2 Recent Buys – NSU, WPM

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Another quick update on a few recent purchases. This market is giving some great buying opportunities in the resource sector and I continue buying and adding more to my portfolio.

  • I added to my position in Nevsun Resources (NSU). For this particular transaction, I put my US$ to work as I had more US$ cash in my investment accounts, but for all reporting purposes, I will simply include the TSX-listed entity in my portfolio page. I bought 1,000 shares of Nevsun Resources (NSU) @ US$2.13. Nevsun is a top tier copper producer and has interest in two massive mines, one in Serbia (Timok) and the other in Eritrea (Bisha). The latest earnings releaseย painted a bleaker picture for Bisha than expected, and timelines have been revised to later dates for Timok. The company also has a new CEO and it is clear that the previous leadership was sitting on these problems for too long hoping to sweep things under the rug. The new CEO has decided to rip the bandaid off and set things in motion by taking the right steps. The company still pays a paltry dividend, but I expect that to get cut in the coming days. Better to save the cash and put it to better use than distribute it to shareholders. The shock sent the stock price down 20%, and it was the perfect opportunity for me to load up. As is the case with the resource sector, the mines and resources are still there, and investors are being too shortsighted for a project the scale of Timok, which is a fantastic tier-1 resource.

  • Second purchase was in the precious metals space. I added 100 shares of Wheaton Precious Metals (WPM) @ US$19.00. WPM is the formerly known Silver Wheaton Corp, which underwent a name change a couple of months ago, to realign the focus from purely silver to silver-and-gold. The company already has streaming and royalty rights coming from gold, which makes approx 30% of the revenue (the rest being silver). The company released fantastic quarterly results yet again for Q2 2017. Not only that, but the company also raised dividends by 43% — second time this year, after already raising 16.6% in March. Oddly enough, investors punished the stock the day after earnings release and I decided to add to my position.

I will end this post with this interesting chart of why am I so bullish on the commodity sector? This chart shows that it has never been relatively cheaper to invest in commodities, whether precious or base metals, compared to the broad equity markets such as S&P 500.

Full Disclosure: Long NSU & WPM. Our full list of holdings is available here.

11 thoughts on “2 Recent Buys – NSU, WPM

  1. hotrunner says:

    hi R2R !

    a quick question about WPM….there is some kind of outstanding CRA court case regarding taxes owing the CRA.

    “They have an outstanding CRA court case that could be quite big for them, but is something that would be dragging on for the next 5 years”

    Does this overhang not concern you at this time, especially (5 yrs?) and if they loose what it will do to the stock price and perhaps keeping the price depressed for now until there is some visibility to a resolution either way ?

    thank you
    hotrunner

    • Hi hotrunner,
      The CRA case has been ongoing for a while now and I believe that the case put forward by CRA does not make sense and (hopefully) WPM will come out relatively unscathed. But CRA is looking to getting $300M+ out of WPM. How it will play out, its anyone’s guess — depends on how good the lawyers are, I guess ๐Ÿ™‚

      Having said that, I have heard some rumors that WPM may reach a settlement for a very small paltry amount and is moving fast with this negotiation. Right now, it is up in the air…but I am a big fan of WPM’s business model, the assets that they own and the future streams of the projects they are invested in. It is a riskier play, with the CRA sword hanging over the head, but I am willing to take this risk.

      R2R

    • Wheaton Precious Metals is a large cap royalty and streaming company, and one of the best in the business.

      Nevsun has 100% ownership stake in Timok Upper Zone in Serbia, one of the highest grade and finest tier 1 copper discoveries in recent memory.

      Yes, there are a ton of penny stock junior miners out there and they are beyond volatile… The two stocks R2R purchased are NOT those; on the contrary, the assets held in these entities are some of the finest in the entire industry by consensus.

      Cheers!

      • FI, I know you have made a ton of money in this space (if I remember correctly this was the sector you watched HARD), but I respectfully disagree. NSU is a $2/share stock with a $600 market cap and WILD swings up and down. Notwithstanding, if your research shows that it should be worth double then you found your play but for an outsider who knows NOTHING about commodities it looks very risky (again, maybe you make a ton cornering and knowing that sector inside and out).

        WPE looks a little different at first glance – but I didn’t even go to the chart on that one when I saw NSU.

        • “$2/share stock with $600 market cap”

          by definition is not a penny stock. ๐Ÿ™‚

          it’s a large cap.

          I’m not disagreeing with you in regards to volatility, this stock and the sector as a whole is volatile… beyond crazy volatile.

          In the case of NSU, there are risks and the company has certainly run into a huge string of operating issues in recent times… but on the whole, don’t confuse volatility with risk. they aren’t the same thing.

  2. Thanks for your take on NSU – I don’t currently have a position in Nevsun but have traded it successfully in the past. It’s an interesting company that definitely has some appealing value characteristics!

    • Definitely one of the most lucrative plays in the copper/commodity sectors right now. Whether the bottom is already in is debatable, but its much closer to the bottom than the top, for sure.

      Best
      R2R

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