Wednesday, 25 October 2017

Dolly Varden looks interesting on a pullback

Garibaldi (TSXV:GGI) is the darling of British Columbia's Golden Triangle at the moment and we might even see some assays in the next week.  It seems like an uber speculative investment with a market cap approaching $500 millionđŸ˜¨, but the fact that Eric Sprott continues to aggressively invest in Garibaldi suggests it may actually have a significant nickel discovery. Mr. Sprott recently invested another $5 million as part of a private placement and now controls 11.7% of GGI.  Drill results better be good or GGI (and related pump-job MTS) are going to go down faster than a peregrine falcon (random fact: peregrines can achieve speeds of 320km/h in its hunting dives).

GT Gold (TSXV:GTT) illustrates what can happen to hot exploration stocks when results start to disappoint.  That stock is now 60% off its highs, even though the company's latest news release included the statement "Possibly the best is yet to come." (link)
I don't feel sorry for whoever the sucker was that paid $2.75/share for GTT.  Serves you right for being dumb enough to think that the company was worth $200 million based on a few drill holes.  These are the lottery tickets that I referred to in an earlier blog post.  You might get lucky and hit the jackpot with a stock like GTT (or GGI...or NVO), but the odds are against it when the valuation gets out of whack with reality.  When stocks like these shoot up, they become a high risk, low reward situation and that is not a smart investment strategy.  More often than not, they turn out like GT Gold, Cordoba Minerals, etc. etc.

Another company in the Golden Triangle that I recently took a look at is Dolly Varden Silver Corporation (TSXV:DV).  I'd classify DV as a low to medium risk, high reward situation.  Here are the reasons why:
  1. Dolly Varden only has a market cap of $28 million.  The odds of Dolly Varden being a 10-bagger with a new discovery appear far greater than the odds of Garibaldi, GT Gold, or Novo Resources going up 10-fold from where they are currently trading.  Garibaldi and Novo are already 10-baggers and 100-baggers are almost as rare as unicorns, even in junior mining.
  2. The company actually has a mineral resource estimate.  An August 2015 report estimates 31.8 million ounces of silver in the Indicated category and 10.8 million ounces of Silver in the Inferred category.  There is actually a lot more silver in the area, but the majority of it is below the 150 g/t silver cut-off used to calculate the resource.  The average resource grade is 321.6 g/t Ag for Indicated and 373.3 g/t Ag for Inferred.
  3. The odds of finding mineralization are generally better when the occurrence of mineralization has already been found in an area.  Over 20 million ounces of high grade silver have been extracted from the Dolly Varden property.  The Dolly Varden deposit was a briefly mined from 1919 to 1921 with an average production grade of 1,109 g/t silver and Torbrit was mined from 1949 to 1959 with an average production grade of 466 g/t silver.
  4. Hecla recently tried to buy the company for $0.69 per share, just above where the stock is currently trading. 
  5. Dolly Varden has already announced a new high grade discovery, but it does not currently appear to be priced into the stock.
Let me elaborate on that last point.  On August 14, 2017, Dolly Varden announced a new discovery with hole DV17-058 intersecting 16.1 metres grading 293 g/t silver equivalent in an area 200 metres north of the Torbrit deposit. The stock popped on the news, but then gave back all of the gains.  This might have been because the headlines focused on a broader intercept that included some grade smearing.  The true width of the better portion of the intercept was only 6.27 metres grading 481.1 g/t Ag .  So, hole 58 did make a new discovery with a decent intercept, but the company lost credibility in my eyes by highlighting the core length in the news release headline and smearing grade.  The company redeemed itself in the August 29, 2017, news release (link), by highlighting 6.72 metres of true width grading 1,272 g/t silver equivalent in hole DV17-63 in the new zone identified by hole 58.  The best intercept in that hole was actually 10.05 metres grading 852.2 g/t silver (929.4 g/t AgEq) in VMS style mineralization 427.85 metres down hole.  That is a very nice grade intercept, both in terms of grade and width.  If there is continuity of this mineralization, it could have a significant impact on Dolly Varden's total silver resource.  I would expect the company to drill follow up holes this year, as the drill program was expanded in late September to 12,000 metres from 5,000 metres.

