Currently, a bullish thesis on oil is met with concerns about an impending recession.

It’s understandable, the market isn’t great right now.

The fear of the unknown can be troubling.

Especially when it comes to investing.

If you think that you can buy something cheaper in the future, it’s only natural to want to wait.

However, the problem is twofold.

First, will what you are predicting even happen?

When market perception is almost unanimous, in my experience, it usually doesn’t play out exactly the way you think it will.

Second, let’s say it does, the recession or crisis hits.

Will you have the courage to buy when things continue to erode or drop quickly?

Maybe, but again, in my experience, that mindset tends to lead the investor into thinking that a share price might go even lower – I’ll wait!

Buying when others are fearful is necessary as an investor, but it’s not easy.

Looking back on my own experience, I was able to muster the courage to buy tranches in good companies amidst the chaos of the falling market in 2020.

It’s this dollar cost averaging approach which gave me the best of both worlds.

Yes, this approach reduced my upside, but most importantly, it reduced my downside.

Courage doesn’t mean you are without fear…

It means that despite the fear, you logically move forward and execute.

Not surprisingly, 2020 was my most profitable year, thus far.

Buy in the bearish depths, have patience, and in years like 2016 and 2020, there is potential to make a lot of money.

Speaking of the 2020 Covid-19 pandemic, it’s easily the most cited example to refute buying oil and oil-related equities at today’s prices.

2020 was a traumatic year for many, not only oil investors.

But the situation in 2023 is not the same as 2020.

In 2020, the world was shut down due to Covid-19.

People across the world were locked down in their homes.

They weren’t driving to work, taking their kids to school, going to the movies or taking a holiday in the Caribbean.

Life as we knew it changed to the extreme during those early days of the Covid-19 pandemic.

Certainly in my lifetime, and arguably in the history of the world, humanity had never experienced something of this magnitude.

In response to this extraordinary event, the oil price for a short period of time went negative.

In essence, suppliers had to pay to get rid of their barrels of oil.

It’s a crazy thought.

Something I still have a hard time wrapping my head around.

In my view, the recency of that event hasn’t been forgotten by investors.

Today, I think it’s that risk of recession that has everyone in a state of fear.

Asking themselves, ‘how low can or will it go?’

It’s an appropriate question, but if your recency bias is toward the negative, obviously you are going to say, ‘very low.’

Maybe even jumping to the extreme conclusion that this is it, the end.

I can’t predict the future, but I will say that I think it’s unlikely that this is the end and I doubt that we will see a negative oil price anytime soon.

In my view, the Covid-19 pandemic was a unique event, one that may indeed happen again, but we won’t get to plan for it.

It’ll just happen…

If we are heading into a recession, yes I think it has the capacity to be a doozie, but we’re still going to consume oil.

Most of the people who live in the developed world are highly dependent on oil or natural gas in their daily lives.

Electricity generation, fuel for their cars, and a whole host of petroleum products – plastics, etc. are all consumed each and every day.

Consumption amounts may diminish, but they won’t disappear.

This is even more true for the developing world, whose sole reliance is almost exclusively linked to oil and its derivatives.

I do think in a recessionary setting the oil price can go lower, but I don’t think it will stay there for long.

Examining the oil price chart above, you can see the volatility we have seen over the last 70 years.

The recessions are highlighted in gray.

There is no real pattern that I can see that depicts how the oil price behaves during and after recessions as none of them are the same.

The oil market is extremely complex. 

In my view, looking back at past performance doesn’t give us any indication of how things will work today.

The situations are totally different.

Look at this table from IGWT’s 2023 report regarding a few metrics in relation to the 1980s, 2010s and today;

As you can see, these various decades are completely different, incomparable, unless you are trying to point out how different they are.

Add in demographics, geopolitics, interest rates and a number of other factors and today we live at a distinct moment in time.

We have to evaluate today with today’s known metrics.

Let’s start with interest rates.

In my view, the Central Banks, mainly the U.S. Federal Reserve (FED), will deploy the same tactics that we have seen in past crises or recession moments.

Quantitative Easing (QE) is their desired remedy to a downturn.

I don’t think that changes anytime soon.

In 2020, the Covid-19 pandemic was met with unprecedented spending.

More money was infused into the system in 2020 than had ever been created in all previous years COMBINED!

A recession appears to be coming, how bad it will be is still a question mark.

Either way, I still think we’re in the mindset of expanding the money supply to combat the pain of economic turmoil.

Therefore, when you mix in the lack of oil exploration and development, war in Europe (escalating?), OPEC+ production cuts and the depletion of the U.S. Strategic Oil Reserves, I think the oil price recovers quickly – V Shaped.

We live in a world that is still very much dependent on oil and all of its derivatives.

We are fortunately or unfortunately multi-trillions of dollars and a whole bunch of years away from meaningfully cutting our dependency.

To me, US$70/bbl is much closer to a bottom in the oil price than a top.

Ergo the opportunity.

Opportunity in the resource market is usually accompanied by patience.

We’ll see where the oil price goes.

 

In the meantime, you should become a Junior Stock Review VIP and get my latest thoughts on the resource sector sent right to your inbox for free.

 

Until next time,

 

Brian Leni  P.Eng

 

Editor – Junior Stock Review Premium

What is the first thing that pops into your mind when you think about Argentina?

For some, it’s Lionel Messi or football (soccer for those in North America).

For others, it’s beef; I’ve been told that Argentina’s steakhouses are among the best in the world.

For investors, it’s most likely a thought about risk.

So why do investors associate Argentina with risk?

Since the 1930s, there have been issues with Argentina’s economy.

It has been a constant struggle to manage its national debt, control inflation, and now, within the last 20 years, deal with the consequences of a default on the national debt in 2001.

Going back to the early 90s, Argentina dealt with their inflation issue by pegging the peso, at par, with the U.S. dollar.

Further, the government privatized numerous state-owned and operated businesses to stimulate the economy and, of course, provide a much needed boost to the government’s treasury.

In 1998, however, things began to unwind, as debt continued to grow and the boom created by the privatization of the state-owned companies diminished.

Over the next 3 years, things progressively got worse, and eventually, it led to Argentina’s now famous default on their national debt in 2001 – roughly US$93 billion.

The situation spiralled out of control.

The peso took a massive hit.

Bank deposits were frozen.

The unemployment rate rose to over 22% and social unrest followed.

From this point onward, the country has never really been able to “right the ship†as they say.

To be honest, it really doesn’t surprise me, either.

As debt levels begin to rise and reach or exceed that of GDP, historically speaking, there is no turning back.

Not only is rising debt an issue from an economic standpoint, but socially, easy money becomes a part of the culture – it’s hard to break.

Applying this to Argentina’s situation, I really see no discernible changes in the obviously flawed government policy that led to this mess.

You can’t fix a debt issue with the same policies that created the issue in the first place.

Like so many countries, these days, governments have let their debt load rise to a point where they can’t even service the interest (at reasonable rates) on the debt.

Rather than default, governments or central banks choose to lower interest rates and begin the process of spurring inflation.

Inflation, however, like most things in life, is a double-edged sword.

Yes, you are able to inflate away your debt by de-valuing your currency, but it comes at a high cost.

First, you can’t control it.

Inflation isn’t like a light, you can’t turn it on and off at will.

Second, inflating away debt destroys the middle class, the very people whom government’s say they are trying to help.

SIDE NOTE: It’s estimated that Argentina’s annual inflation is an astounding 40%. Remember, the U.S. Federal Reserve has openly stated on numerous occasions now that it wants to trigger inflation within the U.S. economy. Inflation will devalue the USD and, over time, allow payback and the servicing of the national debt. I understand the intrigue of the idea, but the fact is, it can’t be controlled and, unfortunately, comes at a huge cost. Readers take note of the situation in Argentina and the numerous other examples we have seen throughout history. None of the situations are exactly alike, some worse than others. Bottom line, it doesn’t ever end well for the average Joe.

It’s a crazy, never ending loop.

While Argentina is particularly bad at managing its debt, it isn’t alone.

Most of the world, especially due to the Covid-19 pandemic, has elevated their debt levels to realms that are impossible to service at healthy or normal interest rates.

We are truly living at an interesting juncture in human history.

So, with this in mind, as resource investors I think that there are 2 main questions that need to be asked.

The Current Situation

First, from an economic standpoint, what is the current situation in Argentina?

Argentina continues to struggle with its current financial situation.

They have defaulted on their debt for a ninth time since 2001 and have an economy which is estimated to contract by 12% in 2020.

The latest default is linked to a US$57B IMF bailout in 2018, which, at the time, was coined as a ‘standby financing’ which would allow the economy to recover and put Argentina in a position to begin paying off their debt.

The economic recovery didn’t happen and the Covid-19 pandemic certainly hasn’t helped, but is hardly the main reason for the failure.

It’s obvious that this is a continuous loop of defaults, inflation and bailouts.

SIDE NOTE:  Argentina’s international credit rating with Standard & Poor, Fitch and Moody’s is ranked alongside countries like Ecuador, Venezuela, Lebanon, and Congo. These aren’t the countries you want to be associated with when it comes to economic prosperity.

In eerily similar fashion, today, Argentina is in the midst of negotiations with the IMF on restructuring their debt and delaying payback until 2024.

This is a key negotiation for both parties.

From the IMF’s view, they just want to get paid, and there’s nothing wrong with that.

My guess is that the IMF wants to find terms that don’t completely tie the Argentine government’s hands, but are stiff enough to prevent the chance of another default in the future.

As the Argentine government states, they don’t want to default on their debt and this is why they are looking for further wiggle room in the payback structure.

In my view, prevention of a future default on debt is inextricably linked to a cut in government spending – without a doubt.

With that said, given their past and the fact that there are midterm elections on the horizon, I find it highly unlikely that this will happen.

The government, however, has announced new stiffer capital controls, in addition to those adopted in 2019, which are aimed at stabilizing the country’s foreign currency reserves.

