Phenomenal Leverage to World-Class Discovery


Michael Ballanger

Michael Ballanger isn’t shy on opinion and on this submission he reveals a high-leverage copper play in Colombia that’s within the early phases of exploration. He is satisfied you must take a better look.

As a backdrop to offering all subscribers with a glimpse into how and why I choose investments, you will need to first have an understanding of the asset class earlier than losing one’s time and power on an thought that’s both earlier than its time or is past its buy-sell date.

In January of 2022, I elected to diverge from my longstanding adherence to the premise that errant world fiscal and financial insurance policies had created “the proper storm” for treasured metals (PM) investments.

Whereas I proceed to favor PMs as portfolio anchors, I made up my mind that for the reason that final two years of provide chain shocks and over-reliance upon conventional sources {of electrical} energy, the world would get up one morning shivering at midnight with the sudden realization that we had been going to want an important deal extra copper to facilitate the “electrification motion” — and that the cleanest supply of power on the planet was nuclear energy, whose main gasoline, uranium, was in structural deficit.

In each instances, I felt that an explosive transfer in demand accompanied with non-existent CAPEX planning for each uranium and copper would propel them to superior efficiency on this planet of useful resource investing.

On high of the generational advance seen in spot commodity costs for the reason that arrival of the pandemic, uranium and copper are about to surpass the 2002-2008 interval — the large infrastructure buildout in China and for causes extra intently aligned with scarcity situations moderately than unprecedented Asian demand seen throughout the prior advance.

For this dialogue, I deal with the “crimson metallic,” or Dr. Copper, the place popularity and folklore would describe it because the “the metallic with a PhD in Economics.” One of many causes that copper confirmed up on my funding radar display was that, traditionally, the junior exploration and improvement world prevented copper due largely to the boring nature of its purposes.

Whereas gold is “the funding of kings” and diamonds are “a woman’s finest pal,” copper has lacked the the Aristocracy and intercourse enchantment of different commodities, and as such, has been largely ignored by the hypothesis crowd that as an alternative dove into hashish and crypto and egregiously overpriced tech shares and renewables as a method of veering off the overwhelmed observe of funding conformity.

Alas, after a two-year sojourn into bureaucratic ineptitude verging upon tyranny, the worldwide pandemic has been the beacon in an enormous tunnel of darkness and ignorance that has lastly highlighted the systemic and structural scarcity situations dealing with us as we burrow ahead into the 2020s.

Simplified, if the brand new generations of worldwide residents insist upon a substitute for reliance upon fossil fuels and the elimination of all vestiges of the carbon footprint, that they had higher first take a course in ECON-101 and perceive the strains that can accompany the transition from the interior combustion engine and (coal-fired electrical energy crops) to photo voltaic and wind sources and electrical automobiles on the highways.

Embracing that transition is the emergence of an enormous improve within the utilization of copper and since replacements are tough to supply and much more so to implement, the speedy depletion of historic sources by way of each amount (tonnes) and high quality (grade) has multinational miners the world over scrambling for tasks carrying scale and geopolitical sanctuary.

So, when I’m introduced with a “story” (as a result of all investments are framed in a “story”), I need to know that earlier than I take exploration threat, I can anticipate to be free from the risks of political interference and — god forbid — confiscation. It’s due to this that I view jurisdictional safety as at the start within the hierarchy of preconditions adopted by secondary issues, corresponding to infrastructure, geology, and administration.

This constitutes a primer of types for these wishing to get a glimpse of my private guidelines comprising the preconditions for funding; there are various extra subtleties far too quite a few clog the pipeline in at present’s missive so I now current an concept that has been assigned A+ scores in all classes with particular point out of 1 shining attribute within the possession of this firm — leverage.

Max Resource Corp.Since I first joined the funding business in 1977, I’ve been both immediately or not directly concerned in plenty of main discoveries the place I speculated on a junior exploration firm buying and selling for pennies that ended up buying and selling for a lot of tens of {dollars} per share.

They’re certainly uncommon and whereas the “win ratio” is low, when Mom Nature and Woman Luck smile upon you within the mineral exploration area, the elasticity of return may be actually mind-boggling.

