Disclosure: The following represents my opinions only. I am long AAV, ASCU, AYA, BIR, CAPT, CDR, EQX, FM, FOM, GOT, HSLV, KNT, LBC, MMA, MMET, NDM, NSE, NXE, PNE, PTK/POET, TAO, TKO, TNZ, TUK, VIO and VLE (image credit to dharmendra sahu on Unsplash)
Unless you’ve been asleep, you’ve likely felt some market turbulence lately. From February 20th to March 13th, the S&P dropped about ten percent as the market worried about recessionary fears and Trump tariffs. The TSX Venture exchange also dropped about ten percent in an even shorter period, while the TSX big board fared a little better and only shed about 5 percent. Meanwhile, copper and gold have both outperformed the broader tapes as the DXY (i.e., the U.S. dollar) took it on the chin. With recessionary fears and a market that is indifferent to oil, WTI crude is currently trying to hang on to support in the $65-67/barrel range — but I never worry too much about oil prices… because the cure to low oil prices is low oil prices.
Markets like these tend to give people a reality check in terms of what they’re willing to hold and how much of it they really want to own. Having some dry powder if things get really squirrelly is never a bad idea, so those who may have raised cash on the dip may think a little harder about where and when they want to deploy it. There’s nothing like that feeling of looking down the dark hole of market despair to make a person focus a more sharply on what they’re holding and their overall exposure. Everyone will have their own reaction in the face of market volatility, but I was sent a quote from the late Charlie Munger the other day that said, “If you can’t stomach 50% declines in your investment, you will get the mediocre returns you deserve.” So I guess the question that everyone needs to ask themselves on dips like the one we just had (are having?) is whether or not general market malaise really changes your view on any given company. If it does, you’re likely looking at a speculation, not an investment… and telling the difference isn’t always that easy. Broadly speaking, for me, an investment implies 1) a knowledge of the business plan of a company and how it will create shareholder value, 2) faith in management to execute that plan, 3) a belief that the company has enough capital/cash flow to continue its business as usual regardless of what “the market” is doing short term (I’d define short term as less than a year in this context), and 4) a hopefully well-founded view that the shares of the company are undervalued if the company succeeds (or continues to succeed) in its endeavours.
So what have I been doing in the market? Not a lot. I just got back from a site visit to Valeura’s Jasmine field offshore Thailand (more on that below). Before I went away, I set some partial-position stops on my more liquid larger-cap names and trimmed handful of smaller junior positions. Most of my stops were triggered, which raised cash for me, so I’m having a think about what to do next. If I was going to chase anything right now it would be gold or copper, but the recent moves have been pretty sharp, so I’ll be selective. Gold really looks like it’s breaking out ($3000 has been surpassed) and copper is challenging its highs from last year in the low-$5’s. Most resource stocks offer very good value relative to the rest of the market, so the dream is always that the generalist money will finally come to this sector en masse someday. That’s always the dream, and when it happens it is epic. For a while now, the resource market has felt a lot like the same money sloshing from name to name, but a rising tide would be most welcome. The strength in some of the gold names is undeniable, but I don’t see a lot of headlines on gold or gold stocks lately, which may be a good sign. I’ll keep an eye on the DXY, copper, gold, trading volumes, and the wires to see if it’s different this time. When it’s on, it’s on, so here’s hoping. Meanwhile, the energy sector undoubtedly offers some of the best value out there (strong balance sheets and good free cash flow at modest multiples), so I could see big money managers rotate back towards the energy market. There’s nothing like volatility to get people thinking a little bit more about what good, defensible value really looks like.
