Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21
Why Tether USDT, Stable Scam Coins Could COLLAPSE the Crypto Markets - Black Swan 2021 - 6th Jun 21
Stock Market: 4 Tips for Investing in Gold - 6th Jun 21
Apple (AAPL) Summer Correction Stock Trend Analysis - 5th Jun 21
Stock Market Sentiment Speaks: I 'Believe' We Rally Into A June Swoon - 5th Jun 21
Stock Market Russell 2000 After Reaching A Trend Channel High Flags Out - 5th Jun 21
Money Is Cheap, Own Gold - 5th Jun 21
Bitcoin and Ravencoin Cryptos CRASH Bear Market Buying Levels Price Targets - 4th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

7 Gold & Silver Mining Companies to Buy Before the End of the Year

Commodities / Gold and Silver Stocks 2016 Nov 18, 2016 - 04:06 AM GMT

By: The_Gold_Report

Commodities

Headline news results in rash decisions; don't let Trump's victory distract you from the bigger picture, says Matt Geiger of MJG Capital. He explains why now is an excellent time to deploy capital into mining equities and highlights seven companies poised to deliver outsized returns.

We are still in the early stages of a four- or five-year resource bull market. Those who own hard assets will be heavily rewarded; those exposed to the general stock market (or, god forbid, government debt) are in for a rude awakening. What we are witnessing is reversion to the mean after a five-year period in which commodity prices slumped as financial assets inflated in price. The tide has shifted, and Trump instead Hillary in the Oval Office will have little effect on this reality.


For those who have missed this mining bull market thus far, NOW IS THE TIME TO GET AGGRESSIVE. Precious metals, base metals, ag minerals and energy metals should all do well. After a torrid start to the year, resource equities have been in a consolidation phase since mid-August. Smart investors are using this opportunity to build positions in high-quality names. Why wait until 2017 when hard assets start moving again when you can buy right now at cheaper prices?

Before I provide updates on a few of my favorite picks, I encourage all readers to check out a white paper produced by Jeremy Grantham and Lucas White from GMO. The paper, entitled "An Investment Only a Mother Can Love: The Case for Natural Resource Equities," provides a comprehensive look into the benefits afforded by long-term investments in natural resource equities. This is a must read for anyone actively investing in the space and can be accessed free of charge here.

The partnership maintains a concentrated portfolio of ~20 resource equities. Our biggest winner thus far in 2016 has been Almadex Minerals Ltd. (AMX:TSX.V), which I've discussed in previous Streetwise articles. When we started buying Almadex shares in Q4/15, the company's market capitalization was equal to the value of its working capital + marketable securities + gold bullion holdings. Remarkably Almadex shares are up over 800% since the beginning of the year, largely due to a new discovery made at the company's El Cobre Project in early August.

The success of this investment reminds us of two lessons:

(1) When companies with honest and experienced management teams are trading at/below working capital, BUY HAND OVER FIST. All surprises will be to the upside, and companies with small (or negative) enterprise values have historically proven to be low-risk investments.

(2) With a little luck, mineral exploration can generate tremendous value out of seemingly nowhere. Remember that Almadex had already drilled nine different holes at El Cobre before hitting significant mineralization in Hole EC-06-010. Since this discovery hole, the Almadex share price has tripled with additional gains quite possible.

An investment in Almadex is riskier now than when we first initiated our position. There is no question that the market has big expectations for El Cobre and, if the company fails to delineate a significant copper/gold deposit over the coming 12 months, the share price will be hit hard.

That said, Almadex will have excellent news flow over the coming months. Management still believes that the intrusive core of the porphyry system has yet to be discovered; the company will soon be drilling the "Deep IP Zone" and "Villa Rica Zone." Both of these are untested targets that lie south of the discovery hole. When analyzing upcoming drill results, investors should be looking for higher grades (at least 2 g/t gold equivalent) and equal widths (at least 150 meters) when compared to recent assay results. If the company is successful in finding the intrusive core, we would see another double or triple in share price in short order.

