Broad markets are down this week in a wide, deep selloff. Or for optimists out there it’s a general cleanup across the spectrum, punishing the overly ambitious. Gold is down too, as I’ll discuss below.

Here’s what’s going on, and towards the end I’ll list five “mine and minerals” ideas on how to play it all.

First, and obviously, markets have declined based on negative sentiment. And why? After all, is there any good news out there? Consider:

• War in Ukraine, rapidly emerging as a new, generational East-West struggle.
• Structural, built-in inflation across every economy in the world.
• High oil and natural gas prices, with production and supply issues worldwide that have translated into shortages.
• The nat-gas shortages have led to a lack of fertilizer which – rolled in with high oil/diesel prices – foretells of eventual, widespread food scarcity.
• All of the above, while the global cargo ship economy remains mired in clogged ports, amplified by Covid shutdowns in China.
• And people have finally caught onto the racket of those high flying, profitless tech companies with business plans that lose money, seemingly forever.

I could go on, but you get the picture. It’s a mess out there and getting messier. Not exactly the foundation of a booming global economy as 2022 unfolds.

So yes, people feel negative, sell out, and go to cash. They de-risk, so to speak.

Which brings us to gold, which is sliding. And here’s the quandary: Why sell gold into a de-risking market? Gold ought to represent long-term security in a time of risk, right?

The sell-side argument is that interest rates are rising, and rising rates raise the carry cost for holding gold. That is, physical gold is “just metal” and doesn’t pay a dividend. So, every ounce in the vault is a missed opportunity to generate cash. And the imputed loss on gold (i.e., versus holding cash) is greater when interest rates are high.

It’s not difficult to understand the argument, but I don’t buy it. Because look at the situation from a different angle.

Per the U.S. government’s own statistics, inflation is running in the 8.5% range – and the true number might be twice that if you follow what is called “shadow statistics.” In that respect, holding cash also has a cost, namely that 8.5% inflation rate (or more) per year of vanishing purchasing power.

Here’s the investor choice: hold cash and generate minor amounts of interest in an environment of rising inflation. Or hold gold and protect the wealth basis against declining purchasing power over time.

Indeed, the Fed threatens the world with small interest rate increases of 0.25% or even 0.5%. Okay, but that’s insignificant when compared with the 8.5% (or more) declining value of cash.

So, why have people sold gold down in recent days? Well, sometimes you don’t sell what you want to sell. You sell what you have to sell. Like if you need fast cash.

You sell gold because it’s liquid and always catches a bid. That’s not necessarily the case with many other investment ideas.

During market sell-downs the price of gold often drops early, such as when overstretched people need cash to cover margin calls. But after that early tumble, gold tends to be among the first plays to recover on the other side of the selloff and cleanup.

Along with the declining price of gold, metal miners often head down too. Good companies drop in value for no good reason. The list is long and includes names that hold great assets with serious ore in the ground, coupled with excellent geologic work, facilities, workforce and management teams.

There’s no saying how long the current selloff will last. Will the market find a bottom and then head back up? Or will more downside yet unfurl? Nobody really knows, and things can change in a matter of hours.

But along these lines, I have five names for you, companies in the gold and related metals space that have tumbled in recent days into bargain-hunt land:

One great up-and-running metal miner is Avino Silver & Gold Mines Ltd. (NYSE American: ASM | TSX: ASM). This company has operated near Durango, Mexico since 1968. The ore body is a deep-running series of veins that were first discovered in 1548 by Spanish explorers/conquistadores. There’s a full package of mineshafts, mills and processing facilities. Much of the operation was closed during Covid, but it’s all getting back into production. Ore grades are excellent, with continuing discovery as mining progresses. Plus, an offtake agreement with Samsung for all the metals.

