Shares in Asiamet Resources (LSE:ARS) sat flat at 4.3p on Friday after the firm said work at its Beruang Kanan Main (BKM) copper deposit is going to plan.

The business is carrying out additional resource evaluation drilling as part of a bankable feasibility study (BFS) at the site. As it stands, 22 holes for nearly 3,000m of diamond core drilling have completed. Drilling is ongoing, with a further 1,825m planned. This is expected to be completed by five drill rigs by the end of the current quarter.

In an update, the firm said results from the first four holes confirm the continuity of mineralisation in the southern part of the BKM deposit. Moderate to strong chalcocite-covellite mineralisation was intersected just below the zone of oxidation. Some samples returned grades of up to 5.52pc copper.

A preliminary economic assessment has given BKM an NPV10 of $204m, and an internal rate of return of 39pc based on a 431.9kt contained copper resource. Asiamet plans to develop an open pit mine that will produce 25kt of copper cathode a year over eight years, with immediate expansion potential.

However, it hopes its current programme of drilling can upgrade and capture additional inferred resources at the site. If successful, it expects this to enhance BKM’s project economics and the robustness of its BFS significantly ahead of project financing. The firm plans to begin production later this year, with financing discussions underway.

In today’s update, Asiamet’s chief executive Peter Bird said initial drilling were positive and in line with expectations.

He added: ‘With operational work continuing apace we expect to be consistently reporting further results as they come to hand over the coming weeks leading into completion of the BFS. In addition to the ongoing technical programme, various work streams relating to the Environmental Impact Assessment ("AMDAL") for BKM and forestry use permits are also being progressed along with due diligence investigations and commercial discussions with potential partners on both our main projects. We look forward to providing further updates as they become available.’

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
The Author has not been paid to produce this piece by the company or companies mentioned above.
Catalyst Information Services Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.
MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

Thursday saw MetalNRG (NEX:MNRG) reveal that its potential uranium project in Kyrgyzstan has been given the green light for mining. The State Reserve Committee of Kyrgyzstan has granted a mining licence covering 3,371.1ts of uranium reserves at the Kamushanovskoye deposit. This resource would have an in-situ value of c.$253.1m at current spot prices.

MetalNRG paid $50,000 last August to enter an option to acquire an interest in Kamushanovskoye and carry out due diligence at the site. The project is currently 94.7pc owned by International Mining Company (IMC), with MetalNRG now holding the remaining 5.3pc through its stake in IMC.

Under the terms of the option, IMC would transfer the project in a new holding company. MetalNRG would then inject a specified amount of project development funding in exchange for a 51pc stake in the new company and the project. Under an amendment to the option agreement made last month, the two firms agreed that MetalNRG would be granted an additional 2.5pc stake in the new company for every $50,000 payment made to IMC.

In today’s announcement, the business said it has now decided to pursue the joint venture. It said it has supported IMC financially with the application for a mining licence and now plans to pay a further $45,000 over coming weeks before ultimately injecting $813,500 to attain its 51pc position.

Kamushanovskoye is located 48km from Bishkek, the capital city of the Kyrgyz Republic, and within 550km of three uranium refineries. It includes a JORC-compliant measured and indicated resource totalling 3.604Mlb of U3O8, a compound of uranium, and an inferred resource of 1.939Mlb U3O8. It also offers a potential exploration upside of an additional 2.58Mlb of uranium from a partially explored zone

Rolf Gerritsen, chief executive at MetalNRG said the business is interested in the project because market dynamics are currently making it an ‘extremely interesting’ time for uranium.

‘Our project is moving towards production and we are all extremely pleased with the progress. The financials around the project make it an outstanding opportunity and we look forward to the ongoing working relationship with IMC who are doing a great job,’ he added.

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
The Author has not been paid to produce this piece by the company or companies mentioned above.
Catalyst Information Services Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.
MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

 

Guest article by David Price, CEO of Rockfire Resources

Evaluating a mining exploration stock requires some level of knowledge of the terminology used within the sector and the ability to review and understand assay results.

Assaying is the process of determining the quantity of each element within an individual sample, which is representative of a prospect or an ore body. Assaying is usually performed by independent, commercial laboratories, however, some active mine sites will have their own assaying laboratory at the mine to minimise on-going costs of many hundreds of thousands of assays.

