A Couple Gold Stock Picks Setting Examples For Their Peers

In this report SilverCrest Metals and Goliath Resources are featured.

Everybody that follows my reports knows I’m extremely bullish on gold. To the point that I have recently expressed my bullish outlook that gold will reach $20k within 10 years.

The basis for that outlook is the world is in a Death Spiral of Debt that will cause a return to the Gold Standard. 

It has already begun with the BRICS nations aggressively buying gold. I don’t think it will be too long before the G7 nations are forced to back up more of their debt with gold as well. The East is leading the move to Gold Standard, the West will have to join the golden party.

Another factor for my bullish outlook on gold is that I think it will play a growing role as a key currency for international trade. It used to play a crucial role in transactions for global products and natural resources, and it will again. 

When analysts talk about fiat currencies, they often mention that the USD is the cleanest dirty shirt. I would suggest that currencies referred to as dirty shirts aren’t the best currencies for international trade.

Especially when there is a perfectly clean gold shirt that is going up and setting new record highs against practically every fiat currency. Gold is the soundest money and primed to go much higher. Making it an ideal currency for international trade.

The icing on the bullish gold cake is that supply is in decline, while we are at all-time highs. Gold miners are struggling to maintain production, even with the price of gold in a remarkable bull market.

It is clear the supply of gold production has peaked and moving into long-term decline. This won’t change because gold is heading higher, when it comes to exploration for new discoveries, and projects in development, the cupboard is bare due to long-term underfunding of exploration, projects in development and new mines being built that are unable to replace what is being mined every year.

So far, the buying by the central bank of the BRICS nations has driven gold to all-time highs. But, they still have not backed up their debt in a significant way yet. The global debt is a bit over $300 trillion, but the backing by central bankers is only around 1% of that debt.

They have a long way to go to significantly back the debt up with gold. Which is why I believe the demand for gold will increase dramatically. And drive the price of gold multiples of its current price.

Gold Stocks Are The Best Leveraged Play On The Gold Bull Market

My favourite topic of late is the catalyst that will bring the gold stocks into the gold bull market.

That catalyst is immediately in front of us. The second quarter of 2024 has had the best average price of gold, ever. The first quarter of 2024 had the best average price of gold ever until the second quarter. And the second quarter had an average price of gold somewhere around $300 per ounce better.

Back to back quarters like that is going to lead to strong balance sheets and windfall profits for several gold miners. With the second quarter being a real eye opener for generalist investors that will bring them into the gold stocks.

Despite this exceptional quarter setting up the gold stocks for a blowout quarter for gold miners, I still see several gold miners wavering with issues.

Including some that are struggling to increase production, replace what they are mining, and bring down costs. Top picks in our reports, Agnico Eagle and Alamos Gold don’t suffer from these issues, 

Which is why they are not only performing very well, they are setting new all-time highs while gold is doing the same. They are significantly outperming the bullish rally in gold so far in 2024 and I see that trend continuing.

Another issue that I see for many gold miners is that they are in a rush to sell all their gold production to sit on fiat currency. This one is a bit of a shocker for me.

The allure of gold is that it has proved to be an exceptional store of value and protector of purchasing power since the 2001 to 2011 gold bull market. It is only getting better, so the gold miners that aren’t sitting on some of their gold production are missing a fantastic opportunity to highlight the terrific role that gold plays as a store of value and protects against inflation.

Instead, they pay dividends and buy back stock which did very little to benefit them during the bear market for gold stocks that ended in late February of 2024. I believe paying dividends and buying back stock is a strategic error compared to sitting on some of their gold production.

I also believe that plenty of gold miners could do a much better job of using digital marketing tools. It is pretty surprising that they aren’t using them more because they are at their fingertips at very inexpensive costs. 

They can be effectively used to tell their own stories and the story of why gold is such a great investment as the world returns to the Gold Standard because it is drowning in debt.

Two Top Picks That Are Unique Compared To Their Peers

In this section of the report, I will focus on two companies that are doing things differently than the vast majority of their peers. 

One is a miner of high-grade gold and silver with low costs, which is generating remarkable free cash flow.

The other is my highest conviction gold discovery pick.

SilverCrest Metals

SilverCrest is a one mine company with their Las Chispas mine in Mexico. They have proved themselves to be an exceptional mine builder and operator. 

