Public junior resource companies are perhaps the riskiest sector of markets, but can also provide the largest capital gains. To reduce risk, I focus on a number of criteria, and will use $OPHR and $PMET to illustrate my process:
1. There are two primary categories, namely pre discovery and post discovery of significant drill results that suggest good potential for a tier 1 deposit. A post discovery company is usually immediately rewarded with a significant increase in share price, often 2x to 5x, making it more expensive to build a share position, but with reduced risk. $PMET is a good example of a company that rose 2x to 3x on discovery and is where I started building a large share position. The share price of pre discovery companies are usually reflected by low share prices, facilitating the opportunity to build large share positions at a relatively low cost. $OPHR is a good example of a pre discovery junior resource company where I have built a substantial position.
2. Geology is a critical aspect in selecting a junior explorer in which to put money in harms way. OPHR's Radis and Pelipas projects both exhibit very prospective geology to host large spodumene pegmatite deposits. There are initial spodumene discoveries at Radis with about 80% of the project area yet to be prospected within the Yashinski Greenstone Belt. The Pelipas project is located in what appears to be the nexus for pegmatites in this section of the Eastmain Greenstone Belt and exhibits the correct K/Rb ratios, LCT pathfinders and structural setting to host very large spodumene pegmatites. At both Radis and Pelipas, satellite imagery suggests there are numerous large pegmatites awaiting a "boots and hammers" first pass with drilling to follow later in 2024. PMET's geology has been proven to host at least one tier 1 deposit and a handful of satellite deposits, any one of which may eventually prove to rival CV-5.
3. Management is also important. I have to see they have a track record of being able to raise equity capital on an ongoing basis, with as little dilution as possible. PMET has demonstrated this on all financings to date, as has OPHR's management. Prudent management of equity capital is also very important, with the bulk of expenditures directed towards exploration and drilling.
4. Participation in financings are a good way to build positions at a fixed price. I did not have the opportunity to participate in early PMET financings, but added to my position in the market near financing prices. I have participated in OPHR financings and used them to build my share position in addition to market share purchases.
5. Buy and hold or trade? This is dependant upon ongoing drill results and position sizing. Trading positions are generally smaller and sized to average trading volumes to maximize liquidity. I take large positions that are difficult or impossible to trade, and add to my positions on positive ongoing drill results. I continue to buy PMET on dips and have recently added to OPHR. In the past, I had great success with a buy and hold strategy with DFR (Diamond Fields and their Voisey's Bay discovery), DMM (Diamet Ekati discovery), Delaware Resources (SNIP gold mine) being a few examples. The downside of a buy and hold strategy is that losses are larger when exploration results disappoint, however, the phenomenal gains from buying and holding and continuing to add to winners far exceeds losses from the losers.
In summary, OPHR is an attractively priced pre discovery junior explorer with a good management team , projects that exhibit favourable geology, and ability to raise capital on an ongoing basis, making it an attractive speculation , and PMET continues to offer good upside for an advanced and under priced tier 1 discovery.
Disclosure: As indicated above I have long positions in OPHR and PMET and have no affiliation with either company.