The foreign currency reserves, mainly their holdings of USD, are vitally important because their debt is denominated by USD.

Citizens are being dissuaded from purchasing USD and selling pesos, and at the moment, they can only acquire a maximum of US$200 per month.

Further, there’s a new 35% tax on USD denominated purchases, which is on top of the 30% solidarity tax that’s already in place.

Corporations, like Argentina’s citizens, are subject to similar controls that are aimed at diminishing the export of USD.

This mainly affects how companies distribute dividends, export goods and service their USD denominated debt, although new recent regulations were recently put in place to solve these issues, as mentioned below.

SIDE NOTE: The Peso is losing its value at such a high rate that nothing of significant value is priced in it – Real estate, vehicles or any other big ticket items are all priced in USD.

With rampant inflation and stringent capital controls, a black market for USD has sprung up.

The official exchange rate – 74ish Pesos to 1 USD.

The unofficial or black market rate – 150ish Pesos to 1 USD – and rising fast.

As you can see, for those looking to acquire more dollars or dollar denominated services/products, the cost is enormous.

Moreover, these restrictions, while bringing short-term stability to the foreign currency reserves, without a doubt, have cast further doubts about the investment attractiveness of Argentina.

Mining Investment Attractiveness of Argentina

So now, as resource sector investors, what’s the current mining investment attractiveness of Argentina?

This is a great question and the whole point of this article.

The fact is, if you just read the headlines surrounding the current risk in Argentina, you would be missing a big part of the equation.

As always, there’s never a ubiquitous answer to any question, it always depends.

In this case, it depends on:

• Type of Company – At the moment, junior mining companies that are exploring and/or developing projects are able to take advantage of the unofficial exchange rate between the Peso and U.S. dollar by completing what some of the companies call a “Blue Chip Swap (BCS)â€.

A BCS is when a company imports USD into the country and invests it into blue chip stocks on the Argentine exchange.

 After holding it for a period of time, they then liquidate the position and are able to take the cash out and convert it at the unofficial exchange rate – completely legal.

To note, all the companies that I spoke with use the official rate to set budgets.

For companies that only burn cash, this is a major plus.

For producing companies, it’s a little different.

As I stated earlier, there are restrictions on USD out flows – dividends, profits and debt payments.

With that said, the government has relaxed some of the restrictions in light of the importance of mining.

• Reduce the export duty for mining exports from 12% on FOB value to 8%
• Include mining activity in the strategic plan for the reactivation of the Argentine Economy.

Further, the Central Bank Of Argentina (BCRA) stated the following in ‘Communicacion A 7123’:

• Foreign currency brought into Argentina and liquidated into pesos by export companies will enable those companies to: (i) pay off capital and interest of foreign loans (provided that repayment terms are greater than one year) and (ii) repatriate capital, which we understand includes dividends, from investment projects once they have started operations.
• All this is subject to certain conditions (that the mining industry meets) such as the following: 1. The exports refer to productive projects that generate export goods and / or that allow substituting the import of goods; 2. The foreign currency from exports is entered into the country as from October 2, 2020; 3. Those who opt for this regime designate a financial entity that will do the follow-up. For those who opt for this regime, the amounts of foreign currency that they will be able to acquire for imports are also increased (50% of what is exported).

• Location – As they say in real estate “location, location, location,†and the statement applies to the junior mining world.

As I mentioned in Part 1 of the series, it’s key to understand the risks at the national level and work your way progressively down to the state or province then to the region or county, and finally, at the local town or city level.

As you progress toward the exact location of a prospective company’s project, you will uncover any hidden risks at the upper levels.

In terms of Argentina, it’s all about which province the project is located.

San Juan and Salta, in particular, are great provinces in which to be a mining company.

Both have the history, mining law and general positive attitude toward mining.

Here’s a look at how the Fraser Institute ranks mining investment attractiveness in Latin America.

Source: 2020 Fraser Institute Rankings

As you can see, San Juan and Salta are ranked #2 and #4 in Latin America and only trail Chile and Peru, which are widely considered some of the best places in the world for mining investment.

In Argentina, the provinces control the mining law and collection of taxes, which are capped at 3% of revenue.

Now that we have an idea of Argentina’s current situation and how it affects junior mining companies, it’s pertinent to explore risks that may occur in the future.

I think there are 3 main risk factors that we need to explore:

• Nationalization of Assets – The nationalization of assets is a very real risk.

Unfortunately for investors in the resource sector, it does happen and, more specifically with Argentina, it has happened once fairly recently.

In 2012, the Argentine government voted to re-nationalize the country’s largest oil company, YPF.

For context, YPF was once an entirely state-owned company until the spree of privatization in the 90s, which resulted in a large portion of the company being sold off to foreign interests.

 The YPF privatization was highly criticized in Argentina since other countries in Latin America kept their state-owned oil & gas companies (Petrobras in Brazil, Pemex in México, etc.) in order to maintain sovereignty over these resources.

At the time, Christina Fernandez de Kirchner (now VP under Alberto Fernandez) was President and justified the re-nationalization on the grounds that the private company didn’t boost the oil and natural gas production needed to keep up with local demand.

This move has and will continue to haunt Argentina moving forward.

So, are junior mining companies at risk of having their projects or mines nationalized?

No one can say ‘yes’ or ‘no’ without a doubt.

What I will say is that at least a portion of the risk is dependent upon the type of company.

In my view, the companies that are exploring or developing a project(s) in Argentina are less likely to see their projects nationalized than a producing mine.

Junior mining companies require both cash to burn and a niche skill set to effectively explore and develop projects.

 I highly doubt this is an appealing prospect to a government.

Second, while the risk is higher for producing hard rock miners, I still think that there are many barriers to making nationalization an appealing alternative for governments.

Why nationalize and have to operate a mine when you can just tax it?

Further, while YPF is a recent example of nationalization in Argentina, I wasn’t able to find an example of a fully private company that was nationalized by the government.

While I know the government is fully capable of stealing, I’m less inclined to believe that is the course of action they would prefer to take.

• New Tax Regime – It’s my contention that the greatest risk to mining companies within Argentina is the risk of increased taxes in the future.

A new tax regime could remove a good portion, if not all, of the profitability of a mine.

How likely is it to happen?

That’s a really hard question to answer.

There are a couple of scenarios that I think could make taking a larger chunk of the mining company profits tempting.

• A major spike in the metal prices – In my view, mining is one of the few sectors that I think will show major growth over the next few years. This growth will be driven by high metal prices.
• Brink of another default – As I mentioned, I don’t see any dramatic policy changes related to spending coming anytime soon. This is a problem moving forward as it appears that their current loop of borrow, inflate, and default will most likely continue into the future without a drastic change to how the country is run.

While the threat of higher taxes is a risk to mining companies in Argentina, it may only be a threat to future mines.

It should be noted that junior mining companies, by current law, lock in tax rates for 30 years of production once a Feasibility Study (FS) has been completed on their project.

Now, this doesn’t mean laws can’t be changed – they can be.

But I can’t help but think that the fallout of such measures would cause much more damage than any short-term gain.

Ecuador is a great example for Argentina.

Their institution of a windfall tax had devastating effects on the mining sector.

With a new government in place, the impact of the windfall tax was re-assessed and, with the help of Wood Mackenzie, Ecuador revamped their tax regime to better reflect best practices worldwide.

Low and behold, investment dollars from investors and major mining companies have begun to flow back into the country.

Ecuador is by no means a perfect jurisdiction for mining, but it’s getting better and has outstanding geological potential.

Mining is a huge part of Argentina’s economy, especially in provinces like San Juan and Salta where mining accounts for more than 80% of the province’s revenue.

They can hardly afford to lose it.

For perspective, for every US$1 that leaves the country because of mining, US$24 comes in.

Higher taxes on mining aren’t the answer to Argentina’s debt issues.

If anything, the government should make it a priority to enhance Argentina’s mining investment attractiveness, not further destroy it.

In the end, I think that the provinces that are pro-mining and have a history of upholding its mining law will remain that way.

With regards to the Federal government, it’s much harder to gauge.

Mining Companies in Argentina

Many of the biggest senior gold and silver miners have operations or are developing mines in Argentina.

Here’s a list of a few of them:

Pan American Silver (PAAS:TSX) – Operate their Manantial Espejo mine in Santa Cruz and owns the Navidad project in Chubut.

Fortuna Silver (FVI:TSX) – Recently spent US$300M in CAPEX to construct their Lindero Mine, which is located in Salta.

Barrick Gold (ABX:TSX) – Operate their Veladero mine and the Lama project and new exploration areas in San Juan.   In 2020, Barrick also entered the Salta province by signing an earn-in agreement on the El Quevar silver project.

SSR Mining (SSR:TSX) – Operate Puna which is comprised of the Chinchillas mine and Pirquitas processing facility which is located in Jujuy.

Newmont (NGT:TSX) – Operates the Cerro Negro mine in Santa Cruz.

McEwen Mining (MUX:TSX) – Operate their San Jose silver-gold mine in Santa Cruz jointly with the Peruvian company Hochschild, and also owns the large-scale Los Azules copper project in San Juan.

Yamana (YRI:TSX) – Operate their Cerro Moro in Santa Cruz.

Austral Gold (AGD:ASX) – Operate their Casposo mine in San Juan.

First Quantum Mineral Ltd. (FM:TSX) – Advancing their Taca Taca project in Salta.

Glencore PLC (GLEN:LSE) – Operate Bajo de la Alumbrera project in Catamarca, jointly with Goldcorp and Yamana Gold,  and also owns Pachon in San Juan.

A few junior mining companies that are exploring and developing projects in Argentina:

AbraPlata Resources (ABRA:TSXV) – PEA Level Project

JoseMaria Resources (JOSE:TSXV) – PFS Level Project

Filo Mining Corp. (FIL:TSXV) – PFS Level Project

Aldebaran Resources (ALDE:TSXV)

Golden Arrow Resources (GRG:TSXV)

Neo Lithium (NLC:TSXV)

Lithium Americas Corp. (LAC:TSE) – Under construction

Concluding Remarks

In my view, protecting your downside risk by investing in companies that are selling for less than their value is an essential part of making money consistently in the junior resource sector.

