[Ed. note: Here is our latest contribution from longtime reader Myron Martin. He has agreed to our trading restrictions, and, as usual, we have not reviewed, approved or screened his stocks or ideas, and the opinions he expresses are solely his own. Many of the stocks Myron covers are microcap “penny stocks” that can move dramatically with or without fundamental reasons, so please be cautious. Myron’s past commentaries can be seen here.]
Public opinion as we enter 2014 seems to be divided between two factions. First, those who “see the glass as half full,” and fervently hope and pray that things will soon return to normal (whatever that is). That group hangs on every pronouncement from the President and the government that things are getting better, that the housing market is improving, jobs are being created, deficits are being reduced from previous highs, and we can soon expect our lives to improve as a rising tide lifts all boats.
Countering that rosy picture are what have been dubbed the “doom and gloomers,” who see the proverbial glass as “half empty” because government statistics are not reliable, and politicians lie and only protect the interests of their wealthy supporters (particularly bankers), whom they rely on to get re-elected in safe government jobs where they can prosper on inside knowledge and ensure themselves of a cushy retirement. Quite a contrast in outlook, so maybe you are asking, where do I fall on that divide?
Long term, I am bullish about the future and consider myself a realist, meaning I am not swayed by political rhetoric, partisan politics, or self-serving commercial interests. My personal focus is “digging deep” to get at provable truth, based on history and mathematics as a foundation on which to apply common sense and sound logic and reason.
The opinions to which I give the most credence are those who have “been there and done that,” particularly successful businessmen and entrepreneurs who have been at the forefront of advancing our quality of life with innovation, critical or outside-the-box thinking, contrarians who are not afraid to take a stand against a self-serving establishment.
One can not help but wonder whether our situation as a nation would not be much better had more such successful people stood for office, as opposed to lawyers who love nothing more than enslaving the people by more and more confusing legislation, rules and red tape that hinder free enterprise and entrepreneurship that expands economies and provides jobs. I am all for less government and more private initiative to create jobs that add to our productive capacity, instead of the burdens imposed by mostly parasitic bureaucrats that suck the blood out of otherwise viable businesses with red tape and punitive taxes.
With that as a background, consider the reality check found here.
As a lead-in to this column’s focus on preparing for more difficult times ahead, I would first of all like to address our biggest enemy, irrational fear! That can take many forms. Maybe you have a reluctance to pull the trigger for fear you might lose money on a stock purchase, which is certainly possible. The important point is to expect it and cut your losses short while letting your winners run. Another fear many have is the government confiscating any gold or silver you might accumulate. The rational thing is to realize that the government is already confiscating your wealth through inflation and has been ever since the Federal Reserve Act was enacted in 1913. That escalated in 1971 when Nixon abolished the gold standard. In recent years we have approached the “end game” where the dollar is in danger of losing its status as the world’s reserve currency and the wealthy are accumulating “hard assets” to protect their wealth. This video makes a good case for why there is not likely to be a repeat of the 1933 Roosevelt confiscation of private gold and silver holdings.
While I can not promise every future column will have three choices to invest in (more than any other newsletter I am aware of in over 10 years in the business), currently there are so many undervalued companies to report on, I do not see myself running out of interesting companies to profile for the rest of the year. This time I am reporting on the number one gold stock in terms of volume of accumulation over the past quarter without a real serious breakout in price, though it is poised to do so once a takeover is finalized and investors realize what an incredible value it really is based on its assets. For balance, I am also profiling a not-well-known silver company that is considered by many analysts to be the lowest-cost silver producer in Mexico, with excellent management and reserves that can be ramped up in production once the market price justifies it. Finally, I am reporting on one company I do not yet own, but have been following for years, and that is poised to go into production of a base metal where as many as six major mines are likely to be shut down over the next couple of years with a predicted supply shortage developing. I refer to zinc, and as some of you may know, zinc and lead mines almost always produce silver as a by-product that lowers mining costs. With silver expected to at least double in 2014 according to the best experts in the business, this one justifies being early to catch the likely increases in silver and zinc pricing.