I cite for example the Eskay Creek discovery within the Golden Triangle area of B.C. the place slightly junior referred to as Consolidated Stikine owned a 50% curiosity within the play and went from CA$0.50 to over CA$40 in slightly over a yr.

A couple of years later, a discovery of a single pyrope garnet in Canada’s Northwest Territories set off what turned the most important staking rush in world historical past as junior explorers scrambled to safe land positions in Canada’s Arctic.

Not solely did the legendary DiaMet Minerals diamond discovery take the share value from pennies to over CA$70 per share, but it surely additionally launched a completely new business in North America with diamond reducing and sharpening centres popping up in Yellowknife and different Canadian cities to facilitate the processing of gem-quality stones of extraordinarily excessive worth.

Then, just a few years later, mining entrepreneur Robert Friedland’s Diamondfields Assets made a giant nickel discovery in northeastern Labrador that wound up in a $4.3 billion takeover by Inco in 1997.

The factors of commonality in all of those discoveries embody rarity, scale, and grade. When I’m speculating on a junior explorer buying and selling for pennies per share, understanding how lengthy the percentages are of discovering something financial, I’ve to weigh these odds in opposition to the elasticity of return if there’s a discovery.

If I’m listening to a pitch from a geologist that talks in regards to the potential for a 500,000-ounce (500 Koz) gold discovery, I’m often left unimpressed not on the geological mannequin or the methodology of the search however extra so as a result of there may be restricted upside. I don’t prefer to put money into a junior explorer except there exists an inexpensive likelihood for a discovery but it surely have to be coupled with expandable scale and grade as a result of if just one out of ten juniors experiences success, then it had higher respect at the very least tenfold with a purpose to make up for the 9 different “bowsers” that drew blanks.

By instance, I took nice curiosity within the Canadian diamond play in 1991 as a result of there had by no means been proof of the existence of gem-quality diamonds of financial scale in Canada previous to DiaMet’s discovery.

That led to my deal with the Mountain Province story and its 60% curiosity within the Kennady Lake discovery of 1995 and the ascendancy of the share value to almost CA$10 from pennies in lower than 12 months. The rarity of diamonds created a shortage issue that attracted large funding capital thus offering the elasticity of return and subsequent windfall for these courageous sufficient to take positions.

This brings me to a novel alternative referred to as MAX Useful resource Corp. (MAX:TSX.V; MXROF:OTCBB), a brand new place of which I solely just lately realized by means of a dialogue with a colleague, a skilled geologist who has been managing cash for over 35 years. He took the time to stroll me by means of a geological mannequin however not earlier than suggesting that I do some background work on an in depth and memorable sedimentary unit situated in central Europe often known as the Kupferschiefer (German for “copper shale”) that has been the first supply for copper for your complete European continent since as early as 1499.

It covers an space of roughly 600,000 sq. kilometers with the Polish mining operations producing over 212,894 tonnes of copper and 756.7 tonnes of silver mined as of 2012 (from the North-Sudetic trough) and 20,000,000 tonnes of copper and greater than 14,085 tonnes of silver mined since 1949 (from the Fore-Sudetic monocline).

There are numerous traits that set aside these very uncommon sedimentary items from different kinds of copper-silver mineralization however suffice it to say that Max Assets has acquired a big land bundle in northeastern Colombia in an space dwelling to current mining infrastructure the place Glencore Worldwide Plc (GLNCY:OTCMKTS) at the moment operates the Cerrejόn coal mine.

Surprisingly, Colombia at the moment enjoys a premier mining business rating from the Fraser Institute with many main and intermediate mining corporations energetic so so far as nation threat is worried, it’s of minor consideration.

Of utmost significance for junior explorers working in international lands is to have the ability to show to native authorities stable monetary power by means of multinational joint-venture companions or inside steadiness sheet integrity.

This paves the way in which for growth of concession rights within the occasion that exploration efforts are profitable. The Feb. 28 announcement detailing a transaction with Endeavour Silver Corp. (EDR:TSX; EXK:NYSE; EJD:FSE) whereby Endeavour buys 5% of Max by means of the personal placement of shares (whole deal CA$7.76 million) satisfies the steadiness sheet requirement after which it’s anticipated that each one permits and concession rights will likely be accredited upfront of an April drill program.

