Jordan Roy-Byrne – We Get It Gold Is Flat, So What Companies Provide The Best Leverage?
Jordan Roy-Byrne, Founder and Editor of The Daily Gold joins us to share the precious metal stocks he is focused on in this flat metals price environment. We all understand how boring these stocks and broad markets have been but if the major breakout in gold happens, that Jordan is expecting, then there are certain types of companies that would perform very well. He likes advanced explorers and growth oriented producers. We have Jordan explain why.
Definitely some good companies out there in this category. But also some that do a raise when it was expected to fund their activities from production. Then they come up with a lame duck excuse for doing the pp.
Yes, there are some good companies in the growth-oriented producers category, and many of them are self-funding a big portion of their exploration or development work with organic revenues.
Of course, there still are times where a company does a capital raise or takes on debt to build another mine or make an acquisition (like Impact Silver just did), and those are actually good uses of capital.
A great example of this is (MAI) Minera Alamos will need to take on some healthy debt to build mine #2 (Cerro de Oro), but it’s still a low capex build for that project, and once in production and combined with production from mine #1 (Santana), then a lot of that revenue will go towards exploring, derisking, and building out mine #3 (La Fortuna).
(IAUX) (IAU) I-80 Gold is another example of a company that has some limited production starting to ramp up at Granite Creek, where they are trucking it over to Nevada Gold Mines (Barrick/Newmont JV) to process at their facilities and this will start bringing in more revenues over the course of 2023 and 2024. However, ultimately, they may need to raise some healthy debt to upgrade their permitted and built Lone Tree Processing Center and permitted and built Ruby Hill processing center to accept their ore from McCoy Cove and Ruby Hill and then bring that Granite Creek ore over internally after that point in time. They did some residual heap leach mining last year for 20,000 ounces, but expect to produce near 50,000 ounces this year from the Granite Creek arrangement with N.G.M., but then ramp up to 100,000 in 2024, then 200,000 in 2025, and possibly grow it even further from there beyond that. They also have been knocking the ball out of the park at their CRD deposit at Ruby Hill, so they have that “holy grail” massive exploration upside running in tandem with their projected production growth.
(CXB) Calibre Mining has continued to ramp up their production each year since 2019, while simultaneously growing their resources in Nicaragua, and then they acquired Fiore Mining a little over a year ago to expand their production footprint into Nevada with the Pan Mine, but also picked up the development stage Gold Rock deposit nearby, and the 2 million ounces of gold in the ground at their Golden Eagle project. They’ve been very aggressive in drilling out multiple assets in Nicaragua, Nevada, and Washington, and at some points have had 10-15 drill rigs turning over the last 2 years. That is another example of a “holy grail” growth-oriented gold producer with massive exploration upside.
(SVM) Silvercorp [that Jordan mentioned in the interview above] is another example of a company that has continued to add more silver/gold/base metals mines in China for pennies on the dollar through auctions and government bidding processes to grow production, but also utilizes one of the more advanced internal communication systems to greatly improve productivity and production growth at better costs than most peers. In addition to that, they are always exploring and expanding their resources internally, but simultaneously incubating 4 exploration companies in South America, with New Pacific Metals being their most notable success story in Bolivia.
(KRR) Karora Resources, has really done an excellent job turning their operations around over the last few years to become more economic, produce more ounces of gold and pounds of nickel, and they are well underway with a plan to double their production over the next 1-2 years, but putting in a 2nd decline to allow more mine access, and less congestion. In addition to all all of that operational growth, they’ve been avid explorers and have discovered some impressive high-grade gold and high-grade nickel zones that will further increase production in the years to come as the mine sequence works towards those new areas. So again, a prime example of another growth-oriented gold producer.
(STGO) Steppe Gold has been growing gold production at their Mongolia mine, but also just finished acquiring (XYZ) Anacortes Mining for their high-grade Tres Cruces Gold Project, located in Peru, so growing operationally and through acquisition, as another interesting growth-oriented gold producer.
There are other examples I could list like Cerrado Gold, Argonaut Gold, Alamos Gold, Fortuna Silver, Mako Mining, Thor Explorations, or Orezone, etc… that also fit this category nicely.
These kinds of producers have had really nice moves off their lows in the 3rd and 4th quarters of last year to present, but also have growth on tap to keep building value even if metals prices stayed stuck in a range for the next 1-2 years, but the optionality to really blast up higher if metals prices appreciate like many are expecting over the medium-term to longer-term.
(CXB) Calibre Announces Initial High-Grade Drill Results at its Eastern Borosi Mine Complex; Drilling Intersects 12.9 g/t Gold over 8.5 metres Including 23.30 g/t Gold over 1.6 metres
10 May 2023
https://ceo.ca/@globenewswire/calibre-announces-initial-high-grade-drill-results
(STGO) Steppe Gold Ltd. Signs Arrangement Agreement to Acquire Anacortes Mining Corp. and Creates a Leading Diversified Precious Metals Producer
8 May 2023
https://ceo.ca/@newsfile/steppe-gold-ltd-signs-arrangement-agreement-to-acquire
(IAUX) (IAU) i-80 Gold Completes Acquisition – High-Grade FAD Deposit
8 May 2023
“i-80 Gold Corp and Paycore Minerals Inc. are pleased to announce the completion of i-80’s acquisition of Paycore, owner of the FAD Property that hosts the high-grade FAD deposit located immediately south of, and adjoining, i-80’s 100%-owned Ruby Hill Property in Eureka County, Nevada.”
https://ceo.ca/@newsfile/i-80-gold-completes-acquisition-high-grade-fad-deposit
Seems like we are always at a point of going either up or down and down happens. Now I think there are no people in the markets. I went out in the garage and pulled the battery out of my weed eater as it keeps shorting my stocks.
