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A Clean Energy Giant In the Making

GoviEx Uranium

Disclaimer: The following is not an investment recommendation, it is an investment idea. I have not been compensated to write this review, nor do I own shares in this company. Please perform your own due diligence to decide whether it is a company that’s best suited for your personal investment criteria. All GoviEx Uranium analytics were taken from their website and press releases.

 

There’s an abundance of naturally occurring uranium (the nuclear fuel) in the world, but producing mines of consequential size and profitability are scarce. This is especially clear looking at the top 10 nuclear power generating nations. Canada is the only country with surplus uranium production; most of the rest are importing close to 50% or more of the uranium they consume.

Top 10 Nuclear Power Generating Countries
Source: International Energy Agency – 2016 Key World Energy Statistics – pg.17

France, in particular, stands out like a sore thumb because it’s not only the 2nd largest nuclear power generator, at 436 TWh, but nuclear power accounts for 78% of France’s domestic electricity generation. This is further compounded by France’s dismal uranium producing capability, with a mere 2 tonnes being produced in 2015. Low production forces France to import the vast majority of its U3O8 needs. Using the WISE Uranium Project’s Nuclear Fuel Material Balance Calculator, 436 TWh requires roughly 12,1576.74 tonnes of U3O8. So where do the French get their supply?

Areva is the 3rd largest uranium producing company in the world, with 9,368 tonnes of uranium produced in 2015. Areva, however, isn’t just a miner, it’s involved in all aspects of the nuclear fuel cycle. In addition major shareholder in Areva NP, Electricite De France (EDF), operates the majority of the nuclear power generation plants in France. From a global perspective, France makes up 39% of total company revenues, and 68% of total company employment. More than 85% of Areva’s shares are in French state hands, making it absolutely sensitive to French power generation needs.

Areva’s uranium production comes primarily from Niger, with its world class COMINAK and SOMAIR mines. The COMINAK mine is smaller than SOMAIR, but is the 15th largest uranium producing mine in the world, of which Areva owns 34%.

The SOMAIR Project, on the other hand, is the 5th largest current producing mine in the world, and Areva owns 63.6%. Both mines are located in the northwest region of Niger, near the town of Arlit. The mine was established in 1968, and by the end of 2015, had produced around 63,240 tonnes of uranium. With the mine lives nearing 50 years, SOMAIR and COMINAK could are approaching the end of their production, based on the quoted reserves.

Along with France, China and South Korea are the other standouts for me, from the world’s top 10 nuclear power generating countries, as their uranium needs far outweigh their uranium production figures. With future nuclear plant construction being dominated by these Asian power houses, the current U3O8 surplus will quickly be shifted to these nations.

Reactors under Construction
Source: World Nuclear Association- World Nuclear Performance Report 2016 – pg.14

 

In my opinion, a portion of this future uranium demand could be satisfied by GoviEx Uranium.

The GoviEx Uranium Story

The GoviEx Uranium story is bigger than its flagship Madaouela Project, in Niger. In their June 13, 2016 news release, GoviEx Uranium and Lukas Lundin’s Denison Mines announced that they had completed the transaction to combine their respective African uranium interests. GoviEx Uranium’s deposit portfolio now consists of not only its flagship Madaouela Project, but also the Mutanga Project in Zambia, the Falea Project in Mali, and finally, the Dome Project in Namibia. For this, Denison received 56,050,450 shares and 22,420,180 common share purchase warrants in GoviEx (further details can be found in the press release). This deal makes Denison Mines GoviEx’s largest shareholder, with a 25% stake in the company, and results in GoviEx holding approximately 200Mlb U3O8 in total mineral reseources, and two permitted mines.

Investing with Some of the Best

The insider support for GoviEx extends beyond the Lundin Group. Nuclear industry giants, Cameco and Toshiba, own 7% and 11% respectively. Mining legend, Robert Friedland’s Ivanhoe Industries owns 7%. Friedland’s geologist son, Govind, is the founder of GoviEx and holds 12% of shares. In total, roughly 60% of GoviEx is owned by influential corporate and strategic shareholders.

Jurisdiction

It’s no secret that Africa has seen its fair share of political unrest and overall unpredictability. At first glance, this may seem like a negative for the company, but a portion of the African nations depend almost entirely on their resource exports for the cash their economies so desperately need. In particular, Niger stands out as a mining friendly jurisdiction, with a democratically elected government. In my conversation with GoviEx CEO, Daniel Major, he highlighted this fact when he referred to Niger, where uranium production makes up about 70% of the national exports. For Niger, uranium mining is a business that brings social stability through job creation.

Further summarizing my conversation with Major, most West and Central African nations use OHADA business law, making navigation for companies in multiple jurisdictions much easier. In particular, GoviEx benefits by spreading risk across 4 countries that share similar legal systems and histories of mining. As described earlier, the SOMAIR mine has been in operation since 1968, meaning that the Nigerien people have multi-generational experience with this business. As Major points out, the Madaouela Project’s onsite work force, at least currently, is totally Nigerien.

The need for uranium production exports, and meeting the high international standards on its studies, has allowed GoviEx to acquire mining permits in 6 months, which is unbelievably fast compared to its peers. Mines such as Cigar Lake in Canada’s Athabasca Basin, for instance, have taken several years to acquire the appropriate permitting.
Any concerns about terrorist activity in Africa can be at least partially alleviated by the fact that there’s military presence, most notably the French, US and German in neighbouring Niger and neighbouring Mali. Also, drawing on one of the points I made earlier, because GoviEx has a 100% local work force, its projects may be considered less of a terrorist target.

GoviEx Resources

Beginning with the flagship asset, the Madaouela Project is made up of 5 deposits: Marianne, Marilyn, Miriam, MSNE and Maryvonne. As outlined in the development plan (where you will find further details), the Madaouela Project has approximately 61 million lbs U3O8 of Probable Mineral Reserves. The after-tax NPV, with an 8% discount, is USD $339 million with an IRR of 23.5%, and a long-term uranium price of USD $70 /lbs U3O8. The life of the mine (LoM) is expected to be 21 years, with an annual average production of 2.69 Mlb U3O8. Now, I’m sure most are wondering, how much is this going to cost, and how do you finance a project with a falling uranium price, in Niger? These are the questions I asked Major during our conversation:

  • How much is this going to cost?

As described in the development plan, initial capital costs are estimated at USD $359 million, with LoM capital cost being USD $676 million.

Short-Term PUSH:

A reliable indicator for identifying the presence of uranium in the ground is a radon gas survey. Radon gas is produced via the radioactive decay of radium-226, which is found in uranium ores. RadonEX of Saint-Lazare, Quebec in Canada will be conducting a radon gas survey at the Madaouela Project for GoviEx in the near future.

To summarize Major, the RadonEx program is targeted to expand resources at the Miriam open pit deposit portion of Madaouela. He said he believes that if this program is successful, it could improve the economics of the open pit portion of the project, reducing the capital cost associated with its construction. This reduction in cost not only reduces upfront capital, but also simplifies the project in the eyes of the financiers, who should be paid back before the second leg of the project, which is underground.

  • How do you finance the mine construction, given the uranium price and the jurisdiction?

To summarize Major, the traditional financing measures used by a lot of companies throughout the world aren’t typically available to projects in countries such as Niger. GoviEx has appointed Medea Capital Partners Ltd. as a Project Debt Advisor. They will assist in the process of structuring the debt portion of the project financing that’s required for the development of the project in Niger.