The undertaking of curiosity is the Cesar undertaking the place three separate discoveries of copper and copper-silver bearing mineralization had been made, with the latest being the Uru (“African belt sort”) and Conejo (copper-silver) discoveries. However the discover made in 2020 often known as the AM discovery carries Kupferschiefer-style mineralization and district-scale implications.

What leaps off the web page for this creator is the sheer scale of the land bundle which covers an space of accredited concessions exceeding 70 sq. kilometres at Uru and a formidable 116 sq. kilometres at AM. It’s estimated that the Cesar Basin extends for a 90-kilometer-long zone of curiosity internet hosting the three discoveries.

Wonderful highway entry and proximity to deep-water ports (inside 100 kilometers) are contributing options to the enchantment and that Max has already performed a substantial amount of the sooner, high-risk exploration — with success — is of big profit to shareholders coming into the play now versus three years in the past. The time period “de-risked” involves thoughts and whereas there may be nonetheless a component of exploration threat, when measured in opposition to the potential reward of “African Belt” (Uru) or “Kupterschiefer-style” (AM) deposits, the chance is clearly evident and unmistakably compelling.

To make certain, the markets haven’t been variety to the junior explorers or builders relative to the transfer in metals and power costs largely as a result of the brand new wave of traders which might be more and more dominating markets have little (constructive) historical past with the junior useful resource sector.

It has been a problem for most of the youthful institutional portfolio managers to embrace even a 5% allocation to the senior metals gamers after greater than a decade of FAANG outperformance, not to mention a “punt” into an intermediate or (gasp!) a junior.

Because of this, I consider we’re within the early phases of a bull market in junior useful resource corporations that can final for the subsequent decade. That is primarily the explanation I opted to pen this Particular Conditions Report.

If my forecast is appropriate, subscribers can anticipate geometric advances in all the positions in each GGMA 2022 portfolios however not with out the necessity for one phrase — endurance.

Generational shifts in funding paradigms primarily based on demographics can take years and I take advantage of for example the instance of the Web, which was first constructed within the Nineteen Sixties to permit American army computer systems to speak with one another lengthy earlier than the general public gained entry in 1989 when Compuserve was first in a position to service 500,000 customers.

The paradigm shift that enabled large adoption of the brand new expertise took 10 years to present itself into an funding mania peaking in 2001 with the collapse of the DotCom bubble however not earlier than enriching an important many traders and entrepreneurs within the early phases.

Since 1982, the world has been led to consider that attributable to advances in productiveness created by technological innovation and globalism, it had entered a interval of perpetual disinflation. Consequently, commodities (ex-energy) suffered from a low pricing regime that discouraged capital expenditures for exploration and improvement of recent sources of provide.

That development was interrupted within the early 2000s with the large China infrastructure buildout however resulted in 2011 when a decade of commodity value advances had been punctuated by the 2008 Nice Monetary Bailout. That period has now ended and has been changed by a world whose sources upon which we have now relied closely for the reason that introduction of the Industrial Revolution as now in dire scarcity situations with no treatment seen on the instant horizon.

Lastly, if there may be one aspect of study that applies to the junior useful resource business, it’s that high quality of administration is of paramount significance within the supply of above common efficiency. CEO and President Brett Matich was CEO of Aztec Assets, which rose from a A$1m market cap firm to an A$300m merger with Mount Gibson Iron in addition to his involvement with TSX.V-listed Cap-Ex Ventures the place he oversaw the invention and institution of an 8-billion-tonne magnetite useful resource. In different phrases, Mr. Matich is aware of how you can navigate the exploration area and, extra importantly, how you can flip a prospect right into a profit-generating return for all shareholders.

Head of Exploration for Max is Piotr Lutynski, described as a “Kupferscheifer-syle” geologist who was quoted in a latest publication as stating that “The copper and silver are very classical components more likely to be in sedimentary deposits like Colombia,” mentioned Lutynski, noting he has labored in related mineralization in Peru. “It’s the identical stratigraphy with the sandstone beneath the limestone on high and Kupferschiefer equal within the center.”

