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Kai Hoffman: My best ideas for 2023
Guest post by Kai Hoffman of Soar Financial
I’ve known about Kai and followed his work for many years, but we first met in person at the New Orleans Gold Show last October. He’s an absolute fanatic about junior mining, and I feel his finger is really on the pulse of what’s going on at the speculative, tinycap end of the market. So I invited him to come and give us his best ideas for 2023. Here they are. Enjoy!
It all started mid-March 2022. Jerome Powell and the Federal Reserve started on its rate hike cycle journey. This trend will continue as long as the Fed sees the need for more rate hikes to keep reducing inflation.
From a sentiment perspective, it feels like we will have to keep waiting for gold and silver’s moment in the spotlight. Investors are taking their chips off the table yet again. Gold is fighting with the $1,800 level. Silver is now fighting once again in the $20-22 zone.
The financing window for many companies has closed again. We are only seeing large scale financings by developers and later stage explorers. Companies must literally go big or go home when asking for money.
Against this difficult backdrop, my intention with this piece is to share my best stock ideas for 2023 with you.
As an investor you need to understand what to look for in a company, but also how to cleverly buy in the market. I don’t think there is a particular need to rush into of the stocks mentioned, but rather cost average your way in, as I believe the market will provide you with the luxury of lower share prices until after Easter … at least.
A couple of things I want to mention before, I give you the names. Yes, you can scroll down and cheat, but where is the fun in that?
First, I own the stocks I mention here. Second, I have visited the companies’ projects each at least once and have excellent relationships with the respective management teams. For me this is extremely important, as half the game is investing in people and not the project. But I am not telling you anything new here.
So here we go.
Banyan Gold Corp (TSX-V: BYN)
Banyan Gold has a tier one gold project on its hands. The next resource update, due later in 2023, should show a 7mn oz resource figure (up from 4mn ounces). Tier one status for a mining project means, according to Minex: annual gold production of over 250,000 ounces, 20 year or longer mine life and bottom quartile of the cost curve. I strongly believe that the AurMac project will deliver on those metrics.
The Yukon gold explorer also sits on a treasury of roughly C$19mn and is fully funded for 2023. Keeping in mind what I mentioned above, the treasury is extremely important and valuable.
Since the company does not have to drill deep holes - it is a flat lying ore body, close to the surface - results will be steady. The field season due to amazing access, will start in the coming days.
Montage Gold Corp (TSX-V: MAU)
I just returned from a visit to Montage Gold’s projects in Ivory Coast late last week. There the company owns the 3.4mn ounce Koné project and the 350k ounce Gbongogo project which it recently acquired from Barrick Gold and Endeavour Mining (both companies are also now larger size shareholders in MAU).
In February 2022, Montage released a definitive feasibility study for Koné showing interesting metrics. The IRR at $1,800 gold would have been 47%. However, the reserve grade sits only at 0.66 g/t which by no means is bad, but definitely on the lower end. Given the inflationary environment and CAPEX of over $500 million, the market shrug its shoulders, rightly so imho.
The game changer happened in December last year. Montage acquired neighboring ground from the major miners mentioned above. More importantly it acquired 350,000 ounces of gold at a 3x higher average resource grade of 2.1 g/t Au with a lot of upside size potential. It is early days still and MAU is doing its homework on the recently acquired licences.
Regarding the cash position, the company is operating 5 drills at the moment (1x Diamond, 2x RC, 2x Air core). It has cash at hand but I would not be surprised to see a financing before Easter, given market conditions.
Montage will be a takeout candidate as soon as the new resource is included in an updated DFS and Gbongogo drilling shows even more upside.
GR Silver Resources (TSX-V: GRSL)
We can make this short – the company disappointed the market with its resource calculation back in August of 2021 and has been in the dog house ever since. The company, after 18 months of additional drilling, discovering new areas and infilling gaps in the resource, is due to release an updated resource study in the coming weeks.
GR Silver is working on a the polymetallic Plomosas project – which it acquired from First Majestic Silver – and the silver dominant San Marcial project, in the Rosario district of Sinaloa. The new global resource will combine both areas. If the numbers that I expect to be released hold up, the stock is due for a re-rating in the mid-term.
The company also just closed a C$3m financing and is in no immediate financing need, but will have to raise additional funds to progress work – this is an exploration company and the need for additional financing should not come as a surprise to you.
At 10c or below this company and its management team is definitely worth a closer look.
Canada is where the large majority of natural resource companies are listed. If you don’t have a broker who can deal with Canadian stocks, Interactive Investor is a cheap and usually fairly reliable option for UK investors. If you sign up with them, and say I referred you – email@example.com – you will get a year for free and I get a referral fee.
Disclaimer: We are not regulated by the FCA or any other body as a financial advisor, so anything you read above does not constitute regulated financial advice. It is an expression of opinion only. Natural resource companies are famously risky so please do your own due diligence and if in any doubt consult with a financial advisor. Markets go down as well as up. Especially natural resource companies. I do not know your personal financial circumstances, only you do, but never speculate with money you can’t afford to lose. This letter cannot be liable for any losses incurred.