Taking advantage of further price weakness in the junior exploration arena
Last Monday (March 16) represented a glorious opportunity to bag high-quality gold stocks at prices that bordered on the surreal. You had to be quick though, the sell-off lasted less than one hour before buyers rushed in pushing many of the stocks I follow back to unch’d levels or better.
30 to 40% one-day gains were possible during the meltdown.
With the possibility of another liquidity event overtaking the broader indices in the days/weeks to come—the Dow 30 and S&P 500 futures are currently locked limit down in overseas trade as I type—my focus is on the highest quality ExplorerCos, those with world-class assets and plenty of cash on their books to fund aggressive exploration and development campaigns over the next six months to a year.
Cash is critical right now. Companies that stoked their coffers in advance of this broad market selloff are in a good position to push their projects ahead without the need for a heavily dilutive raise.
Note that during previous liquidity crises, gold stocks were the first to turn. During the 2008-2009 (Lehman Brothers) financial debacle, by the time the broader markets had bottomed out in March of 2009, gold stocks had more than doubled.
This following shortlist list is composed of cashed-up juniors—companies that stand a good chance of delivering significant shareholder value going forward.
This list will feature a brief summary of the company’s assets, their cash position, as well as a chart featuring their recent (crash) lows of Monday, March 16—levels that may be revisited in the not too distant future.
Keep in mind, this is not a comprehensive list.
Skeena Resources (SKE.V)
With four million ounces grading 4.4 g/t AuEq, the company’s Eskay Creek Project ranks as one of the highest grade open pit deposits on the planet.
A recent PEA demonstrates an after-tax IRR of 51% using a US$1,325 gold price.
After raising $16M in Dec. 2019, monetizing non-core assets in Feb. 2020 for $8M, and announcing a $20M fully subscribed non-brokered PP (FT shares priced at $1.155) two weeks back, the company has ample funds to push Eskay Creek significantly further along the development curve.
Skeena is in a very enviable position.
On Mar. 16—last Monday—SKE common tested the $0.50 level. That is where I would enter my stink bids in hopes of taking advantage of similar selling pressure, should it present itself again again.
Pure Gold (PGM.V)
Pure Gold is building a mine in Red Lake, the High-Grade Gold Cap of the World—“Pouring Gold before Christmas” is scrolled out across the company’s Investors page.
The PureGold Mine boasts the following attributes:
- Probable Mineral Reserves stand at 3.5 Mt at 9.0 g/t Au for 1.0 million ounces of gold;
- A low initial capital requirement of $95 million including a 9% contingency;
- An after-tax NPV5% of $247 million and an IRR of 36% with a 3.4 year payback of initial capital;
The above study is anchored by a conservative $1,275 gold price (gold is currently trading on both sides of $1,500).
On Mar. 16, Pure Gold shares tagged a low of $0.38, levels not seen in four years. The forty cent level is where I would place my stink bids.
Metalla (MTA.V)
Metalla Royalty & Streaming (MTA.V), one of the more aggressive companies in the space, has assembled a robust portfolio of royalty and streaming deals that could create significant price trajectory if the bull market in precious metals plays out the way I think it will.
Having inked deals with third parties on existing royalties/streams, the company is hooked up with the likes of Agnico Eagle (AEM.T), Newmont-Goldcorp (NGT.T), Pan American Silver (PAAS.T), St. Barbara (SBM.AX), and Osisko (OR.T).
The company is currently sitting on $7.3M in cash— it has convertible debt of $7.0M, an available credit facility of $5M, and a dividend yield of > .6% (yes, the company divvies out a divvy).
Metalla’s shares visited the $4.00 level last Monday—I thought the $5.00 lows of Feb. 28 might stick.
$4.10 to $4.25 is where I would enter buy orders if I were looking to initiate or add to my position in this stock. Of course, we’ll need to see some extreme general market weakness to revisit these levels.
Ely Gold (ELY.V)
ELY’s current royalty portfolio includes a number of deeded royalties and optioned properties that are currently generating revenue.
The company has been in acquisition mode of late.
According to their corp presentation, Ely has $4.5M cash on hand, investments of $900k, debt of $1.86M, and an undrawn line of credit of $5M.
The company’s shares went on a tear beginning in January of this year.
Ely’s shares tumbled to $0.48 last week. That would be sweet entry point as the medium to short term look very looks promising for this aggressive and well-managed royalty co.
Cartier (ECR.V)
Cartier has been well documented in these pages. My most recent coverage can be accessed via the following link – Cartier Resources (Au) and Defense Metals (REEs) continue along the path of de-risking their flagship assets
After a $2.94M PP back in Oct. 31 2020, the company had a strong cash position with over $8.1M in its coffers. Important backers include Agnico Eagle (AEM.TO), JP Morgan UK, and a number of institutions and US-based investors.
