• From inception under Brent Cook's lead in February 2008 through year-end 2010, the Exploration Insights' portfolio performance was strong from the Global Financial Crisis to the continuation of the Commodity Super Cycle, returning an average gain of 173% on the sold positions and a gain of 319% on positions held at year-end.

• In 2011, the mining sector, and particularly the junior sector as measured by the S&P TSX Venture Index (S&P TSXV), began to collapse, falling 26% in 2011, 23% in 2012, and a further 59% in 2013. By comparison, the Exploration Insights portfolio showed a loss of 2% in 2011, was down 14% in 2012, and off 18% in 2013.

• In 2014, mining and metals were down again, with the Gold Bug Index (HUI) off ~18% (~38% from the 2014 high) and the S&P/TSX Global Mining Index (TXGM) down ~15% on the year (~26% from 2014 high). The GDXJ also had another bad year: off ~25% and down ~45% from its July peak. Worse still, the GDXJ fell a remarkable 86% from its high set in early 2011. The unweighted performance of the Exploration Insights portfolio for 2014 was a positive 18%. The strong performance reflected the sale of a few companies that had made metal discoveries before 2014, and the discipline to sell companies when results did not meet the investment theses.

• 2015 was a dismal year for miners, metals, and nearly all commodities and major markets. The Bloomberg Commodity Index was off 26%, metal demand was down 5.1%, and base metal prices were off 25% to 30%. The precious metal indexes were also down (HUI -32%, GDXJ -20%) while the TSX Venture Exchange hit an all-time low. The Exploration Insights portfolio finally succumbed to the bear market, showing an unweighted loss of 6%. In November, our cautious strategy turned somewhat more aggressive towards gold producers and explorers, to position ourselves for the future by owning solid companies and assets rather than betting on a rising tide.

• I joined Exploration Insights at the end of 2015 as Brent Cook thought that 2016 would prove to be the year to actively buy the few high-quality deposits, mines, and management teams available. 

The strategy paid off: I added three mid-tier gold producers and a couple of explorers before the end of the year, and by December 2016, I had actively recycled the portfolio, closing 23 positions while adding 20 new ones, resulting in 24 open positions. The open positions provided us with a 63% average return, while the realized gain for our closed positions was 107%.  

I use the S&P TSX Venture (S&P TSXV Index) as a benchmark, as the majority of the stocks held in the portfolio are listed on that exchange. The benchmark was up 45% in 2016.

• In 2017, I saw a need to move down the food chain into earlier-stage projects that could develop into significant discoveries. This approach meant higher risk and higher reward plays that required careful analysis of exploration results and a commitment to cut bait quickly if results failed to meet our investment thesis. By applying this process consistently, I hoped to continue to reap returns that exceeded the benchmarks.  

I was fairly active, closing 18 positions via 22 transactions and opening 12 positions in 9 new companies, including 2 cash-flowing gold companies (producer and streamer), 6 explorers seeking gold, copper, zinc, and lithium, and 4 prospect generators focused on precious and base metals in the Americas. Positions closed in 2017 translated into an average weighted return of 80%, while the open positions generated an unrecognized return of 37% while the S&P TSXV Index benchmark was up 12% over the same period.

• In 2018, I focused on the early side of the investment cycle due to the lack of exploration by major producers, especially in the gold sector. The majority of our open positions were in prospect or royalty generators, while the remainder were in grassroots gold, copper, zinc, and lithium explorers, and gold developers, producers, or streamers. I was also active, adding 16 new positions, 10 of which were in new companies while divesting 7 positions in 6 companies. The sales or closed positions generated an average return of 140%, but the open positions only generated a 6% unrealized return, while the S&P TSXV Index benchmark yielded a return of -35%.

• After making several adjustments in 2019, including closing 17 positions in 10 companies and adding 7 new positions in 7 new companies, the open positions comprised 30 holds in 20 companies. By the end of the year, the open positions had generated an unrecognized average return of 18%, and the overall return from the closed positions was 2%, while the S&P TSXV Index yielded a 4% return.

• At the end of 2020, of the 23 miners in the portfolio (in 29 positions), 20 were listed in North America (TSX, TSX-V, and CSE) and three in the Australian Securities Exchange (ASX), providing exposure predominantly to precious metals (gold and silver) and less so to industrial metals (copper, nickel, palladium) and uranium. 

The unrecognized return from the open positions was 70%, which on average, exceeded the benchmark by 25%. I was fairly active throughout the year, adding nine positions and selling 15 positions in 11 companies for an average recognized return of 39%. The S&P TSXV Index benchmark generated a robust 52% return over the same period. 

• In 2021, I added 10 new positions while divesting 11 due to locking in some positive returns, an M&A transaction, and underwhelming drill results. Consequently, at the end of the year, the closed positions returned on average 8% while the open positions were down 6%, and the S&P TSXV Index was up 7% over the same period.

• At the outset of 2022, I anticipated a turbulent year for the markets predicated upon the exponential rise in COVID-19 infections due to the Omicron variant, higher-than-expected inflation rates, continued geopolitical conflicts, and climate change. 

I was once again quite active, divesting myself of 11 positions in nine 9 companies due to underwhelming results from drill programs, geopolitical risk, margin compression of precious metal producers, and better-managed companies. The average return from the closed positions was a disappointing -26%, roughly in line with the S&P TSXV Index performance (-39%), while the open position generated an unrecognized return of +26%.

• The benchmark resource equity ETFs for precious metals (GDXJ +6.3%), base metals (XBM +0.7%), uranium (URA +37.9%), and lithium (LIT -13.1%) displayed mixed results in 2023. However, the Exploration Insights portfolio, which is weighed heavily towards non-cash flowing juniors, faced challenges, underperforming the benchmarks on average with a decline of 19%, primarily influenced by grassroots, illiquid junior explorers, which experienced negative returns of 50-75%.

Thanks for your interest in Exploration Insights, I wish you luck in your investments in 2024,

Joe Mazumdar 

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