Medea concluded that there should be market capacity for Export Credit Agency (ECA) covered debt project financing for the development of the mine. The ECA’s involvement is expected to play a key role in achieving full funding. ECAs can provide credit insurance, which significantly reduces the risk profile of project debt to the syndicate of mining finance banks, that ultimately finance the development of the project. ECAs are public agencies that provide sovereign-backed loans, guarantees and insurance to companies who seek to do business in developing countries.
This method takes a little longer than the traditional process, and as Major says, they hope for the financing structure to be in place by the end of next year.

GoviEx’s other 3 properties are highlighted by the other fully permitted mine, Mutanga, situated in Zambia and was part of the acquisition from Denison Mines. In total, the Mutanga Project (Resource Outline) has 2.0 Mlbs U3O8 Measured, 5.8 Mlbs Indicated and 41.4 Mlbs Inferred. Some short-term PUSH could come from a Preliminary Economic Assessment (PEA) on the Mutanga Project, which Major indicated they would be pursuing in the near future.

Each of GoviEx’s 4 projects present exploration upside, which may not be as important in the near-term, but present great options for the future expansion of the resource.

Most Valuable Commodity

In the junior resource sector, it’s widely accepted that people are the company’s most valuable commodity. In GoviEx’s case, Daniel Major was tasked with bringing this company to production, drawing upon his technical background in mining. During our conversation, he outlined his work history and it’s chock-full of mining industry experience, ranging from his humble beginnings with Rio Tinto, as a mining engineer and hands-on equipment operator, to his work as an analyst with HSBC and JP Morgan. This combination of skill set and experience leave me feeling confident that Major is the man to bring this deposit into production.

Money is Made on the Delta Between Price and Value

While there are unanswered questions and concerns about GoviEx Uranium, such as solidifying financing, the African jurisdictional risk, and a falling uranium price, in my opinion, the story is undervalued in comparison to its development peers. Also in the last uranium bull cycle two of the best performing shares were Paladin and Energy Fuels, because they built mines in the cycle. After all, in the junior sector, money is made on the delta between price and value.

You be the judge:

· Proximity to the world’s 5th and 15th largest uranium producing mines
· Two mining permits: One for the 61 Mlbs (Probable) U3O8 Madaouela Project in Niger, and one for the Mutanga Project in Zambia
· 60% insider ownership; Lukas Lundin’s Denison Mines, Govind Friedland, Robert Friedland’s Ivanhoe Industries, Cameco and Toshiba
· 4 Projects with a combined resource of 197 Mlbs (M&I + I) with exploration upside

Is its current CDN $30 million MCAP justified next to its presented value proposition and company peers?

 

Until next time,

 

Brian Leni P.Eng

Founder – Junior Stock Review

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Strategies for Successful Buying or Selling

Junior Stock Review

As I’m sure you have heard or experienced, the junior resource market is highly volatile. To protect yourself, there are a number of different ways to buy and sell positions for maximum gains. I have put together a few of the strategies that I have used to squeeze out as much profit as I can with the juniors.

Tranche Buying

Tranche – def: a portion of something.

Tranche buying is the dollar cost averaging of the stock of your choice. Typically, dollar cost averaging is used over a specific time period. The investor decides they are going to invest X amount of money in a company and buy its stock over a certain period of time. The buying price of the stock isn’t taken into account, and will vary across that given time period.

Tranche buying is similar, but all price dependent. The investor picks a total position size and buys a large percentage of that total position as a first tranche. Typically, a first tranche can range from 40% to 60% of the total position. The remaining tranches will make up the remaining position, the portion of each is up to the individual investor. For myself, if I’m using this tactic, I will buy in two or three tranches, with the first tranche making up 50% and the other two split 25%/25%.

Typical rules of thumb for deploying the second and third tranches: A second tranche is bought if the stock drops by 10 to 20% below the initial investment. A third tranche is bought if the stock drops below 30% of the initial investment. Also, it should be noted, you should always investigate why the stock is dropping; is it just the regular volatility of the market or is it bad news that can’t be beaten? Answering these questions will tell you if you should buy a tranche or possibly even sell your position.

In my experience, I didn’t do enough investigation into why the stock was falling, because I was so used to a bull market that averaging down my initial position was somewhat automatic. A great example of this is Exeter Resources (XRC); I bought the stock in early 2012, somewhere around $3.00. The stock rose to around $4.00 and then proceeded to fall back down below a dollar by early 2013. I bought twice along the way – it was like trying to catch a falling sword.

In retrospect, with Exeter, I was chasing a deposit that looked amazing above $1400 USD/oz Au, but fell apart once the despair and doubt of the bear market took over. For a number of reasons, I should have caught this earlier, but I didn’t. Lesson hopefully learned. As Howard Marks says in his book, The Most Important Thing Illuminated, we need to be second-level thinkers; what are the unanswered questions? Have they been answered? What do the answers mean?

A Simple Example of Tranche Buying:
Total position – $10,000 in Explore Corp
1st tranche – $5000 @$1.00/share
2nd tranche – $2500 @$0.90 to $0.80
3rd tranche – $2500 @$0.70 and below

NOTE: There are many speculators who will average up their position in a stock after answering questions that open up new avenues for the success of the company. Answering major questions that might persuade you to buy more at a higher price include:

    – Good drill results that suggest there are more good things to come
    – Better than expected feasibility study results…higher IRR%
    – Political change, the de-regulation (these days, this rarely happens) of the mining industry

Free Ride

My first exposure to this rather simple concept was through Casey Research. They coined it taking a “Casey Free Ride,” because the initial investment amount is sold once the stock doubles, thus allowing you to take a free ride on the remaining portion of the stock that you own. For the junior companies, this is a great way to de-risk yourself as there are so many ways for a project to fail. By having your initial investment removed, you’re only playing with potential profit.
The downside to this strategy is that it significantly reduces the amount of upside potential the stock presents to you and it also increases the broker fees.

Full Position Buying

Depending on your risk appetite, this may be the most straightforward way to invest in the junior market. Personally, it’s the system I use the most these days. I find the best value for my risk appetite and deploy my full amount into that stock. The twist, however, is that if the stock price does fall and I’m ready to buy my next position, I will compare the value presented by each of the stocks in my portfolio to any new positions that I may be interested in buying – whatever presents the best value or buying opportunity is what I buy.
My most recent example of this is buying Lydian International (LYD). I bought my initial position in Lydian in the fall of 2014, just above $1.00. The stock dropped like a brick over the next year and found a resting place fluctuating between $0.20 and $0.30. Evaluating my portfolio this past spring and comparing it to the value in the market, I believed – and still believe – that Lydian poses remarkable value in a quickly rising market.

Margin Buying

Certainly the riskiest of the buying styles, the investor uses margin (or credit) to purchase more stock than they have actual money in their trading account. This allows for massive gains when you get it right, and massive holes when you don’t; major market fluctuations in such a small market, margin calls or outright company failures leave you very open to risk. This is not a buying strategy that should be taken lightly. I highly suggest that you speculate with money that you can afford to lose, but it’s your choice and fortune does favour the bold!

Private Placement Shares Becoming Free Trading

The primary source of cash for junior companies comes from private placements (PP). These PPs become free trading four months after issue. Investors in need of cash flow, especially after a run up in the stock, will therefore use this first opportunity to cash in their investment. You can play this a number of ways; firstly, you can short the stock in anticipation of the free trading shares, or you can think of it as a possible entry point and buy on the weakness, or both (Use SEDAR or SEDI to find this information).

