Junior Mining stocks are extremely volatile

I actually didn't really have the intention to write this blog article - I didn't even have the idea. But as so often, the circuamstances of unfolding realities helped me delivering a fresh piece of content all along.

So let's talk about something that is actually near and dear to us as investors. Stock prices raising, and staock prices falling, and the whole cycle going about with verocity. This is, after all, the reason why we're in the business of investing. Buying stocks cheap, and selling them dear. Money made, holiday booked.

And as Junior Mining investors, we don't really have that much different dreams; we only might dream a little bigger, because we all know of the upside potential that Junior Mining stocks might deliver (put a bold, underlined 'might' here).

And the month from July 25 to August 25 2024, and the week from August 26 to today (August 30, 2024) then showed what Junior Mining markets are capable of. And now the question is, how to deal with that.

Of course, as a little in-between disclaimer, what I am saying here and now is my personal observation and opinion, and this is what I am doing in this particular case.

The case in question has to do with Explorado's portfolio company Ophir Metals, a company which is working on two lithium properties in James Bay, Canada. For more details about the company, please refer to my detailed analysis here:

60% up in one month: You gonna sell?

In any case, Ophir has started a drill program at its Pilipas property in summer, with the second part of this drill programme to take place mid-October. The overall situation of the company is solid, Pilipas having produced some good hints that could point towards a successful drill campaign. Fron late July onwards, it looked as if investors would be lining up to get the stocks of Ophir still at a low price before they might go up substantially on the back of a successful drill campaign. Actually, for companies that did some good marketing, this is not very unusual, because a successful drill campaign really can be a game changer.

And so the price went up by a nice 60%. That's not bad. Enough to make investors who are unfamiliar with our sector tremble, because 60% outside of Junior mining in a month....is very uncommon. And again, this price increase was purely based on a line-up of investors looking for a nice drill outcome. There were no changes on the project as such.

So far so common. So, does that mean selling at the peak, on August 25, would have been a good idea? Well, that of course depends on two things.

First, when did you buy the stock originally? If you bought it on July 25, you would have taken the 60%. Had you bought stocks for USD 10,000, getting another 6k for free is nice enough. So, it could have been a yes. For me, it was not an option because I bought the stock in March, at a much higher price (as you can see, I just made a big confession - I am not a supermastermind when it comes to finding the best entry point of a Junior Mining stock).

But, I also wouldn't have sold it under other circumstances, and not even if I had bought on July 25. In the case of Ophir, I wasn't looking at the 60%.

The importance of project milestones

And here comes the second point: Selling also depends on your strategy, or on the MILESTONE that you might have identified, and the milestone the project is heading to. Milestones are critical points in the course of project development, and I am dedicating a table for milestones for all the projects I have in my portfolio, which you can find HERE:

For the case of Ophir, I am looking for an excellent drill result. This is my milestone. This is what the company is currently working on. And as I was pointing out, I expect a good result to take the price raise much higher than 60%.

Of course, this is somewhat speculative. And it is risky. I have less data to undermine hopes for a good drill results than is the case for Heritage or Emperor, two other mining companies from my portfolio, but I don't go too much into this story. Point is, I was kind of immune of any price increases before drilling would be out.

Now comes the second part, because the story doesn't end here.

40% down in one week - you gonna sell now?

Starting from August 26, the prices of Ophir stocks started to fall again. In fact, they did so over the whole week (August 26 was a Monday). By the time of writing today (Friday of the same week), it has lost a whopping 40%, almost.

Again, I believe that for people outside of our sector, this would have been a good reason to hyperventilate and get shell-shocked. Loosing 40% in one week normally could only mean your brewery failed to build up this plant in Afghanistan. And such a decline in such a short time frame would be the signal for all investors to run and hide.

Could that also be the right action for Junior Mining investors? I have to say clearly and loudly: Well - maybe. But let's look again at why Ophir fell 40% in a week.

Actually, for no reason. Nothing happened on the project, nothing on the financial or management side of things. It could well be that some investors who cashed in the previous week just took their gains and went home.

Junior Mining markets are not very liquid, so a limited number of buyers and sellers can move a stock, specifically at such an early stage. Ophir has a market cap of around 10mio, depending on the week. So similar as with the 60% +, the 40% - are no signal for me to sell. Even in case it should go further below next week, unless there is a specific reason for it.

Speaking of reasons, there is one more factor coming in that tend to influence stock prices of Juniors, and that is - metal markets.

I have spoken about the lithium market here and here, so again, I will lean back and say 'not too much detail'. But I want to point out that from time to time you have very speculative markets, as was the case for lithium between 2015 and 2019, and again in 2021/22, when everyone was looking for a decades-long undersupply of lithium based on a universal EV-boom - that finally didn't set in as strongly.

While during these times one could see lithium explorers raise by hundreds or percent in their stock price simply because they bought a mining lease nearby a successful exploration permit, we now have kind of the opposite. Kind of, because lithium markets aren't really that bad, but also not as promosing either. Fact is, lithium demand will increase, but it will be met by a more or less equal increase in output capacity as well. But an overall increase of demand will also mean that good lithium exploration projects are necessary, and such project will also get financing.

As you can see, there is a bit of uncertainty built in. The 40% downfall could also partially be cause by people having limited trust in lithium markets. But me personally, I like to look at the more general and mid-term outlooks, and these aren't bad as I pointed out before.

In total, neither were the 60% price increase a reason for me to sell (I would have made a loss anyway, as I pointed out), nor are the 40% price decrease such a reason. If at all, i might consider increasing my shares.

Sort of conclusion

So the conclusion is (again, this is my personal statement only) that investors should look at their milestones, and compare the project in relation to the milestone as the main triggers for selling. There might always be ups and downs in between, specifically during early exploration, where volatility is greatest. If on the other hand you bought at a very good price, and the stock goes up for no reason, selling and going away, especially if your trust in the project isn't too big, could also be a justifiable tactic after all. Also, if you feel, and if this is underlined by facts, that the project won't hold what it has promised - then running and selling might also be considred.