Portfolio Update: Adding to My Best Ideas (September 09, 2016)

by FI Fighter on September 10, 2016

in Precious Metals Updates

alicanto-minerals

Over the past few months, I had previously decided to only share my best new ideas with subscribers of this blog, along with my buy/sell orders. However, due to the profound increase of interest in both the precious metals (gold/silver) and clean energy (lithium/graphite/cobalt) space, lately, I’ve had to re-assess my stance on this…

In general, I first made the switch because I wanted to incentivize subscribers (particularly those who have stuck by me through thick and thin) by providing these fine folks with a “premium service” for their continued loyalty and interest in the blog…

Hey, I seriously, seriously, appreciate all the support over the years!

Anyway, as everyone well knows by now, these mining stocks are just so much in favor these days! Also, I’ve learned that this blog has indeed expanded its reach, as my articles are now routinely being cited across the web, on various investment forums and discussion boards…

So, with such growing interest in the sector, I realized that it would be too difficult for anyone who wants to track my history to be able to dig up “old posts” that, well… don’t exist… In other words, all the content that I was shipping out to subscribers can only be found in a select few inboxes… None of those “e-mail alerts” are archived on this blog…

For anyone curious, here’s a small snippet example of what my subscriber updates used to look like…

June 29, 2016 Subscriber E-mail Alert.

subscriber-email-alert

Moving along, for the immediate future (as long as mining stocks remain fashionable), I think any updates that I provide will best be served by being featured on this blog… But at some point, I will certainly need to figure out a way to give the subscribers something a “little extra”, like I was doing before with my updates…

With all that said, let’s now explain how I got to my latest “best new idea” in the gold sector.

Just the other day, I took a serious look at my mining portfolio, and decided it was time to exit out of one of my gold positions, Pilot Gold (PLG.TO). The stock had run up quite a bit, and I was sitting on some pretty hefty unrealized gains… On reflection, I realized that I first got involved with the Pilot Gold story because I had interest in their Turkey assets, and thought the company represented solid value at around sub ~C$30 million market cap. Well, with the most recent run up in practically all gold stocks, shares of PLG.TO are now trading closer to ~C$100 million market cap.

Further, with all the turmoil surrounding Turkey these days, you could say that my interest in that region has waned greatly in recent months…

In addition, I just can’t honestly say that I’m all that inspired and interested in the company’s current exploration targets in the US (Kinsley Mountain, Goldstrike, and Mineral Gulch)… Who knows, perhaps one day one of these targets will hit the motherload and become a multi-million ounce gold deposit? Pilot Gold does have some of the best geologists in the industry on staff, so I definitely wouldn’t put anything passed them… But my gut feeling is such that I just don’t think these projects will ever amount to anything of significant size and importance…

I hope I’m wrong, but at this point in time, my conviction is to book my gains and try and re-deploy the capital elsewhere.

So, I sold out of my entire position in Pilot Gold, liquidating 45,000 shares, and realizing over C$24,000 in profits.

Just prior to liquidation.

Current as of mid-day September 07, 2016.

screen-shot-2016-09-09-at-5-47-03-pm

With my Pilot Gold position closed, I had about C$34,000 in fresh capital to invest into a “better” idea.

Almost immediately after, I decided to initiate a position in a new company, Alicanto Minerals (AQI.AX). I purchased 100,000 shares of AQI.AX @ A$0.32/share.

Similar to Pilot Gold, Alicanto Minerals is an early-stage exploration company that is primarily focused on making the next major gold discovery.

With Alicanto Minerals, there is a lot to get excited about with this story!

First off, the company is focused in Guyana, which is a relatively underexplored but very prospective region for finding gold.

Just look at the following slide below.

From Alicanto Minerals.

s_america_africa_continuety_compressed

There is a saying in the gold industry — “The best place to find gold is to go where people have previously found it before.

If you look at the map above, it’s very impressive to see how many multi-million ounce gold deposits have been uncovered nearby. Most recently, Guyana Goldfields (GUY.TO) has done particularly well getting into full-scale commercial production with their Aurora deposit.

Guyana Goldfields performance year-to-date (YTD).

guy-to_chart

From Guyana Goldfields.

Guyana Goldfields Inc. is an emerging gold producer with the onset of its Aurora Gold Mine which achieved first gold pour in August 2015. The mine plan for the Aurora Gold Mine is designed to produce 2.86 million ounces of gold, averaging 188,000 ounces per year, over an initial 16 year mine life.

