Last report, I talked about the three punch combination that is bullish for gold. All three hit nicely, USD continued the rolling over trend, we also got a significant breakout to the upside on the cup and handle trend on gold, and saw a nice Golden Cross for gold as well. Hold on for the bullish ride on gold, it is just getting warmed up.
Another big point I made in the recent report was how much the gold mining business needs more exploration and discoveries. What I want to stress in this report is how oversold gold stocks are from the big ones, to the middle tier and down to the exploration juniors.
The last time gold stock valuations were this cheap was in 2000, which was just before the decade long gold bull market from 2001 to 2011. Many investors in the gold space consider themselves contrary investors that look for value.
Here we are at super cheap valuations, that are a perfect setup for contrarian investors. Yet, those contrarian value investors are nowhere to be found. Those that are buying gold stocks with strong potential and reasonable valuations are going to be rewarded handsomely.
Things are really shaping up nicely for gold, silver and precious metals stocks, especially the smaller juniors because they are extremely cheap. While cheap, things are in place to see gold perform very well and make them much less cheap.
In this report, I have a couple new companies to add to the radar screen, and then will give an update on recent picks.
Two New Radar Screen Picks
Westhaven Ventures (WHN.V)
Westhaven made a new discovery of high-grade gold in the last quarter of 2018 and the cheerleaders of the stock had it pumped up recently like they were going to hit a 5 or more million ounce gold discovery. The stock hit a yearly high of $1.43 in late December, but, recently they had assay results out that disappointed the arm waving cheerleaders and the stock got the smackdown. It closed on Friday at 75 pennies.
There are a few factors that got the market pumped up when they made their discovery. High-grade gold over significant intersections, combined with it being in British Columbia right beside a highway and infrastructure, open for year round exploration, in a location good for low cost exploration, and a marquee mining family at the helm. But, as is often the case, with a situation with these attributes, the stock got ramped up and the results didn’t meet the stock promotion.
As soon as the results went out, I made comments that I was concerned about the possibility of erosion of the veins. This didn’t make me very popular, but, the truth machine certainly cut off the veins to the southeast.
They are looking for a cluster of epithermal veins, sometimes, erosion can cut off some of the depth potential. Evidence of the potential for erosion is that there was a lot of gold found in the river below. Another indicator is the high-grade gold itself, often in an epithermal veins system, you aren’t expecting to see the high-grade at the top of the system.
From the recent drilling it looks like they have cut off some of the strike length, but, they feel that it could have been caused by faulting and that they can pick it up again. Where they are in the system has me worried about some of the depth potential. What I can’t ignore is the sweet high-grade gold they have found. It doesn’t take a lot of strike length and depth, with the grades they have found to get in the million ounce plus category.
Next they are doing an IP survey, which might help them to light up the veins with geophysics. They also plan to start drilling again in around a week or so. If they can pick up the vein on the other side of the fault, and find more veins with the high-grade gold, things could get really exciting for the stock again quickly.
Gren Thomas is the chairman and a big shareholder, his young son, Gareth Thomas, is the President/CEO. Gren lead Aber Diamonds that found Canada’s second diamond mine. He is a marquee player in the mining business with a big following.
They are in the early days of exploration and already have close to the 100 million share count that I see too many explorers have these days. This amount of stock can hamper the stock moving up, but, it is not a big concern, as the insiders own over 30% and they have a well healed investor in Gren Thomas as a big shareholder. So, I don’t see them having a hard time raising money in the future at reasonable valuations to keep the stock dilution down.
They still have a lot of drilling to do to understand the vein system and hopefully find more veins with high-grade gold. Due to the recent pullback, and drilling right around the corner, it is shaping up for really good timing for investors taking a position around the current valuation.
Amex Exploration (AMX.V)
Amex has an interesting high-grade gold discovery on their Perron project in Quebec, which is the project they recently announced a 1.7 metre intersection of 393 g/t gold hit on. That has caused the stock to come to life as it has doubled in price recently on strong volume. They have around 50 million shares on a fully diluted basis, which gives it a fairly modest valuation. In addition, they have more drill results pending, and I expect they will be cranking up the drilling a lot more this year.
The project was formerly partnered with Agnico Eagle who declined to continue on the project in 2017 after spending $2.5 million. This doesn’t bother me, for one they did a lot of good work, secondly, it can often take a few companies taking shots at a project to open it up. It has happened many times in mining. They are compiling all this past work, and reviewing it and that process has lead them to the high-grade gold discovery.
The recent drill results came from the East Gold Zone (EGZ), including the 1.7 metre intersection of 393 g/t gold, which was drilled in 2019. At the EGZ, they have two parallel zones, one is the narrow high-grade zone and right beside it the wider low-grade zone. The drilling so far has been close to surface, within a few hundred metres, what makes things really interesting is these two zones look like they could come together at depth.