The higher the delta between price and value, the more downside protection you have.

I believe, therefore, that it allows for investment in opportunities in some of the riskiest jurisdictions on the planet.

Now, there’s a thin line here, you do have to understand what you are getting into and how the company you are investing in is going to navigate that risk and, ultimately, make you money.

There are going to be some situations that just aren’t worth the risk or the time commitment.

Personally, I think that I have a good understanding of the situation in Argentina.

There is risk.

With that said, I’m ready to make investments in junior mining companies operating there if they fit my framework for an investable company.

As always, the thesis starts with the people running the company.

Do they have the IQ, experience and backing to execute the action plan which they are pitching?

Second, if it’s the right people, is the company selling at a discount to its value?

The higher the discount to value, the more appealing the opportunity is.

Third, where is the project located?

Personally, I want to concentrate on San Juan and Salta.

I put my money where my mouth is and have put this framework to use.

Last year, I invested in AbraPlata Resources at $0.033/share.

It’s run by the right people.

At the time of investment, the company was selling for a steep discount to value.

Finally, their Diablillos project is located in Salta.

All the right ingredients needed to protect my downside risk, plus it had huge upside potential if the company executes on their plan.

Today, the share price is roughly $0.38, a more than 10 fold increase and, at the moment, a vindication of the original investment thesis.

Investing your money in countries like Argentina come with risk, but if you have done your homework and have applied a framework for decision making, it’s my contention that you have given yourself the best opportunity to be successful.

Finally, there’s nothing wrong with avoiding risky jurisdictions, just remember any country/government is capable of stealing your money.

Use the Coupon Code DILIGENT to get 25% off a subscription to  and get my best investment ideas and commentary first.

Until next time,

Brian Leni P.Eng

Founder – Junior Stock Review Premium

Disclaimer: The following is not an investment recommendation, it is an investment idea. I am not a certified investment professional, nor do I know you and your individual investment needs. Please perform your own due diligence to decide whether this is a company and sector that is best suited for your personal investment criteria

Our success in life is largely due to the quality of the decisions we make.

The more consistently we make good decisions, the better chance we have of achieving our personal goals.

So why do some people tend to make good decisions consistently?

This is a great question.

I think the answer is that some people have better frameworks for making decisions than others.

For some, these frameworks come naturally, it’s just the way that they think.

For others, it often requires a conscious decision to follow a framework for their decision making, which, of course, is influenced by what they want to achieve.

The more scattered or unfocused your goals, the weaker your framework is for decision making and the more susceptible you will be to emotional states of mind.

Be very specific with what you want in your life and, more pertinent to this article, what you want out of your investments.

This will dictate the ideal framework for your investment decisions.

It’s clear to me that the core reason I have lost money in the market, in the past, is directly related to the poor decisions that I’ve made.

Unfortunately, mistakes will happen, no one is perfect.

With this said, my personal goal is to both reduce the number and severity of the losses in the future.

Thus, as I’ve stated, I created and use a set of rules to anchor my thoughts and decisions regarding my investments.

My framework and adherence to that framework for decision making in the junior resource sector is better than the average investor.

I’m, therefore, able to minimize my mistakes and, consequently, am able to profit consistently no matter what market we’re in.

Today, I would like to discuss a particularly important subject when it comes to junior resource sector investment – jurisdictional risk.

Unlike many other types of businesses, mineral deposits or mines can’t be moved if a country suddenly becomes a place where it’s hard or impossible to do business.

The assessment of risk within a jurisdiction, therefore, is an integral part of a junior resource sector investor’s decision framework.

While it’s integral, in my view, it isn’t where you should start.

Personally, I think you begin your investigation with answering the following question; what is the delta between price and value?

Buying a company which is trading for less than its value is the overriding principle that must be followed continually to ensure success in the junior resource sector.

Once you have determined that a company is selling for less than it’s worth, you proceed to contrast that value proposition against the risk to investment.

Putting it together, if you personally think that the value proposition contrasted against the downside risk is acceptable, you should be a buyer.

It’s easier said than done.

Identifying and understanding the risks are a big part of being successful.

As I said, employing a system or framework for analysis can drastically improve your rate of success and, ultimately, minimize your biggest risk to your investment – YOURSELF!

Let’s take a closer look at some of the points to consider when constructing your framework for analyzing jurisdictional risk.

A Framework for Analyzing Jurisdictional Risk

Jurisdictional risk is a complex topic.

With that said, I think breaking it up into individual components is a great way to simplify the analysis.

For me, I think there are 3 main components:

• Mineral Potential
• Geography and infrastructure
• Political Risk
  • Law
  • Culture
    • Influences – dominant religion(s), genesis of the country, demographics, etc.
  • Geography
• Timing
  • Flow of Cash – Smart money is typically paying close attention to the timing aspect.

Mineral Potential

Why do junior resource companies explore for mineral deposits in some of the world’s riskiest jurisdictions?

The answer is straightforward; for the most part, all of the large, outcropping, easy-to-find deposits in tier #1 jurisdictions have already been found.

It’s, therefore, the probability of making a big discovery which drives exploration teams to take their drills to these far flung locales.

Further, mineral potential can be gauged by looking at historical discoveries in the region or by simply looking at a map and looking for areas with high geological activity, such as mountain chains.

The potential or the actual size and quality of the deposit should be at the forefront of every resource sector investor’s mind.

Taking it a little further, while the mineral potential is first and foremost, infrastructure can be a major hurdle to overcome, even for the best deposits.

Road access, power, water, and deep sea ports are all major factors contributing to not only the discovery of new deposits, but also the conversion of those deposits into mines.

Both the mineral potential and infrastructure quality are inputs for computing a project’s underlying value, which can then be contrasted against the company’s market price.

The delta between these values will allow you to understand the value proposition.

Political Risk

There aren’t many topics that get more complex or emotional than those focused on political risk.

Political risk breaks down further into a number of sub-topics:

• Law – The rule of law within a jurisdiction is very important as it should clearly outline the criteria for ownership, taxation and liability.  It’s important to research a jurisdiction’s past and current reputation for upholding the laws that it’s supposed to be governed by.
• Culture – This is where things get complex, as a country’s culture is formed over hundreds of years by numerous inputs. Inputs such as the dominant religions, demographics, how and when the country was formed, and much more. What you see is what you get. Don’t expect a cultural shift in your lifetime. Things may appear to be changing or shifting in a direction, but much like markets, there’s always a reversion to the mean.
• Geography – The location and terrain of a nation play a big role in its risk profile. For instance, if a country is land locked, this could be an issue for travel, the importing of exploration equipment, or future export of mineral concentrates. Further, if the country is located next to a high risk country which is dominated by a terrorist organization, civil war or a virus outbreak – these issues can plague neighbouring nations.

Timing

Much like markets, in my view, jurisdictional risk moves in a cyclical motion.

The risk is always there, but it can change briefly after extremes in risk are realized.

Such as after a civil war, the fall of a dictator or on the less extreme end of things, the mass exodus of mining companies due to a new and damaging tax regime.

As I have said many times, it’s impossible to time markets with any consistency.

Sticking with the comparison of markets to the cyclicality of jurisdictional risk, I think that it’s very hard to try and pick a bottom.

What I suggest is that investors don’t try and pick the bottom, let someone else do that.

Look for smart or big money entering a risky jurisdiction after one of those climax-like events happen.

Smart or big money can be named investors putting a large chunk of cash into a junior, or maybe it’s a senior mining company which is buying a project they’re looking to develop on the cheap.

It’s a really good sign for investors in junior companies when a senior mining company sinks big dollars into a project to turn it into a mine.

Fraser Institute

While certainly not being perfect or the definitive source, the Fraser Institute does a great job at quantifying jurisdictional risk in their annual rankings of Mining Investment Attractiveness.

I continually reference the rankings as part of my research into a jurisdiction.

They are free to access and review; I highly suggest adding this to your investor tool kit.

Concluding Remarks

Jurisdictional risk is a huge topic, one that actually requires much more depth than I covered in this article.

Further, I think to really understand the topic, you need to do more than just a desktop review, you really need to visit the country in question.

It isn’t until you visit a country that you can begin to understand the culture and the nuances that come with it.

Further, while much of the jurisdictional risk discussion revolves around countries, you must really drill down to the local level of the project.

Start at the country level and move down to state or province, then move down to county or region, and finally, move down to the immediate locale – town or city.

It’s here where you can find a whole other sub-culture, one which most likely has its own nuances.

With the knowledge gained from this article, you can begin to form your own framework for analyzing jurisdictional risk.

Creating the framework and doing the research puts you miles ahead of the average investor in the junior resource sector.

It’s that advantage which will give you a leg up when it comes to becoming consistently successful with your investment choices.

In Part 2 of the series, I will use the framework laid out in this article to analyze a specific country.

Stay tuned.

Get the e-book Junior Resource Sector Investing Success: The Risks, Rules & Strategies You Need to Know today, when you become a FREE Junior Stock Review VIP .

Until next time,

Brian Leni P.Eng

Founder – Junior Stock Review Premium

Disclaimer: The following is not an investment recommendation, it is an investment idea. I am not a certified investment professional, nor do I know you and your individual investment needs. Please perform your own due diligence to decide whether this is a company and sector that is best suited for your personal investment criteria

Prior to the 2019 edition of the Sprott Natural Resource Symposium, I mentioned that Rick Rule’s speech on Thursday August 1^st would be worth the price of admission – he didn’t disappoint!

The speech was entitled, Lessons, Re-Learned, In a Bear Market, and for good reason, as Rule covered many of the lessons that I have found so helpful over the course of my investing career.