Dolly Varden's stock went up by almost 20% on the back of hole 63.  But once again, it has given back all of the gains and is now trading back in the low $0.60s.  Any further share price weakness will make DV quite attractive as a value Golden Triangle play.  Downside risk is reasonably low due to the existence of an actual resource, as well as interest expressed by Hecla.  If planned drilling in the area north of Torbrit hits more mineralization like hole 63, then this stock has the potential to trade up substantially from its current valuation to reflect the size of the discovery.  Safe and boring, but I'm OK with that.


Disclosure: I do not own shares of any of the companies mentioned and have no relationships with any of the companies.  I may buy shares of Dolly Varden in the near future.

Wednesday, 18 October 2017

5 Questions to ask before you invest plus one more from me

The Investing News published an article earlier this week titled "5 Questions to Ask Before You Invest in a Gold Junior Mining Stock."  It is a decent piece with some good advice from a variety of people in the mining industry.  The questions the article suggests you ask are:

1. Who is on the management team? 
2. Where is the property?
3. What is the geology like?
4. How far along is the project?
5. Is the business viable?

Let me add one more:
6. Does your mining company plan on "diversifying" into the marijuana or cryptocurrency/blockchain space?
If the answer to this is "yes" or "maybe", then run the other way because that would signal to me that the mining projects probably are not viable and the company is jumping on a bubble bandwagon.  Just because it is called cryptocurrency mining doesn't mean that it has anything to do with mining!  But that is exactly what MX Gold (TSXV:MXL) is doing (link) and in a news release issued today the CEO stated that "I truly believe that the sector can provide our shareholders with a unique angle to differentiate ourselves from other mining companies."  You can't make this stuff up! 

MX Gold spent $471,506 on Professional, management and consulting fees, $179,836 on Salaries and benefits, and $250,516 on Investor relations and public company costs in the first half of 2017.  Rather than looking for investments that have nothing to do with mining, perhaps management should have focused on its mining business and things like NI43-101 disclosure standards in order to avoid the BC Securities Commission having it retract a whack of bad disclosure relating to its mining projects (link).

In my opinion, wasteful spending and a lack of focus is far too rampant in the junior mining space.  Capital is scarce and should be allocated to quality projects and teams.  MX Gold recently raised $4 million (at $0.10 per unit with a full 5-year warrant at $0.20), very little of which is likely to be spent of real mining work since the company had a working capital deficiency of $1.6 million at June 30 and a burn rate of $2.3 million per year based on the most recent financials.  My guess is that the $4 million is going to disappear very quickly, with very little going into the ground.  More than likely, money will be spent on things like this pump piece by Future Money Trends (link), for which the company paid $85,000 last year.  The only thing getting "mined" here seems to be investors' pockets.


Friday, 13 October 2017

Garibaldi answers some questions and jumps another 33%

Garibaldi Resources (TSXV:GGI) issued a news release this morning that answered some of my questions in yesterday's post.  They've now drilled an additional 11 holes since EL-17-01 (3,000m in total) and all of those holes have intersected "broad sections of disseminated to blebby net textures sulphides (pyrrhotite-pentlandite-chalcopyrite), hosted in olivine gabbro".

To the company's credit, they have also posted more than 20 pictures of core samples from the E&L drill program and pictures showing the rugged terrain on their website (link).  I commend that kind of disclosure and transparency.  The core highlights various intercepts with massive sulphides, which should carry good nickel and copper grades.  But, the question remains how broad are the massive sulphide zones versus the disseminated sulphide zones, which may not contain enough mineralization to be economic.  So, while I appreciate the additional information from the company, on the assay results will start to provide a true sense of what Garibaldi has discovered.  Today's news release indicated that assay results will be released as they become available in the second half of this month.  In other words, we could see actual results as early as next week.

Today's release fueled excitement in GGI, with the share price closing up 33% at $3.57 with over 6 million shares traded in Canada.  The high of the day was $4.20, at which point those who bought on Wednesday would have doubled their money.  For those lucky enough to have bought a few months ago, you now have a 20-bagger without a single batch of assays results.

