Erik Wetterling – Spotting Inefficient Markets In Junior Mining Stocks Reviewing Sunk Costs Versus Valuations
Erik Wetterling, Founder and Editor of The Hedgeless Horseman website, joins us to review the advantage of considering the advanced explorers or developers overall sunk costs in relation to their current valuations to spot inefficient markets. We dive into the topic considering all the sunk costs in project(s) with regards to capital deployed, time, personnel, specialized knowledge, and derisking. This encompasses all the early groundwork, trenching, drilling, geophysical surveys, permitting, expansion and infill drilling, resource estimates, metallurgical work, engineering studies, economic studies, permitting, and any infrastructure or development on site.
In this low sentiment environment in the junior mining sector there are plenty of examples of how the current market caps of companies do not reflect all the money that has been put into the projects, with many trading at 30% of those sunk costs (or 70% off of the capital that would be needed to get that project to where it is today, not even accounting for the increases in inflation). One recent example highlighted is where Lion One Metals (LIO) (LOMLF) is trading, on the back of investors upset at a recent financing, that highlights the huge disconnect between where the company is valued today, versus the over a decade of monetary capital, time, and intellectual capital spent on developing the Company’s Tuvatu Gold Project to where it is today.