Anything is Possible

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The information contained herein is accurate to the best of the author’s knowledge, but the material and interpretations contained herein should be independently verified by any party using this information as part of any research, editorial, or decision making process. Any views expressed here represent the author’s opinion only, and as such readers should do their own research and come to their own conclusions if they are using the opinions contained herein as part of any larger due diligence process. The author may have long or short positions in the companies mentioned and may be buying or selling in the market depending on which way the wind is blowing at any given moment. Opinions are subject to change without notice. Prospective resources, predictions, comparisons, financial projections, and extrapolated metrics are, by their nature, subjective and interpretation dependent. The topics covered are highly speculative and involve a high degree of uncertainty and risk. Speculative companies can and do go to zero. By using this site, you agree that the author(s) and Hydra Capital is/are not responsible for any damages incurred by the use of the presented materials. Anyone reading these blog posts should know that they are the author’s thoughts and opinions, which are not to be confused with or construed as research reports.

Disclosure: The following represents my opinions only. I am long every stock mentioned in this post (Image credit to Ice Tea on Unsplash)

Recession, recession, recession. You can’t go a day without reading about it, and yet the charts on the Dow, Nasdaq, and S&P look pretty hopeful. The market is geared for one more quarter-point rate hike to come out of the FOMC meeting on May 3rd and after that, it’s up to the economic data that follows. With the SVB “event” highlighting the vulnerabilities of certain kinds of collateral (for one, long-dated paper issued at negative-to-near-zero rates) under a rapidly rising interest rate environment, I think that the Fed knows that it needs to take a wait and see approach over the summer. I’m seeing a growing chorus of “3-4% inflation is the new 2%” in this new world of reorganizing/onshoring supply chains, so we’ll have to see if the Fed starts to adopt that stance. Markets aren’t cheap by historical standards, and yet the index charts look buoyant, so I’ll be keeping an eye on the March lows as a gauge of overall sentiment. Generally speaking, this still feels like a stock/sector picker’s market to me. I haven’t forgotten the Mark Mills presentation on the material realities of the energy transition that I linked to earlier this year, so metals and energy still figure prominently in what I’m most interested in theme-wise, along with my favourite “special sits” which I think can perform under most market conditions — as long as I can be patient with them.


No change here. Oils are cheap as a group and not many believe in the return of $100 oil. All projections suggest that H2 2023 will see a real tightening in the oil market and when I look at US rig data, I’m not fearing big U.S. shale growth in the meantime. OPEC’s recent production cut may suggest that they aren’t fearing U.S. shale either. Time will tell. My interest is in companies that are either event driven, or just really cheap, so I’m good with just about any oil tape.

Tenaz Energy (TNZ.TO, last at $2.05)

Still waiting. No change here. TNZ is trading at about 1x EV/CF in the low $2-range, which I think represents one of the best risk-reward setups in the energy sector. Sure the market cap is small and the liquidity is low, but I own a good chunk of Tenaz with the belief that it’ll be small until it isn’t — and there’s a deeply-experienced management team in place that is fully capable of making that transition. Boredom is the enemy here. Once you decide that you’re good to bet with management, patience is the only requirement. The company buys stock back just about every day and directors have been buying lately, with the most recent buy being a 50,000 share purchase ($105,000) by director John Chambers, who knows a thing or two about energy as former head of GMP First Energy. One day, TNZ is going to capture something that the market will pay attention to, and when it does, these little wiggles in the low 2’s will seem insignificant… or at least that’s the plan.

Tag Oil (TAO.V, last at $0.64)

TAO put out a tweet on Monday saying that the fracture stimulation of the vertical BED 1-7 well was completed successfully and that over 100 tons of sand and 4,000 barrels of water was injected at high pressures and pump rates. That’s music to my ears as it suggests that the frack was successful in opening up significant connected reservoir volume in order for the well to take that much sand. Recall that frac sand is pumped into the target horizon (the ARF in this case) with fluids under high pressure in order to induce fractures that fill with the sand/water mixture. Once the pressure pumping is complete, the well is flowed back in order to recover the frac fluid, leaving the sand grains wedged in the newly formed fractures within the target horizon. This is how fracture stimulations increase the connected surface area/volume available for hydrocarbon production. Now, with what sounds like a successful fracking operation behind them, it’s all about flow rates. It should take a couple of days of flowback to recover the load fluid (water pumped in with the sand), after which TAO will be measuring oil flow rates in the field. Companies in western Canada often put out test rates in new plays after 1-2 weeks of testing, but IP30’s are always preferred. Perhaps TAO will end up with a shorter term update, followed by an IP30… I’m not sure. Therefore, my timeframe for when the market might see flow rates is anywhere from 7-30 days from now. I’ll have more to say after some flow rates come out, but for now I’m just happy that the fracture stimulation went according to plan. The first time you do something in an area where it isn’t often done, it always takes a little longer, but TAO’s operational experience at BED 1-7 will be invaluable when it comes to planning a multi-stage completion in the first horizontal well this summer. After a long wait, this one is just getting ready for showtime. If I see a good vertical test rate (say, ~200 bopd from a single frac), I’ll just hold on with both hands for the journey because the writing will be on the wall for the horizontal. Remember that all of the infrastructure needed for production is right there. If this play works, it’s going to be some highly economic oil and it will have a very short path (and low cost) to production.

