Mining All-Star Lineup: My $100,000 Lottery Ticket(s)

by FI Fighter on October 28, 2015

in Precious Metals, Precious Metals Updates

house - 1

Ever played the lottery and had high hopes of winning it big? I’ll confess, I have… More so when I was a little kid, but even most recently (September 2013), I’ll admit to having purchased a few lottery tickets. In fact, at my old company, we used to pool funds together and play semi-regularly. I can’t say I ever had much success with it, though, perhaps winning $20 was the highlight of my gambles…

But even today, the thought of “hitting a home run” still excites and motivates me. Of course, you should only play with money you can afford to lose! But as I’ve learned with investing/speculating, “risk” can be mitigated by buying as low as possible.

Stocks can be risky… especially if you were purchasing at the peaks of 2006.

Ditto for real estate in 2006.

But buying stocks or real estate in 2009 presented a much safer and lucrative buying opportunity. Chances are, if you “backed up the truck” during that period of time, you emerged from the depths of despair (the financial crisis) lightyears ahead of your peers in your quest towards early FI.

And when it comes down to it, for all of us, early FI is the end game we are all striving for!

Seek Help

When I first started attempting to build and accumulate wealth, I used to think that I had to do so through my own: blood, sweat, and tears. It didn’t take long for me to realize that I could only work so much (or hard) in a given day, and that relying solely on my brain (and skills) would take an eternity for me to achieve any semblance of progress…

With investing (or speculation), you really can save yourself a lot of time (and stress) by leveraging off of capable people who really do know what they are doing and know how to build wealth.

Let the smart people do all the hard work…

Recently, I’ve started placing large bets in the mining sector, convinced that a drastic upturn will take place within the next 3-5 years (hopefully)… When a sector has been decimated by 80% to 90%+, it doesn’t take a rocket scientist to figure out where you should be looking for deep value discounts!

Clearly, now is an opportune time to start researching into mining stocks! No one knows where the absolute floor is, but it should be pretty obvious that we are far closer to a market bottom than top.

So, that’s where I’ve been shopping… To make life infinitely easier (and more profitable) for myself, I’ve put in the time to do research and figured out which horses I should back to better increase my odds of massive success.

Mining is no different than any other industry — If you want to make a lot of money, follow and back the right management teams who have been tremendously successful before in the past.

There are no guarantees in life, outside of death and taxes… But with mining, we can better increase our odds of winning the lottery by partnering up with the right people.

I’m taking this message to heart as I work on building up my portfolio, slowly, day-by-day.

The All-Stars

The following is my own list of All-Stars who I am following and investing my hard-earned dollars into.

Ross Beaty – Alterra Power (MGMXF/AXY.TO)

Ross Beaty is a geologist with more than 40 years of experience. Mr. Beaty founded Pan American Silver (PAAS) in the early 1990s and in the process helped construct one of the largest silver producers in the world. PAAS stock surged from $3/share to $40/share from 2000 to 2008.

In 2002, Mr. Beaty got interested in copper and launched Lumina Copper, which later morphed into six separate companies. When all was said and done (the last Lumina Copper company sold), $170 million of investor capital was transformed into $1.87 billion worth of copper projects.

Now that’s what I call creating shareholder value!

Mr. Beaty’s latest venture is into clean, renewable energy through Alterra Power. Shares are currently trading for around C$0.45/share, with a market cap of C$220 million.

Although Alterra Power isn’t a mining stock, per se, I’m obviously a big fan of management so I’m willing to roll the dice with this pick (although this stock ranks lower on my priority list for purchases). Mr. Beaty has a history of taking good care of shareholders, so I’d like to get in at the earlier stages of this developing growth story.

Quite simply, I’m treating this story as an emerging play on a future dividend paying utility company.

Full Disclosure: I currently do not own any shares of MGMXF/AXY.TO, with no plans to purchase over the next 24-72 hours.

Keith Neumeyer – First Mining Finance (FFMGF/FF.V)

I first covered Keith Neumeyer when I wrote The Best Junior Mining Gold Stocks (2015), published earlier this month.