The term “prospect” is generally used to describe mineral occurrences and early-stage exploration targets. The term “Project” normally refers to a prospect which has been defined to the point that it is justified for significant funds to be allocated to the prospect and the Prospect becomes a Project. An ore body is a specific term used only when the economic parameters of potential mining have been taken into account. In other words, an orebody has to demonstrate potential to become economic at some point in the future. Without the economic component, mineral accumulations should only be referred to as prospects or projects.

There are numerous factors that combine to determine whether a mineralisation discovery is worth developing. Generally, how easy it is to mine (mining method), the size of the find (tonnage), the ease of extraction (processing), and the concentration of the minerals (grade) are the main considerations. Proximity to existing processing facilities naturally increases the odds of a discovery becoming economic, and a site having such operations nearby is often referred to as having ‘nearology’.

Near-surface deposits are cheaper to extract via open pit mining, as long as the orebody is large enough to be mined in bulk. Generally, open pit mines are no more than 300 metres deep and are several hundred metres wide. Open pit mines can be used in hard rock mining for ores such as metal ores, copper, gold, iron, aluminium, as well as coal mining and many other minerals.

As you might expect, the costs associated with underground mining are considerably higher owing to many factors including additional safety requirements, potentially harder rock, necessity for ventilation, escapeways and water/power provision at depth. As a comparison, if the cost of mining ore at an open pit mine is approximately $10 per tonne, an underground mine may cost around $25-$50 per tonne. The actual cost will vary from one project to another and factors such as rainfall, labour rates, snow depth, ground conditions, terrain, weathering of the rock, altitude, accessibility and fracture density in the rock will all contribute to variation in mining costs.

Does it make the grade?

Once a discovery is made, its economic viability needs to be assessed. Assuming the depth and size of the deposit make it attractive for development, the next thing to consider is its mineralisation grade. This is the proportion of target minerals within the rock and is usually expressed either as grams of target minerals per tonne of rock to be mined (g/t) in the case of precious metals (gold and silver), or a percentage (%) of target minerals within the ore in most other cases.

Analysis of gold content is generally performed by Fire Assay (FA). Each sample submitted by the company is firstly dried, crushed (to -5mm), then pulverized (to -80 micrometers) to create an homogenous sample. A sub-sample is then taken by the laboratory (either 30g or 50g) and generally, the larger the sub-sample, the more statistically accurate the result is likely to be.

A flux and lead bead is then added to the pulverized sub-sample and the sample is put into a furnace to be smelted to a liquid. The gold preferentially adheres to the lead, so as cooling occurs, the lead and gold separate out from the rest of the sample. The lead is ultimately absorbed into the crucible, leaving a small gold ball (prill) in the bottom of the crucible. This gold prill is then analysed using either Inductively Coupled Plasma (ICP) or Atomic Absorption Spectrometry (AAS), which are both spectrometry techniques to determine absolute gold values. 

From the assay results, exploration companies generally calculate the average grade across a deposit and apply what’s called the ‘cut-off grade’ – a minimum grade determined from possible economic parameters for the deposit. Grades beneath the cut-off grade are usually excluded from the data when calculating average grades. Similarly, high-grade cuts are usually statistical high anomalies which are excluded from the data when calculating average grades, to ensure anomalously high grades are not likely to contribute to an over-estimation of the average grade.

When reviewing grades, it is important to note the sample size. The more drill holes intersecting the orebody, the more reliable the data. It is also most important to note the individual sample size which is submitted to the laboratory. Sample sizes will vary from a 50g split to a 5kg sample. The larger the sample contributing to the preparation for fire assay, the more statistically accurate the sample is likely to be. For example, Rockfire Resources instructs the laboratory to crush and pulverises an entire 5kg sample which has been submitted to the lab, prior to a 50g sub-sample being taken by the laboratory for fire assay. This larger, homogenous sample increases the cost of each individual assay, but ensures the most statistically accurate sample is analysed.

Grades can vary quite significantly, with the highest grades frequently grabbing the headlines, but larger tonnages and higher average grades are the best indicators of a potential resource. Assay results are often mapped out in order to pinpoint likely targets for future drilling campaigns.

