Booking Profits – Klondex Mines ($20,551.74 Realized Gains)

by FI Fighter on February 10, 2017

in Precious Metals Updates

Let the selling continue! Similar to my reasons for cashing out of B2Gold (BTG) stock entirely, I also decided that now was a prudent time to book gains on another gold producer that I’ve held for over a year, Klondex Mines (KLDX).

Klondex Mines, one of the best run mid-tier mining companies out there, I’m going to miss having you anchor my mining portfolio! It’ never easy to say goodbye, but as is usually the case with our winning bets, it’s ALWAYS the toughest getting out and selling at/near the top…

Well, shares of KLDX aren’t sitting EXACTLY at 52 week highs ($6.03/share), but we aren’t that far off…

In a span of 1 year, KLDX is up 123%!

I sold my remaining 3,800 shares of KLDX @ $5.60/share. All in all, I walked away with realized gains (pre tax) of $20,551.74 with this speculation in a little more than 1 full year.

What’s my reason for selling out of this AWESOME gold stock?

Well, KLDX is nearing ~$1 billion USD market cap, shares are already up ~20% YTD, and similar to the case of BTG, it just no longer looks very cheap to me…

With KLDX, I do feel that investors are paying a premium for safe jurisdictions (primarily Nevada and to a lesser extent Manitoba) and world class management… At ~$1 billion market cap, though, the company is certainly trading at a much richer valuation than some of my other gold producers, such as Teranga Gold (TGZ.TO). Teranga Gold produced 216,735 ounces of gold in 2016, but its current market cap is less than $400 million USD

Klondex Mines is aiming to produce between 210-225k ounces of gold in 2017…

From Klondex Mines.

How do you explain the valuation gap?

Teranga Gold produces gold out in Senegal… Yup, West Africa, a destination that the market will ALWAYS discount relative to other jurisdictions perceived to be much more stable and safe.

What are my thoughts?

Mining is an inherently risky business and things can AND do go wrong all the time… regardless of where you operate your mines on this earth… Would I prefer to own companies mining in the USA, Canada, and Australia? Sure, but only up to a certain point, I guess…

Price is what you pay and value is what you get.

Moving forward, I will attempt to find better value out in the mining space… Actually, the main reason I decided to liquidate out of my KLDX holdings at this time is that I’m leaning towards increasing my precious metals allocation to focus a little bit more on silver. In other words, I plan on using the KLDX proceeds to pick up some more shares in some mid-tier silver producers… Just a gut feeling, but I’m anticipating silver outperforming gold on the next leg up in the precious metals bull market, and thus, I think bigger gains will be made in some of the better silver stocks…

In the summer of 2016, silver was trading at over $20/oz… At that time, KLDX lagged some of the more popular NYSE listed silver producers: First Majestic Silver (AG), Endeavour Silver (EXK), and Fortuna Silver (FSM).

Here is a 1 year chart comparing: KLDX, AG, EXK, and FSM.

KLDX (blue line) CLEARLY trailed behind in the “race to the top” when silver was shining most brightly… Since the fall/winter 2016 sell off in precious metals, KLDX has caught up quite a bit to the silver stocks, and even overtaken FSM, which is up 104% over the last year.

But I for one don’t anticipate this recent momentum shift lasting for the remainder of 2017… At some point, I think silver goes back up over $20/oz again, and the graph reverts back to looking similar to the way it did in summer 2016 again…

Just a hunch…

The current Gold/Silver ratio is 68.91… Here is a 10 year chart (encapsulating both bull and bear markets), to put things in perspective.

From Goldprice.org.

Buy low and sell high.

I’m still a HUGE gold bull, but I’m going to use this period of relative gold strength to book some gains (like I just did with both BTG and KLDX) so that I can redeploy some capital back into the silver space…

 

Market timing?

 

You know me…

 

I have not a clue as to what I’m doing at all… but I’m still going to try and do the best that I can.

 

In summary — KLDX stock is holding up extremely well (near 52 week highs), the company is executing (near) flawlessly, and I’ve been one extremely happy investor. So, I took my profits and booked gains of $20,551.74.

 

Just like all my other sales, now we move on with no regrets…

 

Fight On!

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{ 9 comments… read them below or add one }

1 Mustard Seed MoneyNo Gravatar February 11, 2017 at 6:47 am

Wow that’s an awesome profit, especially for someone that “has no clue” what they’re doing you seem to be doing something right 😉

Thanks for sharing your trades!!!

Reply

2 FI FighterNo Gravatar February 14, 2017 at 4:12 pm

MSM,

Thanks! It was a good trade and I’m very happy with the profits.

Cheers!

Reply

3 Thankful ReaderNo Gravatar February 11, 2017 at 6:49 pm

Hi Jay,

I would like to thank you for your write-ups on gold. It was December 2016 when I read your posts that convinced me gold/silver was undervalued and I made a purchase for McEwen Mining. Although I only made a couple of thousand as opposed to the tens of thousands of profits you booked, I am very grateful for the information and insight you provided.

Now I’m wondering if you would be interested in the uranium space? Recently spot prices have fallen to very low depths and it doesn’t appear likely that prices can continue to be this low since no miner can be profitable under these prices. Also uranium is not loved as the public is opposed to new nuclear projects (Fukushima in Japan), but the world’s need for clean dependable electricity sources will continue to grow. And new projects have come online and will be coming online from China. Anyways it seems like a contrarian opportunity today. One particular company is NexGen who is an exploration company that has discovered around 200 million pounds in a good mine-able area (not water flooded). At today’s lowest spot price, it is worth 200 million * $20/lb = $4 billion USD. The market cap for the stock today is $1.3 billion CAD. A reputable fund manager gave a convincing talk on uranium and in particular NexGen. https://www.youtube.com/watch?v=nr_xbcd0nOk. Please have a listen, and I look forward to hearing your thoughts on this company.

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4 Thankful ReaderNo Gravatar February 11, 2017 at 6:55 pm

Meant December 2015*

Reply

5 FI FighterNo Gravatar February 14, 2017 at 4:14 pm

Thankful Reader,

Congrats on those gains and I’m very glad to know that you made some good money in the gold space! 🙂

In regards to uranium, NexGen would be one of my top picks if I was participating in the sector. Right now, I’m more focused on lithium and cobalt, but certainly the Arrow deposit has a ton of upside and potential remaining.

I will be cheering from the sidelines.

All the best!

Reply

6 JustinNo Gravatar February 13, 2017 at 8:41 am

Jay, UUUU is looking good finally. I think it is all UP from here. The volume is good and the price is rising with other uranium companies.

Reply

7 FI FighterNo Gravatar February 14, 2017 at 4:15 pm

Justin,

Wonderful run for UUUU to start the new year!

Go uranium!

Take care!

Reply

8 SriniNo Gravatar February 14, 2017 at 5:40 am

Jay,

Boy, I had been contemplating to sell Klondex to rotate to more attractive Junior silver miner. Though i havn’t pulled the trigger yet, i was positively shaking my head when i read ur post. 🙂

Klondex management did all they said will do and probably one of the flawless juniors i had tracked along with Guyana goldfields. But i feel its time to rotate out of klondex to other attractive juniors to maximize profit.

cheers
Srini

Reply

9 FI FighterNo Gravatar February 14, 2017 at 4:16 pm

Srini,

I hear you buddy! Lots of attractively priced juniors right now, so I thought the decision to sell KLDX was kind of a no brainer… It had a nice run up, similar to GUY and I didn’t mind booking gains and taking that capital back off the table.

All the best!

Reply

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