I had held HOC for ages; just a stub holding. Up around 55% over goodness knows how many years. Your article prompted me to cash it in today. Agree with WizardofWindsor that you have to hold a basket of these junior gold miners. Buying VanEck Junior Gold Miners ETF (GJGB) might make sense, up 49% over 1 year.
Oh Oak, I would love to invest in BSRT, it has such a nice discount too. And look at that lovely royalty. Then there's Cemex etc.
But I just cannot get over SilverX. Every time there's an update I see nothing to disconfirm my view that management is on the take and unable to maintain costs. The bad old days of noughties mining management. But ofc they're cheap and could multi-bag easily, 1000% plus. I dunno though I just don't trust them.
But great work in this space. There's very little coverage of mining and resources in the UK and we have some great companies.
Mkango is one you've covered which I think will go very far. But if you're at a loose end, maybe have a goose at Prospex Energy and look at their forward income from their portfolio, the MD I think is very canny and careful with shareholder funds, and growing fast under the radar without calls for capex. Nat gas in Europe will be at a premium for years to come, and this is one way to play it.
Oak, you make some great points here, especially regarding HOC's cost profile. I share your reservations.
However I don't think an outright sell here is justified. I think the following considerations need to be borne in mind:
- Silver. The bull case for silver is compelling imo. For one, there is another year of net supply / demand deficit. For another, the SP has held up in the face of just about everything going against it, including rising interest rates, a strong dollar, constant recession fears and geopolitical uncertainty. Also, the shorts out on silver are 150% of the annual global supply- showing the level of Larceny going on. And yet - silver is not getting knocked down. To the contrary. It's holding up nicely.
I wonder if your article might be an 'inverse Cramer' moment. Or my comment. We'll see. But my view is that silver will break through $34 this week, fuelled by heavy Chinese buying. Then the next target is $50, still not even an ATH.
Gold - very under owned in the West, accounting for less than 1% of investment portfolios. Thus, downside limited. Meanwhile, a consumer product in Asia which no one in the West seems to understand. Huge queues in gold shops even at ATHs when I visited Thailand, both in cities and towns. Same in China I've heard. Indian households own $5tr of the stuff and even the government can't get them to sell.
I agree re. THX (major position for me). So why hold HOC? Because in my view one has to own a basket of miners, simply to manage the blow ups that happen along the way. For example, 4 of my PM positions are up over 100%. One 200%. But then I have 3 that are between zero and -20%. One of these, B2Gold, is a strong buy ATM in my view but has had a grotty 2024, a lot beyond its control. THX also has been dragged down by Mali / Burkina Faso / Nigeria nonsense, and should be many multiples higher. Hence I see investing in mining operations similar to building a team, not every player is going to perform, but the brilliance of a few is enough.
Anyway good write up and again, agree re HOC costs, management. But I do think this share is going higher.
100% agree on covering possibilities. I'm very excited by the prospect of you being right and me being wrong on the price of silver.
Baker Steel BSRT has the Prognoz NSR 0.8%-1.9% with SolidCore (ex PolyMetal) a major silver mine. At today's $33/oz less likely deductions of $7/oz, conservative for a remote but high-quality deposit:
Net Price: $26/oz net smelter return per ounce.
Net Smelter Return (NSR Value) Revenue Basis:
Base Case (6.5M oz): 6.5M oz × $26/oz = $169 million annually.
Upside Case (13.5M oz): 13.5M oz × $26/oz = $351 million annually.
Royalty Payment Calculation
a/ At 0.8%:
$169m × 0.008 = $1.35 million/year (base).
$351m × 0.008 = $2.8 million/year (upside).
b/ At 1.2% (Midpoint Estimate):
$169m × 0.012 = $2 million/year (Baker Steel’s guidance was $1.5M+ last year).
$351m × 0.012 = $4.2 million/year.
c/ At 1.9%:
$169m × 0.019 = $3.2 million/year.
$351m × 0.019 = $6.7 million/year (nears the $8m upside at higher output).
