Portfolio Update: Building My Positions (December 17, 2015)

by FI Fighter on December 17, 2015

in Precious Metals Updates

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Wow! What a total bloodbath this morning… It looks like the Fed rate hike wasn’t priced into gold mining stocks, after all… 😉

It should be interesting to see how much more downside we have remaining this year, particularly with tax-loss harvesting ramping up.

Surprisingly, I’m noticing that many stocks (small-cap Canadian ones) are holding up well, despite today’s sell-off… For the most part, it’s the most liquid stocks trading on the NYSE (institutionally heavy) that are experiencing the most pain.

In any case, I used today as an opportunity to add some more shares; I picked up 2,500 shares of Richmont Mines (RIC) for $2.84/share.

More details to follow soon, as I’m in the process of writing up a much longer article…

 

For anyone interested, here are the deals that I’m digging today:

  • Pretium Resources (PVG) @ $4.90/share
  • Newmarket Gold (NMI.TO) @ C$1.28/share
  • Klondex Mines (KLDX) @ $1.93/share
  • IAMGOLD (IAG) @ $1.33/share

 

Please note: The following are just my own thoughts and ramblings… Please don’t misconstrue any of what I have to say as actual investment advice! Speculate at your own risk!

 

PVG below $5.00/share is a great buy, but somewhat more risky than the other picks above. Pretium’s main project, Brucejack, should be in production sometime in late 2017. Although it’s arguably one of the best undeveloped gold deposits out there (depending on who you ask), anytime there are questions regarding the orebody and “continuity of grade”, there will remain question marks until the cash register rings… repeatedly. My own cost basis is about $6.34/share… If my funds were unlimited (and I didn’t already own 3,000 shares), I would of course dollar cost average (DCA) down today, for sure!

NMI.TO just looks like an absolute STEAL at these levels… This is one of my favorite mid-tier producers, and one that I think will do particularly well in 2016.

If you look at the other Australian mid-tiers such as Northern Star Resources (NST.AX), OceanaGold (OGC.AX), Evolution Mining (EVN.AX), etc., they have all done exceptionally well this year… My bet is that NMI.TO will follow suit in 2016 and join its brethren…

KLDX is another one of my favorite mid-tier ideas. They meet all my criteria: safe jurisdiction (Nevada), great deposits (particularly Fire Creek), low cash costs ($621/oz per gold-equivalent-oz; Q3 earnings), ample cash in the bank (before today’s acquisition, anyway), minimal debt, great management team. Below $2.00/share is a bargain. This is one company that I am most confident can survive a prolonged period of low gold prices…

I’m not a huge fan of IAG, but I especially like it at these levels… If it gets back up to $2.00/share, that’s about a 50% gain… I wouldn’t peg IAG as a “best idea” at all, but I do like it as a short-term trade vehicle.

Regarding my own purchase today, RIC, it’s got a lot of the same qualities as KLDX… In addition to those plusses, RIC has a very tight share structure, which is great if you’re a speculator concerned with excessive share dilution.. There are only about 58 million shares outstanding! They’ve also got some great exploration upside, as they are working on expanding on their Island Gold Mine, working at depth, to generate an additional 78,000 oz. per year beginning in 2017. All-In-Sustaining-Costs (AISC) reside on the higher end of the spectrum (relative to peers), at $968/oz (most recent Q3 results), which is a drawback, but they have a strong balance sheet (C$76.5 million in cash and only C$6 million in debt) which hopefully can help them withstand any potential shocks…

 

I don’t know about you, but I relish sell-offs such as today! It always feels good to be able to add to, or start new positions at a more favorable cost basis…

 

And perhaps my favorite gift of all (the one that keeps on giving):

Screen Shot 2015-12-17 at 11.22.32 AM

 

Happy Hunting!

