A Self-Fulfilling Golden Prophecy
In this report McEwen Mining, i-80 Gold, SilverCrest Metals, Alta Copper, Meridian Mining and Goliath Resources are featured.
There is a self-fulfilling prophecy happening in the price of gold that will take it much higher. The foundation of it can be found in the Death Spiral of Debt and the return to the Gold Standard. They feed on each other.
Lately, I had been predicting that gold would break through $2100 and then set a series of new record highs throughout 2024. The dynamics of out of control debt are forcing the return to the Gold Standard.
Governments won’t stop spending, the interest rates are at a level that will only add fuel to the debt crisis. Meanwhile, consumers in India and China keep buying gold and the BRICS nations’ central bankers continue buying gold on a daily basis to return to the Gold Standard.
Some of the recent reports of buying by Chinese consumers have me thinking that it is like gold is the Bitcoin for Chinese consumers. Indians are no different, they always have and always will love gold.
I don’t think it will be very long before the Western central bankers will have to follow the BRICS nations’ central bankers to return to the Gold Standard. It is not that they will want to, they won’t, but their insane debt creation will force them into it, kicking and screaming.
All of these reasons combined, as well as technical indicators in the price action on gold, and the psychology of markets lead me to believe that we have a fast path to $2500 in the immediate horizon that will set the stage to see a move to $3000. If not this year, in early 2025.
A key factor causing that type of action will be the gold owners holding on for dear life, while the generalist investors and momentum traders gain a fear of missing out.
That kind of buying pressure will not only drive gold higher, it will bring gold stocks into play. I’m already seeing action in the big gold miners that the contrarian investors and some die hard gold stock investors are taking actions to position themselves.
They are coming into the majors, and some select companies down the gold stock food chain. It won’t take long for the early adopters to realize that the menu of gold stocks from the majors, through to the mid-tiers, small miners, developers and explorers is small when trying to look at the best in breed at the various levels.
Gold stocks have been in a bear market for a long time, they are priced for depression while gold keeps going higher. The contrarians and die hard investors are causing gold stocks to come off their recent bottoms, when the generalist investors and momentum players arrive gold stocks are primed for a remarkable gold stock bull market.
The coming bull market for gold stocks is already underway. But, very few see it or believe it. The evidence is there for everybody to see, it may be ignored but that doesn’t make it go away.
Agnico Eagle is one of the best in breed major gold miners. They bottomed in the middle of February and have seen a rapid 20% plus gain off the bottom.
Barrick is another household name for investors when thinking of gold stocks. They also bottomed in the middle of February and have rallied around 15% from the bottom.
Even Newmont, which has been one of the most punished major gold miners over the past year, bottomed nearly a couple weeks after Agnico Eagle and Barrick, and then rallied in a similar fashion as Barrick off its bottom.
The GDX is performing much like the majors. Then looking down the gold stock food chain, Alamos has bottomed and risen like Agnico Eagle. The gold miners are percolating but few are paying attention.
I prefer to go down the gold stock food chain and focus on special situation stocks. One of my special situation gold stocks is McEwen Mining. They had a yearly low of CAD $8.05 on February 26th and then rallied aggressively, closing today at $11.46. Basically, what this shows is that there is potential for more torque as you venture down the gold stock food chain.
Key reasons that McEwen Mining is on my list of special situation picks is because they are making good strides to improve their gold mining operations, and they own 47% of McEwen Copper. The Los Azules project owned by McEwen Copper is one of the top 10 undeveloped copper mines worldwide and is also in the lowest quartile of costs of copper production on that list. Many big gold miners are hungry to add copper to their mining mix and McEwen Mining is ahead of the curve.
SilverCrest Metals is another of my special situation picks. They bottomed on February 26th at CAD $6.75, and then went on a strong move, today they closed at $8.92. I’m a big fan of this company for their gold and silver production at their Las Chispas mine that is only a few quarters into full commercial production.
They went into full commercial production owing $100 million and recently reported in their financials that after paying off all the debt since full commercial production started they are sitting on over $100 million in cash and bullion. In addition to having low cost production and high grades, I find it very impressive that instead of converting their bullion to cash, they are sitting on it as they believe the prices of gold and silver are going higher and they don’t need the cash. It would be very bullish if more gold and silver miners followed their lead.
When a new miner starts production, there are often knocks against them as some will state concerns about whether they can bring it into full commercial production and how it will perform? They have shown those knocks to be unfounded.
Now the knock is yeah but they don’t have a long mine life and can they replace what they are mining. Since bringing the mine into production they are replacing ounces mined at a faster pace than they are mining ounces of gold and silver. The concerns about mine life lose sight of the fact that many epithermal vein mines start with relatively short mine lives, and then keep drilling to replace ounces and keep mining for much longer than their initial mine lives.
They didn’t focus on proving up long mine life, they were focused on bringing Las Chispas into production and then drilling to replace ounces while establishing it as a low cost miner of high-grade. Which is exactly what they have done.
Most of their mining and drilling has been focused on a couple of veins in a cluster of epithermal veins. I think they have a project that will continue replacing ounces to extend the mine life well beyond the forecast in their initial feasibility studies. And with the rate they are generating free cash flow, they have the potential to be an acquirer of other mines.
