Portfolio Management for the active metals investor – Time to tighten up your portfolio
Doc Jim Jones, Private Investor, joins us to share his strategy for investing in metals stocks during the slower summer trading season. We discuss why he thinks it’s best to tighten up your portfolio in these times and the types of stocks he is investing in right now.
+1 David . Agreed with our questions of “why am I paying this price for this resource? Am I on the right track?”
Some other good questions for investors to consider:
– “Why does this company have this market cap if it doesn’t have a resource estimate yet? Is it justified? Can it be sustained when a resource comes out, and where would that resource need to be for things to be squared?”
– “How does this market cap compare to it’s closest peer group in the same subsector? (so explorers to explorers, developers to developers, and producers to other producers with the same production profile).
– “How does this market cap compare to mining stock in different stages of mining, and is it realistic?” (so when an explorer gets a market cap of $100 Million or $200 Million and is it already larger than some of the developers and producers in the same commodity with similar ounces of gold in the measured/indicated/proven/probably categories?)
(If an explorer gets up over $100-$200 Million market cap, without a resource or economic study, then it better be a very special case. What size of resource and project economics (NPV, IRR, Payback period, Capex needed, metals pricing assumptions used) would be needed to justify a market cap in the hundreds of Millions?
– If it is a developer with economic studies in place, that outline the Net Present Value, then what kind of a discount or premium is it trading to that NPV?
– Is there more than one project that should be factored into the valuation? (2-3 projects that each have economic studies or at least a ball park idea from historic estimates or the cumulative drilling done to date). Is the company only getting value for 1 of their projects, making the rest of their projects free upside in valuation?
Ex:
Great stuff. This is a keeper post that I need to tape to the wall at eye level.
Ha! Thanks for saying so David. I didn’t put much thought into those questions, as they were more of a spur-of-the-moment rant, but they are questions bouncing around in the back of my mind when looking at the hot and trending (or the opposite dead and unloved) Explorers and Developers.
As in all markets, some companies end up looking very richly valued after just a few of those questions (mostly the explorers), and other companies (mostly with the developers) start looking undervalued relative to their assets and economic studies would indicate.
There are plenty of other good questions to consider, so maybe we should start compiling a list to tape to the wall. 🙂
I have taped to the wall: “Coming to this Space: Questions To Ask Yourself”
Silvercrest is at the top of my list( SILV )
Agreed Marty. Silvercrest has the higher market cap, but earned it through continuous success with the drill bit for several years, on growing a large tier 1 deposit and they are moving forward with plans for construction in and development in the next 1-2 years. Silvercrest also still has massive exploration upside on their property and have shown they have the mineral goods, so I expect them to continue to grow and expand in the years to come on the veins they have not even had a chance to really explore yet.
In contrast, we’ve seen dozens of explorers run to bloated market caps, that don’t have the same proven “pounds in the ground”, don’t have economic studies in place yet, and some of them don’t even have resource estimates in place yet. Those have become the story stock exploration companies that have moved higher in valuation than the development projects with known resources, and in many instances, the explorers have become swollen in valuation beyond producers with 1-4 mines already in production, all their permits and sunk capex completed, and still have substantial documented ounces in reserves. That’s what makes a market though… (but it often creates retail bagholders once reality sets in and gravity brings the valuation back down to Earth).
A lot of miners chart share an uncanny similarities with Tesla albeit they are lagging a bit in price action but I have a feeling they will play catch up.
Started nibbling on SSR Mining
Doesn’t having a mine in Turkey bother you?
Hi Mike,
I, personally, would take that into consideration. THAT DOES NOT MEAN THAT I WOULD NOT INVEST IN IT.
There are no more Tier 1 / jurisdictions in mining under the current and future simply because the practical, emotional, financial, economic, geopolitical and spiritual world is in such disarray that circumstances( exogenous events) can happen on a dime
I bought a few last week. I look like a sleeper to me with a little div. They are due to have a news report out the 4th. if good they should be ready to go.
Michael Boutros on Gold (32:55) : https://www.youtube.com/watch?v=VhRc613nHX0
What happened to the Hedgeless Horseman, haven’t heard from him recently. He’s good, I’d like him back.
Where’s the Hedgeless Horseman? Let’s get him back.
Erik (the Hedgeless Horseman) was in Finland traveling, and then camping in the woods and out of range, but we chatted last week, and will be getting him back on the show this week. I also appreciate getting his thoughts on the market, his trading strategies, and a look at some of the companies he is liking for risk/reward set ups.
Cheers!
