Value Microcaps Junior Miners

[Bobwins]

I've been mostly out of miners for awhile. I knew the sentiment was bad but I didn't know it was this bad. Today I was looking up info on lead, zinc and copper prices for the one miner that I do own, Telson Mining, TSN.v/SOHFF. Telson has a base metal mine in Mexico and is preparing to build a mill for a second mine in Mexico that will be producing in Q1/Q2 2019. This second mine will produce gold plus some byproduct base metals.

So I looked up the 5 year charts for lead, zinc and copper. I was shocked by the steep drop in inventories for all three metals to 5 year lows. Ordinarily this would trigger a huge price spike but the opposite is happening. Investors are assuming that China is headed for a recession and so base metal prices have fallen dramatically over the last six months.

IF/WHEN China and the US settle their trade disputes, base metal prices should be sharply higher and mining stocks should head for the moon.

OR China could have a real recession and consumption of base metals would drop and prices could fall further. I believe that China won't drop off the map and that the US and China will settle their trade disputes over time.

So this looks like an opportunity but a risky one if base metals continue to be on sale. Telson is off 50% from my buy earlier this year. I am going to hold just because this inventory situation can't continue. Either demand is going to go into freefall and inventories will rise or the price is going up sharply. That should send mining stocks up.

Telson is a pretty good way to play the whole sector because they have zinc and lead production from Morado and should get modest gold production from Tahueheuto, ~30,000 oz/yr, with plans to dramatically increase production over 5 years.

I am guessing that without a decent agreement between the US and China on trade, miners will remain in the doghouse.