Mr Market is Statistically an idiot

Example of why you can statistically prove this sector is irrationally cheap…

Below are three junior explorers that all are backed by Major miners. Since they are major miners one could assume that they at minimum would want to see something worth $500 M.

1. Headwater Gold – $23 M
   1. 12 Projects, 2 discoveries
   2. Newcrest
   3. 32.9% insider ownership
2. Inflection Resources – $13.6 M
   1. >#22 targets
   2. AngloGold
   3. 29% insider ownership
3. Irving Resources – $69 M
   1. #11 projects, #3 discoveries
   2. Newmont & Sumitomo
   3. 9.51% insider ownership

Total 

• MCAP: $105.6 M
• Total Targets/Projects: #45
• Total Theoretical potential with minimum $500 M per target: $22.5 B
• Discoveries: #5
• Price per target: C$2.35 M
• Price per discovery: C$21 M

Implied Odds

Chance priced in of finding ONE $500 M deposit within a #45 target portfolio that includes 5 discoveries already: $105.6 / $500 = 21.1%

Aka a 42.2% chance of proving up even one deposit worth $250 M

Aka a 84.4% chance of proving up one deposit worth $125 M across #45 bloody targets which again includes 5 discoveries.

Oh and lets not forget some other things that should also be priced in:

• Long term supply/demand picture
• Geopolitics
• Jurisdictional premium/discount
• Future inflation
• Sentiment pendulum

… Which should all be reflected TODAY already.

I could add other examples but he point remains. Either the major mining companies are totally braindead or the prices set by retail investors right now is totally brain dead. And there is an overwhelming amount of evidence pointing to the latter.

If one built a diversified portfolio of junior companies with thumbs up by majors or other smart money it should be (almost) statistically impossible to lose if one threw away the password to the brokerage account for a few years (Forced HODL). This is not the first time the sector has gotten this out of whack but I would say the current opportunities are way better than the 2015/2016 bottom when almost no mine made any money and producers were near bankruptcy. Today it is totally different but the retail driven junior sector doesn’t seem to be aware as the absolute valuations are not too far off from said bottom.

I hereby conclude that this sector is easy to beat, and will always be easy to beat, for any person with common sense and infinite patience. Since only a tiny minority can use those two main tools CONTINUOUSLY almost everyone ends up trading themselves to oblivion and wasting these no brainer lay ups that come around every 8 years or so.