S&P 500: Why This ‘Pullback’ Will Likely Continue
Jun. 12, 2020 – Victor Dergunov

“The S&P 500/SPX just had a pullback of 7%. However, the selling is probably not over just yet.”

“The Nasdaq corrected by around 5.5%, but if a crucial technical level is breached, the correction could be around 12%-13%.”

“The VIX illustrates that many market participants became extremely complacent and were caught off guard by the violent selloff.”

https://seekingalpha.com/article/4353605-s-and-p-500-why-this-pullback-will-likely-continue

2020 instead of 2021. I guess all years look alike when buying miners.

Thanks for your thoughts Ex. Yeah Bonterra has floundered. I own it and am in a slight loss position. Might trade it for Pure Gold as it seems like a little safer play at this point. I really appreciate your detailed insights.

Hi Charles.

Pure Gold is definitely hitting their stride and will have nice leverage to rising gold as they move towards production, and Red Lake projects are in demand with Evolution Mining taking over Goldcorp’s Red Lake Mine, with the continued exploration success from Great Bear and Pacton on the move in the area as well.

With Bonterra, for the record, I still really like it and believe it represents a very attractive value proposition at these depressed prices, and may have further to run from present levels, on a percentage basis, than Pure Gold as they work to turn their ship around. However, it may take Bonterra a while longer to start to get some traction, and they’ll have to find a way to recapitalize their operations with a larger partner. They also started their winter drill programs late in the season in Feb, and then immediately had to shut them down in March due to Covid 19. That is a real bummer as that drilling was going to hit a number of highly anticipated targets and it got shelved.

Pure Gold is a safer bet, with a bright future, but Bonterra is an attractive underdog bet that will be due a nice re-rating when they finally figure out a financial solution to the mess they are in.

May

What do you guys like so much about Pure Gold other than it is in the Red Lake Region? I own Bonterra and wonder how Pure Gold stacks up.

http://www.puregold.com
Their cover page has a good summary. They plan to pour gold before the end of year. 9g/t average, at cost of $800 per ounce with IRR of 51% in Red Lake and aren’t through identifying source.

Thanks David. That is some good timing.

Thanks DT. Yes (PGM) (LRTNF) Pure Gold is a solid pick on a high-grade developer moving towards production by year end or the beginning of next year. It has definitely been a company I was glad to have had a nice drink of in 2020.

Charles, yes, I echo what David posted that because it is high grade, a low projected AISC, and has so much more prospective land in the Red Lake area to explore, it makes it a top gold developer to own as they move towards production.

In my experience, almost all companies have a few hiccups after the initial first gold pour, so I may lighten the load some after that as they work out the kinks, but right now Pure Gold is in the “Golden Runway” on the construction and development phase into production, where most stocks make a substantial move higher. This Golden Runway phase is typically accretive in any kind of market, but with Gold prices rising to where they are now in the $1700’s it spikes the economics on the project bigly, and if Gold goes to $1800, $1900, $2000 over the next 12 months, then they’ll have really nice leverage to the rising gold prices since they are in the process of graduating to a producer.

Lastly, I still believe a larger producer could still be waiting until they get the project construction completed and producing, and then take them over (for a great liquidity event to exit the position in full). That’s my 2 cents and why I’ve been bullish on Pure Gold since last year.

Charles, as for Bonterra (BTR) I own a position that is slightly underwater in it, and have considered averaging down in it fairly soon, but there were so many other quality companies that sold down from late February to mid March, that I decided to back the horses I knew would run hardest coming out of that intermediate low, and shelved adding to BTR for once those companies have moved… and most of those already ran hard in from mid March through late May.

BTR had financing challenges in the recent past, and now there are a few wildcards up in the air.

> (KL) Kirkland Lake owns 12.5% of Bonterra, and Eric Sprott owns 7%, and much of this interest came from when Sprott was involved with Metanor (prior to Bonterra buying them out in the merger), and it was Metanor that had the operating mill that BTR now owns. Sprott is likely underwater on that position and will be a fan of anyone that can get BTR’s properties moving once again and create some value. Kirkland Lake also is interested & invested with Bonterra’s neighbors – Osisko Mining, backstopped by Osisko Gold royalties.

I thought Kirkland Lake may make a move on acquiring Bonterra this year, with the ultimate plan of making a move on Osisko Mining after that to consolidate the whole Windfall Lake Urban/Barry Gladiator zone for themselves. However, KL got busy and took a detour with Detour Lake, and now may be more interested in grabbing the combined Wallbridge/Balmoral merged entity. Regardless, I still believe both Kirkland Lake and Osisko Gold Royalties have their eyes on Bonterra and Osisko Mining to consolidate that area play and get it into production.

For the last year Bonterra has floundered a bit financially, and despite doing some good exploration work, they are in need of a recapitalization plan. There have been a few changes to their board of directors, and some anticipated changes coming to their management team, so they are currently in flux.

>> Akiba Leisman is a Director on the board of BTR now. He is quite a capable leader, and the force behind Wexford Capital and I’ve made good money backing his team in Marlin Gold, then Sailfish Royalties, and then Mako Mining. Some postulate that Wexford Capital could take a stake in Bonterra, and one of the ideas being tossed around is if Mako Mining merged with Bonterra, diversifying them from Nicaragua risk by growing into Quebec.

