Around this time of year (since 2017), I publish a Tax Loss Silly Season Shopping List of stocks that I believe offer attractive risk/reward profiles. I do this exercise for myself as much as I do it to benefit my readers. I usually start with 15-25 candidates, then gradually whittle the list down to the six best ideas. This year’s list also happens to feature two names from last year’s list, albeit at lower share prices than they were a year ago.
It’s important to remember that this is a list of stock ideas that should prompt the reader to do their own research. Furthermore, these are ideas based upon a well known seasonal tendency in the junior mining sector; most investors complete their tax loss sales by December 15th, thus creating a notable drop-off in selling pressure in the final two weeks of the year.
Typically, the criteria for my annual list involves each stock being down year-to-date. However, this year I have included a special consideration for a stock that is actually UP 200% in 2023!
How could a stock that’s up 200% possibly be a candidate for tax loss selling? Well, the answer is that this stock traded enormous volume at much higher share price levels during August and September. Given that the vast majority of trading occurred at levels far higher than the stock is trading at today, I have made an exception to include BAY.V as a 6th tax loss pick this year.
All of the remaining five stocks on this year’s list have experienced selling during October/November that exhibited many of the key characteristics of tax loss silly season capitulation share price declines. Each year in the junior mining sector, when October rolls around and a stock is down 40%+ for the year it automatically becomes a prime candidate for tax loss selling. Tax loss selling is motivated primarily by individual tax liability considerations (booking losses to offset taxable gains elsewhere) that have little to do with the future opportunity available to shareholders of the company.
The exercise of picking stocks that have had poor performances year-to-date is an interesting one because most of the poor performances have some common themes including:
- Delays (drilling, assay lab results, permits, forest fires, etc.)
- High investor expectations at the beginning of the year (high market caps relative to the stage of the companies’ projects etc.)
- Companies that are pointing to next year, thus creating a situation in which many investors don’t see much risk of missing out by selling and waiting 31 days
While narrowing the list down, I focused on companies with high-quality management teams, solid cash positions, insider buying activity, and actionable catalysts/news flow on the way in early 2024. Each one of the companies in this year’s list has a legitimate chance of delivering sizable returns over the next 12 months. However, each company is also dealing with varying levels of investor disappointment (and the resulting overhead share supply overhang) that will need to be reversed by delivering strong results and meeting key milestones on time in 2024. These are stock ideas, not marriages.
The annual tax loss silly season shopping list is not intended to offer an exhaustive analysis of each company. Instead, the focus is getting to the salient points that make these stocks attractive propositions at their current market valuations. Think of it as a list of ideas that might prompt the reader to dig deeper, review company filings on SEDAR, schedule a meeting with the CEO(s), or add some symbols to a watchlist.
While failure is the norm in junior mining exploration and financing risk is always present, each of the companies on this year’s list have had varying degrees of exploration success and demonstrated strong financing capabilities.
I also want to stress that price matters, especially when it comes to the value proposition of a junior mining stock. As a general rule, the higher the price that we pay, the more risk we are taking. Junior mining stocks are largely driven by investor sentiment (as opposed to earnings fundamentals or dividend payout etc.), therefore a significant shift in investor sentiment towards a company can generate outsized share price movements. We should strive to remain disciplined when it comes to how much we are willing to pay for a speculative junior mining stock. The share prices listed below are based on the market close on Friday December 1st, 2023 and the market cap calculations are based on shares outstanding as published in each company’s latest corporate presentation.
I will add one final point before diving into this year’s list. There were so many good candidates, I found it challenging to limit the list to only six symbols. There were many stocks that just missed the list, but I decided to stick to only six symbols, in order to not make the list too long. This year, I also branched out to one prospect generator (Eagle Plains Resources), and one royalty and streaming company (Star Royalties). The value propositions were too compelling to pass up.
LAST MINUTE UPDATE:
One of the few bright spots from last year's Tax Loss Silly Season List delivered some long awaited news this morning.
Vanstar Announces Friendly Acquisition by IAMGOLD
IAMGOLD (NYSE:IAG, TSX:IMG) will acquire all of the issued and outstanding common shares of Vanstar at an implied price of C$.69 per Vanstar share. The total consideration payable by IAMGOLD based on the Consideration Value is approximately C$45 million on a fully diluted in-the-money basis. The Consideration Value represents a 74% premium to the 20-day VWAP of the Vanstar Shares on the TSX Venture Exchange as of December 1, 2023.
