Mining Stocks – Plenty of Good Deals Floating Around (November 09, 2016)

by FI Fighter on November 9, 2016

in Cobalt, Graphite, Lithium, Precious Metals

screen-shot-2016-11-10-at-7-10-23-am

Well, that was fun while it lasted… Haha, not really, but oh well, what can you do? The markets are absolutely unpredictable, and most everything that has occurred during this election week has caught me by complete surprise…

As it pertains to stocks and finding “bargains”, surprisingly (or not), I’m actually locating a ton of great buys right now… With gold/silver teasing most investors by flying off the charts, only to come crashing right back down to earth again, this dizzying display of “back to where we started from” movement has created many interesting entry points into some of the better mining stocks out there…

Here’s my current watchlist (I keep close tabs on more stocks/companies than I’ll ever end up actually buying):

screen-shot-2016-11-10-at-7-23-41-am

OK, it’s a short list (sorted above by market capitalization), but it comprises many different sectors: gold, lithium, graphite, and cobalt.

From an investing point-of-view, honestly, I really couldn’t have cared less who won the US presidential election… Regardless, my stance has not changed at all — I remain incredibly bullish on precious metals and clean energy mining stocks.

So, over the last few weeks, I’ve been buying many of the stocks listed above hand over fist… I still need to provide a portfolio update for readers, and I’ll try to get around to doing that later this week… Right now, I’ve still got some pending transactions that I need to settle away first…

But I don’t mind sharing my best ideas at this time…

Top Picks

In particular, here’s why I’m so keen on some of these stocks:

ssp-v_swa-v_gqc-v_org-v_chart

With gold mining stocks, from a risk vs. reward perspective, I’m really digging developers such as: Sandspring Resources (SSP.V/SSPXF), Sarama Resources (SWA.V/SRMMF), GoldQuest Mining (GQC.V/GDQMF), and Orca Gold (ORG.V/CANWF).

Speaking strictly for myself, I have been enthused to add lots of these shares to my portfolio… From this short list of goldies, the only one that I haven’t added to my portfolio yet is Sarama Resources… But I really like that West African prospector generator around C$0.21/share… Yes, I’ll continue to follow Sarama’s share price movement most closely…

Looking at the above chart, you can easily observe that high quality names such as Sarama Resources, Sandspring Resources, and GoldQuest Mining have fallen off by over -30% in the past 3 months!

To my knowledge, these projects and stories have only gotten better with time, not worse!

From Sandspring Resources.

sandspring-sona-hill

I highlighted Sandspring Resources in more detail during my last portfolio update.

Similar to Sandspring Resources, GoldQuest Mining is a developer that I really like a lot. GoldQuest has got a high grade gold/copper project called Romero, located in the Dominican Republic. The most recently published Pre-Feasibility Study (PFS) shows some very robust economics.

From GoldQuest Mining.

goldquest-pfs

I’m attracted to companies like GoldQuest because they’ve got the goods to deliver, and I’m secretly hoping that this stock, along with Sandspring Resources, becomes a takeover target for a mid-tier/major producer at some point down the road… C’mon Rob McEwen, you own a ton of GoldQuest stock, make it happen! If not, I’ll settle for a drastic re-rating as the company gets closer to hitting full-scale commercial production…

Here’s a recent video interview with GoldQuest CEO Bill Fisher discussing the PFS.

Just look at a gold stock like Red Eagle Mining (R.TO/RDEMF) as an example of the share price appreciation that can happen once you’ve hit the milestone of achieving “first gold pour”.

rdemf_chart

Hopefully, GoldQuest will fast-track the Romero project and get it into production sooner rather than later!

Anyway, as is typical with most mining stocks, there will ALWAYS be a whole lotta volatility involved in the picture!

Sometimes, for no rhyme or reason, the share prices will get decimated to the downside…

You just gotta learn to take the punches to the gut in stride… and buy MOAR! 😉

Orca Gold

Orca Gold, another developer, in comparison is up over 30% in that same 3 month timeframe, but that’s probably due to the fact that most people are scared of Sudan, and the stock had flown well under the radar of most investors, until Ross Beaty recently stepped up to the plate and made a C$4 million investment.

From Market Wired.

ross-beaty-orca-gold

If Ross Beaty is buying, you had better believe that I’m paying close attention as a retail investor!

And despite the fact that Orca Gold is up so much over the last few months, at a current market cap of under C$50 million, I still see tremendous value in this development stage gold stock… The company’s Block 14 project hosts over 2 million ounces of total indicated + inferred gold resource.

From Orca Gold.

orca-resource

The Preliminary Economic Assessment (PEA) shows some very attractive economics as well.

