Katusa Research Founder Marin Katusa also mentions three junior resource stocks he likes
SmallCapPower | April 12, 2017: Katusa Research Founder Marin Katusa, in a speech at the newsletter writers’ presentations at the PDAC 2017 convention, shared his thoughts on topics such as junior gold stocks and uranium. Here’s a summary of what he discussed that day, including some of his top stock picks.
He said he has a large position in Trek Mining Inc. (TSXV: TREK), which is the merger of JDL Gold Corp. (TSXV: JDL) and Luna Gold Corp. (TSX: LGC). The Company has more than $140 million in cash in the bank and no debt. He expects Trek’s Aurizona gold project in Brazil to be in production within 24 months.
On buying junior gold mining stocks:
Marin Katusa believes good gold companies have to have more than 200,000 ounces of annual production, and at least a 10-year mine life. They also have to have high margins and the lowest quartile on safety, as the safety record matters to the Majors.
No Major is going to buy out an asset unless there’s district scale potential, with current full production growth of at least 100%. Little rules of thumb: Payback less than three years, and they want simple metallurgy. Refractory ore is tough. You’re going have to have over US$1,500 an ounce gold to bring in any new assets with refractory ore, regardless of the situation.
His thoughts on uranium:
So, uranium, there’s lots of pounds out there. The real key, though, is to avoid stranded pounds. What’s the access to a mill and infrastructure? What’s your cost quartile? What’s the country risk? Discoveries will get rewarded, just like they do in every cycle.
However, Cameco is selling their U.S. asset. As well, Rio Tinto just came out and said they’re putting Roughrider up for sale, which they bought for a little over $500 million from Hathor. Because to build a mill in the Athabasca Basin today, like McClean Lake, which can handle 24 million pounds, you’re looking at about $4 billion to $6 billion and 15 years of lead time to handle that type of size.
There’s also permitting and road costs. A lot of people don’t know, in the Athabasca Basin there’s no public roads. To get from a mine to McClean Lake, you’re driving on private road that is owned and managed by AREVA. So, another company can’t just say, “Oh, we’re just going to do a deal with AREVA.” It doesn’t work that way. Cameco put hundreds of millions of dollars to be able to upgrade McClean Lake to get the access of Cigar Lake into McClean Lake, which is owned by AREVA and Denison.
Marin Katusa said he owns only two uranium stocks. Uranium Energy Corp (NYSE MKT: UEC), he believes, is going to be the consolidator and has a world-class management team. CEO Amir Adnani, individually, is the largest shareholder and you’ve got the former U.S. Secretary of Energy as the Executive Chairman. Rick Rule and Sprott Inc. are also investors, as is Li Ka-shing.
Mr. Katusa also owns shares of Skyharbour Resources Ltd. (TSXV: SYH), which secured an option to acquire Denison Mines’ Moore Lake project on the southeastern side of the Athabasca Basin. He thinks the stock will have a “big run.”
In addition, he thinks that Moore Lake will be a Sioux type of deposit, which are the type of deposits that allowed McClean Lake to go into production. Recent drill results hit uranium grades as rich as 20%. Its shareholders include Denison Mines and Doug Casey.
Disclosure: Neither the principals at SmallCapPower, nor their family members, own shares in any of the companies mentioned above.
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