|Novo Resources and Irving Resources|
|Many people invest in the mining sector for leverage. If you look at the data of the last two decades leverage seems to be a myth.
Mining as an industry is a wealth destructive industry. A lot of blame goes to investors who approach mining as a gamble, “investing” based on hunches and hopes, rather than analysis, which positions them in an unfavorable risk-reward situation.
An investor must focus primarily on protecting his capital—there are far too many forces at play that want to take away his savings. His focus on preserving his capital orients him psychologically to produce wealth and make money.
I have for many years invested in arbitrage opportunities, particularly when I have analysis of the underlying values of the merging entities.
I prefer to invest when companies are trading for prices less than what my conservative valuation leads me to. I then look for a 100% upside.
I always want to invest with people I know and respect. They should not only be good people, but also street-smart and financially literate.
In my analysis, I always use metal prices that are lower of the spot or the future price. I like to get blue-sky for free.
Here is my reminder about two companies that I have written about in the past. Both of these companies have done very well, in terms of creating value for their shareholders:
Novo Resources (NVO; $0.77): This is a company run by Dr Quinton Hennigh. It has two high-grade projects, Beatons Creek and Blue Spec, in Australia. It pays to remember that high-grade, high-margin projects offer low-leverage to metal prices and hence their inherent-values are less affected by fall in metal prices. Their share prices of course tend to fall with the so-called leveraged plays (so-called, because leverage is often a myth), often offering opportunities for astute investors in a bear market. NVO also has a project in Nevada that one day should supply feed to one of the nearby mills. NVO released its latest drill results from Its Blue Spec project on 29 November 2016. They should continue to announce results over the few weeks.
Irving Resources (IRV; $0.45): IRV has stayed below the radar, slowly and silently acquiring projects in Japan. The company has Dr Quinton Hennigh as the Chief Geologist. IRV is run by Akiko Levinson (who is also on the board of Novo Resources). Both of them were behind Springpole project, one of the largest gold projects in Canada, which got sold later last year. I like to invest with people with a background of successes. IRV has projects in Malawi and Tanzania, but what interests me the most are their projects in Japan, where they have recently found very high-grade grab samples. They have also significantly increased their land position. This is an early stage company, but rapidly moving towards—in my view—becoming something significant.
I am a big shareholder of both, NVO and IRV. I have also in the past worked for these two companies, so please do extra due diligences before you invest in them.
Since 8th November 2016, most of my time has gone into understanding what has been happening in India… The Indian Prime Minister decided to pull out 88% of the monetary value of the currency from circulation. This has led to a very major crisis.
In my view India is on a path to becoming a full-blown police state. In a way, this was inevitable. Given the massive chaos that India is, I will be looking at Zimbabwe or Uganda for an analogue. Modi will likely declare himself a dictator.
Finally, while at Mines & Money in London, I spoke on “Is India the next China?” My assertion is that these two countries are not comparable and India cannot and will not be the next China. India will likely be the next banana republic.
Merry Christmas and a safe and prosperous 2017.
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