Energy
Tenaz Energy (TNZ.TO, last at $13.20)
Still haven’t sold a share. Why would I? Tenaz released its year-end 2024 results on March 12th and increased its pro-forma PDP reserve value to C$18.25 per share, its 1P reserve value to $23.25/share and its 2P reserve value to about C$42.40 per share. Those are after-tax NPV10 numbers. The stock closed at C$13.20 on Thursday. For those following along, that’s a thirty percent discount to PDP, a forty-five percent discount to 1P, and a seventy percent discount to 2P reserve values (note: some companies trade close to their 2P reserve values, many trade near 1P, and very few below PDP (the ones that do trade below PDP usually do for good reason). This discount is present on a company with that could drop an accretive M&A deal in the market’s lap pretty much any day. Additionally, the NAM acquisition is on track to close by mid-year or earlier and recall that those assets have a 10% base decline rate. That is among the lowest base decline rates in the industry. And those reserve values don’t account for exploration, development, and optimization opportunities that TNZ surely saw when they signed the deal to acquire them — and have no doubt been refining. Despite the compelling value proposition, Tenaz continues to fly right between the eyes of most institutional and retail investors. How do I know this? Because this is a company with an A+ management team, with an A+ strategy, a distinct competitive advantage, few viable competitors, a very clear and industry-relevant business plan, a ~10% base decline rate on its soon-to-be-officially-owned production cornerstone, and with netbacks that would make any peer blush. And yet it trades at discount multiples on a cash flow and NAV basis. That’s not a market that’s being efficient. If anything, given what I’ve laid out above, I think should trade at least at industry average multiples; if not towards the premium end. It currently trades at the low end. Time will tell, but I like my odds here. Worried about Russian gas? TNZ will still print money at half the current TTF gas price (which happens to be close to C$20/mcf currently). Oil prices too low? Great, TNZ is a buyer and is loaded for bear with around C$150 million of available liquidity (read: cash) for closing the NAM acquisition and landing other deals. Oh, and TNZ has the capacity to put in a corporate debt facility should it feel the need when it pulls the trigger on its next acquisition, so it could buy something sizeable. In a nutshell, in my view, for this to trade at such a large discount, particularly relative to its $18/share blow-down NAV (PDP reserve value) and its $42/share 2P reserve value is, well, nuts. I rest my case.
Valeura Energy (VLE.TO, last at $7.78)
Valeura gets to go second today because it’s top of mind and I’ve been thinking about this one for a long time. My concern about VLE since its “reinvention rerate” has been that its PDP reserve value is actually a negative number. However, management had always maintained that they would be able to replace and grow reserves for years, resulting in field-life extensions; and thus delay the facility abandonments that drag the PDP reserve value down. Well, with VLE reporting reserves in February, they certainly did just that. The company replaced 128% of 1P reserves and 245% of 2P reserves in 2024 and has built up US$259.4 million in cash, with no debt. Meanwhile, the pending Wassana FID could nearly double Wassasa reserves should the company decide to proceed (this could take corporate 2P reserves up around 25%). The 1P after-tax NPV10 per share is $8.30. The 2P NPV10AT per share is $13.60. Against a share price of $7.78, I think that’s a decent set up because of what follows below.
I mentioned above that I visited VLE’s Jasmine field earlier this month. I also attended Valeura’s Capital Markets day in Bangkok (the slides can be found on the Valeura website). After spending some time listening to presentations and asking questions, I came away with a few key impressions. First, CEO Sean Guest has assembled an impressive team of engineers, geoscientists, and commercial professionals who are not only capable of running the current operations, but are also capable of running larger operations, all with an ever-present focus on costs. Second, exploration wells are cheap and VLE has an inventory of targets to drill, many of which could be tied back to existing infrastructure. Statistically, some of those are bound to hit, but I don’t think people look at VLE as an exploration company. There has already been one discovery at Nong Yao D which will be followed up in Q4 2025 and there’s a moderate-risk target called Ratree that is expected to be drilled in Q2 2025 — and there’s plenty more prospects behind those. Third, there is M&A potential in SE Asia and VLE has a non-zero chance of acquiring something if the price is right; and they’ll be disciplined about that. VLE has a common thread with TNZ in that regard… the theme of larger operators divesting of non-core assets to qualified and credible buyers is also alive and well in SE Asia too, so you just never know what management might be able to lasso. And lastly, at $65 oil, VLE will have roughly its market cap in cash by the end of next year based on current projections. Now, a positive (re)development decision at Wassana could tap that cash balance a little, but if the company gives that project a green light, presumably they expect to generate a real cash return on that capital, so I wouldn’t see that as somehow taking away from the value proposition.
Overall, VLE fits what I like to look for in energy stocks… reasonable downside protection and good potential for upside. Of course, if oil somehow goes to $50-55 (or worse), all energy stocks will get hit — but at that price, U.S. supply would drop pretty quickly and reset the market… and a debt-free company like VLE should be able to hunker down and come out okay on the other side of that scenario. I like the jurisdiction and the pro-business attitude of the people and the country. Quality operators are welcomed and encouraged — Thailand is a major net importer of oil and gas and VLE has a good reputation there. Infrastructure abandonment has already been extended materially for the most part and abandonment costs are going down as the company rethinks prior plans. The only reason I don’t own more VLE is because I realllllly like TNZ’s higher discount to NAV… but, I see the appeal here and I think VLE will continue to perform well in any reasonable oil tape.