I first bought B2Gold Corp. (BTO.TO BTG) exactly two years ago for reasons that have only become stronger with the passage of time. The name at first glance may sound a little strange, but not when you come to understand the story behind it. Years ago I also owned Bema Gold, who sold their previous holdings to Kinross Gold Corp. (K.TO KGC) for $3.5 billion in 2007. Based on subsequent but unforeseeable events, Kinross overpaid, which is why its stock price is now in the $5.00 range compared to the $21.00 at which I sold. The good news is that the successful Bema management team used the profits to launch a new company and repeat their success, i.e. “Bema 2.” They obviously couldn’t use the name Bema again, hence it just became B2. Just an interesting sidelight to the company, very capably led by CEO Clive Johnston. Do you hear an echo? Yes I like these “second generation” plays, much like Balmoral Resources, Ltd. (BAR.V BALMF), from my previous column, but this one is much bigger, already producing from three mines, with total production for 2014 estimated to fall in the range of 395,000 to 420,000 ounces of gold.
B2Gold is a very unique company, a hybrid if you will, because exploration and mine building/production are really two different businesses requiring different skills and mindsets, but with their previous experience, they already have the people in place to do both. And, with a cash flow of $100 million cash and credit, they are in a position to make good acquisitions in today’s depressed markets without overpaying, as so many bigger companies did in years past. This means that recent acquisition Volta Resources (I owned it before takeover, increasing my B2Gold holdings) is now a 100% owned subsidiary of B2Gold. As such, it can be almost immediately accretive, instead of write-downs as the majors are experiencing on assets bought in the last couple of years at high prices. For instance, the Gramalote mine being developed in Columbia in a joint venture with AngloGold Ashanti Ltd. (AU) ($14.71) as operator at 51% ownership (B2Gold owns 49%) is expected to add another 300,000 ounces a year, with 140,000 ounces minimum added to B2Gold’s production profile, and that is only one of several development projects in progress.
The Ojikota project in Namibia, to add a third mine there, where they are the third largest employer in the country, is on time and on budget. The expected mine life is 12 years, producing 112,000 ounces of gold per year, at a very low cost of $524 to $689 per ounce, due to a poor and low-wage country. Both the local and national government are highly supportive due to B2Gold’s high creditability because they have delivered on what they promised in terms of good jobs and local community support in respect to their first two mines.
B2Gold also owns Masbate, the largest gold mine in the Philippines, which has a 15-year mine life and has already produced over 500,000 ounces of gold to date, with a 16KM strike length for expansion, and higher grades have already been discovered. The development of the Volta advanced-stage assets in Ghana and Burkina Faso will enhance production in coming years. In Burkina Faso, you have in the Kiaka project alone another potential 340,000 ounces of gold per year. B2Gold has an 81% interest in this mine that has a projected 10-year mine life with measured and indicated (M&I) resources of a total of 4.86 million ounces. The blue sky potential from all these resources could thrust B2Gold into the stratosphere of a solid major producer in just a few short years, with present reserves as follows: proven and probable reserves of 5,294,700 ounces of gold; M&I of 4,482,500 ounces; plus 2,996,600 inferred. As exploration continues some now inferred resources will hopefully be upgraded to reserves as exploration continues and additional new resources are also discovered. I rate B2Gold as a 3% portfolio position up to a $3.00 buy price.
Excellon Resources Inc. (EXN.TO EXLLF) (currently $1.28, bought at $0.55) has been in my wife’s portfolio since April 2012, and other analysts are finally catching on to the fact that this is an outstanding company from every aspect. Experienced management from a who’s who of the best companies in the extractive industries with legendary (Mining Hall of Famer) Ned Goodman on the board representing the investment of well-known mining investor Dundee Capital. The Sprott Group (billionaire Eric Sprott) is also a financial backer. With no debt, $15 million cash in the kitty and all-in costs of only $14 per silver ounce from a mine that is expected to produce for 100 years, things are looking very good. At 800 g/t this is a cash cow that has a recent report by professionals pegging it as the “#1 silver mine in Mexico,” which is the world’s number one silver producer.
The La Platosa mine is located in the heart of the Mexican silver district in Durango state, and one analyst went so far as to label it “the best silver mine in the world.” With such high grades and 70% silver content, margins are excellent due to zinc and lead by-product credits. The company is already cash-flow positive and with only 55,000 shares out, no dilution is needed for further development as the company continues exploration to expand the resource. Besides that, it has a $22 million loss carry forward that will defer taxes for years to come, and in 2013 it already produced 2.1 million ounces of silver at a cash cost of only $8.80. Excellon is well positioned compared to peers for a “first mover” advantage if the silver market explodes to new heights in 2014 as industry experts anticipate. I rate this one for a full 5% portfolio allocation.
