When investing in exploration drill plays, here’s a strategy to consider
Erik Wetterling, Founder of The Hedgeless Horseman joins me to share his strategy for investing in exploration companies when a drill program is upcoming. We discuss the concept of a ten bagger and balance drilling hype vs drill results.
Good thoughts today on how The Hedgeless Horseman approaches getting into early-stage exploration stocks early, when they are boring, and then takes some of the chips off the table pre-assay release, to minimize that risk, and then will buy back in, under the rare circumstance where a company does make a true discovery. However, he also mentioned a few times here and in previous interviews, where he is willing to hold through the assay risk period with companies that have already had 1-2 successful drill programs, as they have proven something is there, and are trying to grow it larger. I take a similar approach with exploration plays, and agree they don’t always need to be 10 baggers, but you can have multiple-fold returns in your portfolio by scalping a 2-3 bagger here and there, but also minimizing the downside risk or avoiding round trips where solid gains get erased when investor hopium gets crushed from the actual drill assay results.
It is just as much about managing downside risk and locking in gains regularly, compared to only swinging for the fences and then overstaying the welcome when a stock becomes a cult narrative and gets way too far ahead of itself in valuation.
Hidden secrets can be found in the base metals sector as well. In the past my focus was mostly in the gold/silver metals miners, now it’s mixed combined with the base metals. And the same above text applies to that area of interest as well.
Good explanation and not far off at all.
Gold Bulls Get All Clear
Todd ‘Bubba’ Horwitz – Friday April 16, 2021
https://www.kitco.com/commentaries/2021-04-16/Gold-bulls-get-all-clear.html
From Bubba’s analysis above:
“On Thursday, gold finally broke and closed above the key level of $1750 based on June futures. This has triggered a buy signal and we are now long or in the process of being long gold.”
“Gold is up about $11.00 this morning, trading at $1,778. Don’t be surprised if we see a pullback to support at 1750 over the next couple of days; we will use selloffs as buying opportunities.”
Bubba is more in the traditional trading and TA camp, that wanted to see a move above $1750 to get long, so there are likely many traders in line with his analysis and strategy on trading. As a result, it does seem like Gold has broken out of the down-trend this week, and for the first time in 7-8 months, there are some green shoots in the PM sector.
Unless things reverse strongly throughout the day, it does appear that Gold is going to close this week strong with a bullish weekly candle. I’ll take that over the opposite.
Rising Inflation And Geopolitical Concerns Boost Gold
David Erfle – Friday April 16, 2021
China is opening it’s doors to billions of dollars of gold exports. Now we have the floor for gold, Asian demand is insatiable, Yummy! LOL! DT
exports should read imports
J Taylor’s monthly newsletter came out this morning with the following comment on Novo:
“Novo Resources saw its shares get hit hard in April when the company announced a C$22 million financing. I firmly believe the market is overreacting but as Quinton Hennigh explained to me once the company received the PEA, it concluded that it will need to drill on 20×20 spacings before it begins to mine and mill in order to have better grade control. The PEA which was reported on April 2, calculated a NPV5 of $250 million. I view this as a buying opportunity and believe the company’s future is as bright as ever.”
Ex, I bought some Novo this morning, I’m sure you read this from Bob M that came out today.
http://www.321gold.com/editorials/moriarty/moriarty041621.html
Hi DT. Yes, I saw Bob’s piece today, but had already bought yesterday, thinking the fickle retail investors had over-reacted. Quinton clearly outlined what the capital raise was for on Cory’s interview on Wednesday, and yet, most of the comments I saw over at Stockhouse, Ceo.ca, and even on that daily editorial here at the KER had tons of disinformation and fake news about challenges at Beaton’s creek, or continuity issues, and all kinds of garbage, so those were a nice contrarian indicator that people didn’t get it and had oversold to the downside. We’ve seen that happen before in many stocks and repeatedly with Novo from the bashers, and we’ll see it again. While most of the retails trading herd that bought at much higher were levels into the hype bought at the wrong time, they were also selling at a loss this week at exactly the wrong time, where smart money was accumulating the weakness (which far exceeded the dilution). The raise was $22M and the market cap loss at one point was near $120M, so that’s called a market tantrum, and is irrational, and time to buy.
People always claim they want to buy low and sell high, but as we’ve discussed and pointed out so many times, often the retail hordes actually like to cry low and buy high. 😉
QH has more experience than I do in finding things and making them work. It would not enter my mind to challenge his decisions. My decision is to own the stock or not. I sold no shares. I would have liked to buy more but it was already the best performer of the day. QH is still a PhD and I am still an investor.
