GGPChat

https://www.youtube.com/watch?v=b8Oxt25VyWY&t=1465s
Interesting section in this interview on Lobo Tiggre's study of the Pre-Production Sweet Spot that GGP currently finds itself in.

UPDATE 04 JAN 2024: Link below to a longer interview with Lobo discussing the PPSS in more detail and see next post on thread for a breakdown analysis of key points of the PPSS
https://youtu.be/0g0FkiC5954?si=GKtED1gdtaweZZ4L

Link to PPSS Report:
https://independentspeculator.com/img/u ... S-2023.pdf

Lobo Tiggre of IndependentSpeculator.com shares what commodities are working for him now and which ones he'll be looking at further down the line. He places gold, silver and uranium in his first basket, copper and oil in his second basket and lithium in his third.

Tiggre also discusses mining industry topics like permitting and ESG.
0:00 - Intro
0:24 - Sentiment at PDAC
1:07 - Is this time different?
5:08 - Strategy as recession nears
8:53 - Now - gold, silver, uranium
10:54 - Later - copper and oil
14:44 - Permitting and ESG
20:20 - Much later - lithium
24:25 - Lobo's updated PPSS data
29:32 - Outro

TRANSCRIPT OF THAT SECTION
LOBO
Pre-production Sweet Spot is available no, pre-production sweet spot (formerly known in my past life as the 'Golden
Runway' is basically the time between when a Explorer becomes a producer, and this doesn't count when somebody already has multiple mine builds a new one. It's not any mine build it's that change from literally pouring money into holes in the ground when you're drilling to getting money out of a big hole in the ground when you're Mining.

And if you think of it that way of course there must be a revaluation and my claim to fame in the industry is that as far as I know I'm the first one to actually measure that and it turned out that the gains in that period are much larger than people had appreciated. On the average of about a double, and you know we just did a new round of research with several new examples in the database and the numbers changed a little bit but roughly the same. It's a very robust finding and given how few examples of this there are every year you know just a handful um I don't know that we got them all but the the sampling the the database is quite complete.I'm not I'm not like sampling one percent and hoping it's representative of the world, I mean I I think we've got most of these in there so the numbers are real.

HOST
And they are they're very interesting numbers, I've seen obviously not the new report but the previous one it's very interesting and somebody was reminding me today about this concept and was saying that this is the time when companies tend to get ignored because it's that time when not I mean obviously a lot is happening, but it's a little bit more quiet and so yeah I guess that that fits into…

LOBO
Well I guess one other tidbit we can put in advance is that the pre-production sweet spot is not linear, it's not like the price just goes up from the construction decisions your first pour or first plate or whatever the first production is, PPS works for all of them uh it curves of course and the biggest gains are actually in sort of the last trimester of pregnancy if you will when you're gonna give birth to this beautiful baby or whatever it is um and… so if you if you miss the construction decision or if market conditions are such that you're not in the Market at that time unless you're in that final ramp up…

You know because it takes a long time you gotta clear the Earth you got to do all this uh civil engineering and stuff and when you're blasting holes underground it's not visible but once you're getting into that Final Phase and suddenly the buildings are going up, you know the framing is there the cladding is there and the trucks are there you start seeing all this stuff it becomes much
more visible and and you're realising oh my gosh you know they're going to start cash flow stuff and you can usually on average statistically we see that in the ramp up in the share prices. So, in my view that makes any Market lulls that you have an opportunity to go back and pick up PPPS plays that you might have missed before.

HOST
Okay I think we've gotten through quite a bit today it was always very interesting are there any final thoughts that you would leave investors with?

LOBO
Well we also mentioned the success in progress that's not a full-blown report but if you go to the website and search for Success you'll see successful progress and that's just another strategy like. I’d it's actually for exploration it's my preferred speculative strategy because before Discovery the odds are so hard, I mean even if you have a multiple successful mine finder starting a new Junior exploration company it can take decades before they find the next one if they ever do right so it's just it's not that I hate exploration but I understand how very high risk it is and if you miss
the discoverable a lot of people think well that's it I missed it.

But it's not true, between that Discovery Hole and producing a 43 101 report you know a deposit that matters, never mind the pre-productive sweets point of life. Actually so like the Lassonde Curve, you have this big sweep up in Discovery, that's where the 10 Baggers are then you have the orphan (Orphan Period), the boring engineering phase and then you have the pre-production sweet spot right. Well that first Spike the discovery… it’s not based on one single drill hole, it's actually a process that this is as far as I know I'm the first one to look at this too you know after the first discovery hole and the first 43 101 report or that you know awareness that this is a discovery of significance, there's a there's a substantial game and I don't have numbers on this like PPSS.

I can't give you a percentage or something like that my gut feeling is that it's on the order of a double or a triple after the discovery but you risk at that point if somebody is drilling like they have a model it's a vein it's a Porphyry, it's a whatever and they're they're drilling that and they're consistently hitting each one of those holes each fence that they drill and a fan that they drill from those fences right adds value in the ground, it makes it bigger and you can see it happen and and the stocks are usually rewarded for that so it's um maybe not as sexy as 10 bagger Discovery Holes but the risk is so much less that I think that it actually makes for more consistent money making than swinging for the Bleacher Zone. I mean you swing for the bleachers every time and you're going to have a lot more Strike outs.

