Source: Malcolm Shaw 03/15/2024
Malcolm Shaw, from Hydra Capital Partners, unveils a treasure trove of investment picks in the metal and energy sectors. His insights pave the way for investors to delve into the commodity realm armed with knowledge.
The limelight is on the gold sector this month, with prices reaching unprecedented heights.
Despite the remarkable surge, many investors remain wary, scarred by past false alarms. Yet, with central banks amassing gold and the eroding strength of the U.S. dollar, the outlook for this precious metal has never been sunnier.
Eruption of Gold and Investor Sentiment
Gold’s recent catapult past the $2,080 mark has caught many off guard. Most have steered clear of the sector, unversed in its stocks and valuations.
This gap in participation suggests that the gold rally may have ample room to soar as doubt wanes and investors flood in, reminiscent of the energy sector’s bounce-back in late 2020 and early 2021.
Even amidst the recent climb, many gold stocks boast tantalizing valuations historically, based on metrics such as price-to-net asset value (P/NAV) multiples, free cash flow yields, and cash flow multiples.
Big players like Newmont Corp. NEM linger near their 5-year lows without a hint of exuberance. These solid fundamentals, paired with gold’s unprecedented peak, hint at a potential prolonged upswing in the sector.
Other Key Commodities To Keep Tabs On
While gold dazzles the crowd, silver shows potential. Some “silver bugs” even predict it may outshine its golden counterpart.
Copper, pivotal in the energy shift, has now pierced the critical $4.00/pound threshold. A faltering U.S. dollar and robust supply-demand dynamics spell good tidings for this red metal. Zinc tails the rise of copper.
Oil and natural gas equities remain reasonably priced versus other segments, while uranium’s supply-demand landscape promises good fortune.
On a different note, lithium’s performance has sagged and may face risk from tax-loss selling later in the year, while Nickel remains under the shadow of fresh Indonesian supplies.
Patience in Precision
As an experienced commodities investor, I favor simplicity in approach. The long-range chart of the TSX Venture index hints at substantial upside if the dawn of a synchronous commodity upswing is indeed upon us. Should this momentum persist for a few more weeks, the Venture index might witness a “golden cross,” where the 50-day moving average overtakes the 200-day moving average — a promising sign for those eyeing the next major breakthrough in commodities.
While optimism flickers, the act of penning this piece may imply a need for the market to consolidate before its upward march. It’s worth noting that prior to this budding trend, commodity stocks endured a prolonged phase of underperformance. Nonetheless, given prevailing market conditions, I am buoyed by the belief that a broad commodity rally could resonate for the long haul.
I must confess that my hopefulness now surpasses that of many moons past, and in sharing these musings, I trust they do not inadvertently stymie the market’s stride. In forthcoming sections, I unveil a mix of familiar and fresh investment prospects while advocating for a tenacious and steadfast stance, adhering to the ethos of “be right and sit tight.”
Teeming with Energy and Copper Choices
Tenaz Energy Corp. ATUUF:
Count Tenaz among my top picks. With a judicious M&A blueprint and a nimble, seasoned management squad, Tenaz Energy stands primed to seize the tailwinds of the current market landscape, where major energy firms seek to rationalize their portfolios and divest non-core assets to adept, credible teams.
Sporting a modest share count and a sub-$100 million market cap, the company has ample growth leeway as it executes its business stratagem. Owing to its M&A focal point, Tenaz’s growth is an inevitability. Moreover, Tenaz ranks among the most cost-effective energy equities around, trading at a minimal EV/CF (enterprise value divided by annual cash flow) multiple within the sector (approximately 1.5x, versus peers at 2.5-4x). I believe the firm embodies one of the finest risk-reward propositions witnessed in my career. Fronted by an exemplary management panel, I advocate for patience as this seasoned crew steers the company toward its target output of 50,000-100,000 barrels of oil equivalent each day via deliberate, targeted acquisitions. Patience is a rare commodity, but I endorse the stance that those who wield it concerning Tenaz will reap generous rewards in due course.
TAG Oil Ltd. TAOIF:
TAG Oil’s drilling crusade in Egypt, homing in on the Abu Roash F formation, has sparked a flurry of interest among specialist investors. Yet, drilling delays have left the stock in abeyance as the market awaits test outcomes from its debut horizontal well. It merits mention that the Abu Roash F formation mirrors the prolific Eagle Ford play in the southern U.S.
With a potential array of 60-80+ locations in the company’s Badr concession zone, TAG Oil stands poised for substantial expansion in the forthcoming years should its pending well test unveil commercial rates. Any figure exceeding 1,000 barrels of oil per day as an initial production rate should be lauded as a triumph. With flow test results on the horizon in early April, TAG Oil emerges as a timely and intriguing speculation.
New Stratus Energy Inc.