While building Las Chispas, they faced two formidable challenges. They started construction during the Covid pandemic and then had to face remarkable inflation as they were ramping it up to full commercial production. 

Undaunted, they were able to build the mine and bring it into full commercial production on time and on budget. Since then, Las Chispas has proved to be one of the best new gold and silver mines in the business.

Not long after bringing Las Chispas into production they were quickly able to pay down the debt they incurred to build it. This is a key metric to watch for, quick payback of capital costs. when assessing any mine.

Since paying down the debt they had when they brought the mine into full commercial production, they have replaced the debt with a warchest of cash, gold and silver that is well above the debt they paid off. It is continuing to show that it generates a ton of free cash flow. 

Which is another key metric to look for when looking at a mine, there is a big difference between cash flow that is marginal and free cash flow that sends a great deal of profits to the bottom line. Las Chispas is a free cash flow machine.

Their CEO is very talented at explaining the value of gold and silver, the performance of the Las Chispas mine, their teams talents as mine finders, mine builders and mine operators, why they sit on gold and silver as part of their business plan, and what they are looking to do in order to grow the company. 

The team's ability to find a mine, then build it and operate it is very clear based on how well Las Chispas is performing. 

To get Las Chispas into production, they focused on only a few of the epithermal veins that are part of a cluster. Not only can they keep replacing what they mine with the key veins they have focused on, they have a pipeline of other veins in the cluster to use for organic growth of their resources.

The fact that they have already built the mine, new discoveries on their project have a lower economic threshold as the material would have a short trucking distance to the mill. 

Clusters of epithermal veins can be a spectacular way to build a company into a bigger mining company. They can often start out small compared to huge open pit mines. 

The benefit is that they are much less costly to build and their mine lives that were initially considered relatively small, often stay in production for decades beyond their initial mine lives. As they are able to replace what they mine with new ore to mine and truck it to their built mill.

Their real secret sauce is in their business plan which includes sitting on a healthy portion of gold and silver. They believe that they are better off holding onto gold and silver as it helps them protect against inflation. More gold and silver miners should do the same.

Another key part of their business plan is that if they can’t find a better asset to put their cash into, or other companies to invest in that offer better metrics than their own company, they buy back their stock.

I also very much appreciate that they want to use their built mill as a hub and spoke asset. They can not only use it for their own veins at the Las Chispas mine, they can also look around just outside their claim boundary for other discoveries that can truck material to their project.

I follow the ground around Las Chispas very closely, because the best place to look for a free cash flow machine of a mine is next to one. I know of key projects in close proximity to them that I think could benefit from their hub and spoke model for growth.

They have shown remarkable discipline from exploration to mining at Las Chispas. They aren’t the kind of company that will buy other projects for the sake of getting bigger for the sake of getting bigger.

In past reports I have spoken highly of Goldcorp, when they were mining the Red Lake Mine. It was a high-grade low cost mine that generated peer leading margins. What I haven’t written about is why they went into a challenging period. 

Basically, they changed leadership and wanted to diversify into more than one mine, the issue was, they bought lower margin mines. They got bigger for the sake of getting bigger. And it is important to note that getting bigger isn’t always better, getting bigger while maintaining healthy margins is much more important.

I don’t see management wanting to get bigger for the sake of getting bigger. I see them as ultra disciplined and will only pull the trigger on buying other assets that are accretive to the bottom line.

Which brings up the question, where to from here? Las Chispas is no longer hampered with debt and is helping SilverCrest build up their warchest of cash, gold and silver. Plus, I think it has plenty of room to keep replacing what they mine with organic growth from drilling at Las Chispas.

Their war chest has gotten to the point that it is very meaningful and has to be looked at by bigger high growth junior miners and even mid-tiers. It is also big enough that they can easily look at buying projects that aren’t big enough for the mid-tiers or majors. Yet, they would be fantastic engines of growth for a company like SilverCrest.

As gold and silver go up in value, it further benefits a tremendous mine like Las Chispas. It also benefits the value of the gold and silver they hold.

I see a several other catalysts for them on the short term horizon. They have to be a target for a takeover, it would shock me if bigger miners are looking at them closely. They could also benefit from a merger of equals kind of deal. They could also become the partner of choice for a smaller company, or they could get active as buyer of others.

