Portfolio Update: Adding to My Best Ideas (November 28, 2016)

by FI Fighter on November 29, 2016

in Copper, Copper Update, Lithium, Lithium Updates, Precious Metals, Precious Metals Updates

swa_axu_org

To me, the selloff in precious metals mining stocks is starting to feel like late 2015 again. As I’ve often stated with these updates, I don’t think it’s possible for ANYONE to accurately predict where asset prices are headed next, so I just try and keep things extremely straightforward and simple — If I see attractive valuations, I’m buying.

Most recently, I made the following moves:

  • Sold 18,000 shares of Critical Elements (CRECF) @ $0.385/share (~C$0.52/share)
  • Bought 24,500 shares of Sarama Resources (SRMMF) @ $0.1136/share (~C$0.1525/share)
  • Bought 13,500 shares of Sarama Resources (SRMMF) @ $0.1169/share (~C$0.1570/share)
  • Sold 4,000 shares of Ivanhoe Mines (IVPAF) @ $1.84/share (~C$2.47/share)
  • Bought 5,495 shares of Alexco Resource (AXU) @ $1.33/share
  • Bought 9,600 shares of Orca Gold (CANWF) @ $0.268/share (~C$0.360/share)

 

A bit of shuffling going as, which is probably typical for someone like me who essentially needs to sell off shares in order to raise capital to fund other ideas…

Critical Elements

First off, I decided to trim my position in Critical Elements (CRE.V/CRECF) to both reduce my cost basis and to help me take advantage of the recent selloff in precious metals stocks.

Absolutely, Critical Elements remains my favorite lithium idea out there (alongside Birimian Limited; BGS.AX/EEYMF), but the truth of the matter is, the lithium sector has been holding up a lot better than gold/silver as of late, so at this time, I thought it made sense to re-allocate a portion of my funds.

Share price performance of the stocks outlined above over the last three months.

cre-v_swa-v_ivn-to_axu_org-v_chart

CRE.V is up 3.70% while SWA.V is down -50%!

I still own 182,000 shares of Critical Elements (CRE.V + CRECF).

Sarama Resources

Next up, I proceeded to use the CRECF ammo to purchase some more shares of Sarama Resources (SWA.V/SRMMF), which have been absolutely CRUSHED this month. At a current market cap/enterprise value of less than C$20 million, the company is simply too appealing for me to resist at this time…

I have not discussed Sarama Resources in detail on this blog, but for anyone who is interested in learning more, I would start by watching the following clip (please do your own due diligence and research, as ALWAYS before putting your hard-earned capital at risk!).

Although Sarama Resources is an early-stage exploration company, I like it for the following reasons, which are summarized succinctly on the first page of the most recent presentation slides.

From Sarama Resources.

swa

There are a lot of moving parts with Sarama (thanks to multiple joint venture projects with mid-tier producer Acacia Mining and fellow junior explorer Savary Gold), but in a nutshell, the company currently has an ownership stake (control) in projects that as an aggregate combine to produce a mineral resource of ~3.2 million oz. of gold, scattered across multiple tenements located in the highly prospective Birimian Greenstone Belt in Burkina Faso…

If you want to find gold, it’s usually not a bad idea to go where others before you have found it in abundance (e.g. Burkina Faso)…

From Savary Gold.

burkina-faso

And this is what Sarama brings to the table.

From Sarama Resources.

screen-shot-2016-11-30-at-10-44-14-am

 

Sarama has some other projects as well, but those are the Big 3 (South Hounde, Karankasso, Bondi), and although there is still a ton of work that needs to be done in order to prove out and de-risk these assets, I really like Sarama Resources from a risk vs. reward perspective.

Again, the current market valuation being prescribed for the ENTIRE company is less than C$20 million… yet more than $9 million USD (~C$12.09 million) in historical expenditures has already been spent on the Bondi project alone (see slide below)…

From Sarama Resources.

bondi-acq

So, if we keep things simple and prescribe ~C$12 million to the value of the Bondi asset (which doesn’t seem outrageous to me in a decent gold market), even with joint ventures in place for the other two projects, I’m more than convinced that Sarama’s stake in South Hounde and Karankasso (which can be argued are even more prospective than Bondi) are worth well, well, well north of ~C$8 million

Shoot, just the upcoming 2017 drill programs at South Hounde and Karankasso (funded by the joint venture partners) have already been budgeted at a combined $6.1 million USD (~C$8.02 million)!

Incredible value, no?

I feel like the markets are just broken right now, similar to how they were back in late 2015… So, I’m happily buying up shares of companies like Sarama Resources… Exploration companies (as a whole), even those with defined mineral resources are currently being handed out very little (almost ZERO) value by the markets…

Here’s a summary of the mineral resources found across Sarama’s projects that are attributable to the company.

From Sarama Resources.

swa-resource

There’s a lot of drilling planned for 2017 across all these projects, so resource upgrades will be worth watching out for!

In regards to management, Sarama Resources is led by President and CEO Andrew Dinning, who has extensive experience working in Africa, and very importantly has a track record of having successfully taken a junior company/asset through to the finish line (from exploration-> development-> sale).

From Sarama Resources.

He was a Director, President and Chief Operating Officer of DRC based Moto Goldmines Ltd from 2005 to 2009. Andrew oversaw the company’s flagship Moto Gold Project (now Kibali Gold) develop from 4 million ounces of gold to +22 million ounces of gold and took the project from exploration to pre-development before Moto Goldmines was purchased by Randgold Resources and AngloGold Ashanti in October 2009.

