We think that this current bull market could last until sometime mid-2021, although signs already exist that a less buoyant -while still positive- variant could stay among us for up to 18 months. To take advantage of the momentum while making the best of travel restrictions, many listed companies holding projects in a country different than their base resorted to adding local assets to their portfolio, which is completely logical noting many company executives have been locked out of their target countries. That has been a very sensible approach, and we applaud the flexibility. We think this will continue well into mid-2021.
One of these players was Meteoric Resources (ASX: $MEI), a listed gold explorer focused in South America. They were getting great results from their projects in Brazil -a country we are very bullish on- but with Covid restrictions, they decided to acquire an Australian asset, with a pathway to cashflow. AIS Resources (TSX-V: $AIS), in turn, completed an acquisition in Victoria, a gold project located 12km from Kirkland Lake Gold’s (NYSE: $KL) Fosterville Mine. Sayona Mining (ASX: $SYA), a lithium explorer progressing the Authier project in Quebec, expanded its already active WA portfolio. Other firms resumed exploration on their local assets that had been dormant for a couple of years, such as Pan Asia Metals (ASX: $PAM) and its project in NSW, and SolGold (TSX & LSE: $SOLG).
On a related subject, emerging from the same original situation, we see a greater reliance on local networks and partnerships, for operations, due diligence, as well as investment. If you can’t travel, you depend even more on local teams, partners, and advisors; many highly strategic decisions normally fully the realm of the board -or CEOs- will come to lay on local teams’ desks. Relationships become even more valuable and critical to success and perhaps even opening the door for increased ownership for local team members, and a higher degree of responsibility. This also connects with the fact that we have started seeing increased local allocations in financings, to levels much higher than pre-pandemic, allowing local investors to participate in “their back yard” with any powder previously earmarked for international transactions.
Now, we also see good value being realised from smaller projects, such as those under 500koz in the case of gold, that can be put in production and serve as funding for regional exploration, giving these young companies a better base for growth. Traditionally, these small-production projects have been shunned by private equity and other large institutional investors, but the tide is turning, and it just makes sense in the current environment. We are working on one of these ventures now, and we believe it is an exciting path to progress.
In any event, it will be a heck of a year…
And that is it for today. We’d love to hear your thoughts. Reach out on our social media channels to chat and find additional resources here. See you next week!
The Weekly by Synergy: 5-minute musings on the markets, current trends, and events. From our opinions, observations, analysis, and news commentary, just a few lines to get you started every week.
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