READ TIME: 9 MINUTES
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Matt Geiger, founder of MJG Capital, provided us with a comprehensive analysis of the state of the junior mining sector, his fund’s performance in 2024, and the broader macroeconomic factors influencing investment in junior mining. Geiger discussed the disconnect between strong metal prices and lackluster mining equities, the implications of long-term underinvestment in the sector, and why he remains fully deployed despite market volatility. Matt also touched potential catalysts for a market turnaround, including a historical pattern of copper following gold’s upcycle and increased M&A activity, particularly within the junior royalty space. Additionally, we talked about some jurisdictional trends within regions like the Ivory Coast and the Carajás mining district in Brazil while noting slower-than-expected developments in the Arabian-Nubian Shield. Throughout, Geiger emphasized disciplined investing, portfolio construction, and strategic capital allocation as essential tools for navigating the unpredictable junior mining landscape.
TL;DR
- – Junior Mining Equities Lagged Commodities in 2024: Despite gold’s 27% and copper’s 8% gains, junior mining equities underperformed significantly, leaving MJG Capital with a modest 6.7% return.
- – Underinvestment Signals Future Potential: Geiger emphasized the long-term implications of nearly 15 years of capital starvation in mining, predicting supply-driven price increases.
- – Potential Copper Upswing in 2025: Historical patterns suggest copper may follow gold’s breakout with a one-year lag, positioning the metal for potential outperformance this year.
- – Disciplined Investment Amid Zero Cash: MJG Capital’s fully deployed cash reflects confidence in current opportunities despite exposure to liquidity risks.
- – Anticipated Consolidation in Junior Royalty Space: With Newmont’s asset sales completed, Geiger expects increased M&A activity, particularly among smaller royalty companies seeking scale.
What drove MJG Capital’s performance in 2024?
In 2024, MJG Capital posted a positive return of 6.7%, outperforming the broader junior mining sector, which declined by approximately 2%. However, the fund’s performance lagged behind the TSX Venture Composite Index and significantly trailed the S&P 500, which gained 25% during the same period.
According to Matt Geiger, “2024 was a frustrating year,” primarily because the positive performance in key commodities like gold and copper was not reflected in mining equities. Gold experienced a remarkable 27% increase—its strongest annual performance since 2010—while copper prices, despite strong early gains, ended the year with an 8% increase.
“The year was characterized by strong outperformance from gold and copper, but equities failed to keep pace,” Geiger noted. The junior segment, where MJG Capital focuses its investments, remained subdued for most of the year, with a brief rally from late September to October that was quickly reversed following Newmont Corporation’s disappointing earnings release and subsequent macroeconomic events, including the strengthening US dollar.
If you had told me at the start of the year that gold would be up 27% and we’d see significant M&A activity, I would have expected returns closer to our 2020 results. Instead, we ended the year with a mid-single-digit performance.
Why persist in a sector that consistently underperforms broader markets?
Geiger candidly acknowledged the psychological difficulty of remaining invested in the junior mining sector, especially when benchmark indices like the S&P 500 deliver significantly higher returns with far less effort.
This industry has been starved of capital for nearly 15 years. History tells us that eventually, such neglect leads to supply constraints and subsequent price increases.
Matt maintains a contrarian belief that capital flows will shift from high-growth, technology-focused sectors back to traditional, resource-based industries.
We’ve witnessed a prolonged period of tech dominance and passive investment strategies. I expect a reversion to value, active management, and old-economy sectors over the next decade.
The fundamental thesis underpinning his investment strategy is that prolonged underinvestment in critical metals will inevitably trigger supply shortages, thereby driving prices higher and creating opportunities for speculators positioned early in the cycle.
Is the current gold price rally sustainable, or is a correction inevitable?
The continued rise of gold prices to new all-time highs has prompted concerns about a potential correction that could derail the nascent recovery in mining equities. Geiger remains cautiously optimistic but emphasizes the importance of a measured and sustained bull market.
“We’ve seen those sugar-rush markets in 2016 and 2020,” he explained. “While exhilarating, they were short-lived. A multi-year uptrend would provide the foundation for genuine wealth creation in the sector.”
He further noted that historical patterns suggest that copper often follows gold’s upward trajectory with a lag of roughly 12 months. Given that gold experienced a significant breakout in March 2024, Geiger believes that copper may experience an upcycle in 2025 if historical trends hold.
What prompted MJG Capital to maintain a 0% cash position?
MJG Capital ended 2023 with a double-digit cash position but subsequently deployed nearly all of it into four key deals during a period of particularly negative market sentiment.
“From Q4 2023 into early 2024, sentiment was deeply depressed,” Geiger explained. “We identified compelling opportunities and acted decisively.”
While holding no cash leaves the fund vulnerable to potential liquidity shocks, Geiger expressed confidence in the positions they hold.