And yes, Thailand was a wonderful place to go for a site visit. The Thai people are all incredibly warm and kind… and that description extends to all the Valeura staff I came across during my visit. Khop khun khráp.
Condor Energies (CDR.TO, last at $1.80)
I think Condor continues to represent a real value proposition for people who can actually own a stock and watch their capital appreciate as the company executes on its plans. Production from CDR’s gas fields in Uzbekistan is around 12,000 boepd, which is about 100% higher than it would’ve been without their involvement. Clearly Condor’s view that the Uzbek assets were undeveloped and undercapitalized is holding true. The reported Uzbek reserves as of the end of 2024 came in at about 108 BCF with an NPV of US$50 million. I consider that to be a very conservative starting point. The rubber will really meet the road here this summer as CDR gets active in these gas fields and starts drilling development wells of its own in new and existing horizons. Additionally, Condor’s early success with this initial asset package may win them additional similar development projects in the country, of which there are many. Time will tell, but Condor is tracking very well so far here.
In Kazakhstan, Condor continues to progress with its onshore LNG initiatives. The company has already secured two feedgas allocations from the government to supply natural gas to its planned modular LNG builds and with plans for 7-8 plants, CDR could be busy on the LNG front for a while. As a reminder, in Kazakhstan, diesel is expensive and natural gas is cheap, so with a little bit of investment in fuel switching technology, fleet operators can realize huge savings in fuel costs if they switch to LNG. Condor’s first contracted customer to do this in Kazakhstan is KTZ, the national railway operator, which will have Wabtec (WAB.US) convert KTZ locomotives so that they can burn Condor’s LNG. This is a classic industrial arbitrage opportunity playing out in real time. For some, this may be hard to get excited about, but from my perspective, this is a massive opportunity and Condor has done a lot of heavy lifting in getting things to where they are today. With an MOU signed to buy its first plant in Q4 2025, the LNG revenue is a 2026 story, but it’ll be like a snowball once it gets rolling and additional plants are brought onstream.
I have little to do but sit and wait here, but if you want to know where I think this could go with successful execution, say, 1-2 years out, I’d say something like $8 and heading northwards from there. Yes, the jurisdictions may be tough for some to swallow, but this team is as experienced as they come in the region. I think that my only requirement here is some patient waiting. With the last financing at $1.90 late last year, no one has missed anything yet, but 2025 should be an inflection year for the company as the company progresses its plans in both countries.
Tuktu Resources (TUK.V, last at $0.12)
TUK is still my penny oil speculation for 2025. The company successfully drilled its first horizontal well into its Mississippian target horizon in Q1 and should be completing it with a multi-stage fracture stimulation this month, if not already. There are a lot of things still to be determined here, like pool size and IP rates, but we know this is light oil with a low gas-to-oil ratio and good deliverability based on the vertical proof-of-concept fracture stimulation completed in 2024. The single-frac vertical well was still producing well over 400 barrels per day as of mid-January, having exhibited little decline since August of 2024. Eventually, that well will decline, but what a well it’s been already… wow. Now, the market will focus on the rates from the first horizontal well into the play. The over/under bet seems to be in the 700-800 bopd range given the pump capacity that the company is expecting to have on the well. That result will most certainly be out in Q2, so I’ll patiently wait for that.
New Status Energy (NSE.V, last at $0.32)
There has been much fanfare around NSE’s proposed acquisition of the (large) Sacha oil field (and surrounding block) in Ecuador. Net to NSE, we’re talking about 30,000 bopd of production. There is a concurrent financing that has not been completed yet, but with Ecuador in the midst of what could be a close election, there’s hesitation in the air. It’s pro-business Daniel Naboa versus not-so-pro-business Luisa González in the run-off vote on April 13th. A Noboa win would bode well for the deal standing, while a González win probably kiboshes it. Betting on politics is a tough game, but at this stage that’s what NSE looks like to me… a bet on the election.
TAG Oil (TAO.V, last at $0.115)
Nothing new here. The stock can be had for around a dime depending on the day and the company continues to wait on approvals in Egypt for its “tuck-in” acquisition. The path for TAO has to involve a farm-out of the ARF to an operator that doesn’t mind doing a little science in exchange for the chance at a huge oil prize. If it can close its acquisition and attract a farm-in partner, things will look a lot different for downtrodden TAO. I’m sure that Abby and his team are keenly aware of this, so I’ll just wait and see what they do this year.