From Miners To Big Oil, The Great Commodity Cash Machine Is Back
Bloomberg News | August 2, 2021
“The economic rebound from last year’s covid slump has powered an explosive rally in commodity prices as consumers forgo vacations and dining out and spend their money loading up on physical goods instead: everything from patio heaters to start-of-the art TVs. Politicians are helping, too, lavishing hundreds of billions on resource-heavy infrastructure projects.”
“The Bloomberg Commodity Spot Index, a basket of nearly two dozen raw materials, surged to a 10-year high this week and is rapidly closing in on the record set in 2011. Brent crude, the global oil benchmark, has again surged above $75 a barrel, copper is headed back toward $10,000 a ton, European natural gas is at its highest ever for the summer season, and steel is changing hands at unprecedented levels. Agricultural commodities such as corn, soybeans and wheat are also expensive.”
https://www.mining.com/web/from-miners-to-big-oil-the-great-commodity-cash-machine-is-back/
It’s One Giant Controlled System with Distorted Monetary Policies, EB Tucker Goes Off on the Fed
August 2, 2021 – Stansberry Research w/ Daniela Cambone
The Federal Reserve will try everything possible to not raise rates says E.B. Tucker, author of “Why Gold, Why Now.” Their recent action in the repo market is another defense mechanism to keep the U.S. dollar as the reserve currency.
“This is a severe drug addiction, they have “financialized” the economy,” Tucker told our Daniela Cambone.
He should go off on the FAKE FED…. lol…… finally catching on…. LOL….. 🙂
+1 As we’ve discussed in the past OOTB, that E. B. Tucker really cracks me up, and he has the ability to nail it on the head with certain statements he makes. Love it!
Yes, I do enjoy EB….. I think he makes a lot of good comments….
Agreed OOTB. I really liked the part where EB talked about minimizing distractions from TV, radio, smart phones all bombarding us with too much negativity, and that he takes several 30 minute breaks for personal quiet time, and goes on walks to allow everything to settle and gains a better perspective.
In addition, he really nailed the points on the strengths in the royalty business model and how the long life 20-40 year Gold, Silver, Copper royalties are going to be paying for decades, and asked where with those prices be over that span of time.
Even though he plugged Copper hard and the royalties they hold for the red metal in Nova Royalty, he also acknowledged that there is still a very good market for Oil and related companies, and how he bought his kids Chevron stock when oil prices when negative for that period of time as a “generational opportunity.”
He also was spot on regarding the “debt ceiling” “repo markets” and desire to control the “money flows” by the FED that is increasingly backed into a corner with only one option of never letting the money printing stop. Really good stuff that most people on here already understand, but still nice that he’s out there making the points on big platforms and putting things in plain terms for people.
Bob Moriarty: This Is The Greatest Time To Invest In Resource Stocks In History
Energy & Gold – August 1st with (CeoTechnician; aka @Goldfinger; aka Robert Sinn)
“Last week, on 321gold‘s 20th anniversary I had the opportunity to spend an hour speaking with Bob Moriarty about some of his favorite junior resource stocks and why this is the greatest time in history to be a resource investor. Bob has been consistent in stating that the world needs a return to sound money, and natural resources will be at the forefront of this return to sound money once the Ponzi economy comes crashing down.”
> Goldfinger: “Good to speak with you today Bob, let’s start with Eloro Resources (TSX-V:ELO, OTC:ELRRF). That’s definitely some notable news, and a stock that we have talked about many times – we were very early in illuminating this company and its potential. So in this hole 18 at Iska Iska, ELO intersected 300 meters of 129 g/t silver-equivalent mineralization, or if you want to make it gold equivalent term, it’s almost two grams per tonne gold. So that is an excellent width and grade, extremely good intercept.”
“The main question is that it’s a polymetallic deposit so there are eight different metals comprising this 129 g/t silver-equivalent grade over 300 meters. There is silver, lead, zinc, tin, copper, gold, cadmium, and even some bismuth. ”
>> Bob Moriarty: “Yeah, it’s a polymetallic deposit. They’ve got silver, they’ve got lead, they’ve got zinc, they’ve got tin, they’ve got indium, they’ve got a bismuth sample and a tiny bit of gold. The key is that all of those minerals can be floated and you can make a silver con, a zinc con, a lead con, and a tin con. But here’s what I do, I’m the only guy that has done this, but I think it’s an accurate way of doing it. Nobody understands what a long intercept means. I used the analogy a couple of weeks ago, they had one fair size interval and one long interval, the long interval has a lot more impact on the total value. What I do is I imagine a cube, 300 meters by 300 meters by 300 meters. Now, obviously that’s the maximum size that you could possibly have. However, it gives you the ability to measure that against a hundred meter cube. Are you with me?”
