How do you go about keeping track of announcements each morning before the market opens? Do you set aside time specifically to review ‘interesting announcements’?
I’m finding it challenging to stay on top of everything and identify potential discoveries. At the moment, I’m using Drill Alert on X, which is decent, but I’ve been considering a more focused approach—creating a shortlist of high-quality explorers engaged in genuine greenfields exploration with tier-one discovery potential. I’d then have my broker notify me of any new announcements from these companies.
Would love to hear your thoughts on this approach or any strategies you use.
Fascinating article - thanks for sharing! I have a couple of related questions
For a company that passes the stage gates on the "Speculation Stage", what's the most common event that triggers the "Orphan Period"? Is it the MRE - particularly when Tier 1 isn't really in-question? NB: I'm reasonably new to Discovery investing but I've experienced this period with a few stocks including WA1 and I need to adjust my strategy, moving forward
Do you also have any advice or rules of thumb when a stock is overbought during the "Speculation Stage" with so much uncertainty at play? I like to apply Buffet's "sell when others are greedy" approach but it's more art than science
In my experience the "Speculation Stage" is highly variable in length. If we assume it to be the period between the discovery and the orphan period then what I have observed most often as bringing it to an end is the transition of work from coarse drilling that expands the deposits potential in imprecise terms to the sort of necessary but otherwise value neutral work that has to be done to get a mine up.
For example if a company is constantly drilling and expanding a deposit and the grade stays constant or improves then investors can in very coarse terms see the deposit growing. As this happens a clearer rough picture of positive economics either emerges or it does not. Eventually, the company will find the outer bounds of the deposit and begin infill drilling, met testing, environmental baseline studies etc etc.. The onset of this stage is what I have seen bring on the Orphan period.
As to your second question working out when a stock is overbought is something that I am not great at. I have a tendency to sell too early (this was the case with WA1). The best answer that I have arrived at is to continue holding if I judge something to be a Tier 1 asset. The problem is that in the time from discovery to sale these companies can go trough 3-10 50% + drawdowns.
Totally makes sense in terms of the trigger event for the "Orphan Period" transition. I'll be mindful of that, moving forward. From my limited experience in this kind of investing, it seems to me the quick (and big) money is made in the "Speculation Stage" - even if a Tier 1 asset is proven. Holding your shares thereafter seems to me to be an opportunity cost compared to selling them, being patient and reinvesting into other new discoveries and hence, repeating the "Speculation Stage" with more capital
In terms of "overbought", I should better define it as prior to stage gate drilling results i.e., from follow-up drilling. I notice that you run a freeheld strategy but this strategy can leave a significant amount of money-on-the-table when some discoveries run so high that the buying appears somewhat irrational compared to the uncertainty present e.g., ESR, TEM, TG6. In these cases do you still operate your freeheld strategy or do you also sell the majority (if not all) when these scenarios occur and if so, do you use any criteria?
Ok I see what you mean. This is challenging and yes the prospect of leaving lots on the table is very real. I’ve certainly done this. Given the statistics of passing the gateway follow for the most part Pareto distributions for my purposes I have estimated that the number of prospects that pass the first gateway to be 10%. Assuming this is the case aiming for 10 doubles rather than 1 10 bagger and 9 -50% trades makes more money. The only way I have found to ameliorate this has been to upscale the position post gateway. In the case of WA1 the two people that played it best in my opinion were Datt Capital and Regal. Regal went into it with force on the 2.70 raising and kept buying on the way up. Entering when the size of the carbonatite and the supergene enrichment were both confirmed. They went very big when there was no risk left in my opinion, only work and time.
Very interesting. Essentially you take profits by selling the majority of your holdings before each gateway and treat the follow-up drilling results like discoveries or probably more by answering the question as to whether the share price is likely to re-rate or not, post-opening
Also interesting by what you say about Datt & Regal in terms of playing the risk-reward trade-off best - I get your logic. I would add you into that mix as well given you got them at 22.5c (I heard the podcast) because there's such limited downside in buying a discovery at open for a $3m MC company. NB: I only got on them at 40c
Out of interest, where do you place AQD on the discovery spectrum compared to your DEG, WA1 & TG6 examples? NB: I'm an AQD investor
AQD is interesting as a continuation of oxidized mineralization as it stands could under the right circumstances make for a heap leach operation. At the same time the prospects of high and higher grades undercover could make for more significant discovery. I would place it below WA1 and DEG with the potential for follow up to demonstrate a deposit of comparable significance. We will see.
Yeah I'll be selling the majority of my holdings before the next results - my experience is inline with your comments re:pareto distribution. Will wait for the FOMO to kick in first
What seems to work for me is just the see when great new assays start missing their effect on the stock price (key is to evaluate new assays & YOUR feel for it's impact (so best before the open)) . Yes, value is building, but doesn't mean you can't trim and wait for a stock to cool off and add more exposure again at better risk-return point.
I have a proprietary in house system I and some partners developed over a number of years that alerts me to significant events. Key is to have the contextual understanding at hand to then decide whether to act on the announcement or not. Having this you gotta do the reading but in saying that I didn’t know WA1 to any great detail other than being a new outfit chasing IOCG’s in the West Arunta. Others like AQD I’ve known about for a while and given the quality of what they do expected a discovery at some point. The main thing I exert energy on is determining the quality of discoveries and long term prospects. This isn’t as time sensitive and in the case of real discoveries has paid off for me. It’s also the point after the first “gateway” at which I think about sizing up positions.
Excellent article
Thank you
Great article
Thanks
Hi Carp,
Great article!
How do you go about keeping track of announcements each morning before the market opens? Do you set aside time specifically to review ‘interesting announcements’?