Here’s a look at 2 lessons that, when incorporated into your investment process, in my view, will be key to your success.

1. The sequence of answering unanswered questions leads to high returns over time.

This lesson is the basis for share price appreciation across all sectors, but is particularly important in the junior resource sector.

So, given its importance, how does one identify a company’s unanswered questions?

The unanswered questions focus on the catalysts that will drive the share price in the future, for example, the most common unanswered questions surround drill results.

Invariably, the answering of these questions leads to more unanswered questions and, thus, the process really never ends until you get a “no” answer or you have attained an acceptable amount of profit (different for everyone).

Along with identifying the unanswered questions, it’s paramount that the investor evaluate the probability of attaining a “yes” answer to each of the questions and weigh it against the potential profit.

Evaluating the probability of success is rooted in the company’s fundamentals, aspects such as who is running the company, its share structure, its cash position, the geology of the property and the jurisdiction in which the company is operating – to name just a few. 

Examples of unanswered questions:

Question – Does the mineralization extend along strike from the existing deposit?

• If yes, how far and at what grade?

Question – Is the mineralization amenable to standard mineral processing techniques – crushing, grinding, floatation, magnetic separation?

• If yes, are there any deleterious elements contained in the concentrate?
  • If yes, what are smelter penalties?
• If yes, what is the metal recovery?

Share prices are driven by catalysts, and by focusing on these quantifiable answers, an investor can not only maximize his potential profit, but also minimize the effect that emotion has on their investments.

1. When the reason to own a stock goes away, the stock needs to go away.

Lesson #2 is closely linked with lesson #1, but is particularly important in my opinion because selling a losing position can be hard to do.

The basis of this lesson is rooted in selling a stock because of receiving a “no” answer to an unanswered question. In my experience, this is very wise advice, especially in the short term, as it most often takes time for a company to reset and recover after failure.

Additionally, I think you can parlay lesson #2 a little further.

For example, you may invest in a company for specific reasons, such as its business model, the involvement of a particular person, its focus on a particular metal, or maybe it’s an interest in a particular project.

Following the mantra of lesson #2, if any of these reasons change, it’s time to sell. For example, if a project generation company whose business model centres around using “other people’s money” to explore their properties changes to using their own money to explore, you may want to think about selling, as the risk profile of the company just changed.

In my view, these lessons are invaluable and, when practiced, easily justify the price of admission to a conference such as the Sprott Natural Resource Symposium.

With that said, it will be 2020 before you know it, and with it a chance to register for next year’s conference at a significant discount if done early. Watch for the links in the New Year.

Symposium Exhibitors

One of the many perks of attending the Symposium is its list of exhibitors, each of which has been vetted by the Sprott organization and owned in a Sprott managed equity account.

While this is definitely an advantage, it doesn’t mean that investors should freely invest in any company at the conference. No matter who recommends a company, each investor is obligated, in my view, to complete their own due diligence and determine if it’s an investment which fits their own personal criteria.

I met with 10 companies that were exhibiting at the Symposium and compiled a few notes on each of them. In no particular order:

Aethon Minerals (AET:TSXV)

MCAP – $5 million (at the time of writing)

Cash – Over $3 million

• Altius Minerals (ALS:TSX) spin out in 2018.
• Recently announced a merger with AbraPlata, whereby all of the issued and outstanding Aethon shares will be exchanged on the basis of 3.75 AbraPlata common shares for each Aethon share. This implies consideration of $0.248 per Aethon Based on the 10-day volume weighted average of AbraPlata shares $0.661.
• Currently, Aethon is trading at discount to AbraPlata.
• John Miniotis will be the new company’s President and CEO.
• Flagship asset – the Diabillos Project has a total indicated resource of 27,100 tonnes – 80.9 million oz of silver at 93.1 g/t and 732k oz of gold at 0.84 g/t and an inferred resource of 1,100 tonnes – 1.69 million oz of silver at 48.8 g/t and 29K of gold at 0.83 g/t.
• Diabillos Project – High grade precious metal exploration potential.
• Large Chilean land package which is slated for future joint ventures with senior mining companies. I expect to see a JV deal before the end of the year.

Hot Chili Limited (HCH:ASX)

MCAP – $44 million (at the time of writing)

Cash – Over $1 million AUD (will need to finance for Phase 2 drilling)

• Christian Easterday is Managing Director.
• 2 Projects: Cortadera Copper Porphyry Project and Productora Copper Project.
• Cortadera was optioned from a private Chilean mining group, SCM Carola, earlier this year.
  • Located 14 km from Productora Copper Project.
  • Initial 5,500 m drill program was highlighted by the discovery of a new high grade zone at Cuerpo 3, the main porphyry- CRP0013D – 750 m grading 0.6% copper and 0.2 g/t gold from 204 m depth, including 188 m grading 0.9% copper and 0.4 g/t gold.
  • Exploration potential – geochemistry and geophysics (ground mag and IP) have identified a North Target area which has never been drilled.
  • Exploration potential – Additionally, each of the 4 porphyry centres remain open at depth and laterally.
  • Phase 2 drilling to commence shortly.
  • Maiden resource on Cortadera to be released very soon.
• Productora Copper Project
  • Total Proven and Probable Reserves (JORC) – 166.9 tonnes at 0.43% copper, 0.09 g/t gold and 138 ppm molybdenum (at metal prices – Cu $3.00 USD/lbs, Au$1200 USD/oz and Mo $14.00 USD/lbs).

Altus Strategies (ALTS:TSXV)

MCAP – $16.9 million (at the time of writing)

Cash – roughly $1 million in cash and securities

• CEO Steven Poulton leads a team of geologists and mining engineers who have a history of success in the resource industry.
• Altus team has a long history of success in Africa.
• Insider Ownership – CEO Steven Poulton owns 14.2%.
• Strategic shareholders, which includes – Exploration Capital Partners (2012 and 2014) combined 13.2%, and Euro Pacific Gold Fund 3.8%.
• 18 projects, all located in Africa, encompassing a wide range of precious and base metals.
• Prospect generator business model.
• Targeting greater than $10 million USD per annum JV financed exploration expenditures.
• 9 projects in the “Joint Venture Ready” portion of their development – precious and base metals.

Millrock Resources (MRO:TSXV)

MCAP – $8.3 million (at the time of writing)

Cash – Over $2 million in cash and securities

• Greg Beischer is President and CEO.
• Millrock is mainly focused on mineral exploration within the Tintina Gold Province located in Alaska, but does have additional project interests in BC and Mexico.
• Prospect generator business model.
• No joint venture partners at the moment, however, this is likely to change in the weeks to come.
• Currently, the Goodpaster Project is a focus for the company, as they are targeting an extension to Northern Star’s Pogo mine.
  • Using CSAMT geophysics Millrock is targeting a deep shear zone to the west of the existing mine. Key to this program is the fact that they are using the same contractor as Northern Star did to complete the work.
  • Completion of the program will either be followed by a decision to drill or wait for a JV partner to fund the drilling of the prospective target.

Mundoro Capital Inc.

MCAP – $8.67 million (at the time of writing)

Cash – $3 million (Q1-2019)

• Teo Dechev is President and CEO.
• Prospect Generator business model.
• Exclusively in Eastern Europe, mainly Serbia and Bulgaria.
• JOGMEC JV – Currently in Phase 2 program – geophysics, with drilling to follow in Q3 2019 – JOGMEC can attain 51% of the project by spending $4 million USD in expenditures by March 2019 and purchase up to 80% of the project with the delivering of a Feasibility Study.
• Freeport JV – Currently in Phase 1 program – Alteration mapping and geophysics, with drilling to possibly follow near the end of Q4 2019 – Freeport can attain 51% of the project by spending $5 million USD in expenditures by September 2021 and up to 75% of the project by solely funding an additional $40 million in expenditures by 2026.
• Timok Project is up for Joint Venture, but no partner at the moment.
• Strategic Alliance In Bulgaria with JOGMEC.
• Large institutional holdings – 58%.

Ardea Resources (ARL:ASX)

MCAP – $59.44 AUD (at the time of writing)

Cash – $11.2 million AUD

• Andrew Penkethman is the CEO.
• Focused on both precious and base metals, with a primary push towards nickel-cobalt.
• Goongarnie Nickel Cobalt Project – PFS: 2.25 Mtpa, before tax NPV of $2.4 billion and IRR of 31%, CAPEX cost $918 million USD, Pressure Acid Leach (PAL).
• Large gold and nickel exploration land package totalling 3500 square kilometers.
• Possibility to spin out gold focused projects and make Ardea solely a nickel company as we move into what may be a strong nickel price environment in the years ahead.

Equinox Gold (EQX:TSXV)

MCAP -$843.6 million

• Christian Milau is CEO and Executive Director.
• Ross Beatty is a major shareholder, owing 12% of the company.
• Gold focused, with 3 advanced staged / mines in Brazil and California, USA.
• Aurizona Gold Mine poured its first gold in May 2019, 2019 production guidance is set at 75 to 90,000 oz Au at a AISC of $950 to 1,025/oz.
• Mesquite Gold Mine – in production, YTD 2019 – $70.8 million in revenue, 52K oz produced, $780/oz cost and a AISC of $907/oz. Production guidance updated to 125 to 145K oz at an AISC of $930 to 980/oz.
• Castle Mountain – 3.6 Moz Au reserves, 16 year mine life, $763/oz avg LOM AISC – construction to begin second half of 2019.
• Overal,l Equinox should produce 200 to 235K ounces in 2019, with a goal of attaining production over 1 million ounces per annum by 2023.

