(KW Episode Dec 22, 2023 was recorded Dec 22 but posted after the end of the year to allow us to use end of year graphics). The past year has been very dreary for resource juniors with the market declining into what seems like an eternal winter. At the start of Q3 one could feel a sigh of capitulation flooding into the resource juniors even as general equity markets began to perk up amid signs that inflation was subsiding and the interest rate hikes had likely peaked. Because this capitulation wave was dragging nearly all resource juniors regardless the stage of their projects, it was shaping up to be an excellent bottom-fish research season. Kaiser Research has a very powerful search engine which allows you to combine corporate and project level criteria to generate a list of hits. The resulting display is very useful because it includes a short and long term chart, basic information such as working capital, fully diluted, and key people, a truncated version of the overview if it exists (its full version will display in the company profile), a list of all company projects that fit the project level criteria. This snapshot also includes links to the KRO profile, the company web site, a people tree, a social forum such as Stockhouse or Hot Copper, 15 minute delayed quotes on Big Charts, and not too long ago a list of SEDAR filings. For an experienced user such as myself I could very quickly determine if it was going to be worthwhile to dig deeper into a company's fundamentals. This is important because doing a deep dive consumes 90% of the time spent researching a particular company, and when your goal is to identify potential future winners, discovering your target is a dud means you wasted a lot of time. That, of course, is not the case if your goal is to identify short selling picks, but since I am targeting cheap juniors that may qualify as bottom-fish picks that could appreciate 500% or more if missing pieces fall into place, there is no money to be made selling short a dead fish.

The typical KRO member is a sophisticated investor who has dabbled in resource juniors for many years and understands that there are four basic ways to profit from them.

One is to get positioned through an initial by invitation only round of financing in what is being primed as an orchestrated ramp job where the price of the privilege is an implicit expectation that at some point one will pump the stock to others to generate buying that takes the stock higher. Very few KRO members have this strategy available to them.

The second is to jump into a junior that already has a visible uptrend and hope that the trend remains one's friend until one has sold. The problem with momentum gambling is that the rush of a fast buck on paper is intoxicating and typically provokes the shareholder into finding out what story is driving the momentum and falling in love with it which prevents one from accepting that the trend is no longer one's friend.

The third is to jump into a stock that is just starting to wake up at the beginning of what will be a powerful and sustained uptrend driven by evolving fundamentals. I try to spot these, but if you have not done prior research which has revealed what the story is which the company is chasing, the risk is that the stock runs away too fast or has rallied on a false alarm. Newsletter writers endeavor to make such picks for their subscribers.

The fourth is to accumulate juniors flat-lining along a bottom after one has researched the underlying story and identified what needs to happen to launch a speculation cycle. The risk of the fourth approach is that the missing piece never falls into place, or takes a very long time to do so, turning it into an opportunity cost. To mitigate this risk the truly sophisticated KRO members accumulate a dozen or so bottom-fish positions and monitor developments closely, while also keeping an eye on other bottom-fish in the KRO collection. When an existing bottom-fish position or a bottom-fish being watched starts coming to life for the right reasons, the investor can make a much bigger investment by adding to an existing bottom-fish position or jumping into the watched one not already owned. The bottom-fishing strategy is thus a form a self-disciplined knowledgable monitoring.

The KRO Slack Forum in which KRO members can be members who post or just lurk, provided they follow the Slack Rules of Order when posting, is a very useful platform for catching bottom-fish breakouts, or detecting an imminent breakout courtesy of the increased chatter about that stock, much of which comes from me. By flagging resource juniors as bottom-fish I reduce the set of stocks one needs to monitor, and, when there is a critical mass of KRO members willing to post about their own long positions, my ability to monitor the entire collection is leveraged by the collective activity of other members. I mentioned that KRO members tend to be quite sophisticated in the resource junior space, but the KRO Slack Forum serves as a learning platform for newcomers to this sector. When something is hot off the press I will dash off my interpretation as a quick and dirty post in the Slack forum. And if somebody posts something that I think is off the mark, I will add a post presenting an alternative interpretation. This, of course, works in both directions; members either with a public post or a private message will point out when I am confused or missing an important detail. The collaboration aspect of the KRO Slack Forum is why I call it a Bottom-Fish Workshop

Plodding through the KRO search engine results can become tedious, especially when we are in a seemingly eternal winter where spotting a fabulous gem dirt cheap is accompanied by a nagging concern that such gem will never be recognized as such by anybody but oneself. The research process needs to have an entertaining and aesthetic dimension to it, and grinding through snapshots of 400 juniors with at least $500,000 working capital, insiders holdings at least 5% of issued, and trading below $1 is, well, just a grind, especially during winter. The key is to introduce a visual interface that goes beyond stock charts, and what makes resource juniors different from non-resource juniors is that their stories can each be reduced to a set of GPS coordinates plotted on a Google Earth map.