Trevali Mining Corporation (TV.TO TREVF) has a high-profile partner that makes for a strong foundation. I refer to Glencore Xstrata plc, which is the world’s largest commodity trader and zinc miner, and since 2010 has had an 8% stake in Trevali, with an off-take agreement for all the zinc they can produce. They are also the operator of their Santander mine in Peru, which was commissioned in August 2013. Recovery of all metals, zinc, lead and silver are attaining anticipated targets. At the Magistral North, Central and South deposits 33,000 metres have been drilled, but numerous high priority zones remain untested along a 14KM strike length. They also own the Tingo hydroelectric plant 15 KM away that not only supplies the 2000 t/d plant with cheap electricity, it has sufficient capacity to sell any surplus into Peru’s national grid.
Since ramping up, Trevali has excellent analyst coverage. Some examples:
- David Morgan (the silver guru), recently stated, “TV is one of the few positive stories out there right now.”
- PI Financial commented, “Santander will be a stable source of cash flow”
- Raymond James, analyst, said it was, “among top performing resource stocks the past three months” and “transitioning itself from a mine developer to a metals producer” and also noted that the fundamentals for zinc are improving as several of the world’s largest producers will be mined out and closed by 2016.
Indeed, Trevali is positioning itself as the next mid-tier base metals producer, but it is not a one-trick pony. Among their other assets is the Ruttan copper-zinc deposit in Manitoba, but their primary immediate focus is their Caribou Mine & Mill, in the Bathurst Mining District of Northern New Brunswick, where they are already fully financed for a second mine. With no major new discoveries since the 1990’s, current major producers are not being replaced fast enough to meet the expected demand. That puts Trevali in an enviable position to ramp up in time to fulfill any additional accelerated demand as other mines close. I like the fact they are well-diversified with a planned revenue base of 65% zinc, 15% lead, 12% silver, and 8% copper-gold with 70% of their resources being in Canada and 30% in Peru, where their partner Glencore is well experienced and has a good relationship with government.
Their resources are impressive. In the Indicated category we have 2.7 billion pounds zinc, one billion pounds lead, 109 million pounds copper and 34.5 million ounces silver, which is equal to, or even superior to, some highly-touted silver stocks with equivalent prices just on that one asset alone. In addition, while inferred resources are not valued until upgraded with further drilling and feasibility studies, which takes additional time and money, it can be indicative of future potential and therefore worth noting, as I do here: 4.3 billion pounds zinc, 0.9 billion pounds lead, 638 million pounds copper, and 32 million ounces silver, with lots of “blue sky” exploration potential.
With 290,000 fully diluted shares I would expect a future rollback at some additional financing point if needed, but with a 52-week high of $1.13 and a low of $0.49, I would not hesitate to buy up to $1.25 if building a position. Since it may take some time for a big-time move in the price, my strategy would be to put in a “stink bid” for half of a 3% allocation and hope to pick up the other half in the summer doldrums if it has not moved up significantly by then.
As usual, I will not trade in any of the stocks mentioned for at least 72 hours to give all of you first dibs on acquiring a position, nor will I trade any of the ones I do own, as noted, B2Gold, Excellon and Balmoral. The mini-sleuther needed a rest after a hectic week of being snow bound, so with a full slate already will let him rest until next time.
Excellon, like so many small miners, has a chart that looks like slow death. In 2012, this stock was running $2 – $2.50 range, so our columnist’s wife has taken a 50% haircut if she bought it in 2012. Not to criticize–I have hung with Argonaut Gold (ARNGF), another well-managed and profitable small miner that has generally even outperformed Excellon, but I have taken a 30% bath on this puppy that also has a chart that looks like the pathway to extinction. The shuttering of mines from efforts to drive down gold will eventually produce a shortage that will drive up prices, but the trick now is not to be caught holding one of the companies that goes shuttered. The precious metal mining stocks continue to take a relentless beating and generate consistent disappointments for stockholders.
ED: With respect, as stated in my column, I am a realist, and for the record, between my wife and I we have 4 different portfolio’s, but I have “trading authority” on my wife’s accounts, so the decision to buy Excellon was mine not hers, she has little knowledge or interest in the stock market. What you outline emphasizes the different between chart readers and fundamental analysis. I identified Excellon early in 2012 as an excellent buy, I subsequently SOLD when as you acknowledge it was running in the $2.00 – $2.50 range. We made good money on Excellon, bought @ .55 and only continue to hold free trading shares, so it is all in the timing, and like you, I hold Argonaut. What I am now saying is that Excellon which has great assets, is well managed and financially strong, is probably quite ready for another run. Those who wait for the charts to show them that an investment is now “safe” based on my experience, will likely miss 25% to 50% of the ensuing rise. You say you have taken a “30% bath” on Argonaut, however, that would only be true if you sold to lock in that loss at a low point, which is unfortunately what most investors tend to do.