Author: David Price

Many thanks to David for this guest article. David is Chief Executive Officer and Managing Director of Rockfire Resources plc. David is an experienced geologist and senior executive with +30 years of experience in the global mining industry and has over 20 years’ experience in securing funding for exploration projects. David holds the highest category of membership as a Fellow of the Australasian Institute of Mining and Metallurgy (FAusIMM) and is a Competent Person for Mineral Exploration under the guidelines of the JORC Code. Rockfire Resources is advancing gold and copper projects in Queensland Australia, where historical drilling has already identified significant gold, copper and silver mineralization.

https://www.rockfireresources.com

 

Fertiliser firm Harvest Minerals (LSE:HMI) has released a new corporate presentation to update investors on its plans for 2019. Harvest’s flagship asset it the 14,946-hectare Arapua fertiliser project in Brazil’s Minas Gerais agriculture belt. Here, it produces a multi-nutrient, slow release, organic, government-certified remineraliser called KPfertil.

According to the business, KPfertil offers many economic and agronomic benefits to local farmers. It also aims to address the significant demand for locally-produced fertiliser in Brazil. As it stands, the country imports 90pc of its potash. However, it rather ambitiously intends to be self-sufficient in fertiliser by next year.

Arapua is a shallow, low-cost mine with an indicated and inferred resource of 13.07Mt at 3.1pc potassium oxide and 2.49pc phosphorus pentoxide. This is based on drilling just 6.7pc of known mineralisation, which Harvest believes to leave significant upside potential. The existing resource is equivalent to more than 29 years of production.

In its new presentation, Harvest lays out its rationale for focusing on Brazil’s fertiliser market and provides a rundown of KPfertil and its production process. It also recounts its significant progress in 2018 – which included getting KPfertil government registered and securing its first significant sales contracts – before laying out its plans for 2019. Finally, the business states what it believes to be the case for investing in its shares, using the tagline ‘simple product, ideal location, revenue generating’.

The presentation can be accessed by clicking here.

It follows the launch of Harvest’s new corporate website earlier this week. This can be found at www.harvestminerals.net.

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
The Author has not been paid to produce this piece by the company or companies mentioned above.
Catalyst Information Services Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.
MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

Jangaga Mines (LSE:JAN) jumped over 16% into the market close yesterday as news spread regarding the sale of a royalty share of its flagship Pedra Branca asset. Solitario Zinc Corp (NYSE:XPL; TSX:SLR) sold a 1% Net Smelter Return (NSR) royalty in Pedra Branca to private Cayman Island based SilverStream, as part of a deal worth C$600k (c.£350k). This looks highly encouraging for Jangada’s shareholders, not least because Solitario described the Pedra Branca component as its “centrepiece royalty property”.

Under the terms of the agreement, Solitario will receive C$250kin cash, and C$350k in a convertible note which will convert into SilverStream stock should the company complete an IPO within 12-months. The deal also includes an additional 1% NSR in a Mexican asset and an option right to acquire a 1.5% royalty on a third asset in Montana.

Despite the transaction involving three separate royalties, its Solitario’s description of the Pedra Branca element as the “centrepiece”, which has caught AIM investors’ attention. Solitario’s description makes sense since Pedra Branca is the only one of the three assets that has a JORC compliant resource. As such it is a significantly larger and more advanced project. 

This is not surprising when taking into account Pedra Branca’s economics. This is a story we have highlighted a number of times on MiningMaven, but the NSR deal offers a new dimension of analysis.

A Net Smelter Return royalty is a royalty arrangement whereby the holder receives a new percentage of revenue generated from the sale of a mine’s metals, less all refining and transportation costs. It’s considered a preferential type of royalty since exploration and capital expenditure are not deductible from it, meaning payments are higher in the short-term.

As it happens, in the case of Pedra Branca the forecast payback period on investment is a mere 1.6 years anyway. That has been calculated on current commodity prices, which still appear to be at the lower end of their current cycle. This is, of course, with the exception of palladium, which has had a strong run over the past year. Pedra Branca’s production is forecast to be $64k ounces of PGM+AU per annum, which, very roughly equates to revenues of US$55m at today’s spot prices.

The project looks increasingly attractive when you consider it boasts a very low capital expenditure (CAPEX) requirement of around US$33.8m to build the processing plant. Operating expenditure (OPEX) has been estimated at $17.32/t based on processing 2.2m tonnes of ore – that’s just over US$38m per year.  All in all, Jangada forecasts total costs for year one will come in at around US$81.5m.