Cardinal Energy (CJ.TO, last at $7.58)

No change here. I love CJ for its leverage to WCS pricing, its clean balance sheet, its outsized tax pools, its beefy 6-cent monthly dividend, its low decline rates, and its carbon-negative ESG chops. The best knock I’ve heard against CJ is with regards to its future well abandonment liabilities, but management has that very clearly built into their business plan, so I don’t spend any time worrying about it. I do however spend time dreaming that my chunk of CJ and I will see a $100/barrel oil environment again, because special dividends and share buybacks are both on the menu when it comes to enhancing shareholder returns going forward.

Valeura Energy (VLE.TO, last at $3.12)

The deal that seemed to be too good to be true actually closed at the end of March — insert golf clap here — and kudos to management for generating big value for shareholders with that one. Wow. With a financial update now out to the market (net working capital increased by US$105 million on closing) and updated reserves volumes (and values) released, the market has had a chance to see what it thinks VLE is worth… and today’s close says that number is $3.12. It’s cheap on a CF multiple basis, but the abandonment liabilities and newness of the asset will take some time for the market to digest. I think VLE will find a new level here over the next few weeks/months where its share price will consolidate its meteoric rise from obscurity. After that, it’s up to the oil price and execution on these and other assets (e.g., Wassana and Rossukon). Ignoring any future additional deal-making, I think that VLE has a few levers to pull which could take its production to >25,000 bopd in the not-too-distant future, so there’s story to be written here yet. For me though, the easy re-rate trade has now happened (remember that not long ago VLE was trading at 75% of its cash value and no one cared) so I’ve booked some profits and will look to add back on weakness if the market gets bored with this one over the summer.

Parex Energy (PXT.TO, last at $27.61)

PXT has been good to me. The market’s dislike for Colombia keeps high-quality PXT as one of the cheapest companies by most metrics on industry comp sheets. Meanwhile PXT trades just a little over its PDP NAV with three big Exploration (with a big “E”, i.e., high-impact) wells planned for this year. One of those wells, Chirimoya, is drilling right now and should TD this quarter. A hit there, or on either of the other Exploration targets (these are big targets), could send PXT higher — even if it is in Colombia. With PXT, I think I’m getting a free call option on high-impact exploration upside in a very well-managed and fundamentally cheap company, so I own it.

Vermillion Energy (VET.TO, last at $18.45)

VET also screens as being one of the cheapest companies on the comp sheets these days. I can’t say that I totally understand why, so I own some and will let the quarterly earnings reports tell me if I’m crazy or not. VET has excellent leverage to European energy prices, windfall taxes and all, and it historically keeps a stable of high quality assets that are capable of generating sustainable free cash flow. Sometimes I like underdogs, so I’ve got some VET back in the boat at a cost just a little lower than here. The $16.50 low on the chart shouldn’t break based on where VET trades on fundamental metrics, so I’ll keep an eye on that level for signs of trouble.

Africa Oil (AOI.TO, last at $2.83)

The first Venus appraisal well is currently drilling offshore Namibia (Total is the operator), following up on what has been touted as possibly being the largest offshore oil discovery, ever. I’d expect results sometime over the next month or so. AOI has an indirect 6% interest in the discovery through its 30% ownership of privately-owned Impact Oil and Gas, which owns 20% of Venus. At these levels, AOI can’t be called expensive and I think I get a free call option on Venus here, so I still own it.

Natural Gas

No change for me here. I’ll come back to gas in due course, but for now, I’m still on the sidelines. If I had to play some way, Arc Resources (ARX.TO, last at $16.59) might fit the bill due to its significant condensate production stream kicker.