I've been on the sidelines watching Novo Resources, GT Gold, and Garibaldi because I prefer certainty over speculation.  However, grassroots exploration is clearly where the massive action is in the junior mining market right now.  Therefore, the next time I see a good drill result with the potential for a new discovery you can bet that I will be jumping into the action posthaste and suggest others consider doing the same!

Thursday, 12 October 2017

Can WHY's Frank Marasco turn $10 into $326 million?

While we are waiting to see what the Alberta Securities Commission does on West High Yield (TSXV:WHY), I perused the bullboards to see if some investors still think this is a credible deal.  The number one thing that confirmed was that there are a lot of gullible people posting on the bullboards.  But one post prompted my interest, as it stated that WHY CEO Frank Marasco and his family control almost half of WHY shares.  As it turns out, Frank and family really do control about 43% of WHY shares.

I had to do some digging to find out how much Frank paid for these shares.  Going all the way back to the June 2006 WHY prospectus, I learned that the 20 million shares held by West High Yield Holdings Ltd. were acquired for less than the cost of a pizza.  Ten dollars!  If the deal is real, which of course I do not believe given the evidence to the contrary, then those 20 million shares alone could be worth C$326 million.


A 15-bagger without a single drill result - Garibaldi Resources (TSXV:GGI)

Sometimes you get the feeling that other people may have a lot more information than is publicly available when it comes to mining stocks.  A good example of that at the moment is Garibaldi Resources (TSXV:GGI).  The trading in GGI has been pretty wild the past two days, with the stock dropping 20% at the open yesterday and tripping a circuit breaker.  I thought that perhaps somebody got wind of results before they came out, but then the share price recovered the losses today and jumped 15% in the last 30 minutes of trading today. 

Looking back a little farther, trading volumes in GGI suddenly exploded in late July 2017 and the stock has traded an average of 1.5 million shares per day in Canada over the past three months.  What changed three months ago?  On July 27, 2017, the company announced that "Widespread pyrrhotite-chalcopyrite mineralization has been identified on surface in gabbroic rocks that outcrop over a broad area at previously unexplored "Anomaly A", approximately 6 km north-northeast of the historic E&L nickel-copper-rich mineralized zones where drilling commences shortly."  Fair enough.  A potential new discovery in the hot Golden Triangle area of British Columbia should get some attention in this market.  But the run up in the share price and the market cap, which now sits at $232 million, has been nothing short of remarkable given the lack of details on the discovery to date and leave me wondering who knows what and if any people have taken a peak at the core.
On Sep. 1, 2017, the company issued a news release indicating that the first drill hole " intersected two long intervals of nickel-copper sulphide mineralization totaling 176 meters and consisting of pyrrhotite-pentlandite-chalcopyrite in the first drill hole..." and "Additional highlights of the first drill hole:
  • EL-17-01 entered mineralized gabbro beginning at a depth of 51 meters with disseminated sulphides continuing to 169.5 meters.  A second section of disseminated sulphides started at a depth of 274.5            meters and continued to 332 meters.   Meter-scale intervals of up to 30% sulphides at the base of the intercept occur as heavy disseminations, net-textures and gash veins;
  • EL-17-01 remained in the E&L Intrusive Complex (ELIC) from the collar to the end of the hole at a depth of 441 meters;
  • Core is being processed and assays will be reported as soon as possible."
GGI stock popped from $0.70 to $0.94 on the news, which is reasonable.  But that is where things get strange.  In the same release that teased about good results from the first drill hole, the company announced that it had arranged a $6 million non-brokered private placement consisting of $0.65 units, which include a full 2-year warrant exercisable at $0.90, and flow-through shares at $0.75/share.  First of all, why rush to raise money if you think you have a great discovery?  To little old cynical me, this seemed like a "friends and family" style private placement with cheap stock.  The regulators also took issue with the timing of the PP and made the company revise the pricing to $0.82/unit and $0.92/FT share, which was still a great deal because the market price was $1.81 when the financing revision was announced.

