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Wallbridge Mining Initiation Report

Wallbridge Mining (WM.TO, MCap C$76.2M)

In keeping with my promise to add more speculative names (this is my forte - I spent 5 years analyzing these stocks in a professional capacity), let's take advantage of yesterday's rout in gold and the miners to scoop up bargains.

Wallbridge owns the Fenelon project in Quebec, which hosts 4.1 million ounces of gold. The project is at the Preliminary Economic Assessment (PEA) stage, which means the economic model estimating its market value is closer to guesswork than a study you can build a mine on.

In 2020, Wallbridge acquired Balmoral Resources for C$84.4M in an all-share deal, with Balmoral shareholders getting an 18% stake in the combined entity. The deal consolidated Wallbridge's land holdings in the Detour-Fenelon gold trend (the same geologic events that created mineralization at Fenelon also affected the surrounding region, hence the phrase "trend").

Wallbridge went on to be worth over C$1B in the 2020 gold bull market. Gold is more or less unchanged since then, the company has added value through 3.5 years of drilling and exploration work, yet the stock is now worth just about 7% of its peak value. All that's changed is market sentiment towards gold.

Resource markets are cyclical. When the price changes, everything changes. When gold is at $2250/oz and money starts flowing into the sector again, the tide of liquidity will send the small cap explorers screaming higher. Like uranium, biotech or crypto, you can't assess the fundamentals by looking at the balance sheet. This is a bet on what's possible - if certain catalysts come about to provide a tailwind.

Buying exploration stocks is closer to venture capital than public market investing. You will get burned often, with the winners making up for everything. I'm trying to tilt the odds in my favor by buying at extreme low sentiment, catching the capitulation wave. Allocate half of what you would to Western Copper and Gold, or equal weight them at 0.5% of the portfolio. That way, you can lose often, and ride 100% gains through 50% drawdowns, back to 200% gains, and so on. The volatility will be brutal, no different from crypto.

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