by James Kwantes
Published first at Patreon
How did the CEOs of the junior exploration companies you own manage shareholder money during the long bear market? The answer can offer signals to their likely behaviour ahead of the "running of the bulls."
Did they raise money on dilutive terms, then drill high-risk holes in hopes of hitting The Big One?
Did they continue to spend money on expensive marketing, splashing cash onto a parched desert and hoping for a garden to grow?
Or did they hunker down/cut unnecessary costs/shift into survival mode/find creative ways to advance their companies?
There are wrong answers, of course. Identifying right answers in the moment in this volatile sector can be tricky. Sometimes there are no right answers. Sometimes CEOs who act prudently in bear markets can't capitalize on bull markets.
For one case study on corporate strategy, rewind to July 2021. CEO Zach Flood and team had taken gold-focused private prospect generator Kenorland Minerals (KLD-V) public early that year. By July, the stock was already sliding down from above a dollar to the 70-80c range it has occupied pretty much ever since.
On July 28, 2021, Kenorland optioned its Rupert property in James Bay, Quebec, to privately held lithium play Li-FT Power in exchange for cash, 10% of Li-FT shares and a 2% royalty. (KLD co-founder Francis MacDonald left Kenorland to become Li-FT's CEO in November 2022.)
The electrification/EV narrative was taking hold and Li-FT came out of the gate hard when the company listed in late June 2022 (on the CSE initially). Lithium flourished as the junior gold sector continued to tank.
Flood saw opportunity and seized it. Kenorland sold $9 million worth of its Li_FT stake at $12 a share (near the top), then another $7 million worth at $7/share. Li-FT shares (LIFT-V) now trade at about $3 a share.
The sales helped position Kenorland with a bullet-proof treasury of about $25 million as of year-end 2023 -- and plenty of opportunity. KLD shares currently trade at 78 cents, for a $51-million market cap.
A recent addition to KLD's portfolio is an organically generated and valuable 4% NSR royalty on Sumitomo's Frotet property in Quebec, which hosts the high-grade Regnault discovery. I wrote more about that here.
Choose wisely.
Disclosure: I own Kenorland stock ... and am taking a hard look at shares of Li-FT Power (LIFT-V), where buying by insiders has picked up lately.
