Canada Unearthed: Turn up the volume, please TSXV

Link copied to
clipboard

• TSXV has turned into “a ghost town of trading” as the small cap exchange continues to suffer from weakening volumes
• The TSX’s biggest +$1bn capped resources winners for June: NexGen, Ivanhoe, Cameco, Filo, Denison
• Top TSXV June winners: Solis, Grid Battery Metals, Trench Metals, Canuc

Our Canada Unearthed column wraps the news driving mining and exploration stocks listed on the TSX and TSX.V.

Canada’s TSXV has turned into “a ghost town of trading” as the small cap exchange continues to suffer from weakening volumes since its February 2021 peak.

Low trading volume can indicate a lack of interest in either buying or selling; generally not what you want as a trader, and certainly not what you want as a broker.

According to PI Financial investment advisor Justin Hayek, trading volumes historically move in tandem with the overall value of the TSXV, which has been trading sideways for some time:

Which makes sense. Hot market = more trades, and vice versa.

The difference in $ volume transacted between ‘bull’ and ‘bear’ markets is notable, Hayek says, with roughly two to four times more liquidity and turnover during a bull market v bear market.

“… market tops are when buyers, capital invested and therefore turnover are at their greatest,” Hayek writes.

“Market bottoms are quite the opposite, naturally, of market tops. At these levels, there is a lack of buyers and volumes decline precipitously.

“Bids (buyers) dry up and selling tends to exaggerate the declines of these typically already illiquid securities.

“These time periods are also marked by a general lack of interest by retail investors to allocating additional or even moving around risk capital.”

Which is what is happening, right now, and may go some way to explaining why TSXV resources stocks appear to be underperforming their ASX listed peers.

How long until the crowds return to the TSX.V?

Hayek says while weak volume has been a big topic of discussion of late, this period is nowhere near as bad as things have been in the past.

“There is a real possibility liquidity does not improve over the summer (it’s summer doldrums as we like to call it); in fact (it) may worsen July & August,” he says.

“Historically we do see a pick-up in activity come the fall and before Christmas holidays.

“However, we could also see a sustain lulled in activity for some time barring two variables 1) a meaningful improvement in commodity prices (plausible) or 2) meaningful improvement of investor sentiment & return of risk capital (I’m not so sure).

“Either way we know we have seen this type of market in the past and seen the pendulum swing the other way eventually.”

How did the TSX/ TSX.V perform in June?

Fairly well. The TSX composite index closed out June with a 1.12% gain thanks to winners in the technology and material sectors.

The resources heavy TSX.V composite index was up 1.88% for the month, touching mid-May levels on a strong day of trade Friday.

The biggest +$1bn capped resources winners in the TSX for June were:

NexGen Energy (TSX:NXE) +23%

NexGen is a dual listed company developing the Rook 1 uranium mine in Saskatchewan’s southwestern Athabasca Basin, the largest development-stage project in Canada.

“Unlike Cigar Lake, the deposit is entirely contained in basement rock with no surface water,” says Shaw and Partners senior private wealth adviser Felicity Thomas.

“A 2021 Feasibility Study outlined an initial 11-year life producing 29Mlbs at AISC US$10/lb for US$1.3bn capex (11-month payback) making it the lowest cost uranium mine in the world.

“The company is now progressing to through the permitting and detailed engineering phase.”

Shaw and Partners has a 12-month price target of $10.75 on this stock.

We are pleased to announce that $NXE has commenced its highly targeted summer exploration drill program comprised of 17,000m and focused on high priority areas of $NXE’s extensive SW2&SW1 land package. Read more about the summer drill program and our pursuit of material uranium… pic.twitter.com/KspRlpkWlW

— NexGen Energy Ltd. (@NexGenEnergy_) June 12, 2023

Cameco (TSX:CCO) 14%

The uranium producer has benefitted from an upswing in yellowcake prices and investor sentiment.

In April, Cameco senior vice president and CFO Grant Isaac said this was the start of a major contracting cycle with one of the largest nuclear reactor builds in decades — 57  worldwide — about to hit.

Isaac says higher prices would be needed to encourage new sources of production to market.

“The primary supply stack isn’t poised to respond. We don’t have those secondary volumes that have helped fill the gap in the past.

“We’ve never been at this stage of a cycle at a US$50 uranium price already.”

Filo Corp (TSX:FIL) +22%

Filo’s main game is the monster Filo del Sol copper-gold-silver deposit along the Argentina-Chile border.

FIL recently raised CAD$130m via private placement, upsized due to strong investor demand.

“In addition to the support of the Lundin Family and BHP, the private placement was well supported by institutional investors, including funds and accounts managed by BlackRock,” the company says.