Expiration of Warrants

Typically, warrants are issued during private placements. Warrants will always have an expiry date, and investors who have not exercised their warrants may rush to cash them out. Giving you the potential to enter the stock at a reduced price or the ability to short the stock in anticipation.

Forced Conversion of Warrants

Forced conversion of warrants isn’t a part of all private placement deals, but it can be. Reading the details of the deal can reveal this information and give you a leg up on the rest of the market. Forced conversion may be worded something like this, “if the stock price trades above a certain price for 20 trading days, the company has the right to force convert the warrants laid out in the PP.” Like the other PP related buying strategies, you can use this knowledge in a number of different ways (Use SEDAR or SEDI to find out this information).

Options or Insider Buying/Selling of Management or Consultants

Knowing when insider options are exercised or open market buying or selling is occurring is integral for understanding how much skin the company insiders have in the game. There’s an article I wrote which outlines this in more detail and explains how to keep track of insider buying and selling for your favourite stocks. Check it out. Invest Like an Insider

Until next time,

Brian

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2016 Natural Resource Symposium: A-List Speakers, Sexy Commodities & Words of Wisdom You Can’t Afford to Ignore

Natural Resource Symposium 2016

“Money is made on the delta between value and price.” ~ Rick Rule – Natural Resource Symposium, July 2016

For those who have never been to an investment conference, it’s time you attended one. If you have the budget, time and desire, the annual Natural Resource Symposium is the best there is when it comes to resource investment conferences.

The Symposium was held at the Fairmount Hotel in the heart of Vancouver, British Columbia, from July 26th to 29th of this year. The full cost of the conference was $899 USD (not including accommodations), but if you’re interested in future conferences, there are plenty of opportunities to lock in at a cheaper price, if you book early in the year.

For those who weren’t able to attend, they also offer mp3 recordings of the entire conference minus Robert Freidland’s speech. The mp3 recordings cost $299 USD and are a great alternative if you couldn’t be there in person.

To get an idea of what you can expect from this annual event, check out their website.

The Theme

With gold breaking out over the last 8 months, it isn’t surprising that there was an overarching precious metals theme at the Symposium. Honestly, though, even in the bear market of the last 4 years, interest has been focused on gold. It’s the sexiest commodity out there.

Besides gold, uranium was represented by Goviex, UEC’s Amir Adnani, and Fission’s Dev Randhawa. Personally, this is what interested me the most because I believe uranium is the next market to change cycles; coming out of the bear market that has slaughtered the uranium spot price to a 10-year low of around $25 USD per pound.

Stayed tuned! Subscribe to my FREE newsletter to receive the upcoming 4-part series on the uranium market. I’ll be discussing the Nuclear Fuel Cycle, world supply and demand, and a few of the companies you may want to watch.

Symposium Speakers

The list of speakers at this year’s Symposium may have been the best yet, with an all-star line up of newsletter writers; Louis James (Casey Research), John Kaiser (Kaiser Research), Marin Katusa (Katusa Research), Matt Badiali (S&A Resource Report); company executives that included Ivan Bebek (Auryn Resources), Robert Quartermain (Pretium), Patrick Anderson (Dalradian), Randy Smallwood (Silver Wheaton); and finally, brokers and resource personalities like Jim Rickards (The New Case for Gold), Trey Reik (Sprott), Peter Grosskopf (Sprott), Doug Casey (Casey Research), and John Embry (Sprott). And the list goes on…

Just like investments, you want to ensure that you’re receiving the best bang for your hard earned buck when you purchase a financial product. I could review each speaker and give a blurb about what they said and why it’s important, but I’m not going to do that. Simply put, Rick Rules’ talks alone were worth the money you’d pay to go to the conference (or to buy the mp3s) – the dozens of other presentations were icing on the cake. Even though much of what he says is the same every time I hear him speak, I always learn something, or better yet, have a ‘EUREKA’ type moment. I can truly attribute a lot of my success in the junior sector to what Rule has said in his speeches.

Rick Rule – Wednesday July 27, 2016 @7am

In total, Rule gave 5 presentations during the conference, one of which was an introduction to the companies that were in attendance. The focus of this review will be the talk he gave on the morning before the main event.

Here’s a summary of what were, in my opinion, the top 3 points from Rule’s speech:

1. Rule believes that the most common mistake speculators make is (transcribed from his speech):

“Every day you don’t sell a stock…for cash, you’ve bought it…If you are not willing to buy a stock that is in your portfolio…with fresh money…sell it.”

Rule made this statement as context for a free portfolio review he did with a prospective client. He reviewed their portfolio and asked why they owned certain stocks, but they couldn’t give a good answer. Rule proceeded to suggest that they sell the stock. The prospective client basically refused and said ‘no, I’m way down!’

To dig into Rule’s comment, every day that you hold a stock it’s like buying it again. If you wouldn’t re-buy the company in its present form and share price, you should sell it. A drop in the share price is like a sale at the mall; if you liked what you bought last week at full price and it’s on sale this week, wouldn’t you want to buy more?
When to sell a company is just as important as when to buy, but even still, I’d be willing to bet that most people are fixated on the buy side instead of the sell.

2. Rule believes the key to junior investing is (transcribed from his speech):

“You add value by answering unanswered questions…the key to making money in this business.”

This point is very important when it comes to determining the potential valuation of a company, as there should be a definite plan for answering these unanswered questions. If you ask the company executive how they plan to accomplish their goal, and they can’t give you a straight answer, walk away, or as Rule puts it, hang up the phone.

Conveniently, I recently wrote a post that examines this topic in greater detail, along with reviewing some of the ideas found in Howard Marks’ book, The Most Important Thing Illuminated.

3. Something that I wish I’d learned from Rule earlier in my investing career (transcribed from his speech):

“When a company’s story changes or your reason to own the stock vanishes…you have to sell.”

My worst loss to date was Banks Island Gold. My mistake? I didn’t sell when the story changed. Banks held two main properties, Yellow Giant and Red Mountain (now owned by IDM Mining). To make a long story short, they had issues at Yellow Giant and missed a payment to Seabridge for the Red Mountain – and they lost it. Red Mountain was the key to the speculation, but I didn’t sell. I still felt they could turn it around. Instead of losing 30%, I hunkered down and lost 95%. Hopefully, I’ve learned my lesson.

Thinking for the Long-Term

Everyone is interested in hearing about junior stock picks, but take it from me, you will make more money in your speculations if you take what Rule says and put it to work. Like the saying goes, give a man fish and he eats for a day, teach him to fish and he will eat for a lifetime. Early next year, most likely after PDAC in March, you will see the first rumblings of ticket booking for the 2017 edition of the Natural Resource Symposium. I highly suggest you go, or at least purchase the mp3s.

Subscriber Investment Summit

I started the review with sage words from Rule; “Money is made on the delta between value and price.” Well, on October 11 of this year, a conference of tremendous value and the best price in the business – FREE – will take place in Vancouver, British Columbia. It’s the Subscriber Investment Summit (SIS), hosted by Tommy Humphreys of CEO.ca, Eric Coffin of Hard Rock Analyst, and Keith Schaefer of Oil & Gas Bulletin.

Book your FREE ticket to check out companies that include: IDM Mining, CanAlaska Uranium and Colorado Resources; just to name a few.

Really, there’s no better way to do your due diligence than by speaking to a company’s CEO and/or other executives. Whether it’s the Sprott Symposium, the SIS that I attended back in the Spring, or any other investment conference, there’s a lot of value to be gleaned from the presentations and one-on-one conversations with the industry’s top minds. Plus, it’s always fun to fraternize with like minded individuals!

