The 1,111-carat diamond Lucara unearthed at Karowe late last year.

Commodity carnage made 2015 another painful year for junior mining investors.

It was a year that saw me take a buyout from a newspaper job at the Vancouver Sun and transition to the exciting world of digital publishing with Tommy Humphreys and the growing CEO.CA team.

The buyout also gave me some dry powder for another passion, investing. One of the things I love about the markets is the ability to tap into different perspectives and learn from my mistakes, as well as look more closely at things that went right. Those tasks are made much easier by the CEO.CA chat community.

Here, then, are a few of my 2015 investment forays, with lessons learned.

1. Catching falling knives is painful

Scars, I have a few. One of them is my position in Platinum Group Metals (PTM-T), which is building the Western Bushveld Joint Venture mine and developing the Waterberg project, both in South Africa’s Bushveld.

I had interviewed PTM chief executive Mike Jones in the spring for the Vancouver Sun, and come away with a positive view of both him and the company. WBJV mine construction was well underway and the mammoth Waterberg discovery - a thick deposit that will be amenable to mechanized mining - was growing rapidly.

Jones was focused on company operations but when I asked him about the falling share price, he expressed some incredulity at how far the stock had tumbled. It continued to fall in the weeks between the interview and when the story was published, when it hit 57 cents.

Later in the year, the platinum price plunged and PTM shares moved relentlessly lower. I bought some in an RRSP account at prices from the mid to high .30s. Surely the bottom had arrived?

No.

The stock fell below 20 cents in the weeks after I bought and finished 2015 at 19.5 cents. The commodity washout in the final months of the year didn’t help, and neither did an unexpected US$40-million debt financing announced on Nov. 2.

I haven’t sold any shares but also haven’t purchased more. My investment in Platinum Group Metals is predicated on the belief that Mike Jones will be able to bring both WBJV and Waterberg into production, navigating a difficult commodity market and a sometimes-wild political scene in South Africa.

The cuts have healed but the scars are a useful reminder of a hard lesson learned. Attempting to pick the bottom is a mug’s game.

Platinum Group Metals (PTM-T)
Price: 0.195
Shares outstanding: 775.9 million
Market cap: $151.3 million

2. When you invest in quality, the surprises are more likely to be positive

I had tracked Lucara Diamond (LUC-T) for a few years but never bought the shares. The Lundin Group company is a cash-flow machine, with most of its revenue coming from the largest, high-quality diamonds recovered from the Karowe mine in Botswana.

The stock had a great 2014, running up to $2.70 on an otherwise dismal mining investment landscape. I stayed on the sidelines, reasoning that the stock had gotten a bit ahead of itself.

2015 saw rough diamond prices fall, hammering the shares of Canadian producer Dominion Diamond (Ekati, Diavik) and hitting Lucara as well. I took the plunge at $1.67, buying some Lucara shares in an RRSP account.

Within 2 weeks, Lucara announced the recovery of a 1,111-carat diamond, the second-largest ever unearthed. The stock hit $2 the next trading session and hasn’t looked back, closing 2015 at $2.25.

The timing was a fluke, but Lucara’s recovery of the gargantuan diamond evidently wasn’t. The following day the company announced the recovery of an 813-carat stone, the 6th largest ever unearthed.

As an investor, deciphering the riddle of patience - when to be patient and when not to be - is one of my greatest challenges. The Lucara experience taught me that patience can be a virtue, even when you’ve found a stock that you like a lot.

Lucara Diamond (LUC-T)
Price: $2.13
Shares outstanding: 380 million
Market cap: $809.4 million

3. But there are no guarantees/Don’t be afraid to take profits

From the heights of Lucara to the lows of North Arrow.

I was high on North Arrow Minerals (NAR-V) and the stock scaled heights well above $1 in 2015 on speculative anticipation that the company’s Qilalugaq deposit in Nunavut hosted a population of rare, valuable “fancy” yellow diamonds.

It exited the year at 18 cents after publishing a very disappointing valuation of a small batch of Qilalugaq diamonds. The focus is now further exploration at Pikoo, a Saskatchewan diamond discovery North Arrow made in late 2013.

I’ve written about North Arrow before but in a nutshell I own the stock because:

- chairman Gren Thomas’s Aber discovered Diavik, Canada’s second diamond mine;

- CEO Ken Armstrong is a topnotch geologist with decades of exploration experience;

- Lundin family trusts are the major shareholder, and top insiders are incentivized with large share ownership positions

- the company has never had trouble raising money (and remains well-financed at these depressed stock levels);

- North Arrow has several projects, each of which could be a company maker and provide spectacular returns if things work out.

North Arrow was one of my major positions, and I sure wish I’d sold a few shares during the speculative run-up. It’s a cautionary tale that in junior mining speculation, the story often doesn’t work out even when all the right boxes have been ticked.

There’s also an interesting tie-in to Lucara beyond the Lundin connection. North Arrow CEO Ken Armstrong’s brother John Armstrong is Vice-President, Mineral Resources at Lucara and deserves much credit for Lucara’s success at Karowe, it should be said.

North Arrow Minerals (NAR-V)
Price: 0.175
Shares outstanding: 54.2 million

Market cap: $9.5 million

4. Follow the money and opportunity/Profit from Mr. Market’s tantrums

Looking back, any exploration company that pivoted out of resources in early 2014 and into finance, avoiding the ensuing two years of carnage, deserves some applause.

That was the case with Troon Ventures, a cash-rich shell run by Sabina Gold & Silver (SBB-V) CEO Bruce McLeod.

Troon did a business combination with Grenville Strategic Royalties (GRC-V), which listed on the Venture in February 2014 with William Tharp and Steve Parry at the helm. Grenville’s business model is to purchase revenue royalties from profitable but small businesses that have trouble securing traditional debt or equity financing.

Grenville is a dividend-paying microcap and in any royalty business, some of them don’t pan out - two factors that make GRC a volatile investment. The stock came out of the gate strong, hitting 80 cents before settling back and finishing 2014 at 62 cents.

GRC performed well to start 2015 as well, surging above 90 cents in the summer, but then a double whammy in August knocked the stock back. A wave of selling hit virtually all Canadian small-cap plays and Grenville had the misfortune of a bad quarter that included a $1-million writedown on one of its investments.

Mr. Market reacted violently to the Aug. 18 NR, sending Grenville shares down from 75 cents to 60 cents in a day (they bottomed at the 50-cent level). I reasoned that nothing fundamental about the company had changed, and bought some shares at 58 cents a short time later.

Grenville has since executed, and several portfolio companies have also bought out their royalties, which typically provides GRC with healthy IRRs exceeding 100%. On Nov. 17, Grenville bounced back with a blowout quarter - revenues rose 400% to $4.5 million and free cash flow came in at $2.6 million. The cherry on top was a 40% increase in the dividend, which is paid monthly. Mr. Market is in a better mood about GRC lately.

An interesting side note on the resources-to-finance pivot: Bruce’s sister Catherine McLeod-Seltzer - a mining powerhouse in her own right - remains on Grenville’s board of directors.

Grenville Strategic Royalty (GRC-V)
Price: 0.76

Shares outstanding: 100.8 million

Market cap: $76.6 million

Dividend yield: 9.2%

Disclosure: Author James Kwantes owns shares in Platinum Group Metals, Lucara Diamond, North Arrow Minerals and Grenville Strategic Royalty. North Arrow Minerals is a CEO.CA sponsor and author is a consultant to CEO.CA.