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KRO Review for December 1-31, 2019


KRO Publication Summary: December 1-31, 2019
Kaiser Research Online is an information portal featuring all resource companies listed on the ASX, TSX, TSXV and CSE. New individual registrations will be temporarily suspended January 1, 2020 while we build a new web site though individuals already registered at KRO can subscribe for the USD $450 annual individual KRO membership during the transition. The USD $1,000 annual multi-user Corporate Membership will continue to be available in 2020 to new members. KRO will continue to operate in its current form with the difference that some Trackers will become unrestricted to non-members after a short period. Use your Email to retrieve your login credentials. See Membership Details for an overview of KRO.
The KRO Summary lists all Trackers and Blogs published during the designated weekly or monthly period so that so readers can easily catch up on what they may have missed. We no longer notify KRO members by email about new material except in special circumstances. When a Tracker is posted at KRO we notify members through the KaiserResearchOnline Slack Workspace. If you are an active KRO member and not registered on Slack, please let us know and we will send the invite. We will email the link to the KRO Summary to all KRO members when it is published. We will also Tweet the link so that Twitter followers can catch up at their leisure. The title links to the Tracker or Blog, the charts in the Discovery Watch Blog link to the YuoTube audio segment for that company, and the Tracker charts link to the free Corporate Profile. On occasion we may include commentary on the state of the market. Blog content is unrestricted but Trackers are always restricted to KRO members unless one has been tagged to become unrestricted. Check the General Release Schedule to see which Trackers are already unrestricted or scheduled for general viewing.
KRO Favorites 2019 - Dec 31, 2019
Company Start End Start
Price

Spec Value Rating Current
Price
Chg
Atac Resources Ltd (ATC-V) 12/31/2018
$0.260 Bottom-Fish Spec Value Favorite $0.225 -13.5%
Colonial Coal International Corp (CAD-V) 4/8/2019
$0.510 Good Spec Value Favorite $0.320 -37.3%
Eagle Plains Resources Ltd (EPL-V) 12/31/2018
$0.090 Bottom-Fish Spec Value Favorite $0.105 16.7%
Midas Gold Corp (MAX-T) 12/31/2018
$0.960 Fair Spec Value Favorite $0.630 -34.4%
Midland Exploration Inc (MD-V) 12/31/2018
$0.990 Good Spec Value Favorite $0.920 -7.1%
Minaurum Gold Inc (MGG-V) 12/31/2018
$0.480 Fair Spec Value Favorite $0.500 4.2%
Namibia Critical Metals Inc (NMI-V) 12/31/2018
$0.175 Bottom-Fish Spec Value Favorite $0.175 0.0%
Nevada Exploration Inc (NGE-V) 12/31/2018
$0.310 Fair Spec Value Favorite $0.290 -6.5%
Orezone Gold Corp (ORE-V) 12/31/2018
$0.570 Fair Spec Value Favorite $0.660 15.8%
Osisko Metals Inc (OM-V) 12/31/2018
$0.520 Fair Spec Value Favorite $0.425 -18.3%
Pacton Gold Inc (PAC-V) 12/31/2018
$0.325 Bottom-Fish Spec Value Favorite $0.150 -53.8%
PJX Resources Inc (PJX-V) 12/31/2018
$0.215 Bottom-Fish Spec Value Favorite $0.160 -25.6%
Renaissance Gold Inc (REN-V) 12/31/2018
$0.170 Bottom-Fish Spec Value Favorite $0.330 94.1%
Royal Nickel Corp (RNX-T) 12/31/2018
$0.480 Fair Spec Value Favorite $0.500 4.2%
Scandium Intl Mining Corp (SCY-T) 12/31/2018
$0.210 Good Spec Value Favorite $0.095 -54.8%
Serengeti Resources Inc (SIR-V) 12/31/2018
$0.245 Fair Spec Value Favorite $0.185 -24.5%
Sun Metals Corp (SUNM-V) 12/31/2018
$0.300 Fair Spec Value Favorite $0.225 -25.0%
Verde Agritech Plc (NPK-T) 12/31/2018
$0.710 Good Spec Value Favorite $0.410 -42.3%
Westhaven Ventures Inc (WHN-V) 12/31/2018
$1.350 Fair Spec Value Favorite $0.920 -31.9%
Wolfden Resources Corp (WLF-V) 12/31/2018
$0.240 Fair Spec Value Favorite $0.120 -50.0%
Each year I publish a list of Favorites to which I add or subtract during the year. The companies need to have a Bottom-Fish, Fair or Good Spec Value rating to qualify. The Favorites list may omit companies in which I take a deep interest and write extensively about during the year. Usually these are juniors with a Bottom-Fish Spec Value rating, which means they have one or more important missing pieces that prevent them from developing an uptrend. KRO has its origins in the concept of "bottom-fishing", which involved identifying this sort of flawed junior, "a diamond in the rough" if you will, which would do very well once polished and properly presented. Over the decades the concept of "bottom-fishing" has changed, starting with seasonality during the eighties when most juniors had projects in Canada, shifting to "people positioning" during the nineties when third world frontiers opened up to the juniors and a 12 month hold period for private placements allowed an accumulation window for bottom-fishers which closed around 2002 when the hold period was reduced to 4 months, and shifting to sectoral trend timing in the 21st century when the China driven super cycle kicked in, and more recently to "critical" metal price bubbles created by security of supply dynamics linked to supply shocks from disruptions (rare earths in 2009-2011) or demand shocks from new applications (lithium and cobalt for electric vehicles 2015 onwards). But the more recent metal price bubbles were short-lived, and good returns on individual juniors such as Arizona Mining Inc tended to be isolated events that rarely flipped the glass half-full for a larger group of juniors during the resource junior bear market that began in 2011. Novo's Pilbara play in 2017 started to do so but it fizzled when Novo failed to solve the nugget based grade measurement problem.
