Portfolio Update: Reshuffling the Deck (July 28, 2017)

by FI Fighter on July 28, 2017

in Cobalt, Cobalt Updates, Lithium, Lithium Updates, Precious Metals, Precious Metals Updates, Uranium, Uranium Updates

Another week, another flurry of moves for my mining portfolio. I’m sorry, I can’t seem to sit still and I keep constantly finding the need to tinker something. It’s a pretty active management, which is why I can understand why a lot of investors don’t want to dive in too deep into the Game of Rocks.

I’m sure you can probably leave things on auto-pilot sometimes, but a lot of these stories are just so dynamic that swapping in and out of positions can make sense every now and then.

Well, that’s my rationale and I’m sticking to it!

Here’s what we’ve got for this week ending on July 28, 2017.

  • Bought 277,000 shares of AVZ Minerals (AVZ.AX) @ A$0.047/share
  • Sold 1,500 shares of Richmont Mines (RIC) @ $8.32/share
  • Bought 10,000 shares of NexGen Energy (NXE) @ $2.39/share
  • Bought 16,500 shares of Resolute Mining (RMGGF) @ $0.86/share (~A$1.08/share)
  • Sold 15,000 shares of Critical Elements (CRECF) @ $0.98/share (~C$1.22/share)
  • Bought 8,000 shares of eCobalt Solutions (ECSIF) @ $0.95/share (~C$1.1812/share)

AVZ Minerals

I got the week started by essentially doubling up on my AVZ Minerals (AVZ.AX) position, adding shares on basically the one day it dipped on Sunday Monday night (Monday Tuesday in Australia).

As I mentioned in the video that I posted last week, assay results were pending and I wanted to make sure I had a decent sized position before the news hit the wire. To most everyone’s surprise, the company decided to release results of the first diamond drill hole yesterday, and boy did the news not disappoint!

From AVZ Minerals.

202.8m @ 1.57% Li2O on the very first drill hole.

What an epic start for AVZ Minerals…

And there’s so many prospects to chase after with the drill bit…

From AVZ Minerals.

It is noted that outcrops and exposures in pits suggest that the two largest pegmatites are the Carriere de L’est Pegmatite and the Roche Dure Pegmatite. Each of these alone is evidently as large or larger (Figure 2) than the famous Greenbushes Pegmatite in Western Australia where current resources are stated as 120Mt of 2.4% Li20.

Given the size and mineralised nature of the pegmatites at Manono, the Company has generated an exploration target tonnage of between 400 and 800Mt at grade between 1% to 1.5% Li2O within pegmatite ore. The potential quantity and grade as stated, is conceptual in nature as there has been insufficient exploration to estimate a Mineral Resource and it is uncertain if further exploration will result in the estimation of a Mineral Resource.

This conceptual target is based on detailed prospect scale mapping, some 37 trenches totalling 2,800m producing 1,200 assay samples and approximately 1,750m of logs relating to diamond core drilling from 7 drill holes as completed to-date. The Company intends to embark on a significant drilling program to enable drill definition of Mineral Resources to JORC 2012 standard.

Seriously exciting stuff to look forward to for investors…

Shares of AVZ.AX are SCORCHING HOT right now, and this has got to be the most exciting lithium story of 2017.

Let’s just say luck beats skill and in this case I got super lucky with timing and I feel fortunate that I was able to add more shares before the spike up.

Please keep in mind, we are talking about early stage exploration here, so expect a ton of volatility moving forward. This stock remains super high risk, so it’s definitely not for everyone. In short, it’s the blue sky potential of uncovering a world class tier 1 discovery that has me fixated here.

Richmont Mines and NexGen Energy

Richmont Mines (RIC) had a nice recovery to start the week so I used it as an opportunity to sell out of shares while the going was good. I still really like the gold producer, but in the grand scheme of things, the company produces less than 200,000 ounces/year, and I would say is fairly valued, if not overvalued at this moment in time. Richmont has been executing flawlessly and they’ve got a great management team in place, but their assets are kinda small in nature, so I had to do some thinking and re-assessing.

Ultimately, I decided I would rather own shares of NexGen Energy (NXE) at this time. NexGen is focused on uranium which is in a state of despair right now, but the Arrow asset is without a doubt world class tier 1.

High grade + size = blue sky potential

Yup, that’s gonna be a popular theme and discussion topic moving forward… I want to focus and concentrate much more of my portfolio allocation to holding some of the best mineral assets out there, regardless of commodity (e.g. Ivanhoe Mines, AVZ Minerals, and now NexGen Energy). In a good market or bad market in uranium, NexGen should do plenty well and still be able to generate lots of free cash flow (while most everyone else struggles for survival).

From NexGen.

Arrow A2 HG clearly stands out from the pack…

From NexGen.

