The last time gold began a long-term bull market, in 1999-2000, the metal rose from $250 an oz. to $850 an oz., or over three times in less than a decade, notes Gavin Graham, money manager and contributing editor to Internet Wealth Builder.
I’m not suggesting gold will match that performance, but it’s reasonable to assume that having taken out its previous all-time high, gold could run to $2,500 per oz., a 25% move.
Equinox Gold (EQX) has projects in Canada, the US, Mexico, and Brazil, with seven operating gold mines and five growth projects. Mining entrepreneur Ross Beatty owns 8% of the company. Equinox went public in November 2018 at $4 per share.
The company has proven and probable reserves of 16 million oz. and measured and indicated reserves of 30 million oz. It expects to have production of 670,000 oz. in 2022.
Its growth projects include the Santa Luz mine in Mexico, where it is spending $103 million in retrofitting a previously producing mine which will come on stream this quarter. It is estimated Santa Luz will produce 110,500 oz. annually for the first five years of operation.
Also, Equinox officially broke ground in October 2021 on the Greenstone project, one of the largest mines in Canada. It is anticipated the two-year construction period and six months commissioning should permit the first gold pour in the first half of 2024.
With a projected 13% increase in production from 593,000 oz. in 2021 to 670,000 oz. this year, Equinox is well positioned to enjoy strong growth in revenues and cash flow, quite apart from the rise in the gold price.
With $310 million in unrestricted cash and $200 million undrawn from its revolving debt facility, Equinox is a well-capitalized gold miner with seven operating mines in politically stable jurisdictions. Projected growth in production over the next couple of years is to 1 million oz. per year.
The stock sells at 22 times 2022 forecast operating earnings. It is in the bottom third of junior producers in terms of price/net asset value (0.63 times). It expects the second highest production growth from 2021-24 and has second highest reserves amongst the group. I rate the stock a buy.
