Interview with Brian Leni: How to Build Success in the Junior Resource Sector and His New Project "Field Notes"
Brian Leni (Junior Stock Review, Mining Stock Education) visited with me recently. He has a great new project called "Field Notes" and we explored how to consistently build success in this sector.
tl;dr:
I interviewed Brian Leni of Junior Stock Review and Mining Stock Education fame. The original plan was to discuss his new project “Field Notes” but we ended up in the weeds of how to find and build success in the junior resource sector. It was a great conversation ranging from the philosophical to the practical, including 2 of Brian’s top investing picks right now.
Part 1: Brief Article Part 2: Written Summary, with hyperlinked timestamps
An update!: I am nearly done building a resource stock-focused Discord that is due to go live in the coming days. Join here if you want to be in when I go live!
The interview (articles below):
Part 1: Brief Companion Article
If you don’t know Brian Leni or his work and you’ve somehow made it here, I’m flattered. If you’ve somehow missed him, Brian is a well known name in the junior resource sector. He started his own newsletter - Junior Stock Review - some years ago and has since then grown into one of the most well-known names in the industry. On a personal note, I know that consuming content like his was a huge part of my early journey especially in this sector. I was glad, then, to have the opportunity to sit down with him for a conversation.
Brian is working to get the word out on his new “Field Notes” series, an immersive, beautifully-produced project with a heavy focus on narrative storytelling tracing Brian’s own investing journey before ultimately taking him to site of his various investments and sitting down with their executives. Still only a few episodes in, but so far there’s been lots of valuable conversations, and yeah, I love the cinematography so far. Well worth a watch and one I look forward to following as it progresses.
However, I couldn’t help but try to pick Brian’s brain a bit on some of the lessons he’s picked up along the way of his investing journey. He has a lot of experience and knowledge to draw from. So the conversation ended up quite wide-ranging and in-depth. Brian happily provided lots of detail and discussion of what it takes to succeed in this industry, covering things like:
Timing Your Investments
Understanding the Macro Cycle
Position Sizing
Due Diligence Process
Learning From Your Mistakes
etc.
If you’re new to the space, or just want to compare notes on your own investing philosophy with a known name in the space, this is one you don’t want to skip. Brian is a willing and capable interview, and I hope you enjoy this one.
Part 2: Written Summary
Timestamps are hyperlinked
00:55: Brian shares his origin story
How he transitioned from an engineering career to becoming a full-time investor in junior mining stocks. Brian shares his journey, which involved a transition from pharmaceuticals to steel manufacturing before venturing into junior mining.
03:50: Discussion of Brian’s new “Field Notes” project
Release dates and market unpredictability.
04:45: Discussion of why Brian chose the junior resource sector specifically.
Brian explains that his interest in precious metals was sparked during a conversation with his wife's brother, who introduced him to gold, silver, and Doug Casey's ideas.
Brian discusses how his interest in monetary policy and exposure to influential figures like Doug Casey led him into junior mining stocks. He emphasizes the distinct nature of the junior mining sector compared to precious metals and cautions investors that it's not for everyone.
Brian reflects on how his early success was a drawback as it led to overconfidence and mistakes. He reflects on Rick Rule's advice about confusing a bull market with intelligence. His successful early investments included Gold Standard Ventures, Ivanhoe Mines, Reservoir Minerals, and Orion Resources.
08:00: What about early losses?
Brian explains a missed opportunity with Canstar Resources and the importance of taking profits to manage risk and the regret of not taking more profits when the stock's price surged and eventually declined.
10:20: Risk Mitigation.
Brian emphasizes the need for a flexible approach, tailored to the specific company, market conditions, and external factors. He underscores the importance of individual understanding and discernment, especially in the context of exploration stocks.
There is no one-size-fits-all strategy for de-risking. He highlights the necessity of an investor's understanding of the business they are investing in and the specific level of risk associated with exploration stocks. Brian also mentions the danger of getting lured into the exploration sector due to sensational results and promotional tactics.
Self-awareness, risk, and patience in investment decisions are all critical. He mentions the need to consider the timeline for being right, citing FPX Nickel as an example of a company with a long, multi-phase timeline for success.
Investors often want quick and substantial gains in exploration stocks, but this can be unrealistic and risky. He suggests that good companies with solid fundamentals, a plan, and a realistic timeline are better investment choices.
15:00: The Market Cycle
Brian stresses the importance of understanding the market cycle, noting that different stages of the cycle favor different types of companies. He mentions that during bear cycles, exploration-based companies often gain traction, but it's essential to differentiate between grassroots exploration and companies with established resources and plans.
16:00: The role of self-awareness in investment decisions
Setting up a systematic approach, such as rules-based investing, can help less experienced investors control emotions and improve decision-making. He highlights the significance of having clear rules for buying and selling. Writing down investment rationales can help crystallize one's understanding and prevent hasty or irrational decisions.
18:30: Different personality types may be better suited to investing
But he believes that setting up a systematic approach can help control emotions and lead to better decision-making. He emphasizes the importance of a rules-based approach, focusing on buying at a discount and selling on a double.
19:30: The importance of selling
Selling is obviously a critical aspect of investment. Too many people focus too much on buying. He stresses the value of setting up a repeatable and systematic approach, including rules-based selling strategies.