But at $50 silver ($44 net) even at the midpoint, base case $2m grows to $3.4m a year.
At 1.9%, upside case, the $6.7m becomes $11.3m per year!
$50 silver would translate to up to £5m income per year for a share you can buy for £55m, values the NSR at £1m NAV and the market discounts that by over 40% and which separately will be delivering an estimated £10m income via Cement, Met Coal and Gold in 2026+.
I ran the updated numbers on a condo level extrapolated to the portfolio, and the discount to NAV is now c. 60%, plus a number of other factors not in the price which I shared on Paul Scott's substack comments yesterday.
Surely this is now in Oak Bloke asset special territory? :-)
Yes, Phoenix Spree Deutschland has been on my watch list for some time now. Even the official discount is 42%. I see it passed its continuation vote yesterday. It's up 18% over 1 year but basically flat YTD. Limited downside risk at this price, I reckon and if their strategy pays off then could get interesting.
At £1.6bn market cap it is clearly on a lot of people’s radar and fully valued. You’re right I didn’t forecast the absolute top of the share price, but I do maintain that other ideas have proven (and still shall prove) more lucrative than HOC. OB
Not sure if you've come across Don Durrett but his goldstockdata website is a bible on PM companies of all sizes. He's on X and in last couple of days shared his best ideas of Gold Silver 10 baggers. Cerrado is on there with a host of others.
Yes my miners got a bit smashed this morning but i think its just the froth being taken off and I'm buying in again. If it stays around $3300 gold for any length of time as you know cashflows will be so strong.
I had held HOC for ages; just a stub holding. Up around 55% over goodness knows how many years. Your article prompted me to cash it in today. Agree with WizardofWindsor that you have to hold a basket of these junior gold miners. Buying VanEck Junior Gold Miners ETF (GJGB) might make sense, up 49% over 1 year.
Oh Oak, I would love to invest in BSRT, it has such a nice discount too. And look at that lovely royalty. Then there's Cemex etc.
But I just cannot get over SilverX. Every time there's an update I see nothing to disconfirm my view that management is on the take and unable to maintain costs. The bad old days of noughties mining management. But ofc they're cheap and could multi-bag easily, 1000% plus. I dunno though I just don't trust them.
But great work in this space. There's very little coverage of mining and resources in the UK and we have some great companies.
Mkango is one you've covered which I think will go very far. But if you're at a loose end, maybe have a goose at Prospex Energy and look at their forward income from their portfolio, the MD I think is very canny and careful with shareholder funds, and growing fast under the radar without calls for capex. Nat gas in Europe will be at a premium for years to come, and this is one way to play it.
Keep the aspidistra flying! :-)
Oak, you make some great points here, especially regarding HOC's cost profile. I share your reservations.
However I don't think an outright sell here is justified. I think the following considerations need to be borne in mind:
- Silver. The bull case for silver is compelling imo. For one, there is another year of net supply / demand deficit. For another, the SP has held up in the face of just about everything going against it, including rising interest rates, a strong dollar, constant recession fears and geopolitical uncertainty. Also, the shorts out on silver are 150% of the annual global supply- showing the level of Larceny going on. And yet - silver is not getting knocked down. To the contrary. It's holding up nicely.
I wonder if your article might be an 'inverse Cramer' moment. Or my comment. We'll see. But my view is that silver will break through $34 this week, fuelled by heavy Chinese buying. Then the next target is $50, still not even an ATH.
Gold - very under owned in the West, accounting for less than 1% of investment portfolios. Thus, downside limited. Meanwhile, a consumer product in Asia which no one in the West seems to understand. Huge queues in gold shops even at ATHs when I visited Thailand, both in cities and towns. Same in China I've heard. Indian households own $5tr of the stuff and even the government can't get them to sell.