Bottom-fishing these days is no longer a bet on cycles except the big bet that maybe in 2020 the resource juniors will finally enter a bull cycle. In fact, the lesson learned is that companies that qualify as "bottom-fish" because they are missing some important piece are unlikely to fix themselves unless external help is offered. So to some degree KRO has shifted from passively observing bottom-fish status, and hoping miracles will happen spontaneously, to helping out through nudges that influence the changes needed to lift the junior out of its bottom-fish limbo. Arizona Mining is an example where the passive approach worked just fine; Scandium Intl Mining Corp is the contrasting example where the spotlight provided by KRO prevented that junior from just fading away as another failed junior and until recently was the leading contender to become the first primary, scalable scandium producer. Arizona Mining has since disappeared in a $2.1 billion buyout while Scandium Intl is back to a floundering bottom-fish where only the company and its major shareholders can take the actions needed to restore a Good Spec Value rating.
KRO has become a multi-use center where sophisticated members can use the information resources to generate their own picks, less sophisticated or ambitious members can pick and choose from the Favorites List, and the more adventurous members can join John Kaiser's efforts to help juniors escape their bottom-fish traps. The latter has been made possible by the KRO Slack Workspace launched in late 2018, a private interactive forum to discuss juniors and related issues either in plain view for all members to see or through the private messaging system. Bottom-fish by nature are very cheap, which makes them interesting for speculators seeking out-sized returns, but dangerous for those who do not appreciate the associated risks. For example, Tri Origin Exploration Ltd is a very cheap junior with significant upside potential that management cannot actualize relying only on internal resources to overcome embedded shortfalls. But such juniors interest me because it is possible to accumulate a lot of cheap stock while the stock remains in bottom-fish limbo, and once the missing pieces are fixed, it can be migrated onto the Favorites List where it will attract a much broader audience.
The annual KRO Favorites List is not a collection of juniors with the best upside delivery potential (ie top picks), but rather a selection of juniors representing different sectors, stages, and approaches, some of which may even be inversely related to each other. For example, a bet on higher gold prices these days is all about the degree of uncertainty in the world, with US policy as the primary driver of uncertainty. But circumstances that are good for a higher gold price are bad for global economic growth and thus macroeconomic demand for raw materials such as base metals. On the other hand, should US policies destabilize the concept of globalized free trade that emerged in the wake of the Soviet Union's collapse, the location of your potential metal supply could become very important. For example, nearly every rare earth deposit outside China is worthless at today's rare earth prices, which are subsidized by environmental rules very different from those that prevail elsewhere. You can't just throw a half dozen darts at the list and expect the result to be a portfolio that makes sense. You need to understand the different themes each Favorite represents, make your own big picture assumptions, and select those juniors which best reflect your big picture outlook.
My own view is that the only trend that has any certainty in 2020 is that of rising uncertainty about the future, for which I see gold as the main proxy. And while the long term gold chart above looked at in isolation encourages one to wonder if down will be easier than up for gold in 2020, when you put the gold chart into perspective as I have done below, which shows that the $1,523 spot price is only 22% above $400 gold in 1980 inflation-adjusted through 2019, up looks easier than down. And when you consider that the big move from 2002 was largely an inflation catchup by gold, unlike the move from 1972-1980 which was a real price move of 400% reflecting rising uncertainty about America's role on the global stage, it is not hard to predict with a straight face that we will soon see a dramatic repricing of gold into the $2,000-$3,000 per oz range in real price terms that will have profound implications for the junior resource sector.
