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2019 - Be a pig, but don't get slaughtered

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It's cliche, but what a difference a year makes.  We started 2018 with a very bullish market for metals and mining stocks.  The euphoria, however, was short lived with the market starting to roll over in February with another leg down starting in July and a horrendous December.  In fact, the major US indices recorded their worst December since the Great Depression.  The Chinese Zodiac calendar had 2018 as the year of the Dog.  In hindsight, I'd say that was pretty apt.  RIP 2018!


Since we're on the topic of the Chinese Zodiac calendar, 2019 is the year of the Pig (starting Feb. 5).  I don't believe in zodiac signs or horoscopes but, interestingly, analyzing S&P 500 returns over the past 90 years indicates:

The average annual S&P 500 return from 1929 to 2018 was 11.2%The average S&P 500 return in Years of the Pig was 20.8%The average S&P 500 return in Years of the Dog was 10.9% Lo and behold, the year of the Pig has the best stock market returns of all 12…

It is wise to listen to billionaires - Part I

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When a person in the mining sector has built multiple successful companies and made over a billion dollars doing so, listening to their advice is a no brainer.  Ross Beaty is such a guy, having built Pan American Silver when he saw an opportunity in silver and Lumina Copper when he later saw an opportunity in copper.

Rick Rule recently did a great interview with billionaire Ross Beaty.  The interview is worth a read given Ross' success in the mining sector.  Here are the key statements I want to highlight for investors and managers in the mining sector:
"This business is all about high risk and high reward...In public markets, given the fact of outsized risk, you want to be looking for things with outsized returns like 100% or 1000%.""If you’re going to be building a public company, go for size. Don’t waste your time on little things.""You can have a deposit that has 100 million ounces like Pebble (Northern Dynasty). It’s almost a goose egg of value if you…

M&A could be an enema for crappy sector performance

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Yesterday saw another significant M&A transaction being announced in the mining sector, with Pan American Silver acquiring Tahoe Resources.  This deal comes less than two months after the merger announcement between Barrick and Randgold, which was well received by the market.

Drain the Swamp!
I'd like to see a lot more of these deals announced because hopefully they will help clean up the mining sector and provide investors with some long overdue returns.  While the broader market has seen a tremendous bull market over the past decade, the mining sector has been stuck in a quagmire.  Not because of metal prices and not because of demand factors, but because the sector has done an extremely poor job of creating value.  In large part, this is because some companies or management teams have been exceptionally good at destroying value.  Public companies are supposed to make investors money and the mining sector has been atrocious in this regard.

Investors Chase Performance - No Love…

Loose lips at Aurion Resources

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I was at the Precious Summit last week, so I wasn't keeping a close eye on the market.  I saw the news that Aurion Resources (TSXV: AU) finally found the potential source of the gold boulders in Finland.  Hole AM18042 drilled intercepted 0.65 metres grading 3,510 g/t gold (or, if you like your results smeared a bit, then it was 2.90 metres grading 789 g/t gold of which 2.25 metres was only 3.0 g/t gold).  That is a whopper of a gold intercept, although it seems like they are looking for needles in haystacks.

I was happy for Aurion and its shareholders, even though I'm not a shareholder, because discoveries and gains are good for the entire junior mining sector.  At least I was happy until today when I pulled up the Aurion stock chart and noticed some peculiar trading action.  Aurion started drilling on June 21 and the stock got a bit of a pop on the news, which is normal.  But then, the volume and price suddenly jumped on August 15.  Then the price really jumped on September 1…

Meet Garibaldi's baby Voisey

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Garibaldi (TSXV: GGI) created lots of hype last year by making insinuations that they had discovered a new nickel deposit that could rival Voisey's Bay.  Eric Sprott was a believer and validated the story, so lots of investors bought into GGI, resulting in a market cap north of $300 million.  An impressive feat given the recent state of the mining sector!

Based on the latest drilling, I congratulate Garibaldi on the birth of baby Voisey.  Aww, it's so small and cute!  Dr. Peter Lightfoot must be a proud papa.


What this baby is still lacking is some size.  The market seems to have clued in on this, when in reality it shouldn't have come as a surprise because this is how exploration typically plays out.  Geology is tricky and involves a lot of luck.  I've met Dr. Lightfoot and I think he is a very knowledgeable and enthusiastic gentleman.  Maybe Nickel Mountain does grow into something big, but it will take lots of time and drilling...and some luck, which factored in lar…

Everybody loves copper - Rio Tinto should buy Turquoise Hill stake

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Markets don't like uncertainty because uncertainty equals risk.  For this reason and US dollar strength, we've seen metal prices plummet over the past few months.  This uncertainty stems from the escalating trade war situation between the US and China, the big fat pig with an insatiable appetite when it comes to metals consumption.

