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

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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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BeSmartRich
4 years ago

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

The Dude
The Dude
4 years ago
Reply to  FI Fighter

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.

mike
mike
4 years ago

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… Read more »

Vinit
Vinit
4 years ago

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.

Income Surfer
4 years ago

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

Srini
Srini
4 years ago

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… Read more »

Mike
Mike
4 years ago

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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