The KRO Favorites for 2019 as a group were a disaster. I create an equally weighted index of these KRO Favorites based on the prior year's ending prices and close it out at the year end prices. The best performance eked out by the KRO Favorites 2019 Index was 9.7% in late February 2019. The worst was down 23.5% accomplished on October 23, 2019. Things started to turn around in December, but the KRO Favorites 2019 Index still managed to finish the year down 14.5%. To make matters worse, I still like all the companies from the 2019 Favorites List. But KRO members don't want me to be like a broken clock that is eventually correct. They want me to be at risk of being wrong all the time, so I have dropped a number of 2019 Favorites and replaced them with new Favorites, most of which KRO has already dealt with as juniors assigned a Bottom-Fish, Fair or Good Spec Value rating. Below is a summary of the deletions. The new 2020 Favorites list is available to KRO members in the KRO Favorites Center and their daily market activity along with comments and news from the past 7 days can be found in the KRO Favorites Daily Center.
I have dropped Atac Resources Ltd as a Favorite because I think Atac is still trying to regain its bearings following the unfortunate death of its Exploration VP Julia Lane this summer. The junior still has $9 million working capital, is working to farm out the eastern two thirds of the Rackla Belt in the Yukon where the Carlin-type gold potential resides, and will focus on the western third called Rau where carbonate replacement style deposits are the target. 2019 hopes that the Bobcat showing would turn into a polymetallic skarn type zone with dominant copper close to the heat source as Sun Metals thinks its #421 Zone at Stardust is fell apart when drilling suggested this showing was still very distal. Atac can easily be reinstated as a Favorite once it becomes apparent that a story focus has emerged.
I have dropped Midland Exploration Inc as a Favorite because I am disappointed at how the Mythril copper play fizzled after a lot of excitement in early 2019 when I thought Midland was on the verge of delivering an unexpected world class copper discovery for the James Bay region where the focus has been mainly on gold since Virginia's discovery of Eleonore in 2004. Mythril could have turned the James Bay region of Quebec into a Great Canadian area play. But so far the tonnage-grade combination needed for James Bay is not present. Midland is very well financed with over $14 million working capital, but right now it is a richly valued Quebec prospect-generator with dozens of projects, none of which really stand out as a flagship play on which I am pinning my 2020 hopes. But if Gino Roger calls up and declares that this time he is truly having his Andre Gaumond moment, I will be all ears.
A friend told me this summer that the reason my Favorites are such dogs is that I am not focusing on juniors with "torque". I wasn't really sure what he meant, and the "torque" example he gave involving a recycled Alaskan gold play so far has been the sort of wet noodle that qualifies for the KRO bottom-fish workshop. But I did take his advice to heart when I reviewed Minaurum Gold Inc for whose Alamos silver vein play in Mexico I had high hopes heading into 2019 despite Brent Cook and Joe Mazumdar giving up at the same time for what I now understand was lack of torque. Minaurum managed to close up 4.2% in 2019, so it can't be blamed for the bad Favorites performance in 2019. But Minaurum's valuation is not cheap, and while it will benefit from a higher silver price, the story seems stalled. I may revisit it as a Favorite down the road.
Namibia Critical Materials Inc is being dropped as a Favorite because it failed to finance in 2019 to advance any of its projects such as Grootfontein, part of a portfolio it acquired in late 2017 that turned it into the Namibian exploration arm for the Gecko group. NMI remains an important Bottom-Fish Spec Value rated junior because it owns the Lofdal heavy rare earth deposit in Namibia, one of the few HREO deposits outside China that could be rapidly developed if Chinese supply were permanently cut off. However, the heavy rare earth prices remain at rock bottom, and Lofdal is currently worthless, partly because yttrium, the dominant rare earth, is cheap because it has lost its main applications. That could change in a big way, but not overnight. NMI is working on a farmout partner with the capacity to develop Lofdal. It is also seeking a farmout partner for the Epembe tantalum-niobium deposit on which Gecko has done considerable work. The Kunene copper-cobalt play that was the flagship in 2018 is pretty much dead as a cobalt story because exploration failed to generate zones similar to those on the adjacent Opuwo project of Celsius Resources Ltd which in turn is not feasible at the current cobalt price. The junior plans to focus on the gold potential of the Erongo project located in a region that is yielding open-pittable, structurally controlled gold zones hidden by cover rocks.