Another interesting angle on this transaction is that IAMGOLD is a takeover target itself, and IMG may be cleaning up ownership of assets to prepare. Nelligan is a very attractive tier-1 development stage asset (open pittable, multi-million ounces, Quebec, etc.) and 100% ownership of Nelligan probably makes IMG a more attractive takeover target for a larger company.
Vanstar ended up being slightly more than a double from the date of last year's list when it was trading at C$.32.
This article serves as the list of this year's picks along with a brief summary of each. Over the next week I intend to add additional content to supplement this article, including a number of CEO interviews, X Spaces, and a YouTube video summarizing this year's list.
Aston Bay (TSX-V:BAY, OTC:ATBHF)
Share Price (12/1/2023): C$.06
Market Cap (12/1/2023): C$13.3 million
2023 Performance: +200%
Aston Bay's key asset is a 20% free carried interest in the Storm Project property (Nunavut, Canada), which hosts the Storm Copper Project and the Seal Zinc Deposit. Aston Bay has a 20% free carried interest in Storm until American West has made a decision to mine upon completion of a bankable feasibility study, meaning American West will be solely responsible for funding the joint venture until such decision is made.
Aston Bay also holds a number of copper, zinc, and gold exploration properties in central Virginia, USA. Aston Bay has made two new discoveries in Virginia, including a high-grade mesothermal gold vein with an intercept grading 24.73 g/t gold over 3.57 meters. The Buckingham Gold Vein has significant down-dip and along strike exploration potential.
BAY.V (One Year)
BAY currently has C$1.1 million in its treasury after completing a financing in October and settling a number of outstanding payables. More prep work is necessary before the commencement of the next phase of drilling in Virginia. The company recently acquired an additional mile of strike length where the Buckingham Vein continues. Drilling is fairly inexpensive in Virginia ($200/meter) and CEO Tom Ullrich plans to commence drilling in Virginia in mid-2024, but first more prep work will be carried out in the next few months.
Initial maiden resource for the near surface copper zones at Storm will include drilling from 2023 (39 RC holes), and the MRE will be published in early 2024 for the 4100N, 2750N and 2200N near surface copper zones. The near surface copper mineralization at Storm is flat-lying and continuous over a significant lateral extent. The latest assays confirm thick intervals of copper mineralization on the margins of the 4100N Zone, giving strong indications that the mineralization remains open laterally in most directions.
I am expecting a large copper resource at surface, that should open a lot of eyes as to the potential scale at Storm. Aston Bay CEO Tom Ullrich believes American West/BAY are very close to being able to say something significant about the size of the near-surface copper deposit at Storm. In addition, American West has begun environmental baseline studies and initial permitting at Storm. The first order of business after resource is a scoping study (PEA) - an ore sorting operation is low cost and initial capex at Storm could be less than $100 million.
The deeper sediment-hosted copper targets need more testing in 2024, however, the 2023 drill program was very successful in confirming American West's geological and geophysical models at Storm. In 2023, every deep exploration drill hole intersected sulfide mineralization as predicted by both the geological and geophysical models. Kilometer-scale geophysical anomalies in highly prospective stratigraphy remain untested, and planning has already begun for a major drill program in 2024 to determine the extents of the system and target grade and size.
Plan view of the Storm area showing the gravity data, fixed loop electromagnetic plates, near-surface mineralization footprint, major faults, and diamond deep drill hole locations.
Aurion Resources (TSX-V:AU, OTC:AIRRF)
Share Price (12/1/2023): C$.46
Market Cap (12/1/2023): C$61million
2023 Performance: -23.5%
For me, Aurion is all about the size, location, and potential of its enormous land package in the Central Lapland Greenstone Belt in Finland. JV agreements with large producers B2 Gold and Kinross are a testament to the prospectivity of Aurion's mineral tenements covering approximately 75,000 hectares. Aurion Chairman David Lotan's relentless open market buying of AU shares only adds weight to the opportunity in Aurion today.
Aurion Resources is a sponsor of Goldfinger Capital.
So far in 2023, Lotan has purchased more than 1,200,000 Aurion shares through open market purchases:
A management interview with Aurion Resources will be published in the coming days.