Critical Elements (CRE.V. last at $2.05)

CRE has fallen with the rest of the sector as lithium prices in China came under pressure at the same time that the broader market indexes did (smells to me like momentum money leaving). Importantly, CRE’s project has little to do with the lithium market in China because CRE’s lithium is not bound for China. If I’m right about the play here, CRE’s lithium should be bound for a battery factory somewhere in North America, with those batteries being used in EVs bound for North American or European markets. I recently read that the US wants something like 2/3 of new car sales to be EVs by 2032 while Canada has an equally ambitious goal of 60% by 2030. Combine that kind of government inertia, with government funding, in the midst of an “onshoring” theme for critical minerals and little CRE starts looking pretty tasty. With permits, low impurities, a choice location/jurisdiction, and impressive base-case economics I don’t worry about CRE’s future as a lithium supplier. Not all projects are created equal and I think that CRE gets funded and built in this cycle, so I continue to own it for exposure to the EV theme and have added recently despite the terrible chart. The stock is sitting on its 200-day moving average here, so a guy like me could believe/hope that level will act as support until CRE finds a dance partner.


Copper is just hanging around $4 trying to pick a direction. I’ll act accordingly when it does. The charts are looking hopeful and most mainstream names are still well off their prior highs, but mixed economic signals make the short term direction unclear. In the meantime, Hudbay’s (HBM.TO, last at $7.26) out-of-the-blue bid for Copper Mountain (CMMC.TO, last at $2.75) last week brought me some joy. I think the deal is good for HBM and I’m happy to take also-discounted HBM paper. I think there’s big value to unlock if HBM were to figure out a way to split its precious metals production from its base metals production given the low multiple that HBM trades at, despite having a good-sized gold company buried inside it (HBM is projected to produce >300,000 ounces of gold per year in 2023 and 2024).

Other names of interest for me in copper include Capstone Mining (CS.TO, last at $7.21), Faraday Copper (FDY.TO, last at $1.09), Arizona Sonoran (ASCU.TO, last at $1.95), Surge Copper (SURG.V, last at $0.13) and Ascendant Resources (ASND.TO, last at $0.24). CS is the only producer in that bunch, but I think that the rest have projects that are all worthy of going into production if each management team delivers on their business plans.

I’d be remiss in not mentioning Arizona Metals (AMC.TO, last at $4.39) here after the company’s last drilling update. AMC’s high-grade and high-tonnage Kay deposit in Arizona already looks attractive as a development project, but exploration drilling to the west is suggesting that there may be more VMS mineralization to find in a folded repeat of the same rock layers. I don’t own AMC right now, but it’s on the shopping list should I find myself wanting more copper; especially if drilling at the western target starts hitting long intercepts of massive sulphides (so far stringer and semi-massive have been reported, suggestive of proximity to a VMS orebody).


It has been dead money at best. No change in my view here, but that doesn’t move markets. I’ve seen that G7 nations want to cut Russia from the (zero carbon) nuclear fuel supply equation… perhaps at some point they’ll also realize that the supply of the raw material that goes into the fuel production is equally important, and equally unsecure.


My relationship with gold is complicated. I like it when it’s going up, but I hate it when it’s going down. Lately, it has been going up and the charts all look good again, with many a golden cross shining through (50-day moving average crossing up above the 200-day moving average). Maybe that means it’s time for another gut punch in the golds or maybe this is the time that gold goes for one of those runs that leaves everyone in the dust. I’m not sure. What I do know is that most gold stocks are still way off their prior highs, despite gold itself recently having the longest closing streak over $2000/oz, ever. I’ll also point out that the gold equity indexes like the GDX.US, GDXJ.US, and XGD.TO have all broken out to the upside from a textbook example of a cup-and-handle reversal pattern with initial upside for each targeted around 25% higher than current levels, if you believe in the dark art of technical analysis.

I’ve upped my gold exposure because I still think the sector is under-owned and I see no signs of gold fever out there. There are undercurrents in the currency markets (e.g., BoJ policy re: the yen, and the BRIC+OPEC concept of accepting currencies other than the dollar for trade) that could be dollar-negative and I’ve got to think that the Fed at least pauses after the May meeting. Throw in healthy U.S. government spending and the prospect of lower tax receipts (i.e., a healthy deficit) and I could see how the dollar could continue its slide. Honestly, I have no idea, but the market is speaking to me when I look at the gold charts. They’re a little overheated in the short term, and the fact that I’m writing about it is probably a bad sign, but the charts remind me of the how the oils looked before they really took off a couple of years ago, so I’m not going to ignore my ever-optimistic intuition. I’m also not going to take my eye off the exit, because remember… I only like gold when it’s going up.