If you did your personal due diligence on the fundamentals of Argonaut as I did, that persuaded me to buy, then if you have the courage of your convictions, you just need to exercise the patience to hang on until as you say; “efforts to drive down gold will eventually produce a shortage that will drive up prices,” I understand if you are growing weary of the “blood bath” that the sector has endured the past 2 years, perfectly understandable, but the best investors in history all agree that the time to buy is when there is “blood in the streets” or when an asset is hated, and I believe we have reached that point of capitulation where the sellers are exhausted and it is time to buy. Let me give you an example, I was seriously considering profiling Volta Resources in the past few months because I had faith in management, and knowledge of the resources they held, but at only .05 stock price, even I was afraid they might be one of the junior casualties you seem to fear. This was in my books a “missed opportunity” because they ended up being bought out at a nice premium by B2GOLD, a strong company that will now develop those resources and bring them too market. At 5c I missed the opportunity to buy thousands of additional shares that would have made made me some serious money, but all is not lost, knowing the assets B2Gold now acquired, that potential will now be magnified just by exercising the PATIENCE to hold the extra shares I have until the Burkina Faso assets gets developed, which may just happen to coincide with when the gold price is finally allowed to rise.
Great Article. Def drinking the coolaid here. Any new thoughts or news on Valdor? It would appear that this winter (and the ridonkulous subzero temps) will make alot of Canadian and US telecoms think about using their products. Looks like fiber optics is set to explode so I assume this company will go along for the ride and could therefore be very profitable.
Eric: If you are talking about the commercial product Koolaid, I wouldn’t drink the stuff if they gave me a lifestyle supply for free, but thanks for the positive appraisal of Valdor who indeed are making progress. I said from the start this one would require some patience, and indeed price has declined currently, which is why I sometimes recommend splitting a purchase in a profiled company in half or even thirds to dollar cost average. I personally plan on picking up some more shares next week after the “hold” period runs out, because I believe this is a long term winner. I have met and talked to management and feel confident they have their “ducks lined up” with finances to execute on their business plan, based on their superior products.
Already they are making an acquisition of a company that is complimentary in the fiber optics industry that should be accretive to cash flow quite quickly, so hopefully those who invested in this pick will be encouraged by the significant fact they have recently hired an Investment Relations firm, which is often a rising companies launch point to success over 6 months to a year. Listen to the update from management in the interview at the following URL: http://smallcapvoice.com/blog/1-29-14-smallcapvoice-interview-with-valdor-technology-international-inc-vtiff/ Getting in at the ground floor on a company like this with exciting new technology is a rare opportunity for the average retail investor.
Myron,
For Excellon Resources Inc, would that be EXN (Toronto) and EXLLF (otc)?
Thanks for the catch, Kevin! We’ve made the correction in the article.
Sorry for the mistake, I need new glasses or need to enlarge the print size on my computer, unfortunately typo’s sometimes slip through.
Myron I think you convince me now is good time to trade on Toronto exch. I intend to invest just a little til I see how it goes. Do you have any council on good online broker for
U.S. citizen?
I still hold several miners hoping for comeback. I have always said sanity is a matter
of degree,, anyone may act irrationally & I think stock market often so. I greatly enjoy your writing Thank you
Patience will be rewarded Frank, hope very soon. Yes buying on the Toronto market where most of my picks are listed is better than buying over the counter because of higher volume, better liquidity and generally a tighter bid – ask spread. Hope you find a broker you can work with. Good advice below, but there are also other U.S. brokers that will trade the Canadian markets.
Hi Frank,
I tried ‘Interactive Brokers’ about 1 year ago for my trades in Canada and overseas and it works pretty well for me. It takes some time to get used to it, at least it did for me, because I did not realize one has to convert the currency as well. But now I am quite comfortable with it. The price is right as well. Very reasonable! Good Luck! By the way, Mr. Gumshoe is using them as well, he was the one who brought them to my attention in the first place.
Herbalix thank you I will look into them.