We’ve chosen to be fully invested because we see significant upside potential. If a broader market dislocation occurs, we’ll take it on the chin, but that’s a risk we’re willing to accept given the setup.
Can past lessons mislead investors in changing market conditions?
Investors often rely heavily on lessons learned from past experiences, but Geiger warned that overlearning from recent bear markets can lead to missed opportunities.
“Market cycles impact investors at the physiological level,” he said, referencing a book that details how prolonged bear markets increase cortisol levels, fostering excessive risk aversion.
A personal example he provided involved Bravo Mining, which experienced a sharp rally following the announcement of an IOCG discovery.
We got caught up in the excitement and didn’t sell when the stock doubled. In hindsight, trimming the position at the peak would have been prudent.
To mitigate such errors, MJG Capital maintains a journal documenting the original thesis behind each investment. “Revisiting the rationale regularly helps us remain anchored to our initial assessment,” he said.
What framework does MJG Capital use for selling positions?
The decision to sell in junior mining can be more complex than deciding to buy. Geiger described his approach as measured and systematic.
It’s better to be approximately right than 100% wrong.
The fund evaluates the following factors when considering a sale:
- Fundamental Developments: Declining drill results, significant insider selling, or diminishing exploration potential prompt re-evaluation.
- Valuation Metrics: Comparing the company’s valuation to peers and reassessing the fundamental thesis.
- Portfolio Construction: Avoiding excessive exposure to single jurisdictions, commodities, or business models.
We don’t aim to sell at the top. Instead, we prioritize prudent risk management and capital preservation.
How does MJG Capital assess fair value in a notoriously uncertain industry?
Determining fair value in junior mining is challenging due to the speculative nature of exploration and development. Geiger outlined several techniques:
- Producers and Royalty Companies: Peer-based valuations and sum-of-parts analyses.
- Development-Stage Companies: Discounting NPVs from technical studies, applying higher discounts for less advanced projects.
- Exploration Companies: Estimating potential resource size and applying a probability of discovery success.
He noted that prospect generators require a more specialized approach.
We track enterprise value relative to expected partner expenditures. Higher ratios suggest more efficient use of investor capital.
Why did Lara Exploration outperform while Midland Exploration underperformed?
Lara Exploration’s share price tripled in 2024, driven by the unexpected return of full ownership of the Planalto copper project. Capstone spent $10 million on the project before withdrawing and returning it to Lara at an opportune moment.
That was a masterstroke in JV structuring. The resource update later in the year confirmed significant potential.
In contrast, Midland Exploration has been overlooked despite strong technical fundamentals and significant partner-funded drilling.
Midland looks undervalued compared to peers. Its low-profile, methodical approach has yet to capture market interest.
Why does MJG Capital maintain significant exposure to prospect generators and royalty companies?
Prospect generators and royalty companies constitute approximately half of MJG Capital’s portfolio. Geiger explained that this weighting resulted from specific opportunities rather than a top-down strategic decision.
We’re drawn to companies with capable teams, compelling projects, and attractive valuations. It so happens that many of those opportunities lie in these business models.
While he remains open to further investments in these areas, Geiger indicated a slight preference for later-stage assets in the current market environment.
Which jurisdictions are attracting MJG Capital’s attention?
MJG Capital’s portfolio is heavily weighted toward North America, with notable exposure to Brazil’s Carajás mining district. Geiger expressed confidence in Brazil despite the country’s perceived political risks, citing the district’s robust mining infrastructure.
The Carajás is a world-class district. Mining has strong institutional support there.
He also highlighted the Ivory Coast as an emerging hotspot within West Africa, particularly for gold exploration. In contrast, he expressed disappointment with the slower-than-expected uptake in the Arabian-Nubian Shield region.
Will Newmont’s asset sales impact junior mining M&A activity?
Newmont’s recent divestment of $4.3 billion in non-core assets removed a significant overhang from the market.
Newmont is the sector’s bellwether. Its asset sales caused hesitation in broader M&A activity. Now that this process has concluded, I expect renewed interest in juniors.
He anticipates heightened consolidation within the junior royalty sector, where numerous small-cap players are currently competing for deals.
What regions and sectors might lead the next wave of M&A?
While Geiger did not identify a specific regional focus for upcoming M&A activity, he pointed to the junior royalty space as ripe for consolidation.
The valuation disconnect between large and small royalty companies is stark. I wouldn’t be surprised to see some strategic mergers among the smaller players as they seek greater scale and efficiency.
What’s Matt Geiger’s Outlook?
Geiger concluded the interview by reiterating his long-term optimism about the sector’s prospects.
The fundamentals of supply and demand haven’t changed. The world still needs metals, and years of underinvestment have laid the groundwork for a significant rebound.
His strategy remains unchanged: maintain exposure to quality assets, manage risk through diversification, and stay patient for the inevitable cyclical upswing.
Matt Geiger Interview – MJG Capital Founder
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