We came across a bullish thesis on Idaho Strategic Resources, Inc. (IDR) on Substack by Microcapexpert. In this article, we will summarize the bulls’ thesis on IDR. Idaho Strategic Resources, Inc. (IDR)’s share was trading at $10.49 as of Dec 20th. IDR’s trailing and forward P/E were 20.57 and 13.28 respectively according to Yahoo Finance.
Aerial view of the Rodeo gold mine with a team of miners in the foreground.
Idaho Strategic Resources (IDR), formerly known as New Jersey Mining, is a unique mining company with a long history and a compelling growth trajectory. Originally established over a century ago, the company changed hands multiple times before being acquired in 2013 by John Swallow, who saw potential in the company’s assets, particularly the Golden Chest mine in Idaho’s Cœur d’Alene mining district. Swallow’s leadership has driven the company’s gradual expansion, transforming it from a modest operation with limited resources into a more diversified player in both gold production and critical mineral exploration. The company also shifted its focus in recent years to include rare earth elements (REE) and thorium, positioning itself as a key player in the U.S. drive for critical minerals.
IDR’s main activity today is underground gold production at the Golden Chest mine, which has seen steady production growth since 2016. Last year, the company produced 8,247 ounces of gold, and it is on track to exceed that figure this year. With an ambitious target of 15,000 ounces in the near future and a competitive all-in sustaining cost (AISC) of $1,300 per ounce, the company is poised for further growth in its gold production. Alongside its gold operations, IDR has made significant strides in building a rare earth minerals portfolio, holding the largest REE land position in the U.S. through its deposits at Mineral Hill, Lemhi Pass, and Diamond Creek. This strategic move comes as the U.S. government is ramping up efforts to reduce its reliance on foreign critical minerals, which could place IDR in a prime position to benefit from the anticipated demand for these resources.
The company’s rare earth assets, particularly at Lemhi Pass, have shown promising concentrations of valuable heavy REEs. IDR is working with various partners, including governments and universities, to better understand the mineralogy of these deposits and to explore processing technologies. More drilling is planned for next year, potentially paving the way for a future resource definition. Additionally, IDR holds the largest thorium resource in the U.S. at Lemhi Pass. Although thorium, which is seen as an alternative nuclear fuel, is not a major focus at this time, it represents a potential upside if the U.S. explores its use in nuclear reactors in the future.
Financially, IDR has seen significant operational improvements, with rising production and a favorable gold price contributing to its profitability. 2023 marked the company’s first profitable year, and it is on track to earn approximately $0.70 per share this year, with potential for further earnings growth if gold prices remain strong. At the current share price of $12.55, IDR is trading at a reasonable multiple of 12 to 14 times next year’s expected earnings. However, the company’s management prioritizes long-term growth, and as a result, it may reinvest profits into exploration, particularly in its rare earth projects, which could impact short-term profits.
The valuation of IDR’s REE assets is difficult to determine at present, but the company is likely to make strategic deals with larger players or secure government grants to fund these projects. As the U.S. intensifies its focus on domestic REE production, IDR’s assets could become much more valuable. The company’s thorium assets, while not a primary driver of the investment thesis, offer additional upside if thorium becomes a viable fuel for nuclear reactors in the future.
As with any mining company, IDR faces risks related to operational challenges, fluctuating gold prices, and the key-man risk associated with CEO John Swallow. If he were to leave, the company’s future prospects could be less certain. Additionally, the REE and thorium projects may not turn out to be economically viable, or the government may choose to support other initiatives in the critical minerals space.
Overall, IDR represents a unique investment opportunity. The company is still in the early stages of its growth story, and while its gold production is expected to continue rising, its rare earth and thorium assets have the potential to significantly increase the company’s value in the coming years. With a visionary CEO at the helm and a strong strategic plan, IDR could become a much more valuable company over the next five years, making it an attractive investment for those willing to take a long-term view.
Idaho Strategic Resources, Inc. (IDR) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 7 hedge fund portfolios held IDR at the end of the third quarter which was 4 in the previous quarter. While we acknowledge the risk and potential of IDR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than IDR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.