And here are a couple of names for companies well-along in the exploration side, with superb results to date and great prospects ahead:

Take a look at American Pacific Mining Corp. (CSE: USGD | OTCQX: USGDF). This company controls a major copper exploration play in Madison, Montana and is partnered-up with giant Rio Tinto to explore a skarn-porphyry, mineral-bearing body. Progress – meaning mineralization uncovered – has been excellent over the past 18 months, with numerous unreleased drill results still to come. Meanwhile, Am-Pac holds 100% of two other outstanding, high-grade, near-surface gold plays in hard-rock mining country in Nevada.

And look at Group Ten Metals, Inc. (TSXV: PGE | OTCQB: PGEZF). This is another company that works in the nickel-platinum belt of Montana, adjacent to property controlled by Sibanye-Stillwater. Group Ten controls a vast land package and has had remarkable success identifying high-grade zones of copper-nickel, along with platinum group metals, gold, silver and even chrome. Indeed, it’s a “battery metals” play from numerous angles.

For early-stage gold exploration, look at TRU Precious Metals Corp. (TSXV: TRU | OTCQB: TRUIF). The company works in Newfoundland, in a highly prospective gold-copper belt. Its neighbors include two well-known names, Marathon Gold and Newfound Gold Corp., and TRU is directly on the geologic trend that connects these other two plays. Early sampling, mapping and geophysics are promising, with drill results offering strong promise.

And finally, another early-stage explorer, Romios Gold Resources Inc. (TSXV: RG | OTCQB: RMIOF). This is what geologists call a “hip pocket” play, an intriguing collection of historically explored and mined projects across Canada and in Nevada. Right now, the focus is on two high-grade works that were picked in the olden days, but abandoned to the mists of time due to low-priced gold. Modern geophysics and drilling reveal significant new mineralized zones. Romios is a small-cap play, but with the ability to move on news from the drill deck.

That’s all for now…  Thank you for reading.

What a week! Last Thursday, Russia invaded Ukraine. Then this week global supply chains went crazy, with skyrocketing price moves and a global-scale sense of worry about where it all leads.

I won’t dwell on war news, meaning stories and imagery from front lines. It’s tragic and painful to witness, and no doubt you follow events.

But definitely, it’s worth discussing the economic impacts of the war. In particular, consider the almost immediate commercial isolation of Russia that’s now taking shape with a wide array of sanctions on Russia’s government, her banks, businesses and people.

This is an entirely new page for the world economy. And what’s happening is not as easy as just saying, “Russia is bad so let’s punish her.” Sad to say, though, that’s where much thinking across the world is focused. Do something. Make it fast. Think about it later.

Another way to say it is that Russia is a major, global-scale source of key energy and industrial resources. These range from products straight from the well like crude oil and natural gas, to refined hydrocarbons like gasoline, diesel and chemicals. Plus, Russia produces a vast array of industrially critical elements, again ranging from ores and concentrates to highly refined and processed alloys.

For example, as Russian sanctions kicked into play over the past few days the price of oil pulled up into a strong climb, with Brent Crude hitting $114 per barrel at one point. This reflects market uncertainty over future access to Russian exports. Meanwhile, one sees stories of tanker-loads of Russian oil going “no bid” because traders are uncertain about the legality of even making an offer. It’ll sort out, more or less. But for now, it’s a serious mess.

Other important commodities with a Russia-trade angle are also rising in price. Wheat futures are soaring to two-decade highs, according to market tracking services. And lumber futures are up sharply as well, reflecting concern over diminishing Russian supply.

Other materials rising in price include aerospace-grade aluminum, now at record levels according to a market follower with whom I spoke earlier. Meanwhile, a significant fraction of the world’s aerospace grade titanium – about 60% by some calculations – comes from Russia.

Or consider spot prices for other widely used, critical industrial elements like copper, nickel and uranium. All have a strong Russia supply angle, and all are at 10-year highs, per trading data.

You get the picture, right? Literally, overnight, anti-Russia sanctions have created uncertainty over future supplies of key energy resources and metals.