 

With early-stage exploration companies, the “ideal outcome” that many investors seek out is a takeover from a larger producer (mid-tier/senior) at a market premium. With Sarama Resources, we are still much closer to the beginning stages of development than towards the end, but over enough time, should this bull market in precious metals get back on track and resume course, this is a company I’m speculating will get taken out (whether that be from Acacia Mining or some other party remains to be seen)… There are a lot of players out in the South Hounde region, which may make it ripe for consolidation in the future…

Here’s the outlook for 2017, with the events that could lead to a share price re-rating.

From Sarama Resources.

swa-2017

And some “final outcome” development scenarios for the future (which may or may not happen for Sarama, but these are reasonable assumptions to make, given what we know, at this time)…

From Sarama Resources.

swa-future

With these purchases in the books, I now own 118,000 shares of Sarama Resources (SRMMF).

Ivanhoe Mines

Moving along, the next move I made was I sold some shares of Ivanhoe Mines (IVN.TO/IVPAF). Similar to the case of Critical Elements, this was a move that I didn’t want to make (it was pretty painful, I’ll admit), but at a time when copper is soaring and precious metals are crumbling apart, it’s another instance where I elected to attempt to “sell high in order to buy low.”

Year-to-date (YTD), Ivanhoe Mines has been one of my best performers so far, and when all is said and done, I wouldn’t be surprised if this speculation turns out to be the ABSOLUTE BEST financial investment decision of my life… Ivanhoe is a MONSTER (multiple world class assets spanning multiple commodities all under one roof!), and the story only seems to be getting better and better… Despite the run up in share price, I still see a still a ton of potential with this stock, moving forward (the only real fear I have are jurisdiction risks due to the deposits being located in Congo and South Africa)…

Ivanhoe Mines is an outsized position for me (relative to my other large holdings), but this is one stock in particular that is very tough for me to sell… I still hold 50,000 shares of Ivanhoe Mines (IVPAF), but obviously, of course I wish I owned many more…

It is what it is…

Alexco Resource

I proceeded to use the capital from my IVPAF sale to buy some more silver shares… Alexco Resource (AXU) is a name I like a lot, and a company that I’ve discussed in detail before in the past.

I’m now up to 24,495 shares of Alexco Resource (AXU), but may look to trim some stock if silver can ever stage a meaningful recovery again… I’d very much like to reduce my cost basis some (currently at ~$1.54/share), and I think I’m somewhat overallocated in this stock at this time…

As I’ve shared with you readers before, when a stock I like is selling off, I tend to prefer catching falling knives, as opposed to chasing after moving trains… With that in mind, my own personal strategy is to buy in tranches, averaging all the way down… By doing that, though, oftentimes I end up purchasing slightly more shares of a given company than what I originally had in mind…

But we’ll see where things go… Who knows, Alexco may have further to fall still…

Silver has seen better days, that’s for sure…

Orca Gold

Last but not least, I used some of the remaining capital I had on hand to also average down on Orca Gold (ORG.V/CANWF).

You can find my thoughts on Orca Gold here.

I now own 77,000 shares of Orca Gold (ORG.V + CANWF), and will probably look to top off around 100,000 shares should the share price continue to decline… Otherwise, I’m comfortable with my small stake moving forward…

Getting a chance to add more Orca shares at around ~C$0.30/share would be pretty sweet, though…

Summary

Precious metals are facing a ton of headwinds right now as bond yields, USD, USDJPY, etc. are all surging, and the Fed rate hike is just around the corner…

As for myself, I know I can’t time markets, so if I see value, I’m just going to do my best to keep adding to my positions by purchasing small tranches here and there…

In any event, I’m going to try and pace myself, in case things get a whole lot worse over the next few months…

 

For now anyway, I’m mostly done buying… But should gold fall back down to the ~$1,100/oz range, it’ll be time to lock and load (heavily) yet again!

 

Happy Hunting!

{ 5 comments… read them below or add one }

1 JanNo Gravatar November 29, 2016 at 8:36 pm

Thanks for the update!

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2 kakoo88No Gravatar November 29, 2016 at 8:46 pm

Thank you for sharing Jay!! Always a pleasure to read your Blog! I have also been following Mining Book Guy and The Next Big Rush through YouTube and CEO.CA, very informative, I got to learn a lot.. (maybe you should consider starting your YouTube Channel as well, you will probably attract more followers that way..)

Hopefully I will be starting a position soon in some of the companies you have mentioned in your posts, I am trying to do my homework for now and to find a way to free up some $$ (SSP looked great to me too)

Take care and thanks again for your great work!!!
BTW, what did you think of CRE’s move today?? A big name (A German speaking French as well as he studied in Paris :D!) joining the team prior to the BFS release and the Helm agreement confirmation, isn’t that neat??

Cheers!

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3 KPNo Gravatar November 29, 2016 at 10:24 pm

Thanks for the update, Jay!

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4 TawcanNo Gravatar November 30, 2016 at 10:39 am

Lots of activities on your side. The precious metal space is looking very interesting nowadays.

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5 FinanzrNo Gravatar December 8, 2016 at 1:03 pm

The stock market is looking frothy at the moment – basically all stocks are up…
I bought some Sarama and Sandspring yesterday and would like to add to my Teranga holding, but unfortunately ran out of cash… I hope that TGZ prices stay around 0,84 CAD, so I can load up later this month.
Great input from your site! Keep it up!

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