Focussing back on the deal and (adjusting for US currency, to compare like for like) if we assume US$200k – less than half of the value of the Solitario sale - is attributable to the 1% NSR royalty of the Pedra Branca project, this would translate to a current US$20m valuation for a 100% royalty. This appears to be broadly in line with the US$192m Net Asset Value (NAV) Jangada has assigned to the project. 

To put this in context, what is surprising is Jangada’s Market Cap is a mere £3.95m at today’s current share price of 2.1p. I highlighted the stock as a potential buy earlier this month at 1.85p after it appeared to have bottomed out. With today’s news adding further weight to the investment case, the company looks even more attractive, particularly when you consider it raised £2.1m last September at 3p per share.

It’s worth noting that Jangada’s directors aligned their interest further with shareholders by participating in the recent fundraise, with both Brian McMaster and Luis Azevedo investing £50,000 each. The company has stated it is fully funded to deliver its Bankable Feasibility Study (BFS) for Pedra Branca and there is plenty of newsflow to come as the project progresses.

With the Solitario/SilverStream deal highlighting and corroborating the potential on offer here it is surely only a matter of time before the market re-evaluates the value it is attributing to Jangada Mines.

Author: Stuart Langelaan

The Author currently holds a position or positions in the stock(s) and/or financial instrument(s) mentioned in the piece.
The Author has not been paid to produce this piece by the company or companies mentioned above.
Catalyst Information Services Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.
MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

MOD Resources (LSE:MOD) soared 57.3pc to 22.5p yesterday after revealing an unsolicited takeover bid from a major copper miner. The ASX-listed resources firm, which dual listed in London last November, received the proposal from fellow Australian business Sandfire Resources. MOD’s largest shareholder Metal Tiger (LSE:MTR) also rose 27pc to 1.6p on the news.

Sandfire offered to acquire 100pc of MOD’s shares at $0.38 each, valuing the firm at $113m. However, MOD said it believed the indicative proposal undervalued its assets. Despite this, it said it would be ‘willing to engage’ with Sandfire if it presents a more compelling price.

MOD is the owner of the 60Mt T3 copper project in the centre of Botswana’s highly prospective Kalahari Copper Belt (KCB). The company is progressing a feasibility study for the project, which it expects to release by the end of Q1 2019. This is expected to help it reach a decision to mine within the first half of the year.

The firm believes that its flagship asset presents the potential for a long-life, high-margin, open-pit copper mine with significant exploration upside. Indeed, based on its pre-feasibility study, the asset has an NPV (pre-tax) of $370m under the base case and $529m under the expansion case.

In yesterday’s update, MOD gave many reasons for considering Sandfire’s initial offer insufficient.

First-of-all, the company highlighted its dominant position in the KCB, which comes in at around 11,700km2 in granted licences. It called the area ‘one of the last under-explored sediment-hosted copper belts’, adding that exploration results have already indicated the potential for additional copper mineralisation.

Elsewhere, the business pointed to T3’s prospectivity. It said it expects the project to produce a high-grade, high-quality concentrate that will attract keen interest from metal traders and smelter. It also claimed to have confidence in a range of alternative funding options for progressing T3 to production following third-party discussions.

Finally, MOD pointed to the fact that its share price and the MOD/SFR exchange ratio are at a 2.5-year low. Extending this point, it highlighted its most recent $0.47 per share placing price.

Managing director Julian Hanna said the proposal confirms the potential of the T3 Copper Project. However, he said ‘significantly undervalues’ the company’s assets.

Elsewhere in Monday’s update, MOD announced that it had carried out a $10m placement with institutional and sophisticated issued. It issued the shares at $0.30 each, a 36pc premium to its last closing share price on ASX. It will now follow the placing with a rights issue to raise c.$5m from eligible shareholders. This will be priced at $0.24 per share.

MOD said the funds would be used to complete a 2019 capital works programme. This will see it progress T3, purchase a farm on which the T3 open pit is based, complete underground mining studies, and carry out follow-up exploration work. It will also fund infill drilling to upgrade part of the early stages of T3 mine production to a JORC compliant Measured Resource category. Finally, MOD said the money would enable it to progress negotiations with numerous parties around funding T3’s future development.

Hanna added: ‘Funding from this capital raise will enable the Company to progress the T3 Copper Project towards a development decision and conduct further drilling for additional resources. With strong ongoing support of our shareholders through a placement and a fully underwritten rights issue, we believe that the Company will have sufficient working capital to achieve our objectives.’