From Orca Gold.

orca-pea

From Orca Gold.

orca-sensitivity

Further, Orca controls a HUGE land package (3,750 km2) with many highly prospective drill targets just waiting to be explored (this region has historically been ripe for artisanal mining but modern exploration is only now beginning to take place).

From Orca Gold.

orca-map

As for Sudan, the country has some negative stigma attached to it, similar to that found in many other parts of Africa… Certainly, there are geopolitical risks involved, but there’s no denying that the region is an excellent and most fertile place to be if you’re looking for gold.

In fact, check out the growth trajectory profile of gold mining in Sudan in recent years… It’s quite impressive!

From Orca Gold.

sudan-gold

To a strong degree, Orca has got “first mover advantage” into Sudan, since there really aren’t that many companies and explorers operating in these parts, yet…

I gotta like that…

And lastly, this is one of MiningBookGuy‘s best ideas, and just like him, I’ve been buying up as many shares of Orca Gold as possible…

Check out Nick’s awesome video below, which will go over the Orca story in even more (better) details than what I’ve just outlined above.

Full Disclosure: Yes, I own shares of Orca Gold (and many of the other mining stocks listed above in this article), but seriously, I’m not trying to sell you anything! I don’t get compensated in any way, shape, or form, for putting out my list of “best ideas”… I simply put my money where my mouth is… That’s it! As ALWAYS, please do your own due diligence and research before making any kind of financial decisions!

eCobalt Solutions

Moving along, I’d also like to highlight some of the clean energy stocks that I like right now… In particular, eCobalt Solutions (ECS.TO/ECSIF).

I like eCobalt Solutions because this is a development stage primary cobalt producer that is located in the United States… When it comes to the upcoming clean energy revolution, cobalt is perhaps the most unheralded, yet important material in the lithium-ion battery supply chain…

From Visual Capitalist.

cobalt

From Visual Capitalist.

cathode-type

Not to mention, cobalt also fetches the highest price tag (USD/tonne) of the essential raw materials “critical for battery tech”.

From Visual Capitalist.

metals-pricing

Currently, ~60% of the world’s cobalt supply comes from scary places such as the Democratic Republic of Congo, where it is typically produced as a byproduct from predominantly copper and nickel mines.

From eCobalt Solutions.

cobalt-map

And right now, the clean energy sector is receiving a black eye from all the negative press coming out from Congo, as the media has recently learned that much of the cobalt being supplied to companies is being mined artisinally (unregulated and dangerously) by many people, even children!

From the Washington Post (a must read article).

congo-cobalt

I am fully convinced that clean energy pioneers such as Tesla Motors (TSLA) are going to want nothing to do with a supply chain that is associated with exploiting children for profits, and ethically speaking, they will want to secure future offtake agreements with cobalt producers located in “safer” and more mining friendly jurisdictions.

eCobalt Solutions will have a producing cobalt mine in Idaho, which is just a stone’s throw away from Tesla… I’m not saying an offtake agreement between the two companies is imminent, but logistically speaking, it would seem to make a lot of sense!

From eCobalt Solutions.

icp

Anyway, when it comes to cobalt, really, there just aren’t that many choices out there for investors… Most of the companies mining for cobalt are early stage explorers, and since I just want some light exposure into the space, I’ve opted to go with a company that is much further along in terms of development… A company like eCobalt Solutions has already sunk over $110 million in developing their Idaho Cobalt Project through the years; development was temporarily suspended in 2013 because ironically enough, cobalt prices were crashing (with just about every other base metal commodity) through the floor.

From eCobalt Solutions.

ecobalt-suspension

eCobalt Solutions used to be known as Formation Metals, but they recently rebranded themselves this year.

So, again, the company has already poured in $110 million into developing the Idaho Cobalt Project (the current market cap is trading at a palatable ~C$60 million), the resource is mostly drilled out and proven (not a lottery ticket), and Idaho is about as mining friendly and safe a jurisdiction as there is out there…

From eCobalt Solutions.

icp-resource

A Feasibility Study (FS) is currently in progress, so we should be getting an actual mineral reserves update sometime in Q1 2017.

In terms of project economics, mine production will be small (800 tpd), so the risks are pretty high (e.g. CAPEX) for the given output…

From eCobalt Solutions.

icp-capex

From eCobalt Solutions.

icp-economics

But like I mentioned earlier, when it comes to cobalt, it’s usually extracted as a byproduct of a copper/nickel mine, so it’s not exactly the easiest of materials to find out there…

Cobalt is very rare, and with so many copper/nickel mines being put on care and maintenance due to declining base metal prices, the supply crunch should only deepen over the next few years, at a time when demand emanating out of the clean energy space (i.e. lithium-ion batteries) should be absolutely massive.