Until next time,

Brian

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The Most Important Thing Illuminated

What Type of Thinker are You?

The depth to which you research and think about an investment will most often dictate how successful you are. Howard Marks uses a great comparison of first versus second-level thinkers. He says,

“First-level thinking is simplistic and superficial, and just about everyone can do it (a bad sign for anything involving an attempt at superiority).”
~Marks, The Most Important Thing Illuminated. pg.4

“Second-level thinking is deep, complex and convoluted. The second-level thinker takes a great many things into account…Second-level thinkers know that success in investing is the antithesis of simple.” ~ Marks, The Most Important Thing Illuminated, pg.4

Here is a real world investing situation with a first and second-level solution: A gold mining company publishes a news release about lower production numbers for the next quarter, unfortunately, matching the previous quarter’s low results.

• A first-level thinker reads the news release and says let’s dump the stock

• A second-level thinker reads the news release and asks, “can they fix this production issue? What is the value of the stock if they can only produce at this current rate of production?” Most people will sell the stock because of this news; I think you should buy if there’s value there!
It’s easy to see the difference between the two lines of thinking and why the second-level thinker will always beat the first-level thinker. BE A SECOND-LEVEL THINKER! In the end, the choice may be the same, the best choice may be to sell, but by getting more complex with the questions you ask, a more reliable conclusion can be made.

“Upshot is simple: to achieve superior investment results, you have to hold non-consensus views regarding value, and they have to be accurate. That’s not easy.”
~Marks, The Most Important Thing Illuminated, pg.7

A Lesson from One of the Best

On numerous occasions, Rick Rule of Sprott Global, has spoken about the concept of answering ‘unanswered’ questions when you’re evaluating a company’s upside potential. After researching the basics of the company and what their end goal is, you should be able to assemble a list of questions that must be answered to reach that goal. It’s a good idea to try to roughly estimate a company’s value if that goal is achieved, which will give you a sense of their upside potential.

Recently, I wrote an article about an investment idea that I’ve been contemplating, Sandspring Resources. For those of you who aren’t familiar with Sandspring, it’s a 4.1 Moz gold project in Guyana. The following is an example of a few questions the company must answer to reach their goal of constructing a producing gold mine:

• How high will the gold price go and for how long? Sandspring’s economics are highly leveraged to the gold price. A strong gold price above $1300 USD for a prolonged period of time makes it a very good value proposition. In my mind, this is the most important question of all, as I believe that, barring a major political shift in Guyana, even if management decides not to drag their feet while attempting to build the mine, tremendous share price appreciation is in the future if the gold price continues to rise.

• Will they finance the project and, if so, how? There are a few different ways that they can finance the project, each with positives and negatives for the shareholders. They will only try to finance this project with a strong gold price and, therefore, this shouldn’t be an issue.

• How large of an impact will the drill results at Sona Hill have on the company’s economics? They are drilling 8000 metres over the course of the next year, good results could mean that the gold price may not need to be above $1300 USD for it to be of good value.

• Will the mine be permitted for construction? This is always a huge question when it comes to mines. It is one thing to drill and find mineralization, it’s another thing all together to permit a mine. Fortunately for Sandspring, a neighbouring mine, Guyana Goldfield’s Aurora Project, has been permitted and is producing.

• Are the people involved able to take this project successfully to production? They have done it in the energy sector in North America, can they parlay that to Guyana?

By answering these questions, you create more questions. The process is never over, you need to determine where your exit is and follow through when you do or don’t reach that goal.

As Rick Rule puts it, “it is easy to confuse a bull market with brains.” I can totally attest to this, because coming out of the crash in 2008, everything I bought went up. As the bear market bore its ugly head in 2012, I wasn’t ready for it and neither was my portfolio.

I can’t stress how important it is to buy at the bottom of the market’s cycle. True value lays where the majority of the investing population believe it’s not. A great example is the first six months of this year, when the precious metals market came back with a boom. For the last four years, the junior miners have been beaten down, dropping over 90% in nominal terms, and yet, the talking heads of the mainstream media and a good portion of your average investors believed there was no return from this hole.

With the money flowing into the resource sector the last few months, you almost can’t make a mistake – all boats are rising. This is very characteristic of a bull market in the junior resource sector. However, the more confident the general population becomes, the less comfortable you should be.

Until next time,

Brian

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Risky Business

Risk, we manage it in every part of our lives, but it’s most prevalent in our investments. The best in the business make it their goal to minimize it, while still maximizing profits.
In the junior resource sector, risk is managed by understanding a number of different aspects about a company, including: Who are the people, Where is the property, What does the balance sheet look like, and How much of the stock is owned by the company insiders?
Answering these questions will allow you to mitigate risk and maximize profits. The better the questions you ask, the better the results, I have no doubt!

“The art of investment has one characteristic that is not generally appreciated. A creditable, if unspectacular, result can be achieved by the lay investor with a minimum of effort and capability; but to improve this easily attainable standard requires much application and more than a trace of wisdom.”
~Ben Graham – The Intelligent Investor

Mr. Graham sums it up in this timeless quotation that applies to pretty much everything in life; mediocre results can be achieved by anyone, it’s only those who strive to outperform and act differently than the crowd that can achieve spectacular results. Managing risk is a big part of success in the financial world and, therefore, it’s very important to not only understand your risk tolerance, but also how to judge the amount of risk that exists in the investment you intend to buy.

Disclaimer: The following is not an investment recommendation, it is an investment idea. I do own shares in some of the companies mentioned in this article. Please perform your own due diligence to decide whether any of the companies mentioned fit your personal investment criteria.

Portfolio Distribution

During that first period in my investing career, I didn’t pay much attention to the risk associated with the portfolio I had assembled. I knew speculating in junior resource companies was risky, but I didn’t consider the level of risk that was involved with the types of companies I owned.

What do I mean? Well, in my view, there are a few different types of companies within the sector. Here are a few examples, plus some of the risks associated with each type of company:

Explorers (highest risk)

These companies are drilling for discoveries on properties that hopefully have the goods. In most cases, some mineralization has been found, but it currently doesn’t amount to much more than a hope or a dream.

Risks Associated with Explorers: They are cash burners with nothing but the cash in the coffers and the potential of their property to prop their stock price up.

Examples:
Colorado Resources
West Red Lake Gold Mines

Early Discovery (medium to high risk)

These companies have hit mineralization, but are looking to expand their discovery. These companies have not performed a Pre-Feasibility Study, Feasibility Study or Preliminary Economic Assessment.

Risks Associated with Early Discoveries: Consider if there’s further mineralization, whether that mineralization is economical, politics (unfortunately, always a risk), and how much money they need to further outline the resource.

Examples:
Auryn Resources
Gold Standard Ventures
Balmoral Resources

Outlined Resource (medium risk)

These companies have found a resource. The value of the resource is directly linked to the Feasibility Study (or Pre-Feasibility) or Preliminary Economic Assessment.

Risks associated with outlined resources typically relate to the commodity price, politics (permitting and taxes), and financing.

Examples:
Dalradian Resources
Orezone Gold Corp.
Lydian International
Goldquest

Prospect Generators (medium risk)

These companies are explorers (high risk), however, they use other people’s money to drill their properties, making it less risky than a typical explorer, but there’s still the risk of not finding any mineralization.

Risks associated with prospect generators are typically similar to explorers, however, they are less of a risk because they have access to other people’s money. ‘Other people’s money’ typically refers to senior producers, who will pay certain companies to perform exploration work for them.