+1 David. Well-stated.
Investors are understandably upset because QH did not FORSEE the need for $22 million in cash for an immediate drill program. QH is a marvelous geologist and I sincerely believe he should hire someone else to be the CEO of Novo. It is likely that he made the funding mistake because he signs up with a new company each week to offer his geology expertise. IMHO, that lack of focus does not help Novo investors as you just witnessed.
Sachs, Quinton is not the CEO of Novo, and already did hire Rob Humphryson as the CEO of the company. This kind of information is available for anyone that spends 1 minute on their website doing any due diligence at all.
https://www.novoresources.com/company/management/
It’s these kinds of displaced anger and lack of real understanding of how things work that create these false narratives where Quinton is solely to blame because of taking on too many projects, when it had nothing to do with this decision.
People in the “let’s blame Quinton” bandwagon are forgetting there is a whole team of people in place at Novo making decisions, including a sharp board of directors, and it was the board that voted on moving forward with the capital raise based on the recommendations coming out of the work on the PEA to do infill drilling in a 20×20 fencing to get the mine plan developed for years 2, 3, 4, because they need to permit those now. That has absolutely nothing to do with other projects Quinton is working on.
While they will be able to fund future exploration at Karratha at Purdy’s Reward/Comet Well, and Egina through organic growth from production at Beaton’s Creek, they never said anything to the effect that they’d never have to raise money ever again, and they aren’t even up to commercial production yet, so the retail complainers expectations were off, as is their knowledge about how to run the company, which is why that is best left to the management team and board of directors.
Here is a video with Crescat Capital that came out on Friday, where starting at 51:34 mins Quinton addresses (again) why they did the raise, based on information that came in under a week ago regarding the infill drilling that was recommended in the 3rd party reviewed 43-101, that the whole company and board of directors reviewed, and took action on with the capital raise.
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Crescat Gets Activist on Gold & Silver #28
That fact that Quinton has a PhD in geology and a great track record at finding shiny rocks is fantastic and a huge asset to any company to have his geologic eye. However, a PhD in Geology does not infer having a great mind towards capital structure and cost of capital, which, based on this decision to sell ownership in the crown jewel asset (the entire Pilbarra land package and mill) makes no sense whatsoever.
If you were told you had to raise a bunch of cash, what possessions (e.g assets) would you sell first? Your most prized and valuable assets/possessions, or your least valuable/cheapest possession? The answer is the latter. And instead of selling cheaper asset (e.g. non-core investments and shares in NFG), he sold the most expensive asset in the company’s portfolio – the Pilbarra land. It was the wrong decision by a long shot and damages shareholder value.
He should have gold NFG, or other assets, to raise $22M. Not the crown jewel. And that’s why shareholders should be pissed. Not that his forecast was wrong (although there’s some concern there that he hasn’t enough experienced mill operators from major miners who can run a mill like a tight ship), but he doesn’t recognize he sold his most valuable company asset above all other options.
I bought more NSRPF at 1.92 after it opened at 1.86 and rose up to 2.06 and then fell to 1.92. I hope I have enough Novo at last. NFGFF is up big today.
I agree with Jim Rogers, Bitcoin will be outlawed if it becomes successful. No Kidding! DT
Unless something happens before close, I am sitting at the top of my 8 month down channel. The good part is it is at the top of the channel. The bad news is is still in the channel. Same old alternating day pattern of some up, some down…just a few that went up more than down to get to the top of the channel. Opening has been walked back all day. Appears capped for days. Irritating… but at least it is at the top of the down channel.
Perhaps OpEx has something to do with it? The turn is i. Glad I do’t have to catch falling knives anymore, at least for a while.
Closed above open on my screen at the last trade of day (not counting after hours or computer delays). Interesting…for those of us with blood on our foreheads and dented walls.
Best of day including my share count: Novo, Group Ten, Blackrock, Great Bear and Van Gold. Sort of a surprise, the laggards that they are.
The Hidden Secrets of Gold & Silver Juniors by Dr. Quinton Hennigh
Baby Investments – Apr 15, 2021
“In this video, Dr. Quinton Hennigh is talking about the hidden secrets of gold & silver juniors.”
“However, Dr. Quinton Hennigh doesn’t think that gold & silver juniors have to make it from exploration to production in order for a stock market investor to make money off of them. Gold & silver juniors are often times taken over by larger gold & silver companies.”
“Dr. Quinton Hennigh says that there is no perfect definition for what a junior gold & silver company is. ”
https://youtu.be/TrDdWWcl1CA