Rotating: Iron to Gold?

Truth to tell I love Labrador Iron Ore Royalty (LIF.T). Not a lot of stock action, but a very decent dividend and usefully boring. Yes, I should have sold it a couple of years ago when it hit $50.00, but I didn’t. The dividend was just too lovely.

Now I am looking at trimming, if not closing my position, for a while. LIF.T is hugely exposed to China where the Iron Ore Company of Canada, a subsidiary of Rio Tinto, sells the bulk of its iron. My sense is that China has the potential to be an economic basket case in fairly short order. Which will mean a decline in construction and, with that, a decline in the demand for rebar and, with that, a decline in the demand for iron. Alternatively, China will be OK but limping for a while which certainly does not suggest a tremendous growth in the demand for iron. Either way, LIF is not likely to double in the next year or so. And its dividend may drop.

Iron looks a bit rusty, gold, on the other hand, may close out the month over $2000 USD an ounce. I have a number of badly beaten up gold juniors in my box. And I am looking at increasing my positions in several.

Let’s start with an actual producer, Victoria Gold (VGCX.T). I wrote about Victoria at the end of October and began a starter position. Victoria had some issues this summer with wildfires which meant it had to suspend operations for a couple of weeks. The wildfires are out and Victoria is back to full operational status. They keep working right through the nasty Yukon winter.

There has been a bit of insider buying just over $6.00 a share on Victoria which I always see as a good sign. If gold goes for a bit of a run, $10.00 a share would be a reasonable target. It is trading at $6.90 as I write.

Down the road from Victoria’s Eagle Mine is Banyan Gold, (BYN.V). Talk about all your eggs in one basket. BYN has traded off my entry point of $0.30, but not by much. Again, there has been a bit of insider activity in the last couple of weeks including my pal Paul Gray, QP for BYN press releases, exercising some of his $0.05 options. (You’re buying at Cambridge, Paul.)

If gold continues to strengthen, a producer like Victoria will rise solidly, but a company like Banyan, with 6.2 million ounces of gold in its Mineral Resource Estimate, could explode.

If I sell a share of LIF I’ll get about $30 and forego a quarterly dividend, which will likely be around $0.50 this quarter. Ouch. But I can buy 4 shares of Victoria or 100 shares of Banyan. Neither are going to run out of cash anytime soon so there is very limited downside. Upside? If gold stays where it is, my bet is that Victoria will drift upwards towards $10.00 purely on the cash it is currently generating. Banyan’s price will depend on its drill results, most of which are pending.

One-hundred-seven (107) drill holes and 24,722 m of drilling has been completed to date which together closed the gap between the Powerline and Aurex Hill deposits and will extend and demonstrate the extent of the Aurex Hill Zone to the east. Assay results from 69 drill holes are pending. (press release September 6, 2023)

I don’t expect those results to be spectacular, I expect them to be solid and for Banyan to put out a revised MRE over 7 million ounces of gold.

If the gold price continues over $2000 I expect Banyan will see its market cap expand, a lot.

So, goodbye, LIF.T. It was a great ride. But, Yukon Ho!

[Disclaimer: This is not investment advice. I am not an investment professional. I am down about 30% at the moment. I will write about companies that I hold. I will disclose any holdings. Do your own due diligence. Do it hard. Call the CEO.

I currently hold shares in BYN.V and VGCX.T and while I have no plans to sell anytime soon I reserve the right to take profits as they arise.]