Feels like a bear market doesn't it - Junior miners in Oz (such as West Wits)

Looking at the watch list, plenty of junior miners are down 40-50% year to date.

In the past month or so, some of the stocks that I like are down say 20-30%.

The question is what to do here ? Or we can frame it as a more general question of what to do in the middle of a sizeable draw down or a bear market ?

When it comes to investing, 2 words always ring true - Greed & Fear. In bull or bear market, more often than not, doing what is mentally uncomfortable is often the "better" answer.

In a bull market, try not to go head long and chase the hottest stocks/themes. Lighten up on the way up. Clearly, in the current market environment, AI ticks the boxes beautifully. In a bear market, when folks are scared, it pays to be the one who is greedy and shop for bargain.

No one can pick the bottom to the day. In waterfall situation, the bounce can be vicious. My rule of thumb is if you think the stock is getting too cheap, buy some. If it falls another 15%, add another tranche. And another 15%, add the final tranche. If it gets even lower, examine your case and grit your teeth if you still believe your case is right.

Now take West Wits as an example. I started buying at $0.6... In a month, it dropped to $0.4. When gold was over $5000 in 2025, West Wits stock price was as much as $0.9. When I started buying WWI, gold pulled back to $4500 and stock price was down 1/3 from the high. Thought I was pretty safe. BUT subsequently, when gold dropped to $4000 or so (plus new Fed threatened to raise rates), West Wits promptly dropped another 1/3.

Frankly, I have been buying on the way down. Every time it dropped a fair bit, I added a bit more.

The key point to make is it only makes sense to average down if you believe in the long term outlook of the industry and the company.

In the case of gold, inflation is probably difficult to tame. Along with persistent budget deficits in many countries, the easy way out for the system is to inflate the debts away. Gold as an asset class is in an interesting spot. Gold is a long term trend worth betting on.

Then at the company level. It started mining in Oct 25. It plans to achieve steady state of 70K oz by end of 2028. It has secured financing while it ramps up production i.e. it no longer needs to raise capital until it becomes a profitable business. AISC is around US$1300 only. Beyond 2028, it plans to lift production to 200K oz. Not to mention, it has resource of over 7M oz at 4g/t (pretty respectable). It will be able to grow and grow and throw off cash for years. West Wits is at the start of its hockey stick.

Have a look at Pic 2. I did a sensitivity table on its net profit based on production and price of gold. Let's say it reaches its goals of 70K oz and gold stays at current $4K level, it would have made net profit of US$95M (A$136M). If gold gets back to $5K, its net profit would be US$130M (A$186M). Importantly, it would remain profitable even if it can only produce 40K oz of gold at price of $3K.

When I started buying WWI, its MV was around A$250M. It has gotten even cheaper. Following the decline, its MV is only A$176M @ $0.41 (US$121M). So base case is it has declined from 2X PE to 1.3XPE in 2028.

Now say we put it on 10X in 2028/29, it is a multi-bagger... It has become an even bigger multi bagger following the recent stock price decline..... Now if it eventually hits of goal of 200K oz production @ $5K gold, we are looking at net profit of US$372M.. We are looking at upside of as much as 25-30X vs. current MV of US$121M.

Key risks we are taking on are: i) it is a South Africa company listed in Australia (so clearly we are taking on jurisdiction risk here), ii) can the company ramp up production smoothly, and iii) long term gold price. My view is most of these risks are manageable. Not to mention, LT gold price can be much higher than $5K when populace loses faith in the system.

An interesting point is there are other multi-baggers on offer as well. Aguia and Matsa come to mind. It feels like the mining industry has been overlooked for so long. An interesting tell for sure.

In summary, don't be fazed by sharp draw down, or bear market... Inevitably, there will be opportunities available. One just has to be "open" to them and look out a few years.

Note.. Not investment advice. DYOR. I may own/sell stocks mentioned.