TXRogers wrote: Well, I mentioned earlier in the week how planned to restructure my Pilbara holdings. So keeping with my word I have stated it below. I have also included an appendix explaining my rationale if anyone is interested. It's a personal choice which I believe covers the play adequately to my personal investment preferences. Reference: Where Pigs can Fly – Part 1 (May 9, 2018): My Personal Pilbara Investment Strategy (May 20, 2018) Initial Summary: The “quiet” month of May has passed, and ended with another NVO NR that may have filled the diapers of many investors. For some, I would imagine it was tantamount to throwing a hand grenade into a bathroom. However, thankfully the month did reveal the tell-tale corporate activity which I wanted to see prior to any CW/Purdy’s sample NR.
My primary message in the link above being: “
I was never anxiously anticipating the apparent “lost in shop” SGS bulk samples in Perth. They are important pieces to this story of course, but not the most critical in the short term. I want to see accelerated corporate action by ES affiliates during this month, as these sample results await public disclosure. That continues to be the most bullish signal to me.”
As a result of the month’s activities, I have chosen summarize my Pilbara picks to date and to realign my portfolio as follows:
- PAC is a Buy, but I am fully positioned due to its high weighting.
- NVO is a Buy, and I have bought another 10% on this recent pull back.
- KAI is a Buy, and I have bought another 20% this past week.
- DEG is a Hold, with future dilution being a concern.
- ARV is a Sell, only based on my personal investment premise.
If one wants to understand the rationale behind my choices above, it is provided in the paragraphs below correlating to listed numbers above.
Tx
***** Aappendix: Additional Analysis Below*****
For a more detailed explanation on my rationale: Let’s quickly brief the month of May, and note the following key activities:
NVO - Novo Resources (The Crown Jewel). PAC - Pacton Gold (The Special Ops). I realize that I may have made some very speculative assumptions pertaining to corporate action preceding the endlessly long awaited NVO bulk sample NRs, but there is one key assumption I did NOT make: I never attributed the delays in NRs to anything suggesting
NVO’s Continuing Incompetence. The rejection that NVO’s management is incompetent makes all the difference to how an investor plays this gameboard. Below is my rationale behind each investment choice:
- PAC is a Buy, but I am fully positioned due to its high weighting.
- NVO is a Buy, and I have currently bought on this recent pull back.
The staggering increase in tenement assets under ES Executive influence since the beginning of May is reflected in the updated District map showing the PAC tenements in yellow (inclusive of the associated mining permits).
In a mere month PAC has gone from an obscure junior gold exploration play, to one of the largest tenement holders in the Pilbara behind NVO. I am not assuming that these deals were all cooked up in haste and completed in a matter of a few short weeks. In all probability, they likely took months to craft. But they have been all finalized concurrently and all prior to NVO releasing any data on their Purdy’s / CW explorations. You can say it’s all coincidental, but it does seem a little uncanny to me, especially since NVO NRs that do come out seem to halt the market more often than not. And it sure has worked in ES’s favor by the look of it.
Let’s examine at the PAC tenement map above once again. Both the area and location of the tenements. Now, if I was the primary shareholder of NVO and PAC and the active C.O.B. of NVO, what would be my priority? Would it be an urgency to release fragmented NRs concerning Purdy’s / CW bulk samples in which the market would likely misunderstand anyway? And I would assume that after 6 months or so, the preliminary data likely provided the information needed. Would I risk prematurely igniting prices in the District for assets that I still sought to acquire? Or I would I concentrate on stealthily building up my land prospects while prices were at fire sale levels?
IMO, the answer to the above questions seems clear. And it’s the difference in thinking between a long term focused strategic corporate manager vs a small time junior operator rushing to shine up the company ASAP. The winning strategy is always to gain control of as much of the gameboard as possible, especially before the game really gets going. The greater advantage being always with The House.