Meanwhile, share prices for important Russian producers have collapsed. Consider just two key companies in the Russian investment space, gas producer Gazprom (OTC: OGZPY) and metals producer Norilsk Nickel (OTC: NILSY). Both companies’ share prices have tumbled in recent days, as you can see here:

Is there an investment angle? Well, the possibilities are many and depend on your risk tolerance.

For the truly bold, the collapse of Russian share prices creates a contrarian setup. If you are aggressive, and perhaps a bit crazy, feel free to wade into the selloff and buy shares of Norilsk and Gazprom. Of course, we don’t yet know what will happen as events unfold, so the “buy low” idea could also lead to even more losses, of not a complete wipeout. You’ve been warned.

Or frame it this way: Russia now has a very significant level of what’s called “war risk” in everything that has to do with its investment climate. Perhaps there’s an upside in the not-too-distant future, but for now the entire space is a very dangerous place to be for most investors.

The safer investment idea is to focus on U.S. and Canadian names that work in the resource space that’s affected by Russian sanctions. Of course, there are many names out there ranging from small exploration plays to large and mighty companies.

For example, let’s look at nickel. Large nickel producers include Brazilian play Vale (NYSE: VALE), as well as Swiss-based Glencore (OTC: GLNCY) and Australia’s BHP Group Ltd. (NYSE: BHP). These names have global operations and everything you would want in a major player. If customers need nickel and cannot obtain it from Russia and Norilsk, they can buy it from these other guys.

On the much smaller, exploration side, though, my strongest play is a Canadian junior operating in Montana, called Group Ten Metals Inc. (TSXV: PGE | OTCQB: PGEZF). This company is relatively early stage in its efforts, but with significant progress on the books. The play is focused within the well-regarded Stillwater District, where the company holds a massive land package. Exploration has already revealed extensive mineralization in copper, nickel, platinum, palladium, rhodium, gold, silver and even chrome. It’s a superb asset (I’ve visited the site and seen the mineralization), with strong technical and management talent.

It’s also worth noting that Group Ten holds lands directly adjacent to Sibanye-Stillwater, Ltd. (NYSE: SBSW), currently producing minerals in the region. This situation makes it more likely that Group Ten can eventually obtain necessary mining permits and move towards development and production.

To sum up, we can’t do anything about the tragic war in Ukraine. Meanwhile, the anti-Russia sanctions are a massive, international phenomenon, again out of our hands. But already these dynamics have set up severe supply chain issues, all based on just a few days of history being made. And more disruptions are, no doubt, in the pipeline as events unfold and politics play out.

Finally, looking ahead the world is not simply on a glide path to a new version of the Cold War. No, Western nations are on the path to a “Commodity War” scenario, firmly embedded inside the looming political, economic and perhaps military confrontations. In this sense, holding real assets – including ores in the ground – is critical to your investment future.

On that note, I rest my case.

That’s all for now… Thank you for reading.

Best wishes…

Byron W. King

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness.”

Apologies to the ghost of Charles Dickens for borrowing the first line from his 1859 historical novel, A Tale of Two Cities. It’s about the French Revolution, but that same sentiment pertains to our current era, and certainly how stock markets reflect (or mis-reflect) the economy.

Dickens highlighted political and social contrasts and contradictions. Sophisticated London versus revolutionary Paris. Plus, how science and reason were gaining traction across the world, while in another human dimension passion and bloody craziness were the rule.

Dickens and his Two Cities cross my mind every year around this time, in late November and the first couple of weeks of December. Predictable as phases of the moon, there’s always an annual market sell-down known as “tax loss selling season.”

We definitely see this phenomenon in mining shares, and if you’ve been around for even a short while you know the drill.

Towards the end of the year many investors, funds, etc. sell mining shares that have done well, to book gains in the winners. Then they sell shares in different companies to book losses. The idea is to rebalance portfolios, take money off the table and absorb losses as a tax shelter.

You want contrasts and contradictions? The best of times and worst of times? Voila!

On the one hand, a long list of wonderful companies bleeds red on the screen, based on share price declines. Ugh, you think. What a takedown.

