(This company is not worth shorting unless its share price were a lot higher.)
Canadian Zinc’s flagship property is the Prairie Creek property. It used to be a mine that opened in 1982 and shut down the year after. It must have been a horribly uneconomic mine to have shut down so fast. Fast forward to today. CZN is trying to raise capital as it needs at least $234M to build a mine on the property (probably more).
Contango Ore is a mineral exploration company that spun off from Contango Oil and Gas (MCF). Brad Juneau, MCF’s long-time oil & gas exploration partner, is the CEO. Avalon Development Corporation provides geological services for the company. Contango Ore has interesting drill results though it’s too early to tell if it has an economic deposit.
GLD is a trust that owns physical gold.
GDX is an ETF index of gold mining stocks.
As you can see from the chart below, GLD has clearly been the better performer since the inception of GDX. (GDX would perform better if dividends were taken into account. However, it still wouldn’t make a difference.)
In my opinion, gold miners have spent way too much effort on mining the capital markets (e.g. you, me, your pension, etc.) and on chasing projects with terrible returns.
A year ago, Cliffs put out some information on the economics of its Black Thor project in its Investor’s Day presentation by Bill Boor (see Cliffs’ website). I’ve only stumbled across it and read it now. In the figures given out in the presentation, there are some extremely aggressive price assumptions used and the stated IRR is only 14-17%. The projects’ economics are overstated and this project doesn’t look economic at all. I wish I had realized this sooner.
Now I’m in an uncomfortable position with KWG Resources and Noront. Both their fortunes are tied to Cliffs building a mine and smelter that it shouldn’t.
Originally, I was interested in Osisko since it has dropped by three quarters since 2011 and it seemed cheap. However, the company consistently uses aggressive accounting so it’s not as cheap as it seems. Overall, Osisko is hard for me to evaluate since (1) I don’t trust the promotional management and (2) there isn’t enough information being disclosed. I also prefer to invest in management teams that are really good at generating value.
Here are two: RX Gold and Veris Gold
It boils down to this: I think the company is lying about its project’s economics.
