lance sjogren

Finding the Right Junior Miners for Maximum Upside Potential

Another thing to think about right now is Uranium.

Uranium miners have been in a big slump.

Consequently, Uranium is one of the few super bargains out there right now in the commodity space.

I have been stocking up on Hathor, a little bit of Terra, and a little Denison.

Hathor has the biggest recent discovery by a junior of high grade U in the Athabasca region. Terra has a 10% carried interest in that deposit so it is another way to play that resource, although with Terra you don't get a stake in Hathor's other promising properties.

Finding the Right Junior Miners for Maximum Upside Potential

Hey, thanks for this forum.

I am constantly questioning my own investment decisions.

By motivating me to come up with a pitch for my top two holdings, I found that I was able to make what appears to me a pretty compelling case.

So, I am happy with my two main holdings.

I know there are a lot of opportunities out there that I will probably regret not having, but that is life. I like Silvercorp and have had it off and on, but since it's more liquid than my larger holdings it is a tempting one to trade in and out of to try to take advantage of the volatility in silver prices.

I also like First Majestic and Endeavor, and I recently noticed another one that looked interesting, Alexco I believe it is called (I really should remember the name since I bought a few shares)

But, what I like best is exploration-only plays (nothing can go wrong with your gold and silver when it is just sitting in the ground, except for things like being confiscated by Kleptocrats like Hugo Chavez or killed by enviro obstacles.

(Environmental obstacles are one reason I think the big blockbuster deposits of low grade such as those of Novagold, Seabridge, etc., are pretty risky. First of all if the price of oil goes sky high then they are liable to not be economic even if PM prices are strong. Secondly, mining hundreds of millions of tons of ore in pristine areas like the mountains of BC seems like something highly vulnerable to being killed by regulatory obstacles. Case in point, Northgate Minerals' Kemess North deposit.

Finding the Right Junior Miners for Maximum Upside Potential

By the way:

Anyone in the US who wants to invest in junior mineral companies should get used to buying pink sheet.

The vast majority of juniors listed on the Canadian exchanges have a US version but only in pink sheet form.

I have traded these for a number of years and by trial and error I found how to trade them with very little penalty for the fact that I am not trading the native Canadian version of the stock.

First of all, I found the best vehicle for trading them to be TD Ameritrade. I have long had a hunch that because of TD being Canadian, when I buy pink sheet I suspect that it is actually the Canadian stock they are trading and that somehow in their administrative system they are able to convert it into pink sheet.

However that works, it seems to work fairly well. I used to have an international account with another broker to check the real time price of the Canadian stock, but nowadays I just check the time delayed price on Yahoo, then I translate to USD, then put in a limit order on TD Ameritrade. Sometimes I'll just order a fraction of what I want to buy and if it doesn't trade I will jack up the price a half cent at a time until I get an execute, that way I get "price discovery" and then decide whether I want to buy more.

Most of the time I seem to be able to buy at the ask price or sell at the bid price or very close to it.

Some investing guides I read a couple years ago advised against these because of the propensity to wind up having to pay large penalties due to the illiquidity. I found this is not the case, with one caveat.

The one caveat being that the bid-ask spreads are often substantial. That is not a symptom of buying pink sheet but simply an inherent characteristic of many small companies that trade on the Canadian exchanges. So I often find I have to wait to trade a particular stock until it happens to be trading a little more than usual and its bid ask spread shrinks to a reasonable level.

Finding the Right Junior Miners for Maximum Upside Potential

My favorite is Sabina Silver. Market cap about $100 million US, they have something like $30 million in cash for exploration, and their resources are:

Back River: 2.3 million ounces gold at 10 gpt

Hackett River: 230 million ounces silver at 4 opt + base metals with in-situ value about equal to the silver. Most of the deposit is open-pittable.

Aggressive drilling programs are in the works.

If you convert everything into gold equivalent (assume a 60:1 gold to silver ratio) these guys have about 10 million ounces of good grade gold equivalent, and you are getting it for about $10 per ounce. In terms of silver equivalent it is about 600 million ounces or $0.16 per ounce of silver. And these are GOOD deposits too.

Main drawback is that their deposits are in a remote area in Nunavut, to develop a port needs to be built at Bathurst Inlet, estimated cost $100 million, plus a road to the deposits. Since they recently acquired the Back River deposit they have a bigger resource base to spread the capital costs over. Other players in the area may help spread the costs as well- e.g. the Chinese recentlly acquired the Izok Lake and High Lake base metals deposits from Oz Minerals. I would think there is also a possibility that Canada govt might chip in some for a port as part of their goal of solidifying their claims to the far north in competition with Russia, but that is pure speculation on my part.

2). Eastmain Resources. 1.2 million ounces high grade gold in northern Quebec. The primary deposit, Clearwater, is close to Goldcorp's Eleonore deposit. Goldcorp owns about 10% of Eastmain. If you just count their main deposit, Clearwater, they have 1 million ounces. At a fully diluted market cap of about $100 million US, you are paying about $100 per ounce of gold, which is not cheap, however, this deposit should be able to leverage Goldcorp's infrastructure at Eleonore, so it is almost equivalent to gold at at an active mine where all infrastructure is already in place. Furthermore, there is a widespread view that drill results in the last couple years could well lead to a substantial expansion of the resource when the new 43-101 comes out.

Those are my primary 2 holdings in the PMs. A couple of others I have a much lesser amount of are Golden Goose Resources (Quebec gold deposit) and Terra (10% carried interest in Hathor's high grade Uranium deposit in Athabaska)


Note: Note that I count all resource ounces whether they are measured, indicated, or inferred.

Short Squeeze in Silver - How to Profit

I like silver, my main silver stock is Sabina Silver.

In my view they are the best choice if you prefer to invest in an exploration-only company that is sitting on a known deposit.

Their net cash position is a large portion of their market cap, if you back out the cash you are getting silver in the ground in a large deposit with a good grade of silver and other marketable minerals for something like $0.10 per ounce of silver equivalent. Plus, the deposit is in politically-safe Canada. It is in a remote area, however, so whoever eventually develops the deposit will have to incur major capital cost. But the deposit is big enough to be able to support such capital expenditures.