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
The Author has not been paid to produce this piece by the company or companies mentioned above.
Catalyst Information Services Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.
MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

Kavango Resources (LSE:KAV) rose 1.9p on Monday after revealing the imminent launch of its next phase of airborne electromagnetic (AEM) surveying over Botswana’s Kalahari Suture Zone (KSZ). Importantly, the company also revealed that it has contracted a high-power new technology to carry out the work. It expects this to ramp up the speed at which it can highlight potential copper, nickel, and PGE mineralisation in the area dramatically. Speaking exclusively to MiningMaven, Kavango’s exploration director Mike Moles told us the significance of this development and how it could help the company in its quest to identify Norilsk-like mineralisation at the KSZ.

Surveying targets

In Monday’s update, Kavango announced that it has now mobilised the second phase of its AEM survey. The work is being carried out over the business’s 15 prospecting licences in Southwest Botswana. Much of this sits on the KSZ, which is a highly-prospective, 450km2-long magnetic anomaly.

Kavango hopes to identify massive sulphide orebodies containing vast amounts of nickel, copper, and platinum group elements beneath the KSZ’s surface. Mining consultant MSA Group has backed the potential presence of these deposits on the KSZ, which was first explored in the 1980s and 1990s. Meanwhile, Kavango has suggested that the area has a similar geological setting to the giant Norilsk copper/nickel deposits in Siberia.

The airborne EM survey is the first stage in the company’s efforts to identify these sulphide orebodies. It detects and prioritises potential locations for these deposits, which Kavango can then follow up with more detailed groundwork and drilling.

Flying for the second phase of the survey is expected to begin later this month, with the first phase completing at the end of last year. It will take between four to six weeks to complete and will cover up to 2,062 line-kilometres in the Hukunstsi area of Botswana.

The highlight of Monday’s announcement was the news that Kavango has contracted the services of a leading airborne geophysical survey player called SkyTEM for its latest phase of work. SkyTEM offers a ground-breaking, high-power surveying system that has been optimised to reach a depth of up to 300m below the earth’s crust.

It reaches these depths by using a high current and low base frequency of 12.5hz. According to Kavango, the technology has not been used in Africa before and is more effective than the older systems currently on the market.

Increasing efficiency

Moles tells us the technology will allow Kavango to investigate for orebodies at a much deeper level and with higher resolution than it was able to in the first phase of its survey.

The company identified 26 conductive anomalies over 2,000 line-km of the KSZ project during this stage of work. However, the technology used did not penetrate deep enough beneath the surface. As such Kavango was unable to tell which anomalies were low priority near-surface conductors like clays and shales and which went much deeper.

In layman’s terms, the deeper an anomaly is, the more likely to be prospective for mineralisation. This makes it a higher priority drilling target for Kavango.  As such, the firm was forced to carry out groundwork on all 26 targets to determine whether they were worth following up. Moles tells us this was a difficult task that took longer than expected to complete.

He believes the new technology will make it much easier for Kavango to differentiate between the two types of anomalies.

‘We will immediately be able to see which conductors have a depth component to them and represent high priority targets. Likewise, it will be much easier for the business to identify and ignore those surficial conductors that are very often just clays and other conductive materials that lie within the first 50-60m below the surface,’ he told us.

‘The technology we contracted in Phase One used a much higher frequency and was not getting deep enough to differentiate between the shallow and deep targets. If we had SkyTEM’s technology back in September when we launched the campaign, we could have reduced the number of conductors worth following up from 26 to about six or seven straight away. Using our new approach, we should be to turn over these conductors much more quickly in Phase Two.’

To assess the effectiveness of SkyTEMS’ technology, Moles told us that Kavango also plans to run lines over some of the areas it surveyed in Phase One and compare results. However, he tells us he is already very confident that the results will be positive:

‘We are confident that this new technique will work. A huge amount of test work has been completed in the past to demonstrate its effectiveness. We think it will represent major step forward in our exploration strategy.’

If Moles’ confidence translates into results this could prove to be highly significant for £2.5m valued Kavango. Since listing last summer the company’s story hasn’t attracted a great deal of attention, despite the progress it has made on the ground. Exploration plays can be extremely racey stocks and with the size of target Kavango is going for, the deployment of the new technology could give it just the edge it needs. 

