Matthew Gordon
Founder
CRUX Investor
/
View from the Top

Providing Information for Smart Investment Decisions

By Paloma Duran | Tue, 02/02/2021 - 16:46

Q: What information and business intelligence gap does CRUX Investor address and how do you measure success?

A: I used to be banker and when I entered the Junior mining world, I soon realized that there was a great deal I did not know because the rules of the game were different. Some fund managers, analysts and I recognized that there was a massive scarcity of information in the junior mining space. This problem was caused by MifID II which meant brokers and researchers were unable to provide information to retailers, gearing it instead to institutional use. CRUX Investor gathers and provides better information to make intelligent investment decisions by conducting interviews and writing company and institutional reports that people without a technical background can understand. We are demystifying investing in mining through education, pointing to red flags, asking the hard questions and holding companies accountable.

Q: How does your information complement what mining companies are reporting?

A: We are not here to complement the company’s information, but to validate what they say and what they write. Therefore, we are listening to companies. I believe companies need to communicate better and more regularly to provide useful information, not just the issues they want you to hear but those we need to hear. CRUX Investor has encouraged companies and CEOs to communicate better. We want to understand their business plan and their strategy to deliver it. It’s your money that they are playing with.

Q: How can you guarantee the reliability of the information provided by Crux Investor?

A: When CRUX Investor began, we set ourselves a lot of rules and a framework by which we would abide when investing. We determined that we would base this framework only on information that is publicly available because that is all retail investors have access to. Therefore, we are not in a position to guarantee anything because we are using information provided by the public company to investors. We are in the same boat as retailers, so we will fight hard for them. One of the most successful fund managers in this space said, to me “If we get this right, more than 50 percent of the time, I think we have had a good year.” The question is how much money you make when you are right, and how much you lose when you are wrong.

Q: What are the main trends that have influenced investor appetite for junior mining companies and how is this shaping demand for the information you provide?

A: 2020 was a really interesting year because of the COVID-19 pandemic. Mining is a tough sector to interpret, but we still saw most commodities do well. Moreover, I believe that what we saw in the last year is a legacy of what happened at the end of 2019 within precious metals, especially gold that started its steady upward climb from around US$1,250 to around US$1,800 now. This trend continued throughout 2020 mainly because of the fears around the COVID-19 pandemic, and the belief that gold is a safe haven. Additionally, at the end of 2020, supply concerns around uranium saw equities double and treble. There were many catalysts for uranium during the year but they did not materialize until the end of 2020 and the smart money is saying 2021 is the year for uranium. Companies like Tesla are promoting the need for production of nickel, copper and lithium, raising prices for battery commodities. Last year, prices for graphite, graphene, zinc, manganese, among others starting going up. I think those are the big themes of 2020. Finally, the implementation of Environmental, Social and Governance (ESG) practices and ethical & green investing increased last year, and now companies are being encouraged to behave differently than they have in previous decades. Hopefully I’ll be talking to you next year about advances in AI in mining. It’s not quite there yet!

Q: What are the most relevant variables investors should evaluate when investing in junior mining companies?

A: I believe we should always start with the business plan, which I think is critical. Eight out of 10 companies do not have a business plan and they are just drilling holes and hoping they find something underground. First, a company should be able to clearly articulate its plan and if they cannot, we walk away. Second, the company’s team should have relevant experience. Has the CEO run a public company before? Have they made shareholder money before? Have they built companies, got those mines into production… Timing is everything and if they do not understand that, we should not invest in them. Moreover, a company should have the ability to get the right type of money and at the right stage for the company. This is something that we take into account, whether it is in exploration or development. We can understand a great deal by assessing the resource that they are after, the scale of opportunities, the type of resources and their mining experience. In addition, when companies build a mine, we need to know if their plant and equipment operate economically in different market conditions. Additionally, politics, mining code, the rule of law, the permitting process, transparency and if mines in the country are within their jurisdiction all factor into the equation. These are all really important matters investors should consider. If you do not understand it, do not invest. There are always more deals out there.

Q: What challenges and opportunities do junior mining companies face in Mexico compared to others mining jurisdictions?

A:There are many companies that have economically successful operations in Mexico because there is a good mining code and rule of law. However, there are negative perceptions of South America and Mexico, especially when companies have not invested in these regions and must deal with political issues. I believe the Mexican government is starting to do a better job in communicating, especially in relation to junior mining companies. I recently had a conversation with José Jabelero from the Ministry of Economy about some initiatives that the government is taking regarding transparency concerning the incorporation of processes to request permits and licenses online. Hopefully, that will help to remove some negative perceptions of mining. Mexico has large deposits and hosts big mining companies that can demonstrate how easy it is to do business in the country, if the companies do things the right way. Moreover, I think there are still several opportunities and assets yet to be discovered, investors and companies that are planning to come to Mexico should be excited.

Q: If you could recommend junior mining companies with operations in Mexico to a potential investor, which ones would you choose and why?

A: There are many companies that I could recommend but there are 2 that stand out in 2020. The first is GoGold Silver & Gold, managed by Brad Languille, who we have interviewed a few times. We have seen that company go from $0.40 cents to US$2.60. I believe they have done many things well, because they have engaged municipal leaders, especially during the COVID-19 pandemic. GoGold is a Canadian company that has been working in Mexico for the past 25 years and I think they will be considered one of Mexico's big mining companies in the next two to three years. The second is another Canadian mining company called Minera Alamos, led by Doug Ramshaw. When we started talking to them, they were at $0.20 cents and now they are around $0.80, which means they have done really well for shareholders. This company is different from GoGold because they have smaller operations. In addition, this company is also getting involved with the community and the Mexican government, which has allowed them to have stable growth. There are many companies to choose from because I believe there are many successful companies operating in Mexico. At the moment, it has one of the best jurisdictions that investors are talking about. I believe Mexico is in the same level as Canada, the US and Australia. I spoke to a big South American family office, that has assets worth US$14 billion, and they said there are only 4 countries in Latin America in which they would invest. Mexico was one of them.

Crux Investor is a new market-insight channel to understand the junior mining world and opportunities to invest. Its purpose is to cut through the jargon, bias and bluster to determine whether a company has a strong footing for growth and success.

 

Paloma Duran Paloma Duran Junior Journalist and Industry Analyst