You may recall that I (NFTRH) had a great investment in the former Great Bear Resources and Great Bear Royalties, both of which have since been bought out (by Kinross and Royal Gold).
The reason I bring this up is that my conviction in Great Bear was very high due to initially being convinced by a former gold fund manager, Scott, who focused primarily on juniors/exploration. My conviction was greatly aided by an NFTRH subscriber named Michael, who is a geologist and whose opinions (and facts) meshed with Scott’s.
Fast forward to today. Scott, a man much more acquainted with juniors and explorers than I am (I do not now and never have much cared for the sub-sector, on balance) and I had a conversation today. Our conversations range from real tin foil hat stuff (I write that with a smile, not dismissively) to nuts and bolts discussion about gold and the miners.
Bottom line is that he has all but sworn off the junior mining sector with the dissolution of his fund and sales of Great Bear and GB Royalties. The only position he holds is Minera Alamos (MAI.V/MAIFF), which is the one stock I hold as core in part because the same person who advised me/us on Great Bear is positive on Doug Ramshaw and MAI.
But ‘positive’ is relative. We talked about the annihilation of Rio2 and Pure Gold (to name two) and how this could happen to any of them, given the risks built into junior exploration and mining, almost by definition. MAI is probably suffering from seasonal tax loss selling as well as the general extermination of the inflation bugs that I go on about all the time.*
But the bottom line for me is that I came away from the conversation with a few thoughts.
My gut has always told me that it is best to buy higher quality established miners rather than over-do any single smaller stock. I made exceptions for Great Bear and MAI. Since I present to you the stocks I hold I am obligated to let you know that MAI is no longer considered ‘core’. When the people who guided you successfully and proved themselves speak, you listen. Or I do. Scott triggered something in me that wanted to come out in the first place; my need to pick quality established miners and royalties. I don’t like gambling.
I’ll interject right here that I know of nothing material going on at MAI other than slow but positive progress. Scott did not have any concrete negative reasoning either, other than tax loss season.
My MAI position is very small in the grand scheme of things. Profits were taken long ago on the larger positions. The only reason the current position shows a loss is because being in a Roth IRA, I just sold what I sold without worrying about tax lots or taxable profits. So the sale took out the shares bought much lower back in 2019. All in all it was a good speculation. But I am moving on from the junior sub-sector effectively, if not 100% positionally (I’ll probably have a few junior specs sprinkled in if the sector really gets going).
Moving forward, if/as our plans for the gold mining sector play out, I am going to focus on established names like AEM, GOLD, NEM, KGC… even NGD, BTG, and the established royalties like WPM, RGLD, FNV, etc. These companies will track the sector – and by extension, NFTRH analysis – much better than speculations in the junior patch. My/NFTRH analysis is FOR the sector, not so much any individual stock.
Just want to make the above clear since I had tagged MAI as ‘core’.
* As a side note, I continue to receive opinions about gold stocks and what bad businesses they are and how gold and the miners suck at providing inflation protection, etc. My answer is as it has been for 1.5 decades: they are not for or about inflation! Scott and I talked about how the 1970s model still lives in many peoples’ minds, but it’s a far different world now. Gold miners went up big during the 2003-2008 inflation trades and crashed even bigger, which we noted at the time was justified.
This Post Has 4 Comments
Thank you for passing on tidbits of the conversation and your thoughts about them.
Sure thing. I just want to be transparent and up front about anything that seems relevant.
Comment from subscriber Mike by email (WP won’t allow him to comment on protected NFTRH posts for some reason)…
“Moving forward, if/as our plans for the gold mining sector play out, I am going to focus on established names like AEM, GOLD, NEM, KGC… even NGD, BTG, and the established royalties like WPM, RGLD, FNV, etc. These companies will track the sector – and by extension, NFTRH analysis – much better than speculations in the junior patch. My/NFTRH analysis is FOR the sector, not so much any individual stock.”
When I look at GDX, their top holdings include all of those.
Could you elaborate on why you’d risk individual holdings vs. the GDX (or GDXJ or XME) type ETFs?
I understand on juniors, maybe it would be for that home run. But when you’re talking bigger companies, personally I like the idea of spreading around the risk esp. buffering individual earnings misses for example.
Just curious, and please remember I can’t post protected.
My response follows…
Well, a couple reasons (but I’d have no problem using GDX either).
1) I want to pick within the group. e.g. AEM over KGC as an example. I want to weight individual positions the way I want them, not the way GDX wants them.
2) If I buy GDX I am buying the fund company that manages it to some degree. If I am buying an individual equity through a broker I am buying that company’s certificate.
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