Examples:
Lara Exploration
Mirasol Resources

Producing (medium to low risk)

These companies have a resource that they are harvesting. They can be further broken down into segments based on the amount of ounces they produce, with the low multi 100Ks ounces being mid-tier producers and those in the millions of ounces being considered senior producers.

Risks associated with producers are political and production related failures.

Examples:
Endeavour Mining (mid-tier)
Guyana Goldfields (mid-tier)
Gold Corp (Senior)
Barrick Gold (Senior)

Streamers (low risk)

These companies generally fund juniors with an outlined resource. The deal works for both parties, as the funding company is able to buy a certain portion of the produced commodity at a fraction of the spot price, typically for the life of the mine and any future discoveries on the property. The junior benefits by acquiring funding without diluting shareholders and depending on perspective, receives a better deal on the financing cost of the project.

Risks associated with streamers are political and production related failures, however, streamers typically have multiple streams and therefore dilute the risk associated with any one given jurisdiction or mine facility.

Examples:
Silver Wheaton
Franco Nevada
Royal Gold
Sandstorm Gold

When designing your portfolio, it’s wise to choose the types of companies that fit your risk profile, whatever that may be. Keeping in mind that the value of the companies in any of the given categories may make investing in them less risky than if all of the companies are trading at what you could call “fair market value.” Also, company type is only one part of the risk analysis.

“The bigger the discount, the bigger the margin of safety. Too small of a discount and the limited margin of safety provides no real protection at all.”
~Marks, The Most Important Thing Illuminated, pg.25

Assembling a Portfolio

Breaking the types of companies down into groups, you’re now better equipped to decide what’s going to make up your portfolio. I would highly suggest picking at least ten companies and splitting your money between them. Which percentages in each? Now, that’s another detail you will have to decide. During this last bear cycle, I believed the best value for my risk profile laid with the Early Discoveries and Outlined Resources. Therefore, these two groups made up 85% of my portfolio positions. In today’s market, August 2016, I would say that most of the value is in the explorers, which are, in most cases, sub-40 million dollar MCAP companies. But, the risk associated with that value may be too high for most people’s blood, because it truly is boom or bust with this group of juniors.

Putting it Together

My examples have been entirely precious metals based, because it’s been my focus for the last four years. To be a true value investor in the resource sector, however, you must branch out into whatever resource presents itself as the best value, which is typically whatever everyone else thinks you shouldn’t be in. Right now, in August 2016, that could be oil or uranium..?
I have only made one gold stock purchase in the last nine months and, right now, I sit contemplating where to put the profits from the stock that I sold. Does it go back into the precious metal sector for the next leg up in the bull market? Does it go into uranium (I’m very intrigued)? Or, does it go into oil (I actually bought my first oil stock in over four years, two weeks ago)? Not sure yet, but I want to manage my risk effectively and that, to me, means buying value, not what’s hot.

If you want to hit your first 10 bagger, it won’t be from buying the hottest stock going, it will be by doing the opposite of what most think to be true. For example, accumulating gold junior stocks in 2014 and 2015!

Unitl next time,

Brian

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Euro Pacific Bank Review

Euro Pacific Bank

Is International Diversification for You?

International diversification is an interesting subject, mostly because it doesn’t mean much to the majority of the population. Most people are very comfortable living their lives entirely in one jurisdiction. Take the United States, as an example, where only 39% of the population actually holds a passport. Needless to say, the vast majority of Americans are comfortable sticking within the borders of their own country. There’s nothing wrong with this, but generally speaking, you should keep in mind that you’re completely vulnerable to the whims of the voting majority and its elected government.

As the demographics change and a new generation becomes the voting majority, countries will change. For the most part, this will be a good thing, but for a select few, it can have devastating outcomes. You need to look at the country in which you live quite closely, and ask yourself these questions: How are the demographics changing? How do I fit in with the new majority? Am I okay with their new direction? These are questions that should be asked multiple times throughout your life, because as your needs change, others’ needs are changing, too. How will that affect you?

Before getting to the review, I’ll leave you with some wise words from one of the world’s most successful International Men, Doug Casey:

“The day is coming when your local government may stop seeing you as a milk cow and start seeing you as a beef cow, and you want to have options before that day.”

Disclaimer: The following is not a financial product recommendation, it is only a financial product idea. I have not been compensated to write this review. Please perform your own due diligence to decide whether it is a product best suited for your needs. If you are an American looking to internationally diversify your assets, this is not the product for you because the Euro Pacific Bank does not accept American clients.

Euro Pacific Bank

Euro Pacific Bank was created by Peter Schiff in 2011. The bank was formed in St. Vincent and the Grenadines and approved for a class A International Banking License. Their business is predicated on bank transactions, and so the seriousness with which they take customer experiences is evident in their assigning a private banker to each client, and their commitment to customer privacy – two of the hallmarks of off-shore banking.

A Discussion with the Head of Business Development

I had the chance to speak to Euro Pacific’s Head of Business Development, Ashe Whitener, a conversation in which he answered a couple of questions regarding the bank and its competition, and provided me with some of the background for St. Vincent and the Grenadines.

Brian – “What separates Euro Pacific Bank from its off-shore competitors?”

Ashe – “There are a few things: Firstly, it is a full reserve bank, meaning it has 100% liquidity. Secondly, all profits are transaction based, so the bank derives all of its profits from fees and commissions, not lending out deposits, substantially reducing your counter-party risk. Lastly, Euro Pacific offers the only government backed precious metals storage program by an off-shore bank, as the Perth Mint is backed by the Australian government.”

Brian – “What makes St. Vincent and the Grenadines a good place to open an off-shore account?”

Ashe – “There are three reasons why St. Vincent is a good place to open up an account. First, with privacy …St. Vincent banking law protects clients’ privacy, making it a requirement to keep clients’ personal information confidential. It is a tax neutral jurisdiction…St. Vincent has no income or capital gains tax. Finally, St. Vincent’s is an independent nation, with a democratic governing system.”

A Couple of Euro Pacific’s Most Appealing Products

In my opinion, Euro Pacific Bank (EPB) is a great option for those looking to internationally diversify their assets. Over the last five years, they have expanded their business and the products and services that they offer to suit the needs of anyone looking to diversify themselves internationally. Let’s take a closer look at those products/services:

Euro Pacific Bank Online Brokerage – Global TradeStation

After having formed the bank in early 2011, EPB proceeded to purchase Global Trading, which enabled EPB to offer a full service online brokerage. EPB uses Global TradeStation to power their online brokerage, with access to 20+ stock exchanges around the world. For those who are particularly interested in the resource sector, you can buy stocks on the London Stock Exchange (LSE), New York Stock Exchange (NYSE) and, finally, the biggest resource markets of all, TSE and TSX.

Also, I tried out the Global TradeStation simulation and found it to be very easy to navigate, with a ton of information at your finger tips. Check out the simulation for yourself, here.

Gold/Silver Backed Account

In 2013, they became an approved dealer for the Perth Mint, based out of Australia. Their gold/silver backed account uses the Perth Mint Depository Program to hold your metal. You can buy or sell your metal at any time, 24/7. Also, the account can be accessed through a debit card which can be used on major cards’ networks around the world. Click herefor further details and pricing information.

Bank Reserve Ratios and Investment Behaviour

Their reserve ratio, investment behaviour and the list of products and services that they offer are top notch. Read on to discover why this bank, in my opinion, is a safe place to put some cash.

