A bit of a different Maven Monday this week. Usually I snip out part of the macro editorial from the letter to share, but this week I thought I’d send out the commentary I provided on the six Maven portfolio companies that put out news in recent days.
All have been in the portfolio for some time, so subscribers have had lots of time to position (and profit!). The idea is that some of you may have considered subscribing, but weren’t sure what you would get out of it.
What you get is the weekly letter. It always contains a macroeconomic editorial, of the type you have seen parts of in Maven Mondays. But it also contains comments on interesting industry news, extensive writeups of new investment recommendations, and updates on Maven portfolio companies – what they are doing and why it matters.
If you like this kind of analysis, consider subscribing at www.resourcemaven.ca/subscribe
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Gold Standard Ventures (TSXV: GSV) – BUY; High Risk ($3.42)
Gold Standard released one particularly nice drill hole from North Dark Star, the developing northern addition to the deposit in the southeast corner of the company’s Railroad-Pinion project in the Carlin Trend.
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Last week’s Maven Letter was a lengthy one because I assigned a risk rating to every stock in the Maven portfolio.
Before the bull market began, every mining investment was high risk. The undervaluation was obvious but so was the risk, because there was no way to know when or how strongly the market might turn.
When the turn got going, risk dropped. Investing in gold miners was still a contrarian move early this year but, if you believed that gold was going for it, you could have thrown a dart at a list of gold producers and your portfolio would have done well.
Now both of those phases are over. The deep value, high-risk days of the late bear market are done, as are the early everything-rises days of the nascent bull. Today, as the market matures, it is offering a wider range of investment options – and as options increase so do risks.
That’s where crafting a subscriber portfolio is tough. Each investor has a different risk tolerance. The Maven Letter is about what I am buying and selling, but if that information is to be useful to others then my methods deserve better definition.
Now that
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There was lots to discuss in last week’s letter, starting with the Fed’s decision to not raise rates. I also delved into the big themes I encountered at the Precious Metals Summit in Beaver Creek, which was a very valuable event.
Speaking of conferences: if you have time in late October, consider heading down to the New Orleans Investment Conference. It is a fantastic event with engaging speakers addressing a range of topics and great companies. To register, CLICK HERE.
Enjoy this week’s snippet from the Maven Letter. As always, if you like what you read here you should try the full service: sign up for a free trial HERE.
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On The Macro: No Raise
Glad that’s over with. The Federal Reserve Open Market Committee once again held interest rates steady today. After exceptionally flat trading Monday and Tuesday gold started creeping up this morning, as traders finally gathered the gumption to place bets, and then jumped when the news hit.
The bounce puts the price comfortably back above US$1,300 per oz., a level that acted as resistance in the spring and early summer but turned to support in July. A
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I missed two weeks of Maven Mondays, and for that I apologize. Things are very busy – financings to contemplate, conferences to attend, and investment opportunities to assess – but at the same time the overarching theme in precious metals markets remains frustratingly staid: interest rates.
It’s frustrating only in that debating the same issue over and over for the last few years has gotten boring. That doesn’t mean rates don’t matter. On the contrary: interest rates are the most important driver of the nascent gold bull market. Other factors also matter, but rates are number one.
With that in mind, and looking ahead to this week’s Federal Reserve meeting, I dedicated last week’s editorial to the Hawkish Dovish Fed. My conclusion: whether Yellen raises rates or not, gold will gain over the rest of the year.
After hitting Send on that letter, I spent the week at the Precious Metals Summit in Beaver Creek. It’s a really great conference and I have much to say about what I learned. Those thoughts will go first to subscribers in this week’s letter, out on Wednesday. (Click here to sign up for a free trial or to subscribe.)
Without
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Monday morning, Orezone stock halted trading. Speculators like me hoped it was for news of a takeover bid. Not so: instead, the company announced that its pending resource update will likely reduce the oxide gold count at Bombore by 30%.
The market, not surprisingly, was pissed. ORE lost 39% on Monday and another 19% on Tuesday, to fall from $1.23 to $0.59 over the two days.
I talked with president Ron Little at length on Tuesday night. Before I get to what I think investors should do, I want to go through what happened and why.
Orezone used the engineering firm SRK to do its 2013 resource estimate. That resource was the basis for the Bombore feasibility study. A different engineering firm, Roscoe Postle Associates (RPA), did the feasibility study.
That means RPA took SRK’s resource and pulled a reserve out of it – identified which ounces were economic to mine.
The feasibility study happened during the bear market, and happened in a rush because Orezone needed the study in hand to complete its permit applications before Burkina Faso changed its mining code. As such, the final 50,000 metres of drilling at Bombore were not included in the
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After the gains mining has seen year-to-date, a common question is: what to do now? That was the subject of the editorial in last week’s Maven Letter, reprinted for you below.