Actually, what I would prefer most is for a major to come in and buy NexGen out, which would be my ideal exit strategy. No, I’m not expecting any offers to come in anytime soon, but that’s cool, I’m willing to be patient with this one.

Yes, Li Ka-shing’s latest investment of an additional $110 million into NexGen was further validation for me to hurry up and just own this stock already.

From Bloomberg.

Seriously valuable rock” is how Cormark Securities Inc.’s Tyron Breytenbach has described NexGen’s Arrow project in Saskatchewan, considered one of the world’s most promising deposits of the metal used by power plants to produce nuclear energy.

I’m gonna follow Asia’s wealthiest man on this one; I’m sure he knows exactly what he’s doing with this NexGen investment!

Yup, lots to like with this story and the company may be on the verge of making another meaningful new discovery.

From NexGen.

World class discoveries tend to oftentimes be the gift that just keeps on giving, getting better and better throughout the years. Also, NexGen has a Preliminary Economic Assessment (PEA) that’s due just around the corner and if those economics look outstanding, I can easily see the share price climbing steadily higher on the good news.

So, that’s why I made the swap… and besides, I’ve got plenty enough gold miners as is… Uranium is a terrible place to be right now, but that won’t be the case forever and ever… When the sector eventually rebounds (nobody knows when), NexGen should be an outperformer in the space, no question.

Critical Elements and Resolute Mining

Next, I sold some shares of Critical Elements (CRE.V/CRECF) since the stock had run up so much and this one holding had swelled to consume over 10% of my overall mining portfolio. Nothing wrong with the stock or company at all, just me booking profits and de-risking to a degree.

I used the CRECF profits to initiate a position with Resolute Mining (RSG.AX/RMGGF) a mid-tier/large cap gold producer based in Australia. Shares of Resolute have been absolutely destroyed over these last few months, so I thought now was a good time to get in since I was able to purchase shares near their 52 week lows.

Most recently, I shared my thoughts on Resolute Mining on Seeking Alpha.

eCobalt Solutions

Lastly, I added shares of eCobalt Solutions (ECS.TO/ECSIF) on the pullback today. I’ve got a pretty decent sized position already but this is a company that should be on the fast track to production and since the Tesla Model 3 deliveries start later this evening, let’s just say it was my last ditch attempt to get very well situated in clean energy stocks before we start the bottom of the first inning of the clean energy/EV ballgame.

I think I’ve got enough eCobalt shares now, and will probably look to trim some on any spikes up to reduce the cost basis and de-risk somewhat.

Conclusion

It’s nice to see gold/silver/lithium/cobalt/copper/nickel doing so well since I’m benefiting nicely with the mining stocks from the rise in the underlying metals prices.

It’s early stages, but I feel confident that we are on the cusp of starting a multi-year bull market in commodities.

Yes, in a perfect world I wouldn’t be reshuffling the deck so much, but hey, I’m learning as I go so this is always going to be a work in progress.

Nevertheless, after this week’s moves, I feel better about my portfolio and the overall allocation of stocks.

 

I guess I could use more silver and AVZ Minerals (hah, of course!), but either way, I’m pretty set…

 

For now, anyway…

 

Fight On!

{ 3 comments… read them below or add one }

1 Midwestern LandlordNo Gravatar July 29, 2017 at 8:55 am

$950K is a pretty nice valuation. I am still focusing on the boring rental income that comes in each month. In a broader sense, I still can’t get my head wrapped around AMZN market cap being twice that of WMT. AMZN is an impressive company, but value IMO matters. It certainly does to you as well which is why you have been focusing on the commodity trades for so long. Buy things when they are on sale and you have a chance to do well.

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2 FI FighterNo Gravatar July 29, 2017 at 10:26 am

Midwestern Landlord,

Exactly! There’s nothing I would love more than to cash out this mining trade and gobble up some high quality Class A rental properties! That’s absolutely the dream and end game with this trade, but until valuations come back inline with reality, I’m going to have play the waiting game.

I look at mining just like I do rental properties — To win, you have to focus on acquiring the best assets that will be highly coveted by the marketplace in a recovering/good market. Right now, I sure wish I had a few more Bay Area properties under my belt!

My biggest mistake with rentals was focusing on Class C junk assets that nobody wants… Trying not to make the same mistakes with mining.

Live and learn.

Cheers!

Reply

3 VinNo Gravatar July 29, 2017 at 7:54 pm

Cheers for the update Jay! And as Midwestern Landlord point out, a nice (appreciation in) valuation.

Coincidentally, I also took my (first) position in an uranium company this week. I almost purchased Nexgen, and I probably still will, but I bought this very interesting junior instead, called Skyharbour Resources.

Link: skyharbourltd.com/_resources/presentations/fact-sheet.pdf

Let me know what you think.. Cheers,

V.

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