Back in 2018 one of my summer student employees figured out how to do this with Google's Fusion tables and we spent a lot of effort adapting KRO's company-project database so that I could embed a Google Earth map in a KRO web page which displayed a range of color and shape coded icons. Even better, when you clicked on an item, a "card" would pop up with basic information and key links such as the project's location inside the company's KRO profile. At the same time one could zoom into the project area and explore its local features and potential issues such as a nearby village, as well as figure out what other companies are in the vicinity. I could even create embedded maps filtered for particular companies or projects with specific target metals. This was really cool but, unfortunately, a year or so later Google, although observing that journalists and all sorts of non-profits dealing with geo-location based information got tremendous mileage out of Fusion for common goods, could not figure out how it served the Google good and pulled the plug on Fusion.

That was a bummer but such is what life can be at times. My son was able to adapt a different platform for the kimberlite database that is part of the Pat Sheehan Diamond Literature Compilation I host as a free public good on KRO, but then covid came along and I never made the effort to adapt the new platform to the KRO database. But during the past year as I was covering what is supposed to become the Greatest Canadian Area Play ever, namely the James Bay lithium pegmatite hunt in Quebec, I got frustrated by the absence of regional maps such as Glen Jones used to produce, and the tendency of juniors to publish maps showing the location of their properties, but not that of any neighbors unless it happened to be a junior with a major discovery such as PMET's CV5 pegmatite. Although the James Bay region is a featureless region, I was usually able to pinpoint the center of a junior's property on Google Earth and capture the coordinates.

My frustration arose because a Great Canadian Area Play has a dynamic where fundamental success by one company tends to feed market interest in nearby companies. In the case of lithium where the world may need 600%-1,200% more lithium supply by 2030 to meet EV deployment goals and expectations than the 130,000 tonnes of lithium metal equivalent produced in 2022, there is no reason for juniors to hinder others from benefiting from that company's success. But despite my high expectations in Q1 of 2023 that a lithium exploration boom would sweep Canadian resource juniors, duplicating what happened to Australian juniors starting in 2015, the speculative winter that descended on the market in Q2 of 2023 compelled juniors to hoard information so that what little risk capital was coming into the market would not be sucked up by juniors with nearby properties.

So in late November I bit the bullet and threw myself into reviving a map platform for KRO to light up the dreary winter as a wonderland. The icons come in 3 shapes with diamonds representing a company's flagship project, squares representing the secondary projects on which some activity is underway, and circles representing projects the company still has on its books but are either being held for a farmout or for a relevant miracle to happen that makes the project interesting. The icons are color coded to reflect the stages of the project, with green representing grassroots or target testing stages, blue representing discovery delineation stage (when there is still bluesky), purple the infill drilling and metallurgy stage (a JORC or 43-101 resource estimate has been published), yellow for the PEA or PFS stages (the PEA stage means a PEA has been published, and PFS stage means the company is now working on a PFS), orange for the feasibility and permitting stage, and red for the construction and production stages, with construction also doubling for a suspended mining operation. I may be suffering from advanced mental hypothermia, but these colorful maps do cheer me up like sparkling Christmas trees in a winter wonderland.

These maps are not visible to non KRO members because they make researching resource juniors more efficient and entertaining, and while information wants to be free, efficiency translates into time which is money, and what a KRO membership is to a degree selling is the saving of time, like renting a jackhammer to dig out those old fence post footings rather than wasting time and effort banging at them with a pick axe. As for entertainment, somebody might be entertained by enjoying a free Kaiser Watch episode or noting some member only analytical comment an unworthy KRO member has copied into social media, the entertaining exploration of the earth for potential resource junior winners is an individual experience to which there is an admission fee.

Right now the new KRO map platform has been embedded within the metal supply reports where you can spot all projects with say, copper or lithium as the primary target metal, or, cases like silver where silver is the first or second most important metal, and by-product metals such as platinum and palladium where the metal simply needs to be a target metal. Within the KRO database system once a resource estimate has been published only those metals included in the resource estimate are defined as target metals and in the position of importance defined by the company. Maps have also been embedded in country and state/province profile pages so that you can focus only on Nevada projects, though thanks to the Google Earth zoom function you can do that with the global map that features all projects for which we have GPS coordinates with at least approximate reliability. The company profiles also include a global scaled map featuring only that company' projects.