ISO Energy (ISO:TSXV)

MCAP – $49.9 million

Cash – $3 million

• Craig Parry is the President and CEO.
• Board of Directors is led by the Chairman Leigh Curyer, who is the CEO of NexGen Energy. NexGen owns arguably the best undeveloped uranium deposit in the world.
• Team has the background to be successful in the Athabasca Basin.
• NexGen owns 53.4%, Cameco owns 5.4%, Orano owns 2.0% and Institutional owns 19.2% – doesn’t leave much in the public float.
• Summer Drill Program – Hurricane Zone – 8 holes into a 16 hole program on their Larocque East Project, which is located in the eastern portion of the Athabasca Basin. Targets are hosted in Sandstone/unconformity. Drill program is expected to cost $1.5 million, leaving them with $1.5 million going into 2020.
• 3 other projects in their portfolio – Thorburn Lake, Radio and North Thorburn.

CanAlaska Uranium (CVV:TSXV)

MCAP – $11.24 million (at the time of writing)

Cash – roughly $1.0 million in cash and cash equivalents (April 2019).

• Peter Dasler is President and CEO.
• Prospect generator business model.
• 3 main Projects: West McArthur, Cree East and NW Manitoba.
• West McArthur is a JV with Cameco – Targeting a unconformity-basement uranium deposit.
• Cree East has no JV partner – 9 target areas across the property, possibility of both basement and sandstone hosted uranium deposits.
• NW Manitoba lies in close proximity to the Saskatchewan border and is similar geologically to Rabbit Lake, Collins Bay and Eagle Point Uranium mines which are within 90 km of the property.

Goviex Uranium (GXU:TSXV)

MCAP – $65.6 million (at the time of writing)

Cash – $2.8 million USD

Debt – $8.0 million USD

• Daniel Major is the President and CEO.
• 3 uranium projects, all located in Africa – Madaouela, Mutanga and Falea.
• Flagship Madaouela Project is at the definitive feasibility study stage of development. The Republic of Niger has signed a definitive agreement to jointly develop the project.
• After-tax NPV@8% – $340 million USD, IRR – 21.9% at a uranium price of $70 USD/lbs.
• Orano (formerly Areva) operates a uranium mine in close proximity to Madaouela, which is reaching the end of its mine life.
• “The State is to receive an additional working interest of 10% in exchange for approximately US$14.5 million of claims due by the Company to the State comprised of the final €7 million Madaouela I Mining Permit acquisition payment and settlement of previously challenged three years of area taxes (US$6.6 million) (collectively, the “Debt”) between the Company and the State related to the Madaouela Project. The Company is to receive a final, complete and unconditional release without reserves in respect of the Debt, upon the transfer the additional working Interest.” ~ News Release
• The company is working at optimizing its metallurgy and subsequently extract value from the other base metals that are present – nickel, cobalt and molybdenum. Gravity separation and floatation techniques are being tested for their ability to concentrate the metals effectively. If successful, these advances have the potential to positively affect the project’s economics.

Don’t want to miss a new investment idea, interview or financial product review? Become a Junior Stock Review VIP now – it’s FREE!

Until next time,

Brian Leni  P.Eng

Founder – Junior Stock Review

Disclaimer: The following is not an investment recommendation, it is an investment idea. I am not a certified investment professional, nor do I know you and your individual investment needs. Please perform your own due diligence to decide whether this is a company and sector that is best suited for your personal investment criteria.  I have NO business relationship with any of the companies mentioned in this article. I am a shareholder of Aethon Minerals.

“Society does not get endlessly richer and more sophisticated. Periodically things collapse. It is not the end of the world. It is the end of an age.” ~ Rickards – The Road to Ruin – pg.297

Change is coming, I can feel it.

My sample size isn’t overly large, but in my life, I can’t remember society being as polarized between left and right as it is today. It isn’t just Canada and United States, either, it seems to be a good portion of the world.

So, why does it matter? Well, in my view, the root of where we are economically begins with the culture of the society. In this case, I’m referring to western culture or, more specifically, the derivatives of western culture which are found in Canada and the United States.

Western culture is of particular importance because its ebbs and flows, presently, have such a profound effect on the entire world. In fact, I would suggest that what I’m feeling is actually the degeneration of western culture and, in effect, the fall of the global economy as we currently know it.

For all intents and purposes, the United States represents the peak of western culture, as its rise to the world’s top power over the last 100 years has been predicated on all the ideals, mainly liberty and freedom, which allow the free thinking individual to prosper.

Instead, today we are headed on a path toward destruction. This path is one which is moving to remove the liberty and freedom of the individual and increasingly to replace it with government oversight, effectively removing an individual’s responsibility of choice.

In essence, the left and right are fighting to establish who knows best for everyone else. This will ultimately end in the failure of the western culture and, along with it, the collapse of the global economy in its current form.

Today, I have for you a review of James Rickards’ latest book, Aftermath – Seven Secrets of Wealth Preservation in the Coming Chaos. Aftermath is volume 4 in a quartet of books that included Currency Wars, The Death of Money and The Road to Ruin.

Much like the previous three, Aftermath doesn’t disappoint as it sets out a blueprint for wealth preservation in the coming chaos.

Let’s take a closer look.

Aftermath – Seven Secrets of Wealth Preservation in the Coming Chaos

Much like Currency Wars, The Death of Money and The Road to Ruin, in Aftermath Rickards uses both his experience and financial knowledge to outline his thesis for why a reset to the global monetary system is inevitable.

The chapters in Aftermath are broken down into topics, the ramifications of which could individually or collectively trigger the next global economic meltdown.

In my own words, here are the 7 topics that Rickards covers:

• Tariffs and Trade Wars
• Debt to GDP Ratio
• Behaviour Economics
• Passive Investing
• Velocity of Money
• Global Monetary Reset
• Terminal Unit

Each of the topics is deserving of its own chapter, however, I particularly enjoyed the information Rickards provides on the debt to GDP ratio and behavioural economics. In my view, these 2 topics are of particular importance because I think that, ultimately, a crisis in the global economy will start with them.

Specifically, I believe quantitative easing (QE) and low interest rates are to the market as drugs are to an addict.  Therefore, pick your poison; more QE and low interest rates that will lead to an overdose, or go cold turkey, which will lead to the tremors and, most likely in this case, death. Either way, change is on the horizon.

Debt to GDP Ratio

Currently, the United States debt to GDP ratio sits at roughly 105%, a level which Rickards explains is considered by most economists to be above the point of no return. Once an economy reaches these critical levels, the growth of the economy is destroyed as any profits are directly fed into servicing the debt.

Japan is a great example of the effects of a high debt to GDP ratio, as the Japanese economy has been stagnant for multiple decades.

The obvious question then is, can’t the U.S. expand their debt to GDP ratio to the extent of Japan and still avoid a crisis? The answer is probably not; there would be a crisis of confidence before it reached the levels of the Japanese economy.

“The U.S. debt to GDP ratio is approaching the point at which it cannot expand much farther without inducing a crisis of confidence” ~ Aftermath

Firstly, while Japan’s debt is much larger than its GDP, the saving grace for the Japanese, in my opinion, is the fact that the Japanese people are its largest holders of its debt. Because of this, I believe there is a level of protection that the U.S., for example, doesn’t have.

Second, while the U.S. does appear, superficially, to have room to grow its debt to GDP ratio, the potential lack of confidence in the U.S.’s ability to service that debt begins to heighten. Unlike the Japanese, a good portion of the U.S. debt is held overseas and, thus, presents a major hurdle to further expansion.

Dwindling confidence will snowball and surely cause a major economic crisis. America’s debt to GDP ratio is in risky territory. In the chapter, ‘Putting out the Fire with Gasoline,’ Rickards walks you through the history and risks associated with debt to GDP rations and, most importantly, provides a tip for protecting your wealth against this major risk.

Human Behaviour

“Are humans risk adverse slugs or overconfident pretenders? The answer is both, depending on past circumstances and current conditions at the point of decision. This behaviour contradiction, one of many, illustrates why it is so difficult to make sense of human behaviour in markets” ~ Aftermath

We all have cognitive bias that affects the decisions we make. More specifically to the basis of this book review, it is the bias-laden investment decisions that many of us make that pose a major risk to the economy.

In the investment world, there is a tendency to follow the herd into buying the most popular stocks – for example, the FANG stocks (Facebook, Apple, Netflix and Google) or using the most popular investment techniques, such as passive or index investing. While the herd mentality can sometimes provide short-term profits, over the long haul, it typically ends in losses.

Currently, we sit at a very risky juncture in the stock market, where it sits at all time highs. All time highs mixed with the hyper-synchronicity investments is extremely dangerous for both the individual investor and the market as a whole.

If or when losses begin to mount, it will have a contagion effect on the market and, undoubtedly, lead to what could be major losses.

There is so much more to this topic which Rickards covers in the book – I won’t spoil it. Understanding this one chapter in the book could make all the difference in preserving your wealth.

Concluding Remarks

While it is easy to get caught up in the ‘when,’ as in when will the crisis occur, it really is a waste of time. No one can predict when complex events such as a global monetary reset will take place. In my opinion, it’s important to continue to live life as you normally would, but with some added financial prudence.

In my view, Aftermath is a MUST read for everyone, not just for those who are focused or interested in the global economy.  The benefits of understanding the ramifications of what has happened in the global economy over the last 10 years is integral for understanding where we may be headed.

In Aftermath, Rickards lays out the groundwork needed to protect your wealth in the future, no matter what’s around the corner.

While it may not be imminent, it does appear to be inevitable that a global monetary reset is on the horizon. Read Aftermath, The Road to Ruin, The Death of Money and Currency Wars – you won’t regret it!

Don’t want to miss a new investment idea, interview or financial product review? Become a Junior Stock Review VIP now – it’s FREE!

Until next time,

Brian Leni  P.Eng

Founder – Junior Stock Review

Disclaimer: The following is not an investment recommendation, it is an investment idea. I am not a certified investment professional, nor do I know you and your individual investment needs.

In my opinion, nickel laterite deposits will continue to play a major role in the future of the global nickel market. Nickel laterite deposits are, in relative terms, abundant and located at shallow depths within the earth’s crust, making them an ideal low-cost nickel source for the stainless steel industry. I, however, believe that in the future the role of laterites will expand to help fulfill the burgeoning electric vehicle revolution.