Here’s an excerpt from that article:

First, he took a penny stock, First Quantum Minerals (FM.TO) and transformed it into one of Canada’s largest mining and metals company. Currently, FM.TO has a market cap of C$3.74 billion ($2.81 billion).

Next, he started up a silver company, and helped make First Majestic Silver (AG/FR.TO) one of the largest pure silver producers on the planet.

I’m a big fan of First Mining Finance because I very much subscribe to the idea of “buying low and selling high”. Mr. Neumeyer has a strong track record of doing exactly that (with First Quantum Minerals and First Majestic Silver), and it’s because he is so disciplined at buying assets for pennies on the dollar, he’s been able to repeatedly create world-class companies.

I’m expecting it should be no different this time around with First Mining Finance…

Full Disclosure: I currently own 40,000 shares of GDCRF and 30,000 shares of GCU.V, which should be converted into FFMGF and FF.V shares, assuming the merger between Gold Canyon Resources and First Mining Finance completes (still subject to shareholder approval).

Robert Friedland – Ivanhoe Mines (IVPAF/IVN.TO)

Robert Friedland is arguably the most successful mining entrepreneur alive today. His team helped discover the Fort Knox Gold Mine in Alaska, now owned by Kinross (KGC). Later, he discovered the Voisey’s Bay nickel deposit in Newfoundland which took his company, Diamond Fields International’s stock from $1 to $160 in 1995.

In Mongolia, he helped put the Oyu Tolgoi copper mine into production, financing a multi-billion project during a time when skeptics said it couldn’t be done.

Ivanhoe Mines 1.0 was later renamed Turquoise Hill (TRQ/TRQ.TO) and it rose as high as to $29/share during the last bull run in commodites.

Mr. Friedland’s latest venture, Ivanhoe Mines 2.0, might be his best one yet. Contained within Ivanhoe’s portfolio are perhaps 3 of the best undeveloped projects out there right now:

Platreef (Platinum-Group-Metals [PGMs])
Kamoa (Copper)
Kipushi (Zinc and Copper)

In an upmarket, the NPV (net present value) of each deposit could easily push north of $1 billion/each. In a downmarket (right now), you can purchase the entire company at an EV (enterprise value) of less than $400 million.

Yes, there are risks associated with South Africa and the Democratic Republic of Congo (which along with the recent commodities slump present the primary reasons why shares of IVPAF/IVN.TO are so heavily discounted), but world class projects tend to eventually find a way to get themselves built… It may take 3 years… 5 years… but these projects will come online at some point in the future.

And with Platreef and Kamoa, we are indeed talking world class here!

The Chinese and Japanese seem to believe so, anyway:

From Ivanhoe Mines:

Screen Shot 2015-10-28 at 10.46.30 AM

The share price of IVPAF/IVN.TO should rebound once this transaction goes through (hopefully with the continued cooperation of the Congolese government!):

Screen Shot 2015-10-28 at 10.47.08 AM

The Japanese deal for Platreef was struck a few years ago when metal prices were much higher than where they are today:

Screen Shot 2015-10-28 at 10.47.36 AM

Outside of Platreef and Kamoa, you can look at it from the perspective that you get the Kipushi project for free…

Also, Mr. Friedland apparently knows a thing or two about flipping houses as well…

From SF Curbed:

Screen Shot 2015-10-28 at 10.21.39 AM

Full Disclosure: I currently own 40,000 shares of IVPAF.

Bob Quartermain – Pretium Resources (PVG/PVG.TO)

Bob Quartermain is the CEO of Pretium Resources. I first covered Bob Quartermain when I wrote The Best Junior Mining Gold Stocks (2015), published earlier this month.

Here’s an excerpt from that article:

Premium Resources is led by Bob Quartermain, a geologist by trade, who is a seasoned mining veteran with over 38 years of experience. Prior to starting Pretium Resources, Mr. Quartermain was the president of Silver Standard Resources (SSRI/SSO.TO) from 1985 to 2010, where he helped take that company’s market capitalization from $2 million to $1.9 billion. Put in context, SSRI stock rose from about $0.78/share to $48.00/share, creating millions (and perhaps billions) for shareholders.

Pretium’s Brucejack project might be one the best remaining undeveloped gold deposits in the world. Since the mine has not been built yet and is just entering the construction phase, of course risks will exist.

