Trilogy Metals Inc. (TSX:TMQ) holds the two best undeveloped, giant, high-grade copper deposits located in a safe geopolitical jurisdiction, says Mickey Fulp
Mickey Fulp | April 20, 2020 | SmallCapPower: I have been a shareholder of Trilogy Metals Inc. (TSX:TMQ) for over three years, way back when it was still a penny stock. I introduced it to subscribers and initiated coverage in late May of 2017 at 66 cents.
[This article was originally published on April 3, 2020 on goldgeologist.com]
In my opinion, Trilogy Metals holds the two best undeveloped, giant, high-grade copper deposits located in a safe geopolitical jurisdiction in the world: Arctic, a polymetallic volcanogenic massive sulfide deposit, and Bornite, a sediment-hosted copper-cobalt deposit, both in Northwest Alaska. Better yet, these mineral deposits are separated by a wide valley of about 20 km, currently share a camp, and will be accessed by the same private road.
TMQ reached an all-time high of $3.14 in late June of 2019. When I wrote on TMQ from early August to late September, it was in the midst of a three-month bout of repeated algorithmic short attacks, an institutional fund exited the stock and was replaced by another, and it had an unexpected personnel change. During this turbulence, it bottomed at $1.50. Along with some subscribers, I bought and sold into this volatility and generated short-term profits.
From October 1 to 15, the stock bottomed again at $1.50 to $1.60. At that juncture, smart speculators played on its strong fundamentals and a sustained run to $2.25 was the result. Tax-loss selling in late November to early December took it down to about $1.75. However, Trilogy rebounded to close at $2.60 at the beginning of 2020.
It closed at $2.50 upon announcement of the Phase I US-China trade deal on January 16. A couple of trading days later, copper hit a seven-month high of $2.84 a pound.
Then everything went south and then some. Media-stoked fears over a new flu virus outbreak in China led to fear and panic, and then to irrationality and hysteria. Subsequent Draconian government actions have shut down a large proportion of the world’s economy and have driven copper prices to a 3.5-year low, oil to an 18-year low, and gold to a seven-year high. Copper bottomed at $2.08 on March 23 but has gained some ground since, trading from $2.15 to $2.20 over the past couple of weeks.
This admittedly nasty flu has resulted in quarantines and lockdowns of billions of people, imposition of martial law, massive shut-down of industrial capacity and retail businesses, embargo of ship cargoes, and travel bans to and from all foreign countries.
The hysteria is driven by a media that embraces any sort of event deemed worthy to wear the “crisis” label and a corrupt and criminal United Nations medical bureaucracy (WHO) that squanders hundreds of millions of dollars annually and is led by an avowed Marxist.
As China’s original problem has spread to other nations, it has weighed heavily on world stock markets; US equities are now in bear market mode after hitting all-time highs in mid-February. The market turmoil has almost equally affected “Dr. Copper” as it faces both supply and demand destruction. However, the downturn is exacerbated for copper stocks.
So while the metal is down over 20%, it should be no surprise that copper explorers and developers have dropped even more. Trilogy Metals Inc bottomed at its low since tax-loss season of 2017 at $1.03 in mid March. It closed today at $1.40 and nearly 50% below the year-to-date high of $2.75.
Meanwhile, company news flow since my last report has been quite positive:
- In mid-September to late October 2019 drill results from the 7600 m, 10-hole Bornite drill program were reported.
- In early November, it reported drill intercepts from the promising Sunshine prospect in the Ambler Schist Belt, approximately 13 km west of the Arctic deposit. Six holes were drilled and totaled approximately 1350 meters. One was previously reported in September; all intersected multiple zones of ore-grade, copper-rich, polymetallic mineralization.
- In mid-December, the anticipated 50-50 joint-venture with South32 Ltd was announced. The deal was formally consummated upon receipt of $145 million and the new operating company was structured in mid-February.
In early January, Trilogy provided an update on project activities. Details are below.
- Intercepts from eight of 10 holes totaling 2400 meters that were drilled mainly for geotechnical and hydrological purposes within the Arctic deposit in 2019:
- An additional 465 state mining claims were staked adjacent to the existing claim block. Total project holdings are now approximately 1727 sq km:
- In late March, the BLM tabled the Final Environmental Impact Statement (EIS) for the Ambler Mining District Industrial Access Project, the 211 mile road from the Dalton Highway to the project.
Trilogy Metals anticipates significant news flow and catalysts in the second quarter of 2020. Included are:
- Record of Decision for the Final EIS for the road and permit from the Army Corps of Engineers, expected within a couple of months.
- Completion of the Arctic Feasibility Study, on track for delivery in late Q2.
- The summer work program and budget for the Upper Kobuk Mineral Project that includes Arctic, Bornite, and the Ambler Schist Belt.
- Commencement of the summer exploration and development program, which is targeted for mid June.
I think that with the quality of its projects, partnership with one of the world’s largest integrated mining companies, cash in the bank, currently depressed stock price, and positive developments on the docket for the near-term, Trilogy Metals Inc should be considered a buy at this juncture.
Note that I have purchased another tranche of the stock and may do so again if the price remains in its current range or goes lower.
You must always do you own due diligence. If Trilogy Metals meets your speculative portfolio goals and you agree with my ideas, I submit it could be an opportune time to buy in again.
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