So, there you go, an example of a Guyana success story that many of the juniors just getting started in the region will no doubt try and replicate in the future.

Enter Alicanto Minerals and their Arakaka Gold Project.

With Arakaka, the land package is especially exciting because it’s so vast and there are so many targets for the company to go after.

From Alicanto Minerals.

arakara2

From the slide above, it says, “+1moz Au historical alluvial production“. What this means is that with Arakaka, we are dealing with Brownfield Exploration and not Greenfield/Grassroots Exploration… Or, in layman’s terms, we already know that the project has got gold (and most likely lots more of it)… we just don’t know how much gold is actually there… yet.

But for certain, with Arakaka, we ain’t dealing with virgin grounds, so the company isn’t just blindly firing away drill holes in the dark, simply hoping and praying that they get lucky… Stage 1 of exploration was all about putting together hints and clues to help the company pick out the best drill hole candidates. Sure, the team could still come up “empty handed”, delivering results that fall well short of market expectations, but it’s almost without question that whatever they drill, they’ll find gold to some degree. I like the odds, anyway, much more than I would with say another junior explorer who is indeed going after “new discoveries”.

A 6,000m drill program at Arakaka commenced in June, and the first assays should be released any minute now…

Obviously, there are no guarantees that the company will deliver any “spectacular” hits, but hey, that’s of course the risk you take with early-stage exploration plays…

In a way, investing in these stocks very early on (before a single drill result has been released) is akin to buying lottery tickets… But like most things in life, the devil’s in the details and I think it’s too much of a sweeping generalization for anyone to just assume that anything early stage is just simply “too risky to partake in”.

In the case of Alicanto Minerals, if anyone cares to dig into the details, they will find that the company has an earn-in deal with Barrick Gold (ABX).

barrick-deal

Yes, that Barrick Gold! The largest gold producer on the planet has skin in the game…

For a company like Barrick Gold to get involved with a junior exploration company, you would have to think that the land package was something pretty special, right? At least half-decent? I mean, a company like Barrick Gold is so big that in order for them to move their production needle even slightly, they would need to acquire and develop some pretty MASSIVE deposits, right? We are talking about multi-million ounce projects here… Something that can only be found in “Elephant Country”.

In my simpleton eyes:

Elephant Country = Massive upside potential.

That’s what I’m interested in…

Currently, shares of AQI.AX trade at the following valuation.

screen-shot-2016-09-11-at-12-29-27-am

From a risk vs. reward perspective, I think AQI.AX looks pretty appealing at ~A$25 million market cap.

Again, I was looking to get out of Pilot Gold at ~C$100 million market cap… So, in essence, I tried to trade out of a more “overvalued” stock so that I could move the proceeds into a company that was arguably more “undervalued”. Not only that, but I think my new “best idea” in the gold space has much greater prospects of being able to deliver a multi-million ounce discovery than my previous idea…

Yes, Pilot Gold has more assets under their belt that are at a much more advanced/mature stage of drilling, but I will be quite honest, the earn-in agreement that Alicanto Minerals has with Barrick Gold was pretty hard for me to ignore… I see blue sky potential with Alicanto’s Arakaka Gold Project, which I clearly don’t see with any of Pilot’s assets. Not to mention, Alicanto Minerals has the support and backing from Sprott Global, who is a major shareholder.

Add to that a very tight share structure and there’s definitely a lot to like with this story, so far…

From Alicanto Minerals (August 2016 Corporate Presentation).

alianto-shares

Only 83.6 million shares on issue… Top 20 holders own 50% of the company and management holds 20%… You gotta love that! Anytime management holds 20% of shares (or more), I look at it as a strong positive for the company, and it definitely helps me cross off an important consideration on my buying checklist.

Oh yes, and in addition to the Arakaka Gold Project, the company is also currently in the process of doing its due diligence to acquire another prospect, the Ianna Gold Project.

From Alicanto Minerals.

alicanto-new-project

Time will tell if this new project ever amounts to anything, but it’s another discovery candidate that might soon be added to the fold…

In general, I’m not a huge fan of early-stage exploration stories because quite frankly, I’m just not good enough to participate heavily in the space… You have to really know what you are doing (and be in the know!) to succeed with this stuff, and for the most part, it’s just too high risk for me…

But again, I like to look at things from a risk vs. reward perspective… And right now, I think that Alicanto Minerals represents one of the better deals to be found in the gold space… After all, the senior producers, mid-tiers, and even development-stage companies have all gotten bid up quite drastically in recent months… From my perspective, most gold stocks are trading at fair value, if some aren’t overvalued at the current spot price of gold…

But for A$25 million, sure, I don’t mind taking a “flyer” on an early-stage growth story with a portion of my capital that could very well someday return some pretty impressive gains… especially if gold keeps on marching along, continuing its bull market ascent.

