Portfolio Update: Building My Positions (December 01, 2015)

by FI Fighter on December 1, 2015

in Precious Metals Updates

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It was a busy day of trading for me today. With these markets, you just never know what you are going to get… Even though precious metals and commodities have been bludgeoned as of late, for whatever the reason, mining stocks decided to trend upward this morning.

Before I knew it, my shares of Yamana Gold (AUY) were up 10% relative to my cost basis…

When it comes to buying stocks, if the price is low enough (and I have strong interest in the sector/industry), I’ll tend to jump in even if a particular company is not on my list of favorite ideas. As it pertains to AUY, I like that they operate in safe jurisdictions, but this mid-tier producer has more debt on the balance sheet than I would prefer… Initially, I bought into the story when shares were trading at $1.99/share.

As such, I used today’s run up as an opportunity to book profits… Please don’t get me wrong, when I am establishing positions, I don’t go in with the mentality that I am going to trade the stocks… However, when a position goes vertical for no apparent reason (no tangible news), and a few of my better ideas are sitting there flat (or down big), it does present a unique proposition for me…

By selling out of a “not so favorite” holding, I was able to:

  • Book profits (after all these stocks are insanely volatile and any paper gains could just as easily be vaporized by tomorrow morning).
  • Use the proceeds to add to other preferred positions at favorable entry points.

Here’s a summary of today’s actions:

  • Sold 5,350 shares of Yamana Gold (AUY) @ $2.20/share (+$1,088.74)
  • Purchased 1,900 shares of Energy Fuels (UUUU)  @ $1.87/share
  • Purchased 1,500 shares of Klondex Mines (KLDX) @ $1.95/share
  • Purchased 10,000 shares of Teranga Gold (TGZ.TO) @ C$0.495/share

Initially, I wasn’t planning on adding any more shares of uranium stocks… However, after a brief conversation with a friend last week, I was convinced that the market valuation of UUUU is just totally off right now… The book value alone is worth a lot more than what the market is giving the company credit for…

From Cantor Fitzgerald Research (October 29, 2015):

Screen Shot 2015-12-01 at 12.33.03 PM

You can cut the $9.48/share target above by 50% and we’d still be looking at phenomenal value here…

Further, I came to realize that I can always use any mini-rallies in the future to sell 1/2 of my position should the stock double (at these low prices that shouldn’t be so difficult)… That way, I would have no skin in the game and be able to maintain a decent position to ride it out until the uranium sector rebounds…

The risk vs. reward profile for UUUU is heavily skewed towards the reward side right now…

As I’ve mentioned before in previous posts, I’m not expecting a significant rally in base metals or energy anytime soon… With that said, it should be a lot easier waiting for a turnaround story when you have no capital invested (let’s hope we get that opportunity)!

Moving on to KLDX and TGZ.TO, these are two of my favorite mid-tier gold producers.

Both companies are doing everything right:

  • Great properties
  • Strong management teams
  • Stable jurisdictions
  • Lots of cash in the bank
  • Low cash costs/AISC
  • Minimal debt
  • Exploration potential on land package

Basically, they have all the ingredients a company needs to be able to weather out the remainder of this bear market storm.

KLDX trades at a higher premium because their properties are located in Nevada (first world jurisdiction) whereas TGZ.TO operates out of Senegal (West Africa). Senegal happens to be one of the safer and more politically stable regions in West Africa, but nevertheless, when a company is operating mines in that vicinity, the market will always price in a heavy discount…. Perhaps someday sentiment will change, but it won’t happen anytime soon (especially not in the depths of a brutal bear market).

Interestingly enough, both companies recently raised capital in the equity markets — KLDX issued shares to pay off the remainder of their 11% senior secured notes.

Here is a quarterly summary from Klondex:

Screen Shot 2015-12-01 at 12.47.07 PM

Teranga completed a private placement and added C$22.736 million to the bank and gained support from one of Senegal’s most influential (and wealthiest) entrepreneurs — David Mimran.

Quarterly results were at the lower end of guidance due to excessive rain issues.

I used today as an opportunity to dollar cost average (DCA) down on both positions — I’m down a lot, but not deterred because I’m digging these low prices.

In summary, I’m a strong buyer of UUUU below $2.00/share, KLDX below $2.00/share, and TGZ.TO below C$0.50/share.

 

But don’t get me wrong, I’m also a fan of AUY at below $2.00/share! 🙂

 

In any event, it’s time to move back to the sidelines (although today’s transactions were merely lateral moves)… I’m loading up for a potential BIG DROP sometime later this month!

 

Let’s hope we get some wonderful buying opportunities!

 

Other ideas I like and am hoping for:

  • Pilot Gold (PLG.TO) @ C$0.265/share
  • True Gold (TGM.V) @ C$0.20/share
  • Endeavour Silver @ $1.30/share
  • B2Gold @ $1.00/share

 

Additional transactions from last week that I didn’t get around to documenting:

  • Purchased 1,500 shares of UUUU @ $1.93/share
  • Purchased 1,500 shares of KLDX @ $2.05/share

 

Fight On!

 

Photo Credit: Klondex Mines

{ 2 comments… read them below or add one }

1 mikeNo Gravatar December 1, 2015 at 9:02 pm

The charts are looking spectacular for a bounce rally in UUUU. Ride it up to $2.70.

Reply

2 FI FighterNo Gravatar December 1, 2015 at 9:11 pm

Mike,

That would be nice indeed! Let’s hope it happens! 🙂

Cheers!

Reply

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