Additionally utmost in significance is the “in-the-field” group whose information of the native geological setting is surpassed solely by familiarity with the political setting as it might relate to permits and land growth. Consulting for the Cesar Basin group is Aussie Dr. Chris Grainger whose “creds” I investigated previous to formulating this report.

“Dr. Grainger resides in Medellin Colombia and has over 20 years of geological experience with intensive expertise in South America, together with Colombia, specializing in grassroots and brownfields exploration, and useful resource definition and improvement inside plenty of totally different commodities and various geological environments.”

Dr. Grainger is well-known to plenty of my Australian mining associates and within the phrases of 1 colleague, carried considerably of a “rock star” popularity with regards to each South American geology but in addition Colombian politics. Rounding out the group is the inclusion of an skilled within the area of Kupferschiefer-style deposits, Dr. Adam Pietrzynski who hails from Krakow, Poland, which supplies credence to the geological mannequin being superior on the AM discovery.

In sum, traders get a substantial amount of “torque” — upside leverage to a discovery — and with the preliminary April maiden drill program at Uru the place highlights included values of as much as 14.8% copper and 132 grams per tonne silver hosted in an “African Belt” fashion mineralized envelope adopted by the delineation of drill targets at Conejo and AM, this largely unexplored area of Colombia might present traders with a life-altering occasion.

For this investor, probably the most enticing a part of proudly owning Max is that it lies on the northern fringe of the world-renowned Andean Copper Belt, which has been host to a number of the largest and richest copper deposits on this planet. Much more important is the presence of copper and silver at roughly one half silver to 10 elements copper which is one other earmark of “Kupferschiefer-style” deposits.

Max is exploring in the suitable location for the suitable metals with the suitable administration group and checks all the packing containers required to make it a “must-own” going into April. As of at present, the market capitalization is roughly CA$50M, a quantity which considerably reductions the potential upside within the occasion of exploration success which validates the geological mannequin being superior by Messrs. Lutynski and Grainger.

As a reminder, Bob Friedland’s Diamondfields Assets held a CA$50M market cap shortly after they confirmed the ovoid zone at Voisey’s Bay solely to be acquired by Inco in 1997 for $4.3 billion in money and inventory. That was an “80-bagger” in 1997 so anticipating a “20-bagger” out of Max isn’t a stretch if they will show out the mannequin in upcoming weeks and months.

Comply with Michael Ballanger on Twitter @MiningJunkie. He’s the Editor and Writer of The GGM Advisory Service and may be contacted at [email protected] for subscription info.

Initially skilled throughout the inflationary Seventies, Michael Ballanger is a graduate of Saint Louis College the place he earned a Bachelor of Science in finance and a Bachelor of Artwork in advertising and marketing earlier than finishing post-graduate work on the Wharton Faculty of Finance. With greater than 30 years of expertise as a junior mining and exploration specialist, in addition to a stable background in company finance, Ballanger’s adherence to the idea of “Exhausting Property” permits him to focus the follow on choosing alternatives within the world useful resource sector with emphasis on the dear metals exploration and improvement sector. Ballanger takes nice pleasure in visiting mineral properties across the globe within the unending hunt for early-stage alternatives.

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Disclosure:
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Michael Ballanger Disclaimer:
This letter makes no assure or guarantee on the accuracy or completeness of the information supplied. Nothing contained herein is meant or shall be deemed to be funding recommendation, implied or in any other case. This letter represents my views and replicates trades that I’m making however nothing greater than that. At all times seek the advice of your registered advisor to help you together with your investments. I settle for no legal responsibility for any loss arising from using the information contained on this letter. Choices and junior mining shares comprise a excessive stage of threat which will outcome within the lack of half or all invested capital and due to this fact are appropriate for knowledgeable {and professional} traders and merchants solely. One must be acquainted with the dangers concerned in junior mining and choices buying and selling and we suggest consulting a monetary adviser in the event you really feel you don’t perceive the dangers concerned.



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