Gold Explorers Set to Run: Why You Should Act Now |
Tuesday, 14 May 2024 | By Brian Chu | Editor, Gold Stock Pro and The Australian Gold Report |
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[8 min read] In this Issue: Mining explorers: Where investor sentiment trumps fundamentals Rising from the slumber: Gold explorers getting set to run The signs are there, let us lead the way with The Australian Gold Report The fantasy of American democracy is that the election process weeds out the dopes, jackasses and frauds. |
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Dear Reader, Last Monday I attended the Pitch n Pizza Evening in Sydney. It was hosted by the Association of Mining and Exploration Companies and Tau Media, a Sydney-based marketing firm. This event brought together mining investors, company insiders, brokers and other interested individuals to rub shoulders at the Rooftop Sydney. Six companies presented, showcasing their projects, goals and achievements thus far. All this done within seven minutes. It was quick, to-the-point and meant to stir you to action. Initially I had expected 40–50 attendees. Here’s a picture of the scene early in the evening: You can see a few empty seats and a bit of space when I took this photo. It didn’t take long before the seats were occupied. Others who had filed in soon partially blocked my view of the presenters. The bar floor was quite packed as there were easily 70–80 people. And that wasn’t it. The RIU Sydney Conference Drinks happened after. It was like a Friday evening happy hour — but composed of a more refined yet similarly jovial crowd. I found it hard to hold a conversation even though I could project my voice in a 300-seat theatre without a microphone, a skill I refined from my years of lecturing in universities! So you get the idea that it was a lively event. In case you’re wondering, the companies presenting weren’t large-cap lithium or uranium producers like Pilbara Minerals [ASX:PLS], Mineral Resources [ASX:MIN], Paladin Energy [ASX:PDN] or Deep Yellow [ASX:DYL]. They were small-cap explorers looking for gold, silver, base metals and rare-earth elements (REE). If you’re aware of these companies, or even own some, you’d know how difficult things have been the last two to three years. You might even want to dump these companies now, especially if they’ve raised capital for the nth time in the last three years. After all, why invest in a bottomless pit? If you’re feeling this way, today’s article is meant to change your mind. Mining explorers: Where investor sentiment trumps fundamentals Things haven’t been good for mining investors from 2021–24, unless you were in lithium, rare-earth elements, uranium or iron ore. Even if you invested in these four commodities, three have already pulled back significantly. If investing in commodities is a rough ride, mining companies pose even more challenges. The rising price of oil in 2021–22, border restrictions and staff shortages all contributed to a perfect storm for mining companies. For explorers, it’s even more difficult. As is the case with the markets, investors focus more on the larger and more established companies first with the smaller companies only getting attention when the investment theme is hot. Explorers are small companies with big dreams, constrained by a small budget. To their advantage, they can operate more flexibly. At least there are little fixed costs as they don’t run a mine operation with a large staff base. But being small companies, they’re tied to investor sentiment and the commodity price cycle. More often than not, their share price won’t reflect their underlying potential. And it can go both ways. They may be ridiculously overvalued in a bull market and dreadfully undervalued in a bear market. Those who can read the commodity market and identify a company’s driver of value will enjoy the most returns over the long term. Rising from the slumber: Gold explorers getting set to run You may have heard me talk for some time about how gold explorers and early-stage developers are deeply undervalued relative to gold and the more established producers. I’ve shown it visually by plotting the relative performance of gold, the ASX Gold Index [ASX:XGD] and the Speculative Gold Stocks Index that tracks the performance of over 60 ASX-listed explorers and early-stage developers. You can have a look below: It’s clear gold has run ahead of gold stocks. But that’s because the difficult operating conditions in 2020–23 have held back many mining companies, not just gold. However, in the most recent quarter, there have been increasing signs that these challenging conditions have peaked. Besides the mining companies affected by the unusually heavy rains in Western Australia in March, operating conditions have improved, staffing shortages have eased and costs are falling. The next few quarters will likely see the gold producers deliver more generous profit margins. This will help the ASX Gold Index [ASX:XGD] break out of the 8,000 level and potentially set up a strong run in this space. And that’s when the explorers could deliver exciting returns. Just like they did in 2009–11, 2016 and 2020 when gold went on a bull run. Some explorers delivered quadruple-digit percentage gains. The signs are there, let The Australian Gold Report lead your way Of course, there are no guarantees this will happen again. These stocks are risky and speculative. But a few companies are showing potential signs they could be poised to benefit in the coming bull market. One gold explorer based in Western Australia has recently merged with its neighbour. The company owns a processing plant that could resume production and transform the company into a junior gold producer delivering high-margin ounces. Another is a South Australian late-stage gold developer that has steadily grown its gold deposits. In the past month its share price rallied around 25%. It recently raised capital from interested institutional investors to fund its development. As funds came thick and fast, shareholders had to jump quickly on a share purchase plan that closed early. Another is a copper and gold explorer in New South Wales who found a significant porphyry deposit. For some time, the price ground down along with investor apathy. Then, all of a sudden, it secured a joint venture partner. Its share price rose by as much as 350%. Right now, I see more companies in the pipeline are waiting to take off. Many have compelling stories. They’re waiting for the right catalysts. These may include securing a joint venture partner, releasing a resource upgrade, finalising a mine plan, or securing critical funding to accelerate their projects. If you want to learn more about which companies might be the next to take off, why not sign up to my precious metals investment newsletter, The Australian Gold Report? Getting the basics right is important as you should first build your core precious metals portfolio. I also have three explorer and early-stage developer recommendations waiting for you to consider. Don’t hesitate much longer! The gold stock bull market could pick up pace. You could find yourself priced out of this market!