What is the Bank’s Reserve Ratio?

First off, you need to understand what a reserve ratio is, and to know that, you need some background on the Fractional Reserve Banking System (FRBS). In my opinion, the best place to learn about the basics of this system is by watching the videos created by Mike Maloney, author of, Guide to Investing in Gold and Silver, and creator of, The Hidden Secrets of Money. I strongly recommend you check out the video.

From the video, you will learn that the term ‘Reserve Ratio’ is basically the amount of outstanding liabilities to the amount of deposits that the bank actually holds. These ratios can be very skewed, as some western banks hold as little as 2% of their deposits, leaving them susceptible to the downside of the loans and investments that they have made. Lehman Brothers’ crash in 2008 is a great example of exposure to the over-leveraged housing sector, which proceeded to crash the stock market and send both the American and world economy into a tail spin.

• Euro Pacific Bank’s policy is to keep 100% of deposits on reserve. For me, this is one of the most appealing things about Euro Pacific. The bank and your deposits are protected from the downsides of both local and global economies.

• How do they make money? Euro Pacific’s profits are solely based off of the transaction fees it collects from its clients. Their website is chock full of all the transaction information for each of their products and services. You can check it out here. It should be noted, because they are a 100% reserve bank, no interest is paid on deposits.

What is the Bank’s Investment Behaviour?

After asking about the bank’s reserve ratio, it’s a good idea to look at what the bank is invested in. What percentage is in bonds, stocks, housing loans, etc.? The answer to this question should give you a good picture of the bank’s solvency. A bank is referred to as ‘solvent’ typically if it can withstand downward swings in their investments and still remain on the positive side of its liabilities to assets ratio.

• Euro Pacific Bank is in a terrific position, holding 100% of their deposits on reserve. As stated earlier, this insulates them from the volatility in the markets and, ultimately, keeps your money in safe hands.

When it Comes to the Currency in Which You Hold Your Deposits, Do You Have Options?

Most national banks only offer accounts that are denominated in the currency of the given country. However, in countries such as Canada, you can open a U.S. dollar denominated account, if you choose, but the ability to hold your savings in multiple currencies is not very common. Multiple currency holdings act in the same way as diversifying your stock portfolio; you spread risk out across a basket instead of concentrating it in one place.

A great recent example for Canadians: The Canadian dollar has dropped like a lead balloon over the course of the last two years, due to a loose monetary policy and a hit to the resource sector (most evident with oil). Holding solely Canadian dollars throughout this period has meant that a lot of goods – such as food, international travel and imports in general – are costing Canadians much more than they once did.

• Euro Pacific Bank allows you to hold your cash in a number of different currencies: American Dollars, Canadian Dollars, Euros, Swiss Franc, Japanese Yen, British Pounds, Australian Dollars, Polish Zolity, and finally, New Zealand Dollars. This is tremendous choice when it comes to diversifying your currency holdings. Each has their own pluses and minuses, depending on your perspective of the market.

• Euro Pacific Bank offers a Gold/Silver Backed Account: This, in fact, could act as your 10th currency diversification. Hold your cash in gold/silver, the world’s oldest form of money, and have it hold its value against inflation. These metals can be liquidated at any point, giving you quick access to your funds. The precious metals are purchased through the Perth Mint, to which EPB is an authorized dealer.

In highly politicized economies around the world, it’s becoming more and more important, in my opinion, for people to internationalize themselves. If you’re not willing to physically move to another country, transferring some of your assets is a viable second option. To me, Euro Pacific Bank offers some pretty significant upsides, if internationally diversifying your assets is your goal.

Not yet a Junior Stock Review subscriber? Sign up to receive free newsletters with reviews of financial products and services and other investment ideas.

Until next time,

Brian

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Is Your Money at Risk? Protecting Your Assets through International Diversification

It Could Happen to You

Today, in 2016, we live in a world of constant flux. The greater recession, that began in 2008, continues to plague the world economy, forcing governments to participate in unprecedented ‘Quantitative Easing (QE)’ to stabilize their economies and weaken their currency. The stability bought with QE has come at an enormous price, as the amount of debt accumulated to keep their markets from imploding is reaching crazy levels. The debt overhang will have to be dealt with at some point, and when it does, the government could seek out your savings to pay for it.

Sounds crazy? Well, it isn’t Ask residents and bank account holders in Cyprus circa March 2013. Their bank deposits became the cash used to bail-out their “too big to fail” banks and government. Bank accounts were frozen and 10% removed as a levy or ‘bail-in’ tax to the Cypriot government, which was severely impacted by the struggles of Greece’s economy, the downgrading of their bond credit rating, and finally, exposure to an over-leveraged housing sector.

Living and investing all within one country leaves you susceptible to the whims of that one country’s governing body. Changes in capital gains taxes, dividend taxes, income tax or the dreaded ‘bail-in’ tax are all possibilities when living and banking/investing in one country. Diversifying yourself and your assets internationally can reduce this risk and put you in a position to prosper, or at a minimum, lose the least amount possible. As the late Richard Russell used to say, “in the future to come, it isn’t who makes the most, but loses the least.”

Advantages of International Diversification

Diversification of your assets into multiple jurisdictions has a number of advantages, including:

• Reduce the Risk of Financial Chaos – these days, most economies are tied together, but the fact is, if you live in the United States, Canada, Germany, England, China and/or Japan (most countries in the G20), you are more susceptible to the turmoil. Picking a jurisdiction outside of these core countries can have a profound effect on minimizing the loss in your portfolio.

• Currency Diversification – The ability to hold your savings in another currency (provided it isn’t worse than the currency you primarily hold) will give you another added layer of protection against your own country’s currency devaluation. Examples: Norwegian Krone or Hong Kong Dollar.

• Access to Foreign Stock Exchanges and Better Interest Rates – Access to foreign stock exchanges opens up a whole new world of possibilities for speculation and investment. Example – The Australian Stock Exchange (ASX) in particular is home to some very good junior resource companies that do not have listings on the TSX or TSXv. Interest rates abroad are far greater than at home (for most, anyway); India in particular offers savings account rates upwards 9% right now – tough for western world banks to compete with that!

• Reduce the Risk of Capital Controls and/or Asset Seizures – The Cyprus example described above is the best modern example of asset seizure. As far as capital controls are concerned, I will make a prediction that G20 nations begin to force their citizens to purchase government debt as a form of retirement savings, instead of investing in the stock markets…just a thought, not yet reality.

• A Real Insurance Policy! – Who knows what the future holds, but having some cash in an off-shore bank account or trading account gives you options, and really, that’s all we can ever ask for.

My Thoughts on Internationalizing

I truly believe we are headed for higher taxes, on all fronts, as the government debts continue their steady climb upwards. I started my journey in internationalizing myself and my family in 2011, and haven’t looked back. I sleep very well at night knowing that I don’t have all of my political eggs in one basket. I will be reviewing some services and products that you can use to internationalize yourself, too. The first on this list will be…

Peter Schiff’s Euro Pacific Bank

I recently came across an internationalizing product that’s worthy of a further look; Peter Schiff’s Euro Pacific Bank (EPB),which is located in St. Vincent and the Grenadines. Whether you have a few thousand dollars or a few hundred thousand, Euro Pacific Bank is a great way to get started internationalizing yourself. If you are American, however, you may want to skip this review. Euro Pacific Bank does not accept clients located in the United States.
I’ll share my review of the Euro Pacific Bank here, very soon. Stay tuned!