I agree re. THX (major position for me). So why hold HOC? Because in my view one has to own a basket of miners, simply to manage the blow ups that happen along the way. For example, 4 of my PM positions are up over 100%. One 200%. But then I have 3 that are between zero and -20%. One of these, B2Gold, is a strong buy ATM in my view but has had a grotty 2024, a lot beyond its control. THX also has been dragged down by Mali / Burkina Faso / Nigeria nonsense, and should be many multiples higher. Hence I see investing in mining operations similar to building a team, not every player is going to perform, but the brilliance of a few is enough.
Anyway good write up and again, agree re HOC costs, management. But I do think this share is going higher.
Hi Nick,
100% agree on covering possibilities. I'm very excited by the prospect of you being right and me being wrong on the price of silver.
Baker Steel BSRT has the Prognoz NSR 0.8%-1.9% with SolidCore (ex PolyMetal) a major silver mine. At today's $33/oz less likely deductions of $7/oz, conservative for a remote but high-quality deposit:
Net Price: $26/oz net smelter return per ounce.
Net Smelter Return (NSR Value) Revenue Basis:
Base Case (6.5M oz): 6.5M oz × $26/oz = $169 million annually.
Upside Case (13.5M oz): 13.5M oz × $26/oz = $351 million annually.
Royalty Payment Calculation
a/ At 0.8%:
$169m × 0.008 = $1.35 million/year (base).
$351m × 0.008 = $2.8 million/year (upside).
b/ At 1.2% (Midpoint Estimate):
$169m × 0.012 = $2 million/year (Baker Steel’s guidance was $1.5M+ last year).
$351m × 0.012 = $4.2 million/year.
c/ At 1.9%:
$169m × 0.019 = $3.2 million/year.
$351m × 0.019 = $6.7 million/year (nears the $8m upside at higher output).
But at $50 silver ($44 net) even at the midpoint, base case $2m grows to $3.4m a year.
At 1.9%, upside case, the $6.7m becomes $11.3m per year!
$50 silver would translate to up to £5m income per year for a share you can buy for £55m, values the NSR at £1m NAV and the market discounts that by over 40% and which separately will be delivering an estimated £10m income via Cement, Met Coal and Gold in 2026+.
OB
Also did you see PSDL's update yesterday?
I ran the updated numbers on a condo level extrapolated to the portfolio, and the discount to NAV is now c. 60%, plus a number of other factors not in the price which I shared on Paul Scott's substack comments yesterday.
Surely this is now in Oak Bloke asset special territory? :-)
Yes, Phoenix Spree Deutschland has been on my watch list for some time now. Even the official discount is 42%. I see it passed its continuation vote yesterday. It's up 18% over 1 year but basically flat YTD. Limited downside risk at this price, I reckon and if their strategy pays off then could get interesting.
Down 23% today.
https://www.londonstockexchange.com/news-article/HOC/mara-rosa-update/17077368
Hi Paul
235p was the price where I called time on it, based on better opportunities elsewhere and risk of disappointment at Mara Rosa.
MAFL, THX have outperformed HOC by a long way.
OB
Indeed.
SP has done another 50% since this date :O
I think the gold rush of capital is about to stampede into PMs and fundamentals are going out the window for anything with a gold pulse.
I was happy to hold but reading this I'm of the opinion to slice and reinvest in some of the other players with much lower ASICs.
At £1.6bn market cap it is clearly on a lot of people’s radar and fully valued. You’re right I didn’t forecast the absolute top of the share price, but I do maintain that other ideas have proven (and still shall prove) more lucrative than HOC. OB
Not sure if you've come across Don Durrett but his goldstockdata website is a bible on PM companies of all sizes. He's on X and in last couple of days shared his best ideas of Gold Silver 10 baggers. Cerrado is on there with a host of others.
Thanks for this and it's an interesting resource.
HOC's 1Q25 results today appear quite disappointing.
Yes my miners got a bit smashed this morning but i think its just the froth being taken off and I'm buying in again. If it stays around $3300 gold for any length of time as you know cashflows will be so strong.
I was so close to top slicing Hoc yesterday...