Portfolio Update: Building My Positions (January 07, 2016)

by FI Fighter on January 7, 2016

in Precious Metals Updates

DSC7369

Wow, who would have expected to see so much volatility in the markets so soon into the new year? I’m not quite sure that I’ve ever witnessed anything quite like it before… In any case, it’s just “business as usual” for me (hoarding cash). As I mentioned in a previous post, my focus this year will be on other activities outside of my own personal finances…

So far, I’ve had a blast recording podcasts with other freedom fighters, and although I haven’t discussed my other plans and intentions in detail quite yet, it’s safe to say those other ventures are consuming much of my free time…

With that said, there are still a few tweaks that I need to make to my stock portfolio before I can essentially let it go on “auto-pilot”.

Here are the latest moves:

  • Sold 5,000 shares of Fission Uranium (FCU.TO) @ C$0.805/share (+C$817.00)
  • Sold 5,000 shares of Balmoral Resources (BAR.TO) @ C$0.435/share (-C$73.67)
  • Sold 30,000 shares of First Mining Finance (FF.V) @ C$0.395/share (+C$2,628.00)
  • Purchased 20,000 shares of Bear Creek Mining (BCM.V) @ C$0.59/share

Fission Uranium

I decided it was time to trim some positions and book profits. FCU.TO was up about 25% or so from my cost basis and since I don’t believe a turnaround in uranium is in the cards this year, I was content with closing out my position and taking the gains. No, I don’t believe anything has changed with this exploration story, and if prices dip below C$0.60/share again, I might re-initiate a position here.

In the meanwhile, my sole uranium play is Energy Fuels (UUUU), a proven mid-tier producer operating in the U.S.

That’s plenty good enough for me…

Balmoral Resources

With BAR.TO, I came to the realization that this early-stage development story was “more risk” than I was comfortable with taking on… The company has a prospective nickel project, Grasset, and a high-grade gold story in Martiniere. However, there aren’t currently any resources available (should be released sometime in early Q1), and these projects still have a long ways to go…

I still like the company, but I’ve got a few other “riskier” speculations in my portfolio, so to play it safe, I started to trim down my position… Unfortunately, only 5,000 shares got filled on the sale, so I’m still holding 10,000 shares… In the near future, I will be on the lookout for opportune entry points to sell off my remaining shares and to close out this position.

The fact that CEO Darin Wagner has been selling off some shares (although small quantity) while prices are at 52-week lows doesn’t help matters any…

First Mining Finance

Like FCU.TO, I sold 30,000 shares of FF.V to book some profits (about 29% gain). I’m still a huge fan of the company, but I got in at a really good price (thanks to the Gold Canyon arb opportunity). As such, I have no problems with saying goodbye and taking some chips off the table!

As Derek Iwanaka (Vice President of Investor Relations) mentioned in our latest podcast interview, the company is on the hunt for more distressed assets. So, I’m expecting some more arb opportunities (like Gold Canyon) to emerge in 2016. If I can execute in a similar fashion, I should be able to again purchase more shares at a discount (hopefully).

If not, oh well… I still own 70,000 shares of the company (FFMGF), so I’m good either way…

Bear Creek Mining

Bear Creek is a company that has been on my radar for awhile now… Once upon a time, this was a C$11.00/share stock… The company has some great silver assets in Peru (Corani and Santa Ana). Unfortunately, at current silver prices, Corani (the flagship project) just isn’t economical… The crash in other base metals (such as lead) has only served to further crater the stock since those mines also produce other minerals, outside of just silver…

Further, Santa Ana’s mining license was revoked in 2011 due to protests…

This story is a little dated, but here are the details:

The Peruvian government said on Thursday it hopes to ease local opposition to Canadian miner Bear Creek’s stalled Santa Ana silver mine and avoid a costly legal battle with the company.

Energy and Mines Minister Eleodoro Mayorga told Reuters that officials are rapidly building support for the project in indigenous Aymara communities and that Peru hopes to be able to allow the company to eventually restart work.

The previous government revoked Bear Creek’s right to build Santa Ana in 2011 after protests against the proposed mine in southern Peru turned deadly.

The company has said the project’s suspension violates investor protections under Peru’s free trade agreement with Canada. On Tuesday, Bear Creek announced it started arbitration proceedings in case talks with the government do not produce an agreement.