Orezone Gold Corp was chosen as a Favorite with Fair Spec Value because it was an advanced gold project in Burkina Faso which was going it alone as a mine development story while waiting for a producer to buy it out, especially once gold has started trending higher. That could have resulted in a buyout at double the price, and the stock has managed to gain 15.8% by the end of 2019, but even though 2019 was a good year for gold itself, advanced gold juniors have only weakly tracked the gold trend. The buyout prospect has been clouded by several attacks in Burkina Faso on mining related "assets" by Islamic extremists, though not where the Bombore project is located. However, France is reconsidering its relationship to past African colonies, and the United States is preparing to pull out of West Africa just as it did with Syria. Orezone remains interesting as a leveraged play on gold rising for reasons such as consequences of the United States withdrawing from the global stage, but in light of the civil war risk as Islamists rush into the vacuum the higher gold price potential is not enough for me to keep Orezone as a Favorite.
Pacton Gold Inc was made a Bottom-Fish Spec Value rated Favorite because I saw it as a cheap proxy on the potential success of Quinton Hennigh's Novo Resources Corp in the Pilbara region of Australia. Although Novo's stock price has done reasonably well, this is more due to its cult following rather than true fundamental progress. The Novo focus in 2019 was the Egina region where the target is placer deposits in marine terraces. So far there is nothing on the bulk sample permitting front for the gold nugget hosting conglomerate units, and until that happens, there is no timeline for determining if the Pilbara nugget gold has commercial potential. Pacton, which has exposure to both conglomerate and marine terrace hosted gold, has only looked at the bedrock hosted vein potential of its holdings in the Pilbara, and its focus in 2019 turned to drilling its claims in the Red Lake region where Great Bear Resources Ltd has kicked off a rethink of the region's gold potential. I'd rather bring Pacton back as a Favorite after the Pilbara gets legs or drilling on the Red Lake claims yields a new discovery than maintain Pacton as a Favorite while waiting. Pacton is one of the worse 2019 performers at down 53.8%.
Royal Nickel Corp caught my interest in late 2018 when its exploration efforts at the Beta Hunt Mine in Australia confirmed the hypothesis that very high "specimen stone" grades existed not just near the base of the mined out Kambalda nickel deposits, but within the deeper stratigraphy where the intersection of structures with thin pyritic shale beds could create pencil rod shaped zones of very high grade gold. Royal Nickel managed to close up 4.2% for the year, but with over 600 million shares issued I'm not sure how much upside remains. Because Royal Nickel is not the sort of story where you can anticipate good news to emerge from Beta Hunt, just wait for it to happen randomly, I am dropping Royal Nickel as a Favorite.
As of January 1, 2020 annual individual KRO memberships at USD $450 are available only to individuals who are already registered KRO members. In 2020 I will work on a redesign of the KRO web site whose architecture is over 15 years old. No other newsletter writer has anything like it in terms of an information portal with a powerful search engine that covers all Canadian and Australian listed resource companies. But form always trumps content unless you are a corporate user who understands that you are renting a tool that saves you time getting answers and you have more than one individual tasked with doing research. The annual corporate, multi-user membership at USD $1,000 is still available for newly registered members. I am not sure when the new site will be available, nor how much of the current KRO functionality will still be available. I am not worried about former members re-subscribing because I can assure them that nothing has changed except that the resource juniors may finally be on the threshold of a sustained turnaround. So no complaining if you do re-subscribe in 2020 as a former member! Newcomers will have to wait for the new web site unless fear of missing out makes that $1,000 corporate membership look like a bargain.

KRO Publication Summary: December 1-31, 2019
Dec 3, 2019 - Blog - SDLRC: Brooke Clements highlights technical diamond articles for December 2019
Dec 4, 2019 - Tracker - Tracker: Rugby signals that 2020 could be the year its Colombia initiative gets traction
Rugby Mining Ltd announced on November 19, 2019 that it had begun field work on its Pastora-El Playon concession applications in Colombia, news that the market ignored because nobody believes that Colombia will ever get its mining title act together. The Pastora concession is one of the concessions Barrick applied for during the decade it spend USD $20 million on target generation work in Colombia. In 2016 Barrick gave up and sold its Soratama subsidiary, including the database, to Rugby for a p...
