Big Breakout In Gold Has Caused Improved Sentiment Toward Gold Stocks
Featured companies in this report are McEwen Mining, Agnico Eagle, Alamos Gold, SilverCrest Metals, i-80 Gold, Meridian Mining, Goliath Resources, Dryden Gold and Canadian Gold Corp.
Prior to the PDAC in early March, I wrote a couple articles describing that I saw the trend in gold shaping up to make an important breakthrough of $2100. Then throughout the remainder of 2024 to make a series of new record highs. It is performing as predicted and yet I see plenty of market commentators mentioning that they aren’t sure why or looking for possible reasons.
It is not a mystery to me at all. For months I have been talking about the Death Spiral of Debt caused by the Free Money Era after the 2008 GFC. As well as the BRICS central bankers moving themselves onto the Gold Standard to protect themselves against the debt crisis.
In addition, they want an alternative to the USD for international trade. What is happening in real time is that the King Dollar is becoming less kingly. First the BRICS nations will increase their use of their domestic currencies for international trade. Don’t be surprised when they also start doing international trade in gold.
To make international trade easier in gold will require a centralized warehouse of gold and then international trade will take off in gold. Fiat currencies are pretty volatile, and are backed by debt which is extreme. Gold is in a bull market that will go much higher, so it makes sense for trade to happen in an appreciating asset than in fiat currencies backed by debt.
As I wrote in a report on March 25, the deck is stacked for gold to go much higher. In the golden coin flip, heads gold wins and tails gold wins. In that report I also discussed the trends I’m seeing in gold stocks.
The majors are in a bullish trend and it is working its way down the food chain. One of the standout performers of late has been McEwen Mining. They have a great combination of gold mining and one of the top 10 undeveloped copper projects in their asset base.
I’ve done several interviews with Rob McEwen and one of my favourite things is when he compares the Los Azules copper project to what the metrics would look like if it were a gold project. Basically, it would be what major mining companies consider a Tier 1 gold mine. Speaking of major gold miners, plenty of them are working hard to have more copper assets in their portfolios. McEwen Mining is already ahead of the curve.
When it comes to major gold miners, my favourite pick is Agnico Eagle. From a fundamental perspective, they are reporting records in production, reserves and operating cash flow. On the technicals, they bottomed in the middle of February and since then have been on a tear, significantly outperforming the bullish run in gold. They are now trading above their 52-week high.
I’m also a big fan of Alamos Gold, primarily because they are a low cost miner relative to their peers and are increasing production. That is a heck of a combination and a recipe for outperformance. Their stock bottomed in late February and has been on a strong run since then and are very close to their 52-week high.
SilverCrest Metals is a new mining company only a few quarters into full commercial production. Their Las Chispas mine is performing exceptionally well. They started full commercial production with $100 million in debt. Since then, they have paid off all the debt, bought back stock and built up a hoard of cash, as well as gold and silver bullion that has surpassed the debt they had at the start of full commercial production.
Due to the low costs of mining gold and silver, and the high-grades they are mining, they are generating remarkable free cash flow for a new mining company. They made an important double bottom in August and September of 2023, then had a significant rally. After that, like many gold stocks, they gave back gains, but made a higher low in late February and since then have been on another strong rally. They haven’t made a new 52-week high, but are within striking distance.
i-80 Gold is an underperformer, but they have recently made an important double bottom. They are my highest conviction pick for growth in production in the near term. Currently, they are a small miner, but they are moving toward test mining at a couple of their key projects.
They have a stellar group of assets, including the McCoy-Cove project, Granite Creek and Ruby Hill. In addition, they have two processing facilities which puts them in a unique position as they won’t have to build them.
Part of the reason that I think they could be underperforming is because it is an aggressive plan to simultaneously drill three projects and turn them into mines. This may concern others, but it doesn’t concern me because that is exactly how a small miner turns into a much larger miner.
It is rare for a junior miner to have three world class projects, like they have at their key projects. They also have the people needed to pull off their plans. Including people that built and operated mines in Nevada for majors.
I don’t think it will take long for investors interested in Nevada gold mining to better understand their combination of assets. That collectively put them in an enviable position for production growth in the near term. It is very difficult for investors to find a company with such dynamic projects with a valuation less than some pure exploration companies.
