Recap & Outlook: Our trip to Kamloops, BC
This week, instead of our regular broad market discussion, we write about a site visit that Pathfinder Analyst, Gary Sidhu, went on recently. As a part of our due diligence process, we visit company operations regularly. These visits have taken us as far away as Asia and have been as close as “down the street”. As you know, we have recently started the Pathfinder Resource Fund, so we thought it would be useful to write about what we discussed in our Investment Committee about Gary’s visit. Gary attended a tour of New Gold’s (TSX:NGD) New Afton mine in Kamloops, BC. While we do not own this company, we have exposure to copper equities with a view that a supply gap in copper is on the horizon, potentially resulting in an uptick in copper commodities and equities.
We thought it prudent to visit New Afton as it’s the only operating block cave operation in Canada. The visit helped us familiarize ourselves with this somewhat less common and more risky mining technique. As deposits are being discovered at progressively greater depths, block caving is gradually becoming more of a viable mining option.
- Block caving is an underground mining technique used on large homogeneous ore bodies that involves removing material below an orebody and allowing it to collapse under its own weight.
- The technical risk associated with this method is still quite high but when done right it, can deliver high productivity and low operating costs resulting in greater capital efficiency.
- Compared to conventional underground methods, the upfront costs are much greater but are offset by economies of scale on the production side through minimal drilling/blasting, and no backfill costs.
“This means that.” Site visits aid our research process by allowing us to compare the merits of successful projects to early stage companies to determine whether a project has the potential to be the next discovery or a future mine. Although some investors still consider block caves risky, companies such as Newcrest and Centerra have used this misconception as an opportunity to acquire undervalued projects. Through “boots on the ground” experience we see an opportunity to assess projects from a technical aspect that may have been overlooked due to misconceptions on the risk profile.
National Instrument 31-103 requires registered firms to disclose information that a reasonable investor would expect to know, including any material conflicts with the firm or its representatives. Doug Johnson and/or Pathfinder Asset Management Limited are an insider of companies periodically mentioned in this report. Please visit www.paml.ca for full disclosures.
*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Partners’ Real Return Plus Fund are presented based on the masters series of each fund. The Pathfinder Core: Equity Portfolio and The Pathfinder Core: High Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder North American: Equity Portfolio (January 2011), Pathfinder North American: High Income Portfolio (October 2012) Pathfinder Partners’ Fund (April 2011), Pathfinder Real Return Plus Fund (April, 2013), Pathfinder International Fund (November 2014) and Pathfinder Resource Fund (May 2018).
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