Canadian hedge fund AlphaNorth has bought into Collective Mining TSXV:CNL to take advantage of discounted prices. The long-biased Canadian equities specialist said that Collective Mining has been reporting exceptional drill reports and that the company “is on track to build a world class gold resource.”
Collective Mining has been seeing some positive news flow coming out of its Guayabales project in Colombia. It reported today that it had assay results on tungsten trioxide at Guayabales. Finding high-grade tungsten as part of the mineral suite matrix in the shallow portion of the project’s Apollo system has the potential to significantly enhance economics of the project. Tungsten has been officially designated as a critical mineral to most countries in the world.
Collective reported last month that it has drilled its best hole to date, intersecting 519m grading 2.74 g/t gold equivalent from surface. This includes 290.8m grading 3.45 g/t gold equivalent in a remarkably continuous and newly discovered high grade subzone, sitting within the eastern portion of the Apollo porphyry system.
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AlphaNorth President and CIO, Steve Palmer, said the strong US dollar has been a major headwind for commodity prices, particularly gold, over the past three months. “It is our view that it is unlikely that this strength will continue,” Palmer said. “Historically gold has had a high correlation with the US dollar. We expect the gold price to rebound with future US weakness. Also, the new conflict in the Middle East will provide a further catalyst for gold as a safe haven trade.”
Steve Palmer will be a guest speaker at the upcoming Beyond the Channel investor event in London on 30 November. Designed for professional investors, the event will be showcasing companies and funds that are breaking new ground in their respective sectors. Professional and sophisticated investors can register for the event on our site.
Palmer said that many of the same investor sentiment indicators which reached extreme levels in October 2022 and coincided with a major equity market low have recently approached similar levels. The aggressive sell-off in equities in recent weeks has taken the TSX Venture index to fresh lows for this cycle.
How do you call a Canadian bear market?
The TSXV has now declined by 52% over the past 32 months. Bear market cycles for the TSXV have historically averaged 36 months and declined by 75%. These are averages based on the five major bear markets since 1980, while each situation has had unique circumstances.
“We believe that other factors such as investor sentiment should be evaluated to ascertain the general timeframe in which a major low is likely to occur,” Palmer said. “It is difficult to precisely time these key inflection points and note that even if one could actually do that, it would be impossible to initiate positions in quality micro/small cap companies in a timely manner without significantly impacting the market price.”
AlphaNorth conceded that they have been early in their forecast for a major low for Canadian small cap equities. “Bear markets are a function of time and price,” Palmer said. “The current bear market is now within the range of the historical norm for both time and magnitude of decline. We therefore expect that the bottom is near.
Palmer said that the AlphaNorth Partners Fund is well-positioned for the inevitable point when the market turns. During past TSXV bull markets, the fund has generated very substantial gains.