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{ 14 comments… read them below or add one }

1 BeSmartRichNo Gravatar December 17, 2015 at 11:41 am

I am very jealous that you are able to take advantage on cheap Canadian dollars. I can see many good deals in US market but I can’t even attempt to get my Canadian dollars exchanged to US dollars under the unfavorable exchange rate. Good for you! 🙂

BeSmartRich

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2 FI FighterNo Gravatar December 17, 2015 at 1:23 pm

BeSmartRIch,

Yes, the cheap Canadian dollar is a huge gift right now, so I will continue to try and milk every last drop that I can get! 🙂

That’s the thing with these currencies, they all take turns and at some point in the future, things will probably reverse course yet again and then you’ll be able to do the exact same thing.

Just a few years ago, I was in Canada and a restaurant I was dining at wouldn’t accept US dollars. Their rationale? The US dollar wasn’t on par, so they weren’t willing to do 1:1… I think it was something like 1:0.95 or something…

My how times have changed…

All the best!

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3 The DudeNo Gravatar December 17, 2015 at 10:25 pm

Wait for oil to turn. Once OPEC votes to cut production, take the first look at Canadian dollars. Before that, what’s the point? Too early.

Same goes for other commodities. So long as oil is down, dollar is up, commodities will likely not be going anywhere. That’s my take.

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4 FI FighterNo Gravatar December 18, 2015 at 6:53 am

The Dude,

Thanks for the tips. Yeah, I don’t see commodities going anywhere but sideways to down in 2016 either. Precious metals being somewhat of an exception since I think the oversupply issues don’t necessarily apply in the same manner (gold is not really consumed by industry so you could say it’s always in oversupply although peak gold has probably occurred).

USD is probably by far the best idea right now. It’s worth watching closely to see when that finally turns around again.

Take care!

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5 mikeNo Gravatar December 17, 2015 at 11:55 am

I love your enthusiasm. Catching falling knives has never been a strategy that works out well for me, so I avoid it. I wait for the tides to turn and ride the waves up, like I did with SUNE last week. 45% returns in 10ish days, nice end of the year Christmas bonus. 2016 does not look promising or the banner year for commodities / commodity based currencies. The good news for you is that you have an iron stomach so you don’t have a problem with being down the value of a new car, because in 5 years you will be up the price of a new house ;). Your a rare breed, a true cowboy. I continue to wish you luck

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6 FI FighterNo Gravatar December 17, 2015 at 1:26 pm

Mike,

Thanks for the support! Yeah, I have no way of knowing how this will play out, and I’ve already proven that I am too early to the dance…

But prices are attractive enough where I’m willing to DCA on the way down… Funny enough, I heard a quote by Winston Churchill the other day — “If you’re going through hell, keep going.”

I’m convinced I know how this story ultimately plays out, but in the meantime, I’m getting thrashed pretty good along the way…

I would NEVER recommend what I’m doing to anyone else, but this is what I’m doing, so I’m simply sharing with everyone…

Hopefully things will work out in the future! I’ll either look like a genius or a total idiot… there is no in-between with this speculation! 😉

Cheers!

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7 VinitNo Gravatar December 17, 2015 at 1:36 pm

You are indeed developing big positions in Gold mining. I hope you hit a home run with all your position. One question I have is are you concerned about the onerous tax bills you would be facing since most of your positions are passive foreign income companies(PFIC) since IRS taxes a lot of your gains if the companies are listed as PFICs.

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8 FI FighterNo Gravatar December 18, 2015 at 6:39 am

Vinit,

Thanks for the support! In regards to PFIC, here’s what First Mining had to say:

“Our Company has not undergone the process of determining whether First Mining Finance Corp. is or is not considered a PIFC. As you know our company is continually evolving and this PFIC matter is quite complex. I suggest contacting a financial advisor or accountant for assistance as we cannot provide definitive information at this time.”

As recommended, I will need to consult with my tax guy to figure out how all this works…

Thanks for bringing that point up!

Cheers!

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9 Income SurferNo Gravatar December 17, 2015 at 3:03 pm

I thought of you this morning Fighter, when I saw the ticker. Fight on Fighter! I am hoping more volatility, and preferably a strong selloff into tomorrow’s close. A rally would be fine also, so long it’s in large cap stocks like Procter & Gamble…..which I want to sell 🙂
-Bryan

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10 FI FighterNo Gravatar December 18, 2015 at 6:41 am

Bryan,

Haha, I’m glad you think of me when you see RED in the markets! 😉

Good luck this morning! Hopefully you can get out of PG… I’ve got a few stocks I would like to sell as well. But I’m indifferent either way… I’m gonna run out of investment capital if prices keep dropping!