I’m going to try and use these times of uncertainty as an opportunity to build my position in PVG.

Full Disclosure: I currently own 3,000 shares of PVG.

Mark O’Dea – Pilot Gold (PLGTF/PLG.TO); True Gold Mining (RVREF/TGM.V); Pure Gold (LRTNF/PGM.V)

I first covered Mark O’Dea when I wrote The Best Junior Mining Gold Stocks (2015), published earlier this month.

Here’s an excerpt from that article:

My next Top Pick is perhaps a little bit more uncertain than the others, but with this one, I’m swinging for the fences! Pilot Gold, led by the resoundingly successful duo of Matt Lennox-King and Mark O’Dea is my choice.

Mr. Lennox-King and Mr. O’Dea, if not already legends in the natural resources business, are quite convincingly starting to build up quite the reputation for themselves. Their last venture together, Fronteer Gold (2001-2011), was nothing short of a massive success. These men took a penny stock ($2 million market cap) company and developed 3 Nevada projects to the point where Newmont Mining was willing to pay C$2.3 billion ($2.32 billion) to acquire them in 2011. If you were fortunate enough to speculate in Fronteer Gold from inception to sale, not only did you get to profit from the AMAZING share price appreciation along the way, but in the end, the icing on the cake arrived when Newmont Mining paid C$14/share, a premium of 37%!

Mr. O’Dea has a number of companies under his belt… Since I don’t know which one will ultimately become the most successful, I’m going to do the easiest thing that I can do:

Purchase them all!

That’s right… I’m a buyer of: Pilot Gold, True Gold Mining, and Pure Gold.

Currently, my preference is to focus more capital on Pilot Gold and True Gold Mining, since those projects are much farther along. With Pure Gold, it’s mostly an exploration play, and with sole-risk exploration, I’m less inclined to wager any real “big-bets”… In general, very early stage projects are too risky for my own tastes (but I will dabble some here and there), although the reward potential with Pure Gold is probably the greatest as well among these selections. But since the share price is so beat up right now (C$0.10/share), the valuation proposition makes Pure Gold a compelling speculation at this time. Most likely, I’ll load up on shares of LRTNF/PGM.V in the near future, should prices continue to remain low.

From Pure Gold:

Screen Shot 2015-10-28 at 8.49.03 PM

Full Disclosure: I currently own 16,000 shares of PLG.TO.

Full Disclosure: I currently own 36,000 shares of TGM.V.

Full Disclosure: I currently do not own any shares of LRTNF/PGM.V, with no plans to purchase over the next 24-72 hours.

Allocation

There you have it — my lottery tickets to ride the next wave up and inevitable turnaround in the mining sector.

It should be of no coincidence, then, to observe that 5/6 of my Top Picks in the The Best Junior Mining Gold Stocks (2015) featured these very same All-Star players (Dalradian Resources is backed by Ross Beaty who closed a C$11.3 million private placement earlier this year) .

The other Top Pick at the time, Rubicon Minerals (RBY/RMX.TO), is NOT supported by any of these All-Stars… Recently, Rubicon Minerals experienced a string of problems that has caused the share price to crash by over 40%.. emphasizing the importance of having sound management steering the ship!

Lesson learned.

When it comes to junior miners, I’m going to stick with the best of the best.

Here is how I’m planning to allocate $100,000 worth of lottery tickets:

Ross Beaty
Alterra Power: $10,000

Keith Neumeyer
First Mining Finance: $20,000

Robert Friedland
Ivanhoe Mines: $20,000

Bob Quartermain
Pretium Resources: $20,000

Mark O’Dea
Pilot Gold: $10,000
True Gold Mining: $10,000
Pure Gold: $5,000

Total: $95,000

What to do with the remaining $5,000?

Let’s bring in Lukas Lundin, another billionaire mining legend! We will do so through Newmarket Gold (NMKTF/NMI.TO), where Mr. Lundin is a director. No doubt, I would have included Mr. Lundin in the original list of All-Stars, but unfortunately I’m not a huge fan of Ecuador, where the Fruta Del Norte gold deposit resides. Otherwise, I would have included shares of Lundin Gold (FTMNF/LUG.TO). But if anyone can turn the Fruta Del Norte project into an overwhelming success, it’s Lukas Lundin!