I've pulled together a summary of key findings in the PPSS report:

The Pre-Production Sweet Spot (PPSS):
- The rerate from a construction decision (CD) i.e. DFS/DTM up to first production (First Pour, First Plate—FP) is known as the pre-production sweet spot (PPSS).
- Usually this is when development starts as oppose to Havieron which has existing infrastructure at Telfer and already initiated a production ready Decline post PFS.
-The increase on discovery (speculator hype on Lassonde Curve) usually much larger than the PPSS. It’s not just possible, but relatively common for stocks to go up 1,000% (10-baggers) as a result of a discovery but discoveries are rare.
- Report shows that the gains when a company builds its first mine can be huge. Sometimes almost as much as during the discovery phase.
- But the important difference is that while companies that set out to make a new discovery rarely do, companies that start building a mine almost always finish the job so reducing investment risk greatly.

Report Dataset:
- Report dataset includes 124 cases of first-time mine builders stretching back to the 1980s, cases consist of exploration companies with a published CD or an announcement that construction had started.
- Included those that failed to reach FP or Commercial Production (CP) or failed to reach either.
- Excluded cases with incomplete/unclear data, mines that were restarted after care/maintenance or companies buying or expanding producing assets.
- The overall odds of success are 92–95%; the average gain of these is almost 100%; and it’s possible to bag around 750% on the top performers.
- One thing that came out significantly is that the average result improved somewhat when holding on after first pour to commercial production but changes the average period from 570 to 737 days.
- Many stocks see a retrace if the mine doesn’t profit the forecasted profitability but most saw additional gains as the companies ramped up into CP.

Here are the basic findings for all 124 cases:
- The whole exercise is aimed at measuring the typical gains for speculation on the transition from exploration to production.
- 91.9% succeed at building their mines (making it from CD to FP).
- 95.2% succeed if we count mines built after a takeover.
- 568.8 days is the average time from CD to FP.
- 97.0% is the average gain from CD to FP.
- 111.0% is the average gain from CD to CP.
- 745.5% is the average gain from CD to FP for the top five cases.
- 20.2% is the average gain during bear markets.
- 132.4% is the average gain during bull markets.

Gold and Silver miners specifically:
- 93.4% succeed at building their mines (making it from CD to FP).
- 96.2% succeed if including mines built after a takeover.
- 560.7 days is the average time from CD to FP.
- 91.0% is the average gain from CD to FP.
- 106.0% is the average gain from CD to CP.
- 594.0% is the average gain from CD to FP for the top five cases.
- 27.6% is the average gain during bear markets.
- 118.5% is the average gain during bull markets.
- 71.7% of all gold and silver PPSS cases delivered positive gains.

Where most of the gains in the PPSS are made:
- Lot of variation in mine construction to FP, with the average at 2 years but some take less than a year while others take several.
- The report breaks up mine construction into 3 and 4 stages to study any patterns (i.e 8 or 6 months each for a mine taking 2 years to achieve FP).
- Generally the initial excitement wanes during the process until the last period in each method of around 33% in 4 periods or 46% approx. in 3 periods.
- So no rush to buy in at the beginning of the PPSS as you can still make great gains at the tail-end.

Top Winners:
- 5 cases averaged almost 750% gains but Lobo wasn’t able to find a correlation studying the data.
- He attempts measuring NPV, IRR and the size of the deposit vs gains but found no investable guidelines.
- Grade vs gain found a bit more success but still not strong enough as some cases of High Grade deposits still lead to substantial losses to investors.
- In an interview linked below Lobo thinks that 'hype' around a project may well be a large factor hence the lack of correlation in specific factor/s affecting the magnitude of a rerate.

Biggest Losers:
- From his experience he’s often lost money on small mines with cheap build costs offering seemingly high margins offering quick cash flow and theoretical big returns.
- So he looked at all the cases and EXCLUDED cases with less than 50,000 ounces of gold annual output.
- The overall lessons was what his mentors often expressed, ‘Go Big or Go Home’ as margin of success markedly improves so a big guideline appears to be to avoid small mines in either bull or bear markets.

Notes on weaknesses in analysis:
- Only 124 cases being examined for example outliers have a large impact on averages such as removing small mines.
- But rare for a junior making transition to producer (handful per year and none in some years) so confident that the results should be sound statistically as most mines built by existing producers.
- While the dataset small enough that new cases do change results noticeably, the general pattern/trends and its scope has not changed since Lobo first discovered it despite the team adding projects annually.
- The average outcome of a successful PPSS play remains around a 100% gain in the share price (from DTM/DFS to First Production).

Summary:
- Not all PPSS investments are successful as many have huge issues so an average increase doesn’t mean success is universal.
- One thing learned in 2022 is that PPSS plays can be highly vulnerable to cost blowouts and many that the report tracks were making headlines due to major cost increases.
- PPSS plays are relatively low risk speculations — but only relatively. They are NOT risk-free.
- Top 5 winners average 745.7% gains and top 5 losers average 70.4% losses so due diligence is still critical
- Over 75% of all PPSS cases yielded some sort of positive gains, but that doesn’t mean that all of these were substantial
gains.
- Of PPSS companies that built their mines, 21.9% failed to yield any positive gain at all.
- Some 32.5% yielded negligible or minor gains (less than 20% over almost two years).
- And a good 46.5% yielded only modest gains (less than 40% over almost two years).
- While lower risk than discovery plays - Due Diligence is still paramount.

Interesting section in this interview on Lobo Tiggre's study of the Pre-Production Sweet Spot that GGP currently finds itself in.
- https://www.youtube.com/watch?v=b8Oxt25VyWY&t=1465s

Longer interviews with Lobo discussing the PPSS in more detail:
- https://youtu.be/0g0FkiC5954?si=GKtED1gdtaweZZ4L
- https://youtu.be/Kurg5U32uH8?t=1748

Link to PPSS Report:
- https://independentspeculator.com/img/u ... S-2023.pdf

Link to information about the 'Lassonde Curve':
- https://www.smallcapinvestor.ca/post/th ... life-cycle

Great analysis as always, Dipsard