The financing closed in two tranches on October 2 and 4.  Lo and behold, Eric Sprott had stepped up for $2.5 million of the placement.  Eric is a very smart and hard working man, so I'm not surprised to see him in the deal and view that as a positive sign.  On the flip side, the CFO sold 40,000 shares on Sep. 28 and a Director sold 50,000 shares on Sep. 6; I guess they couldn't wait for the assays.  But then, an insider bought 173,600 GGI shares yesterday, based on trades marked with the insider tag.  Now, I can only assume that the buyer must have been Eric Sprott, as surely all management and directors would be blacked out pending assays.

Speaking of assays, where are they???  I know labs in British Columbia are backed up right now, but I don't see how the assay results from a priority hole like EL-17-01 haven't been announced by now.  It has almost been six weeks.

Frankly, GGI has me confused.  The hot share price action and Eric Sprott's involvement suggest good things, yet the insider selling, delays in assay reporting, sudden surge in trading volumes and wild price swings raise doubts.  On top of that, the nickel market still sucks because inventories are too high and I don't like the mention of "disseminated sulphides" in the core of hole EL-17-01.  Disseminated sulphides usually mean low grades, which are not good in this part of the world because the terrain looks something like the image below.  Grade is definitely king in this part of the world.
Investors are betting that GGI has something big at its E&L Project.  The stock is up 15-fold since July without a single drill result.  I'm the kind of investor who waits for assays...and I remain on the sidelines, very jealous of those who got in early!


Tuesday, 10 October 2017

One for the value watchlist: Chakana Copper

A double thank you to IKN.  The first is for helping to bring viewers to this site, which is greatly appreciated and an honour.  Insight from IKN and the Angry Geologist have been extremely valuable to me in the past and their unbiased and helpful work was part of the inspiration for this blog.

The second thank you to IKN is for highlighting the pending RTO of Remo Resources (TSXV:RER - halted) by Chakana Copper Corp.  I've taken a peek and I really like what I see, both in terms of the team and the project.

The Team
David Kelley will be President & CEO of Chakana.  The last time I met David he was working at MMG as the Exploration Manager for the Americas, which means he looked at a lot of projects and obviously found this one to be one of the more interesting available.  David has an extensive technical background, including direct experience in Peru at MMG's giant Las Bambas copper project.  Joining David on the board of directors will be John Black, another strong technical expert with extensive experience in Peru, whom I have a lot of respect for.  I have never met Douglas Kirwin, Chairman and Director, but he also looks very strong on paper with 45 years of international exploration experience.

The Project
Chakana is working towards acquiring 100% of the Soledad Project, located in the western ranges of the Andes Mountains in Peru.  The Project hosts a cluster of near-vertical magmatic-hydrothermal quartz-tourmaline breccia pipes that contain copper-gold mineralization, associated with silver, zinc, lead and moly.  The thesis is that the breccia pipes may be related to a deeper porphyry deposit.  The company has commenced a 16,660m drill program to determine the geometry of several pipes previously drilled and the first two holes look very promising.  Hole SDH17-017 intercepted 146.6 metres grading 2.51g/t Au, 48.6 g/t Ag, and 0.77% Cu from surface and hole SDH16-018 intercepted 209.0 metres grading 2.22 g/t Au, 69.6 g/t Ag, and 0.96% Cu from surface.  Some historical drill results are highlighted on the website of Condor Resources (TSXV:CN), which optioned the Soledad Project to Chakana.

The Soledad Project mineral exploration concessions only cover 11.4 square kilometres, which is  a bit smaller than I would like at a company hoping to find a large porphyry, and there will be future cash payments totaling US$5.375M and a 2% NSR (50% of which can be bought back fro US$2M).  However, these are exceptional gold and copper grades, especially since the best grades are near surface.

Valuation
Chakana currently has 41.3M shares outstanding and will issue 1.2M shares to RER shareholders as part of the RTO, plus 0.2M shares to finders.  It also plans a minimum $6M equity raise at $0.50 per share prior to completing the RTO.  So, coming out of the gate, Chakana should have 54.7M shares issued (more if the equity raise is over $6M), a valuation of roughly $28M at $0.50 per share, and around $8M in cash.

I need to take a closer look at the Soledad Project, but at first glance $28M for a project with these grades and this team suggests a lot of upside potential.  Thanks IKN, this is definitely one to watch!