The company had planned to use Santa Ana to help pay for its bigger, $700 million silver project in Peru, Corani. Bear Creek expects Santa Ana to produce some 5 million ounces of silver per year and Corani to produce about 13 million.

Chief Executive Andrew Swarthout said in an email that the company would consider calling off the arbitration process if it received “a good signal that we would be making progress towards a resolution.”

 

Hopefully, there is a resolution to Santa Ana sometime in 2016… In a most recent presentation, CEO Andrew Swarthout mentioned that a cash settlement would be more than ideal; the proceeds would be used to fund development of Corani. On a pure speculation front (as mentioned in the presentation), typically between 40 to 60% of the requested damages is settled in arbitration, which would estimate a payout of between $200 to $250 million

The current market cap is only C$55.23 million.

That would be a HUGE win for the company and shareholders!

Disregarding that possiblity entirely, Corani still ranks as a world-class silver deposit… It just doesn’t work at today’s prices…

However, if you believe (like I do) that silver is going to rebound sharply sometime in the next few years, I can’t really think of a better “non-expiring call option” to purchase than BCM.V.

The company should have enough working capital ($26.5 million at Q2 2015) to last out the remainder of this bear market in commodities:

Most recent Corporate Presentation:

bear creek

As mentioned above, the Corani project is essentially “shovel ready”. The final Feasibility Study was completed in June 2015.

corani economics

So, the bulk of the work has already been finished… Really, all that is left to move the project forward is financing and construction…

Oh right, and a much higher silver price! 🙂

But until Happy Days return again, the company and its shareholders will just have to wait it out patiently…

Non-Expiring Call Options

I’m terrible with market timing, so what I’ve elected to do with my portfolio, instead, is to purchase “non-expiring call options” on my favorite commodity ideas.

Silver: Bear Creek Mining (BCM.V)

Copper: Ivanhoe Mines (IVN.TO)

Uranium: Energy Fuels (UUUU)

As for gold?

The majority of my portfolio is comprised of gold miners!! 😉

But here’s one that’s on my radar to buy next:

 

Lundin Gold (LUG.TO)

 

I’ve got some cash available, so I’m just gonna be out looking for a good entry point… In this most brutal bear market for commodities, I’ve refined my strategy to chase after some of the more massive deposits out there.

As the popular saying goes, “Everything that can go wrong with a big deposit can go wrong with a small deposit… But with a small deposit, you don’ have the tonnage to bail you out!

Once upon a time, Kinross Gold (KGC) paid $1.2 billion for the Fruta del Norte gold deposit… Lukas Lundin bought it from them for $240 million in cash and stock.

LUG.TO currently has a market cap of just shy of C$400 million

From Lundin Gold:

Lundin Gold

And who doesn’t love a serially successful leader, like Lukas Lundin, who ONLY shoots for the moon?

From CEO.CA:

“I want Lundin Mining up to $10-billion [market capitalization]. I want Lundin Petroleum up to $10-billion. And I want Lundin Gold [at] $5-billion,” the Swedish entrepreneur said in an interview in his office, which overlooks the city of Vancouver and the North Shore Mountains beyond.

If all goes as planned at FDN, Mr. Lundin, 58, thinks Lundin Gold could achieve a $2-billion to $3.5-billion valuation in a few years, compared to roughly $400-million today. He doesn’t sound worried about raising the US$400 to US$500 million of additional capital required to build FDN.

To reach his goal of a $5-billion market value, he may need to look for other assets. Remarkably, he hinted that Lundin Gold may even re-acquire Tasiast one day, which is the troubled project Red Back sold to Kinross at an absurd premium.

“Ideally you do FDN and then Tasiast, and then you’re off to the races,” he said. “Then you have a company that produces over one million ounces from two deposits. I don’t want a company with 10 mines that produce 100,000 ounces.

 

If anyone can make it work out in Ecuador, it’s Lukas Lundin!

 

Happy Hunting!

 

Photo Credit: Bear Creek Mining

{ 1 comment… read it below or add one }

1 BeSmartRichNo Gravatar January 7, 2016 at 3:39 pm

What a day today. All I thought about was why don’t I have enough cash reserve today. I saw so many quality stock dropping its value by 5% everywhere. Couldn’t believe my eyes. Hope this last until my next payroll. 🙂

Reply

Leave a Comment

 

{ 3 trackbacks }

Previous post:

Next post:

Copyright © 2012 FI Fighter