- March 26, 2017
We are back with a review of the major gold producing companies to take a pulse on the current state of the supply side of the market and how it impacts the junior gold mining sector. We also provide updates from a high-grade gold-copper project in Turkey, a Mexican prospect generator, and a zinc explorer in Manitoba.
- March 12, 2017
PDAC comments and themes. Buying a Canadian zinc explorer and a follow-up of the mid-week purchase of a Peruvian zinc explorer. Updates from PDAC from several companies.
- March 6, 2017 Alert
An Alert has been posted.
- March 5, 2017
As we arrive in Toronto for PDAC 2017, we summarize the impacts on our portfolio from the recent flurry of adjustments. We also review news from several Canadian exploration and development companies and a prospect generator in Chile.
Fatal Flaws in the Junior Mining Sector
Our investment thesis for selecting junior mining companies involves identifying the rare quality (economic) projects available today and unmasking any potential fatal flaws (if they exist) early on, rather than chasing metal-price leverage or optionality plays managed by companies with marginal projects.
A reality-based methodology for evaluating opportunities in the junior mining sector | August 9, 2016
In the following article, we explain our reality-based methodology for evaluating potential investments in the junior mining sector using our take on the resource revision at Orezone Gold’s (ORE.V) Bombore gold deposit as a practical example.
Part II: Will mining boom again, Dad? by Brent Cook | July 10, 2015
Continuing the discussion of busts and booms.
Why Exploration Insights?
Exploration Insights offers the sophisticated speculator independent and unbiased analysis of the junior mining and exploration market. It is written and produced on a weekly basis by Brent Cook and Joe Mazumdar, two veteran economic geologists and mining stock analysts.
Successful speculation in minerals exploration requires an edge: the ability to differentiate between fact and fiction. Exploration Insights provides you with rigorous factual analysis based on decades of industry-related experience in over 60 countries. These insights are supplemented by extensive on-site field evaluations of mineral properties. For an exploration speculator, there is no substitute for in-the-field experience to truly understand both the potential for a mineral discovery and the fatal flaws that make an economic discovery all but impossible.
From inception in February 2008 through year-end 2010, Exploration Insights' performance was strong, returning an average gain of 173% on the unsold positions and a gain of 319% on positions held at year-end. In 2011, the mining sector, and particularly the junior sector as measured by the Junior Gold Miners Index (GDXJ), collapsed, falling 26% in 2011, 23% in 2012, and a further 59% in 2013. By comparison, the Exploration Insights portfolio showed a loss of 2% in 2011, was down 14% in 2012, and off 18% in 2013.
For 2014, mining and metals were down again, with the Gold Bug Index (HUI) off ~18% (~38% from the 2014 high) and the S&P/TSX Global Mining Index (TXGM) down ~15% on the year (~26% from the 2014 high). For our purposes here at EI, the Van Ecke Junior Gold Index (GDXJ) is probably the closest proxy for our portfolio. The GDXJ also had another bad year: off ~25% and down ~45% from its July peak. Worse, the GDXJ has now fallen a remarkable 86% from its high set in early 2011.
The unweighted performance of the Exploration Insights portfolio for 2014 was a positive 18%. Our strong performance reflects the sale of a few companies that had made metal discoveries prior to 2014, and a strong discipline to sell companies when results do not meet our investment thesis.
2015 was a dismal year for miners, metals, and nearly all commodities and the major markets. The Bloomberg Commodity index was off 26%, metal demand was down 5.1%, and base metal prices off 25 to 30%. The precious metal indexes were also down (HUI -32%, GDXJ -20%) while the TSX Venture exchange hit an all time low.
The Exploration Insights portfolio finally succumbed to the bear market, showing an unweighted loss of 6%. However, and importantly, in November our cautious strategy turned somewhat more aggressive towards gold producers and explorers. We added three mid-tier gold producers and a couple of explorers to the portfolio before year end.
More importantly, Exploration Insights doubled its research capabilities by bringing on Joe Mazumdar, a very respected and experienced geologist and analyst. We did so because we thought 2016 would prove to be the year to actively buy the few high quality deposits, mines, and management teams available.
We were cautiously aggressive in purchases, with the aim of positioning ourselves for the future by owning solid companies and assets rather than betting on a rising tide. This strategy paid off: We actively recycled our portfolio throughout 2016, closing 23 positions while adding 20 new positions, resulting in 24 currently open positions.
To the end of 2016, our portfolio of open positions had provided us a 63% average return, while the realized gain for our closed positions was 107%. Success in a good market can be biased if the performance is not compared to benchmarks. This avoids the tendency to confuse intelligence with a ‘bull market’. Our analysis indicates that our open and closed positions outperformed their respective benchmarks by 60% and 74%.
In 2017, we see a need to move down the food chain into earlier stage projects that could develop into a significant discovery. This approach means higher risk and higher reward plays that will require careful analysis of exploration results, and a commitment to cut bait if results fail to meet our investment thesis. By applying this process consistently, we hope to continue to reap returns that exceed the benchmarks.
Our results and those of the GDXJ make two important points: 1.) Speculating in the junior miners is very volatile-- only invest with money you can afford to lose; and, 2.) Our relative “success” over time demonstrates the validity of a very cautious approach involving a very focused list of companies. It is, after all, our money being invested; therefore, we do take buys and sells very seriously.
Subscriber question, “I subscribe to four other resource letters. What would I be getting from your newsletter that I may not be getting already?”
EI’s reply: “What you get is a (generally) weekly letter written from the perspective of an economic geologist who has 30 years of exploration and mining industry experience in over 60 countries on real projects ranging from grassroots exploration to feasibility stage studies and bank audits. The past 17 years I have been working as an analyst and advisor to funds and high net worth individuals in addition to investing--essentially, turning rocks into money. The letter, then, is primarily about what I am doing with my money, and my only compensation comes from subscribers and the money I invest.
Exploration Insights is a straightforward letter focused on a few stocks in this very high risk/reward sector: exploration and mining. I provide you with information, both positive and negative, with which to make your investment decisions.”
For more information read the "User Manual" here.
Why invest in minerals exploration?
Virtually no other investment sector provides the opportunity for ten to hundredfold share price increases on penny stock investments. The mining industry is extracting over 85 million ounces of gold, 800 million ounces of silver, 19 million tonnes of copper, 127 million pounds of uranium, etc., annually. These companies need to replace the depleted minerals with new viable discoveries. The problem is that economic mineral deposits are extremely rare, and finding one a very difficult and time consuming process; therefore, new mineral discoveries can be exceptionally valuable. When a junior exploration company makes a discovery, its share price and market capitalization increase dramatically. That early discovery, high reward, spot is where Exploration Insights is focused—that is our area of expertise and what we are really all about.
More specifically, the letter covers mining industry trends and provides detailed geological and economic evaluations of junior mining and exploration companies. Once a company makes it into our Exploration Insights portfolio we continue to provide updates and assess its progress, or lack thereof.
Subscribers will receive an email notifying them when a newsletter is posted, 48 times per year on average (subject to travel schedule, website maintenance, and major holidays). You will have the option of accessing the letter either by linking to the website or our mobile site using your username and password--be sure to save these.
For a good introduction to EI and its investment strategy, click on the "Media" tab near the top of any page; this has a number of articles written by Brent, as well as recent and archived Interviews with Brent and/or Joe, which will further your understanding of this investment and analysis paradigm.