Got a junior resource sector product or experience that you would like to share? Please let me know and I’ll share it here, at Junior Stock Review. You can get in touch with me through the contact form, located on the homepage or the bottom of this post, or you can email me at juniorstockreview@gmail.com

Until next time,

Brian

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An Oldie but a Goodie: Canadian Mining Speculation

Canadian Mining Speculation

By T.H. Mitchell

Have you ever thought that the junior resource market might be manipulated? T.H. Mitchell says it is, and that you need to speculate in the market like the professionals if you want to be successful. Originally written in 1957, Canadian Mining Speculation is a book about the factors at play in the marketing of junior mining sector companies. While the book is old and some concepts are no longer relevant, Mitchell has some great words of wisdom for the reader. If you can find a copy, I recommend this one.

Mitchell argues that the junior market is dominated by professionals, and when ignorant of this fact, the average investor is destined to lose money. He defines professionals as those who consistently make profits within the sector (professionals, he claims, comprise 10% of the total buying/selling market), not necessarily those whose actual profession is somehow related to the stock market.

Professional Methods

Mitchell outlines 4 methods that professionals use to make profits, which I’ve outlined below. The fifth, propaganda, is used in conjunction with each of the first three methods as a way to sell the shares that the group has used to raise the price:

• Mark-Up Method – The professional group controls all of the floating share supply. Members within the group trade with each other, raising the price incrementally over a period of time. Once there is a significant enough margin for the group, promotion can be used to bring the general public into the stock.

• Fast-Rise Method – With this method, a rise in price is guaranteed, as the group buys up all of the available stock at market prices. The professionals will typically use this method if the stock is near a bottom and they have a significant enough cash position to buy all of the market orders. Once they have established a major position in the stock, they can begin promoting to the average investor, who will come in near the end to buy at the highest price!

• Slow-Rise Method – Much like the ‘Mark-Up Method,’ the group buys the stock – but only at reasonable prices. The result is a steady rise in price that’s then used to slowly bring in the public.

• Special Recommendation Method – This method can show up in a variety of ways, but is best characterized by the group paying for promotion from influential people, publications or websites. The marketing typically deals with ‘special situations’ and evokes an emotional response in the average investor, where they can’t help but buy into the hype.

“The speculator must take the attitude that all price movements are manipulations by the professional operators. This is not true, but to be on the safe side the speculator must operate as if it were…All news releases are promotion, all price changes are manipulations and all important discoveries are basically unimportant…pessimistic thinking…opposite of the optimistic public – can they expect to be a successful speculator over the long pull”
(Mitchell, Canadian Mining Speculation, 87).

“Sentiment makes prices, and professionals make sentiment; thus, professional operators make the prices” (Mitchell, Canadian Mining Speculation, 90).

“Anyone who intends on engaging in a speculative investment in the junior mining sector had better resign themselves to playing the game as the professionals do, for to run counter is to invite disaster” (Mitchell, Canadian Mining Speculation, 104).

Market Manipulation..?

The prospect of market manipulation is scary; it really makes you question whether you can make money if it’s rigged. Whether or not you agree with Mitchell about the manipulation, however, I tend to agree that if you take a somewhat defensive (pessimistic) posture, you’re less susceptible to the sector’s inherent pitfalls.

I’m not sure about the first 3 methods that Mitchell outlines, but I know the fourth is definitely used. Promotion is great when you’re on the right side of it, but it can evoke frustration or even jealousy when you’ve missed out on an opportunity. I think that chasing the promotional stories instead of searching for the quality companies is a dangerous road to travel. Stick to the basics of junior resource stock investing and ignore the hype – until it works in your favour and then you can enjoy it!

Worthy of a Place on Your Bookshelf

Canadian Mining Speculation may change the way you look at the junior market, or if nothing else, it will make you question your current beliefs in the system. Regardless of what side of the manipulation argument you stand on, I think Mitchell gives the reader a lot of sensible advice for successful speculation, which is ultimately what everyone wants. This is one to add to your list of must-reads.

Have a book review you’d like to share with the rest of the Junior Stock Review community? Get in touch with me via the contact form or you can reach me at juniorstockreview@gmail.com.

Until next time,

Brian

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Financial Products & Your Investing Persona

*Disclaimer: The opinions expressed in this post are based on my experiences and should not be taken as financial/investing advice.

Like investing in junior companies, brokers and the people who write newsletters will play a large role in the value you take away, or in other words, how successful you are in the markets. Go for the best in the business, it’s well worth the money, but it isn’t as easy as picking a product with a great reputation, you’ve got to pick the product that’s best for you.

Over the years, my investing approach has gone through many permutations but I’ve finally found the one that works the best for me. My aim for this post is to share some ideas for how you, too, can discover the financial products that are right for you, without wasting as much time and money as I did.

Narrowing Your Search

There are a few questions you should ask yourself to help narrow the list of options for financial products:

1. Am I going to rely on the broker or newsletter writer to choose and track my investments, or am I going to do this myself?

Brokerages and newsletter writers have a lot of people and information at their disposal, which is put to good use when they choose and track their stock picks. In many of his speeches, Rick Rule has said, “you must be willing to put in an hour per company, per week, at a minimum, to properly pick and track a company.” Most junior company portfolios consist of at least 10 stocks, which translates to 10 hours a week. Do you have that kind of time? In the beginning, I thought I could do this. I tried, but working full time and taking this on in my spare time while my young children ran around me wasn’t practical, nor was it consistently effective.

2. Is the broker or newsletter author’s outlook on investing or speculating similar to mine?

I had a bad experience with this one, and it was entirely my fault. In mid 2013, I decided to hire a broker to manage some of my investments, for a number of reasons that I will cover later on. I’d been around the resource space long enough to be familiar with a lot of the players in the resource brokerage business, and chose the firm with which I wanted to work. After completing all of the paperwork, I was set up with a broker whom I met to review how my money would be invested. After this meeting, I left feeling completely deflated; the broker had a totally different outlook on the market than I did, not only from a macro outlook, but also from a junior company perspective. He didn’t want anything to do with the juniors and I had specifically chosen that brokerage because I wanted to invest in the junior market. I bit my tongue and let him invest my money as he saw fit. The consequence was that I was never happy with the outcome. Finally, in the summer of 2014, I asked to work with someone else, and from that first phone call with the new broker, I couldn’t have been happier. Our risk outlooks were very similar; he loves the juniors and is, in my opinion, very adept at picking stocks. I should have made the change earlier!

3.What is my risk appetite? Am I okay with potentially losing it all?

Your risk appetite is something that you really need to define, because speculation in the junior market is risky business and shouldn’t be taken lightly. Mistakes will cost you.

4. How much money do you have to invest?

Many experts suggest holding a portfolio of several junior companies to combat the risk of putting all of your eggs in one basket. Considering the risk level and the odds of success, when you get a winner you really want to make it count. Give this some thought. Is buying $100 worth of a junior, hitting a 10-bagger and selling the position for $1000 really worth it? The cheaper letters typically cover the larger CAP companies, which make them a better choice for those with smaller cash positions, as you don’t necessarily need to spread your risk as much as with the juniors.

5. How much do I want to spend on the product?

This question is tied in with the size of your portfolio; if I have $5000 to invest and the newsletter I’m considering costs $1000, I’m 20% in the hole before I even start. For the top newsletters, maybe this isn’t a problem, as they give you the best chance to succeed. But, I’m still not convinced this is the best product for you to buy. I would be looking in the $100 to $200 range, supplemented with library late fees!