Dec 4, 2019 - Blog - KMW Blog December 4, 2019: Discovery Watch December 4, 2019 with Jim Goddard and John Kaiser
Highway 50 Gold Corp (HWY-V) Rugby Mining Ltd (RUG-V) Tri Origin Exploration Ltd (TOE-V)
Dec 1, 2019 - Blog - Kaiser Media Watch Blog - December 1, 2019 to December 31, 2019
Dec 4, 2019 - Tracker - Tracker: New Spec Value Rating for Highway 50 Gold Corp
Highway 50 Gold Corp reported on November 28, 2019 that the latest round of drilling on the Monroe zinc-lead project in southeastern British Columbia was a bust. The first hole drilled to a depth of 1,011.3 m failed to intersect anything resembling the target which earlier holes suggested proximity to a Sullivan type Sedex system. Management concluded that this hole exited the sub-basin presumed to be the host for a deposit. The second hole was spotted to better test the target but was lost at 4...
Dec 10, 2019 - Tracker - Tracker: New Spec Value Rating for Azimut Exploration Inc
Azimut Exploration Inc is poised to deliver major discovery news in 2020 on three fronts, of which the flagship for the moment is the 100% owned Elmer gold prospect in the James Bay region. On November 28, 2019 Azimut announced that it had undertaken a drill program of 6 holes (1,000 m) within a fairly small 150 m by 70 m footprint where channel sampling of outcropping quartz vein mineralization yielded high grade gold values. The Patwon Prospect occurs within a 70 metre wide northeast trending ...
Dec 11, 2019 - Tracker - Tracker: Sirios resource estimate for Cheechoo sets stage for consolidation of Eleonore South
Sirios Resources Inc announced a maiden resource estimate on December 11, 2019 for its 100% owned Cheechoo gold project in the James Bay region of Quebec which is good enough to qualify as an optionality gold play. Using a 0.3 g/t cutoff grade based on $1,300 gold and a 1.3 CAD:USD exchange rate Sirios reported an inferred resource of 71,000,000 tonnes at 0.69 g/t gold for an open pit scenario representing an in situ resource of 1.6 million oz gold. The rock value at $1,466 per oz is USD $32.52 ...
Dec 11, 2019 - Blog - KMW Blog December 11, 2019: Discovery Watch December 11, 2019 with Jim Goddard and John Kaiser
Westhaven Ventures Inc (WHN-V) Azimut Exploration Inc (AZM-V) Sirios Resources Inc (SOI-V)
Dec 13, 2019 - Tracker - Tracker: Spec Value Rating for FPX Nickel Corp (FPX-V)
FPX Nickel Corp has had a Bottom-Fish Spec Value rating since 2017 while the junior worked on over-coming the limitations embedded in the PEA Cliffs delivered in March 2013 for a 114,000 tpd open-pit nickel mine at Decar which required a $10/lb plus nickel price to be viable. Most of this work has been completed and 2020 promises to be a relaunch of the Decar nickel story with an updated PEA. FPX caught my attention in 2010 when the junior, at the time called First Point Minerals, switched from ...
Dec 18, 2019 - Blog - KMW Blog Dec 18, 2019: Improving Canada's Junior Markets: John Kaiser and Jim Goddard on Is the Uptick Rule needed?
Dec 19, 2019 - Blog - KMW Blog December 19, 2019: Discovery Watch December 19, 2019 with Jim Goddard and John Kaiser
Clean TeQ Holdings Ltd (CLQ-ASX) Clean TeQ Holdings Ltd (CLQ-ASX) Scandium Intl Mining Corp (SCY-T)
Dec 27, 2019 - Tracker - Tracker: Spec Value Rating for Amarc Resources Ltd (AHR-V)
Amarc Resources Ltd was downgraded from a Bottom-Fish Spec Value rating on December 27, 2019 to a Zombie Spec Value rating following a lacklustre market performance during the 5 years since acquisition of the IKE copper-moly-silver porphyry project in southern British Columbia. Amarc has been part of the Hunter-Dickinson group since the mid-nineties when it peaked at $4.25, and has operated as the group's BC exploration arm for the past two decades during which Bob Dickinson hoped to repeat the ...
Dec 27, 2019 - Tracker - Tracker: Spec Value Rating for Avrupa Minerals Ltd (AVU-V)
Avrupa Minerals Ltd has had a Bottom-Fish Spec Value since the start of 2016 but effective December 27, 2019 it is down-graded to a Zombie Spec Value rating. Avrupa caught our attention in 2012 when it acquired projects in the Iberian Pyrite Belt of Portugal famous for the world's biggest VMS deposits. Under Paul Kuhn Avrupa styled itself as a European prospect-generator with an additional focus in Kosovo and the eastern part of Germany. Avrupa was never able to get anything going with the Oelsn...
Dec 31, 2019 - Blog - SDLRC: Brooke Clements highlights technical diamond articles for January 2020

 
 

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