I would like to comment on the article at the following link that was include early in Myron’s article: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/1/25_2014_-_A_Catastrophic_Year_Of_Historic_Devastation_%26_Chaos.html.
The end of QE in the US is not going to happen until inflation increases dramatically. One of the things that history teaches us is that long term unsupportable trends, such as QE, continue far longer (years) than anyone thinks that they can. Japan, as an example, has two lost decades with debt approaching 250% of GDP and is still implementing the highest percentage of QE compared to GDP of any country in history. So the article at King World claiming that 2014 is the year of reckoning in the United States is way off. We have at least another 3-5 years and maybe as many as ten years before we get so far in the hole that we have a real crisis. When the crisis hits it is going to roll through the United States, Europe, China, and Japan but each of the four will have slightly different timing and slightly different effects. The common thread is that modern trading and distributed manufacturing has connected all of them. So when one collapses it will feed into the collapse of the other three. As each of the other three collapse the collapse will negatively feed back into the collapse of the first one. There will be very few safe investments anywhere. Ask yourself this question: What is the value of Apple stock if the iPhone factory in China is being burned to the ground by angry disenchanted workers?
You end with a very good point, and that type of “chaos” is not likely 10 years away, whether it will actually happen in 2014 is another matter entirely. The fact is nobody really knows for sure how things will play out. On the one hand you have demographics experts like Harry Dent proclaiming that DEFLATION is the “juice de jour” and gold is going back to $250. on one extreme and guys like Jim Sinclair certain that gold is going to $10,000 or more on the other.
We could discuss the WHY of Q/E being unsustainable as you acknowledge, and in spite of all the negativity regarding the U.S. $, I would concede that temporarily at least the U.S. $ may be seen as the “best house in a bad neighbourhood” by many world citizens and experience a temporary bounce as other currencies decline. In the long run, having lost 97% of its purchasing power in the last 100 years, given the history of fiat currencies and a $17. Trillion accumulated debt, I believe we are closer to the end game than 10 years.
Based on your statement; “There will be very few safe investments anywhere” and while not disagreeing, my question to you would be, do you know of anything in the past 5000 years of history used as a “medium of exchange” that has preserved purchasing power better than gold?
Gold might be the best in the long term. But I think in the next five years it will hit two extremes. $800 on the low site and $4000 on the high side. There are several changes that point to much more volatility in all the markets (gold, other commodities, stocks, bonds, etc) in the future. Retirement funds were limited to being invested in long term positions that changed little and provided market stability. 30 day limits on trading positions were the norm. Then we invented ETFs, then leveraged ETFs, then inversed leveraged ETFs. Then this last October I was allowed to roll 95% of my retirement fund into a brokerage account with no limits on which ETFs could be traded with no limits on how fast I could trade. Basically we have removed all of the safeties in our financial markets
My plan is to use inverse leveraged ETFs to play the market down and then follow the advice of people like Myron and invest in a mixture of commodity miners such as gold, silver, shale oil and whatever else is going cheap like Apple at $401 this last fall. Then when I can book a 25% to 100% gain I take it and wait for the next turn in the market. I sold the Apple at $499. You have to follow the advice of Warren Buffet and be greedy when everyone is fearful and be fearful when everyone is greedy.
The derivatives market is still growing. In the spring of 2012 J. P. Morgan experienced losses in the derivatives market. As a percentage of their entire derivatives pool the loss was not that large a percentage. The financial press at the time piled on saying what a failure in leadership this was. My thoughts were that they were lucky to be able to limit their losses to the amount that they ended up to be. In the near future there are going to be several low probability events that trigger derivative meltdowns. The 2011 estimates of derivatives exposure: J P Morgan $70 Trillion; Bank of America $50 Trillion; Citibank $50 Trillion; Goldman Sachs $40 Trillion; HSBC $4 Trillion; Wells Fargo $3 Trillion; Bank of New York Mellon $1 Trillion; Morgan Stanley $1 Trillion; State Street Financial $1 Trillion. So what happens when these banks collectively take a 10% loss of $22 trillion?
I have read comment that “money” invested in derivatives.totals more than
entire worlds wealth. May not be true but is a scary thought that it is well on way.
I steal/borrow (mostly ideas) from those who precede me. Government (and Consensus) is stealing from those not yet born. Law of unintended consequences cannot be evaded.
