Discovery Is What It's All About: The Secrets To A 1 In 1,000 Windfall Outcome In Junior Mining
The purpose of the junior mining sector is to make new discoveries & create wealth for all stakeholders where it did not exist before
The junior mining sector is all about exploration. Exploring the Earth with the goal of discovering new ore bodies; ore bodies that hold economic promise to one day be transformed into operating mines that can supply a hungry world and help fuel the progress of humanity.
Discovery is the cornerstone of this industry. Without it, the world would face a shortage of metals needed for its advancement, and the mining sector would struggle. Significant new discoveries create wealth where none previously existed. In addition, the benefits of mineral discoveries across society and the economy can be expansive and far reaching:
Economic Benefits
Boost to Local Economies: New mineral discoveries can create jobs, stimulate local businesses, and contribute to economic growth in the region.
Increased Revenue: Governments benefit through taxes, royalties, and export revenues from mining activities.
Infrastructure Development: Mining projects often lead to improved infrastructure such as roads, ports, and utilities, which can benefit local communities.
Technological Advancements
Access to Critical Minerals: Discoveries of rare or critical minerals like lithium, cobalt, and rare earth elements are crucial for advancing technologies such as batteries, renewable energy systems, and electronics.
Innovation Opportunities: Access to new minerals can spark innovations in material science, leading to the development of new products and applications.
Societal Benefits
Job Creation: Mining operations and related industries can provide employment opportunities, especially in remote or underdeveloped regions.
Educational and Skill Development: Training programs associated with mining projects can enhance local skills and expertise, boosting long-term employment prospects.
Improved Living Standards: Economic growth from mineral exploration often translates to better healthcare, education, and infrastructure for local populations.
Energy and Environmental Benefits
Support for Renewable Energy: Minerals like lithium and cobalt are essential for renewable energy technologies, aiding the transition to greener energy systems.
Sustainable Resource Management: Discovering new mineral deposits can alleviate over-extraction from existing sites, reducing environmental pressure on specific regions.
Carbon Reduction: Access to minerals for clean technologies can support global efforts to reduce greenhouse gas emissions.
Global Impact
Reduction of Supply Chain Vulnerabilities: New discoveries diversify the sources of essential minerals, reducing dependence on single suppliers and stabilizing markets.
Geopolitical Stability: Countries with new mineral wealth can strengthen their strategic importance in global trade and politics.
In some of my recent conversations with junior mining CEOs, there appears to be a strong consensus that the industry needs to make more discoveries. Discoveries capture investors’ imaginations, generate increased interest across the sector, bring more money into exploration, and help to create a virtuous cycle across the industry and economy.
The challenge is that discovery is hard, and it can be an expensive and time-consuming process. The risks can be daunting, and the high failure rate of early stage exploration companies has deterred many investors from touching foot in the junior mining sector.
However, when excellent preparation and calculated risk-taking meet with some cooperation from Mother Nature, nirvana can be the result. As a reminder of what discoveries can mean for shareholders in this sector, I compiled a list (far from exhaustive) of some of the most prominent recent discoveries:
The Top Three:
Great Bear Resources
Patriot Battery Metals
GT Gold
Honorable mention to Founders Metals (TSX-V:FDR), Vizsla Silver (TSX:VZLA), and Collective Mining (NYSE:CNL).
Great Bear Resources - GBR was arguably the best gold discovery of the last decade, and the stock delivered an enormous windfall for many investors. A rare 100x return in less than five years for those who appreciated the opportunity at Dixie in 2017/2018.
Due to its tight share structure and drilling success, GBR was able to achieve escape velocity after its August 2018 high-grade gold discovery at the Hinge Zone.
From $.58 per share the month before the discovery news to $29 per share 3 ½ years later, Great Bear is the poster child for the extraordinary outcomes that are possible when a world class discovery is made. Some of the keys to Great Bear’s success include:
Seeing what others had missed and creating a new geological model for the Dixie Project.
Making a discovery relatively early in the exploration stage at Dixie.
Maintaining a tight share structure and managing to deliver impactful news flow on a regular basis - this served to maintain the momentum and led to financings at higher and higher share prices.
Being able to transact on the asset before the company entered the orphan period of the Lassonde Curve.
Great Bear was bought by Kinross Gold in early 2022 for total consideration of nearly C$2 billion (including the royalty). Along with Arizona Mining (C$1.8 billion buyout in 2018 by South32), Continental Gold (C$2 billion buyout in 2020 by Zijin Mining), and now Filo Mining (C$4.5 billion buyout earlier this year by BHP/Lundin Mining), Great Bear stands out as one of the greatest success stories in the recent history of the junior mining sector.
Great Bear is the great exception, and definitely not the norm. Even if a company is able to drill a world class discovery hole, they can often have challenges following up on the discovery hole(s) with similar or better results. The key to delivering a 1 in 1,000 lightning in a bottle discovery success story is multi-faceted:
Tight share structure and low trading float at time of discovery hole.
Managing dilution and being able to raise money at increasingly higher share prices.
Keeping Mr. Market engaged with news flow and more discovery success (an incredible ore body helps in this area).
A bit of luck in terms of timing the market cycle.
High quality management with strong financial backing.
In order to create another Great Bear type of success, companies will need all of the above to work in their favor. So far I am closely watching Founders Metals and Collective Mining as the two companies most likely to generate a fantastic outcome for shareholders (due to share structure and momentum of drilling results).
FDR.V (Weekly)
The jury is still out on companies such as Awale Resources (TSX-V:ARIC) and Hercules Metals (TSX-V:BIG), being able to raise money above $1.00 per share would certainly help both of these companies to manage future dilution. But in order to get their share prices up from current levels, they will need to deliver more banger drill results such as OEDD-83 (Awale’s 56 meters of 26 g/t gold at Charger) and HER23-05 (Hercules’ discovery hole at Leviathan, 185 meters of .84% copper).
Disclosure: Author owns shares in some companies discussed in this article including ARIC.V BIG.V CNL and may choose to buy or sell at any time without notice.
DISCLAIMER: The work included in this article is based on current events, technical charts, company news releases, corporate presentations and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. This article is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.