And we also have custom filtered maps, such as the map at the top of the current week's news release report which features icons for the flagship projects of companies that published news. There are separate news release web pages for the Canadian and Australian listings. Over time I will develop a catalog of maps with very specialized filters geared toward different "story themes". A key aspect of KRO is that it is a research platform whose members bring their own confidential criteria to the search engine. The KRO map platform does not have that search query construction facility, but members can propose filter sets via the KRO Slack Forum to be added to the catalog. I can't change the fundamentals of the resource junior market, but I am doing my best to make the experience more enjoyable and entertaining for KRO members.

The 2024 Bottom-Fish Collection has over 80 members and there remains a long list of candidates I have to take a closer look at before adding them to the collection. Unless there is a miraculous upswing during Q1 of 2024 that is more than a short-lived January Effect which forces me to focus on those juniors I have already vetted as bottom-fish, I will be adding many more to the 2024 collection. In a sense I am creating a Survivors Club because I am very concerned that the Canadian resource junior eco-system has crashed through an extinction threshold and is now on an irreversible path towards disappearing as a Canadian institution that has been the basis of my career since I first opened an account in 1978 to trade resource juniors. What I do not know is how quickly or slowly this decline will unfold, but there is a tenacious type of management team which will survive longer than the opportunists who will flee or just fade away in the face of how difficult the funding environment has become.

The financial statements for quarters as recent as September 30 have now been updated and I have a pretty good overview of the financial shape of the resource juniors, in particular the TSXV and TSX listings. I do not include the CSE listings because I am far behind adding to KRO the flood of new CSE listings focused on the resource sector, which really makes me wonder what these groups are seeing about the Canadian resource junior future that I am missing. This episode includes the key graphics I am about to describe.

Let's start with a chart which displays the daily traded value of TSXV resource listings and the TSXV S&P Index which is currently near a low achieved in late 2015 (not counting the steep plunge in Q2 2020 when covid erupted). Since the secular resource junior bear market began in 2011 the TSXV Index has wandered between 500-1000 which suggests a largely sideways trend. The reality is much, much worse. At the end of November the TSXV had 1,905 listings of which 1,035 (54%) are designated as "mining". The index as it is currently constituted has 136 members of which 86 (63%) are in "mining", the catchall term for resource sector that does not include oil & gas. KRO has 1,149 TSXV listings as being in the resource sector, though this will include companies that have been pushed onto the NEX board of inactive companies. The index reflects only 7.5% of the TSXV resource juniors, and because its composition is based on market capitalization criteria, and preserves the value of listings that migrate to a more senior exchange such as the TSX, it does not come close to capturing the misery afflicting resource juniors. Furthermore, during the past decade TSXV trading value shifted significantly in favor of non-resource listings such as cannabis and blockchain startups, many of whose winners migrated to bigger exchanges; their subsequent demise is not captured by the index.

The resource member composition of the index has a fairly good representation of the different types of juniors and stories, but the index does include juniors like Arbor Metals Corp, which is run by people who own zero shares, have none or little incentive options and minimal salaries, working for shareholders none of whom owns enough stock to be a reporting insider. After the stock split 3.5:1 in March 2020 it ramped to $2 in Q3 of 2020 on the basis of a Burkina-Faso project abandoned in 2022 after Arbor acquired the Jarnet lithium project near PMET's Corvette project in the James Bay region. Remarkably, along the way the placees of a 2019 private placement allowed 19 million vastly in the money warrants at $0.04 to expire! Since late 2020 Arbor has consistently traded above $2 until a sharp price decline in October 2023, but did not raise a penny until the decline. The balance sheet had a growing working capital deficit that was funded by loans from an obscure German entity which recently converted the debt into paper. There is no evidence of any marketing deals apart from a one time $26,000 deal in 2020 with a Vancouver outfit to prepare marketing materials, and the junior seems to be absent from social media networks. The press releases were typically congratulations extended to government agencies, EV and battery companies, and other juniors such as PMET. The web site is an ode to information minimalism and I could not find a link to a corporate presentation. Arbor did some boots on the ground prospecting at Jarnet in Q3, but has not yet reported anything to indicate that it is anywhere near making a lithium pegmatite discovery that would explain why the junior had a market cap in excess of $200 million during most of 2023 and traded 133 million shares with a value of $341 million, 40% of which was sold through Anonymous, but much of it bought through a respectable list of Canadian and American brokerage firms. Despite no indication yet that Arbor has a discovery on its hands, the junior managed to raise over $5 million in Q4 of 2023. This member of the TSXV Index is a shining example of what the Canadian regulatory and financial establishment represents and why the resource junior eco-system is dying.