I have heard that too Frank, and this greatly increases the chances that greedy bankers WILL eventually blow up the system, sending precious metals into a moon shot, that is why it is so important to be positioned in advance in good solid producers or near producers whose stock price will respond appropriately to the inevitable collapse of paper promises. The paper games will eventually come to an end bring ing to pass your statement that the, “Law of unintended consequences cannot be evaded. For those who fear another selloff before they will commit, here is an excellent essay with abundant charts that make the case that the time to act is NOW! “http://news.goldseek.com/CliveMaund/1391372304.php
Hi Myron,
As a fairly new member of the irregulars I would just like to say thanks for your great articles.
“You say you have taken a “30% bath” on Argonaut, however, that would only be true if you sold to lock in that loss at a low point, which is unfortunately what most investors tend to do”
Myron, c’mon. Have a little more faith in Gumshoe readers. Your “only” conclusion does not even follow from the premise. One does not need to make any sales at all to take the proverbial “bath” in loss of portfolio worth when a stock drops substantially .
I first acquired Argonaut shares as part of their buyout of another junior miner that I held. I did well on that takeover, bought and sold ARNGF a couple of times since, and made money on the sells. The “30% bath” refers to the shares I bought on drops, and grew as I added nibbles each time the stock of that well managed company made a big drop. Those drops and my nibbles have gone on over a period longer of drops than many of us who have long invested in mined commodities once believed possible. To believe the miners we retain will come roaring back is the only sane reason to hold and nibble, but one should not lose sight of reality; nibbling may not end happily.
A trader looks at stocks; an investor weighs the stock against the probability that money would earn more elsewhere. In the past year of market boom in all-but-commodities, dollars kept in just about any safe mutual fund that you could shake a stick at would have grown 20%. The money kept with junior miners, even good stocks bought with “due diligence,” went down 50%. To estimate a “30%” bath under those conditions is not nearly as bad as the one taken by those who did what you postulated. Still a bath is a bath, and those of us holding mining stocks took it on the dollars we kept in them. I have no trouble being honest about that.
Good miners like Excellon, Argonaut, Silvercrest, etc. have given disappointing returns for a long time, but the time for small entry positions has not seen a better entry point than now either. I prefer these to most “teasers” we like to read about at Gumshoe. Still, there’s more to look at in the case of precious metal miners. When you are a big miner producing gold at costs of $1100 an ounce while staring down the barrel of possible $1000 an ounce gold prices, one way out of loss is to buy operations that pull gold out at $600-700 an ounce –and do that for a song while their stock is tanked. Readers can Google “hostile takeovers small miners” and see some of this happening now. Osisko, like some companies we have named in this discussion, did about everything right to survive mining’s downturn. Goldcorp’s near-seizure of Osisko seems not good for holders of that latter stock. In this long-term depressed commodities market, the stockholders of small miners targeted for hostile takeovers will not recoup their “bath” losses on a buyout, whereas they would do that and more if this current junior miners market were anything near the normal market.
ED: I can not ass-u-me anything in respect to what subscribers may or may not know or believe. Have you noticed how many posters describe themselves as “newbies”? I do think OSISKO management is astute enough that with adequate assets in hand, WILL hold out for a better price than Goldcorp has currently offered. The other consolation is that, if the assets are good enough to attract a well financed senior company that has the capacity to do their due diligence, then unless the assets are somehow down graded, the chances are good that with a little patience you will still recoup your “bath” as the stronger company develops those resources in a rising market once the manipulation by the bullion banks comes to an end. I have had several instances already where takeovers involved companies where I owned both, so the VALUE is still there even if the immediate premium
does not quite match my original purchase price, patience can still provide a good return.
Myron, I have a question for you along this line. I purchased Brigus Gold for approx. .586 a share. Primero offered what equates to about .91 a share. Why then is the price now at 1.19 a share? I am in a quandary as what to do with this stock. Hold it, sell it or ride it out?
Tony: Logical question and the only answer that makes sense is that investors apparently believe that Brigus is so undervalued that its management and shareholders will turn the hostile takeover offer down in favour of a higher bid. As a shareholder I tend to agree. Even though I also own Primero stock, I would prefer to hold out for a better offer.