When in a gold stock bear market, the knocks against companies are bigger as you go down the gold stock food chain. Take for example i-80 Gold, which is another of my special situation picks. They are currently developing three projects in Nevada, McCoy-Cove, Granite Creek and Ruby Hill. This is an ambitious path to growth that during a bear market in gold stocks investors in the space have high scepticism that they can pull it off.
Meanwhile, they bottomed on February 28th and have had a strong rally off the bottom. I think the sceptics are wrong concerning their plans for growth. A key reason is that they have a leader in Ewan Downie that has been down this road before.
He built Wolfden Resources from a tiny junior that made a discovery that led to them being bought out. Prior to getting bought out, they spun out their gold projects to create Premier Gold which then went on to become a gold miner that was bought out. When bought out, they spun out their Nevada gold projects to create i-80 Gold.
Ewan Downie is a serial mining entrepreneur who has a knack for buying assets at reasonable prices and then enhancing them with drilling, and surrounding himself with a strong team. In the case of i-80 Gold he has a stellar team of mine builders and operators that came to i-80 Gold after working for majors like Newmont and Barrick building and operating mines in Nevada.
This isn’t the first time that Ewan Downie has had sceptics. He proved them wrong in the past and I think will again as I believe he is onto his biggest success ever in mining with i-80 Gold.
McEwen Mining, SilverCrest and i-80 Gold are the biggest of my special situation picks. I have three others on the list.
Alta Copper bottomed in early December, 2023, and is up nicely since that bottom. They have a top 10 undeveloped copper project worlwide in size and grade owned by a junior. Fortescue is their biggest shareholder as they have recognized the potential of Alta Copper’s Canariaco project to become a future mine.
The supply chain for copper is very weak and there aren’t enough copper projects in development. The supply chain is so weak and demand so strong, which helps make the argument that there are looming supply crunches.
The copper miners need a lot more projects in development to meet current and future demand. What is needed most is a much higher price of copper, which looks to be happening now. Ultimately, this should be bullish for copper projects in development.
A couple upcoming catalysts for Alta Copper are an optimized PEA and drilling at their Canariaco Sur and Canariaco Norte zones. There is a very good chance that the zones are connected as they are in close proximity, I like the potential that they could become part of one large open pit.
Meridian Mining makes it onto my special situation picks list due to remarkable numbers in their PEA. Highlighted by low capex to build a mine, with grades that show a peer leading IRR and payback of the capex within a year of production. This is an exceptional gold and copper project in Brazil.
They have been busy drilling on two of their main VMS zones. Only using one of them gives them the PEA data, the other is a bonus that won’t need to have its own processing facility as it is in close proximity to their key zone. Projects like this are hard to find and they are well financed to keep drilling to advance the project.
My highest conviction gold discovery play is Goliath Resources. They have made an impressive gold discovery on their Surebet project in the Golden Triangle of British Columbia. In addition to high-grade gold over significant intersections, early metallurgical work shows high recovery rates. The project is in the southern tip of the Golden Triangle, in close proximity to infrastructure.
At the recent PDAC they presented their 3D model of the series of stacked gold zones at Surebet. The bulk of the gold in the zones to date have been found in the sediments and at the transition into the volcanics. In the 2023 drilling season they found the Golden Gate zone which is entirely in the volcanics. Additionally, they did a lot of prospecting and sampling that led to additional discoveries on their large land package.
I’m very excited about their upcoming 2024 drilling season. Mainly because of the drilling that will be focused on drilling into zones within the volcanics. What it is looking like is the gold mineralization in the sediments is the top of the gold mineralizing system. Below that in the transition out of the sediments into the volcanics is also part of the top. Then immediately below that is the middle of the system that is likely the feeder to the gold mineralization above. Ultimately, the zones in the volcanics should lead them to the heat engine of the entire system.
If they only had what is in the sediments, and at the transition to the volcanics and at the top of the system in the volcanics, it is clear they have the making of a Tier 1 gold discovery. I’m looking forward to them drilling into the volcanics and at other targets at Surebet.
Two in particular are Jackpot which is in the volcanics in close proximity to the Bonanza Zone and a target on the northern end of their claims called Treasure Island. Surface sampling on a large outcrop at Treasure Island returned high-grade copper and gold in what looks like it could be part of a VMS system.
They will have a very busy season of drilling at their various targets, they have consistently hit gold mineralization in a stacked system of zones, with over 90% hit rate and a very high percentage of the holes hitting visible gold. The bottom line to me is they have a large, high-grade gold mineralizing system in a prolific mining camp known for big, high-grade mines.
In closing
We are seeing a strong market developing for gold and potential for gold stocks to recover from their depressed valuations that could transition into a more bullish environment for gold stocks.
In this report, I have discussed my special situation picks. During the recent PDAC, I got great updates on several of my other picks and found some new picks. Stay tuned for new reports discussing those.
All the best,
Allan Barry Laboucan
Disclosure
i-80 Gold is a sponsor of Rocks And Stocks News. Goliath Resources is a sponsor of Rocks And Stocks News, and Allan Barry Laboucan is a shareholder and holds warrants to purchase additional shares. Meridian Mining is a sponsor of Rocks And Stocks News. Alta Copper is a sponsor of Rocks And Stocks News, and Allan Barry Laboucan is a shareholder.
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