TA (April 6, 2020)