Mining Stocks Update (June 13, 2017)

by FI Fighter on June 13, 2017

in Precious Metals Updates

Hey everyone! It’s been awhile, and I apologize for the lack of updates lately… I’ve been caught up with the NBA playoffs (Go Warriors!) and did a bit of water fasting as well…

Tomorrow, I leave for Puerto Rico and will be spending a few weeks out there on vacation with family…

Here’s an update with mining stocks and my portfolio…

With the Fed Rate hike most likely happening tomorrow, I’m anticipating that the weakness felt across the precious metals mining stocks over the past few months will start to subside and we’ll start heading up sooner or later (hopefully sooner). Also, the whole GDXJ rebalancing fiasco should be finally put to rest and behind us at the conclusion of this week, or perhaps early next week…

So in the medium-term, I’m pretty optimistic…

As readers know, I take more of a macro view and approach towards these stocks, so the short-term noise and price action don’t really deter me all that much… Rather, when the merchandise is cheap, I like to buy up shares aggressively, and I accept upfront that I’ll never be able to perfectly nail any tops/bottoms…

I like to dollar-cost average (DCA) on the way down on the dips…

With that said, I’ve been buying a few different shares as of late, here’s a rundown:

  • Dolly Varden Silver (DV.V/DOLLF)
  • Teranga Gold (TGZ.TO/TGCDF)
  • Klondex Mines (KLDX)
  • Sandspring Resources (SSP.V/SSPXF)

Here’s where the portfolio stands at the conclusion of today’s trading session.

As of market close June 13, 2017.

Precious metals are out of favor right now, so I’ve been digging the discounted shares…

Quite frankly, I’m hoping that the cryptocurrencies are all telling us something… and are a leading indicator to what will happen to these mining stocks sometime in the near future…

Check out this really cool post from the Hedgeless Horsemen with some more comparisons between the two sectors…

Bottom line, commodities (real hard assets) are historically cheap, especially relative to financial products and the broader markets…

Buy low and sell high.

 

I’m gonna keep trying to do that…

 

Yup, I’m still holding onto a good amount of cash, but I’ll be looking to deploy some more of it soon to buy some more beaten down miners…

 

I’m pretty pleased to have initiated a position in Dolly Varden Silver (DOLLF) at ~$0.45/share (sub C$0.60/share). Long-term, I’m very bullish on silver and this company gives me further diversification into the space, alongside my other silver holdings: Alexco Resource (AXU), Bear Creek Mining (BCM.V/BCEKF), Endeavour Silver (EXK), and Fortuna Silver (FSM).

For mid-tiers, I’ve always been a fan of Klondex Mines (KLDX) and Teranga Gold (TGZ.TO/TGCDF).

As TGZ.TO and KLDX have been demonstrating to me quite CLEARLY during this most recent sell off, forget trying to perfectly nail getting in at the bottom… It’s an impossible task. I’ve just been buying the dips and adding to my underlying position in tranches… The last slug of TGZ.TO I bought was at C$3.05/share and for KLDX it was at $3.08/share.

Lastly, with Sandspring Resources (SSP.V/SSPXF), my cost basis is still pretty high, so when shares dipped below ~C$0.40/share, I took it as an opportunity to top up at a much more favorable entry point. I got in around ~C$0.38/share on this latest batch of shares. Please note — This stock is a pure optionality play and we need to see a gold price of probably $1,400/oz before this stock starts to really outperform its developer peers… Right now, it’s trading for beans so I’m content with adding and most importantly — Waiting patiently for the turn up. Investors who want/demand instant gratification really shouldn’t waste their time with a stock like this. At sub $1,300/oz gold, the company’s Toroparu gold project in Guyana is essentially worthless.

It’s always emotional and nerve-racking buying low, but hey, I’ve been burned enough times in the past to know that for me at least, this strategy sure beats chasing the momentum train up… That’s how I usually get slaughtered playing this game…

 

Happy Hunting!

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{ 14 comments… read them below or add one }

1 KevinNo Gravatar June 13, 2017 at 8:01 pm

Glad to see you posting! I was starting to get worried you were losing interest in the sector 🙂

Reply

2 FI FighterNo Gravatar June 13, 2017 at 8:44 pm

Kevin,

Haha yeah the summer doldrums, I guess? I’m still very interested in the sector but trying to balance life and enjoy the sunshine out here as well. 🙂

Cheers!

