It’s no secret that silver prices have struggled for the better part of the past 5 months, and along with them the share prices of silver producers, developers and explorers alike, explains Peter Krauth, resource sector specialist and editor of Silver Stock Investor.
Not one subgroup has been spared. It’s exactly these kinds of conditions that separate the high-conviction investors from the bandwagon followers.
Many silver stocks are down by 20% to as much as 70% in just the last 12 months. This is obviously a true test of faith. Do you believe in the bull case for silver? Or are you just hoping for a quick, powerful rally in precious metals?
I’ve lived through several precious metals bull markets. And I’ve researched and studied several more. The fact is those who are able to arm themselves with patience and wait out the storm enjoy the fruits.
I own each and every stock that is in the portfolio. I eat my own cooking. My portfolio is struggling too. But the action of the past few days suggests strongly that the worst may now be behind us. Given the economic backdrop, I believe a significant change is in the air for silver.
GoGold Resources (GLGDF) — headquartered in Nova Scotia, Canada — is a rarity among silver stocks. That’s because the company is not only cash-flow positive, but it’s also got superb growth potential. GGD is a mid-tier silver producer and developer operating in Mexico.
Senior management and founders have been involved in a series of successful projects and companies. They bought the Santa Gertrudis project for $11M, invested $9M and sold it to Agnico Eagle (AEM) just three years later for $95M.
They acquired the Ocampo project for $15M, selling it 10 years later for $750M. And they bought the El Cubo mine at $20M and then just two years later got $375M for that asset. This group knows how to uncover and acquire cheap assets, then create value with them, having built 4 mines in Mexico.
CEO and President is Brad Langille (Gammon Gold, Mexgold, Nayarit Gold) who developed projects all the way from grass roots to commercial production in Mexico.
Anis Nehme, COO (Gammon Gold), has spent a decade in mining, with extensive experience in both open pit and underground. He was Mexico Manager for GoGold between 2011 and 2016. And management has plenty of skin in the game, as insiders own about 20% of shares.
Without a doubt, the company’s workhorse is the Parral tailings project in Chichuahua, Mexico. But Los Ricos in Jalisco, Mexico is where the upside exists for GoGold. Los Ricos was bought for just $7.1M in 2019 from a private seller.
GoGold has a very respectable corporate structure. Fully diluted it has 310M shares outstanding. That’s a lot, but aided by the fact that Parral provides plenty of cash.
There’s no debt, about $80M in cash after a big raise in March, another $17M in receivables from the Government of Mexico, and an impressive 20% insider ownership. In addition, institutional shareholders include Van Eck, Franklin Templeton, Sprott Asset Management, Blackrock, Merk Investments, and CI Investments.
I continue to view GoGold as a low-medium risk portfolio holding, since the company remains cash-flow positive and debt free. The upside potential from Los Ricos South and North are the main drivers for growth.
