This was something I was thinking about a year ago until Brexit, Trade Wars and COVID-19 spanked junior resource investors arses!
It’s a really interesting market at the minute. The main indices have bounced back strongly but with the fallout of COVID-19 yet to play out will we see a ‘risk-off’ sentiment return?
Thing is with interest rates and bond yields so low where will investors put their money ?
Well stocks would be the obvious place but I think you are going to have to be selective. It also seems that hedging risk and recent global fiscal policy will keep driving gold higher.
As I have said in recent blogs Ive been adding gold to the portfolio which nicely suits my overall risk profile and the likes of Landore (LND), Pure Gold Mining (PUR) and Goldstone Resources (GRL) have all been delivering solid returns and I expect them to continue to do so.
I managed to catch up with Goldstone CEO, Emma this week and things are progressing very well with expectation the environmental mining permit could come in the coming weeks and preparation for production start in H2 is well underway with equipment being moved to site. Expect an operational update to follow shortly. You can read my research note here – I very much like this company!
Of course there are many other gold plays and the TSX in particular has been going crazy I expect largely due to the swathe of M&A we have seen in the gold space. Large gold miners have the cash and they need quality assets so juniors with quality assets could be snapped up.
I’ll get back to the main topic in a minute but before I do, I’ve started looking for some Silver plays. Silver normally lags gold but can go on to out-perform it so whilst I’m loving the gold plays, I’m wanting some silver in the PF and I’m eyeing up a few earlier stage plays (nano-cap) that appear to be very undervalued on assets, more to be revealed in due course once I’ve done the relevant DD of course!
I doubt anyone reading this has missed the rather extraordinary rise that Eurasia Mining (EUA) has seen since coming back from suspension. I’m vaguely familiar with the assets and palladium is going to be the main driver behind the rise and expectation of a sale after its incredible rise over the last year or so.
I’m not going to comment on the current valuation and upset anyone as my view doesn’t count, the market decides and the market has been buying and thats that! The point here though is this is the time resource investors in my opinion should be eyeing up the companies that have or potentially have tier 1 assets as the M&A cycle could well and truly be starting given a) its already been happening in PGM’s, b) base metals have been moving hard i.e. copper, nickel, zinc, iron ore, c) the dollar weakness and d) lack of historic exploration investment means proven resources are limited, this is particularly the case in nickel and covered in my Horizonte Minerals research note
So despite the back-drop of an unpredictable market it could be the time to start positioning in some of these plays. Clearly there are many options but a few I think that have the scope to ‘do an EUA’ are listed below.
HZM probably tops the list as they have two large tier 1 nickel/cobalt projects and in close proximity to each other and furthermore one of the projects is now fully permitted. You also need to look at the incentive nickel price for competing projects, HZM comes in pretty much top of the list with lowest quartile C1 costs. I think HZM will be a star performer at just $18k nickel it would return $13bn in after Capex FCF from the two projects. Orion who just invested $25m in Horizonte think so too – follow the smart money some would say…
ACP is my graphite play of choice as my followers will know, simple reason high purity, high grade means premium basket prices and with market leading economics, research note here
Then we move on to copper, I’ve been buying up Central Asia Metals (CAML) for a longer-term position. It’s been under pressure due to CV19 issues in Kazakhstan but this is simply a cash cow and hasn’t followed copper lead and zinc up so for me that’s a screaming arbitrage buy signal looking on a forward basis to re-instatement of a dividend and where copper and zinc are likely to be going over the coming years.
Other copper plays I think will do well are Asiamet Resources (ARS) and Arc Minerals (ARCM), the former holding the mighty Beutong copper asset (it’s massive) which could eventually be a 100k tonnes pa copper producing asset and the latter Arc (earlier stage) drilling in one of the most prospective copper areas on the globe, with Arc it wont be so much about the grades but the scale. that a major will be interested in.
Lastly I’m going to be looking for some Aluminium and Rare Earths based investment – there is a nice ASX company Lindian Resources which I am looking at now. Aluminium isn’t mentioned much but it factors heavily in green technologies as reported recently by the Worldbank. Rare Earths I’m eying up a company too – just hope it pulls back a bit !
Research materials prepared based upon my own analysis and research. Accuracy cannot be guaranteed and research notes should not be taken as investment advice. Please always do your own research.
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