> Goldfinger: “Yes.”
>> Bob Moriarty: “So I worked up the numbers. I even applied 300 meters by 2.7 (specific gravity) by 2 grams (Au instead of Ag) instead of 129 g/t of silver, you divide by 31.1 to get ounces, and you come up with a hole that is 4.7 million ounces of gold.”
> Goldfinger: “A 4.7 million ounce hole? 4.7 million ounces of gold in one intercept?”
>> Bob Moriarty: “In one intercept.”
> Goldfinger: “Ok, but you’re giving them credit for many meters of mineralization or tonnage that’s not intersected in that little cylinder (the diamond drill core). You’re assuming that the mineralization extends out into an entire cube, that’s a big assumption right?”
>> Bob Moriarty: “Yeah, but here’s the key, and your point is absolutely valid. The only purpose of calculating the hole like this is to give you the ability to measure one hole against another hole.”
> Goldfinger: “That makes sense.”
> Bob Moriarty: “But if you had a cube, and it was 300 meters by 300 meters by 300 meters and 129g/t silver, you would have 7.5 billion dollars worth of metal. And the key here, is if it’s 300 meters in one dimension, but it’s only 50 meters in the other two dimensions, that’s still a f’ing big hole.”
Bob M. has a way with words as well, and those comments on Eloro Resources can cause one to really do a double-take on just how well-endowed that Iska Iska project is looking.
The more Bobby writes, the more one can learn from the Master… 🙂
The casino is alive and well in America, The Big Bull Market has covered a multitude of sins. Nobody cares what the actual price stock is worth in the conventional markets as long as the market keeps going higher. It is a scam bigger than Bitcoin and all the Ponzi’s and Madoff’s rolled into one. Someday the margin calls will happen and as the tide rolls out we will see how over leveraged the system is.
Well stated DT. Yes, it’s a speculative bubble for the ages, and frothy valuations racing higher everywhere one looks (tech stocks, meme stocks, general stock indexes, bonds, cryptos, art NFTs, traditional art, collectibles, biotech, esports, food, even some commodities)
Yes, someday when the tide rolls out and the derivative markets implode, then we will see how over-leveraged the system is, and as Warren Buffet famously quipped “when tide goes out then we’ll see who was swimming naked.”
That is going to be a really fugly nude beach of overleveraged financial institutions. Haha! 😮
The Fed will keep printing and printing and printing. Legislature will continue to sleep through but get some funds for their friends. Regulators will avoid prosecuting as the days dwindle toward their retirement. Presidents and candidates will continue to act like they don’t understand the economy. The people will continue to believe the Constitution blocks their personal freedoms and dream of future dictators.
EMO, yes, I agree 100%. BRAU confuses me. Please check my info, as I might be wrong, but aren’t they trying to earn into 50% of the ‘million ounces’ over the next three years, which will substantially deplete their cash, then have to raise more money to drill even more to try to take 80% of the project in 5 years? Shouldn’t Doc be talking about half a million ounces in stead of the full million? Sure, maybe they can grow the resource to 2 million ounces in the next three years, and then they would have a million with their 50% share, but until then, what do they really have for their current market cap?
Great Bear (GBR) for my biggest mining stock. That one can grow so big no one will fathom it. If only my horrid Mexus could do the same.
it’s looking like Eloro ay have found a hole even bigger that the assholes of Joe, Kamala, Nancy, Chuck, Adam Shiff, Gates, Fauci, Schwab, and Swalwell combined…If only we could ask Rodney Dangerfield to tell us just how big this hole is.
…may have been posted already? Ker/Corey F mentioned:
“Gold Stock Summer Doldrums Ending? with Pro Mining Investor David Erfle”
podcast cut short, U tybe link:
.
https://www.youtube.com/watch?v=d9WiKMBiT5w&ab_channel=MiningStockEducation.com
A PM portfolio of just 7 stocks is high risk due to excessive concentration. Any PM stock, whether large producer or small developer, can drop by 50% – 75% in short order.
In any sector, fewer positions means more risk and more positions means less volatility and lower potential returns. Tradeoffs are a fact of every decision we make. There’s no free lunch.
gold / silver continue as sick puppies. Won’t be happy with a close below 1800, will bail with anything below 1750. Enough is enough.
Matthew, my actions may be the ultimate contrarian sign for you to buy LOL
long RUN
Great interview all around. Food for thought on what is considered value. Agreement seems to be as to whether there is a large mineable resource versus current market cap. Always ask “why am I paying this price for this resource”. Am I on the right track?