I had the pleasure of attending the 2014 Subscriber Investment Summit in Vancouver today. It was an insightful gathering of resource executives, investors, and newsletter writers. There was even a billionaire or two in the room and naturally plenty of “corporate pillow talk” (credit to Keith Schaefer for the phrase).
The mood of the conference was generally positive, albeit tame in terms of the overall level of optimism on the sector. In fact, Eric Coffin of HRA Advisories stated that “300 to 400 companies still need to leave the space (go bust)” before the market really lifts off.
There were some really top notch presentations including some valuable insights for the audience. Here is some of what I learned:
- Aveda Transporation and Energy Services Inc. (AVE.V) gave one of the better presentations. Aveda has quickly become the best in class transportation and energy services provider in North America. At today’s market closing Aveda shares are trading at 65% of book value and the company is profitable to boot.
- Nathan Weiss of Unit Economics delivered a power packed presentation which included an analysis of natural gas price sensitivity. Nathan sees $3.50 as the equilibrium price for natural gas with dips below $3 being supported by coal-to-gas switching by power plants and moves above $4 being met with a deluge of supply from producers.
- Pure Gold (PGM.V) is a unique way to play the Red Lake Gold District via the Madsen Project which has existing mining infrastructure in place, including a 500 tonne per day mill, a 1,275 metre deep shaft, 24 levels of underground workings, a headframe, and a permitted tailings management facility, all connected to roads and power. The company has been conducting a summer drill program, the first results of which should be public within 2-3 weeks.
- Excelsior Mining (MIN.V) is a very interesting “in-situ” copper play in Arizona – $1.37/lb all-in cost with potential for full remediation of mine site with little environmental issues. I should add that the chart has held up quite well during the brutal tape of the past 6 weeks in the mining space.
- Red Eagle Mining (RD.V) CEO Ian Slater presented a straightforward path to production and free cash flow within two years. We would also add that the company’s stock has done well in a difficult market for juniors, particularly those with exposure to Colombia.
- Nolan Watson of Sandstorm Gold (SSL.TO) talked a bit about gold as money and confessed that he carries a one ounce gold coin in his wallet to remind himself of that fact. Sandstorm is committed to becoming the gold sector’s best risk adjusted, cash flow investment vehicle. With $165 million in available capital for acquisitions I have no doubt that Nolan will be able to find some very attractive deals in the current depressed environment of the gold space.
- Eric Coffin of HRA Advisories gave an insightful macro market roundup and it almost felt as if he had read my mind. However, Eric believes that if the S&P 500 goes into a deep correction gold will also suffer. I believe that gold will likely benefit under such a scenario as the Fed and other major global central banks will undoubtedly move back into their roles of stoking the liquidity spigots into full throttle.
- During the final Q&A portion of the conference I had the opportunity to ask the assembled newsletter writers “What would you do if you were handed $1,000,000 to invest right now?” – the answers were very similar with high cash levels being favored. Nathan added that he would short the natural gas ETF (UNG) and Tommy offered that he would begin legging into the likes of Ivanhoe Mines (IVN.T), NGex Resources (NGX.TO), and Torex Gold (TXG.TO).
- The consensus seems to be that tax loss season will come early this year (October/November) and there is no hurry to jump into the junior space – while we may be at a bottom it seems more likely to be a “bathtub bottom” as a opposed to a “V-bottom”
I would like to thank Katy and her team who were top notch in their organization and planning of the conference. The Pan Pacific Vancouver was an exceptional venue and I look forward to returning next year, hopefully amid a much more cheerful market backdrop for the junior resource space.