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.
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.
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.
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.