So, with all that said, yes, I am a buyer at this time!

In case you’ve been living under a rock, the spot price of cobalt is starting to trend up as well!

Here’s a 1 month chart depicting USD/lb.

cobalt-price-november-2016

And a year-to-date (YTD) chart showing USD/tonne.

cobalt-lme

I’m no fortune teller and I’ve got no tea leaves to look at, but if I was to speculate, I would say that I wouldn’t be surprised if cobalt outperforms all other natural resources over the next decade or so

The trend is your friend…

Yes, I’m expecting the spot price of cobalt to outperform even silver… And everyone knows how potent silver is in a rising commodities market; silver is like gold on steroids!

Cobalt’s growth might be even juicer!

Why? Because we’re probably talking about insane demand coupled with reduced supply! In fact, I’m really anticipating a cobalt supply crunch to emerge sometime in mid/late 2017… That ought to really start to ignite prices upward (I hope)!

With all that said, despite the small mine and “lackluster” projected NPV of the Idaho Cobalt Project, the upside potential and re-rating that might take place with a stock like eCobalt Solutions explains why this story is a most compelling speculation/opportunity for me at this time.

Learn more about eCobalt Solutions.

Learn even more about eCobalt Solutions.

Other Clean Energy Stocks

Right now, I also really like where shares of Black Rock Mining (BKT.AX), and Birimian Limited (BGS.AX/EEYMF) are trading.

Deep value.

I’ve previously discussed my thoughts on Black Rock Mining and Volt Resources (VRC.AX). The graphite sector is in absolute despair right now, and until junior leader Magnis Resources (MNS.AX/URNXF) can secure a binding offtake agreement (BOA), the sector might just remain in the toilet… Nobody’s buying right now, which is why I’m particularly intrigued…

When it comes to graphite, as I’ve discussed before in the past, it’s a very, very opaque market, and you’ve got competition from a lot of Chinese companies… Not to mention, synthetic graphite also competes with natural flake graphite, which only further complicates the situation. In a nutshell, I think the graphite sector and these juniors will do well, but I’m not going to bet the ranch on it… Well, for certain I won’t be investing/speculating at anywhere near the same degree in which I’ve placed my bets on lithium… Again, the graphite sector is just way too opaque for a retail guy like me to fully understand.

Speaking of lithium, Birimian Limited is currently my largest individual holding, in terms of capital invested… I obviously like this lithium story an awful lot, especially at ~A$0.30/share… An absolute bargain, in my eyes!

 

Here are some of my thoughts on Birimian Limited.

 

Some more.

 

And even more.

Summary

No, we didn’t get the mass market sell-off event that many like myself were expecting… When it comes to mining stocks, though, I’m still locating plenty of good buying opportunities at this time!

These past few weeks, I’ve been re-shuffling the portfolio yet again, and doing my best to add some high quality names at some very attractive valuations… As readers of this blog know full well by now, mining stocks are insanely volatile, and they swing up and down on a regular basis…

If you’re the type of speculator/investor that can actually stomach that type of profound share price movement, the spikes to the downside probably get you excited and enthusiastic to buy even more shares. Well, at least that’s how I feel, anyway…

Precious metals and clean energy… The best place to be at moving forward, in my most humble opinion. So, if the market wants to keep gifting shares at these low prices, I’m gonna do my best to keep accumulating more and more.

 

Fight On!

{ 4 comments… read them below or add one }

1 AlexNo Gravatar November 9, 2016 at 11:33 pm

What do you think about another very hated asset … coal ?

Reply

2 FI FighterNo Gravatar November 14, 2016 at 6:31 pm

Alex,

I’m a clean energy guy so I have zero interest in coal as an investment. Although with Trump in office, it’s quite clear that coal will be doing well, and has been rebounding sharply in the immediate term. It could make for a great trade. Long-term, I don’t like it very much…

Best wishes!

Reply

3 Roadmap2RetireNo Gravatar November 10, 2016 at 9:37 am

Thanks for sharing…some really interesting thoughts. I still havent looked into Orca Gold and will need to take a look. Looks interesting for sure.

Best
R2R

Reply

4 FI FighterNo Gravatar November 14, 2016 at 6:32 pm

Sabeel,

Orca Gold is one of my favorite picks right now, and it’s for the most part flying under the radar right now. Sudan is a scary place, indeed, but the value proposition here could be immense as well.

As usual, for anyone reading, please DYOR and due diligence.

Cheers!

Reply

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