Resource Maven: It's ugly out there. #MiningStocks #Gold

What to do with your mining stocks? This from the "Resource Maven": I outlined my investing outlook to Maven subscribers mid-last week. The first point was: A crash might be coming. That was validated within 24 hours.      Another directive: Don’t try to catch a falling knife. I do not know what gold is going to do. Forced to guess, I would say there is more pain on the horizon. Chartists and technical analysts generally agree that, once it broke below $1,142, gold had another $100 to lose easily, perhaps more. Sentiment is negative; momentum is to the downside.      The only significant support I see for gold comes, ironically, from those seeking to profit off its slide: the shorts. Short selling positions are massive right now, in gold and in gold miners.

All those shorts create downward price pressure, to be sure – but only until prices slide enough that the betters get nervous.      Short selling is a very exposed gamble. The faster the price of gold falls the harder it will be for shorters to stick to their guns. The more gold declines the more pressure will build on shorters to buy gold to cover their bets.      So that’s positive for gold in the short term, albeit once the price weakens even more. The bigger the resulting bounce, the more confidence it will create for contrarian investors that this truly is the bottom.      After almost five years of pain, I think the mining bear market is throwing its final punches. This last leg down might last a few days, a few weeks, or a few months. Wish I knew, but I don’t.      What I do know is that, until it is over, things are going to be ugly for those of us left in mining. Then it will get better.      So hold on. Perhaps don’t bother checking on your mining stocks this week. Don’t let yourself check the price of gold too often. The bleeding will gradually slow, then stop, and then it will be time to average down on favorite holdings and establish positions in quality stocks that you have long eyed.      But no rush.

Resource Maven: It's ugly out there.

The Power of the Patient Investor #Gold #MiningStocks #Uranium

Value investing has been out of favor in recent years, but patient long-term investors can still find bargains in unloved sectors of the market.

From Institutional Investor, the author likes these resource plays:

Another opportunity afforded the patient investor exists in
the gold mining industry. Conjuring incremental money takes no
time at all, if by money we are referring to fiat currencies.
Digital trillions require merely a key stroke; patience has
been neither required nor exhibited. Conversely, producing an
incremental gold coin requires rigorous effort, a lot of
capital investment and the patience of a saint. New gold mines
generally take more than a decade to find, drill, assess,
permit, finance (and divvy the economics among owners,
government and other stakeholders), build and begin to operate.
There is a reason only a few major mines have been constructed
over the past 30 years.


Entering the gold mining business is arguably crazy. Yet a
patient investor need not be exposed to the anguish and
expense. Here, too, the valuable product of successful
exploration — years of toil, fruitful negotiation and
massive capital investment — is periodically wholesaled on
Wall Street for cents on the dollar. Names that we like in this
space are many: Barrick Gold Corp., Centerra Gold, Dundee
Precious Metals, Gabriel Resources, Goldcorp, Kinross Gold
Corp., Kirkland Lake Gold, Lundin Gold, Newcrest Mining,
Northern Dynasty Minerals, NovaGold Resources and Turquoise
Hill Resources.


Uranium is next on our list of valuable yet unloved
commodities that can result in investing opportunity. Like
hydro, uranium is used to produce electricity at an extremely
low variable cost and without air pollution or greenhouse
gases. Unfortunately (fortunately, for investors?), uranium is
relatively scarce and getting more scarce. Consumption has been
exceeding mine supply for the past 20 years. According to
energy expert Marin Katusa, the annual deficit could be 55
million pounds by 2020. New mines take many years to develop
and generally would require much higher uranium prices to
justify the investment. How odd, yet fortuitous, that
Canada’s Cameco Corp., owner of the world’s best
uranium mines, has had its shares smacked by the market,
bouncing along at the lowest price levels seen since 2004.

See the whole article on the Institutional Investor site here:  The Power of the Patient Investor:

#Uranium: Denison & Fission to merge consolidating the #Athabasca Basin $DML & $FCU

See the comments below from Cantor Fitzgerald's Rob Chang

DML & FCU - Betting that size matters: Denison and Fission to combine

Interesting transaction in the uranium space as Denison Mines and Fission Uranium have agreed to merge.  Details and our first thoughts below.

Rob Chang

Denison Mines | BUY | Target: C$1.80 | DML-T C$0.88 | DNN-N US$0.70 | MktCap C$456M

Fission Uranium | BUY | Target: C$2.10 | FCU-T C$0.97 | MktCap C$375M

Analyst: Rob Chang    Associate: Michael Wichterle

Betting that size matters: Denison and Fission to combine

Event: Denison Mines and Fission Uranium have announced the execution of a binding letter agreement to merge the two companies.

Bottom Line: Neutral.  The combined company will be appealing to acquirers that are looking to sweep up a large portfolio of quality assets in the Athabasca Basin. Moreover, the combined company will sport a larger valuation that will be more attractive to institutional investors with minimum market capitalization constraints. On the other hand, the merger does not seem to have many obvious synergies as DML's eastern Athabasca assets and FCU's western basin assets are too far apart to share many costs meaningfully.

• According to the terms of the agreement, FCU shareholders will receive 1.26 common shares of DML as well as a cash payment of $0.0001 for every share of FCU.
  • The Transaction will require shareholder approval from two thirds of the votes cast by the holders of Fission common shares, plus any majority of the minority approvals of Fission Shareholders that may be required by Multilateral Instrument 61-101 as well as approval of 50% plus 1 of the votes cast by the Denison shareholders.
  • Based on yesterday's closing prices, this translates into a $1.11/share value for each FCU share, or a 14% premium
    • FCU last traded at $1.11/share on June 15^th. However we do note this is a merger of equals valuation and not a takeout valuation. Indeed the management team of FCU is effectively taking control of DML by assuming the CEO and COO positions.
  • The transaction value translates into a $4.04/lb. multiple for FCU. This is roughly in-line with the average transaction multiple of $3.95/lb. post-Fukushima (see Takeout $/lb. exhibit below).