There are 3 reasons why I think this:

• EV battery market demand for Class 1 nickel will outpace, over time, the current production capacity of nickel sulphide deposits
• Both the production and development of nickel sulphide deposits is on the decline. High exploration costs, a slow development process (i.e. permitting) translate into what can be a minimum of 10 years and an average of more than 20 years from discovery to the development into a mine.
• An increasing proficiency in laterite ore processing techniques – Hydro-metallurgy

 

Electric Vehicle Revolution

In my opinion, EVs represent the most disruptive force within the resource sector since China began consuming metals on a huge scale during the last resource bull market. The reason I feel EVs will have such a disruptive force is a mixture of both metal supply constraints and the major influx of demand.

As I stated in my introduction, the metal I find the most interesting in this EV revolution, given its fundamentals going forward, is nickel.

Source: Glencore 2018 BMO Presentation

 

As you may or may not know, nickel is a key ingredient in the 2 most popular battery chemistries – nickel, manganese and cobalt (NMC); and nickel, cobalt and aluminum (NCA).

Source: Nornickel – May 2018

As you can see from the graph above, the most popular battery chemistry for the last couple of years has been NCM. Up until last year, NCM batteries were composed of equal parts, denoted 1-1-1, meaning 1 part nickel to 1 part cobalt to 1 part manganese. With the spike in cobalt prices, however, manufacturers have started to change the composition to be more economic, yet still have the stability needed for safe operation.

Currently, the newest commercially used ratio is 5-2-3, increasing the batteries’ reliance on nickel.  As well, but still in the experimental stage, is the 8-1-1 ratio, which dramatically shifts the use of nickel higher, making it by far the major component of this future new generation of battery.

Along with the cost savings, the higher ratio of nickel provides the battery with a higher energy density, allowing a battery to maintain a charge longer and have a longer range.

 

 

EV Market Demand – Class 1 Nickel

The nickel used within the batteries is termed Class 1 nickel and is mostly but not exclusively derived from nickel sulphide deposits. Although the current EV market’s demand for nickel is low, the growth profile is incredibly large and is really where the EVs could cause a disruption in the nickel market – if not all of the battery metal markets.

NOTE – Battery related consumption is estimated to reach 85,000 tonnes by 2020, representing 4% of the 2017 nickel supply.

Source: U.S. Geological Survey and RBC Capital Markets

 

To put this into perspective, we need to take a quantitative look at supply and demand. First, let’s look at supply; the global refined nickel supply for 2017 was around 2.1 million tonnes (both sulphides and laterites).

Second, the global nickel consumption for 2017 was around 2.2 million tonnes, demonstrating that demand is currently exceeding refined supply. For the focus of this article, this is particularly important. As I stated earlier, the EV market, at its current consumption rate, has very little effect in the overall market, however, as you can see, consumption is still exceeding refined supply.

What is the effect of EV demand over the next decade? This is a great question and key to understanding the predicament with which the nickel market is faced, moving forward.  A great estimation of future nickel demand is provided by Glencore in their 2018 Global Metals, Mining & Steel Conference presentation:

• Assuming a 30% market capture of the world car market by 2030, EV nickel demand will reach 1.1 million tonnes per year.

1.1 million tonnes of Class 1 nickel consumption in today’s  market would encompass roughly 55% of the refined supply. Now assume that all 1.1 million tonnes can be serviced by the existing nickel sulphide refining capacity, which seems doable, but it isn’t!

There is going to be a proverbial “tug of war” between EV battery makers and speciality steel makers who consume Class 1 nickel for producing speciality grade steel products.

 

Source: Norlisk

Nickel Sulphide Deposits

What I find most interesting about nickel sulphides is that not only are their production figures predicted to curtail over the coming years, but the amount of projects awaiting development is low.  Why is this? In my mind, there are 3 reasons; first, a bear market in the nickel price which pre-dates 2016; second, the fact that exploring for these deep deposits is very costly; and finally, in comparison to nickel laterites, which are estimated to account for up to 70% of the crustal nickel deposits on the earth, there are far fewer sulphides to find.

Let’s take a look at how a nickel sulphide deposit is formed. Instead of me describing this, I found a fantastic image on the Balmoral Resources website, which takes us through the process. See below.

Source: Balmoral Resources

 

Below are 2 pie charts depicting the distribution of known laterite and sulphide nickel deposits world-wide. Currently, the majority of nickel sulphide exploration is occurring in proximity to the world’s existing giant deposits, such as Vosiey Bay in Labrador, Russia, Finland and Australia.

Source: Nickel Institute

Nickel Laterite Deposits

Nickel laterite deposits are found in the tropical regions of the world, places such as Indonesia, Western Australia, New Caledonia and the Philippines.  They are the result of the weathering of a nickel sulphide deposit and their composition is affected by a few key parameters, which include: the amount of weathering, drainage of groundwater and the tectonic setting.

Source: Murdoch University – Nickel Laterite Deposit Layers

 

There are 5 distinct layers or zones of a laterite deposit and they are as follows: ferricrust, red (upper) liminote, yellow (lower) limonite, transition or clay rich and saprolite/garnie. The key distinction between the layers is their composition, mainly the percentage of nickel and magnesium. Starting at the top and working our way down, you can see that the upper layers, the most weathered, have both the lowest percentages of nickel and magnesium. Conversely, the deeper layers contain the higher percentages of nickel and magnesium.

As you will see in Part 2 of this article, the composition of the laterite ore is key to how it is processed into its final product and, ultimately, how it will be consumed in its end use.

 

Sulphide Versus Laterite Deposits

Nickel sulphides and laterites are very different, not only in the basics such as composition, but on a higher level, such as the jurisdictions where they are found.  In my opinion, while the demand fundamentals of the nickel market are bullish, developments in 2 of the bigger jurisdictions for nickel mine production – Indonesia and the Philippines – could have a major effect on the supply side of the market, good or bad. Time will tell.

NOTE: There is a 3^rd but much less common nickel mineral called Awaruite. There is only one deposit that I know of, FPX Nickel’s Baptiste Deposit in the Decar District, which is located in British Columbia, Canada.

 

A summary of the key differences between the 2 types of deposits:

• Mining – Nickel sulphide deposits, which are typically found deep underground, are typically more expensive and difficult to mine in comparison to laterite deposits, which are found at surface and can be open pit mined.
• Grade – Comparatively, sulphides are typically a higher grade than laterites.
• Ore Processing – Comparatively, sulphides are easier and cheaper to process than laterites.
• Exploration – Sulphide deposits are more expensive to find in comparison to laterite deposits. Sulphides are found deep in the earth’s crust and, therefore, are much harder and costlier to find.

As you can see, there are advantages and disadvantages to each type of ore. Currently, the sulphide ore mainly feeds class 1 nickel users, and the laterite ores mainly feed the stainless steel industry (which, by the way, currently accounts for 2/3 of the global nickel demand).

 

 

Nickel Laterite Ore Processing

Nickel laterite ore processing depends on the zone from which the ore is mined. As outlined earlier, each zone within a laterite deposit is very different in its chemical composition and, therefore, restricts the processing technique that can be used to extract the nickel.

Pyro-metallurgy

Smelting

Arguably the most well known and widely used processing technique for extracting payable metals is smelting. The smelting of nickel laterite ore is no different, as the smelting process is the dominant technique and is typically used to make nickel pig iron (NPI) for the Chinese stainless steel market.

NPI is created by mixing, saprolite ores with coking coal and a mixture of fluxes. The process culminates in an electric arc or blast furnace, which renders the unwanted impurities into slag and allows the molten mixture to be cast into molds, forming nickel pig iron.

The main advantage of the smelting process is that it is a proven technology and can process saprolite ores (high magnesium), in relative terms, quickly. As well, it has high nickel recoveries. The smelting process, however, it requires a higher grade laterite ore, a large amount of energy to operate, and finally, doesn’t separate cobalt in the process.

Hydro-metallurgy

Hydro-metallurgical processing of nickel laterite ores can produce either a pure metal or an intermediate product such as mixed hydroxide precipate (MHP), mixed sulphide precipate, nickel carbonate or mixed nickel oxide.

The production of pure metals comes at a higher cost, as it requires additional facilities for purification, cobalt separation, and electro-winning – which can be expensive from an energy perspective. Alternatively, the production of intermediate products can be advantageous for all the opposite reasons that make pure metals less cost effective – less CAPEX and less energy intense.

The future of the hydro-metallurgical processing is most likely in high pressure acid leaching (HPAL), which has its own pros and cons, but has been gaining popularity in the last few years.

 

High Pressure Acid Leaching (HPAL)

The HPAL process’ re-emergence on the world stage as a technique for processing laterite ore is gradually gaining popularity as companies have begun to realize the need for laterites to be processed into Class 1 nickel units. Unfortunately, while the HPAL process is gaining more attention, it’s only really effective at processing the low magnesium limonite ore, as high magnesium levels have a neutralizing affect on the sulfuric acid which plays a key role in the extraction of the payable metals in the process.

The HPAL processing begins with the crushing of the ore, which is then mixed with water and preheated before being placed into an autoclave. The autoclave then elevates the temperature (up to 255 degrees Celsius) and pressure (725 psi) of the slurry and sulfuric acid and, over the next 60 minutes, the mixture reacts, extracting the nickel and cobalt from the slurry.

Once the autoclave portion of the HPAL process is completed, the slurry must be brought back down to atmospheric pressure and, thus, requires at least a couple of pressure letdown stages, which reduces the overall pressure of the slurry. Once at atmospheric pressure, it can be washed and the nickel / cobalt separated from the liquid.

Overall, the main advantages of the HPAL process are its ability to process low grade nickel laterite ores and its high and separate recoveries of nickel and cobalt. These advantages, however, are contrasted by a few negatives, which are its inability to process high magnesium or saprolitic ores, high construction and maintenance costs due to the highly corrosive sulfuric acid and, finally, the proper disposal of the magnesium sulphate effluent (waste).