AU.V (Daily)
Eagle Plains Resources (TSX-V:EPL, OTC:EGPLF)
Share Price (12/1/2023): C$.12
Market Cap (12/1/2023): C$13.8 million
2023 Performance: -37%
Eagle Plains is one of the few TSX-V listed minerals exploration companies with an impressive track record of paying out dividends to shareholders multiple times in its nearly 30-year history. EPL can also boast a healthy treasury of C$8.25 million in cash, and a 'book value' per share (C$.10 per share) that isn't far below the company's current share price. So far, investors haven't cheered EPL's exploration efforts at its Vulcan SEDEX Project in the Kootenay Region of southern B.C. but that could change in 2024. Eagle Plains is expected to release the complete assays from 2023 at Vulcan within the next month, at that time the company may also take the opportunity to outline some of its 2024 plans at Vulcan.
Eagle Plains Resources is a sponsor of Goldfinger Capital.
I will be publishing an interview with Eagle Plains CEO and largest shareholder Tim Termuende tomorrow.
EPL.V (Daily)
Ridgeline Minerals (TSX-V:RDG, OTC:RDGMF)
Share Price (12/1/2023): C$.13
Market Cap (12/1/2023): C$11.6 million
2023 Performance: -53%
Ridgeline was on the 2022 Tax Loss Silly Season List and it proceeded to jump more than 50% within the next six weeks following last year's list. However, that was to be one of the few bright spots for Ridgeline shareholders in 2023. The irony is that Ridgeline has some major accomplishments to its credit in 2023, but they are the kind of accomplishments that need more proving up in order to really get the market excited. One of Ridgeline's accomplishments in 2023 was the staking of its Big Blue Copper-Gold Porphyry Project in Elko County, Nevada. Admittedly, Big Blue is my favorite project in Ridgeline's portfolio, but there is some more field work required in order to prepare Big Blue for its maiden RC drill program in 2024.
The next catalyst will be the results of Ridgeline's 2,000 meter diamond core drill program at its flagship Selena Project. At last check, Ridgeline had C$1.5 million in cash and a market cap of a little more than C$11 million. Ridgeline's current valuation gives it little credit for its excellent results to date at Selena, and multiple JV agreements with gold mining super heavyweight Nevada Gold Mines (Barrick/Newmont Nevada Partnership).
I will be hosting an X Space with Ridgeline CEO Chad Peters Wednesday at noon eastern. Please tune in and ask Chad a question.
RDG.V (Daily)
Star Royalties (TSX-V:STRR, OTC:STRFF)
Share Price (12/1/2023): C$.22
Market Cap (12/1/2023): C$16.5 million
2023 Performance: -40%
Star Royalties is a precious metals and carbon credit royalty and streaming company. Star's management team includes world class experts in their respective areas of expertise. This includes Chief Investment Officer Kevin MacLean, an award-winning portfolio manager with peak assets under management of $2 billion. MacLean has 30 years of capital allocation experience in precious metals and mining investments. On the carbon side of the business, CEO Alex Pernin created the first carbon credit royalties in forestry and in regenerative agriculture.
Star holds 62% ownership stake in carbon credit royalty/streamer Green Star. In May 2022, Green Star raised C$15.4 million from senior gold producer Agnico Eagle (NYSE:AEM) at a C$40.4m post-money valuation. This values STRR’s 62% interest at C$25 million, more than STRR's entire market cap today.
Matt Geiger of MJG Capital explained the Star value proposition quite succinctly here:
“Multiple cash flowing mineral royalties that the company acquired for C$34 million in total, so you’re paying $.50 on the $1.00 for those royalties. Even if they overpaid for those royalties you’re getting them at 50% off. In addition to that, you’re getting their Green Star business for free. Agnico Eagle put in a check for the most recent Green Star financing….. Agnico Eagle valued Green Star at C$40 million, so that’s C$25 million of attributable value for STRR. "
STRR.V (Daily)
Western Exploration (TSX-V:WEX, OTC:WEXPF)
Share Price (12/1/2023): C$.70
Market Cap (12/1/2023): C$24.1 million
2023 Performance: -46%
Western Exploration has a tight share structure (34.4 million shares outstanding) with an even tighter free trading float (~7 million shares). The company's flagship project is the Aura Project in Elko County, Nevada. Aura hosts a 43-101 compliant resource totaling 607,000 ounces gold and 3.17 million ounces of silver in the indicated category (14,237,000 tonnes @ 1.43 AuEq g/t), and 578,000 ounces gold and 6.12 million ounces silver in the inferred category (12,102,000 tonnes @ 1.71 AuEq g/t).
