THH – Diversification: Why I am More Diversified Than Ever

At a time like this, when shit is hitting the fan on a daily basis, I think one should really consider being diversified across different jurisdictions. Why? Because a) The worse things get the closer we get to the end game/aftermath where gold and silver ought to do quantum leaps in terms of purchasing power, b) Juniors, especially gold juniors, are so cheap that a reversion to the mean ought to bring substantial returns, c) Because juniors are so cheap across the board I think one could do very well without a concentrated portfolio, d) It helps being calm/rational when others are panicking, e) If it is enough to have 30% of juniors “survive” for the mean reversion, and then some (gold breaking out of the cup & handle for example), then I would rather make sure I have a high probability of very good future returns than putting all eggs in one basket (company/jurisdiction) and potentially get no returns.

You have ESG, spiking energy costs, spiking labor costs and everything in between in many jurisdictions right now. Some jurisdictions have internal energy production and some don’t. Some have a tight labor market and high input costs and some have less. Some jurisdictions are very hard in terms of getting a mine up and running and some are easier. Furthermore I see ESG as a double edged sword. Sure it has made it a lot harder to permit mines especially in the west. But because of this it obviously means that the supply/demand picture is getting increasingly bullish. I mean just look around. Almost every metal is near multi-year highs or even all-time-highs. The policies that makes it hard to open mines are the same policies that are inevitably leading to shortages and price spikes for commodities. So… Even if a large part of the juniors one own are not able to get anywhere close to production for reasons like ESG it will mean that the ones that do ought to be even more valuable (since supply is getting increasingly constrained).

In light of the above coupled with the ridiculous valuations I truly do believe that some 70% of my juniors could totally fail and I would still make quite a bit of money in the coming years. Gold is trading at around $1,850 and a lot of high quality juniors should probably be valued some 200% higher than they are on average (in light of both the price of gold and the long term supply/demand picture). So if I can get at least 200% from a mean reversion alone, and excluding any real growth for the juniors, then I would end up even with a 66% failure rate. If Gold also breaks out of the multiyear cup & handle, and the gold bull really gets started, then one could probably multiply that 200% by some factor…

Again I would rather have a PROBABLE (via diversification) great result than a POTENTIALLY fantastic result (Bet it all on a few juniors/jurisdictions).

My nightmare is to be right on a) the case for gold, and b) the juniors I own are incredibly cheap, but having it end in a heart break because I lets say only had a few juniors in the same jurisdiction… And something happened there like nationalization or mining being banned (It might sound farfetched but I mean we have over 69 “genders” today so there is a lot of crazy stuff happening that I would never have guessed).

I have noticed some investors who just own a few juniors and they are almost always highly emotional and sensitive to the daily volatility. Personally I am more diversified than ever with probably some 40 holdings nowadays, across different jurisdictions (albeit more concentrated to the better ones), and I even own some Nickel, Copper and REE stocks for good measure. I mean if companies exploring for other metals are cheap, the metals are selling near ATHs, and the supply/demand picture is favorable then it certainly can’t hurt to be exposed to more than only gold/silver. With that said I would say 90% of my portfolio is still focused on gold and silver (and gold more so than silver). Anyway, I sleep like a baby and on an average day I might look at 5-10 tickers or something. I mean a) Have a 1-3 year time horizon for most cases and b) Consider a lot of the juniors not to be clear sales unless they go up 200%-300% all else equal. Basically I am not even close to selling anything so it’s kinda pointless to stare at tickers all day for the sake of it. Besides, we are seeing panic selling aka collateral damage, because the stock markets are tanking, not because gold is going down or the gold business/value of the companies went down… So I am even less inclined to sell now obviously.

I think every single juniors I hold has multi-bagger potential over 1-3 years without gold needing to go to $3,000… But the bull is coming thanks to a) Every FIAT system dies, b) We find less than we take out of the ground, c) ESG, and d) it appears that shit is increasingly hitting the fan!

Examples of some companies I own in different jurisdictions:

Nevada, USA

• Timberline Resources
• Nevada King
• i-80 Gold
• Headwater Gold

Alaska, USA

• Western Alaska
• White Rock

BC, Canada

• Eskay Mining
• Goliath Resources
• Pacific Ridge (Gold & copper)
• Cassiar Gold
• Scottie Resources
• Rokmaster
• Dolly Varden Silver
• Blackwolf Gold & Copper

Newfoundland, Canada

• New Found Gold
• Burin Gold
• Labrador Gold

Yukon, Canada

• Snowline Gold

Mexico

• Defiance Silver
• Golden Tag
• Magna Gold

Australia

• Novo Resources
• Inflection Resources (Gold & copper)

Bolivia

• Eloro Resources
• Mantaro Precious Metals

Sweden

• District Metals
• Gold Line Resources

Finland

• FireFox Gold
• Aurion Resources
• Gold Line Resources

Ireland

• Galantas Gold

Brazil

• Cabral Gold
• Jazz Resources
• TriStar Gold

Africa

• Alpha Exploration, Eritrea
• Montage Gold, Ivory Coast
• Sylla Gold, Mali

Japan

• Irving Resources

Fiji

• Lion One Metals

Other commodities…

Nickel

• Magna Mining
• Zeb Nickel

REE

• Defense Metals

Tin

• Eloro Resources

Copper

• Pacific Ridge
• Universal Copper
• Solis Minerals

Note: This is not investing advice. Consider me biased since I own shares of all these companies and many are banner sponsors. Assume I may buy or sell shares at any point in time. Always do your own due diligence and make up your own mind. Juniors are risky and volatile. Never invest money you cannot afford to lose.

Best regards,

The Hedgeless Horseman