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
The Author has not been paid to produce this piece by the company or companies mentioned above.
Catalyst Information Services Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.
MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

The following represents the Author’s views only.  All readers should consider their own situation individually and take appropriate investment advice where relevant.

I have been investing in natural resource junior stocks for about 13 years and investing generally for over 30 years.  I came to the natural resource sector at a time in my life when I needed to find a way to make money faster than could be achieved through the slow grind of everyday work as an employee working for others.

2005 to 2006 was a pretty good period, and my first exposure to what the natural resource sector could give in terms of rapid returns.  Up 50% in less than a year.

2006 to 2008 was another lesson, this time in terms of what the sector could take away, also in a relatively short time period. Down 75% in around 2 years.

With 2008 came the Lehman debacles and Global Financial Crisis of course, which caused a capitulation driven collapse and crunch of listed company valuations all over.

Christmas 2008 was time for a review.  On a personal and financial front, things were not great and more than ever I needed to find something that could deliver really outsized returns quickly. 

I thought about it and realised I didn’t actually know too much about many things, other than being an employee (Forensic Accounting mainly in my career) and investing.  The former was possible but not for me a draw and certainly a slower grind to where I wanted to be.  The investing route though had potential and I felt if I applied my accumulated experience I stood a chance.

In preparation from 26.12.08 to 1.1.09 I studied three things.  Firstly, a book on managing trading emotions.  Secondly, articles on investing (from which I learnt – at last – that you buy the stuff that is hated). And thirdly, the opportunities available in the London stock market and AIM in particular.

I had one “aim” – to find the most hated, despised and therefore undervalued sector.  Natural resource juniors were clearly in that category.  I focused on natural resource investing along with a few forays into small cap biotechs and a few occasional others.

2009 -2011 the net result all in was a 2.5-year run that saw my portfolio increase 150 or so times. (Don’t worry it started from a low base.)

2011 – 2014 ouch down again with a 75% loss on paper.

2014 – 2017 overall up around 20 times

2019 so far, down around 50% on paper.

It’s a roller coaster, but one point to note is that at the most acute points of frustration, worry, unhappiness etc, there was something quite amazing about to happen.  Fortunately, historically at these times I held on just as I am doing today after the challenges of 2018.

If I had pulled out all my capital in mid-2014 I would have missed the 25x uplift that was impending (10x within a few months as the recoveries tend to be fast and furious).

Same for December 2008, when I would have lost that life changing 150x return.

If you are a reasonably engaged investor having experienced a poor 2018, like most junior resource company investors have, you will currently have a high level of fear and an overwhelming urge to protect capital.  These things are good to keep you in check sometimes but often frightfully damaging if you want to make the right investment decisions.

Right now you look at your positions and compared to months, weeks or even days ago you will likely see red. You may browse the discussion boards (not that most people with any money spend too much time on or around them anymore) and twitter and see a diatribe of abuse for holders of stocks.

Of course, much of what you read is not to be trusted.  Many market participants on the short side (and there will likely me many in the junior resource space at the moment) use social media to spread scare mongering and get you to sell shares at times like this.

Your husband, wife, sister, brother, aunty, uncle, friend, son, daughter, neighbour, work colleague or whoever you discuss share trading with will not be too engaged or sympathetic to your losses.  In this game you are a daft sod when shares are falling and a lucky bugger when they are rising.

There will be an overwhelming urge to blame the market and sentiment generally for your losses and there is a tendency to search for reasons why the companies in which you invested have failed to deliver. 

How the newsflow has been poor – fair criticism often as companies can be extremely poor at newsflow management.

How the companies should be more active – yeah maybe but what with – if finance is tight companies must be cautious and at times like this operational news hardly makes a dent on the share price (although regular news does increase market awareness of a stock ready for the next upswing, so is still important).

Perhaps how the overpaid management have just been creaming it and how they should buy more shares to show they are aligned – err no why should they, directors can’t sell stock they buy even if they drive the price up multiples without being abused, and if they convert options unless wrapped within a tax efficient scheme they get massively whacked with income tax. Management should simply do their job, and do it well, for fair compensation.  Just like most people are expected to do today.  And anyway, imagine if your employer kept banging on to you about lumping your earnings into shares in the firm just to keep your job and show you are aligned.

When prices are sliding, we look for reasons why somebody or something else is to blame. 