So forget about the TSXV Index as an indicator of market sentiment with regard to the resource juniors. A much better indicator is a price range graphic I have been compiling since 2002 which features both TSXV and TSX resource listings. When I invented it I created 12 price range categories at a time before Canadian juniors tended to have less than 100 million shares issued. But during the past two decades the market became more tolerant towards high issued figures, in part because brokers became less important in "managing" markets and the liquidity of a high issued number was appreciated by investors trading through online brokers. The percentages of the different price ranges turned into noise except for the bracket representing stocks trading below $0.10 (the red line). During the China super-cycle peak of 2006-2008 the percentage of resource listings trading below a dime dropped to an astounding low of 4%. But with the 2008 financial crisis that figure soared to 53%. During the gold and M&A boom of 2009-2011 there was a remarkable recovery and the percentage dropped to 12.6% in early 2011 just before the secular resource bear market began. This massive sell-off hit its nadir in late 2015 when 66.1% of resource listings were languishing in the gutter below a dime. Many of them escape the gutter by doing a rollback, but in most cases it takes less than a year for such juniors to descend back into the gutter. I have found this percentage trading below a dime to be a reliable indicator of both inflection points and the trend of market sentiment toward Canadian resource juniors. The last major peak was in 2020 at 53.7% during the covid abyss, which was followed by a remarkable recovery that left only 22% of listings trading below $0.10 in mid 2021. Since then we have witnessed a trend of weakening sentiment, reversed briefly in late 2022 when I came to believe we were heading into a secular resource bull market based on geopolitics and energy transition requirements. The 2023 worsening sentiment trend peaked at 47.2% at the end of October, and finished the year at 46.5%.

During H2 of 2023 we saw a brutal wave of capitulation selling that coincided with a sharp drop in financing activity as shown by my monthly chart of TSXV resource junior financing activity going back to 2009. The situation is uglier than it looks because the financing total is based on a smaller number of companies raising capital, especially through private placements. I've annotated the chart to show past financing winters, of which the 2013-2015 period was the longest. The most recent one lasted two years between mid 2018 and mid 2020. The question today is how long is the 6 month old financing winter going to last?

The next graphic to look at is the one which uses my price range categories to tabulate the total positive and negative working capital of TSXV resource juniors in each price range (working capital is current assets less current liabilities, a figure the regulators have striven to make less useful by forcing juniors to record as fictitious current liabilities the financial consequence of not spending flow-through funds within the time required, which drags down the working capital figure, and makes it imperative to look at balance sheet details once a stock has triggered deep dive research). Overall resource juniors have just under $4 billion in positive working capital, of which $754 million is held by juniors trading below a dime. But those with negative working capital owe $3.3 billion of which a staggering $2.2 billion is owed by juniors trading below a dime. The latter are zombies waiting to be delisted or have all their debt converted to paper followed by a brutal rollback and subsequent price decline to the pre-rollback level. This is the minefield that bottom-fishers need to navigate.

The next graphic to examine is the one that shows how many companies and percentage of the total have working capital within one of the 17 ranges I have created. These can be broken down into three groups: 1) negative working capital which will be companies to avoid with a few exceptions, 2) zero to $500,000 working capital which will be companies that are still alive, but will need a market sentiment uptick to raise capital in order to get exploration work underway that could boost the fundamentals of their story, and, 3) those with more than $500,000 which not only allows them to get work underway, but which would be the first to follow upwards a sentiment change and would attract financing offers (capital markets hate giving money to juniors that need it except at severe knockdown prices). There are 1,149 TSXV resource listings in my database, of which 456 or 40% I can ignore as zombies, and 489 or 43% have more than $500,000 working capital and are the target of my bottom-fish research. There are 193 or 17% in the zero to $500,000 range which are also potentially interesting, but require more work to investigate, and will probably remain in the bottom-fish gutter until a bull cycle is clearly underway.

Assembling the 2024 Bottom-Fish Collection has been a difficult task because almost the entire resource junior sector is trading at depressed prices. I started building the 2024 collection in October, and while the basic parameters such as working capital and minimum 5% insider stake are easy to filter through the KRO Search Engine, the hard part is assessing management motivation and story potential. When I got the new map platform up and running I created a map that features only the flagship projects of those juniors in the 2024 Bottom-Fish Collection. I was shocked to discover how biased I am in favor of companies focused on Canada and the United States, especially in view of the First Nations and NIMBY blockade that is hindering juniors. I had hoped to be done by the end of the year, but I will be busy in Q1 of 2024 researching bottom-fish opportunities in Mexico, South America, Africa and Scandinavia. Most Canadian juniors are not active in Australia, and I am not yet comfortable creating an ASX Bottom-Fish Collection.

