Last week was chock-a-block with big economic events, including Fed talk and new data that carried the higher-for-longer rates theme running headlong into bank crises that made recession risk suddenly very real. Gold is the new near-term bet in this environment, suggests Gwen Preston, editor of Resource Maven.
Why? Gold is a hedge on uncertainty. Buyers have likely moved into the yellow metal as insurance in case failures in the banking system spread. Gold is also known to rise first and strongest out of a crash/recession, so such events end up good for gold. And gold rises when real rates fall, which is actually on the horizon.
One way to play stronger gold markets is with Artemis Gold (ARTG.V). Artemis announced it got its BC Mines Act permit for the Blackwater project, which is (by far) the most significant permit to build a mine in BC.
With this now in hand, ARTG will ramp up major construction activity at the site. The permit was widely expected and ARTG had already started drawing on its construction funding facilities and begun early works.
The process plant site is almost prepped, the 477-room construction camp is almost complete, the construction fleet has been ordered from Finning, and partners have been secured for roles like fuel and explosives supply and storage. Artemis expects construction will take 21 months.
Why own the stock while that happens? My investing guidelines suggest buying halfway through project construction, as the re-rate to production happens then, if not even later, once the mine is operational (and showing success). But I think there are two reasons to own ARTG sooner.
First, Blackwater stands out across development projects and newer operating mines held by single-asset companies for its scale. Reserves defined to date support production of 385,000 gold equivalent ounces per year for 17 years. It shows good economics, with a 42% IRR, a very reasonable capex for a project of this scale ($774 million), and an all-in sustaining cost of $825 per ounce.
Without a doubt, this is an asset that most if not all major and mid-tier miners are evaluating. There just are not many projects offering this kind of scale, economics, and security (permitted). And yet the stock has traded at a discount to peers (0.14x price-to-net asset value, versus 0.28x P/NAV for its peers), likely because of perceived risks around getting this permit and around capex blowouts.
I would note that the permit is now in hand and this team built its last mine, the Moose River mine in Nova Scotia, on time and budget because of their experience and laser focus on costs and execution.
Second, gold now has new life. If the tide really turns bullish for gold, large, advanced projects like Blackwater held in well-traded companies like Artemis should be among the top beneficiaries.
Recommended Action: Buy ARTG.V
