James Kwantes, editor and publisher of Resource Opportunities, shares two commodities he thinks are worth a second look.
The summer doldrums may have hit the resource space, but James Kwantes, editor and publisher of Resource Opportunities, says he sees the current environment as a buying opportunity.
“One of the great things about this market is high-quality companies that have — the stock price is completely detached from the company itself. So then it’s just a matter of time and a matter of waiting,” he explained at the recent Sprott Natural Resource Symposium.
Like many in the space, Kwantes is on the hunt for under-the-radar opportunities, and he mentioned two overlooked commodities where he sees potential.
“One example is uranium. Uranium has been so low for so long. Uranium bulls have stopped talking about it, but I think things are setting up for an increase in the price,” he said.
Kwantes is also interested in the diamond space, and mentioned explorer North Arrow Minerals (TSXV:NAR) as a company he is watching. “There is a real need for new [diamond] deposits because some big ones are closing down,” he commented.
Check out the video above for more insight from Kwantes on uranium, diamonds and more. You can also read the full transcript below.
INN: Today we’re here at the Sprott Natural Resource Symposium in Vancouver. It’s day two. Have you had the chance to get a sense of the mood yet?
JK: Yeah, it seems a little more subdued compared to last year. The price of gold going down again — and again — doesn’t help.
INN: How are you feeling about the resource space as a whole right now? To me it also seems quite subdued, but is that the summer doldrums or — what do you think?
JK: I think it’s the summer doldrums, but it’s — I don’t know, sort of a continuation of a pattern that we’ve been seeing … for the last several years. You know, where the US markets for example just keep going up and up and certain stocks — technology stocks there — and commodities just seem to be grinding lower. I mean, there’s been some action with — copper [had a] good run. [There was] sort of a false start in 2016, but we’re still in a bear market and this feels like close to the bottom if not the bottom to me.
INN: What commodities are you interested in right now? I know like many in this space you’re on the hunt for stories that are under the radar. So where are you seeing those right now?
JK: One of the great things about this market is high-quality companies that have — the stock price is completely detached from the company itself. So then it’s just a matter of time and a matter of waiting.
One example is uranium. Uranium has been so low for so long. Uranium bulls have stopped talking about it, but I think things are setting up for an increase in the price. It’s already happening. NexGen Energy (TSX:NXE,NYSEAMERICAN:NXE) is here, they’re one of the companies that I cover in my newsletter, I started writing about them at about $0.30. So it’s been a good win. They’ve got a great project, they’re advancing, they’re doing a prefeasibility study. Highly economic project that I think will be taken over.
INN: Okay, so uranium [is a] “when,” not “if.”
JK: Yeah, for sure. I [also] cover diamonds … it’s a tough space, but it’s kind of a discovery market, right? Companies that have discovered real — that have had good discoveries have — the stock price has run. One that I’m watching is North Arrow Minerals, which is a diamond company led by Gren Thomas, who found Diavik, Canada’s second diamond mine. North Arrow has a project called Mel in Nunavut, and they’re drilling that now. They found the project by tracing kimberlite indicator minerals … up ice to the source. And they found — they took a sample last year and found … some nice diamonds in there.
INN: My impression with diamonds is exploration is a little more difficult than it is for other types of commodities. Would you say that’s correct?
JK: It is. Yeah, yeah, it’s a bit more of a needle in a haystack. Similar to a lot of other commodities … the majors basically stopped exploring in the last five to seven years. Hardly spent anything on diamond exploration. So there is a real need for new deposits because some big ones are closing down — some big mines, Argyle in Australia.
INN: Okay, so uranium and diamonds. Those are definitely ones that people are not looking at right now. So given where we’re at in the resource cycle right now, is it a good time to be investing? How should investors be playing their cards right now?
JK: Yeah. I mean, cautiously and taking a long-term approach, really. This is such a — in the big investing world it’s such a tiny space, and a lot of the stocks are quite illiquid. You can really be hurt badly, so you need to invest carefully, I would say, with a long-term approach. And with really good management teams, it’s so important.
INN: I’m going to switch gears a little bit. We were both up in the Yukon quite recently touring around different mining properties. I just wanted to ask what your overall impression was up there, what did you think of that?
JK: Yeah, we were on different tours.
INN. Different tours, but same place.
JK: Yeah, yeah. So mine was a … flyover tour. We had a couple of geologists with the Yukon Geological Survey in our plane — we were all wired up and talking to each other, and we all had iPads that had geological and topographical maps, and so we could toggle back and forth as we — and the geos would tell us about the projects as we flew over them. So that was quite neat.
You know what, I first went up to the Yukon in the summer of 2015 in … the height of the bear market, right? It was the end of the world, stocks were not trading and really low. And then 2016 of course was when Goldcorp (TSX:G,NYSE:GG) bought Kaminak. So just a year later it was lots of energy, and it’s sort of drifted down. I would say it felt more like 2015 this past year even though some interesting things are happening up there.
INN: You’ve really been able to watch that progression up there.
JK: Yeah, yeah, and getting back to detachment. I mean, one of the companies, ATAC Resources (TSXV:ATC) — did you go to the site?
INN: Yeah, we did.
JK: Yeah. So, you know, they came out yesterday with 23 meters of 9.5 grams per tonne gold in a step-out hole at Conrad, where they just announced a maiden resource estimate. And the stock I think opened the day of $0.52, went up to $0.55, $0.56, but closed the day flat. And that’s an outstanding hole, it really is. So it’s an example of where there is value in this market, but you might have to wait.
INN: And that non-reaction is just a reflection of the market right now?
JK: Yeah. There haven’t been a lot of great successes in … exploration, but also in the mining sector. It’s like stepping on a down elevator. That’s kind of how it’s been for the last several years, right? And so money’s just flowed out and into things like cannabis and … blockchain as well.
INN: Speaking about exploration — there’s a lot of talk right now about is there enough exploration going on and things like that. The Yukon — just going back there — it’s a jurisdiction with a lot of mining history. What would you say are the pros and cons of investing in properties there vs. a jurisdiction where there has been less exploration, there’s less that’s happened there?
JK: I’d say … the Yukon — one of the greatest things about the Yukon is the government support is outstanding up there. A lot of the First Nations are very business oriented and pro-mining depending on where you are. Remoteness is an issue, right? So these projects are hard to get to. Projects that are on a road in the Yukon — it’s a huge advantage.
INN: That’s all from me unless there are any final thoughts you want to leave investors with for Q3 and the rest of the year.
JK: Just pick good companies, good management teams.
INN: Easier said than done.
JK: It is. It is, but you know what, management teams — it’s all about management in this business, especially in a market like this. So that’s a safety margin that you have to take advantage of.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
North Arrow Minerals is a sponsor of Resource Opportunities, James Kwantes’ newsletter.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in contributed article. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.