Ironically, despite the recent metal price weakness, large mining companies have never been so eager to acquire large new copper assets.  Lundin (TSX: LUN) is still looking to acquire copper assets, after it lost Nevsun (TSX: NSU) to Zijin.  BHP (ASX: BHP) just acquired a 6.1% equity stake in SolGold (LSE: SOLG), which is advancing a big copper porphyry discovery in Ecuador.

South32 (ASX: S32) is also looking for copper exposure.  South32 already has a $150M JV deal with Trilogy Metals (TSX: TMQ), the base metals spin out from NOVAGOLD (TSX: NG) that has two large copper assets in Alaska that are infrastructure-challenged.  The challenge in finding …

A little dump with the pump in the oil & gas sector - Perrison Petroleum

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Notice that there haven't been any egregious scams like West High Yield ("WHY") in the junior mining sector this year?  The reason for that is probably that the junior mining sector has been performing terribly in 2018.  The lack of investor enthusiasm in the sector and the absence of new dumb money attracted to hot sectors makes it tough to run a good scam.  Consequently, the junior mining sector still has its share of BS, over promotion, and low level scams, but the real egregious stuff is taking place where the suckers are.  Crypto/Blockchain and marijuana.

Today, however, I saw a news release for an oil & gas company that reminded me of WHY.  Perisson Petroleum Corporation (TSXV:POG) claims that they have an MOU with Lan Cheng Limited, a private investment fund comprise of "a network of wealthy individuals, associated institutions and private equity groups which invest in large diverse projects on a project-by-project basis."  Under the MOU, Lan Chen wi…

Trade tariffs create risks and opportunities in base metal stocks

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If you're not familiar with the Visual Capitalist, I highly recommend that you check out the website and signing up for the daily email.  Content is always visually stunning and covers a broad range of topics.  Yesterday's post - The Base Metal Boom: The Start of a New Bull Market? - by Nicholas LePan is an excellent one, although the timing was unfortunate.  Base metal prices took it on the chin overnight as The Donald announced that the US will potentially slap tariffs on another $200 billion of goods from China after August 31.

While I agree with the Visual Capitalist article that the electric vehicle boom and electrification of everything will drive the next metals boom, the immediate reality is that base metal consumption growth is totally driven by China.  This growth isn't from the Chinese making lots of EVs and installing solar panels everywhere; for the time being, it is still primarily from infrastructure growth and economic expansion.  The chart below, extracted…

Silver outperforms gold for a change

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There seems to have been increased talk about silver over the past few weeks.  Rather than rehashing the reasons why, here are a couple of good articles about how it may be silver's turn to shine:The Assay - Indicators Point to a Silver Rally Silver Seek - New Silver Bull Coming I'd also previously indicated on this blog that a gold-silver ratio of 80 has historically marked the bottoms for silver.
Interestingly, silver moved up 2.5% yesterday while gold was only up 0.2%.  Could this be the start of a mean-reversion trend that sees silver move back towards its more typical range of 1-to-65 versus gold?  That would imply that silver should be trading at $20.75/oz, based on the a gold price of $1,349.  I hope so, given the significant silver exposure in my portfolio.  However, I have a hard time believing that silver can have a significant rally without gold's participation.  If gold can break out of its range and trade above $1,370, then I think silver will do very well.

Whi…

Tin - no longer a boring metal!?!

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Tin is a boring metal.  It is used predominantly for solder (yawn!), and for applying a thin, corrosion resistant layer on metal (a.k.a. tin-plating) (double yawn!).  Or, so at least I thought.

Recently, Rio Tinto Ventures hired MIT to study which metals would be most impacted by new technologies such as autonomous and electric vehicles, renewable energy, energy storage, and advanced computing and IT.  Never in my wildest dreams would I have expected tin to come out at the top of that list, edging out lithium and cobalt.


We've all heard lots of hype about lithium, cobalt, nickel, and even vanadium being the hot metals associated with electric vehicles and batteries.  Lithium has lost some of its luster due to Tesla's struggles as well as potential that SQM could flood the lithium market.  I still like cobalt due to the supply concentration from the DRC, a hellhole of a country that, ironically, has amazing mineral endowment.  But, this is the first time I've seen or heard …