Of course as a Primero shareholder as well, I would not be particularly happy if Primero paid even more for Brigus. Whichever way it goes I stand to benefit as the actual “reserves” do not change no matter who owns them. I would be quite happy if Brigus simply continued to develop its existing assets as it still has substantial exploration potential and seems to be well run under current management. They don’t appear to need further financing so I do not see the advantage of selling out before the market recognizes their true value. Hopefully an even better offer comes from an even bigger company than Primero. I will continue to hold both companies
Myron… Since the offer by Primero is for .175 shares for each Brigus share, isn’t the Brigus share price trading in tandem with Primero, i.e. Primer is now 6.75us and Brigus is 1.19us. 6.75 * .175 = 1.18125, so essentially no premium is given to the .1 shares Brigus shareholders will get in “SpinCo” which will hold the Goldfields project in Saskatchewan and the Ixhuatán and Huizopa projects in Mexico, along with 10m in cash to fund the company. Isn’t that a reasonable deal for Brigus shareholders? – Thank you – Bruce
Ed as to “money may earn more somewhere else” must also factor in possibility of fiat
money losing entire value IMHO
No arguments there, Frank. Safe places to keep money have largely vanished.
‘Preciate your articles, Myron.
Your picks seem to fall into five main categories — oil and gas, uranium, graphite, rare earths, and gold and silver.
For those of us that are relatively new to investing and have limited funds, could you rank these categories in order of the (a) possibly quickest return on investment, and (b) level of safety? And then (c), all things considered? (Assume one can buy only one stock, with the full knowledge that it is for speculation only.)
I’m asking you to speculate on speculaltion! :>)
My thinking is that uranium might be at the top of both (a), (b), and (c).
I hope you are aware that I can not give personalized financial advice, and that any speculation by anybody is just that, speculation as the future is unknowable with any precision. You have named 7 of 15 categories or sectors that I follow and hold an average of 10 stocks per sector, so as to spread risk. Investing in the junior mining sector is different from investing in the general market where the average investor may invest say $5000 + into a given stock they think offers opportunity for a big score. Since I don’t know your personal circumstances, (which is a good thing) I can only guess at what you mean by “only being able to buy one stock” and its presents a myriad of possibilities. The graphite stock I profiled two months ago offered opportunity for as high as 150% gains, my first pick has approached a double, many others are up 25% to 50%, a few are temporarily slightly underwater but still hold great promise for patient investors, so, to in effect pick one stock that has the best metrics in all 3 categories you name is quite a difficult choice based on factors you alone can rate. based on your personal circumstances and portfolio size.
While I would not disagree that uranium could well be at the top of each category, I would also suggest that silver in particular is overdue for a nice bounce, but these things can change from day to day. My perspective is that patience may well be the most important ingredient, plus intelligent allocation of funds. To use a baseball analogy, a series of on base hits and doubles may in the long run be more productive than a single home run, which is why I always advocate spreading your money around. I rarely invest more than $500. to a thousand in any single junior, that way the few picks that may not work out will not destroy my portfolio, just the way I think. If I had $5000. to invest I would probably hedge my bets by dividing the funds into 2 silver and 2 uranium stocks, but that is just me, you may see things differently, and you should do what YOU are comfortable with.
Thanks for the reply, Myron.
I’ve been investing for about a year, and I have learned that there are a myriad of factors to think about when buying a stock. Not so many when thinking about sectors, but still quite a few. I was trying to make the comparison as broad and general as possible by qualifying the request with “buy only one stock”.
In actual practice, I have bought four of the stocks that you have mentioned.
The graphite stock (MGPHF) tripled very quickly, but is now down to a double. I did not take any profit at the high point since the reasons I bought it have not changed. I prefer to buy and hold until the reasons change. Another reason for me to buy and hold is it minimizes the effect of transaction fees on the small quantites I’m buying.
Still another reason, for me, to buy and hold: I’m taking a risk if I don’t take a profit, but I’m also taking a risk if I take a profit and invest in another stock. I have not yet discovered a way to balance the two risks.
About the other three that I bought — the uranium stock (FCUUF) had been going up; I’m being patient with the other two. They are in the mineral category (AVPMF and WSCRF). The reasons I bought them are still valid.
Once again, thanks for your articles. I learn from each one.
You are a great asset for us gumshoe-ers and gumshoe-esses!
Great response, Myron. Thanks for both your column and taking time to answer Gumshoe folks.
One thing has been evident these six weeks of 2014; as the larger Dow market takes these big 200 point dives, those of us who hung onto our small GOOD mining stocks have seen their portfolios buoyed up, and not taking the same plummets as the general market.
What gives me confidence is that being mostly invested in juniors covering 15 defined sectors, my total portfolio increase has averaged $1,000. per week so far this year, which gives me confidence that there has been a trend change that will probably continue in spite of some pullback days. We may just have a reversal of 2013 when the general market performed reasonably decently while juniors continued to lag, I see the opposite happening in 2014.
