They say that you feel the losses twice as bad as the wins
I had the opportunity to exchange emails recently with Brian Leni of Junior Stock Review.
Why as an investor are you drawn to mining stocks?
My introduction to the junior mining sector was through my brother in-law, who is a big Doug Casey fan. My interest was piqued when he talked about gold and the economy, but most importantly, the big gains that he enjoyed speculating on the juniors. It didn’t take very many conversations for me to feel compelled to look into Casey and what he had to say. I have been hooked ever since and am constantly expanding my search for more information from and about the sector.
How long have you been investing in mining stocks?
I have been investing in mining stocks for the last 10 years, and in that time, have almost seen the market go full circle. 2006 wasn’t a bad year to start investing in the mining sector, as the market steadily climbed, and for a newbie, I felt fairly comfortable buying into positions and selling them. The 2008 market crash hit me hard; I can remember actually purchasing physical gold early on in 2009 and really questioning what I was doing. Well, it turned out pretty good, with the upswing in the gold price peaking in 2011, I was feeling on top of the world as my mining stocks really performed well. The last 4 years, however, have been the hardest, as I have bought tranches all the way down! Looking at the market today, I am very excited about the future.
Can you tell my readers about your biggest win and loss and what you learned from them?
I love remembering the big wins, so I will start with that. In late 2013, I bought into a company called Cayden Resources, which had a property in Mexico, right beside one of Goldcorp’s top producing gold mines. The people involved with Cayden were previously involved in another successful project in West Africa, called Keegan Resources (a smaller win for me!) which, after having outlined their resource and acquiring a mountain of cash, merged with PMI Gold to form Asanko Gold (TSE:AKG) (which I still own today). This prior success and proximity to a profitable gold mine in Mexico were the driving force for my speculation. Agnico Eagle (TSE:AEM) bought Cayden in late 2014, and with my recent selling of Agnico Eagle, I believe it turned out to be around a 4 bagger. What I learned was that area plays, along with good management, are a good bet for success.
They say that you feel the losses twice as bad as the wins…I agree! My largest loss, hopefully ever, was Banks Island Gold. When I bought it, Banks Island Gold had two main properties: Yellow Giant – which was not so giant, as it had roughly 40,000 ounces, all be it at high grade; and Red Mountain, which was larger, at roughly 750,000 ounces. This original speculation looked pretty good, but the long and short of it was that they had issues mining Yellow Giant and it caused them to burn cash at a higher rate than planned. This, in turn, forced them to give Red Mountain back to its original owner, Seabridge, due to a missed payment. Not only did this change the story, but the problems continued with production for Yellow Giant and this year they filed for bankruptcy. What I learned was smaller doesn’t mean easier to manage or mine.