Take care!

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11 SriniNo Gravatar December 18, 2015 at 4:31 am

Hello,

I like the way you approach and it feels to me as your style very much rhymes that of mine . FYI i was busy punching buy orders in market yesterday in Pretium, Newmarket,Klondex 🙂

If you think buying gold mining equities during the end 2015 is early, I was much early when I got attracted to the sector (gold/silver/uranium) by may 2013 when the whole sector tanked. I was not smart enough to pick the winners on the go, but I am great full and thankful to have ended up with 10 companies fairly quickly by early 2014 after churning companies and in the process learning ( being first timer in junior mining) . in spite of the carnage for the past 2 years I am down 7% overall in my portfolio at this point in time and I have prepped myself to see it go down much much lower. My holdings are FM, Alexco, Pretium, Kirkland lake, Klondex, Newmarket gold, Guyana gold, kaminak, firstmining finance, UEC. I continue to add to them on weakness with the exception of kaminak and uec.

I also have /had copper mountain, Iam gold, new gold , pilot in watchlist but it doesn’t check all the boxes for me except pilot gold which I plan to watch further.

You should be proud of yourself for having arrived at your portfolio in such a short timeframe assuming you got attracted to natural resources sector off late.

My strategy is simple , continue buying as long as it’s cheap and sell it to the ducks when they quack at high valuations.

All the best and I will continue to check out your postings.

Cheers
Srini

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12 FI FighterNo Gravatar December 18, 2015 at 6:46 am

Srini,

That’s awesome! Thanks for sharing! It looks like we’ve got a lot of the same stocks and I like many of the companies you listed, especially Kirkland Lake.

Yeah, I hear you on IAMGOLD, Copper Mountain. I would like to use those as trading vehicles but I wouldn’t put them in the core group of holdings. I like Pilot at these levels since it’s basically trading at all-time lows… They just need to keep growing their resources and hopefully one of the three (TV Tower, Kinsley, Goldstrike) can become an economical deposit. Seems pretty high reward, low risk at this point. The exploration team is very experienced so I’m hoping it’s just a matter of time….

Yup, that’s my “simple” strategy too! Hopefully I get the opportunity to just keep DCA across 2016… I’m not sure if we have bottomed or not, but around here and lower are my signals to keep buying more.

It really is that simple.

Love the Frank Giustra quote/strategy as well! 🙂

All the best!

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13 MikeNo Gravatar December 18, 2015 at 12:41 pm

Have you thought about short selling commodity plays with terrible balance sheets at the same time? It may seem counter intuitive but it would actually mitigate the primary risk in your plan, i.e. that commodities will remain under pressure for the next 2-4 years. I know that diversification, or risk mitigation, doesn’t jell with your massive returns philosophy but because of the different time horizons the assets wouldn’t necessarily work against each other (sell companies to make money now, buy companies to make money later).

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14 FI FighterNo Gravatar December 19, 2015 at 1:15 pm

Mike,

Absolutely! When it comes to speculating, I can see the merits of playing both sides of the coin. As much as I think the upside in precious metals and commodities is immense, I have no problem taking short positions or selling on gains either…

In regards to individual shorts, really, the only one I see as an “obvious” one right now is Chevron (CVX), or some of the other majors… CVX at $90/share when oil is below $40 doesn’t make much sense to me…

If I were to play this, I would buy puts 3-4 months out….

In regards to precious metals, my own preference is to not go short, but to load up on significant weakness. I like selling on rallies, which I just did again this past week, selling out of MUX for a small gain.

For those with a higher appetite for risk, you can also buy DUST and JDST if you think metal prices are going down… NUGT would be a good way to leverage any mini-rallies.

I’m focused on “massive gains” for the long-term, but the inherent volatility in mining stocks, and even oil, also make for tremendous trading opportunities, like you mentioned.

All the best!

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