Even in the low-grade zone, they have hit some good numbers including from 5-13 g/t gold, which makes it important as well. But, the big news has come from the narrow high-grade zone. Which has a few reported holes through it that all hit bonanza grades, and they have one hole pending that is the closest to surface in this zone.
It will be very interesting to see the drill results from drilling these two zones along strike, both directions are open, and even more importantly how they look at depth. Both zones are wide open at depth, and they even had some gold sniffs between the two zones. I’ll be eagerly awaiting to see if they can find more zones.
They have a big fault that goes from one side of their claims to the other, and some cross cutting dykes near where they found the EGZ. How this all fits together will be exciting to see with future drilling. I sure like finding these wide open high-grade gold systems, especially in companies without blown out share structures.
As my longtime readers know, I don’t like chasing stocks once they have spiked, so I would look at this as something to take a starter position, and then look for dips in lulls between drilling and assay results to increase the position. I like what I see so far, and think they have a very good chance of delivering more eye catching results, in a company with a reasonably tight share structure that could add up to a much higher valuation.
Updates on Recent Picks
On December 17, 2018, I picked a group of 4 precious metals stocks that were my tax loss selling picks. They included: Minaurum Resources (MGG.V), Premier Gold Mines (PG.T), Equinox Gold Mines (EQX.V) and Great Bear Resources (GBR.V).
On January 21, 2019, I did a report with 3 precious metals stock picks, including: Great Bear Resources (GBR.V), Advance Gold Corp. (AAX.V) and Sokoman Iron Corp. (SIC.V).
These various companies are all well position for success as we enter what I think will be a very strong year for the price of gold. I think they are an excellent shopping list for investors interested in the gold space.
Premier Gold and Equinox Gold are larger companies than the rest, they are both mining companies with strong projects that will help them grow inthe future. They are both run by exceptional management, if investors want exposure to gold miners, these two both offer exceptional performance potential. I look at them as core holdings for investors that want exposure to gold stocks.
Minaurum and Advance Gold are both focused on exploration for precious metals in Mexico. I’m the President/CEO of Advance Gold, we are early into a new discovery of an epithermal vein cluster, in the state of Zacatecas in close proximity to several low cost, high margin, major mines. Minaurum has Peter Megaw on their team, who found the big discoveries by Mag Silver, also in the state of Zacatecas. Minaurum has several projects, including their Alamos project where they have found an exciting vein system.
One of the great things about Mexico, is many places offer year round exploration, at low costs for exploration and mining. Exploration in Mexico offers exceptional geology and well developed infrastructure from all the historical mining.
I live in the state of Zacatecas, and run Advance Gold from here, we are focused on exploration in this region due to the perfect weather for year round exploration, well developed infrastructure with both our projects having road access and power lines running through them. Plus, the exceptional geology that offers world class potential and the ability to keep costs down and thus keep the stock structure tight.
Sokoman Iron has a high-grade gold discovery, in Newfoundland, which is right beside a highway and can be drilled year round. It follows a common theme that I’m focusing my picks on these days, projects that hit with the truth machine, with good access, so they can work throughout the year and keep costs down. No helicopter projects if you will.
Sokoman has pending assay results from their December drilling that wrapped up just before the Christmas break. They also will be cranking the drilling up again fairly shortly, probably within the next couple weeks. So, they will be reporting pending assays, then more drilling and more assays.
Great Bear has recently reported bonanza grade results, including a 0.70 metre intersection of 1.6 kg/t. That is not a typo, it is kilograms per tonne of gold, 1600 g/t that has really got the stock moving.
The project is in Red Lake, right beside the main road going into town, it can be drilled year round and they are loaded up with cash to do a lot of drilling. The project is wide open along strike, has three zones, the juiciest one so far is the Hinge Zone. The known zones will keep them very busy, they have around 30k metres of drilling planned. Their core shack is close to the assay lab in Red Lake, the lab is not very busy so they have fast turnaround times.
They have some deep seated geological structures that are only known to exist in Red Lake at Goldcorp’s Red Lake mine and at Great Bear’s Dixie Lake project.
Despite having all these attributes, the company still has only around a $100 million valuation. The big thing about the Red Lake mine is that it is a deep underground mine, the Dixie Lake project has only scratched the first couple hundred metres from surface and the depth potential is wide open.
If they continue to deliver with the truth machine like they have, and I strongly believe based on the geology, model and drilling that they will, their current valuation will prove to be a bargain.
There you have a couple new picks and updates on other recent picks that I believe all have a lot of room for growth ahead based on the quality of their projects and their valuations. In a stronger market for gold that will amplify their performance potential.
I have more picks that I see performing strongly as gold and silver perform better. It is my intention to write them up and get interviews with their key management. Stay tuned for more reports coming soon.
All the best,
Allan Barry Laboucan
Allan Barry Reports
Advance Gold (AAX.V)
P.S. my reports are for information purposes only, before making any investment decisions it is important to do your homework and speak with your financial advisers.