If you like Kirkland Lake, check out S2 Resources (ASX ticker S2R), which has tenements surrounding and abutting the Fosterville mine. ~ 55 million AUD. Thank me later.
EDIT: For growth orientated producers – ASX listed EMR.
This was a fantastic interview with Jordan, when he lays out the case for the growth-oriented producers, that have both production expansion possibilities, and the “holy grail” companies that also have big exploration upside. I felt Jordan articulated the case very well for why these kind of small to mid-cap producers with solid growth plans can perform much better in bull markets than many investors give them credit for (and consistently have in the past).
In the prior bull market from 2000-2001 to 2011 many of the producers had huge multi-bagger returns, and plenty of leverage to underlying metals prices, but with more known ounces in the ground and ability to generate revenues, grow both organically and through acquisition, and fund exploration out of incoming revenues. It was the same in the big 8 month surge from Jan-Aug in 2016, or from Oct of 2018 through Aug of 2020, where the producers growing value had huge multi-fold returns.
Sure, everyone know that if an explorer hits it big with a discovery, that they can move up exponentially for a big win, but out of the 1000 explorers out there, very very few actually do that, and 99% of targets and deposits will NEVER become an economic mine. I believe the stat is that 1 in 3000 target deposits actually become a legitimate producing mine. Vegas has MUCH better odds than that, and will there will be the ones that scream into the stratosphere like Great Bear, New Found Gold, or Snowline Gold, the reality is the other thousand companies won’t.
Betting on drill plays is fun, and I personally do it, and it is like a potential lottery ticket if they hit and pay off, and a few winners can pay off multiple losing positions. You can also increase the odds of success by betting on good teams or good potential projects, that are well capitalized with a tight share structure, etc… However, why some resource investors or newsletter writers only focus on exploration, and ignore growth-oriented revenue-generating producers that ALSO have have exploration upside, but a legit business to fund it is puzzling. Why snub your nose at companies that actually have known gold and silver in the ground, and plans to build substantial shareholder value over the next 1-3 years?
One of the urban legends that has probably hurt many investors from having the right frame of reference on investing in producers, is that so many have erroneously concluded, based on the way it’s presented on the Lassonde Curve, that once a company goes into production that it is “fully valued” and then gradually falls into depletion and mine closure. They see no further upside once a company is a producer, and nothing could be further from the truth.
That kind of limited thinking totally negates the ability of the producer to make another discovery and keep growing their deposit, convert more resources into reserves, or find a satellite pit or a high-grade underground component, or regional discovery to use a hub & spoke model, or make an accretive acquisition with their incoming revenues, or even merge with another mining company to further grow value and market share in a 1+1 = 3 transaction. Hecla that has been around for 125 years and most assuredly didn’t stop building value when they first went into production, so that part of the reality is conveniently missing from the latter part of that L Curve chart. 🙂
In addition to the great points Jordan made on why he feels the growth-oriented gold and silver producers will really have fantastic torque, there is also the reality that at each market turn, where we’ve seen the metals stop going down, bottom/base, and then turn up, it is generally the producers that get that bid first. We’ve seen a lot of them double or even some triple off their Sept/Oct lows last year, once Silver and then Gold bottomed and started ratcheting higher, while most of the Juniors (with some exceptions) didn’t fare nearly as well.
It’s been just like that at almost all the turning points in the PM sector where the companies with known ounces in the ground and expanding margins (like the producers and royalty companies) get that influx of new capital first, because we know that they actually have gold and silver in the ground. Why investors aren’t regularly accumulating the producers into oversold lows, and riding them up higher when the trends change and the tide turns, is befuddling, as those have the earliest and easiest initial gains to be had when the worm turns, and margin expansion begins.
When new generalist investors finally make the decision to start investing in gold or silver and then make the leap into mining stocks, then a large number are simply going to look to look at revenue generating companies mining the metals, or over the last decade they simply have piled into the sector ETFs like GDX, GDXJ, SIL, and SILJ. Those are also the sectors more money managers would be likely to recommend to generalist investors, much more so than pre-revenue ABC or XYZ drill-play hoping to find an economic deposit. Just the ETF inflows alone are going to naturally position more funds into the companies held within those, and most of them are producers, or the larger most advanced developers.
Sure, in a raging bull market, once the strong winds start really blowing in the PM sector then even the turkeys will fly, and most companies, even the tiny micro-cappers and even the micro-crappers will go up nicely on stronger sentiment. Once there is a strong sector tailwind, even the optionality beta plays will have huge moves higher… that is all coming. It just seems nice to highlight in this chat that there is a case to be made for having a balanced portfolio and mixing in some of the better growth-oriented gold/silver producers with expansion potential not just in future production, but also in self-funded exploration.