To help me overcome my aversion to these other jurisdictions I created a map which features the flagship projects of companies where insiders own at least 5% of issued stock, market capitalization is less than $500 million, the stock price is less than $1.00 per share, and working capital is at least $500,000 as of the most recent filing. And which have not already been tagged for the 2024 Bottom-Fish Collection. As explained earlier, KRO members can explore this winter wonderland by clicking on icons to get the popup, and if the basics look interesting, click through to the KRO company profile for a deeper dive. This is a lot more fun than grinding through a long list of KRO Search Engine results.

As a fan of equal opportunity I also created a Zombie Map featuring flagship projects of companies with negative working capital and where visible insiders own less than 5%. One that I still have to create will be the Gray Zone of juniors with positive working capital up to $500,000 and minimum 5% insider stakes. As I get rolling I will create a whole catalog of customized maps which will allow KRO members to explore those themes and criteria sets that interest them.

An important change for 2024 is that it will be a transition year at the end of which I will either shut down Kaiser Research Online as a public platform or continue it with a substantially higher membership fee, likely USD $200 per month available only on an auto-renewal basis. During 2024 the KRO membership fee will be fixed at $450 non-refundable and expiring on December 31, 2024 regardless when somebody subscribes. Obviously the value will reduce as the year progresses, but there might even be value in paying $450 as late as December 2024 because all members at the end of 2024 will be grandfathered to renew for $450 for another year. In 2025 and beyond new members will have to pay the substantially higher rate. Current KRO members with an expiry in 2024 can renew at a prorated price reflecting the days left in 2024.

Why am I doing this? Since the bear market began in 2011 there have been major changes in the dynamics of resource sector speculation, with a major shift to companies paying parties to pump stock picks to audiences that have signed up for free. There is a trend of information platforms that could emulate the KRO information platform and make structured data search available free or at a very low price. That threat could come from the currently mothballed Share Collective if it is revived or acquired by a properly bankrolled group. There has also been a proliferation of social media forums in which copyrighted material gets circulated. This is not a problem right now because nobody cares about resource juniors, but it is not impossible that a secular resource bull cycle will explode next year or perhaps in 2025, especially if the United States undergoes a leadership change that turns its dependency on raw material supply from anywhere but the United States into an acute liability. If we do get a bull market there will be an influx of amateurs jumping onto the bandwagon who would be absolutely bewildered by the KRO platform, especially if it is functioning as a bottom-fish workshop for sophisticated resource sector speculators. They can spend $200 for what amounts to a one month trial and discontinue if KRO doesn't work for them. The goal in 2024 is to attract a core group of bottom-fishers who will be part of a research club focused on resource juniors. If you want to be part of this club Sign Up Here.

When I launched the KRO Favorites concept in 2022 as a free collection of stock picks covered through the Kaiser Watch series the idea was that it would feature graduates from the Bottom-Fish Collection. I was very optimistic about the 2023 Favorites Collection because I believed we were on the cusp of a major resource sector bull market driven by energy transition needs and geopolitics which would also boost the price of gold. The 16 companies represented multiple themes and metals. The 2023 Favorites Index got off to a good start, gaining 26.8% by early March, but it was downhill from April onwards when several banks failed due to the high interest rate policy of the Federal Reserve, China's post-covid rebound fizzled, and global macroeconomic demand stalled. Even though gold finished the year up 14.7%, the Favorites Index finished the year down 20.8%. Brunswick Exploration Inc was the star, finishing up 74.7% and will be part of the 2024 Favorites. Colonial Coal International Corp was the second best performer up 48.4% and will be continued. The only other Favorite that finished up was Faraday Copper Corp with a gain of 16.7%, but after the PEA showed that higher copper prices or richer ore were needed to make Copper Creek worth developing, it slumped back into a Bottom-Fish Spec Value rating. West Vault Mining Inc was added in April as a gold proxy and while down 6.9% continues to offer Good Speculative Value and will be continued. Solitario Resources Corp was down 11.9% thanks to the sluggish USFS permitting process, and while I've temporarily tagged it with a Bottom-Fish Spec Value rating, it will be a 2024 Favorite. All the rest have been consigned to the 2024 Bottom-Fish Collection. There will be a few new additions to the 2024 Favorite Collection, but it will be a much shorter list than 2023.