“This sets Filo up well for the next phase of drilling as we grow and define this remarkable deposit.”

Very few explorers can go out and raise $130M, but @filo_mining did with some assistance from very close shareholders. Here’s CEO @j_beck00 with @PaulHarrisGold talking about the upsized deal.

Full Episode –>> https://t.co/V5Xal8ZZJm pic.twitter.com/SaqvBmNyRd

— The Trevor Hall – Mining Stock Daily (@TrevAHall) June 5, 2023

Denison Mines (TSX:DML) 19%

During the month Denison released a Feasibility Study on the Wheeler River uranium project in Canada’s world class Athabasca Basin region.

Development would initially focus on the Phoenix and Gryphon uranium deposits.

“After 4.5 years of rigorous technical de-risking and independent third-party validation, Phoenix has cemented its position as one of the lowest-cost uranium development projects in the world,” Denison boss David Cates says.

“While most contemporary uranium development projects have not yet been tested against current cost inflation, the results of the Phoenix FS and Gryphon Update demonstrate that Denison continues to be uniquely positioned to become a meaningful uranium producer with multiple low-cost development assets.”

Denison’s Phoenix FS estimates pre-production capital costs of under $420 million (100% basis), yielding an impressive base case after-tax NPV to initial capital cost ratio exceeding 3.7 to 1.

Refer to the full release here: https://t.co/JqGVMBhRzx pic.twitter.com/foUo6QUaNu

— Denison Mines Corp. (@DenisonMinesCo) June 27, 2023

Ivanhoe Mines (TSX:IVN) 14%

Robert Friedland’s copper play achieved record production of 35,856t copper in concentrate in May from its tier 1 Kamoa-Kakula operation in the DRC.

That’s 430,000t annualised.

The company aims to increase output to +500,000tpa of 99+%-pure copper anodes via its Phase 3 expansion project, which includes the largest copper smelter in Africa.

The biggest resources winners on the TSX.V for June were:

Solis Minerals (ASX:SLM) (TSX.V: SLMN) +718%

Lithium’s dual listed ‘flavour of the month’ announced the purchase of the Jaguar lithium project in Brazil late May.

At Jaguar – located in Bahia state — the company says there are rock chips grading up to 4.95% Li2O along a 1km long, 50m wide spodumene-rich pegmatite body.

It then raised $8.1m at a modest ~7% discount to the last traded price, with big brother and fellow Brazilian lithium play Latin Resources (ASX:LRS) increasing its investment in SLM to 17.79% as part of the placement.

Drilling is already underway. It also has a lithium project in northern Brazil called Borborema and several additional acquisitions in the pipeline.

Stockhead article with ED Matthew Boyes, on why #Brazil is the next #Lithium hot spot.

“I saw an opportunity when I joined, I said to Chris Gale of Latin Resources ‘I’m going to go find another set of assets similar to Latin’, and I think we found them”.https://t.co/TwhWjfJAn7

— Solis Minerals (@SolisMinerals) June 30, 2023

Grid Battery Metals (TSX.V:CELL) +140%

Last month, the explorer added a new clay lithium exploration project in Nevada called Texas Springs to its portfolio, which also includes Clayton Valley (lithium), Volt Canyon (lithium) and Mount Sidney Williams (nickel).

A recent CAD$3m cap raise means the company is fully funded going into the 2023 and 2024 exploration seasons, and to “add additional strategic lithium exploration properties to our mineral portfolio in the near future”.

“Together with this financing, the Company will have approximately CAD$4.5 million in the bank, along with approximately CAD$3.6 million worth of marketable securities from some well-timed Nickel property dispositions to Surge Battery Metals Inc,” it says.

“Together, the Company has in excess of CAD$8 million to be used to create additional shareholder value.”

Canuc Resources (TSX.V:CDA) +129%

Canuc is focused on the San Javier silver-gold project in Sonora State, Mexico.

It also generates a small amount of cashflow — ~CAD $3m since 2011 — from natural gas production at its MidTex energy project in Central West Texas, where Canuc has an interest in eight producing natural gas wells and has rights for further in field developments.

Trench Metals (TSX.V:TMC) +108%

The early stage explorer is about to launch into exploration at the flagship Higginson Lake uranium project in Athabasca, Northern Saskatchewan.

The focus will be dialling in on potential deposits at the Peterson Rapids, Charlebois Lake and Dianne targets.

TSX and TSX.V Winners & Losers

Here’s how TSX and TSX.V-listed mining and exploration stocks performed last week:

Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop.

Stocks missing from this list? Email [email protected]