Subscribers of my newsletter often ask me to find another Great Bear Resources (TSXV: GBR; USOTC: GTBAF). And why shouldn’t they – I recommended GBR at $0.48 in late 2017. Two and a half years later, the stock hit $18 (and remains close to that level). That’s 3,500%. If you invested $8,000, it became $280,000. Believe you me, I look for the next win like that Every. Single. Day. Great Bear made me an accredited investor – the win boosted my account enough that I could participate in financings without needing an exclusion (I got into Great Bear via the Friends and Family exclusion).
I think there will be more 10- and 20-baggers ahead for us in this great commodity bull market. I really do. But the other day, when I got another email asking me to find the next Great Bear, I paused for a moment.
If the goal in junior mining investors were only to find Great Bears, then the vast majority of investors would never win. Great Bear’s story is that unusual. They found a phenomenal deposit, in terms of grade and scale, in a just about perfect location and with each fence of holes, with each new target tested, with each depth test completed, it just keeps getting better.
And GBR did all of that – told the story, raised the money, and created 35X value gains through true discovery – in an only moderately supportive gold market.
Great Bear’s Dixie project is a truly standout discovery, the kind that does not happen very often. For that reason alone, we can’t set our bar at “trying to find another GBR” because, if we do, we’ll feel a lot of disappointment.
But (there’s always a “but” isn’t there?!) there are two key thoughts that go along with that.
- The only way to try to catch the next Great Bear, when it does come along, is to be looking for it all the time.
That looking will uncover a lot of stocks with potential. Researching them, investing, and experiencing the resulting ups and downs is the only way to boost your odds of next-GBR success – knowledge is power.
- Stand out 35-fold success is far from the only way to profit in this space
Let me expand on that second point.
Individual stocks follow patterns. Anticipation of big news, the arrival of big news, strong new investors/money coming on board, a strategic entry by a major, or a highly oversubscribed financing are all forces that push prices higher. The need to raise cash, free trade dates from recent lower-priced financings, and exploration quiet periods all push prices down. By following a stock closely one can play these patterns to a nice profit.
I have used this example before because it’s such a good one. This is GT Gold (TSXV: GTT). From start to finish (this was another stock I flagged for subscribers right from the start) it was a 10x win. That’s great, but along the way it clearly shows the impacts of seasonality (they could only explore July through October), the need to sell into discovery price spikes, and how the need to finance amplified downside. These are all patterns that attuned investors could predict and play, to a large extent. (Now it’s being taken out by Newmont, so all’s well that ends well.)
Stepping back, the market also follows patterns. These are not simple but some of them are reliable. Gold is strongest January through February and then again mid-August through October. Exploration companies generally raise money early in the year; all the related marketing often drives share prices higher in the first quarter, which is often followed by a lull. Explorers who can only work in the summer see their share prices start to gain in May in anticipation of the field season and climb as the summer progresses; where they go from there depends on results but the anticipation gains are pretty reliable. The banks and funds that manage money for large, mining-aware, and opportunity-driven investors usually move ahead of the pack so a surge in bought-deal financings is a good sign that stronger days are ahead.
Gold was the place to be May through August. Since then, it’s been copper. What’s next? Uranium is a candidate. Nickel is as well. PGEs continue to shine.
Like I said, these things are not simple. But they are pretty reliable. We’re seeing gold go through its usual seasonal slide right now (exacerbated by yields marching higher and inflation being MIA, but there is always more than one thing going on). We’re seeing seasonal explorers struggle. We’re seeing free trade dates from January financings creep up and threaten any Q1 gains. That all means that the next few months is positioning time – time to buy stocks while they’re weak.
Another way to play in this space is to move between metals. Gold was the place to be May through August. Since then, it’s been copper. What’s next? Uranium is a candidate. Nickel is as well. PGEs continue to shine. And in these early days of a broad metals bull market, there’s often some small-market metal that’s rising, be it cobalt or vanadium or graphite or or, or.
There are two ways to approach this period of the bull market where metals appear to take turns. One is to try to keep up, switching focus from metal to metal. If that’s your goal, the starting point is knowing that no strong run just keeps going. Gold’s gain last May to August was amazing…but the yellow metal was never going to just keep rising. Gold had to step back and, when it did, something else was likely to take its place.
In playing this game, timing is both everything and the hardest part. The guiding principle is: don’t be too greedy. If you’ve timed a run roughly right, take gains at intervals – some at a double, more at a triple, or similar – and watch for signs that the run is fading (lower volumes, rising short bets).
The other approach to the Take Turns reality of a metals market is to simply have multi-metal exposure in your portfolio and then not worry much about the ebbs and flows, being content instead that the medium-term thesis is strong.
I do a bit of both. I trim gold positions when gold is strong, copper positions when copper is strong, silver positions when silver is strong. I remind myself regularly to ensure I have multi-metal exposure. I don’t try to predict the next small-market metal to takeoff, but I do try to predict the next big market metal that will really run.
Multi-metal thinking increases odds of success. It also makes this game more fun – if gold is going to be boring until June? August? I don’t want to just sit around and wait. Instead, I’m working to find opportunities in other metals.
The only answer to this dilemma is to really understand what any particular company that you own is doing and how the outcomes of current work fit into your investment thesis. That requires, of course, a very clear investment thesis for each stock.
None of this is easy or quick. And if Great Bears came around every other month, or even once a year, then we wouldn’t bother with any of this. There would be no need to flip focus from metal to metal, to play patterns in the exploration space, to follow company news closely enough to profit as various forces push the share price around in fairly predictable ways.
But Great Bears do not come along once a year. They come along once a decade. If we get the kind of bull market that I think we’re going to get, we’ll get a few bonus GBRs and those will do wonders for some portfolios. But the heart of the junior game is about owning a lot of stocks, understanding the investment thesis for each, and moving and shaking as the seasons change and different forces come to bear on sectors and stocks.