Introducing our inaugural Exploration Preview, which focuses on names within our coverage universe with drill bit torque. We review the exploration potential and try and quantify the potential impact on the share price should the company be successful in delivering results. We believe that exceptional drill results can create value regardless of where we are in the commodity cycle. Our top ideas are highlighted in Figure 1 below and will be presented in a similar alphabetical order within this document, bifurcated for precious and base metals focus.
Exploration success can deliver outsized returns, no matter where we are in the commodity cycle. While the base metals market have been focused on global trade wars and the potential for an economic recession (inverted curve), hard assets (especially precious metals) have benefited as the market starts to price in a potential Federal Reserve interest rate cut in July. As a result, mining equities have started to outperform the broader market in recent weeks. We believe exploration success can create outsized returns in a very short period. Figures 2, 3 and 4, highlight a couple of recent examples where one drill hole drove extraordinary price returns.
Evaluating the potential impact of multiple exploration programs. We have reviewed exploration plans for several companies and evaluated each based on 1) impact on share price of success, 2) impact on share price of failure, 3) odds of success and 4) program scale (i.e. number of chances to succeed). We have summarized our findings in Figure 1 and provided further details on each company in the balance of the report.
