Blue light special! It’s shopping season again for the mining sector…
The spring and summer months are often referred to as ‘shopping season’ for the simple reason that it is at this time of year that many mining stocks encounter market weakness. It is not uncommon even for fundamentally sound companies to see half of their market capitalization melt away in the doldrums. For the uninitiated, this type of correction may be disconcerting, but veterans of the sector will be swinging into action to take advantage of the opportunity to accumulate great companies at bargain basement stock prices.
I created the Mexico Mike Portfolio with the objective to highlight companies that one can own without the need to actively trade in order to capture strong gains. A value investor should be willing to allow time for a stock to perform, understanding that the development cycle for a junior miner may take many months or years before the strength of the company is recognized in a higher share price. Market cycles on the other hand tend to be more frequent with sharp corrections periodically interrupting the uptrends even during a bull market. The lesson from this is that one should not become discouraged if a temporary, menacing downturn drives the share prices lower, even while the companies in question are achieving their objectives to create shareholder value.
We are still very much in the early stages of what will probably come to be recognized as a super cycle, long term bull market for all commodities. The time to accumulate the best junior mining stocks is now, while there are still values aplenty, and that may mean that buyers will have to bring a great degree of discipline, patience, and fortitude to hang in through the volatility.
Juniors presented in past editions of the Mexico Mike column such as Bandera Gold (V.BGL), Silver Eagle Mines (T.SEG), EXMIN Resources (V.EXM), ECU Silver (V.ECU), and San Anton Resources (T.SNN), are now priced at ridiculously low levels in my opinion. I have seized the opportunity and have been aggressively buying more of each of these juniors for my own personal investment portfolio. I simply point out my own personal trading activity to underline my opinion that this correction is nothing new to the junior mining sector. It has happened before, and it will inevitably happen again, but I fully expect the higher quality juniors to rebound nicely later in the year.
It is beyond the scope of this column, and inappropriate for me to attempt to provide trading recommendations, as I am not a registered investment advisor. I confine my objectives to presenting the background information for the companies that I consider to offer greater potential relative to the peer group of junior mining stocks, and trust that the readers will complete their own diligence process to ensure that these choices are suitable for their own investment objectives and strategy.
One junior that has held up
very well during this corrective phase is Dia Bras
Exploration. Like many of the juniors that I am excited about in
The flagship project for
the company is its Bolivar Project, a large property located in the very rugged
western part of
The fully permitted mine is currently operating in a pilot mining stage of development, while the company works to prove up resources and complete infrastructure improvements that will enable a long term mining plan to be completed. The company has realized net operating profits during this phase. Exploration activity is ongoing and there is a very real potential for large tonnage of ore to eventually be defined through this process.
Seeking greater leverage to silver, the company completed the acquisition of the Cusi Silver Project, a large property amounting to 75 square kilometers, comprising an entire past producing silver district. A number of historic mines previously worked the rich silver zones on the property, hosted in brecciated veins and stockwork mineralization, often extending for many kilometers. Recent sampling work completed by Dia Bras has encountered an astonishing 2,700 g/t silver intercept across 3.62 metres, and wide drill core intervals of more than 40 metres averaging 100 g/t silver, and 10.5 metres of 678 g/t silver, have been reported. These results underline some of the additional discovery potential. The company is currently involved in small scale test mining at Cusi.
The Malpaso
Mill is located between the two projects along the main highway running west
from the city of
Dia Bras Exploration has many of the
attributes that I look for when completing research for new mining plays. It
controls great projects, has competent and proven management, the ability to
generate positive cash flow internally from operations, a strong capital
structure, and the prospects to deliver impressive growth for many years. The
stock remains well within a clearly defined uptrend, yet it still represents a
value in comparison to the peer group of emerging producers in