They are making impressive strategic moves that make them unique compared to their peers. One of the most important to me is a leader when it comes to sitting on gold and silver, I believe more of their peers would be well rewarded to follow their lead.

Goliath Resources

I just wrote about SilverCrest which went from an explorer that made an impressive discovery, then built it into a mine. Now they are outperforming gold and unlike many of their larger peers are setting new all-time highs like gold is doing.

Goliath has also made an impressive gold discovery in the Golden Triangle of British Columbia. I started reporting on them in the reports early in their discovery. 

What caught my attention initially was that they had a very large outcrop of mineralized rock. It goes from around the valley floor on one side of a mountain, up to the top and then down the other side. That is a very big outcrop of mineralized rock.

They started by drilling just below the outcrop and have since drilled a little over 200 holes and found widespread gold mineralization in a series of stacked veins in the sediments. In addition, during the 2023 drilling season, around 35% of their hits had visible gold in them.

I spent a lot of my career in diamond exploration. As diamonds are rarely ever found in surface samples, explorers use indicator minerals to lead them to the diamond bearing deposit. Then they use the small diamonds to lead them to the bigger diamonds.

I follow a similar path when looking at a gold discovery. A perfect example is the visible gold that Goliath has found in their stacked gold zones. At the top of the system, just below the outcrop, they first started reporting sporadic fine grained visible gold. 

As they followed the gold zones deeper, they started reporting more fine grained gold and it became abundant.

When they got deeper into the gold system in 2023, they saw a transition to more coarse grained visible gold. What I expect to see this year is abundant coarse grained gold to confirm the impressive progression of visible gold as they get deeper into the system.

Another important transition that is following a similar direction as the transition in the visible gold, is the rocks they are finding the visible gold in.

First the gold was in the outcrop, then they drilled below that and found a series of around 10 stacked zones in the sediments. As they drilled below the sediments, they hit the contact between the sediments and volcanics. In 2023, they had a major breakthrough when they hit gold in the volcanics below the contact.

A couple weeks ago they started their 2024 drilling season. Right out of the gate they hit the ground running by announcing that the first hole of the season found abundant visible gold that is fine grained to coarse.

They also reported in that first hole that they hit a group of sulphides that are known to be found near the heat engine of a gold mineralizing system. 

The Colorado School of Mines published a scientific paper that concluded they believe the heat engine for the gold system at Goliath’s discovery is a porphyry. The minerals in the first hole of 2024 are consistent with that analysis.

Like we have seen a transition in the quality of the visible gold, and the transition of the system from the sediments into the volcanics, we are now seeing minerals that suggest the company is honing in on the heat engine of the gold mineralizing system that pumped the gold bearing fluids from deeper up to the surface.

These transitions are why for months now, I have been mentioning Goliath's discovery as my highest conviction gold discovery pick.

I have also been highlighting that I think it is clearly showing the potential to become a Tier 1 gold discovery. More drilling will be needed to convince more people of that analysis, but I am becoming more convinced with every hole they put into the gold discovery.

I don’t use the term Tier 1 gold discovery lightly, after being in the mining business for 30 years, I know how rare they are. Their drilling with the Truth Machine and the holes they report are precisely why I think it is going in that direction.

Not only is their discovery rare, but they are also exemplary at writing news releases, and doing them often, which helps bring their audience into the process of exploration or as I think of it as treasure hunting. 

Drilling for buried treasures is a very dynamic process that many companies fail to write news releases often enough during the proces to update their shareholders and potential shareholders. Goliath does a great job at it and more explorers should follow their lead.

Plenty of the executives of exploration companies feel that one or two drill holes will have investors flock to their stock. The reality is that investors are constantly pulled in many directions due to the access to information on the internet.

I’m very seasoned at exploration and in addition to doing my personal homework to search out good exploration companies, I also have two assistants that do the same. I still find it challenging to stay on top of the explorers. I can only imagine how tough it is for investors in the sector.

To me, I sometimes have to watch a few interviews, read their news releases and corporate presentations for their discovery to really sink in.

Therefore, I know how important it is for companies to be constantly telling their stories. Plenty of them don’t. They think a news release with drill results will do the trick. I’m here to tell them that they couldn’t be more mistaken. 