I’m finding it challenging to stay on top of everything and identify potential discoveries. At the moment, I’m using Drill Alert on X, which is decent, but I’ve been considering a more focused approach—creating a shortlist of high-quality explorers engaged in genuine greenfields exploration with tier-one discovery potential. I’d then have my broker notify me of any new announcements from these companies.
Would love to hear your thoughts on this approach or any strategies you use.
Cheers
Second this.
Fascinating article - thanks for sharing! I have a couple of related questions
For a company that passes the stage gates on the "Speculation Stage", what's the most common event that triggers the "Orphan Period"? Is it the MRE - particularly when Tier 1 isn't really in-question? NB: I'm reasonably new to Discovery investing but I've experienced this period with a few stocks including WA1 and I need to adjust my strategy, moving forward
Do you also have any advice or rules of thumb when a stock is overbought during the "Speculation Stage" with so much uncertainty at play? I like to apply Buffet's "sell when others are greedy" approach but it's more art than science
Thanks for any advice you may have
Hi Rabja,
Thank you for the questions and the kind words.
In my experience the "Speculation Stage" is highly variable in length. If we assume it to be the period between the discovery and the orphan period then what I have observed most often as bringing it to an end is the transition of work from coarse drilling that expands the deposits potential in imprecise terms to the sort of necessary but otherwise value neutral work that has to be done to get a mine up.
For example if a company is constantly drilling and expanding a deposit and the grade stays constant or improves then investors can in very coarse terms see the deposit growing. As this happens a clearer rough picture of positive economics either emerges or it does not. Eventually, the company will find the outer bounds of the deposit and begin infill drilling, met testing, environmental baseline studies etc etc.. The onset of this stage is what I have seen bring on the Orphan period.
As to your second question working out when a stock is overbought is something that I am not great at. I have a tendency to sell too early (this was the case with WA1). The best answer that I have arrived at is to continue holding if I judge something to be a Tier 1 asset. The problem is that in the time from discovery to sale these companies can go trough 3-10 50% + drawdowns.
Thanks for your considered answers
Totally makes sense in terms of the trigger event for the "Orphan Period" transition. I'll be mindful of that, moving forward. From my limited experience in this kind of investing, it seems to me the quick (and big) money is made in the "Speculation Stage" - even if a Tier 1 asset is proven. Holding your shares thereafter seems to me to be an opportunity cost compared to selling them, being patient and reinvesting into other new discoveries and hence, repeating the "Speculation Stage" with more capital
In terms of "overbought", I should better define it as prior to stage gate drilling results i.e., from follow-up drilling. I notice that you run a freeheld strategy but this strategy can leave a significant amount of money-on-the-table when some discoveries run so high that the buying appears somewhat irrational compared to the uncertainty present e.g., ESR, TEM, TG6. In these cases do you still operate your freeheld strategy or do you also sell the majority (if not all) when these scenarios occur and if so, do you use any criteria?
Thanks again
Ok I see what you mean. This is challenging and yes the prospect of leaving lots on the table is very real. I’ve certainly done this. Given the statistics of passing the gateway follow for the most part Pareto distributions for my purposes I have estimated that the number of prospects that pass the first gateway to be 10%. Assuming this is the case aiming for 10 doubles rather than 1 10 bagger and 9 -50% trades makes more money. The only way I have found to ameliorate this has been to upscale the position post gateway. In the case of WA1 the two people that played it best in my opinion were Datt Capital and Regal. Regal went into it with force on the 2.70 raising and kept buying on the way up. Entering when the size of the carbonatite and the supergene enrichment were both confirmed. They went very big when there was no risk left in my opinion, only work and time.
Very interesting. Essentially you take profits by selling the majority of your holdings before each gateway and treat the follow-up drilling results like discoveries or probably more by answering the question as to whether the share price is likely to re-rate or not, post-opening
Also interesting by what you say about Datt & Regal in terms of playing the risk-reward trade-off best - I get your logic. I would add you into that mix as well given you got them at 22.5c (I heard the podcast) because there's such limited downside in buying a discovery at open for a $3m MC company. NB: I only got on them at 40c
Out of interest, where do you place AQD on the discovery spectrum compared to your DEG, WA1 & TG6 examples? NB: I'm an AQD investor
Thanks again!
AQD is interesting as a continuation of oxidized mineralization as it stands could under the right circumstances make for a heap leach operation. At the same time the prospects of high and higher grades undercover could make for more significant discovery. I would place it below WA1 and DEG with the potential for follow up to demonstrate a deposit of comparable significance. We will see.
Yeah I'll be selling the majority of my holdings before the next results - my experience is inline with your comments re:pareto distribution. Will wait for the FOMO to kick in first
What seems to work for me is just the see when great new assays start missing their effect on the stock price (key is to evaluate new assays & YOUR feel for it's impact (so best before the open)) . Yes, value is building, but doesn't mean you can't trim and wait for a stock to cool off and add more exposure again at better risk-return point.
Great analysis .. we played DEG from their 5ct PP in 2018 .. what a ride
Thanks and congratulations. Very special discovery. How did you exit?
Hi Jono,
Thank you,
I have a proprietary in house system I and some partners developed over a number of years that alerts me to significant events. Key is to have the contextual understanding at hand to then decide whether to act on the announcement or not. Having this you gotta do the reading but in saying that I didn’t know WA1 to any great detail other than being a new outfit chasing IOCG’s in the West Arunta. Others like AQD I’ve known about for a while and given the quality of what they do expected a discovery at some point. The main thing I exert energy on is determining the quality of discoveries and long term prospects. This isn’t as time sensitive and in the case of real discoveries has paid off for me. It’s also the point after the first “gateway” at which I think about sizing up positions.