Portfolio Update: Reshuffling the Deck (November 10, 2017)

Here’s an update on my latest trades for the week ending on November 10, 2017.

  • Bought 20,000 shares of Erdene Resources (ERD.TO) @ C$0.55/share  
  • Sold 50,000 shares of Auroch Minerals (AOU.AX) @ A$0.25/share 
  • Bought 20,000 shares of Balmoral Resources (BAR.TO) @ C$0.47/share 
  • Bought 25,000 shares of Balmoral Resources (BAR.TO) @ C$0.43/share 

Erdene Resources

Over the past few months, I have been dollar-cost averaging (DCA) down into adding more shares of Erdene Resources (ERD.TO/ERDCF), which is a badly beaten up gold developer.

Erdene has district scale potential in Mongolia, and long-term I think this story will be a winner…

From Erdene Resources.

Short-term, yes, it’s definitely been painful, and it very much feels like “catching falling knives” with this one…

 

Buy low and sell high.

It’s not easy, but I am trying my darnedest to do that!

Auroch Minerals

Last week, I mentioned that I was looking to add some more cobalt exposure to the portfolio, and as such I initiated a position in Auroch Minerals (AOU.AX). To my surprise, shares ripped much higher above my entry point (on no news), and almost immediately I was faced with the proposition of selling and booking a quick gain.

Since this story is still very early days (and I don’t have that much conviction just yet), I used this most recent period of strength to sell into a rally.

Assays are due in the next few weeks, so if the share price can stay weak leading up to that event, I may look to get back in. But if I can’t get in at a favorable price again (A$0.18-0.22/share range) before assays are released, no worries, I won’t mind paying more after the facts are out (if the results justify a higher valuation).

Auroch could be sitting on a massive cobalt find, but it’s very speculative at this stage of the game, so I booked some quick profits and I’m sitting on the sidelines for now…

Balmoral Resources

2017 has been a great year so far for many lithium and cobalt investors. Nickel has started to gain traction as well, as evident by the growing interest in stories such as Garibaldi Resources (GGI.V/GGIFF). Lost in the mix is Balmoral Resources (BAR.TO/BALMF), a gold/nickel explorer/developer located in Quebec (prime jurisdiction for mining).

Balmoral is an interesting company, and I must admit that my investment thesis has changed over the years with this one… Originally, I was here for the Martiniere Gold Project…

From Balmoral Resources.

There’s been a lot of drilling (progress) made over the last few years at the Martiniere property… The company has so far outlined 4 potential gold deposits (Martiniere West, Bug North, Bug South, Bug Lower Steep), and recently made a new discovery known as Bug NW Zone…

 

But…

 

Because sentiment towards gold is in the crapper at the moment (nobody cares), and due to the following price chart:

From InfoMine.

I have been reminded that Balmoral also controls a high grade nickel sulphide deposit!

From Visual Capitalist.

Yes, that’s right, nickel sulphide (which are rare) NOT nickel laterite!

From Balmoral Resources.

The last drill hole at the Grasset Nickel Project was punched in late 2015 and returned 7.5m at 10.5% Ni… The company put Grasset on hiatus because sentiment towards nickel (and base metals) was absolute shit in late 2015 (if anyone cares to remember)…

With a 0.5% cut-off grade, Grasset already has 10.2 Mt @ 1.1% NiEq grade… Not an enormous initial resource by any means, but a good start!

Clean energy has really started to boom this year (lithium and cobalt stocks in particular), and I think it’s only a matter of time before nickel catches a strong bid and investors start piling on in… In the future, cathode formulas will likely be re-worked to 80/10/10 configuration (see below).

From Visual Capitalist.

Of course, the pick up in nickel demand won’t happen overnight (the nickel market is HUGE relative to small “niche” sectors such as lithium, cobalt, rare earths, etc.)…

Similar to copper, it could take a few years for the heat to turn up for nickel, but if/when that actually happens, is anyone’s guess… I do know that investor sentiment towards the nickel sector has intensified in recent months…

Just check out some of Balmoral’s nickel peers and the share price performance so far this year…

  • Garibaldi Resources (GGI.V/GGIFF) is up 2,810%.
  • Giga Metals (GIGA.V/HNCKF) is up 541.7%.
  • Balmoral Resources (BAR.TO/BALMF) is down a painful -39.6%.

Talk about BLAH for Balmoral, in comparison to some of its peer group… but clearly interest for nickel stories is there!

Seriously, with nickel heating up, can you imagine how the share price of BAR.TO/BALMF would respond to news of 7.5m at 10.5% Ni in today’s environment?!?

Certainly, not like the following (which is the sad nature of reality for Balmoral shareholders this year)…

Balmoral management is no doubt well aware of the current depressed share price situation, so I would imagine lots of news flow will hit the wire in the future to remind the market about their Grasset asset (and hopefully the company’s plans to start aggressively drilling it again in 2018!).

Anyway, at ~C$60 million market cap and ~C$11 million cash in the bank (with a recent financing completed), the company looks like a damn good deal to me at these low prices!

The exploration potential that exists with Grasset is why I loaded up on shares of Balmoral this week… but despite that, we really shouldn’t forget about the high-grade gold, which is no slouch, and in theory should command a significant premium (since we are talking about Quebec here) in a decent precious metals market.

Summary

Not too much activity this week; I went deep value hunting by picking up shares of Erdene Resources and Balmoral Resources. Also, I booked some quick short-term profits by trading out of Auroch Minerals.

Here’s where things stand now…

 

Until next time…

 

Fight On!

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Anoy

Hi Mate,

North American tax selling usually last til 2nd week of december, no fear of further slides ?

Bowman
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Bowman

Thanks for the update. I also happened to add Balmoral Resources (new addition in my portfolio) @ CAD 0,45. I hope the deep value exposes itself in the future. 🙂

Pon
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From an engineering stand point, if cobalt prices do go up to a point where it’s uneconomical, do you think people will engineer around it, and create/design something to replace cobalt, leaving cobalt obsolete? I mean they already have other types of battery. This is probably an extreme case, but if cost will inhibit the proliferation of EVs and clean energy, then people will work around it. “Anything that can happen, will happen” As for me, I like to pursue the path of least resistance.

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