An ongoing phase 3 drilling campaign at their Chimo Mine Project has eaten into these funds, but the company is still in a strong cash position to drive development forward (management is very protective of its funds).
The sell-off on March 16 didn’t exactly knock Cartier down—the shares have been grinding lower for over a month and are currently trading at multi-year lows.
If you believe, as I do, that gold and gold shares are about to assert themselves in dramatic fashion, Cartier is worth a close look at these levels.
Coral Gold (CLH.V)
Coral holds an uncapped sliding scale 1% to 2.25% NSR on over 2.7 million ounces at Barrick Gold’s Robertson Property located along the prolific Cortez Gold Trend of northern Nevada.
For a detailed look into the company, my maiden Highballer article will bring you up to speed on this royalty and exploration play.
Coral was weathering the storm fairly well until the morning of March 16 hit.
The shares were nearly cut in half before rebounding dramatically higher. Nimble traders were rewarded with significant gains from those early session lows.
Stink bids below $0.30 could see a fill if broader market volatility continues.
HighGold (HIGH.V)
The company’s Johnson Tract property in southcentral Alaska is the real attraction here. We covered Johnson Tract in some detail late last January in A high-grade gold and base metal play with Tier-1 potential.
Regarding their Timmins Gold Camp Projects, the company dropped the following headline last week:
HighGold Mining Temporarily Suspends Timmins Area Drill Program
“A total of 12 drill holes for 2,524 meters of diamond drilling have been completed out of a planned 5,000-meter program. It is HighGold’s intention to restart operations and complete the remainder of the planned drill meters later this year when appropriate to do so.”
The company currently has roughly $12M cash on its books. That’s a lot of cheddar.
HighGold common traded as low as $0.57 last Monday. News that the company had suspended drilling in the Timmins Camp didn’t help these shares attain a solid rebound. But this is one of the better exploration and development plays I’m aware of. A test of last Monday’s lows would make for a low-risk entry point.
White Gold (WGO.V)
The Golden Saddle and Arc deposits hold the bulk of the company’s resource ounces.
- 1,039,600 gold ounces within 14,330,000 tonnes at 2.26 g/t Au in the Indicated category;
- 508,700 gold ounces within 10,696,000 tonnes at 1.48 g/t Au in the Inferred category.
An updated resource estimate for these two deposits could drop any day.
There’s also 230,000 Inferred ounces at their VG Zone, located across the river from Golden Saddle.
The company’s largely untapped discovery potential is what clearly stands out here. Details of this potential can be accessed via the following Highballer piece:
White Gold – unparalleled discovery potential in Canada’s Yukon
The company will be needing to raise funds over the next six months, but it still has roughly $5M in its coffers, enough to press ahead with a substantial exploration program this spring.
White Gold shares are currently mired at multi-year lows.
I would consider any price in the neighborhood of last Monday’s lows of $0.41 and extremely attractive entry point.
Two Silvers
Alexco (AXU.V)
Alexco operates in the Keno Hill Silver District.
The company’s goal is to become Canada’s primary’ silver producer and is on the verge of making a production decision.
Current Reserves stand at 1.2 million tonnes grading 800 g/t silver + a further 7% combined lead (Pb) and zinc (Zn).
Current resources, both Indicated and Inferred, total more than 107 million ounces plus significant zinc and lead credits.
A 2019 PFS demonstrates an after-tax NPV (5%) of $101.2M and an IRR of 74%.
All-in sustaining costs (AISC) are pegged between $11 to $12.00. CapEx is a very modest $23M.
To fund a big chunk of that CapEx, the company recently monetized its reclamation business, taking in $12.1M (another $1.25M is due Feb. 14, 2021).
The company has roughly $13.9 in working capital and a US $15M credit facility.
Alexco tagged a low of $1.00 last Monday. The shares bounced back solidly from that level. Four days later, AXU common traded as high as $2.32 (a 132% lift from the low).
The last price printed was $1.65. A return back to the lows of March 16 would represent an interesting entry point. That’s where I would enter my stink bids.
IMPACT (IPT.V)
IMPACT was featured prominently over at Equity Guru after I visited the company’s Mexican assets one month back.
This is an extraordinary project with a number of moving parts. There’s also excellent leverage to rising silver prices here.
The company has annual revenue of roughly $13M and working capital of $3.5M.
The company’s shares traded as low as $0.22 last Monday. Anything in the sub-$25 range would be an attractive entry point should the general markets continue to gyrate as viciously as we’ve witnessed in recent sessions.
That’s it for this one.
END
—Greg Nolan
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