Reply

3 AlexNo Gravatar June 14, 2017 at 8:27 am

Have you heard anything about brimian I haven’t really read much up on it lately.

Reply

4 CNo Gravatar June 14, 2017 at 9:42 am

Alex, They released a statement just yesterday/today.

Reply

5 CNo Gravatar June 14, 2017 at 9:48 am
6 AlexanderNo Gravatar June 14, 2017 at 3:05 pm

you think thats negative news i cant really tell

Reply

7 FI FighterNo Gravatar June 14, 2017 at 9:44 pm

This is very good news. The new board is sorting through the mess the old board left behind. That’s a lot of cheap options that have lapsed and are now wiped off the share register.

I’m optimistic for better days ahead!

Cheers!

Reply

8 JBNo Gravatar June 14, 2017 at 11:04 am

Out of all of your stocks currently in the port…which one would you say you are most excited about?

thanks,
jb

Reply

9 FI FighterNo Gravatar June 14, 2017 at 9:45 pm

JB,

Probably Critical Elements (CRE.V/CRECF). They are firing on all cylinders and I think Q2 for lithium will be very strong.

Take care!

Reply

10 SeanNo Gravatar June 14, 2017 at 12:00 pm

I’ve been following you for a while and rooting for good things to happen for you but one burning question I have is how you never talk about the real possibility of a lot of these companies becoming insolvent and going bankrupt. You always talk about when gold reaches $1400/oz, which I agree with you it will, but what about the real possibility that 80% of these companies you own going bankrupt before that happens? Bankruptcy and consolidation within a sector is usually what tells the bottom of a major sell off, not some arbitrary economic indicator. All these companies you own should be viewed as call options with an expiration date (bankruptcy), you can’t just hold them forever and wait for gold to turn around.

Reply

11 FI FighterNo Gravatar June 14, 2017 at 9:52 pm

Sean,

Solvency and bankruptcy are not fears or concerns that keep me up at night. If you look through my portfolio, I only own 6 producers: Fortuna Silver, Endeavour Silver, Teranga Gold, Klondex Mines, Kirkland Lake Gold, and Richmont Mines.

Some of the names above are lower cost producers like Fortuna Silver, and perhaps all of them have a ton of cash in the bank and minimum debt. Further, companies like Kirkland Lake and Teranga are backstopped by billionaire investors who will snatch up any cheap shares and provide funding if that ever becomes necessary (Eric Sprott and David Mimran).

Not all companies are created equal and that’s where all the time and research goes into — Finding the standouts that will survive any brutal bear markets. The rest of my portfolio consists of explorers and developers which carry minimal debt, if any debt… For funding, they raise via private placements and right now these mining shares have caught a bid, so companies with quality projects are able to get financing rather easily… It’s night and day compared to 2015, as evident by the lack of deals being put together by royalty and streaming companies like Franco-Nevada, who are essentially going to sleep on precious metals now… The capital markets have opened up again, a very bullish sign for the sector as a whole.

As for $1,400 gold, only Sandspring Resources needs that… Well, I guess it would help everyone, and Orezone would benefit a lot too… but for the most part, most of the stuff in my portfolio is economical at $1,200 gold. A long-term price of $1,300 gold would be just fine for generating free cash flow and running a profitable business…

Anyway, the devil is in the details as always… but solvency is not a very big concern for me right now unless we see like $1,000 gold or lower.

Cheers!

Reply

12 Investment HuntingNo Gravatar June 14, 2017 at 5:45 pm

WARRIORS, WARRIORS ;-). It felt great to beat the Cavs again. I’ve bought 5 mining stocks on the pullback. Hopefully the bottom is near.

Reply

13 AlexNo Gravatar June 14, 2017 at 8:12 pm

Which ones I didn’t know you were into mining stocks

Reply

14 FI FighterNo Gravatar June 14, 2017 at 9:54 pm

Nathan,

Go WARRIORS!!! The highlight of my summer back home to the Bay Area for sure 🙂

Cheers!

Reply

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