Both NVO and PAC are backed by the same largest shareholder in ES, with all the geo and financial talent he needs at his disposal to make a decision long before the public is privy. Early last November at Jekyll Island ES mentioned that NVO had secured all the good Pilbara conglomerate gold prospects. Viewing his interest in PAC and the amount of additional lands that have been secured this past month, I suppose ES may have slightly overstated NVO’s positioning last November. But some of us already suspected as much.
Despite this recent thrust and the PAC NRs,
I doubt the acquisitions and mergers have ended. And PAC is going to go higher I believe. I will not invest in other local Aussie juniors with this predator loose in the Pilbara. I will always stick with the declared aggressor. Investors who have been on the receiving end of a “PAC attack” have NOT been rewarded adequately IMO. PAC is volatile as we have seen. And it exhibits a high correlated beta with NVO stock fluctuations. But if you believe in the long term success of NVO, then PAC will follow suit.
However, for PAC to have reached its current state so rapidly, I assume that its relatively unknown name and a lack of District gold discovery data must have been the key advantages for acquiring its assets at a low cost (hence my reference to “Special Ops”). These advantages are now disappearing under PAC’s large size, public knowledge of its financial backers, and the public declarations of
Alec Pismiris.
Therefore, I expect PAC’s tenement acquisitions to slow and become more expensive. Nevertheless, PAC share price should continue to represent one of strong District growth stories over the long term, just not at the rate which it has enjoyed under the flurry of these recent asset acquisitions. I will not sell PAC now, but I may sell a portion in the future when the position becomes too large within my personal portfolio. And I believe the PAC land holdings represent strong exploration prospects. The company has emerged as a serious gold player in the Pilbara.
This last NVO NR has been another geo-centric announcement. It has negatively impacted the NVO and PAC share valuations, and that of other juniors in the District. But it should be temporary, and I would not be surprised if trial/medium size mining sharecropping JV arrangements soon follow involving the major NVO partners and major shareholders. I expect to see continuing market scrutiny of NVO. After all, NVO is the “Crown Jewel”, and the centerpiece of ES’s Pilbara strategy.
Therefore,
I have increased by NVO holdings by 10% yesterday in anticipation of positive events moving forward.
- KAI is a Buy, and I have been buying this past week.
More specifically,
I have increased my KAI holdings by 20% over the last couple days. Unlike NVO, KAI has remained around 4 cents for a few months and it may enjoy a good bounce from here if the District draws the expected excitement.
The
KAI Croydon Project are the most interesting story to me because it is situated adjacent to NVO/PAC tenements, already has ES investment interest, and contains a significant 22km strike of Mt Roe conglomerate running through it and into NVO tenements of both ends. And KAI’s structure gold discoveries keep getting better as well.
- DEG is a Hold, with future dilution being a concern.
I consider DEG a good junior explorer overall, and NOT in any immediate danger of being a takeover target by KL as far as I am concerned. It is a viable company under fairly competent management. DEG is more advanced than most other juniors in the area with a respectable JORC resource and mill development plans. I don't think KL or NVO could do much better with exploration either. So DEG remains a promising investment at this point. I believe KL will let them run their operation uninterrupted. And if it all works out, possibly a friendly merger awaits in the future with the HMAS Kirkland Lake.
Near term risks are as follows: DEG just raised cash and underwent further dilution. This was likely due to
De Grey’s recent signing of the 12-month option to acquire the Indee gold project, immediately west of its Turner River project near Port Hedland, for $15 million. The company signed the agreement with current owner China’s Northwest Nonferrous Australia Mining to evaluate the property ahead of purchase by July 2018. KL refrained from another capital infusion via PP. So DGO stepped instead. Let’s hope Indee exploration hits pay dirt and is more market friendly than the previous Blue Moon results.
If DEG gets some good results on Indee then it's game on. If not, they may back down from the purchase and stay with their existing properties.
- ARV is a Sell, only based on my personal investment premise.