Waiting for an update on West High Yield

Trading in West High Yield (TSXV:WHY) was halted before the open on Friday.  It appears that IIROC is seeking "clarification of company affairs."
Bloomberg is doing some good work on this, with an update on WHY on Friday afternoon.  In a nutshell, the Alberta Securities Commission is looking into the purported transaction, the purchaser has a checkered past, and the purchaser's counsel (Baker McKenzie) is not aware that they are acting for them or any connection to the deal.

I'm waiting with bated breath to see what happens next with WHY and how quickly the deal unravels.  I've seen a lot of scams and frauds in my career, but this seems like the most obvious of the bunch.


Thursday, 5 October 2017

WHY oh WHY?

As a follow-up to the last post, 2.36 million shares of West High Yield (TSXV:WHY) traded today and the stock closed at $2.00.  Clearly some investors think there is a chance that this may be a legitimate deal and the boards were buzzing.  Even Bloomberg picked up the story.  I like the part where Baker McKenzie, the reported law firm for the buyer, told Bloomberg that they have no knowledge of the deal!

WHY even filed a Purchase and Sale Agreement on SEDAR today.  Take a look at Sections 2.2 and 2.3, which basically state that the purchaser will wire USD$750M to WHY in exchange for share certificates representing one hundred percent of the then issued and outstanding securities of the Corporation.  Huh????  That is a takeover bid, not an asset sale.  How is management of WHY going to deliver 100% of the shares of the corporation, most of which are held by shareholders, and how do the shareholders get paid?  This is not even a viable transaction!  Never mind section 5.1.1.6 of the agreement, which requires WHY to enter into take or pay agreements on or before the closing date.  Take or pay for what and how?

Not that anybody should need any more clues that this agreement is suspect, but the Purchaser's Counsel is listed as "Baker & McKenzie LLP".  That firm dropped the "&" from their name last year and is now known as "Baker McKenzie LLP".  Also, the Purchaser's address is a home built in 1992 and the email address is @AOL.  All of this information is readily available on the web.

This blog is supposed to be about finding value investments in the mining sector.  Doing that is a lot harder than finding scams and promotes.

If is smells like a scam....West High Yield

This morning a little magnesium company named West High Yield (TSXV:WHY) announced an agreement to sell its mining assets for USD$750 million.  Is anybody dumb enough to believe that a company with access to USD$750M is going to pay this amount for a company with a market cap of $21 millon and a working capital deficit of over $2 million at June 30/17?  Shockingly, the answer is YES!

After WHY re-opened for trading at noon EDT today, the stock shot up from $0.36 to as high as $3.75 per share.  It has since pulled back to $1.40 per share with almost 200,000 shares traded.

A bit of digging suggests no evidence that the buyer, Gryphon Enterprises, LLC, is a business sufficiently large enough to come up with USD$750M (or probably even 1% of that).  Also, I noticed that WHY issued 1,893,333 units only about a week ago for $0.30 per unit.  I doubt a company in the midst of negotiating an asset sale would do a financing, and a deal this size doesn't happen overnight.

If it walks like a duck and quacks like a duck, it probably is a duck.  This one walks like a scam and smells like a scam.  In my opinion, the regulators should have asked for more information from the issuer before allowing this stock to re-open for trading.

Wednesday, 4 October 2017

WTF? (Why The Fall) - Golden Queen Mining

The junior mining sector can be enigmatic.  Shares of Golden Queen Mining (TSX:GQM / OTC:GQMNF) closed yesterday at $0.57 and the stock trades an average of 57,000 shares a day on the TSX.  Without any news, or at least anything formally disclosed, the stock opened this morning at $0.33, down 42%!  At 1:01pm EDT, the company issued a release indicating that there is no undisclosed information.  The stock finished the day at $0.41, down 28%, with over six million shares trading hands in Canada and 6.9 million shares in the US, roughly 80 times the average daily volume.  WTF?
One rumor I heard is that a newsletter writer was responsible with a sell recommendation.  The chart below shows the GQM share price for the past two years.  If the massive sell-off today was due to a newsletter writer's recommendation and you are a subscriber, ask yourself if you really should follow his or her advice on small cap stocks with limited liquidity.  You'll overpay to establish the position and you'll get crushed when the herd heads for the exit, which may explain the action today.  This type of market action also shakes the confidence of other investors who are left wondering if there is something they are missing.  The Golden Queen is looking rather tarnished!

