Monthly report December 2018

2018 closed with a monthly loss of -6.60%. The annual loss for 2018 came in at -32.68%. Only 2011 was a worse year, with a loss of almost 35%. The Toronto Stock Exchange Venture Index (TSX-V), our most important benchmark, fell by -4.5% in December and by 44% since the beginning of 2018. The losses in December were mainly the result of a very strong wave of 'tax-loss selling', which lasted until the end of December. Realized losses can be used to compensate for taxes on gains in North American countries. The negative result in December was extra disappointing given that our peers all performed better. This is explained by our weighting in exploration companies, whereas our peers almost exclusively invest in producing companies. The HUI index of precious metals producers rose in December, a similar set-up to the outperformance of precious metal producers we saw at the start of the recovery in 2000 and 2016. This reinforces our idea that 2019 can be a bullish year, just like 2009, 2010 and 2016.

 

Investments

The S&P GSCI Metals Index fell by no less than 15% this year. The prices of lithium and cobalt dropped almost 50%. Companies exploring or mining these metals saw similar losses. As a result, the valuations within our sector are now as low as at the end of 2015. Several companies in our portfolio are now valued at half their book value. That means the sum of all assets on the balance sheet is twice as high as their stock market value. Not only exploration companies such as Artemis (-22%) were under great pressure last month, a more developed company such as Nexgen Energy (-5%) also fell without noteworthy news. Novo Resources recovered (+24%) on the back of good news regarding the gold conglomerates at Egina, 120 km east of the original discovery at Comet Well. The flat gold nuggets have now been found over an area from 600km by 300km in the Pilbara. Solgold announced that shareholder Newcrest has expanded its stake in SolGold to 15%, presumably as a response to the greater stake that BHP had taken earlier.

Please read the latest Monthly Report here (PDF).