The Bright Spots in the Energy Market: Up-and-Coming Players to Consider
An Energizing Vision: New Stratus Energy and the Latin American Energy Scene
New Stratus Energy, guided by the visionary Jose Francisco Arata, is poised to ascend as a key player in the Latin American energy landscape. Their strategic move in Venezuela marks just the beginning, with expansion plans earmarked for other jurisdictions. This budding energy champion is undoubtedly one to keep an eye on.
Condor Energies Inc.: Navigating Central Asia’s Energy Markets
Condor Energies encapsulates a distinctive investment opportunity in Central Asia’s energy sphere. Bolstered by a recently secured gas field management contract in Uzbekistan and pioneering LNG ventures in Kazakhstan, the company’s adept navigation of niche markets promises substantial growth potential.
Valeura Energy Inc.: Unveiling a Wealth of Value for Investors
With shares trading at a mere fraction of its proven+probable net present value, Valeura Energy shines as a compelling prospect for investors seeking value. The company’s successful field-life extension strategy, coupled with a sturdy financial footing and debt-free status, sets the stage for promising future growth.
Hercules Silver: Unearthing Copper Riches in Idaho
Hercules Silver, despite its misleading moniker, is a rising star in the copper exploration realm, buoyed by a recent substantial investment infusion from Barrick. Their foray into copper exploration in Idaho, where a substantial copper-porphyry system has been unearthed beneath existing silver mineralization, positions them favorably for a groundbreaking drill program this spring. The prospect of positive drill results has the potential to captivate investors seeking a foothold in the copper market.
Reviving Potential: Libero Copper and Gold Corp. Under Frank Giustra’s Spotlight
Libero Copper emerges into the limelight with the backing of renowned resource investor Frank Giustra. Embellished with a colossal porphyry deposit exceeding 600 million tonnes at its Mocoa project in Colombia, and promising opportunities for further expansion, the company holds the promise of significant returns, albeit with a pinch of political risk. The resumption of drilling activities in Q2 2024 is anticipated to unfold fresh opportunities for investors.
Sun Peak Metals Corp.: Frontier Ventures for the Bold Investor
Sun Peak Metals beckons investors with a penchant for risk, offering a gateway to outsized returns through its Shire project in Ethiopia. Drawing parallels to the successful Bisha VMS deposit formerly harnessed by Nevsun Resources and later acquired by Zijin Mining, Sun Peak Metals gears up for drilling activities at the Shire project, poised to unlock a trove of potential opportunities.
Atex Resources Inc.: Prospecting Prosperity in Chile
Atex Resources embarks on a journey to uncover the riches of a massive copper porphyry project in Chile. Bolstered by the patronage of Pierre Lassonde, the company has already unearthed a substantial resource and now sets its sights on expanding the high-grade core of the deposit, with promising drill activities on the horizon. Should their efforts bear fruit, Atex could swiftly evolve into a prime target for major copper producers and investors alike.
Gold Ideas: A Prudent Portfolio Perspective
In a world saturated with gold analyses, let’s keep it simple. As the saying goes, “Just the tickers, please.” Here’s a list of gold names that have caught my eye, offering either value, intrigue, or perhaps a bit of both:
- Kinross Gold Corp. KGC
- Falco Resources Ltd. FPRGF
- OceanaGold Corp. OCANF
- New Gold Inc. NGD
- Aya Gold and Silver Inc. AYASF
- Goliath Resources Ltd. GOTRF
- Ascot Resources Ltd. AOTVF
- Karora Resources KRRGF
- Osisko Mining Inc. OBNNF
- Rupert Resources Ltd. RUPRF
The Uranium Buzz: CanAlaska Uranium Ltd.
A Game-Changing Drill Hole Intercept
In the world of uranium exploration, where the landscape is often littered with mundane discoveries, one recent event stands out like a shining beacon in the night sky. CanAlaska Uranium Ltd., a company that had been quietly toiling away in the shadows, has emerged into the limelight with a drill hole intercept that has sent shockwaves through the industry.
Unearthing Hidden Treasures
The revelation of a 16.8-meter mineralization grading at an astonishing 13.75% eU3O8 at its West McArthur joint venture project is the kind of find that mining dreams are made of. This exceptional discovery, in collaboration with Cameco, has thrust CanAlaska Uranium into the spotlight, showcasing its potential and prowess in the uranium exploration domain.
Looking Beyond the Numbers
While the reported grades, based on gamma probe readings, are awaiting chemical assay validation in the coming weeks, the implications are clear. The promising nature of this high-grade intercept suggests the presence of a substantial and enduring mineralizing system. This tantalizing prospect hints at the possibility of substantial future scale and signifies a potential boon for investors seeking long-term growth opportunities in the mining sector.
The Future Horizon
As CanAlaska Uranium prepares to delve deeper into the rich seams unearthed by this groundbreaking discovery, investors would be wise to keep a keen eye on the horizon for further developments. The industry is abuzz with excitement, and the reverberations of this find are sure to echo far and wide, shaping the future landscape of uranium exploration and investment.