 

NOTE: There are a few other types of nickel laterite processing techniques that are used throughout the world, such as, Caron Processing, Pressure Acid Leaching (PAL), atmospheric leaching, and bioleaching.

Global Nickel Refinement

The following flow chart produced by UBS Research is a great depiction of how the current nickel supply is consumed. It’s my contention that the 10% of nickel laterite consumption, which is currently diverted to create nickel chemicals and metal, will increase over time and fulfill the Class 1 nickel demand, which I believe will outpace sulphide ore production.

Source: UBS Research

 

 

 

Concluding Remarks

The EV revolution is here and, to me, it’s not a matter of ‘if’ but at what rate will the global population adopt EVs into their lives. As a result, all of the battery metal markets will be affected, each in its own way. The metal that I believe will play the largest role in this revolution is nickel.

This future onslaught of demand will be fulfilled by nickel laterites, which, today, have a minimal role in the Class 1 nickel market. In my opinion, the drop in nickel sulphide production, exploration and development over the coming years will force battery makers to consume nickel produced from the HPAL processing of laterite ores.

This, in turn, will have to be met with a rise in nickel prices to allow for these low grade laterite ores to be cost effectively processed for their use within the battery market.

Ultimately, I believe the future is very bright for nickel, but don’t get too caught up in the narrative; as I’ve shown, there are other ways the market can change to accommodate this major influx of demand.

 

Don’t want to miss a new investment idea, interview or financial product review? Become a Junior Stock Review VIP now – it’s FREE!

 

Until next time,

 

Brian Leni  P.Eng

Founder – Junior Stock Review

 

 

Disclaimer: The following is not an investment recommendation, it is an investment idea. I am not a certified investment professional, nor do I know you and your individual investment needs. Please perform your own due diligence to decide whether this is a company and sector that is best suited for your personal investment criteria.

 

In June, I had the pleasure of visiting the Yukon, Canada’s most westerly Territory and the land of the midnight sun. The point of my visit was to partake in the 2018 Yukon Property Tour, which, this year, brought together 3 large groups of investors, analysts and media to see a few of the Yukon’s most promising projects and to participate in a full-day investment conference.

The tour took me to 6 different projects in 4 days, giving me a great perspective of the Yukon’s mineral potential and the people who are exploring and developing within it. In all, I came away very impressed and believe that it’s just a matter of when for most of the projects in terms of their development into Canada’s next mines.

Here’s a look at the Yukon by the numbers and a few specific things that I, personally, look at when gauging the opportunity for investment within a jurisdiction.

Enjoy!

 

 

Yukon – By the Numbers

Population – 38,630 (December 2017) –23% of the Yukon’s population is Aboriginal.

Capital City– Whitehorse (has an International Airport) – Population 29,962 or 78% of the Yukon’s total population.

Demographics – 0 to 19 years of age: 8,217, 20 to 64 years of age: 25,627, 65+: 4,784 – This is a great distribution of demographics for a developing Territory.

Unemployment – 2.7% (May 2018) – This is a great statistic; essentially, those who are able and want a job can find employment. The issue may be, and this is a great issue to have, finding enough workers in what I see as a bright future for growth, especially in the mining industry.

Largest Cities by population, outside of Whitehorse – Dawson City: 2,200, Watson Lake: 1,441, Haines Junction: 911, Carmacks: 549

Real GDP – $2,345.3 million (2016)

GDP by Industry (in terms of NAICS – 2016) – Public administration: 23.1%, Real estate and rental and leasing: 14.2%, Mining, quarrying and oil and gas extraction: 12.8%, Health care and social assistance: 8.4%, Construction: 7.7%

• With higher precious and base metals prices in the future, a lot of prospective projects have a very good chance of re-starting production (i.e. Alexco Resources), or developing their deposit into a mine, (i.e. Western Copper and Gold). Given the relatively small size of the Yukon economy, major projects such as Western Copper and Gold’s Casino Project will have a tremendous effect on the overall Yukon economy.
• The Government of the Yukon and the Federal Government make up a major portion of the Yukon economy, as you can clearly see from the GDP break down. For the success of the Territory, this has to change in the future.

Fraser Institute Ranking for Mining Investment Attractiveness 2018 – 13^th in the world

• The Yukon is a premier jurisdiction for mining and attained a score of 79.67, or 13th in the world, for mining investment attractiveness, according to the Fraser Institute’s 2018 rankings. The Fraser Institute uses a number of criteria for evaluating a jurisdiction, such as political stability, mining law, taxation and, arguably the most important, mineral potential.

NOTE: All statistics taken from the Government of the Yukon Statistics

 

 Aboriginal Land Claims and Self-Government

11 of the Yukon’s 14 First Nations have comprehensive land claim (Final Agreements) and Self-Government Agreements. It was in 1993 that the template, the Umbrella Final Agreement (UFA), was signed and used toward the negotiation of individual land claim agreements.

Source: The Government of the Yukon

 

With the settling of their land claims, each First Nation has the power to control and direct their own affairs. Most importantly for the subject of this article, they have direct control over the exploration and development of the mineral projects on their property.

The following First Nations have settled their land claims and are now self-governing:

• Champagne and Aishihik First Nations (1993)
• First Nation of Na-Cho Nyäk Dun (1993)
• Teslin Tlingit Council (1993)
• Vuntut Gwitchin First Nation(1993)
• Little Salmon/Carmacks First Nation (1997)
• Selkirk First Nation (1997)
• Tr’ondëk Hwëch’in(1998)
• Ta’an Kwäch’än Council (2002)
• Kluane First Nation (2003)
• Kwanlin Dün First Nation (2005)
• Carcross/Tagish First Nation (2006)

 

For most investors, First Nations involvement in mining projects is typically met with skepticism; given the history of some of the dealings around the world, this isn’t unfounded. However, each situation should be examined for its individual merits, as well as the history of the specific First Nations where the prospective investment may occur.

The Yukon’s First Nations are no different and, given the immediate history with mine development, such as Victoria Gold Corp.’s development of the Eagle Gold Project within the traditional territory of the Na-Cho Nyäk Dun First Nation, it would appear to me that mutual benefit from mining is the driving force behind the cooperation agreement.

Another great example of a mutually beneficial cooperation is the synergy that has been found between the Kluane First Nation and Nickel Creek Platinum. The Kluane First Nation provides many of the key non-technical services to the Nickel Shaw Project camp, such as a great cafeteria service, which I had the pleasure of trying!

Looking up at the Nickel Shaw Project Deposit

I think the bottom line is companies that begin their relationship early in the project’s life, work to maintain that relationship, and can prove that they are as concerned about the environment and the people who inhabit that environment will, ultimately, be successful in moving toward the end goal of developing an operating mine. When researching a company, these can be key things to look for and to ask about when interviewing management. Of course, nothing matches doing a site visit and seeing it first-hand.

 

 

 

 

Yukon’s Political Landscape

Currently, the Government of the Yukon is controlled by the Yukon Liberal Party, which is led by Premier Sandy Silver.  Generally speaking, the Liberal Party’s business philosophy is typically thought to be somewhat in the middle of the left-leaning New Democratic Party (NDP) and the right-leaning Conservatives.

In November 2016, the Yukon Liberal Party defeated the Yukon Party (conservatives), which was in power for many of the terms dating back to 2000. With a very low unemployment level and 80% of the population located in Whitehorse, politics in the Yukon are somewhat unique. Much like the rest of the country, however, issues surrounding the environment – carbon tax, power generation and housing – price and availability seem to be hot topics in the land of the midnight sun.

From an investment perspective, I’m always most concerned with left-leaning government power. Although, NDP governments have been in power in the past, the conservatives have dominated the leadership of the Territory for much of the last 20 years. Given this fact, I believe that past will be prologue in terms of the Yukoners’ general political philosophy, but it’s always something that should be watched.

 

Yukon Mining Alliance

Uniquely, to my knowledge, many of the junior and major mining companies with projects in the Yukon have formed the Yukon Mining Alliance (YMA) with the Government of the Yukon and the Canadian Northern Economic Development Agency.

The YMA’s mandate is to,

“promote Yukon’s competitive advantages as a top mineral investment jurisdiction and its member companies and their Yukon-based project.†~ YMA

In my opinion, this is a huge advantage of investing in companies with projects in the Yukon, because clearly the marketing and promotion of mining within the Territory’s borders is a major priority. Bottom line, narrative plays a big role in the success of junior mining companies, and with the added help of the YMA, Yukon-based companies have a distinct advantage working together to promote the Yukon mining jurisdiction narrative.

Personally, I have seen the YMA presence at a couple of the top mining conferences in Canada, such as PDAC and Cambridge’s Vancouver Resource Investment Conference (VRIC). The YMA is putting the Yukon on the map for interested resource investors, which, I believe, will pay off in spades as we move into the next leg of the bull market.

 

 

 

 

Infrastructure

In my opinion, the biggest knock against the Yukon in terms of risk to investment is the lack of infrastructure. With close to 80% of the Yukon population concentrated in Whitehorse, the need for roads, telecommunications and power infrastructure to the remote or uninhabited portions of the Territory hasn’t been a high priority or practical, given the cost. However, this is rapidly changing as it’s now abundantly clear that access to power, telecommunications and roads have become the major sticking points for a few of the Yukon’s most advanced mineral development projects.

Yukon / Northwest Territories Fibre Optic Line

As you can see in the image below, the thick black line represents the existing fibre optic line which feeds the Yukon with its high-speed internet access. With only one fibre optic line feeding the Yukon’s internet demand, the system was highly susceptible to disruptions due to the fibre cable being cut along the Alaska Highway.

 

Source: CBC News

To improve the reliability of the internet access, the Government of the Yukon initiated the$50 to $70 million North Canada Fibre Loop Project, which would connect the Yukon to the Northwest Territories’ (NWT) fibre network via fibre optic lines running north from Dawson City to Inuvik, NWT.

