THH: The Value of Knowing the Value of Information

I’m not a geologist. I am not a mining engineer. I am not a “trained” finance guy even though I studied economics in university…

On paper I guess I shouldn’t be successful when it comes to mining investing…

However I have been pretty successful and I think there are two main reasons for that…

One is my background in poker which cemented the Risk/Reward concept. At the end of the day everything comes down to Price. The best project in the world is a sell at some point and the worst project in the world is theoretically a buy at some point. Paying little for a company is akin to playing a hand of poker that does not cost you much. In that case the odds of winning can be very poor and it still could be a no brainer bet. This is what has helped me to stay rational and buy when things get cheap instead of panic selling like a lot of people seem to do. In other words I get greedy when something becomes cheap because the Risk/Reward gets exponentially better all else equal. The cheaper something gets the less likely it is that one is making a mistake by buying it. It is also beneficial from a reward stand point for a couple of reasons. One is of course that there is more upside potential if something starts out really cheap. The second is that given how the marginal investor behaves it is easier to move a cheap stock (costs less, looks cheap by default etc). A tiny micro cap company could double and it would still often be hard for anyone to say it’s “grossly overvalued”. Even if the project has not become better it sometime is enough for someone to sneeze at the stock and one could be sitting on a double. Personally I don’t go hunting for any dog shit stock that has a sub C$10 M Market Cap in order to wait for “the sneeze” but it is probably a strategy that could work well. I prefer cheap AND high quality because in that case I could “win” via “the sneeze” and/or a justified revaluation higher because of the positive fundamental trend.

Another thing is that I think I am good at understanding and appreciating the weighted value of information. For example I closely follow what Quinton Hennigh and Crescat Capital is doing. Why? Because when one of the best geologists in the world believes that a project has merits then that is some of the most valuable information a mining investor could get (for free to boot). In other words I can be damn sure that whatever project Crescat (QH) gets involved with has strong geological fundamentals. Furthermore it should be obvious to anyone who has ever watched a Crescat presentation with Quinton that he likes to “go big” and always considers the “end game” aka how the project could be monetized (He is an economic geologist after all)…

Early Stage Examples:

1. New Found Gold was considered overvalued by many right off the bat. Well, it recently reached a Market Cap of $2 B because the company has kept on hitting super high-grade gold.
2. Labrador Gold was able to hit high-grade Epizonal Gold on the first tries.
3. Eskay Mining was able to identify numerous geophysical targets and had incredible results on the first drill campaign at TV/Jeff.
4. Eloro Resources looks like it has one of the largest polymetallic systems in the world.
5. Cabral Gold just keeps on finding more gold.
6. Tombill Mines hit the F-Zone on the first try.
7. Lion One hit a bonanza grade intercept at depth at pretty much the first try.
8. Defiance Silver’s silver project is confirmed to be wide open and has seen thick intercepts at depth.
9. Novo Resources has confirmed conglomerate gold in all corners of Pilbara.
10. Gold Mountain was partially a play on New Gold’s appetite for gold and voila New Gold has recently signed a LOI to increase its “Tonnage Limit in its Ore Purchase Agreement”
11. Irving Resources identified three major LSE-systems at Omu via CSAMT surveys.
12. etc

… These are all stories where Crescat (QH) came in early, had visions, and where said visions are materializing. New Found Gold looks like one of the most exciting discoveries in Canada today. Eloro Resources looks like one of the biggest discoveries in the world. Eskay Mining has some of the biggest absolute potential I have seen (which is further confirmed by BLEG samples). These are not your everyday (potential) “wins”. These are remarkable and extremely rare outcomes. Any one of these remarkable stories could have paid for numerous failed investments. The “hit rate” so far for Crescat (QH) is obscene. Especially given how long the odds are in exploration to begin with. I pity anyone who can’t appreciate what gifts Crescat and Quinton Hennigh are. Personally I think the combo is the best thing that has happened to this sector since I started.

When Crescat (QH) enters a play one could say that at face value it is just “one of many funds” and just “one of many geologists” that happen to like a particular stock…

In other words some might notice the event, shrug, and don’t pay much attention to it (aka not appreciating the information).

In contrast, this is what I see…

The value add I see when Crescat (QH) enters a play:

1. Confirmation that the target(s) is legitimate
2. Assurance that there are ways to monetize success
3. Capital infusion which allows the company to create value
4. Guidance to make sure the ROI on the capital infusion goes up

… In other words it usually completely changes my view of a case.  Not only does a Crescat entry confirm that there is high quality potential but it also helps bring forward said potential in time (geological  guidance, strategic guidance and capital to create value ASAP). Furthermore it usually results in even more money wanting to enter the play which has the added benefit of more exposure and even future lower cost of capital. All in all, the signal value (and actual value) provided by the Crescat/QH combo sometimes makes it feel like I’m investing with cheat codes. How many experts out there share so much information publicly and try to educate people as well? You think I would have been early into so many success stories if it wasn’t for Crescat/QH? No way. I would not appreciate the value of Epizonal Gold Systems. I would not have appreciated the value of Iska Iska. I would not have appreciated the value of owning the entire Eskay Creek VMS district etc etc.

I honestly think I could “retire” today and just diversify my portfolio across all the Crescat plays or simply invest in the Crescat Precious Metals Fund and handedly beat the market without doing a lick of due diligence myself. I know for sure that my results so far would not be as good if not for QH and Crescat. In short I consider myself incredibly lucky that these guys are around AND that I was “smart enough” to appreciate just how much value they provide (directly and indirectly). On that note I think these guys are making most newsletters obsolete (including myself for better or for worse).

Note: This is not investment advice.

Best regards,

The Hedgeless Horseman