Writing down investment rationales and articulating them can help solidify one's understanding. He encourages investors to be responsible for what they invest in and to have a clear and well-articulated rationale for their investments.
21:45: The importance of due diligence
Matt discusses concerns about inexperienced investors who may not realize what they don't know and how emotions, particularly greed, can cloud judgment. He expresses a desire for retail investors to succeed and achieve financial freedom.
23:00: How important is geological knowledge to investing success in this sector?
Brian elaborates on the role of geological knowledge in investment, emphasizing the importance of geological understanding when assessing exploration companies. He also highlights the significance of trust in the people involved.
26:30: The Importance of Trust in Leadership
Brian agrees with the importance of trust in the mining industry and adds that he's more comfortable investing when he knows and trusts the people involved. He also mentions that having access to geological expertise is beneficial.
27:30: The Due Diligence Process
Matt discusses the importance of reading technical reports and the need for investors to engage with information provided by the company. He emphasizes the value of due diligence and highlights the role of geological data in these reports.
Brian explains that the length of his due diligence process varies, with a shorter process if he already knows the people involved or if someone he trusts is investing in the company. He mentions that he first compares market capitalization and after-tax NPV (Net Present Value) and then delves into aspects like management, cash position, and G&A.
Brian outlines the process he follows for due diligence, including high-level assessments, calls with the company, DCF analysis, and adjusting his DCF based on factors he believes might affect the company. He stresses the importance of maintaining a margin of safety in his analysis.
Brian discusses his approach to investing, noting that his process includes tracking a few high-level factors in a spreadsheet. He considers various elements, such as the company's market cap, after-tax NPV, cash position, and G&A. He also adapts his pace of investing based on market conditions, company catalysts, and global financial markets.
33:00: How does Brian buy in/scale into a position?
Brian shares that the number of tranches he purchases when fully investing in a company varies depending on his level of interest, catalysts, and market conditions. He aims to build positions to approximately 5-10% of his portfolio, particularly for his wheelhouse companies, with explorers usually making up a smaller percentage.
Brian emphasizes the absence of hard and fast rules in his investing approach, highlighting the flexibility he has developed over time. He acknowledges that early investors might benefit from setting stricter rules to establish a foundation for successful investing.
36:00: The Importance of Learning from Experience and Mentors
When reflecting on his earlier years of investing, Brian emphasizes the importance of learning from experience. He believes that investors need to make some mistakes and learn about the importance of selling along the way. While he learned much from podcasts, he acknowledges that full-time investing required different experiences. Brian also recommends diversifying across several companies and attending conferences to meet like-minded people and mentors.
Brian underscores the significance of seeking mentorship and engaging with others in the industry, both for learning and networking purposes. He expresses a desire to provide guidance to newer investors while acknowledging that individual paths and learning experiences vary.
40:00: Don’t Invest Your Entire Account in a Single Play
Brian discusses the importance of not risking one's entire account, emphasizing the need for longevity in the market to experience its ups and downs. He mentions that early investors may blow up their accounts quickly without having the opportunity to learn. He also emphasizes the value of the journey and the ongoing learning process.
41:00: How many positions does he hold in his portfolio?
When it comes to the number of positions he holds, Brian states that it varies depending on the number of exploration companies in his portfolio. He currently has 14 companies in his Junior Stock Review Premium portfolio and focuses on keeping his portfolio diversified with a cash position of approximately 10%.
45:00: Field Notes Discussion
Brian explains that the genesis of Field Notes originated from his background in manufacturing and his passion for site visits. He desired to share the experience of visiting mining sites with his readers, giving them insight into the locations, projects, and people he encounters. Field Notes aims to create a documentary-style series that provides a deeper understanding of the mining industry.
Brian mentions that the series serves as an educational platform where the baseline process for evaluating junior mining companies is presented in a story format. It encourages viewers to learn about his investment decisions, the projects he supports, and the X factors that differentiate companies in the market. By watching the series, viewers can gain insights into his thought processes and apply those lessons to their own investments.
Brian discusses an environmentally friendly project by FPX Nickel, mentioning their partnership with Panasonic and Toyota. FPX Nickel's low carbon footprint is due to their unique magnetic separation process, resulting in a mineral called brucite that naturally sequesters carbon. Brian emphasizes the significance of such environmentally conscious projects, highlighting their value in the current environmental context.
Brian mentions upcoming companies and themes that he plans to explore in the future but refrains from providing specific details, as they are not confirmed yet.
52:00: Brian’s Investment Picks
G Mining (GMIN.V) - Brian believes that this company, led by the Jignac family, has a strong track record in creating open pit mines. They are 50% through the construction phase of their gold project and have the potential for significant share price appreciation due to a favorable gold price environment.
Prospera Energy (PEI.V) - This is an oil company based in Calgary with projects in Saskatchewan. Brian is highly invested in this company, expecting it to double its production by the end of the year, and believes it has substantial upside potential.
I really enjoyed my conversation with Brian. Lots of ideas and advice for people at all stages of their investment journey. And if you haven’t seen Field Notes yet, go check it out! It is well worth your time.
Thanks for reading.
-Matthew/JRI
