A Contrarian’s Dream

The junior resource sector is trying to dig itself out of a bear market that has even the most experienced and successful contrarians “bored” with the sector.

The backdrop is one that I’ve described as a contrarian’s dream and one that I’m personally taking advantage of by increasing positions in my favorite companies.

Let me explain how we got here and where we’re going.

After years of misallocating capital, majors in the resource space essentially went on strike went it came to the exploration arms of their operations.

Mines were “high-graded” for years with companies choosing to mine out the richest — highest-grade and highest-margin — parts of their deposits instead of investing in exploration drilling to replace reserves.

This was done across the metals sector. Pick a commodity… Gold, silver, copper, etc.

While these companies were busy picking apart the best parts of their deposits, central banks around the world were engaging in a coordinated effort to reinvigorate the world economy by injecting massive amounts of cheap money into the system.

The result is one of the longest bull markets in the history of the U.S. stock market. The cheap money incentivized companies to buy back their own stock, which only added to higher stock prices.

Throw in triple- and four-digit returns in cryptocurrencies and cannabis deals, and speculators’ appetite for risk in the risky junior resource sector — where most of the exploration happens — became nearly non-existent.

In the meantime, the base metals markets were quietly building a bottom and then springboarding into a bull market.

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Name Last Change
DOW 26089.60 0.07%
S&P 500 2886.98 0.16%
NASDAQ 7796.66 0.52%
TSX 16301.91 0.38%
TSX-V 587.84 0.00%

Resource Commodities

Name Last Change
Gold 1336.40 0.17%
Silver 14.85 0.13%
Copper 2.63 2.630
Platinum 901.00 0.67%
Oil 52.51 0.44%
Natural Gas 2.39 2.60%
Uranium 24.70 1.52%
Zinc 1.09 0.00%