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Insights

Q121 Report: Memento Mori

The fourth quarter capped off a spectacular year for the Canadian venture space. Though ravaged by an initial sell-off in the early spring, the TSXV ended the year with an annual return of 50% and a 145% increase from its March lows. In comparison, the TSX returned 3% and 55% over the same timeframe. Not only did investors regain composure quickly, they were apparently undeterred by the coronavirus after all– encouraged by a dovish Fed and waves of fiscal stimuli that continued to weaken the dollar, inflating assets. Q4 served to confirm this trend and Canadian markets responded generally positively to key news, namely Biden’s securing of the Presidency and the beginning of global COVID-19 vaccine rollout initiatives.

Kodiak Copper Corp (KDK-V): Just The Tip of The Iceberg

Kodiak Copper Corp is a Vancouver based junior exploration company focused on advancing their 100% owned MPD copper gold porphyry project located ~50km north of CMMC’s Copper Mountain mine (584 Mt at 0.23% Cu and 0.1 gpt Au) in south-central BC. KDK is backed by John Robins Discovery Group, co-founded by Chairman Chris Taylor (President and CEO of GBR), and led by Claudia Tornquist (former GM at RIO Tinto and former VP Business development at Sandstorm Gold). Kodiak also holds the 100% owned Mohave copper-molybdenum porphyry project in Arizona which is a data rich property with shallow historic drilling but untested at depth.

Q420 Report: All Around the Bonfire

The fourth quarter capped off a spectacular year for the Canadian venture space. Though ravaged by an initial sell-off in the early spring, the TSXV ended the year with an annual return of 50% and a 145% increase from its March lows. In comparison, the TSX returned 3% and 55% over the same timeframe. Not only did investors regain composure quickly, they were apparently undeterred by the coronavirus after all– encouraged by a dovish Fed and waves of fiscal stimuli that continued to weaken the dollar, inflating assets. Q4 served to confirm this trend and Canadian markets responded generally positively to key news, namely Biden’s securing of the Presidency and the beginning of global COVID-19 vaccine rollout initiatives.

NEXE Innovations – Initiation Report

NEXE Innovations is a cutting-edge developer of plant-based materials focused on replacing plastics with entirely compostable components. Initially targeting the single-use coffee market, NEXE has patented and manufactured 100% compostable products as quality alternatives to Keurig brewing systems K-Cups and Nestle’s Nespresso pods. With an addressable market estimated at US$19 billion in 2020, NEXE is forecasting their single-serve coffee segment will grow from under $500k in 2020 to $20 million in 2021 as they ramp up existing production lanes and take delivery of additional lanes delayed due to COVID-19. As the company grows, NEXE plans to leverage their materials expertise and IP to enter markets beyond of single-serve coffee. The company plans to announce an IPO in Q4 2020.

Kodiak Copper Corp. (KDK-V) – Site Visit

We recently attended a site visit to Kodiak Copper’s (KDK-V) 100% owned MPD property located in South-Central BC approximately 35 km south-east of Merritt, BC (Figure 1). KDK’s exploration upside is underpinned by four main targets; Gate, Prime, Man and Dillard. These targets exhibit similar characteristics as the Gate Zone which was discovered in January 2020 with hole MPD-19-003 returning 102 m of 0.53% Cu and 0.16 gpt Au. In our opinion, KDK offers significant exploration upside as a developing porphyry copper story with three additional porphyry centres yet to be tested.

Intrynsyc Capital – Q320 Report

Despite showing signs of deal fatigue towards its tail end, the junior mining sector in Q320 exhibited very much a continuation of the momentum we saw drive the market in Q220. The figure below demonstrates the steep increase in mining capital raised through Q320, with total financings posting 7% higher than the previous quarter. Within the span of H120, ~$1,168M in equity capital was raised across the TSXV’s mining sector in contrast with the $1,931M raised in Q320 alone, demonstrating the disproportionate investor interest this past quarter relative to the year as gold and copper reached YTD highs.

A Precursor to the Copper Movement

In our last Intrynsyc Quarterly, we mentioned that our short-term expectations for copper were improving on the account of operational disruptions in key South American producers and signs of Chinese economic recovery. To date, the potential for COVID-related halts continue to loom over key producers in the absence of a vaccine (despite some operators having temporarily averted employee walk-offs) and recent macro data from China has indicated a faster than expected recovery in manufacturing production and infrastructural spending– foreshadowed by a jump in base-metal demand over the last quarter. Assuming China and its peer economies do recover, the copper fundamentals look favourable in the long term as well. The decline of new copper discoveries in the past decade may bottleneck supply as longstanding trends such as the urbanization of developing areas, and novel proposals for massive copper intensive ‘green’ infrastructural developments in major economies sustain and create demand.

Quarterly Report – Momentum Accumulates Down the Miner Risk-Profile

Last quarter we published “A Flight to Quality”, where we took you through our gold thesis in the context of a rapidly evolving global pandemic response. There, we recommended a tactical entry into a basket of gold producers and near-development explorers. The rationale was that these companies would remain solvent until sentiment shifted back into risk, and be buoyed by a rising gold price driven by an expansionary Fed and weaker dollar.

As gold rallied, we saw momentum accumulate down the miner risk-profile: with investment in senior producers first, then the mid-tiers, then the near-development juniors and so on. As interest picked up, we participated in four early stage junior exploration financings: Blackrock Gold (TSXV: BRC), Tectonic Metals (TSXV: TECT), Pan Global Resources (TSXV: PGZ) and Portofino Resources (TSXV: POR). All things holding equal, we believe that explorers will continue to attract even more risk capital going into the new quarter. Our technology/alternatives portfolio also gained on the continuous growth of Exro Technologies (CSE: XRO) and the acquisition of Askott Entertainment (Private) by FansUnite (CSE: FANS). Please see below a more detailed review of select names in our portfolio.

A Flight to Quality in the Midst of Market Uncertainty

These are sobering times. Though strained credit and equities markets have long indicated to us an environment ripe for correction, the Russia-Saudi oil dispute and the development of the COVID-19 pandemic took the world by surprise– catalyzing a wanton downturn affecting nearly all asset classes. The unforeseen emergence of these events have in turn lent them unprecedented effect: between late February and mid-March we saw the quickest reversal in history from a bull to bear market, with the VIX hitting 82.69 on March 16th, a hair higher than its 2008 peak. As of today, the VIX has since retreated from its reflexive extremes to lower (albeit still elevated) levels in tandem with a tentative recovery in equities on optimistic COVID-19 news and incoming government stimulus programs.

The Intrynsyc Five: On the Brink of Discovery

With the focus squarely shifting back to the mining sector we feel now is the time for investors to take advantage of this change in sentiment. In this publication we highlight five junior exploration companies that are poised to generate new discoveries in the near term. Our selection criteria are based on extensive research (meeting with 300+ companies/year), site visits, a strong technical understanding, and considerable due diligence to narrow down the vast array of junior exploration companies to this selection. A reoccurring theme in our selection includes companies with strong, proven management teams, favourable capital structures, and quality assets. These companies have laid all the initial ground work, completed the exploration and reconnaissance phase, and are initiating drill programs with the potential for transformational results.