Natural Gas
As the start-up of Canada LNG on the West Coast approaches, while U.S. export capacity keeps ramping up, I’ve been scanning comp sheets to see who has torque to rising natural gas prices. I came back to my old friend Advantage Energy (AAV.TO, last at $10.38) and its peer Birchcliff Energy (BIR.TO, last a $6.27) as a result. We’re heading into shoulder season here for natural gas, but the structural change in the North American market from the pull of LNG exports is not insignificant and it might even boost the dreadful AECO prices in due course. I’ve also got my eye on Pine Cliff Energy (PNE.TO, last at $0.76) and Bonterra Energy (BNE.TO, last at $3.52), but haven’t done anything on those yet.
Copper
Midnight Sun Mining (MMA.V, last at $0.66)
My thesis here remains the same. Midnight Sun has the oxides that will juice the economics of First Quantum’s Kansanshi operation. Midnight Sun also has some very good exploration potential at Kazhiba, Mitu, and Dumbwa that should be drilled this year. Owning MMA is kind of like owning the cheapest house on the best street. A little bit of work here and there and buyers should be circling. This year will be newsy for MMA and the company is fully funded for its plans well into next year.
Libero Copper (LBC.V, last at $0.21)
LBC has been a poor performer so far, but nothing about my view here has changed. With part of its project carved out of a forest reserve late in 2024, all of LBC’s 600 million tonne copper-molybdenum resource at Macoa is now out of the reserve area. I view the 600 million tonne resource as being a starter point given the number of undrilled porphyry centres and initial indications from expansion drilling. I’m not sure what gets LBC lit, but the company continues to drill infill and expansion holes at Macoa that are comparable to those of much more expensive peers. The remaining exploration potential is impressive, but timing of exploration drilling is unknown. With a market cap of just $12 million, LBC is way, way under the radar of the street, but if Solaris can command an $800 million market cap based on its Warintza project in Ecuador, I’m quite willing to stick around and see how the LBC story plays out.
Other copper stories of interest to me include First Quantum (FM.TO, last at $22.19, Foran Mining (FOM.TO, last at $4.13), Northern Dynasty (NDM.TO, last at $1.01, Taseko Mines (TKO.TO, last at $3.54), and Arizona Sonoran Copper (ASCU.TO, last at $2.21). In rapid fire… FM and the government of Panama seem open to sorting out “the Cobre Panama issue” and a positive resolution there could send FM higher. I think resolution is the only solution, so I’m willing to bet on that with copper acting so well. FOM is a generational copper asset that is going into first production in late 2025 and commercial production in H1 2026, which makes it a rare bird in the copper space. The stock isn’t exactly cheap, but it isn’t expensive either, and its rarity likely makes it an acquisition target for a larger and long-game-thinking mining company. NDM, TKO, and ASCU are all ways to play the “Trump trade” as they have development projects in the U.S. which could benefit if the copper tariffs have any staying power. TKO is the most advanced with the Florence in-situ leach project expected to start up in late 2025, while ASCU is a solid meat-and-potatoes redevelopment/expansion project with favourable permitting tailwinds. NDM has frustrated many over the years with endless permitting delays/denials in Alaska, but the company’s view that the process has been flawed resonates with me, so with both copper and gold ripping, I can’t help but think that this story won’t get at least “hopeful” again… and owing to its massive scale, a little “hope” could take it a lot higher from here.
Golds
Vior Inc (VIO.V, last at $0.20)
After a $40 million financing at 20 cents, VIO now has some $55 million in cash with which to seek extensions at depth and on trend with the Belleterre Mine Trend in Quebec, which had historical production of 750,000 ounces of gold from ore grading ~10 g/t from veins down to about 250 metres. Initial drilling has proven that the system is still present 500 metres below known past-producing veins and with some 60,000 fully-funded metres being drilled in the ongoing program, there are a lot more results to come (that drill program is likely to expand with the recent cash infusion if results warrant it). The management team from Osisko Mining (which was recently bought by Goldfields for over $2 billion) parachuted in to take the reins in December of 2024, and VIO is still unknown to most. This is a bet on management as much as geology at this stage, but the $75 million market cap (with $55 million in cash) is modest relative to the “mining chops” that come with this new team. They wouldn’t get involved if they didn’t think this could be a material piece of business. With a little bit of luck with the drill bit, some marketing, and increased market awareness, VIO seems like an easy re-rate to me, so I’m long, especially in this gold tape.