Let this also be a lesson for the investors who repeatedly tell me that my clients should get more newsletter writers involved.  Sure, the extra buying is great, but newsletter followers don't tend to be long-term investors and seeing them sell is not so much fun or, as GQM saw today, can be very destructive.


Tuesday, 3 October 2017

Nice drill results from Canada Zinc...stock happened to rise 14% before the news

Canada Zinc (TSXV:CZX) just announced some nice drill results after the close:
Drill Hole A-17-137 hit 57.79 metres Grading 11.79% Zn+Pb and 19.1 g/t Ag - including High-Grade Core of 22.61% Zn+Pb and 36.2 g/t Ag over 15.44 metres

Earlier today, I was wondering why CZX was up 14%.  It was a good day in the zinc space, but it was almost like somebody knew the news was coming.  Higher volume today, before the news, then on any other recent trading day in the past month.  764,502 shares traded today before the news, which was even more than the 409,400 shares traded on Sep. 15 after the last drill results were released.

Hmm, call me cynical but it almost seems like some brokers or investors at Leede Jones Gable and PI Financial knew these results were coming out based on their aggressive buying today.  They were 55% of the buy volume.  The stock also happened to rise substantially in the first half of September leading up to the last drill results news release.  I'm not saying this isn't all coincidence, but it does smell a little fishy.

Always read the disclaimers!

Before you believe anything you read from third parties in the junior mining space, always, always read the disclaimers!  Here is an example I received today in the way of a very promotional email linking to an article on International Battery Metals (CSE:IBAT).  Below are excerpts from the disclaimers in that article.  Kudos to the authors for full disclosure, but pity to the investors in IBAT who believed the glowing promo article and didn't bother reading the disclaimers and failed to realize that the article was for entertainment purposes only.  Ouch!

In this case the Company has been paid by International Battery Metals. In this case the Company has been paid by International Battery Metals one hundred and twelve thousand five hundred US dollars for this article and certain banner ads. This compensation is a major conflict with our ability to be unbiased, more specifically:
This communication is for entertainment purposes only. Never invest purely based on our communication...Oilprice.com receives financial compensation to promote public companies. This compensation is a major conflict of interest in our ability to be unbiased.  

Buying junior mining stocks can be like buying lottery tickets, but it shouldn't be

I've received a few emails in the past week aggressively pumping Los Andes Copper (TSXV:LA), so I thought I'd check it out even though these shamelessly promotional articles are almost always a huge red flag.  My message to mining investors is that they should run the other way when they see articles or emails written in single sentence paragraphs and using over the top, bullish language.  Here is why - if a Canadian lottery was paying these promoters, here is what they might say:

The Canadian government is giving away huge sums of money and every citizen is entitled to participate for as much as they want!

Not only can you make huge returns on your money, but the proceeds are absolutely tax free.  Where else could $10 get you millions of dollars...tax free!

Yet, not everybody has picked up on this lucrative opportunity yet, so investors should jump in as fast as they can before the masses get involved.

Of course, what they would fail to mention is that the odds of actually winning are millions to one and that the odds of winning are in the government's favor.  Lottery tickets are not good investments and should not be a part of anybody's retirement strategy!

The sad thing is that I see enough of these promotional emails and articles that some investors out there must fall for them.  Some junior mining investors don't realize that buying shares is very similar to buying lottery tickets.  The odds of investing in a property that turns into a mine are against you.  To make matters worse, there are characteristics of the junior mining sector that make it an ideal environment for scammers and cheats.

The purpose of this blog is to help non-technical investors understand the junior mining sector a little bit better.  My plan is to provide posts to help investors navigate the minefield that is junior mining, or to scare them enough that they don't lose their hard-earned money.  In the near future, I'll provide a checklist I use when evaluating junior mining companies to hopefully shift the odds of success in my favor.

