What did I learn at PDAC?
- Some people can never have enough free pens or squishy toys. I'd like to see a concerted effort by the mining industry to eliminate all the free junk that is given away at conferences like PDAC. When you feed a pigeon, you'll get more and more pigeons that suddenly show up. Ask yourself if you really want to attract
pigeonspen collectors. People who covet free trinkets are not who we want to attract to an investment conference. On a side note, thanks to Lundin Mining (LUN.TO) for providing small chocolate bars that I gave to my kids so they would still love me after PDAC.
- Copper exploration is hot. There are a lot of big mining companies looking for large scale copper projects. Since there are not a lot of those for sale due to the lack of exploration in the past 5-10 years, producers are now funding juniors to go out and drill. This is good for copper explorers, since there isn't much new institutional or retail money flowing into the mining sector right now. We should all pool our money and hire the Angry Geologist to go out there and find the next behemoth copper deposit for us.
- Cobalt remains one of the hottest metal plays, perhaps because the DRC seems destined for a civil war. The DRC accounts for a whopping 58% of global cobalt production and child labor is abundant. It seems wise to avoid the DRC and get some exposure to cobalt. Clearly, investors are positioning that way, as Cobalt 27 Capital (KBLT.V) just closed a $200 million financing.
- Most institutional investors and corporates remain very leary of Ecuador, despite its mineral potential. I'd include myself in that camp and also avoid Bolivia. On the other hand, I think Argentina is moving in the right direction (at least for now) and they have better wines.
- Solgold (SOLG.L) has a very large advertising budget..maybe because of point 4. Investors couldn't miss Solgold, whether they were picking up luggage at the airport, driving downtown, or getting in a hotel elevator. This week's share price chart suggests that the advertising splurge did little for the share price.
- The market remains fascinated by battery metals and even nickel is getting a boost from it. Perhaps that is in part due to nickel typically being associated with cobalt, but keep in mind that smelters typically only pay for 50% of the cobalt. Unfortunately, there are not many good ways to play nickel. After Inco, Falconbridge, and Breakwater were taken out in the last big nickel surge, the only producer left is Sherritt (S.TO). Sherritt is still recovering from its epic mess at Ambatovy, but the worst of that mess is probably behind it now. And, no, I still don't believe Garibaldi has a world class nickel discovery.
- A banker made one of the most sage comments of the week (shocking, I know). He stated that the mining sector won't take off unless gold and/or copper lead the charge. Those sectors are large enough to draw in generalist funds, which are severely underweight the materials sector. When the mining sector starts to turn, those generalist funds will be dragged into the sector, which they neither like nor understand. However, they won't be able to avoid investing because the sector has a high beta and not participating means that the generalists will get blown away by their benchmarks. So, whether you like zinc, nickel, or something obscure like vanadium, let's all cheer on gold and copper!
- Silver is in the doldrums. I think history teaches us a lot about investor psychology, so sometimes looking at long-term charts can provide good perspective for prevailing situations. At the moment, gold is trading at 80 times the value of silver; the 30-year average is 66. Interestingly, the turning points for silver over the past 30 years have been right around the 80x mark. I generally don't care about silver and just stick with gold. The last time I liked silver was around 2006 and it did very well that time. Now, I would once again consider myself a silver bull. If gold finally breaks out, I think silver will soar even more. Now is a great time to be buying silver stocks, in my opinion, and I've been adding to my position in little-known AbraPlata Resource (ABRA.V), which has a resource that equates to almost two ounces of silver equivalent per share outstanding (and not in the way that Seabridge has a huge resource that can't economically be extracted). I do work for the company, so reach out to me if you want to learn more. Shameless self promotion, I know, but AbraPlata is so undervalued that I couldn't resist plugging it here. I also continue to like Dolly Varden (DV.V) and Endeavour Silver (EDR.TO), whose high cash costs translate into huge leverage to rising silver prices (I have no relationship with those two companies).