During my site visit tour, it was announced that this project was successfully completed and, thus, has brought a new age of reliability to the Yukon’s internet access. This project is a major milestone for the Territory and should provide a reliable base from which to build, moving forward.

 

LNG Power Generation

In 2017, 97% of the Yukon’s electricity was produced from 3 hydro-electric power generation plants. For a number of years, these hydro-electric operations were backed up by diesel generators, which kicked in during peak demand scenarios.

With carbon emissions and the overall price of power generation becoming bigger constraints to development, in 2014, the Government of the Yukon made the decision to green-light Yukon Energy’s plan to move to a liquefied natural gas (LNG) as a fuel for generating backup power for the grid.

The fracking revolution dramatically changed the supply to demand balance in the oil and gas world, causing a major swing upward in the availability of natural gas for the market. Thus, natural gas prices have hovered around their multiple decade lows for a while, now.

While natural gas is one of the cheapest and cleanest burning fossil fuels available, the issue has been economic transportation. To allow for a meaningful amount of natural gas to be transported over a significant distance, it’s currently converted into LNG.

The natural gas is extracted from the ground and then refrigerated to minus 162 degrees Celsius, turning it into a liquid and, thus, more amenable to economic bulk transportation.

Source: Yukon Energy

LNG Storage

A big step toward making LNG a viable option for developing mines in the Yukon could be the construction of an LNG storage facility. Currently, Ferus Natural Gas Fuels Inc., the LNG supplier to the Yukon, is working with Yukon Energy to gauge the potential of such a facility.

If the LNG storage facility were to be built in Whitehorse, it could not only feed the backup generators, but also act as a depot for future mines that incorporate LNG into their long-term energy plan.

Having a reliable power infrastructure is paramount to the success of large-scale mining operations. With a number of sizable development projects waiting for their opportunity to be developed into mines, in my opinion, the Yukon is headed in the right direction by pursuing an LNG storage facility.

 

 

Yukon Resource Gateway Project

On September 2, 2017, the Yukon received a major commitment toward its development when it was announced that the Canadian Federal Government would contribute $247 million to the Yukon Resource Gateway Project.  The $247 million represents just over half of the $469 million needed to construct a road from Carmacks to Dawson City.

In my opinion, the main reason for this major undertaking was Goldcorp’s Coffee Project, which sits roughly half way between Carmacks and Dawson City, and is in the process of being developed into Canada’s next producing gold mine. Additionally, Western Copper and Gold’s Casino Project sits in the permitting stage of development and looks to benefit greatly from this announcement, as the road will give access to what is now a remote location.

Further, the Government of the Yukon will contribute $113 million to the Gateway Project, leaving the remaining $109 million to the mining companies to fulfill. The construction of the road has begun and, given the comments from Western Copper and Gold representatives, should take roughly 3 years to reach their property from Carmacks.

I think there’s no doubt that this road will be a major turning point for the Yukon and its development into a destination for mining, because I believe it and possibly slightly higher metal prices are the only things keeping this area of the Yukon from being developed, right now.

Mineral Potential

In my opinion, one of the most compelling reasons for investment in the Yukon is its mineral potential. With a good portion of the Yukon still not accessible by road, much of the Territory is still yet to be explored and, therefore, presents a blue sky type of opportunity for those who are willing to go off the beaten path.

Yukon Geological Survey

Both the Federal and Territorial Governments clearly recognize both the potential and the large expense associated with mineral exploration and development and are, therefore, directing funding accordingly. One such Territorial organization at the forefront of this PUSH is the Yukon Geological Survey (YGS).

The YGS’s mandate is to ‘provide the geosciences information required for resource and land management for the benefit of Yukoners, by acquiring and disseminating geological and geo-hazard knowledge to support exploration, inform resource and land management planning, and engage communities, schools and the public.’

Additionally, it manages the Yukon Mineral Exploration Program (YMEP), which has been set up to promote mineral prospecting and exploration activities in the Yukon. The YMEP has a $1,600,000 funding level for the 2018-19 fiscal year and is accepting applications for prospective projects.

It’s initiatives such as this that are keeping the pipeline of prospective geological targets full and, therefore, of keen interest to investors.

Tintina Gold Province

One of the most prospective regions for mineral exploration in the north-western portion of North America is the 150,000 square kilometre Tintina Gold Province (TGP). TGP runs east-west across the middle portion of the Yukon and Alaska, and is roughly 200 kilometres wide in its entirety. The TGP is essentially bound by the Kaltag-Tintina fault system to the north and the Farewell-Denali fault system to the south.

TGP encompasses arguably the Yukon’s most famous geological region, the Klondike gold fields which lay just south of Dawson City.  As stated earlier, the Resource Gateway Project will open this region up to development and exploration. Companies such as Klondike Gold, Trifecta Gold, Goldcorp, White Gold and Western Copper and Gold will greatly benefit from the road access to theirprojects.

View from the helicopter while flying over White Gold’s Property

White Gold Core Shack – red circle signifies visible gold

 

 

Klondike Gold Rush

The Klondike Gold Rush began in August of 1896, as three prospectors, George Carmack, Jim Mason and Dawson Charlie, discovered gold in what they referred to as ‘Rabbit’ Creek, or what is now referred to as Bonanza Creek. With the discovery and the rush to stake their claim, word quickly spread of their discovery, and so spurred an historic gold rush in Canada’s Yukon Territory and the United States’ Alaska.

 

Source: Yukon Government Archive

It’s estimated that the Klondike Gold Rush attracted 100,000 people from all walks of life, testing their luck against the odds to find their fortune.  Many of the new American prospectors found their way north via ships boarded in Seattle.  Former ports, such as Dyea, Alaska, were accessible at high tide and allowed prospectors to begin the lengthy trip north toward the centre of the Gold Rush, Dawson City, which is roughly 700km north.

Source: Yukon Government Archive

Unfortunately, for the vast majority of newly minted prospectors, their dream of discovering a fortune never came to fruition; if it wasn’t the weather and the long trip to the prospective gold claims, it was the exorbitant costs that came with exploring and living in the north. In many of the articles I read while researching the Klondike Gold Rush, many estimated that costs were 10 times higher than what most of the people would have experienced in their former lives, living in Toronto, New York or Chicago.

Source: Yukon Government Archive

The Klondike Gold Rush is estimated to have produced $29 million in gold over its 3-year span. Additionally, the Yukon Geological Survey estimates that a total of 20 million ounces of gold has been extracted from the Klondike goldfields since 1896. Gold mining can be credited with spurring the development of much of Canada and America’s northern most territories and states. In my opinion, the Yukon holds tremendous mineral potential and will only increase its prestige within the mining community.

 

 

Selwyn Basin

Moving to the eastern portion of the TGP within the Yukon, you enter the Selwyn Basin, host to the famously rich, Keno Silver District, which has 214 Moz of historic silver production and is located north-east of Mayo. It’s also in the immediate vicinity of Keno City, one of the Yukon’s smallest communities with just 24 residents.

For those who may not know, Alexco Resource’s Bellekeno silver mine is located in the Keno Silver District, which began operation in 2011 and produced until its suspension in 2013. The Keno Silver District is not only famous for its past production, but its high silver grades, which range up to 1,000 grams per tonne, putting them near the top in the world.

Standing in Alexco’s Flame & Moth decline

ATAC Resource’s Rackla Gold Project, also in the Selwyn basin, is a standout, in my mind, given the Carlin Style gold mineralization which has been found on the property. With its typically cheap mining and recovery methods, Carlin Style gold mineralization has made Nevada one of the premier gold producing jurisdictions in the world. In recent news, ATAC released their maiden resource on their Osiris Project, which has an inferred resource of 1.685 Moz at an average grade of 4.23 g/t.

 

 

ATAC Resources – Rackla Gold Property

 

Finally, the Selwyn Basin is home to sedimentary exhalative (SEDEX) deposits (Pb-Zn-Ag), which, in terms of Fireweed Zinc’s Macmillian Pass Zinc Project, rank near the top of the world’s largest in terms of zinc and overall mineral content.

In my opinion, world-class mineralization potential awaits those exploring in the Yukon. As the infrastructure quality improves and cash begins to pour back into the mining sector on a whole, I have no doubt that the Yukon will play a major role in Canada’s mining future.

 

 

 

Concluding Remarks

No investment is without risk, and for many companies within the junior resource sector, jurisdiction is the greatest risk. Personally, having researched the Yukon and now visited, I have to agree with the Fraser Institute rankings and believe the Yukon is a premier jurisdiction for mining investment.

In terms of the risk that I see with the Yukon, it’s mainly related to infrastructure and the time required to build it. In terms of investment, however, I like that the risk is associated with what I believe is a ‘when’ and not an ‘if’ question – it’s just a matter of time before the necessary roads, power and telecommunications are in place to move many of these projects forward.

I must note that there’s a good portion of projects in the Yukon that sit in close proximity to everything that is needed and, therefore, I caution anyone from painting all of the projects with the same brush.

The Yukon has world-class mineral potential and it’s attracting the world’s major mining companies, which, over the last few years, have taken either portions of a few of the juniors or have acquired the entire project for development into a mine.

With what looks to be a politically stable government and a good relationship with its self-governing First Nations, the Yukon is ready for investment, and I will be looking to invest in a couple of the companies that I believe present the greatest price to value propositions.

 

Don’t want to miss a new investment idea, interview or financial product review? Become a Junior Stock Review VIP now – it’s FREE!

 

Until next time,

 

Brian Leni  P.Eng

Founder –Junior Stock Review

 

 

Disclaimer: The following is not an investment recommendation, it is an investment idea. I am not a certified investment professional, nor do I know you and your individual investment needs. Please perform your own due diligence to decide whether this is a company, sector or jurisdiction that is best suited for your personal investment criteria. Brian Leni does not own any shares of the companies mentioned in this article at this time.