For investors with a shorter time horizon, Golden Arrow Resources Corp. (GRG:TSX.V; GAC:FSE; GARWF:OTCQB) is a buy below CA$1. As a quick refresher, Golden Arrow signed a JV deal with precious metals heavyweight Silver Standard Resources Inc. (SSO:TSX; SSRI:NASDAQ) in October 2015. Silver Standard's rationale for doing the deal was simple—its Pirquitas Mill runs out of feed in 2017 and it saw an opportunity to use Chinchillas, located only 30km from the mill, as a satellite pit to extend Pirquitas' production life by multiple decades. The agreement stipulated that Silver Standard would "spend a minimum of $4 million for pre-development activities. Expenditures may total up to $12.6 million based on the success of the pre-development activities," and that a decision needs to be made by March 31, 2017.

Silver Standard confirmed last week on its Q3 conference call that all technical work will be completed at Chinchillas by the March 3 deadline. Additionally the company has spent $10.5 million ($10.5M) at Chinchillas, including $3M in Q3/16 alone. This implies that the $12.6M in expenditures mentioned above will be reached before Christmas. Given the above points and the drastic improvement in precious metal prices since this deal was signed in October 2015, I am nearly certain that this deal will go ahead. What I don't know yet is the structure, and we could see any of the following occur: (a) outright takeover of Golden Arrow by Silver Standard, (b) Silver Standard buys the Chinchillas Project from GRG for shares/cash, (c) Silver Standard and Golden Arrow put Pirquitas Mill and Chinchillas into a separate vehicle, or (d) Silver Standard vends Pirquitas Mill into Golden Arrow in exchange for shares.

"I think Golden Arrow Resources Corp. shareholders will be rewarded with a generous offer in short order."

Regardless of the structure, I think Golden Arrow shareholders will be rewarded with a generous offer in short order. Between now and Christmas is a good time to accumulate Golden Arrow shares on the open market, though I would wait until November 29 when the share lock up from Golden Arrow's most recent placement ends.

I'll conclude with a few ideas for the deep value junkies out there: Golden Valley Mines Ltd. (GZZ:TSX.V), Solitario Exploration & Royalty Corp. (SLR:TSX; XPL:NYSE.MKT); Globex Mining Enterprises Inc. (GMX:TSX; GLBXF:OTCPK), Southern Arc Minerals Inc. (SA:TSX.V; SOACF:OTC ) and Minco Silver Corp. (MSV:TSX).

The above companies share the following characteristics: (1) market cap near/below value of working capital + marketable securities, (2) no debt, and (3) no need to dilute share structure for multiple years, if ever. I view each of these as low-risk investments for the above reasons, but the beauty is that all five stories have plenty of upside exposure to this nascent bull market.

Golden Valley Mines, for instance, owns 49% of Abitibi Royalties Inc. (RZZ:TSX.V)—and Abitibi, in turn, may prove to be 50% undervalued. Solitario has exposure to the Bongara zinc project in Peru (more than US$50M has already been spent on the project) through a JV with the world's fifth largest zinc producer. Globex Mining has 11 active JVs and near-term royalties, including a deal with Canadian Malartic Partnership at the Pandora Wood gold project. Southern Arc Minerals holds shares of Japan Gold Corp. (JG:TSX.V) and Osisko Mining Inc. (OSK:TSX); both of these companies have excellent management and bright futures. Minco Silver owns a late stage gold/silver project in China, which might reach production in this current bull cycle.

Admittedly the above companies aren't nearly as exciting as Almadex or Golden Arrow, but to each his own. Our investments are currently a mix of deep value and (hopefully) rational speculations. As long as you are willing to wait two to three years, now is an excellent time to deploy capital into mining equities—regardless of your investment style. I'd recommend putting money to work before the end of the year to take advantage of this consolidation period. It may not last much longer.

Matt Geiger is the general partner at MJG Capital, a limited partnership focused on long-term capital appreciation through investments in natural resources.

Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosure:
1) The following companies mentioned in this article are sponsors of Streetwise Reports: Golden Arrow Resources Corp. The companies mentioned in this article were not involved in any aspect of the article preparation. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
2) Matt Geiger: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Almadex Minerals Inc., Golden Arrow Resources Corp., Golden Valley Mines Ltd., Solitario Exploration & Royalty Corp. and Globex Mining Enterprises Inc. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. Funds under my company's control hold the following companies mentioned in this article: Almadex Minerals Inc., Golden Arrow Resources Corp., Golden Valley Mines Ltd., Solitario Exploration & Royalty Corp. and Globex Mining Enterprises Inc.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview or the time an article is accepted for publication until after it publishes.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in