“Junior companies must have well-defined targets and avoid rushed decisions like drilling. Investors will be put off if due diligence and planning are not prioritized. There is a lot of competition for funding. Being thorough with a strategy and prepared for execution is far more attractive than rushing to get results.”
How has the finance market for mining companies evolved since we last spoke in September 2018?
We have seen a rise in the price of precious metals, led by gold. We are seeing greater stability in pricing and this is a strong indicator that we continue to transition from a bear market to a bull market after years of consolidation in mining and metals. Stability is crucial. It’s what allows equities to transition from a bear to a bull market and ultimately perform from the low in the cycle. Gold and palladium have been strong performers, and we expect silver to perform even better in the medium term. Nickel and cobalt are gaining traction as well. These metals are ones to look out for because of the rise in the market for electric vehicles and an interest in where the supply will be sourced over the long term.
There is definitely a swing in sentiment as we are seeing interest in minerals even by the generalists. You can see this in the attention being given to the best junior companies with high-grade reserves. Grade is of crucial importance to investors these days; this cannot be understated.
IBK Capital has been involved in Great Bear Resources’ financing, and their stock has been the standout performer in the junior space in the past 12 months. To what do you attribute this success?
Great Bear Resources has been a success and continues to be so because of very strong fundamentals. Its key project is in the correct address and of sufficient land-size; there is room to grow and the right infrastructure to develop. The current drilling sites are well-defined geologically, geophysically and geochemically. There is a good understanding of the currently known ore bodies, and they are following the right indicators to new zones. Their deposits and targets suggest excellent potential for expansion. Their ability to intercept high-grade gold is excellent, and their drilling exploration success is truly the result of a great exploration team.
A comment that applies to any exploration discovery is that continuous exploration and expansion of a deposit are important for the company’s market valuation. Always adding net new mineralization is necessary to fuel higher prices. If a company’s sole focus turns to infill drilling, converting inferred resource to indicated or measured, this might be an indication that the stock has reached its limits.
Can you comment on the potential you see in MacDonald Mines’ SPJ project near Sudbury?
SPJ ticks many of the boxes, including a good location and land package. There is a past producing mine that, in its time, produced high-grade material. There are solid fundamentals so that if you have exploration success, you have access to necessary infrastructure to develop a mine. In terms of discoveries, there are many drill holes with visible gold, which is a good start. Next, one wants a sense as to the thesis for the potential size. In this case, the project thesis is a reinterpretation of an old mine and deposit expanding beyond past limits. If they can show that their reinterpretation is correct with successful drilling and continued high-grade gold discovery, then the project has a lot of promise. We should be able to test if the team’s theory is true soon and at that point consider the significance of the findings. They are doing what many successful exploration companies have done before them: wisely using the tools and data on hand to ensure at each phase there exists the fundamentals of continued exploration success.
To compare to Great Bear two years ago, we are in a different market, and potential new discoveries are getting attention earlier on. That is good to see. Eric Sprott made an investment in MacDonald Mines on October 3, 2019 and is the company’s largest shareholder with 18%.
The investment boom in Cannabis seems to be subsiding, do you think this will impact the climate for mining investment?
It is difficult to compare across markets because mining and cannabis are very different. Cannabis is a very new investment option, and there is still a lot of money to be made in this space, especially globally. However, in the Canadian cannabis space, investors have begun to sober up and look at attractive opportunities elsewhere. Mining is receiving renewed attention because of a few recent high-profile success stories. Generalists are starting to reawaken to the possibility of making money in mining. This is not to say that cannabis is dead, simply that the early investor that was attracted to the cannabis sector two years ago is now being lured to different opportunities. The mining sector has a lot of value to regain and the appreciation in the prices of precious metals and battery metals is starting to attract attention.
What advice would you give to junior companies looking to raise capital in today’s markets?
What I like about an early bull market is that it separates the good from the bad. In the early days of a bull market, investors are very critical and cautious, which means they are careful about where they put their money. Management has to be very convincing in order to obtain capital. There must be a strong vision that is backed with historical data and reliable results, as well as a tested team that can be trusted to deliver results. Management must convince investors that not only is there potential for profitable discoveries but that their theories are well supported and make sense. Junior companies must have well-defined targets and avoid rushed decisions like drilling. Investors will be put off if due diligence and planning are not prioritized. There is a lot of competition for funding. Being thorough with a strategy and prepared for execution is far more attractive than rushing to get results.