Tuesday, 18 April 2017

Canadian Miners Performance Update

With the yellow metal well above $1250, miners have rallied from their correction bottom reached mid December 2016.  On April 12, the HUI index is up 33% from this mid December bottom, yet from its bear market bottom that adds up to a more impressive 115%.  However, from its August rally top the HUI still is down 25%.  Following tables shed light on how the individual explorer, developer and mining stocks performed during these hectic days.

Our long-list consists of 98 miners, developers or explorers for which we have a complete data set, including November 2010 reference data. As a reference, the data on the HUI are added and for comparison the same performances also are calculated for the S&P 500. Most symbols are TSX quotes and hence are in Canadian dollar.  Symbols without the .TO (TSX) or .V (TSX-Venture) extension are in USD. However, compared to land slide differences, any distortion induced by currency fluctuations only is some back ground noise.

Outperforming the HUI by a wide margin since the bear market bottom

In every rally tremendous advances are made by a limited number of stocks, outperforming their reference index by a wide margin.  Gold miners have a reputation of extreme volatility, hence you can expect a similar yet more extreme outcome. The below table is sorted by advance since the bear market low. At the bottom, the HUI data are included as a reference. 

GoldMinerPulse Explorers, Developers and Miners sorted by advance since bear market bottom (click to enlarge)
(Data as of April 12, 2017)
However, it isn't all gold glittering: quite a few explorer plays in the list still face stiff losses since November 19, 2010 when coverage started. Any stock still down more than the HUI index, despite stellar gains since the bear market bottom realized a very speculative gain, which may not last. 

Major disappointments

Quite a few picks equally have slid considerably relative to their (usually August 2016) 12 months high. Despite still outstanding advances, you may have missed an opportunity realizing your gains on a few of those stocks.

The table below is sorted by decline from the 12 months high.

Selection of 25 miners/developers/explorers most down since their 12 months high  (click to enlarge)
Still owning any of these stocks, you missed a lifetime opportunity to avoid a major downturn. The top two even put down fresh all time lows recently, sliding beneath their former gold bear market bottom. Others rallied to lofty speculative highs which proved not sustainable. A few miners published results falling short of investor expectations, but nevertheless have a decent long term performance. First Majestic Silver has been bashed after reaching a speculative high above C$20, yet it again is up 38% since its 12 months low.  This list contains a disproportional number of long term laggards. Hence care needs to be taken: these are not necessarily recovery plays.  Adding to positions in these miners or explorers, you may be throwing good money after bad money.


However there are quite a few exceptions, down relatively little since their respective 12 months high. In these cases the 12 months high may well have been realized after the HUI topped in August 2016.  Not surprisingly this list is topped by the reference index S&P 500, having recently made an all-time high.
Selection of 25 miners/developers/explorers least down since their 12 months high  (click to enlarge)
You find only few long term laggards in this selection. Trilogy Metals is the former Novacopper, a spin off of Novagold, which still is down about 90%, despite its recovery.  Nautilus minerals has a peculiar business model, exploring for mineral deposits in ocean troughs, where the solid crust is particularly thin. Exeter Resources on the third place is going to be acquired by GoldCorp. The deal was announced on March 28.

Recent recovery plays

Following 25 stocks are the explorers/developers/miners have rallied considerably since their 12 month low. The HUI bottomed mid December 2016 and so did quite a few miners.

Selection of 25 miners/developers/explorers advancing most since their 12 months low  (click to enlarge)
Despite the HUI up 'only' 33% since bottoming on Dec 16, quite a few explorers/developers/miners rallied to a lofty high.  The list still is topped by Northern Dynasty Minerals, which owns the Pebble deposit near the Alaskan coast.  It has been the major 'Trump rally' play, but the stock sold off recently. The advance Osisko Mining realized may be more sustainable.  Exeter Resources lists at position 9 in this table.

Long term out-performers

A last table is sorted according to the long term performance since Nov 2010 (or since the IPO in few cases). It is difficult for a mining stock to outperform the S&P500 (+95% since Nov 2010) over a longer time frame.

Selection of 25 miners/developers/explorers advancing most since start of observations (Nov 2010)  (click to enlarge)
The list contains all gold/silver mining stocks advancing since Nov 2010.  Near the bottom of the list a few miners face a minor long term loss.

Poor correlation

Whether mining stocks rallied quite a lot since their bear market low or are up relative to their initial stock price in Nov 2010 seems little correlated.  The graph below is a scatter plot between the long term performance and the gain since their respective bottom price.

Long term performance (vertical) versus recovery from the bear market low (horizontal) - click to enlarge
 Osisko Mining and Arizona Mining stand out on the vertical axis, while horizontally Grand Portage Gold and Harte Gold stand out. GPG still faces a stiff long term loss despite advancing fifteen-fold. Harte Gold has recovered from a seemingly lost position.  Too many explorers still are reduced to pennies on the dollar, irrespective of the advance since their bear market bottom.  On the positive side, some miners own their decent long term gain to a magnificent rally, completely recovering from bear market losses incurred, while a few others proved more resilient during the miner bear market, with a more modest gain bringing them to their current stock price.

Leaving aside the four outliers, we get the lower left quadrant in more detail:

Long term performance (vertical) versus recovery from the bear market low (horizontal) - click to enlarge
Explorers near the bottom are doomed: even a tenfold increase ('ten-bagger') cannot save them from a losing position: you need to accept that you've been wiped out of what you thought to be assets. Above the 50% loss line, doubling brings a miner above break-even. Miners above break-even have realized this with quite varied gains from the bear market low.

Harte Gold

Today's focus is on Harte Gold (at position 21 in the last table) which rallied 1420% from its bear market low to a 10% long term gain today.  Little over a year ago, the developer seemed doomed.  Insiders must have known better.

Harte Gold (in C$)over a two year time frame.
The company is commissioning its first mine at White River, Ontario. Harte Gold also has received the 'Developer of the year' award on April 4. Is this still a 'buy'?  Hard to tell, but you should have bought some time ago.

1 comment:

  1. This was a very informative article. And congrats for the award. I wish you more success in future .