I originally purchased Artemis last summer almost the same day it listed on the US OTC exchange. It was always my intention for ARV to be an investment benefiting from a quick take over by KL. And that may still come. I have no doubt that ARV has many desired assets that are sought by both KL and NVO. Assets such as:
- The NVO/ARV JV tenements (Gold Rights only)
- The Elysian tenements (inclusive of Patch 47)
- The MMS tenements conglomerate gold adjacent to NVO.
- The Radio Hill processing plant.
- The various bulk sample, Heritage Clearances, and mining permits.
Willem MiddleKoop partially influenced my decision to sell. He runs the
Commodity Discover Fund (CDF) and is heavily invested in ARV. The fund has a 10yr cumulative return of -33%, but it does outperform the HUI and TSX-V indices.
With regards to an Artemis take out, Willem stated that CDF wants at least $1 for Artemis and will not sell below this price. As a major shareholder in ARV, I can see that he values the company at a minimum of $630 million MC plus. I simply cannot see ES or KL paying that type of price for ARV, assuming that it’s primarily the gold related assets above that are of most interest and not the rest of ARV. Not all the chocolates in the box are desired IMO, so why pay for what you don’t want? And especially if you don’t need to.
This $1/share figure cited by Willem would exempt the 4million NVO shares that have already been repatriated to KL. Nor can it assume gold will be mined from the 38 tenement JV currently managed by NVO. The JV represents a good portion of ARVs gold prospects. It has already been demonstrated that the JV has been a dysfunctional Bad Marriage, and that NVO has the full capacity to put the 38 tenement JV on ice as it so wishes. NVO has declared that it may revisit Purdy’s to gain further technical data, but that does not suggest that it intends to mine Purdy’s. In fact, it suggests more expenses will be billed to ARV as they are responsible for 50% of the exploration fees.
Now, an argument can be made that ARV could be sold off to another party external to the ES group. Maybe it can, but that other party would still have to honor NVO’s management of the existing 38 tenement JV in perpetuity. And %50 of all profits would have to be shared with NVO. A heck of a price to pay for $630 million plus just to get in.
So, if ARV major shareholders like CDF are demanding such a premium for their shares, then they may end up having to tolerate ARV management of assets not under NVO JV control for some time to come. Personally, I have no interest in waiting to see if ARV can successfully define the resource, manage the assets it controls, and build a viable mining business of over $600 million. They really haven’t demonstrated this ability to date, and I don’t care to stick around any longer.
Therefore, I have sold out my position completely and locked in some profits (with some disappointment). It was this money that I used to pick up the additional NVO and KAI shares. Overall, I feel that there is an acceleration of District asset prices coming. I do not want my investment capital tied up within DL’s “box of chocolates”. I would rather take advantage of other less complicated opportunities that abound.
If KL, NVO, or PAC decide that they want to acquire a specific asset from ARV, they will deal with it individually and purchase their favorite “chocolate” at the agreed to price. Purchasing all of ARV is simply not required, and definitely not for the price suggested by Willem.
Summary on the above Repositioning. The Holy Grail of Precipitated Gold remains the primary quest. It lies ahead within the deep basin and I don’t believe NVO will lose sight of it no matter how successfully these alluvial, fluvial, and structural gold deposits may be. To me, the Pilbara play simply comes down to 4 high impact investments:
- NVO – Novo Resources
- PAC – Pacton Giold
- KAI - Kairos Minerals
- DEG – De Grey Mining
It mostly centers around NVO and the cash rich team headed by ES. Despite the recent volatility, I believe a final boarding call for cheap fares on the
NVO Express may be at hand. For those that may be enticed by this investment opportunity but continue to be perplexed, you may want to hop on the train with an entry position now:
“One thing about trains: It doesn't matter where they're going. What matters is deciding to get on”.
This is my interpretation of the evidence to date and personal view of the situation. The comments and decisions I have made above pertain to my own personal portfolio based on the investment landscape as I see it. I’m sure some will disagree, but so be it. This is a discussion and opinions board after all.
And of course, there is also a tiny bit a faith required whenever one throws their speculative dollars into these junior explorers.
Tx