Sold very nearly the last of my Labrador Iron Ore Royalty (LIF.T) shares. Great company, great dividends but I am not loving the outlook for iron ore in the China market which is a huge fraction of the sales which pay the royalties. I broke about even on the actual shares but made decent money on the dividends.
The LIF shares I sold were in my RSP so no tax issues one way or another. (I fear I am not likely to be affected by the new Capital Gains rule of 75% inclusion over $250k…It would be a delightful problem to have.) So, where to redeploy the proceeds? A prudent investor would seek to replace a dividend paying asset with another dividend paying asset which I expect I will do in due course. However, to paraphrase St. Augustine, “Please God, make me prudent, but not just yet.”
As the world knows, Dr. Copper is going for a bit of a run. It has occurred to the metals moguls that the demand for copper is accelerating but the actual production of copper is declining. My son, crawling around on roofs installing solar panels, runs miles of copper wire to gather and distribute the electricity generated. His company has over 150 jobs pending in and around Victoria. Copper demand will only go up as more and more of World economic activity goes electric.
A couple of copper related juniors have my attention. The first came to that attention in a very roundabout way: last year, my pal Graeme O’Neill at Bayhorse Silver (BHS.V) (which may have copper itself) found himself in possession of a Steinhart Ore Sorter with no rock to sort for the 18 months or so it would take to get final permits on the Bayhorse Mine. A million dollar piece of equipment, fully paid for, needs to earn its keep and O’Neill looked around for a company which would be interested in leasing the machine.
Enter Canadian Critical Minerals (CCMI.V). They too are awaiting permitting but they have a stockpile of 180,000 tons of copper/gold/silver rock sitting at surface at the Bull River Mine project near Cranbrook, BC. They also have an 90,000 ton ore purchase agreement with the processing facility at New Afton.
The ore sorter was delivered last year and calibrated and commissioned to process CCMI’s material. The first results of the sorting process were released April 16 and they were brilliant,
During the month of February 2024 and prior to the imposition of road restrictions on February 24th, 2024, the Company trucked 897 wet metric tonnes ("wmt") of mineralized material to New Afton. This run of mine material from the surface stockpile graded 1.39% copper, 0.29 g/t gold and 11 g/t silver and is representative of the insitu grade of the surface stockpile.
In late March and early April 2024, the Company produced 146 wmt of high-grade mineralized material using the ore sorter and trucked this material to New Afton. This sorted material graded 3.53% copper, 0.60 g/t gold and 27.58 g/t silver. This represents a 250% improvement in copper grade using ore sorting.
Back of the envelope, if CCMI can ship 1000 tons a month of sorted rock the gross value of the rock shipped would be $136,000. But I have to bet that CCMI will be more ambitious. The ore sorter can process 40 tons an hour. A 10 hour day sorts 400 tons of rock and if you use the 250% copper upgrade number it implies that around 240 tons of rock are discarded with 160 tons of the sorted rock being shipped. Running the sorter five days a week would produce a shippable 3200 tons a month. Triple the current volume.
I note that “To-date approximately 45,000 tonnes of mineralized material on surface has been screened and crushed." Press Release, February 26, 2024
By using the sorter to upgrade the material being delivered the New Afton, CCMI cuts its transportation costs radically and increases the payout on the material actually delivered to New Afton. It may take a while for the market to catch on but the stock doubled from $0.03 to $0.06 which is where I opened a position - late as ever.
My other copper story is Hercules Silver. I first wrote about BIG.V back in December when I opened a position at $1.19. It’s trading around $0.75-0.80 so I have lost my traditional entry 30%. But my open was pretty tiny. So now my choice is go BIG or go home.
We are coming into drilling season in Idaho. BIG looks to be using Barrick’s 23 million dollar investment to field at least three drills to start trying to define what it hopes will be a large copper porphyry or, perhaps, a cluster of copper porphyries as well as what may turn out to be a large silver endowment. The IP looks very promising and I am happy to let my opening position ride.
There is, however, the temptation to take what amounts to a “trading” position betting that as the drills turn and the core surfaces there is going to be a lot of market “excitement” around BIG. The new IR lady needs to prove her worth. Lots of speculation, Rick Rule declaring it is the most fantastic copper core he’s seen since he got his All-Clad, core porn pics, tales from indiscrete drill hands, the Barrick corporate jet spotted (note: as far as I can tell, Barrick has no corporate jet) and all manner of speculation about staking and buyouts. All of which will be trading opportunities.
Taking a position at 0.75-0.80 with a firm exit price in mind makes sense going into drilling season. This is the classic “buy on rumors, sell on news” situation. With a bit of luck there will be a bit of a speculative frenzy once the drills start turning. These are likely to be long holes, 400 to 800 meters and it is quite likely they will be released in groups. Lots of time for the pumpers to do their thing.
The last time BIG released holes - which were objectively pretty good holes - the shares went down from $1.40 to $0.80 cents where they have, more or less, stayed. My thought is that we will likely see a similar run up over the next couple of months in which case I will sell. If the reported holes are spectacular, and the market sees them as such, my little starter position will keep me happy as BIG sails upwards to $5.00 and beyond. But my trading position will give me more money to put into something prudent and dividend paying.
[Disclaimer: I hold positions in BIG.V, BHS.V, CCMI.V and still a bit of LIF.T. I may buy or sell at any time. This is not investment advice. Do your own due diligence, do it hard. Call the CEO.]