Any attempt by gold to climb well into the $1,300s has been repeatedly cut short, with the price being driven back three times, often for no other apparent reason save market manipulation, observes Brien Lundin, editor of GoldNewsletter.
There’s an old saying that complacency kills. In the case at hand, the complacency has developed in the minds of investors...and the victim has been gold.
Investors the world over have been throwing money hand-over-fist into the U.S. stock market, bidding the major indices to record heights once again. Gold has declined as worries have fallen and stock prices have risen.
To be an equity investor today you have to adopt Bobby McFerrin motto, “Don’t worry, be happy.” And they are singing it with gusto. Thus, two factors are contributing to gold’s weakness: a lack of worries over the U.S. economy and U.S. stocks monopolizing the pool of investible funds.
There’s no doubt that, for now, the technicals are arguing that best approach for gold investors is to hunker down until the latest storm blows over.
Nevertheless, good number of our exploration stocks are bucking this trends they have been reporting good news. Some of these are quite exciting, with their full potential yet to be realized. So, despite the general market weakness, we do have some buy recommendations.
Midland Exploration (Vancouver: MD)
Midland Exploration has made a good bit of positive news; the bottom line is that Mythril could be very large. An initial 2,000-meter drill program is in progress to test the extraordinary sampling results to depth.
Mythril is a very exciting discovery, with high-grade sampling across a multi-kilometer target area that makes it a clear analog to the multi-million-ounce Eleonore project in the same region. And, as big as the Mythril target already is, it has the potential to grow larger still.
Midland got a further endorsement of Mythril’s potential when it announced that BHP Group (BBL), the world’s largest mining company, was making a strategic investment in the junior totaling C$5.85 million.
That this strategic investment is coming now, shortly before the first drill results from Mythril hit the market, would not appear to be coincidental. It seems that BHP wants to secure a stake in Midland before these results can change the character of this company. Like BHP, I suggest you try to get your position beforehand. (FYI, I’m doing it personally.) Midland remains a strong buy.
Sabina Gold & Silver (Toronto: SBB)
Sabina Gold & Silver has recommenced drilling on the Goose property within its district-scale Back River project in Nunavut. The 8,000-meter program will seek to expand the resource in the underground mineable portions of the Llama and Umwelt zones.
This exploration is happening as the company continues to move forward with its fit-for purpose plans for producing gold at Back River. Those plans currently call for the production of 200,000 ounces of gold per year for 11 years. All needed permitting is either in place or moving steadily through the approval process.
In a sign the company continues to attract the interest of seasoned investors, Sabina recently raised C$5.21 million in flow-through financing via the placement of 3.36 million flow-through shares. Those shares were priced at C$1.55 per share.
The company’s shares have fallen along with the broader market in recent weeks. And yet SBB remains one of our big winners, posting gains near 180% since my initial recommendation back in 2015.
Current trading levels offer us another bite at the apple, though, as I believe this company is ideally suited to deliver leverage on the next big upswing in gold prices. Thus, Sabina remains a buy.
Atlantic Gold (Vancouver: AGB)
Atlantic Gold's share price has drifted down along with the gold market in recent weeks. The company announced Q1 production numbers earlier this month that reflected the difficult mining conditions that this year’s winter created along the East Coast. MRC produced 19,612 ounces of gold during the quarter at an average head grade of 1.21 g/t gold.
Management had anticipated a lower production number for Q1 based on the lower grade it saw coming through the production schedule at MRC. In the announcement of the recent production results, it reiterated its full-year guidance for 2019 of between 92,000 and 98,000 ounces at AISC between $521 and $566.
Those numbers speak to a very profitable operation, one that looks likely to grow larger in the next few years, as ore from FMS and Cochrane Hill comes online. The current weakness in AGB’s share price looks short-term to me, and thus, is a buying opportunity.
Auryn Resources (AUG)
Auryn Resources has extended the mineralization on its Sombrero project’s Fierrazo target by 48 meters. Channel sampling had previously outlined a 184-meter area of 0.57% copper-equivalent material. The new sampling area graded 0.51% copper-equivalent (0.49% copper and 0.04 g/t gold). Overall, the mineralization now extends for 232 meters at an average grade of 0.55% copper equivalent.
In addition, Auryn geologists also sampled material from the formerly producing iron mine on the target. The 37-sample effort yielded values as high as 3.26% copper and 1.2 g/t gold. The new channel sampling results and the assays from the old Fierrazo mine provide further confirmation that Sombrero sits on a large, copper-gold-rich area of mineralization.
We’ll have to wait until later in the year for the company to begin drilling the targets it has identified at Sombrero, but given these early indications, I think that program will prove worth the wait.
In the interim, management continues to tell Auryn’s story to investors, and that marketing effort is having a decided positive effect on its share price, which is up strongly in 2019. It’s drifted a bit lower in April due to the recent gold market volatility. Longer-term, it remains a solid bet on the potential for a major discovery at Sombrero. It’s still a buy.
Bluestone Resources (Vancouver: BSR)
Bluestone continues to crank out solid assays from its infill work on the North zone at Cerro Blanco. Highlights from the latest batch of assays include 8.1 meters of 8.3 g/t gold and 73 g/t silver (Hole 122), 5.6 meters of 19.9 g/t gold and 281 g/t silver (Hole 124) and 10.2 meters of 13.1 g/t gold and 25 g/t silver (Hole 126).
Infill results aren’t likely to wow the market, but this program is generating important information that should allow the company to upgrade a significant amount of Cerro Blanco’s inferred resources later this year.
The next resource update could give a substantial boost to the economics laid out in the feasibility study Bluestone produced earlier this year. That update should hit the market just as gold is returning to form, making BSR a good value, and a buy, at current levels.
Equinox Gold (Vancouver: EQX)
Equinox made some key financing moves this month, closing on the $130 million strategic investment from Mubadala and converting its $100 million acquisition facility for Mesquite into a $130 million revolving credit facility.
The company used the funds to repay the $85 million construction facility on Aurizona and the $20 million Mesquite acquisition facility from Sprott. Collectively, these moves set Equinox up for success as it brings Aurizona online this quarter and moves toward Phase 1 construction at Castle Mountain.
Few gold companies in the mining sector offer a more compelling growth profile than Equinox. EQX’s share price has retreated along with the gold market and looks like an excellent bargain, and a buy, at current levels.