WEX closed a C$4.6 million financing at C$1.55 per share in June. Shortly after the financing closed, the share price proceeded to enter a relentless downtrend that appears to have reached a climactic capitulation low at C$.455 last week.
During the summer, Western completed two diamond core drillholes at Gravel Creek. The prospectivity of resource growth targets at Gravel Creek made it a priority for 2023 drilling. The results of the first core hole of 2023 drilling was released by the company on November 21st. Hole WG456, located 250 meters north-east of the Gravel Creek resource area, reported individual assays up to 34.9 g/t Au and 2800.0 g/t Ag, with key intercepts including:
- 4.7 meters of 9.20 g/t AuEq (4.55 g/t Au and 395.4 g/t Ag)
- 2.4 meters of 7.82 g/t AuEq (5.37 g/t Au and 208.1 g/t Ag)
- 2.0 meters of 21.96 g/t AuEq (12.77 g/t Au and 780.9 g/t Ag)
- 2.1 meters of 7.56 g/t AuEq (5.40 g/t Au and 183.1 g/t Ag)
- 3.0 meters of 6.75 g/t AuEq (5.42 g/t Au and 113 g/t Ag)
Hole WG456 was terminated in mineralization due to drilling complications, with the final 3 meters returning 5.42 g/t Au and 113 g/t Ag. The results of hole WG456 support further exploration drilling to the north-east along a 2.0 kilometers trend of Au-As soil and rock anomalies that parallel a N35E trending density anomaly. Assays for the 2nd hole of the summer program, hole WG457, are still pending.
The company had C$2 million in cash as of November 2023. The company intends to better define the vein trends and determine the extent of the mineralized system to the north-east at Gravel Creek, with the ultimate goal of expanding the project resource base.
WEX.V (Daily)
I'll be hosting an X Space with Western Exploration CEO Darcy Marud this Friday at noon eastern. Please join us and ask Darcy a question.
I would not be surprised if at least one stock on this list delivered multibagger returns in 2024 (200%+), and I would also not be surprised if a couple of the stocks on this list did not perform well (-50% or more) in 2024. That means one should expect plenty of volatility and opportunities to ‘buy low and sell high’. It’s important to understand that junior mining shares regularly experience enormous swings in valuations and one should never risk money that one cannot afford to lose. This sector is highly cyclical and gyrates from being in favor, to being terribly hated by investors, and then back again.
Disclosure: Author owns shares of Aurion Resources, Ridgeline Minerals, Eagle Plains Resources, and Aston Bay Minerals at the time of publishing and may choose to buy or sell at any time without notice. Author intends to purchase shares of other companies discussed in this article in the future. Aurion Resources and Eagle Plains Resources are sponsors of Goldfinger Capital. Readers are charged with conducting their own investment due diligence and recognize that micro cap stocks can deliver a 100% loss of invested capital.
DISCLAIMER: The article is for informational purposes only and is neither a solicitation for the purchase of securities nor an offer of securities. Readers of the article are expressly cautioned to seek the advice of a registered investment advisor and other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed above. The companies mentioned in this article are high-risk venture stocks and not suitable for most investors. Consult company’s SEDAR profiles for important risk disclosures.
The author of this article is not a registered investment advisor and advice you to do your own due diligence with a licensed investment advisor prior to making any investment decisions. This article contains certain forward-looking information and forward-looking statements within the meaning of applicable securities legislation (collectively “forward-looking statements”). Certain information contained herein constitutes “forward-looking information” under Canadian securities legislation. Generally, forward-looking information can be identified by the use of forward-looking terminology such as “expects”, “believes”, “aims to”, “plans to” or “intends to” or variations of such words and phrases or statements that certain actions, events or results “will” occur. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed by such forward-looking statements or forward-looking information, standard transaction risks; impact of the transaction on the parties; and risks relating to financings; regulatory approvals; foreign country operations and volatile share prices. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Actual results may differ materially from those currently anticipated in such statements. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.
