This past week was particularly enjoyable for a number of reasons, and while the action in the precious metals sector finally gave me something about which to cheer, prices for the base metals had terrific moves led by GGMA commodity favorite copper, which hit record highs above US$4.70/lb for the first time in the history of global currency debasement.
Notwithstanding the arrival of an "overbought" condition in this poster child for the electrification movement, copper's performance is a testimonial to a surge in global demand and delayed supply shock brought on by mine closures and COVID-related issues. There exists a confluence of bullish factors in the copper market that supersedes an easier explanation, such as a "weak dollar" or "Chinese hoarding," which includes changes in Chilean tax laws pertaining to mammoth copper production from their Andean cache.
However, it is not simply a copper story. Thirty-day charts for zinc, nickel and lead have all gone near-parabolic as vaccinated nations kickstart their economies back into operational normalcy. Whether or not this is investor perceptions "jumping the queue" ahead of actual physical demand remains a topic for another day. For now, we have entered a raging bull market in commodities, and that is good news for those of us that hold positions, which we do, in size.
Having been exposed to dozens of bloggers and newsletter writers and internet "gurus" taking victory laps this past week, the one bull market that has resumed after a very brief hiatus is uranium, with Cameco Corp. (CCO:TSX; CCJ:NYSE) hitting a 52-week high late week and dragging a number of junior developers along with it, including my only holding, Western Uranium & Vanadium Corp. (WUC:CSE; WSTRF:OTCQX) (CA$2.55/US$2.10). This Colorado-based owner of the Sunday Mine Complex has been a volatile component of my portfolio (which is currently dominated by gold, silver, and copper developers and explorers), having traded as low as CA$0.34 in June of last year, in the post-COVID-crash environment. But after we participated in an $0.80/unit financing in January, the stock price has been on a tear.
Thanks to the efforts of a few of my subscribers, I have been listening to a number of podcasts of interviews with stock pumpers and book-talkers, and while I usually just chalk it up to the usual tripe that infiltrates the blogosphere these days, there was one that really caught my attention. It featured a gentleman named Marcelo Lopez being interviewed by a young lady named Lyn Alden (interview). I have included the link because I learned more about the uranium business in 55 minutes than I would have in a four-month course at the University of Nuclear Knowledge.
More important, for anyone out there who needs a podcast template, this interview should be the acid test for all investment-related themes. No hype, all fact, but permeated by really well-executed excitement on what Mr. Lopez deems "the most asymmetric trade I've seen in my life."
Now, one would normally think that after a 226.92% return, I would be eager to take my stock (and the full-warrant allowing us to buy more at CA$1.20/share) and ring the register, because the unit itself has CA$3.875/share of profit in it on a CA$0.80/share investment made in March.
However, after listening to that darn interview, what leaps off the page is the fact that Western Uranium & Vanadium has a 55-million-lb resource of uranium sitting underground at the SMC. At today's price for U3O8, the in-situ metal value is US$1.58 billion for the uranium resource alone, and that does not consider the substantial vanadium resource present at the SMC.
In the last big uranium cycle, prices moved to $140/lb from the current $28.85/lb level and, according to the narrative, uranium developer/explorer names had astronomical moves before crashing in 2008.
At $140/lb, the SMC holds US$7.7 billion of in-situ metal value, so even at today's market cap of US$76.5 million, Western is valued at less than 1% of that figure. According to those who know a lot more about the uranium cycle than I do, conditions here in 2021 are far better than they were in 2004–2005, when the last bull market erupted. The end users (utility companies) are going to be caught in a supply-shock crisis that will dwarf conditions in 2007, and with electrification now dominating the mindsets of these new generations of investors, these required megawatts are going to come from the cleanest power source on earth, which is nuclear.
When you hear people like Rick Rule waxing so eloquently about the fortune he made in the last uranium boom (which he repeats 17 times in a nine-minute interview), I am forced to look at the price of Western in a wholly different perspective. Instead of thinking of ringing the register, I am going to do the opposite. The reason is this: Uranium is not correlated to the Fed, or to interest rates, or to oil prices, or to anything external. Pricing is purely and simply governed by supply and demand, and in a stock market that is correlated to all of those influences, uranium stocks will be a great place to "hide." So "hide" it is, and I shall be adding to WUC/WSTRF in the very near term.
As for the precious metals, people who follow my Twitter feed know full well that I have been bullish on gold since prices touched the US$1,670 level twice in March (8th and 31st), prompting me to add to my precious metal holdings. I am going to add quite aggressively to my position in silver, now that the US$26.50 resistance level has been vanquished. The two-day-close rule would have worked beautifully if Treasury secretary and former Fed chairperson Janet Yellen had not come out with that ridiculous "I will increase interest rates if inflation shows up" statement. This, of course, allowed someone to cover their shorts in the metals before she was forced to walk back the statement the following day, after she was reminded that it is the Fed, not the Treasury, that sets the Fed funds rate.