Myron I like your thinking.I once heard the way to hit bullseyes is 1st shoot 2nd draw line around bullet hole. BTW if you ever like my comments feel free to use as own. I
probably stole/borrowed them anyway. I think problem with oral history is old
people often “remember” events that did not occur.
The opposite happening in 2014 is my bet too. Good things that get too beaten down for too long usually turn out to be great places to invest. Few things hold a better chance for large gains in 2014 than junior miners. With large reward potential comes large risk of course. This has surely been a banner week for miners.
Myron,
How do you account for the 1:5 reverse split in EXN back in May of 2013. That would seem to make your wife’s cost $2.75 and you have a > 50% loss. This chart shows that EXN never traded below $1 in 2012. http://finance.yahoo.com/q/bc?s=EXN.TO&t=5y&l=on&z=l&q=l&c=
Also, there are 55 MILLION shares outstanding, not 55,000.
Norris: I wish I had a simple answer for your query. but so far I do not. Thanks for pointing out the typo that slipped through proof reading, you are of course correct that there are 55 Million shares outstanding. I am certainly not above making mistakes, and it is true I did not take any reverse split into account. At this point I can not substantiate the Yahoo chart as being in error, but I can assure you I have in my hand a Confirmation slip from my broker dated Apr. 2nd 2012 confirming my purchase of EXN in my wife’s RIFF account @ .55 For the amount of stock involved, it is not worth my time to try and track down any alleged discrepancies, I am only too happy to buy more at this potential turn around point.
That being said, the last 2 years were brutal in the market in general and the junior market in particular. Regardless of alleged losses, I will confirm my conviction of EXCELLON being a well run and well positioned company with a further purchase when the “Hold” period is over.
Hi Myron. I enjoyed reading your article. I wonder what your thoughts are on Pretivm (PVG). I have shares for about a year, with a 50% haircut, but am holding. They are getting geared up for full mining, after completing a 10k ton sample run that was better than expected. From their website…….
8.7 million ounces of gold in the Measured and Indicated Resource categories (15.3 million tonnes grading 17.6 grams of gold per tonne); and
4.9 million ounces of gold in the Inferred Mineral Resource category (5.9 million tonnes grading 25.6 grams of gold per tonne).
http://www.pretivm.com/Home/default.aspx
Thanks, Del
sorry, make that a 1K ton sample
Guess I am not the only one capable of making typo’s. As I am sure you know since you are holding the stock, the haircut we took was primarily due to a dispute between two 3rd party contractors as to method of defining resources. Yes I will acknowledge being in a deficit position on this one currently, but it was on my list to profile when the “noise” settles down.
I had too much faith in Bob Quartermain to believe that as some alleged, this was another BRE-X, so I did not sell as many did on the news of alleged lower grades. Brucejack is a great asset and I am confident will reward our patience once the gold market returns to growth.
These are the type of situations where it does not pay to have an emotional, knee-jerk reaction as opposed to calmly getting all the facts on which to make a sound decision.
So, you own it too? I am down to 100 shares, having sold 300sh. that I bought to average down, and actually made a whopping $108 profit. I wanted to remember what that felt like. I will likely buy those back again.
I do my best to keep all of you informed on things I see happening in the market that offer an opportunity to profit. With the hundreds of stocks I have bought over several years, plus watch lists I set up by sector as my research uncovers new potential buys, I usually have at least a dozen stocks every 2 weeks that would be worth profiling and have to choose 2 or 3 as offering the best chance for near term appreciation. On occasion however I run across a situation or profile by others that can not wait for the next column to get the best buying opportunity, so consider this a “FLASH ALERT” on a stock to buy that I have profited on several times in the past and currently own again. I am talking about BNK Petroleum which has a 40 year reserve life on their heavy oil concessions in Albania.
At this URL: http://seekingalpha.com/article/1991521-bankers-petroleum-massive-resource-steep-production-growth-strong-upcoming-catalysts-significant-undervaluation?source=google_news you can get all the details of a stock that has been moving up nicely and is still 75% undervalued compared to any peers. Since I don’t think I could do any better job of evaluating this stocks potential, I do not plan to profile it myself considering that I already own it. I am sharing this simply because I agree this is a great stock to get into at the best price you can get on a down day in the markets such as we had recently.