The blog will also provide an outlet for me to vent about the aspects of the junior mining sector that really tick me off.  From an insider's perspective, it is disgusting to see how much money is wasted by mediocre companies with projects they know are substandard just because it provides them with employment.  The junior mining sector is the least efficient sector I have seen in my 25+ year career because capital certainly does not go into the highest quality companies and way too much money goes towards stock promotion.  The reason that this aggravates me is that I now work as an investor relations consultant to junior mining companies (full disclosure: my clients are Tinka Resources (TSXV: TK) and West Kirkland Mining (TSXV: WKM).  I will only work for a company if my research indicates that it is a worthy investment with an attractive risk-reward profile and I refuse to be overly promotional when pitching companies.  My mantra is that I want my clients to under-promise and over-deliver in order to make investors money over time.  The challenge is that we are competing for a limited pool of investment dollars against other companies that have no problem over-promising and under-delivering.  Investors falling for the promotions need to realize that they are effectively buying lottery tickets and the only way they'll "win" is if the company gets lucky and actually has a major discovery.  Like the lottery, the odds of that are high.

I told you there would be some ranting!  Anyways, back to the example of Los Andes Copper.  I spent less than five minutes looking at it and here are my observations:
  1. The recent drill results hit some major copper-moly intercepts with nice grades like  506.0 m @ 0.57 % Cu, 357 ppm Mo and 1.1 g/t Ag (0.67 % CuEq) in hole V2017-10.  Sounds great, right?  The newsletter writers certainly made it seem so.  Unfortunately, this intercept started 486 meters down the hole and this was a pretty steeply drilled hole (75 degrees).  Why is that a problem? These are only good grades for a large open pit operation and anything this deep is too deep for a pit.  Just think about how much would it cost and how long it would take to pre-strip the 400 meters of waste rock on top of the mineralization in this area; also, as the pit goes deeper, the sides will get pushed out into unmineralized rocks, further adding to the amount of waste and cranking up mining costs by hundreds of millions of dollars.  Using my lottery analogy, this intercept is like getting all of last week's winning numbers on this week's ticket.  You're not getting a prize, sorry.
  2. A PEA on the Vizcachitas project was completed in 2014 and it confirmed my suspicions.  The initial capital was $2.9 billion dollars.  At $2.75/lb copper and $13.64/lb moly, the after-tax NPV was a meager $274 million with an IRR of 9.5% and a 6 year payback.  Those are not good rates of return for such a massive investment, so this project is not likely to go anywhere until metal prices are much, much higher.
So, after five minutes of looking at Los Andes I decided it was not a good investment for me despite the company's large mineral resource and my positive outlook for copper.  Could the share price go higher?  Sure, if copper prices go up, but then every other copper stock out there is also going to go up.  I would rather invest my money into something that has a lower valuation and more potential to become a mine with at least a 20% IRR at today's metal prices (and at least 30% on a PEA).  I'm looking for value and this isn't it.

Even though I quickly ruled Los Andes out as an investment, I did a bit of extra digging for the sake of this blog post.  I noticed that Bahamas-based Turnbrook Mining Limited owns over 58% of the outstanding shares of Los Andes Copper and has been its biggest backer.  I've never heard of Turnbrook Mining, so I dug a little deeper and discovered a link between Turnbrook and the Panama papers.  As per this Reuters article and this translated CIPER article, Gonzalo Delaveau, a director of Los Andes Copper, was a key Chilean figure who got tangled up in the Panama Papers.  Mr. Delaveau resigned as the president of the Chilean branch of Transparency International (a German-based organization that seeks to monitor and root out corporate and political corruption worldwide) when they Panama Papers revealed that he was an intermediary to a number of the offshore companies identified in the Panama Papers, including Turnbrook Mining.  I have no clue whether there has been any wrongdoing or not, but I have no idea who is behind Turnbrook Mining and where their money and assets have come from.  My investment strategy is to try to find high reward potential with relatively low risk. Los Andes seems like low reward and high risk.

If anybody from Los Andes Copper reads this, I'm sorry to pick on you in my first blog post.  My view is that you wasted money paying biased newsletter writers to hype your story to make it sound better than it really is.  That is not serving your shareholders well and it takes capital away from other projects with better economics that should be advanced.  Oh, and you should remove the paid research report from your website because the regulators take the view that it has to be NI43-101 compliant if you disseminate it and that report is not compliant!


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

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...