Other things that have caught or continue to hold my eye in the golds include, in no particular order: Goliath (GOT.V, last at $1.85), Equinox Gold (EQX.TO, last at $10.00), K92 Mining (KNT.TO, last at $12.06), Aya Gold and Silver (AYA.TO, last at $13.26), Highlander Silver (HSLV.C, last at $1.90), Miata Metals (last at $1.20), and Capitan Silver (CAPT.V, last at $0.405). GOT is in a quiet period now as drilling won’t start up again until spring/early summer, but results continue to demonstrate that a very significant mineralizing event happened at its Surebet project in the Golden Triangle, British Columbia. The stock took off like a jackrabbit, moving up 170% from January to late February, after which it took a hard dive to the $1.50 range, before settling at $1.80 today. Talk about volatility. GOT will likely need to raise money for more drilling, so the only questions now are how much, from who, and at what price? I guess we’ll see. No change for me on EQX or KNT. EQX’s buy of Calibre Mining (CXB.TO, last at $3.12) will make EQX the second largest gold producer in Canada and the combined company is cheap versus comparable producers. Its pro-forma size/market cap will likely force additional index buying, which is always nice. KNT has moved up but is still a very high growth production story with significant exploration potential. I think it has to be a viable acquisition target in this tape and in the meantime, it’s cheap relative to comps. AYA is an easy silver pick that was down in the dumps as investors briefly soured on the name. The clouds seem to be parting though and AYA has a long way to go to get back to old highs, so I’m there for exposure to silver. HSLV is a new name here, but I’ve followed it and owned a little since 80 cents. I still own a little, but with drilling expected to start here I might own a little more. It’s not cheap, but the company’s Peruvian epithermal asset (San Luis) is open for expansion and is very high grade. The sponsorship of this name is gold-plated, so I think that this well-funded story will continue to attract eyeballs as it progresses. MMET is also a new name and can best be thought of as “maybe/hopefully the next Founder’s Metals (FDR.V, last at $5.92)“. With vein fields exposed at surface and substantive artisanal mining at its Sela Creek gold project in Suriname, MMET is looking for its “discovery hole”. The market loves a good gold discovery and the FDR experience is not lost on MMET hopefuls like me. With drilling underway, the wait won’t be too long for results, so here’s hoping that what’s being found at surface continues at depth with good grade and thickness. CAPT goes last because it’s the smallest. This is an early stage silver play in Mexico that is stepping out on known silver-mineralized veins with the hopes of building a material resource. Drilling hasn’t started yet, but when it does, the market may perk up. This one has a fairly devoted following that will sing from the rooftops if the geological thesis of vein continuity proves out. We’ll see.
Uranium
While “low” spot uranium prices (is $65/pound low?) send uranium shareholders for the hills, long term pricing remains very healthy at $80/pound. I still just own Nexgen (NXE.TO, last at $7.21) as it is the best deposit, in the best jurisdiction, and it is on track for permit hearing dates in December 2025 and February 2026, which is later than the market had hoped. Still, a delay is only a delay, and when the permits come — and with the local support, that’s a when, not an if — a takeout will be inevitable given its large scale and low projected production costs. Nexgen’s deposit is a king-maker in the uranium industry. It will be bought, eventually, so I’ve added on this dip.
The Lone Tech Story
Poet Technologies (PTK.V, last at C$6.10, POET.US, last at US$4.27) has been a technology rockstar for me and while I’ve trimmed some, I remain long as an AI/data centre play. The company continues to progress its business plan, having recently completed deliveries of final design samples of its advanced optical transmit engines to “three major technology leaders”. This is the last step before POETs potential customers can complete their transmit modules and then, in turn, ship them for qualification by their end customers. POET’s receive optical engines have already been qualified, with production orders expected in H2 2025. Despite market turbulence, the AI/data centre theme isn’t going away, and POET has a vey useful cog in that machine so I’m still playing along with this one.
Final thoughts
This was an epic note today, so well done if you made it to the end. Overall, not much has changed for me, but I summarized what kinds of things I’ll be watching at the top of this note. Sometimes the best thing to do is actually “not a lot” and that would describe my approach right now. Gold probably captures my imagination the most right now, so fingers crossed that the gold run continues, because there’s no bull market like a gold bull market… bring on that rising tide.
Happy hunting.