For their story to resonate with commentators on the sector, and investors from retail to institutional investors, absolutely requires companies to be using interviews to consistently tell their stories. X-Twitter has a strong group of mining investors on it, plenty of companies have a handle, but rarely use it, the team at Goliath makes it a priority, more companies in mining should do the same.

Goliath’s CEO is constantly being interviewed to discuss the company. There is a saying in mining that mines aren’t found, they are built. The same can be said about building an audience of shareholders and potential shareholders. They are built not magically found.

It takes effort, in the case of Goliath, they have an exceptional story to tell. I have had their CEO on Rocks And Stocks News for interviews many times and I always find them informative and get me pumped up about their gold discovery. 

I know many viewers of those interviews and readers of the reports that I discuss Goliath in also find them informative and helpful in better understanding their discovery.

Three things set Goliath apart from their peers. The most important is that they have a spectacular discovery. Secondly, they write regular news releases that bring their audience into the process of treasure hunting. Thirdly, their CEO is constantly out there telling the company's story. They are following the recipe that every junior exploration company should follow.

While plenty of exploration companies are seeing their stocks languish, Goliath is being rewarded with a stock that is trading at its 52-week high. Very few can say that.

Of course, it is primarily based on what they are finding with their drilling, but the other factors are adding fuel to their fire.

Before I close up this part about Goliath, I wanted to mention another recent news release they put out. It was the one announcing that they have started the drill program at their Treasure Island project that is at the north end of their claims.

It is a large outcrop of rock that has widespread sulphides and high grades of gold and copper. Highlight results returned channel samples up to 20.60 g/t gold and 14.45% copper. 

Whenever I hear high-grade VMS potential in the Golden Triangle of British Columbia, I pay attention. That is due to the fact that the Eskay Creek Mine was a high-grade VMS deposit that put the Golden Triangle on the map.

In its heyday, the Eskay Creek Mine was one of the highest grade mines in the business and it also had low costs of production. So it was a free cash flow machine of a mine when metals prices were much lower than they are now.

As they have more drilling results from their Surebet discovery, I am also excited to hear more about the Treasure Island drilling. Stay tuned as I’m confident we will hear more great news from their drilling very soon.

In Closing

SilverCrest Metals is doing a remarkable job running a free cash flow machine of a gold and silver mine at Las Chispas. Plus, they are setting an example to other gold and silver miners that they should follow to sit on gold and silver.

I would take it one step further. Why aren’t gold and silver miners using the paper market to buy derivatives that allows them to lock in gold and silver prices, then take delivery of the gold and silver?

Goliath Resources has an exceptional gold discovery in the prolific Golden Triangle of British Columbia, and they may very well have a VMS discovery soon.

They also do a great job at putting out news releases to keep their shareholders and potential shareholders in the loop with their treasure hunting efforts. And are constantly out telling their story in social media and through interviews on YouTube. More exploration juniors should do the same things.

All the best,

Allan Barry Laboucan

Disclosure

Allan Barry Laboucan is a shareholder of Goliath Resources’ common share and also owns warrants to purchase additional shares.

Rocks And Stocks News does not make buying or selling recommendations. The reports are for information purposes only. Sponsors pay a fee to Rocks And Stocks News for content creation. The business model of Rocks And Stocks News is to fund research and reporting on the sector, picks and sponsors through corporate sponsorship. We are thankful to sponsors for enabling commentary free of charge to readers and viewers of the reports. When reporting on sponsors it is on behalf of the sponsors discussed in the portion of the report mentioning the sponsor. Before making any investment decision it is important for you to speak with your financial advisors to consider your risk profile. It is also important to do your homework. To help in that process, Rocks And Stocks News means to be a gateway by doing reports and interviews of management of sponsors and picks. The reports and interviews should not be considered investment advice. Allan Barry Laboucan is the founder and owner of Rocks And Stocks News, he has worked in the mining sector since 1993 and has been reporting on the sector since 2005. He has worked with and been mentored by very talented geoscientists in geology, geochemistry and geophysics. He uses the skills he has picked up during his career to assess sponsors and picks in the reports. Whether a company is a pick or a sponsor they go through the same filter and are reported on when important news is made that Allan Barry Laboucan wants to discuss on the Rocks And Stocks News platform. He may own shares in sponsors and picks for investment purposes which he discloses when discussing them in the reports.