Yet if you follow many of these declining plays, the back-stories have never been better. Great assets, experienced and savvy technical teams, strong management, money in the bank. Yet people are hitting the sell-button and share prices are sliding.

Well, there’s another way to look at it too. If you follow the right kinds of companies and know the stories – assets, capabilities, management – you can find bargain basement plays.

The idea is to shop now and pick up discounted shares. Then ride the gains that typically come with the new year, aka the “January effect.”

For example, look at a large, well-run company like Agnico Eagle Mines Limited (NYSE: AEM | TSX: AEM), with a market cap of $11.8 billion. It’s a solid gold mining play for any long-term investor. The company has no serious problems in any news.

Yet in just the past month the Agnico share price has slipped from over $57 to the $47 range. That’s definitely not reflective of the company, its assets or people. It’s just sellers taking money off the table towards the end of 2021. Yet by about March 2022 that $10 down-move will more than likely be fully restored and then some.

Agnico is a buy just now.

Or look at a much smaller company like Group Ten Metals Inc. (TSX.V: PGE | OTCQB: PGEZF), an early-stage explorer with a market cap of a mere $45 million. It controls a vast spread of mineral claims in the legendary Stillwater district of Montana, adjacent to mighty Sibanye-Stillwater Ltd. (NYSE: SBSW), with a market cap of $8.9 billion.

Group Ten has identified significant nickel, copper and platinum group metals (including rhodium), along with cobalt, chrome and gold. The company just released a very solid resource estimate, with one version summing up to over 6 million ounces of “palladium equivalent,” leading to a nice uptick in share price back in October.

Yet in the past month, Group Ten shares have drifted down by about 25%. And that’s despite the fact that almost none of the drilling results from the 2021 field season have yet been reported. The company expects to release additional mineralogical (good) news in January and February, which will likely strengthen the share price.

Another buy. W company with great assets, a strong technical and management team, money in the bank, and phenomenal location in mining-friendly Montana, smack next to a multibillion-dollar giant. And just now, in early December, the shares are on discount.

Or how about two other, underappreciated rare earth (RE, REEs, Rare Earths, Critical Material) companies, currently in similar sell-down territory, namely Defense Metals Corp. (TSXV: DEFN | OTCQB: DFMTF) and Appia Rare Earths & Uranium Corp. (CSE: API | OTCQB: APAAF).

Defense Metals is working on a large project in British Columbia involving a rock type called “carbonatite,” which in this case is filled with high grade RE mineralization. After three field seasons (2019 – 2021), Defense has a good handle on the deposit. Management just released a splendid preliminary economic analysis that shows excellent numbers in terms of tonnes/grade, value, return on investment, etc.

Yet shares are down about 25% in the past month, while the company has yet to release results from the 2021 drilling program. If you follow the RE space, here’s a bargain buy.

And Appia is working on another, very extensive RE deposit in northern Saskatchewan. It’s based on a mineral called “monazite,” in high demand across the world for rare earth minerals.

Indeed, Appia’s deposit may be among the highest-grade monazite plays anywhere, certainly in North America and competitive with the best plays elsewhere in the world. The ore body is near-surface as well, which simplifies the mining angle. And the company has an arrangement with uranium processors in Saskatchewan to deal with any issues of radionuclides in the ore.

Yet despite this setup, shares are down over 40% in recent weeks. Another bargain play, now on sale at year end.

With all the companies above, from big Agnico to much smaller Group Ten, Defense Metals and Appia Rare Earths and Uranium, we are looking at temporary, seasonal selloffs. For long-term investors, the shares are a bargain. Even for traders who are looking to buy now and sell into the new year, it’s a setup for a gain.

In other words, we have a relatively short window in early December to buy into any number of beaten-down plays. Or to turn Charles Dickens around and take a more upbeat view of the opportunity which is right in front of you, “It is the worst of times, yet also the best of times.”

That’s all for now…  Thank you for reading.