Not being one to discriminate when I’m laying on a “sector” bet, my gold list is long, lightly researched, and varied:


I own New Gold (NGD.TO, last at $1.78) and Calibre Mining (CXB.TO, last at $1.61) because both screen cheaply and both should give good torque to a rising gold price. I’ve got Agnico Eagle (AEM.TO, last at $76.71) as my gold-standard in the sector with its low jurisdictional risk profile. Osisko Development (ODV.TO, last at $7.21) and GoGold (GGD.TO, last at $1.99) both made their way into my holdings as well. The former made the cut on the hopes that its freakishly high grade Tintic mine is connected to a (much) bigger mineralizing system, with the latter screening as one of the cheapest silver stories out there for no obvious reason. My attachment to each of these names is weak, but at this stage I just want to get chips on the gold table with some appreciation for value and/or upside through the drill bit. I can pick favourites later if the gold trade builds momentum; which is not a given at this point.


My developers list includes companies that are either financed to production or at (or close to) a stage where I think that they are capable of being financed to production. In no particular order, Ascot Resources (AOT.TO, last at $0.65), Troilus Gold (TLG.TO, last at $0.79), Prime Mining (PRYM.V, last at $2.43), Minera Alamos (MAI.V, last at $0.41), Heliostar Metals (HSTR.V, last at $0.34), G Mining (GMIN.V, last at $1.00), and Vizla Silver (VZLA.V, last at $2.09) all seem attractive for one reason or another, including the fact that all are cheap relative to peers and offer unique paths to upside. AOT (British Columbia) and GMIN (Brazil) are both funded to production with start-ups scheduled next year. Historically that’s a good time to capture a developer-to-producer valuation re-rate and hopefully I own them long enough to see that. VZLA is one of the bigger independently owned silver resources, so that’s one way I’m going to play silver. TLG is big and somewhat boring — but so are a lot of gold companies — and TLG has 8 million ounces of bulk-tonnage gold that is the subject of a feasibility study due to be completed in the back-half of this year. It’s a brownfield project in Quebec and keeps growing with drilling. TLG is overdue for a resource update, but it’s already a biggie. PRYM is a well-backed developer in Mexico which ironically now has a higher market cap than little MAI, who sold PRYM its asset a few years back, and still has a decent development project or two of its own in the pipeline. HSTR isn’t really a developer yet, but the re-imagination of the Ana Paula project as an underground mine focused on the high-grade core of the deposit is interesting to me, especially because the high-grade resource can be expanded upon. Ana Paula has produced some eye-popping results in the past and expansion drilling is sure to turn up at least a little more of the same. If the gold tape is good while little HSTR starts reporting big holes from the soon-to-begin-drilling (supposed to be this month), this story could have a nice little run. There is the minor issue of 92 million 22-cent acquisition-financing shares coming free trading in mid-July, but that’s three months from now — also known as a market eternity these days. Last but not least, I still own some Anacortes Mining (XYZ.V, last at $0.43) which has a binding LOI with respect to the intent to merge with Steppe Gold (STGO.TO, last at $1.10). Given that STGO is a producer with assets in Mongolia, this deal might seem odd to some people, but STGO just put an asset into production with very similar characteristics to XYZ’s Tres Cruces… and STGO has producing assets in Mongolia… and the private company that bought Lagunas Norte (adjacent to XYZ’s Tres Cruces) also has producing assets in Mongolia. Hmmmm. I like the STGO team and their paper is as cheap as XYZ’s so I’m happy to put an end to the XYZ saga with this deal. Maybe a phoenix will rise from the ashes.


No change here. Magna Mining (NICU.V, last at $1.08) and Premium Nickel Resources (PNRL.V, last at $1.35) are my ways to play, and if I have to pick one, it’s NICU.


Fireweed Metals (FWZ.V, last at $0.83)

No change. Big Zinc. Big Tungsten. Big backers. Located in the can-do territory of the Yukon. FWZ will be drilling the most this year that it has ever drilled, so there should be a lot of news flow. One day I hope to see FWZ turn into two companies, one for the zinc-lead-silver and one for the tungsten. We’ll see.

It’s getting late, so I’ll saw it off here. Today I leave you with a different kind of Bay Street gold… the immortal Copper Mountain theme song, Anything is Possible. Enjoy.

“Anything is Possible” – Copper Mountain Mining Corp

Happy hunting.