Investor Insights from Industry Veterans on Riding Cyclical Opportunities

Interview with Dave Lotan, President & CEO of LHI Capital, and Mark Shelby, CEO of Canada Nickel.Recording date: 27th October 2023Navigating the Mining Sector for Outsized GainsVeteran mining investors Mark Selby and David Lotan reveal key insights on profiting from the sector's boom-bust cycles. By targeting the right opportunities at the right time, substantial gains can be achieved.Focus on Gold, Copper, Battery MetalsStick to metals with obvious end demand like gold, copper and lithium. When underlying commodity fundamentals improve, these see the most interest. Exotic minerals rarely attract capital inflows.Identify Likely Acquirers in AdvanceBefore investing, consider who may eventually acquire the company or project. With limited buyers, this is crucial. For gold, only a handful of majors and mid-tiers can afford over $1 billion in acquisitions. Ensure your target fits their criteria.Seek Low-Cost Entries in New DiscoveriesThe best gains come from new discoveries made by junior explorers. Selby targets quality teams that have delivered discoveries before. A $50 million explorer finding major gold could reach $500 million in takeover valuation.Avoid “Recycled” AssetsLotan cautions against old assets being repackaged as new discoveries. Focus on fresh finds revealing major potential where little previous work existed. The narrative must justify turnaround.Target 10x Potential Upside from Current ValueIdeally, the upside should be 10x or greater. A $500 million company finding 100g/t gold does not move the needle much. But a $50 million explorer could rise tremendously on similar success. Pay close attention to the entry point.Benchmark Against Historical Takeout ValuesUse past transactions of similar assets to benchmark potential value. Is the project large enough to interest majors? If few relevant deals exist, acquirers may not pay premium prices.Monitor Fund Flows as an IndicatorAccording to Selby, fund flows reveal when capital is returning to miners. It starts with majors, transitions to mid-tier developers, and finally reaches speculative explorers. Position early before hype builds.Focus on Prospective Investments as Capital ReturnsWhen generalists re-enter mining, they gravitate to low-risk plays first. Lotan notes they prefer assets with resources, infrastructure and scale. These have clearer value drivers. Exploration upside is harder to quantify.Allow Time for Commodity Cycles to DevelopCapital flows sustain boom cycles, but require patience. The full rotation from bear to bull can take years. Proper timing is critical to maximize gains. Avoid chasing late-stage momentum.By targeting high-potential opportunities early, being selective on quality, and exercising patience, substantial wealth can be built riding mining's commodity cycles. Pay close attention to capital flows and position ahead of the crowds.Learn more: https://cruxinvestor.comSign up for Crux Investor: https://cruxinvestor.com