Earlier today, Meridian Mining announced a $15 million bought deal financing. The funds will be used to continue drilling at their key gold-copper VMS project in Brazil. Additionally, it will help them produce a pre-feasibility study.
What initially attracted me to the company was the exceptional data from their PEA. Key metrics that stood out to me are a low cost of around $200 million to bring it into production, and a very fast payback of the capex of less than a year, due to nearly 60% IRR. Those kinds of stats are hard to find in the development stage segment of the mining sector.
The cash they are raising through the bought deal will enable them to keep generating a lot of news.
They hit a 52-week low of 25 cents in late February, since then they have come off that bottom nicely. I’m looking forward to seeing the flow of news from their ongoing work as I know that projects like the one they have are hard to find.
Goliath Resources is my highest conviction gold discovery story. They have a series of stacked gold zones at their Surebet target at their Golddigger project. So far they have outlined a very big gold system, with high-grades over mineable widths in a widespread gold mineralized system.
Until the 2023 drilling season, the gold zones were in the sediments and at the contact of the sediments and volcanics. They had a major breakthrough to extend that system into the volcanics. It looks like the feeder zones for what is above are likely in a series of stacked zones in the volcanics.
In the upcoming drill season, a key focus will be to drill for the feeder zones in the volcanics. If they only had what is in the sediments and at the contact of the sediments and volcanics, they would have a rare grassroots gold discovery. What is in the volcanics puts the discovery in the category of having the potential to be a Tier 1 gold discovery.
Those kinds of discoveries don’t come along very often, especially in a prolific mining camp such as the Golden Triangle of British Columbia. Making it even more exciting is that Golddigger is at the southern tip of the Golden Triangle in close proximity to infrastructure.
The reason that this wasn’t found before is because until recently it was covered by glaciers. When they receded, the team of geologists at Goliath saw remarkable outcropping mineralization. They have done a wonderful job drilling it over the past few drilling seasons and they are well positioned to have their biggest success in the upcoming 2024 drilling season.
Something that has caught my attention of late is that the improvement in sentiment toward gold stocks is starting to make its way down to the junior explorers. Earlier today I did an interview with Dryden Gold.
They have an exciting orogenic gold project in Dryden, Ontario which is close to Red Lake, Ontario. Red Lake is a prolific gold mining camp well known for the high-grade gold mineralization.
Dryden, Ontario is in the same age of rocks, with deep crustal faults and secondary faulting that are crucial for finding orogenic gold mines. Most importantly, there has been extreme high-grade gold found at their project within 100 metres of the surface.
What stands out to me about a possible difference between Red Lake and Dryden is that in Red Lake, they had to go down around 1000 metres to hit the bonanza-grade portion of the gold system. The fact that bonanza-grade gold has been hit at Dryden Gold’s project, so close to the surface, suggests to me the possibility that the top of the system could have been eroded away.
If that is the case, and I would add a lot more drilling is needed to figure out if it is, they could reach the bonanza-grade portion of the system with short drill holes. That is a very exciting prospect.
Canadian Gold Corp. is another junior exploration company and I’m impressed with their high-grade orogenic gold project. The project had seen past production over a couple of years, then the price of gold went down and the mine stopped operation. This is another junior exploration company that has recently bottomed and come off those lows nicely.
What intrigued me the most about the project was that minimal drilling below the mined portion hit high-grade gold. But, was not followed up until Canadian Gold Corp. got busy with exploration drilling.
Since then they have shown that the system extends well below the mined zone. In fact, it looks to be getting wider as they go deeper.
To keep the costs down to drill the depth potential they are using a mother hole and then wedging off of it to reach the deeper part of the system.
So far, not a lot of investors are paying close attention to what they have drilled. I am because I see the making of an impressive high-grade gold orogenic gold system.
In closing
This is a group of gold focused companies ranging from a major down to small explorers. They are a solid group for investors interested in gold mining stocks to do their homework on.
This is not a complete list of all the gold mining stocks I follow, but they are a select group that have stand out projects and opportunities for growth.
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. Dryden Gold is a sponsor of Rocks And Stocks News.
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