Another issue that until recently has been a huge performer is Norseman Silver Ltd. (NOC:TSX.V), whose CA$0.76 print in February took it up 150% from the January funding level (CA$0.25/unit). In recent weeks, however, there has been considerable profit-taking, while insiders have been buying, leaving the price at less than half of the 52-week high.
Now, I own the stock for a number of reasons, but the primary reason is the letter of intent (LOI) Norseman signed on the Taquentren Project, located in the pro-mining province of Rio Negro in Patagonia. The man that put the package together is Daniel Bussandre, the prospector/geologist who assembled the mighty Navidad silver project bought in 2009 for over $600 million by Pan American. Work has already started on Taquentren, and while the Patagonian winter is a few weeks away, there should be some news arriving shortly that could provide clues as to the prospective nature of this potential behemoth.
Also active this month are the work crews in northern British Columbia (BC), where a number of silver-copper prospects are getting a look. Drill programs are intended on at least three of the prospects, and with the high-grade showings of copper and silver present, there could be some fireworks in the early summer to propel the share price back to the highs.
Another of the issues that is starting to get my attention is Goldcliff Resource Corp. (GCN:TSX.V; GCFFF:OTCBB), which has been stuck in idle for most of the past year. But I have learned that a new showing at the Kettle River project in British Columbia has caught the attention of project geologists. The area of interest is located on the west side of the Republic/Greenwood District of northern Washington State/southern BC, an area that has produced over 6 million ounces of gold.
The project is a short hop from Kelowna (1.5-hour drive; 130 kilometers) and sits at a modest 900-meter elevation, which means that it is accessible on a year-round basis. What has the rockhounds mumbling in their sleep is a trenching program that has revealed a highly-altered corridor of intensely silicified rock types spread over a large area that contain quartz textures and alteration minerals (like "aduaria") common to low sulphidation epithermal systems. Surface samples from these "highly cooked" rocks (emanated from a major heat event) have contained highly anomalous gold values over a large area.
Obviously, the company was quite surprised by this discovery and has turned its focus from Nevada to BC in order to fully investigate what appears to be a potential game-changer for Goldcliff.
You will all recall the piece I wrote a few months ago entitled "Skin in the Game," where I said that it is always encouraging when I invest in a company where management has a big personal stake in the company, hence the term "skin." George Sanders controls over 35% of the issued capital of the company and participates in literally all financings, alongside outside investors. I like this in a deal, so with a market cap of only CA$6.2 million, GCN/GCFFF is a decent low-risk speculation on a possible new gold discovery in a region known for gold discoveries.
Getchell Gold Corp. (GTCH:CSE; GGLDF:OTCQB) (CAD $0.48 / US$0.3959) will be resuming drilling on the Fondaway Canyon gold project in Nevada shortly, and after last season's spectacular results, I am really looking forward to this accelerated program at Fondaway, as well as the Star Point copper-gold-silver project. With a fully diluted market cap of around US$45 million, it is valued at around US$42 per ounce of in-ground gold, but that was based on a 1,069,000-ounce resource calculated in 2017 using a 3.43 g/t Au cut-off grade and before the 2020 drill program discovered two new high-grade zones that have yet to be quantified.
I have stated that I fully expect Fondaway to hold a minimum 3-million-ounce resource, and if US$100/ounce is the benchmark for in-ground ounces in Nevada, then Getchell should be valued closer to US$300 million, not US$45 million. Markets may need to see more superb intercepts in the upcoming drill program before reassigning the new valuation, or they might decide to move sooner, but one thing is certain from where I sit: Once the current financing closes, the stock is going to all-time highs, because Fondaway is going to wind up as either a "Tier Two" or a "Tier One" asset, either of which will be highly coveted by the major miners in Nevada. It is also why Getchell continues to be my largest holding and my top pick for 2021–2022.
The UPS guy just got chased back into his truck by a large and very aggressive Rottweiler trying to guard us from intruders, so enough of my own book-talking. I must give the UPS driver back his right boot, dutifully removed and now in the jaws of Fido the Protector.
Originally published Saturday, May 8, 2021. All images provided by the author.
Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger's adherence to the concept of "Hard Assets" allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.
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1) Michael J. Ballanger: I, or members of my immediate household or family, own securities of the following companies mentioned in this article: Western Uranium & Vanadium, Goldcliff Resource, Getchell Gold and Norseman Silver. My company has a financial relationship with the following companies referred to in this article: Western Uranium & Vanadium, Western Uranium and Vanadium, Getchell Gold and Norseman Silver. I determined which companies would be included in this article based on my research and understanding of the sector. Additional disclosures are below.
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5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Getchell Gold, Western Uranium and Vanadium and Norseman Silver, companies mentioned in this article.
Michael Ballanger Disclaimer: This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.