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Mining for Value: Klondex and EMX Royalty

08/09/2017 2:50 am EST


Brien Lundin

President, Jefferson Financial, Inc.

Brien Lundin is a leading expert in the resource sector, specializing in small and lesser-known junior miners with both high risk and high reward potential. Here, the editor of Gold Newsletter reviews two favorites.

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Klondex Mines (KLDX) reported impressive Q2 2017 production numbers. During the quarter,its Midas, Fire Creek and True North mines produced 66,629 gold equivalent ounces (GEOs). It remains on track to hit its production guidance of between 210,000 and 225,000 GEOs for the full year.

Management has genuine cause for bullishness, as the Hollister Mine looks likely to contribute quite a bit of ore to the mill at Midas in the back half of the year.  Meanwhile, high-grade intervals continue to come in from Klondex’s aggressive drilling program at True North.

The upshot with Klondex is that it has done everything right to position itself as a mid-tier precious metal producer.

As we saw in the mini-bull run of early 2016, companies of Klondex’s ilk are the first off the shelf when gold and silver start to head north. If the back half of 2017 works out like I expect it to, you’ll be glad your bought this company at or near current levels.

EMX Royalty (EMX) is the new moniker for longtime Gold Newsletter constituent Eurasian Minerals. The new name reflects this prospect generator’s emphasis on monetizing its far-flung property portfolio by cutting joint venture and royalty deals on its assets.

That said, the highlight of EMX Royalty’s portfolio right now is its 39% interest in IG Copper. That’s because IG Copper owns a 51% interest — Freeport McMoran (FCX) owns the other 49% — in Malmyzh, a massive copper-gold project in eastern Russia.

After getting the go-ahead to advance the project last summer from the Russian government, the partners have been engaged in drilling to get a better feel for Malmyzh’s scale. Simply put, this is exactly the kind of project that majors spend their exploration budgets seeking to identify and develop.

Situated near the Amur River, the region’s primary shipping lane, this project has the location and the size to become a world-class copper-gold mine.

EMX Royalty’s interest in IG Copper ensures that its shareholders will get to come along for the ride, should a major bidding war for Malmyzh at some point ensue. Given the near limitless upside involved at Malmyzh, EMX Royalty continues to be a bargain at current prices. It’s a buy.

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