Generally, they are not to blame, but often neither are you, it’s just the way the cyclical resource market goes and as long as you have only invested what you can comfortably live without, for a good while, then patience usually does the trick and a bit of stock selection helps along the way.

So why stay invested through the cycle?  Why not sell at tops and buy at bottoms.

Nice idea and I have thought about it a lot.  I am just not really good enough as an investor to make it happen. 

However, let’s just say I could do the first part and sell at the tops.

The problem is you don’t really know it’s the top.  And if it keeps on going higher after you sell you get priced out really quickly and buying back in is different on many levels.

If you are right and prices fall great.  But when do you buy back in? If you buy too early you still can suffer capital losses quickly.  If you wait too long and miss the upturn you can be priced out of the market again. 

I have seen stocks fall from 5p to 1p and then rebound so quickly. 

If you sell at 5p and it drops to 3p you probably will think it might drop further and wait.  When it drops to 1p you think its on the way to 0.50p. Then it suddenly springs to 2p and its overvalued and you wait for the pull back.  Then it’s at 3.5p and it’s definitely going to pullback.  Then it’s back at 5p and you now think this is nutty and wait for 2.5p again.  Then it’s at 7p and you are not going to pay a 40% premium to the 5p you sold at.  Then its at 10p and clearly overbought.  Then you drop it off your monitor because you can’t take it anymore. But a week later you can’t help yourself and take a sneak peak ….  Feck me its at 16p and rising. You have been priced out and the whole process can happen in a few weeks or months in some cases.

For me now I try and position myself in a diversified way within the sector.  I stay within natural resources because I feel it’s a compelling sector at this time.  The world needs base and strategic metals and will consume vastly more going forward than it has in the past. The world needs precious metals because it’s financially frail and confidence soon enough will be benchmarked against gold and silver.

Some degree of ongoing portfolio juggling is good to stay exposed to the better opportunities for capital growth, based of course on the outcome of your research and personal opinion.

Also, reducing positions when shares move dramatically higher is validated by any sensible risk management model, even if they could yet go up further.

My aim as an investor is to see higher highs and higher lows as the sector moves higher (probably) over the coming years and maybe decades. I must stay with the rollercoaster route and stay in the game all the time because I am not good at selling at the right time and buying back at the right time. 

So, I sit and wait.

My dream is that just one or two of my holdings move dramatically higher whilst the rest of the market languishes for a while longer.  In that case redeployment of capital can afford stunning returns.  However, the reality is we in junior resource investing labour under a cyclical market where, when the tide comes in, all boats rise (or at least the vast majority do).

Most of us now would be happy just for the tide to start coming in.

I applaud those who have the guts and determination to invest in resource juniors at the moment and fervently believe there are incredible returns possible.  We are investing in a potentially life changing sector and notwithstanding the risk, personally I wouldn’t want to be anywhere else.

Author: Paul Johnson

Kodal Minerals (LSE:KOD) enjoyed a 5.9pc boost to 0.2p on Friday morning after releasing a strong set of drilling results at its flagship asset in Mali. Work carried out in November and December confirmed the continuity of lithium mineralisation at the 450km2 Bougoni project.

With a total mineral resource estimate of 207.9kt contained lithium oxide, Bougoni is among the 15 largest hard rock lithium projects in the world. Kodal believes its ongoing drilling shows significant exploration potential that could see this number grow further. To demonstrate this, it is currently completing an updated mineral resource estimate that is on track for delivery at the end of next month.

The most recent round of work saw Kodal carry out infill and extension drilling at defined mineralisation on Bougoni’s Sogola-Baoule prospect. This continued to high grade mineralisation, with one 108m drill hole encountering a 21m intersection at 1.58pc lithium oxide.

Kodal carried out the work after its maiden resource estimate and preliminary open pit optimisation showed the Sogola-Baoule resource could be economically tested at depth as well as along strike. The firm said its most recent work has confirmed this and has the potential to impact future mine design following its mineral resource update.

It is now waiting for assay results for 18 further reverse circulation holes and one diamond drilling hole. Alongside all its existing drilling data, this will be used to complete a geological interpretation and validation. Alongside a ground magnetic survey, this will inform further drilling at Sogola-Baoule. 

Sogola-Baoule is estimated to contain 122.2kt of lithium oxide, making it Bougoni’s largest prospect.