God bless, Brian Chu, Editor, Gold Stock Pro and The Australian Gold Report Brian Chu is one of Australia’s foremost independent authorities on gold and gold stocks, with a unique strategy for valuing big producers and highly speculative explorers. He established a private family fund that only invests in ASX-listed gold mining companies, possibly the only such fund in Australia, putting his strategy and research skills to the test under public scrutiny. He currently writes two gold-focused investment advisories. In his Australian Gold Report, Brian shows you a strategy for building long-term wealth in physical gold, along with a select portfolio of hand-picked stocks, mainly producers with proven revenue streams, chosen for their balance of risk and reward. In his more specialised Gold Stock Pro service, Brian helps readers trade some of the most exciting, speculative gold mining plays on the ASX. He uses his proprietary system — based on the famous Lassonde Curve model, which tracks the life cycle of mining stocks. His aim is to help you get ready to trade the next phase of gold and silver’s anticipated longer-term bull market for opportunities to benefit. The Best and the Brightest |
| By Bill Bonner | Editor, Fat Tail Daily |
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[3 min read] Dear Reader, It was a beautiful weekend in Ireland, the first warm and sunny weekend of the year. The flowers are in bloom. The grass is green and high. The sea sparkles in the distance and the cows mosey across the fields. ‘This has been the rainiest winter and spring I can remember’, says a neighbour. But yesterday, it all seemed worthwhile. Nowhere is prettier than Ireland on a sunny day. ‘Enjoy it while you can’, the neighbour adds. ‘Gather ye rosebuds, and all that. Joie de beaver... heh heh.’ (It took us a while to understand that last remark, a bawdy corruption of the French, ‘joie de vivre’...or joy of living.) The tone in St. Mary’s Cathedral in Youghal was more serious. ‘We don’t control the weather. We don’t vote on whether we breathe or not. There are some things we’re better off not deciding for ourselves’, the priest explained. He was commenting on a section of the Bible (Acts of the Apostles) where it tells us how the apostles replaced Jesus after he was crucified: ‘And they cast lots...and the lot fell on Matthias; and he was added to the eleven apostles.’ ‘It might be better if we chose our political leaders that way too’, he continued, ‘rather than have to listen to all the election news every day’. The gist of today’s comment: He was right. Compared to the US, elections in Ireland are fairly dignified and civilised. Ireland is smaller. The issues are more readily understood. And the Irish still have faith in their leaders, more or less. Fools and Knaves But in America elections have become vicious contests, often between fools and knaves...cutthroats and cads. All the voters can do is to try to decide which one is worse. A national lottery, choosing our politicians as Matthias was chosen — on the basis of chance, rather than fraud — would almost certainly be better. Here, we steer clear of politics. But politics doesn’t steer clear of us. Joe Biden will raise taxes. Forbes: ‘Under Biden Tax Plan, Capital Gains Tax Will Exceed 50% In 11 States’ He’s also planning to spike up tariffs on Chinese electric vehicles. Bloomberg: ‘President Joe Biden will quadruple tariffs on Chinese electric vehicles and sharply increase levies for other key industries this week, unveiling the measures at a White House event framed as a defense of American workers, people familiar with the matter said.’ Not only will Americans pay more for their wheels, the US auto industry – protected by the feds – will become even less competitive. David Fickling: ‘Like birds on isolated islands, America’s carmakers are evolving to suit an oddly congenial environment — one where they can grow big and bloated in the absence of competition from hungry rivals. Gradually, they’ll lose the ability to fly. Consumers who’d like to get their hands on affordable, clean and innovative cars will be the ones to lose out.’ Donald Trump, meanwhile, says will increase tariffs on all Chinese-made goods...thus raising prices on almost everything. He also says he will cut taxes. Bloomberg: ‘“Instead of a Biden tax hike, I’ll give you a Trump middle class, upper class, lower class, business class big tax cut,” Trump said at a rally Saturday in Wildwood on the New Jersey shore.’ Lower rates and lower taxes were Trump’s formula for his first term, but as we’ve seen, without spending cuts they will simply increase debt and end up imposing the worst tax of all — the ‘inflation tax’. Neither candidate seems concerned by the big challenges facing the country — too much debt and too much war. And at least part of the explanation is the election process itself. Candidates court big money sponsors by promising a good return on investment to their donors. And the big money doesn’t take chances. It invests in both leading candidates...making sure the government continues to waste taxpayers’ money in the desired way. The fantasy of American democracy is that the election process weeds out the dopes, jackasses and frauds. A single visit to the Capitol when Congress is in session is enough to dispel that myth. Instead of raising up the best and brightest, it does the very opposite. It elevates the big mouths and mountebanks...those most willing to peddle influence in exchange for campaign money. A lottery would be more honest. It would spare the nation the cost of elections...and crescendo of BS that goes along with them. And almost any citizen, chosen at random, and not beholden to the Established Elite, would probably do less damage. But wait. There is another candidate in the presidential derby. RFK, Jr. Is he really better than random? A reformed drug addict. Former brain worm victim. Is he seriously aiming for the White House? Or is he really just a spoiler? If so, for whom? Biden? Trump? And what if he fractures the electoral college vote...so that the election ends with no clear winner? Tune in tomorrow... Regards, Bill Bonner, For Fat Tail Daily All advice is general advice and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment. |
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