Erik Wetterling – Value Investing Becomes A Naturally Contrarian Strategy In Poor Sentiment Markets
Erik Wetterling, Founder and Editor of The Hedgeless Horseman website, joins us to expand upon being a value investor in poor sentiment markets, and also shares a couple companies he thinks represent a good risk/reward value proposition at current levels. He makes the point that sentiment always swings to extremes, and that often times value investing and buying cheap puts one into a naturally contrarian strategy, “going on offense while everyone else is playing defense.”
As a result, Erik believes that most of the sector is “absolutely braindead cheap” and where the risks are skewed more to the upside with the proper kind of time horizon. Some of stocks mentioned that Erik thinks represent good value here, due to their exploration upside, are i-80 Gold Corp (IAU), Novo Resources (NVO), and Tectonic Metals (TECT).
Terry, I didn’t get that impression from Erik, and his point regarding Novo was that he never got into it for the production at Beaton’s Creek, but rather the large exploration upside on the huge land position. H.H. is not alone in that regard as many investors were and still are interested in the targets like Comet Well, Purdy’s Reward, Egina, Mosquito Creek, Malmsbury, etc… (not to mention all the new base metals and lithium targets that have surfaced on their land over the last 2 years that may be value drivers to vend or partner with other companies on).
Like he mentioned, it would be nice to have Beaton’s Creek cash-flowing and operating better, but he believes at the current valuation that there is hardly any value being given to the larger exploration portfolio, and that is where he sees the upside. We’ll see how that part of their story develops over time and how the ore sorting equipment plays into moving some of those conglomerate deposits towards production.
You summed it up well my friend!
Novo has taken many unexpected turns… Buying a mill, WA locked down so Aboriginal discussions got paused, and then all manpower/money/focused went into BC (which has been a disappointment). Pretty much the whole exploration side, which I think is very much the main attraction, has been on the backburner for over a year. With the new cash hoard it seems that Novo will be able to go back to exploration again and/or maybe do some investing like they did with NFG. At the end of the day I think there is some C$80C$90 M (when subtracting cash and other equities). Lets say they have $95 M to turn an operating mill and all that land/targets into something. I think it could be done.
Best regards,
THH
Yes, that’s a hefty cash horde that Novo is sitting on for sure and that gives them optionality in how to proceed.
I’m looking forward to seeing how that warchest can be used to dial in the operations at Beaton’s Creek to get that working more efficiently and generating better revenues, and then for the bigger picture growth profile and all the exploration upside still available on all the other properties.
Good conversation as always amigo!
Terry – As for Barrick acquiring New Gold… that actually seems like a transaction we may see, as they are key stakeholders. Mark Bristow still wants to expand into safer jurisdictions, and reclaim the title of largest mining company, where that crown currently belongs to Newmont/Goldcorp.
We talked alot about I-80 Gold corp today as well, and they’ve been wheeling and dealing with Barrick & Newmont (Nevada Gold Mines) in Nevada, and so eventually IAU may be on the menu once they scale up production over the next 2 years.
NG-Novagold/Donlin Creek, Alaska
Yeah, sorry, that is what I meant – NovoGold (not New Gold)
Barrick owns 50% of the Donlin Gold project in Alaska, so I could see them taking over NovaGold to just own the project 100%
I definitely agree with Erik’s points on how impressive the drilling that i-80 gold Corp has been putting out have been, and if they were being released by any of the smaller drill plays, there would be dancing in the streets and the stock price would be ripping higher.
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(IAU) i-80 Gold Drilling Intersects 7.1 g/t Au over 78.6 m including 10.1 g/t Au over 41.8 m at Ruby Hill
May 10, 2022
“Ruby Hill is one of several projects that we are looking to advance to mine development in the next twelve months and early results from our first-ever drill program have confirmed our belief that the property has excellent potential to host a world-class, Carlin-type gold deposit”, stated Ewan Downie, CEO of i-80. “The extent of Carlin-type alteration and mineralization in the Eureka district is comparable to Nevada’s most productive gold districts on the Carlin, Getchell, and Battle Mountain trends. We are not only excited by the impressive widths of high-grade mineralization we are seeing in our early drilling, but also by the apparent rock quality that appears more competent than expected and bodes well for mining”.
Even these results that I-80 Gold put out yesterday were still much better than 90% of the drill results we see most “exploration” companies releasing week after week.
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(IAU) i-80 Gold Intersects High-Grade Gold in Drilling of the Ogee Zone at Granite Creek – Provides Initial Results from 2022 Underground Program
– Including 28.1 g/t Au over 18.7 m, 15.0 g/t Au over 14.6 m, & 33.8 g/t over 4.8m
June 1, 2022
1 Jun 2022, 03:00
Has HH lost the plot with NVO? Paul Franke at Seeking Alpha also may have lost the plot, encouraging Barrick to acquire the rest of NG.