I’m off to northwest British Columbia tomorrow, to visit a few projects in the Golden Triangle. I’m excited to see what the retreating glaciers are revealing and to better understand infrastructure, access, and opportunity!
As always, if you’d like to test drive a subscription to the Maven Letter: Click here to sign up now.
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To Hold? To Sell?
Investors who are just joining the metals bull market now have it easy. There’s only one thing to do: buy. The question of what to buy is always there, but if you have limited exposure to this sector on the rise it’s simply a matter of establishing positions.
By contrast, those who entered earlier are facing a conundrum: what to do now? If gold major X is up 100%, mid-tier producer Y is up 250%, and explorer Z is up some amount in-between, what should a savvy investor do?
The answer starts broadly and ends specific to each situation.
On the broad front: the summer doldrums
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Another week, another boatload of news and activity in the mining sector – as if we needed any further evidence that the bull is back.
This week’s Maven Letter snippet includes two In The News articles covering drill results from Gold Standard Ventures and Marathon Gold, which both saw significant share price moves.
The macro article goes through the attributes that will make projects shine in this market. It was written as a prelude to the two stocks I then recommended…but that information is reserved for subscribers. Click here to sign up now.
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In The News
Gold Standard Hits a Hot Hole
The market is a demanding beast. Investors expect companies to churn news out constantly; if activity slows or pauses, people get antsy.
I would say that pretty much describes what had been going on with Gold Standard Ventures’ (TSXV: GSV) share price over the last month. The company had a very busy winter, spring, and early summer: thru January they released fall drilling results from three different targets at its large Carlin trend property, including a hit at North Dark Star that attracted a lot of attention; they welcomed a new major shareholder
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I spent Tuesday last week at Integra Gold’s Lamaque project, which is right beside the city of Val d’Or, Quebec. For those unfamiliar with french, Val d’Or translates as Valley of Gold. And it’s an appropriate name: the city grew up around two gold mines and mining remains the only significant game in town.
That doesn’t mean every attempt to mine gold near Val d’Or has worked out. Looking just at the Lamaque property: two mines were highly successful, producing a joint 9 million ounces of gold over 60 years, while two subsequent attempts ended in bankruptcy.
Now Integra is taking a turn. I bought into ICG in December because the story at that point made good sense:
- A high-grade and growing resource based around a new discovery on the property (not one of the zones mined into bankruptcy).
- A permitted mill, fully upgraded in the late 1990s, able to process 2,500 tonnes per day (tpd) tomorrow pending a few million dollars in repairs and easily expandable to 5,000 tpd.
- A preliminary economic assessment showing the asset could be developed into a mine producing 105,000 oz. gold annually for a cost of just C$85 million and that mine
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From The Maven Letter: March 29
Almost every week the pundits point to a different ‘reason’ for gold to be on the rise.
There’s the rate hike, which ended the pro-dollar positioning that had hampered gold and let the yellow metal rebound. Then there was news from both Europe and Japan that they plan to tighten, an idea that sent the euro and the yen up and consequently the dollar down. Most recently we had Trump’s failure on health care, which has the Trump Bump markets worried that Trump may not be able to accomplish all that after all.
Let’s take on that last point first. The Affordable Care Act Repeal and Replace failure was inarguably significant. Trump’s team pointedly put this legislation on a pedestal, a centerpiece in the campaign and since the election. Their failure, then, to rally enough Republicans to the cause is important.
Everything they try to do from now on will be more difficult, now that those on the far right have seen they can block the administration if they want. Don’t doubt that they will use that power every time Trump suggests something that gives a single iota to the center.
Wall Street
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From the Maven Letter, March 22
Gold is up 4% in a week, performing exactly as I thought it would following the rate hike. The reaction in equities has also been interesting: miners showed extreme leverage on the first day of the move, multiplying gold’s gains 4- to 6-fold, but in the days since have provided no leverage at all (as per the GDX and GDXJ, at least).
The silver ratio also remains intriguing. Silver gained alongside gold on the day of the hike but has ceded ground since, putting the gold:silver ratio in positive territory. It’s commonly argued that silver outperforms gold in an established bull market for precious metals, which is what happened in early 2016. But the ratio has failed to establish a negative slope for 8 months now.
Of course, a few days does not a trend make, but the combination of a lack of leverage from gold stocks over gold and silver not outperforming the yellow metal does give pause. Is the spring run happening?
There are a couple factors to consider here. One is that the price of gold is up against some resistance. The market has shown strong support
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