Steve Todoruk: Finding the Big Discoveries in the Resource Space
Steve discusses his strategies for assessing junior mining companies. He only looks at companies after they have had some drill discovery results. Since you really can’t determine in advance of the numerous companies which might find some good results. Every company has multiple geophysical anomalies but which will have the best economic grades and be truly viable.
He likes initial drill results to be good but not spectacular. This way the subsequent discoveries can hopefully expand that resource. Ideally, if a company can start out mining high-grade ore that is accessible than the company can repay it’s debts quickly. If a company announces spectacular results and then the grades decline or they miss the zone that can have an adverse effect on the stock price. Geologically speaking there can be “one hole drill wonders” and they can be quite brutal.
Majors will rarely partner with early-stage junior projects, but they may be forced to do that more. When the majors start returning decent profits as a market improves there is often a desperate scramble for results since they have few prospects of their own.
Steve discusses further risks with junior miners including what can cause a stock to tank and the potential dangers with large positions. He prefers to see grades that can be mined economically at today’s metal prices or better yet at even lower prices.
Time Stamp References:
1:20 – When to invest in explorers.
3:40 – Optimal resource discoveries.
7:30 – Danger of “One hole wonders.”
10:00 – Very little exploration in bear markets.
13:00 – Risks with news announcements.
14:20 – Why discovery plays can be tough to trade.
Talking Points From This Weeks Episode
• What to watch for in Junior mining and his strategies.
• Potential risks with early drill results and “one hole wonders.”
• The need for economically viable higher-grade deposits.
Steve Todoruk is an Investment Executive at Sprott. Steve moved to California from Vancouver, British Columbia in 2003 to join Sprott Global. Steve is currently a Professional Geoscientist in good standing in British Columbia. He graduated in 1985 from the University of British Columbia, located in Vancouver, with a Bachelor of Science degree majoring in Geology.
Following his graduation, Steve worked for several major and junior mining exploration companies as a field geologist in Canada and the southwestern United States. During that time, he also worked in an underground mine in Canada for two years operating equipment to learn that aspect of the mining industry. Between 1993 to early 2003 Steve was the president of two Canadian-based junior mining exploration companies and a principal in a mineral exploration consulting and engineering firm.
More information on Steve’s strategies can be found here:
YouTube: Steve Todoruk – Investing in Mineral Discoveries – March 2014