 

Please note: As always, please do your own due diligence and research before investing any of your own hard-earned dollars. I only post these type of updates to share with readers what I’m doing with my own money. I will NEVER offer any kind of investment advice!

 

So, there you have it… I really don’t have that many gold ideas that I like these days… Alicanto Minerals is probably my favorite one of them all right now…

 

Fight On!

{ 9 comments… read them below or add one }

1 JCNo Gravatar September 11, 2016 at 9:20 am

This post answers the question of: Is it still a good time to invest in gold mining. I look forward to your new ideas and appreciate the research and thought that goes into each. There is a ton of information out there and it is difficult to narrow down which ideas are good and who actually knows what they are talking about. Keep them coming!

Reply

2 FI FighterNo Gravatar September 12, 2016 at 5:51 am

JC,

The gold market is definitely dynamic and investors need to be careful in understanding all the different options out there before they rush in to just buy anything that has “gold” in the name… The greater the rise, the harder the fall…

We aren’t in the depths of the bear market anymore, so I don’t think you can just throw blind darts at any company anymore and have it go up 100-200% in a few months time…

I’m trying to be a lot more selective with my purchases these days, and I’d say probably only 5% of all gold stocks out there appeal to me (maybe less). The majors, and most of the mid-tiers have run up significantly, so I’ve backed away from those ideas…

Yes, early-stage exploration is inherently more risky, which is why I’m targeting the ones that have very prospective projects and are trading at below $30 million market cap… The lower, the better… My good buddy likes to target sub $10 million to mitigate risks… And he sells half on a double, or enough shares to significantly reduce/eliminate his cost basis entirely… With early-stage exploration, taking a “free ride” is a very shrewd investment strategy to let your participate in future upside while pulling all your chips off the table… It’s hard to lose sleep at night when you are free-carried on your stock positions.

The world of gold mining isn’t like Buy and Hold Forever… The rules are very different and most investors don’t appreciate or understand that when they start to buy.

All the best!

Reply

3 AlexNo Gravatar September 12, 2016 at 11:54 pm

What do you think of NAK and its pebble project ? Also eeymf I tried to get some shares online and it doesn’t let me and I also called td Ameritrade to try and get some shares and they said they don’t offer them any advice for me to grab some ?

Reply

4 FI FighterNo Gravatar September 13, 2016 at 2:50 am

Alex,

I’m not a fan of that project since I believe there is a lot of opposition to it and it’s going to be a lot of working getting it into production… Too much risk for my appetite, but I’ll admit I don’t follow that story all too closely, so am not sure where things stand atm.

In regards to EEYMF, your broker should be able to help you setup a limit order through their block desk, trading directly on the ASX to get the order filled. You would need to call in as I don’t think any online brokers will let you place such an order directly online.

If TD Ameritrade doesn’t work, you can try Schwab or Vanguard who I know for certain can transact in the EEYMF OTC shares.

Easiest solution would be to open up a global trading account if you can. I use Schwab Global personally, but Sprott Global and Interactive Brokers are some other options.

Cheers!

Reply

5 FI FighterNo Gravatar September 13, 2016 at 2:52 am

For anyone interested, check out this video to learn more about NAK:

https://www.youtube.com/watch?v=9Cbv7VZPVX4

Reply

6 AlexNo Gravatar September 13, 2016 at 1:22 am

Also I don’t think they offer alicanto as well …. Any help ?

Reply

7 FI FighterNo Gravatar September 13, 2016 at 2:56 am

Alex,

Alicanto is pretty illiquid, even on the ASX, so I doubt anyone in North America is really paying attention to the story at all… I doubt there is an OTC listing available, so my guess is you will need to contact a broker and have them set one up for you…

The easiest way to purchase Alicanto is directly on the ASX using a global trading account and transacting in AUD…

Cheers!

Reply

8 fromcentstoretirementNo Gravatar September 17, 2016 at 11:10 am

Hey Jay,

I will probably be entering the mining stock market soon (given your results, really).

Assuming I know 0 about it, could you point me to some references to learn about this?

Thank you!

Reply

9 FI FighterNo Gravatar September 17, 2016 at 6:49 pm

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