6. How many others are getting the same advice?

Typically, the more money that you spend on advice, the smaller the audience is for that advice. This is a huge advantage as you aren’t competing with as many speculators for the same stock, when buying or selling. A lot of companies that have multiple tiers in their products will piggy-back stock picks, meaning the highest payers get in first and then each level gets their chance accordingly. This is a situation where being on the right side of a promotion can really help.

Product Example

Casey Research is a great example for these questions as they have a line of products at different price points and risk levels. For instance, for the entry level speculator, they have Casey Resource Investor which covers large MCAP resource companies that have much lower risk levels than the juniors and the newsletter cost is only around $100.

Their mid-level newsletter is the International Speculator, which covers junior resource companies. The risk level is significantly higher and so is the cost, coming in at $2000. However, the upside potential of the returns is much higher.

Finally, they have their ALERT service, which doesn’t have a set issue schedule and is released as the editor, Louis James, finds great opportunities – all be it, very risky ones. His picks can range from micro CAP explorers to large MCAP companies. Last time I checked, the ALERT service topped out at $5000, which is definitely on the high side for newsletters, or at least the newsletters with which I’m familiar.

Things to consider: If I’m going to spend $5000 on a newsletter, I better have a large enough cash position to make it worth my while to spend that much for advice. On the other hand, you are buying the newsletter company’s best ideas and sharing them with a much smaller audience. My experience is that you usually get what you pay for. In this specific instance, I’m not saying that Casey’s letters are good or bad, they just illustrate the point I’m trying to make. There’s a lot of choice, pick what is going to work for you and know what to expect from the money that you spend.

Remember, be very selective in who you let into your circle of influence, pick the best people and products for you. You may not find the right formula without some less than ideal learning experiences along the way, and that’s fine, just persevere and figure out what works – you don’t want to miss the bull market!

If you have any experiences or formulas for successful speculation in the junior resource sector that you would like to share, please let me know, and I’ll feature it in a post. You can reach me via the contact us form or send me an email at juniorstockreview@gmail.com. Also, I can be found on CEO.ca with the handle @Leni.

Until next time,

Brian

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The New Case for Gold Review

Rickards’ Best Yet: Get the Goods on Gold in this Short, Value-Packed Book

For those who have never read a book written by James Rickards before, you’re in for a treat. In my opinion, he’s at his best in the newly released, The New Case for Gold. Now, if you have read one of Rickards’ books before, you know that they often run over 300 pages – not something you can easily rip through in a couple of evenings after work. The New Case for Gold, however, is a value packed 170 pages with his thesis organized into 6 concise chapters, making it something you could dig into on your lunch break.

Accessible Investing Knowledge & News

There’s something to be said for the length of a book, newsletter or other investment resource, how easy it is to get through it, and if you can take what you learned and easily apply it or put it into action. That stuff matters, because at the end of the day, why spend the money on investment tools that take you 6 months to get through (if you ever finish them) and the only action they see is when you use them as coasters? Not to say that short is always better, because there are a lot of resources that are concise and still not worth the paper they’re printed on. What I’m saying is try to choose the resources that are going to best compliment your learning style, time constraints and interests. But, I’m getting sidetracked…

Gold Investing Newcomers Will Appreciate This Book

I really enjoyed this book, but having read many of Rickards’ other books, I didn’t feel I learned anything I hadn’t heard before. For anyone new to investing in gold, on the other hand, the book is a real asset because he’s assembled all of the best information concerning his thesis for gold investment in one concisely written book – I’m highlighting the brevity of this book because it’s somewhat of an anomaly for Rickards. Those who have read their share of monetary books, such as myself, may not discover anything earth shattering in The New Case for Gold, but if you’re looking for information to confirm if you’re investing correctly, this a great source.

Gold Is Money

Rickards cuts to the chase and gives the thesis for the book early in the introduction:

“Gold is money…monetary standards based on gold are possible, even desirable, and in the absence of an official gold standard, individuals should go on a personal gold standard, by buying gold, to preserve wealth.”
~Rickards, The New Case for Gold, 2

Rickards uses 6 chapters to explain his case for gold as money and why you need to make it a part of your personal investment portfolio. These chapters are titled:

Gold and the Fed – A look at US monetary policy past, present and future.

Gold is Money – A history of gold in the world monetary system and a look at what gold isn’t and why that’s a good thing.

“Understanding gold provides us with a frame of reference for understanding the future in the international monetary system” (Rickards, 56).

These ideas and facts are the reasons I first started investing in gold. They have since led me to the junior mining sector, where the ultimate leverage to the gold price exists.

Gold is Insurance – A look into the mathematical side of the world economy and the theory used to model it.

Gold is Constant – A look at the gold price and why you should change your perspective from the gold price rising and falling to the currency price rising and falling in relation to gold.

If you follow Rickards’ arguments in the previous chapters then this one won’t be difficult to wrap your head around.

“July 2015, China updated its official gold reserves…to show 1,658 tons…up from 1,054 tons in 2009” (Rickards, 92).

China’s assent into the world economic powerhouses will be predicated on its acceptance into the International Monetary Fund’s basket of currencies that back the world currency – the SDR (Special Drawing Rights). To do this, gold will play a major role in supporting the Reminibi (Yuang), thus the major push for gold consumption. China is not only the world’s largest producer (it consumes all production), but also the largest importer. Rickards believes that the Chinese gold holding is much higher:

“China’s figures are deceptively low…there are perhaps 3,000 additional tons…in an agency called the State Adminstration of Foreign Exchange” (Rickards, 92).

Gold is Resilient – A comparison of gold to the other mainstream investment vehicles of the world, mainly America’s stock exchanges, and why you are at risk for holding your wealth electronically.

This may be the least discussed topic outside of the ‘conspiracy theory’ realm of commentary, but it’s something that I believe people should take much more seriously as our lives become more and more digitized!

“As a 21st century investor, I don’t want all of my wealth in digital form…I want part of it in a tangible form, such as gold” (Rickards, 147).

How to Acquire Gold – A summary of all the ways you can invest in gold.

I think most of us are fairly familiar with many of the ways to invest in gold; purchase physical bullion, shares in ETFs such as GLD, Sprott Physical Trusts, mining stock shares and international storage banks such as Gold Money. It is, however, interesting to read the pluses and minuses that Rickards’ attributes each of the various ways to invest in gold – check them out!

Collapse. Yup, As In The Collapse Of The World Economy

Ultimately, Rickards believes the world economy is headed for collapse with a major monetary crisis forcing the world’s powers into a third major meeting to sort out a solution:

“When the next collapse comes, there will be another meeting such as those held in Genoa in 1922 and Bretton Woods in 1944” (Rickards, 43).

To weather this coming storm, Rickards encourages a conservative 10%, of investable assets, allocation in gold. With the ideas and facts laid out in this book, you must ask yourself “what are the new rules of the game and how can I survive it?”

Famously, the late Richard Russell used to say, “in times like this, it isn’t who profits the most, it is who loses the least.” If that truly is the case, we’re in for a bumpy road, one that the majority of the population is NOT ready for! Are you?

Is This The Gold Book You’ve Been Looking For?

For those who are new to the gold thesis and want to improve their knowledge of the metal, this is a great place to start because you won’t find another book that describes the case for gold so succinctly without glossing over any points that are necessary to the argument. Like I said, if you’ve been at the gold game for a while, you shouldn’t expect to unlock any new secrets while reading Rickards’ latest, but at 170 pages, this is a book you can add to your collection and return to any time you’re looking to reaffirm your stance on gold.

Until next time,

Brian