Full Disclosure: I currently own 4,000 shares of NMI.TO.

Here’s the final breakdown, again:

$100,000 All-Star Portfolio:

$10,000 – Ross Beaty (Alterra Power)
$20,000 – Keith Neumeyer (First Mining Finance)
$20,000 – Robert Friedland (Ivanhoe Mines)
$20,000 – Bob Quartermain (Pretium Resources)
$25,000 – Mark O’Dea (Pilot Gold; True Gold Mining; Pure Gold)
$5,000 –   Lukas Lundin (Newmarket Gold)

$100,000 – Total

My Current All-Star Portfolio:

Screen Shot 2015-10-28 at 3.48.22 PM

I’ve still got some work to do…

Again, there are no guarantees with speculating… I’m just going to try and do the best that I can… And to me, that simply means getting behind the best management teams.

We will know in a few years how successful (or unsuccessful) this All-Star assembled team will perform. If I was a betting man (and I am), I wouldn’t bet against these living legends.

 

And I’m not…

 

Happy Speculating!

{ 5 comments… read them below or add one }

1 Dominic @ Gen Y Finance GuyNo Gravatar October 29, 2015 at 6:47 am

Based on all you recent posts I would say you are really digging the Gold play 🙂

Any plans to give a monthly/quarterly update on the performance of this gold portfolio?

Cheers!

Reply

2 FI FighterNo Gravatar October 29, 2015 at 7:16 am

Dominic,

Yup, it definitely feels good to be buying assets at near the bottom of the cycle again for a change 🙂

In terms of performance, these stocks are so volatile I’m regularly seeing fluctuations of +- $10,000+ each day! You get used to it after awhile… And although this is speculation, just like an investor, you have to be patient since it will take a few years for this bet to pay off… if it does. I’ll try and post an update towards the end of the year, tracking overall performance.

For the most part, I don’t pay attention to the daily price movements. I really only care as it pertains to stocks on my watchlist since I always want to get into those as cheap as possible.

I wouldn’t mind a continued downturn for another year or so as it would really help me add to my positions. 🙂

Cheers!

Reply

3 RyanNo Gravatar October 29, 2015 at 1:35 pm

Unless the whole world economy collapses (which is not impossible but will make many of the current discussion topics irrelevant), the demand for precious metals can only increase.
Stock price in mining can be temporarily affected by different factors, but over time, solid mining companies will prosper, and so will their shareholders.
The challenge is that these metals have been under much speculation. So stock price depends more on this speculation than true market rule of offer and demand. So I would be very careful with small mining startups who cannot survive a drop of their metal price.
With that in mind, I would consider silver, because it’s on sale right now, as you mentioned. So I would look into ETFs related Silver.

Reply

4 FI FighterNo Gravatar October 29, 2015 at 1:58 pm

Ryan,

Demand for precious metals is definitely high, particularly in the East (Russia, China, India, etc). I don’t place much emphasis on demand coming out from Western nations like the U.S. because sentiment here is about as negative as you could get.

The key to weathering this storm is to pick out companies and management teams that will be able to overcome low metal prices and emerge from this bear relatively unscathed so that shareholders can profit in the ensuing bull run.

The companies mentioned in this article should all be able to do that. They are all backed by industry giants who have the ability to readily raise capital as needed. And as was mentioned in the Mark O’Dea video above, it’s a good idea to pick out companies that have business models that don’t require an increase in metal prices to thrive. For instance, True Gold is economical and profitable at $1,000/oz gold… This is another reason why I’ve been loading up on companies such as Klondex Mines, Lake Shore Gold, Teranga Gold, etc.

In general, I’m not a fan of gold/silver ETFs. In particular with GLD and SLV, they are taxed at the collectibles rate which is much higher than the current rules for long-term capital gains. Also, the leverage to the upside is minimized with those ETFs.

All the best!

Reply

5 ChrisNo Gravatar December 2, 2017 at 4:51 pm

Jay, it’s time doing it again – which ones would be your Top10 for the coming Uranium Bull and why?

cheers
Chris

Reply

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