Key Characteristics Of Wildly Asymmetric Opportunities In Junior Mining
Canadian resource fund manager Darren McLean may have just delivered the single best mining podcast episode in history.
The Australian focused mining podcast titled “Money of Mine” has quickly become can’t miss content for resource speculator degenerates such as myself. However, Travis Ricardo and Jonas Dorling may have outdone themselves with their latest episode guest.
Darren McLean is a Canadian resource fund manager who is cult famous for being part of the group of ‘activist’ investors who helped motivate gold mining giant Newmont (NYSE:NEM) to acquire junior miner GT Gold for C$400 million in 2021.
In the Money of Mine episode, McLean delivers so much alpha packed into 90 minutes that I couldn’t possibly do it justice with a summary. You’ll just have to listen for yourself.
However, I would like to highlight one key nugget of wisdom from Darren’s stream of consciousness sermon.
In three examples of Darren’s success in resource investing (GT Gold, Champion Iron, and Filo Mining), there is a common thread. In each example that was discussed in some detail during the Money of Mine episode, each situation had a substantial residue of underlying market negativity. In Darren’s words (around 21:00 mark), “I like things that are underappreciated, I like things that people view as a bit of a haunted house…. something is wrong with the company, people have been burned before and they don’t want to go back. But something has changed, and that’s the perfect scenario…..this isn’t the same thing as before.”
In the case of Champion Iron circa 2016/17, the iron ore market was deeply out of favor. In the case of GT Gold, circa 2018/19 the junior mining sector was deeply out of favor and many of the early GT shareholders had been focused on the epithermal gold/silver drilling at Saddle South that proved disappointing. The market was slow to adjust to, and fully appreciate, the hole 85 Saddle North Porphyry Discovery that was made in summer 2018. And finally in the case of Filo Mining, it was the jurisdiction risk of Argentina that kept many investors skeptical and on the sidelines.
Simply summarized, the best investment situations can’t be blatantly obvious. There must be a wall of worry to climb. And in many cases, there will be no shortage of detractors explaining to the assembled peanut gallery why this won’t work, and why the stock should be sold short. In fact, if there isn’t an element of negativity in the air then it may not be a truly great investment opportunity.
Please enjoy the Money of Mine episode with Darren McLean and big kudos to Travis and Jonas for creating such quality content on the obscure and opaque subject of junior resource investing.
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.SEDARplus.ca for important risk disclosures. It’s your money and your responsibility.