I have mixed feelings about this idea as I do not really see the synergies between Mako and Bonterra, but it would be fine if that is what plays out, because Wexford doesn’t mess around, and escalates the advancement of their projects quickly [something I wish more teams would do in the mining industry]. It could just be that Akiba was brought in and put on the board to watch over Wexford’s interested in Bonterra getting things moving.

>>> There is always the potential for Option #3 where a large producer comes in and scoops up the rest of Bonterra out of left field. We’ve see the large Asian mining syndicates being very active over the last year, and the larger Aussie producers were active the year before. If Kirkland Lake, Osisko Mining, and Wexford are not careful, then one of the big boys outside the region could always swoop in and steal Bonterra on the cheap while it is currently out of favor. I don’t like that idea one bit, as there would be more value creation in Options 1 or 2, but it can’t be ruled out either.

Once I make a bit more on some other Gold positions, and peel off some winnings, I’ll be averaging down in my BTR position to lower the cost basis and get ready for whatever partner comes in to take the current team out of their misery. From that standpoint, I believe the current valuation is incredibly prospective for a large re-rating when some of these deals get worked out and get announced over the next 6-12 months.

BTR is one of the unloved and forgotten companies ripe for a JV with a strategic partner or a takeover that most investors are not paying attention to because they’ve been stalled most of the year. That is an excellent time to add or build a larger position before the other shoe drops.

Ely in dollar value column right now. Can’t be both. Sorry.

Thanks for sharing your strategy around EXK Endeavour and DSV Discovery. I own both, have added to both in the last few months, and a still believe EXK is going to surprise folks and get out of the operational batting slump they’ve been in the last few years.

Endeavour closed down a mine (El Cubo) that wasn’t working, got a new mine (El Compass) going, and optimized the 2 primary mines (Guanacevi & Bolanitos). Now their costs should start coming down and economics should improve, which is step 1 in their turn-around plan.

However, their real game changer is Terronera as a massive development project that will completely change their production profile. The market is not properly valuing just how big of a deal that is going to be, and is only rating them based on their last few quarters of production. They are missing the forest for the trees.

Then Parral is a nice project after that, and then they have the pipeline of exploration projects in Chile after that. The best years for EXK are still in front of them, but there is time to rotate from other stocks back into them down the road as nothing is imminent and they need to rebuild trust from investors over the next few quarters of production and show they’ve got their turn-around well under way first.

All of EXK Endeavour Silver’s current projects are solid, but why I remain invested and optimist is for pages 16-19 on this Corporate Presentation:

https://s22.q4cdn.com/579360173/files/doc_presentations/2020/06/June-10-2020-website.pdf

As for Freegold, it is quite an interesting story and getting a lot of eyeballs right now due to Sprott covering it regularly (along with DT of course). I know they already have 6 million ounces, which is sizeable, but I need to dig a little deeper into how it got so undervalued in the first place if that is the case.

Ely Gold has been an awesome success story, and with them having the NSR on Wallbridges Fennelon property, they’ve really surged. I feel it is properly valued at this point, and thus much of the value has already been realized by other investors that got in much earlier. I missed it betting on Maverix, Golden Valley, and Sailfish Royalites, which I did well in, but admittedly would have done better in Ely. I may still get some funds moved over to them as a profit dumpster, because I believe a larger royalty company will buy them out.

Azimut I’m aware of but really don’t know much about it, and will need to do a bit more homework. What is their main value proposition that see as a reason they will outperform their peers?

Ex:
Azimut;
Second attempt. First deleted. Azimut reports they own the largest mineral exploration portfolio in Quebec. it includes 4 Gold properties in Elmore Camp, 2 gold properties in the lower Greesnstone belt, and 6 copper and gold propeties in 6 different Canadian areas. 2019 drilling appeared to show some success in copper and gold in the James Bay area. Then on Jan 14, 2020 they released drill results for “substantial gold mineralization” from there Patwon Prospect, Elmer Gold Property, James Bay Region. Sever holes: .62g/t over 101. 3, 3.15g/t over 102, 2.8g/t over 108.2, 1.68 g/t over 97, 1.54 g/t over 54.1, 1.15 over 129, 1.93 g/t.
This release was met with a few 100% run up and held around $1 or so US since Jan with a drop in the .80 cent range and then recently worked its way back up and Friday reached $1.56 US. I got in around $1.05 taking a chance. Of course, Eric Sprott bought 3 times while I was wondering if I did the right thing. So looks like it has worked its way up hoping for another good PR. I put my one bullet in the chamber and spun the cylinder. But, the drill results aren’t bad and that is only one location of many.

Azimut: the 1.93g/t was over 82 m

Azimut:
Forget Sprott. I was thinking Freegold. Azimut has Hecla, Gold Corp and 3 other partners.

Thanks for the additional info on Azimut. Those are nice grades, but more importantly over very wide intercepts… so they’ll be economical drill hits. Also having Hecla and Goldcorp as partners are pretty solid.

Much appreciated!