November and December also saw Kodal carry out reverse circulation and diamond drilling at Bougoni’s Boumou prospect. One hole intersected multiple pegmatite veins, consistent with the company’s geological interpretation. 

Boumou is estimated to contain 22.9kt of lithium oxide. It is characterised by multiple lithium mineralised pegmatite veins with an overall strike trending east-northwest/south-southwest and dipping to the north.

A maiden mineral resource estimate highlighted two distinct north and south zones at the prospect. Kodal said its latest results show that the southern zone is more robust. As such, it will be the target for further definition and extensions drilling. As with Sogola-Bauole, the results will now be used alongside a ground magnetic survey to highlight priority targets for next phase drilling.

Kodal chief executive Bernard Aylward said the latest work gives the firm ‘great confidence’ as it fast tracks its development plans for Bougoni.

‘As such, we are in the process of completing a Mineral Resource estimate update that will include all drilling results to date as we look to confirm a long term mine life.  This is on track for delivery at the end of February 2019,’ he said. ‘The opportunity highlighted by these continuing good results is that we are now able to assess our proposed operation parameters and factor in a larger mining operation with an initial 1.2Mtpa processing plant, expanding to 1.5Mtpa as the operation moves into steady production phase.

‘With this in mind, we are continuing to map out a development programme and will be looking to provide an update to the market on our recent activity and engagement of specialised Engineering contractors to work with Kodal and support this development schedule in due course.’

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
The Author has not been paid to produce this piece by the company or companies mentioned above.
Catalyst Information Services Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.
MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

Avesoro Resources (LSE:ASO) revealed that it met its 2018 full-year gold production guidance on Thursday, helping shares to bounce 2.6pc to 166.8p. The West African-focused business produced 220,458oz over the period, a 15pc increase on its output in 2017.

Avesoro also provided a break down of this production down on an asset-by-asset basis. It produced 109,707oz from its New Liberty gold mine over the period, a robust 44pc increase on FY 2017. However, this fell just short of the firm’s annual production forecast of 110,000-120,000.

New Liberty is Liberia's first and largest commercial gold mine. The project has an estimated proven and probable mineral reserve of 7.4Mt with 717,000oz of gold grading 3.03g/t. It also offers an estimated measured and indicated mineral resource of 11.5Mt with 1,105,000oz of gold grading 3.0g/t and an estimated inferred mineral resource of 3.7Mt with 424,000 ounces of gold grading 3.6g/t.

Meanwhile, the company produced 110,751oz from its Youga gold mine in 2018. Although this represents a 4pc drop on the mine's output in 2017, it falls within Avesoro’s 110,000-120,000 production forecasts for the year. This helped to take total 2018 output into its forecast 220,000-240,000oz range.

Youga is based in Burkina Faso and acquired by Avesoro from Avesoro Jersey in December 2017. It hosts combined proven and probable mineral reserves of 11.2Mt with 660.1Koz of gold grading 1.84g/t. It also offers a combined measured and indicated mineral resource of 16.64Mt with 924.2Koz of gold grading 1.73g/t and a combined inferred mineral resource of 13Mt with 685Koz of gold grading 1.7g/t.

Avesoro’s chief executive Serhan Umurhan said 2018 represented a ‘significant year’ for the business, adding: ‘I am very pleased to announce that we have achieved our full year production guidance for 2018, which remained unchanged throughout the year.

‘2018 annual production of 220,458 ounces also represents a 15% increase compared with 2017 pro-forma production from the two mines. The substantial increase in gold production at New Liberty of 44% versus the prior year also underlines the strong performance of our team as we continue to optimise operational performance and add value at our mines.’

Avesoro now intends to provide 2019 production guidance in March 2019. It will also provide an updated mineral reserve and resource estimate for New Liberty, including its Ndablama satellite deposit.

On this, Umurhan said: ‘Moving into 2019, I look forward to updating the market on the results of the ongoing pre-feasibility study at the New Liberty underground project which is also expected to include the first open pit reserves from the Ndablama satellite deposit towards the end of the first quarter of 2019. The focus for this coming year will be on the delivery of strong cash flow and further debt reduction following the substantial reinvestment of cash generated by operations that characterised 2018.’

Author: Daniel Flynn

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
The Author has not been paid to produce this piece by the company or companies mentioned above.
Catalyst Information Services Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.
MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

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