Portfolio Update - December 2021

It’s been a while since my last post — about 3 months. To be honest, not much has changed for me since then. I have really been sticking true to the principles of long term investing and steering clear of any temptation to day/swing trade.


In my last post, I mentioned that I had offloaded my position in every single stock except for one — Titan Mining (TSX:TI) — which was trading around $0.30. The stock is currently sitting around $0.60. A nice double for those who bought in at the time. Despite the run-up, I have not sold any of my position in Titan.


The only real difference between my portfolio between then and now is that I have added one other stock — Augusta Gold Corp (TSX:G).


 

Augusta Gold Corp (TSX:G)


Another deal from the Augusta Group of Companies - run by Richard Warke - who is probably the most consistently successful junior mining entrepreneur in recent history ... as most of my readers are probably aware by now. He is a legend in the business and someone who you should be following very closely. The last two gold deals that Warke brought to the table were Newcastle Gold (turned into Equinox Gold via 3-way merger) and before that, Ventana Gold, which he sold for $1.5B.



After investing with this group over the last few years, I find it difficult to invest in projects that don’t have their stamp of approval.



So why Augusta Gold Corp?


A bit of background history… the company was formed last year when Augusta Group (Warke) and Barrick Gold decided to take ownership of the Bullfrog Project - with Warke actually taking twice the stake of Barrick. At that time, the company also completed a $22M private placement. Shortly after, the name of the company was changed from ‘Bullfrog Gold’ to ‘Augusta Gold Corp’ and the shares were rolled back 6-for-1.


One of the biggest reasons why I am so bullish on August Gold Corp is due to its strategic, highly sought-after location in the Beatty Mining District.


The big AHA! moment for me came when I looked at the map of the Beatty area and the land packages directly adjacent to the Bullfrog Project. AngloGold Ashanti is clearly the dominant player on scene.



Looking deeper at AngloGold — we can see evidence of their grand plan to consolidate the entire Beatty District. From recent news, we can see that they just acquired Corvus Gold for a price tag of $570M and also had this to say about it….


“The combination of Corvus and AngloGold Ashanti’s Nevada assets further consolidates one of the largest new gold districts in Nevada (the Beatty District) and provides the opportunity for AngloGold Ashanti to establish, in the medium and longer term, a meaningful, low-cost production base in a premier mining jurisdiction. Consolidation of the Beatty District has the potential for significant synergies due to economies of scale and integrated infrastructure, including processing facilities at an attractive capital intensity.”


https://www.globenewswire.com/news-release/2021/09/13/2295844/0/en/AngloGold-Ashanti-Signs-Definitive-Agreement-to-Acquire-Corvus-and-Consolidate-the-Beatty-District-of-Nevada.html


It’s quite obvious that there are a plethora of synergies and economies of scale that would result by consolidating the entire Beatty area. But there is one problem… there are still some assets left standing in the way - and the Bullfrog Project just happens to be one of those.


For this reason, I would not be surprised to see Augusta Gold Corp get taken out by AngloGold in the next few years or maybe even see a multi-company merger between the likes of Kinross-AngloGold-Augusta-Coeur … similar to how Equinox Gold was formed a few years back.


Keep in mind that most of the money raised to date for Augusta Gold Corp was done so at prices well above the current price -- primarily by institutions. The stock is currently sitting at $1.20, which is more than a 50% haircut from last year.


 

Titan Mining Corp (TSX:TI)


Titan Mining has been a cornerstone of my portfolio for the last two years and I don’t plan on changing that anytime soon.


To get yourself up to speed on TI, I highly suggest reading the last Portfolio Update I put out which described my bullish thesis on TI in more detail.


In any case, the key highlights of my investment thesis are still just as relevant today as they were when I first invested.

  • Tight float - most held by RW

  • Low jurisdictional risk (NY)

  • Cash flow positive

  • Dividend Yield

  • Positive macro environment (zinc > $1.50)

  • Off-take agreements with Glencore


Let’s talk about the float size. At first glance, there seems to be 150M shares outstanding. In reality, the free trading float is much smaller… why? Because RW holds 56% of the company’s equity himself (and he never never sells open market - only sells when buyout occurs). In fact, he has actually been buying more in the open market lately - Over 1.5M shares over the last few months.


Another thing I love about Titan Mining is the dividend yield. I can’t think of too many other juniors that pay dividends to shareholders this early on. The company has recently turned a corner in terms of cash flow and the dividend yield is further proof of that.


Lastly, the macro factors affecting TI are hugely positive. Zinc is hovering steady above $1.50 - and the company has recently signed an additional off-take with Glencore at an increased price from the last off-take agreement ($1.35).


 

Despite the lack of diversity in my portfolio, I am very confident going into the new year.


In my own investing experience, I have found it is best to be an inch wide and a mile deep -- as long as you know what you're doing.



⁃ SmallCapInvestor