Update from the Allan Barry Reports
Brought to you by Advance Gold (AAX.V)
Thought I would change it up a little today, considering I haven’t found any new picks. Some of the current picks and even one on my watchlist made news or had interesting stock price action this week. So, I thought I would report on that today.
Pure Gold and Great Bear
One of the picks from the report, Great Bear Resources (GBR.V), has been firing on all cylinders. Due to their exceptional discovery of high-grade to bonanza grade gold at their Dixie Lake project. Yesterday, Pure Gold Mining (PGM.T), which has a lot of ground beside Great Bear, put out a feasibility study that didn’t meet the markets expectation.
Pure Gold’s stock got hammered, and it took Great Bear down with it. In a fickle market like we see in juniors, that is just starting to heal, this kind of tag along action can happen. Even though, the two companies are far apart in where they are in their life cycles.
Pure Gold is at the advanced stages, while Great Bear is at the beginning stages of an impressive gold discovery. A few days before Pure Gold put out the feasibility study, they reported a resource estimate. I looked at the news, and the valuation, and ran the numbers. It looked like they were fairly valued based on the resource so I passed on adding them to my radar screen.
I was glad I passed, because the market was looking for a lot more from the feasibility report. It looks like one of the key numbers that likely spooked the market was after putting out a resource estimate of a couple million ounces, the feasibility study only included one million ounces.
This is part of doing these various studies, the resource estimate has less statistical confidence requirements than a feasibility study. It isn’t like they have lost a million ounces of gold. But, that didn’t seem to matter to the market and they quickly gave it a haircut, dropping from around 80 cents to 65 cents very quickly.
It also put some pressure on Great Bear as well, sometimes closeology can work in a company’s favour, in this case it was the opposite. Despite them being at entirely different stages, one at advanced stages the other in early days of exploration of a new discovery.
Another crucial distinction between Great Bear and Pure Gold is the share structure. Pure Gold has over 250 million shares, and Great Bear only has 50 million shares. Pure Gold could still be a takeover target, but, it won’t be from the biggest gold miners because the project is too small.
To keep moving forward, Pure Gold will need to do more dilution of their shares. On the other hand, Great Bear is fully cashed up with all the funds they will need for extensive drilling throughout all of 2019. If they keep delivering the way they have been, they will also bring in even more funding from the warrants outstanding.
I see it as a complete overreaction for Great Bear to get hammered the way they did off the Pure Gold news. Now that Pure Gold has had a significant haircut, I will be looking closer to consider adding them as a pick.
When it comes to Great Bear, they are on the verge of more drill results coming out shortly. I think there is a pretty good chance they could have two sets of results between now and the PDAC in early March. They have a very good handle on their discovery and where to drill to hit. I’m very optimistic they can deliver good news that will keep their stock performing like a rock star.
Amex Exploration (AMX.V)
Amex is also a star performer of late that has delivered high-grade to bonanza grades from drilling their project in Quebec.
Some folks have even noticed the similarities in grade between Amex and Great Bear and have asked the possibility if Amex could be the next Great Bear. People in the mining sector love these types of comparisons. I try to look at companies individually, based on the merits of their own projects.
But, I would say it is not an out to lunch comparison. So far, Amex has delivered the impressive drill results from a high-grade zone that is steeply dipping. They have drilled five holes into the zone and from top to bottom have delivered the bonanza grades of gold.
Another important hole, with pending results, is a 25 metres step out, that was reported to contain visible gold. There is a high likelihood that the step out hole will deliver as well.
It is also worth noting that the company’s President/CEO, Victor Cantore, who owns over 3 million shares, reported buying more today. The audience following the stock liked that development and the stock closed up 16.9% today. It wasn’t a big purchase relative to his stockholding, but, it wasn’t lost on the market.
To answer the question about whether or not Amex could become a rock star like Great Bear, I would say they are certainly going in the right direction with the truth machine. If the pending step out hole hits bonanza grade, and their future drilling can keep stepping out at depth and along strike, it can certainly be in the cards.
Not sure if I’m ready to make that call just yet because Great Bear is further along in drilling. But, I would also add, that Apex is in the right ballpark and I’m eagerly waiting to see that step out hole. If that hits what I think it will, then they will continue to play catch up.
Westhaven Ventures (WHN.V)
Westhaven has been on an up and down ride since they first announced high-grade gold results from their Shovelnose project in southern British Columbia.
Yesterday, they announced that they were doing a flow through financing to raise $2.5 million for upcoming drilling. I am no fan of flow through financings, as what inevitably happens is, investors buy them for the tax savings. The stock is held for four months and the first chance they get to sell, the stock is whaled out into the market.
Another reason that it concerns me, is that while it was running up to its highs, the rumours and stock promotion was flying around that a lot of big company people were up at the property to checkout the project. Another stock promotion pump was that these companies were eager to write cheques to get involved, but, management had turned them all down.
If that rumour is true, which I have no way of knowing if it was. Then management broke one of the cardinal sins in the exploration business. Rule #1 is that if they are eager to give you money, take it. Rule #2 is if you are considering not taking it, refer to Rule #1.
Let’s say the rumours are true, and they felt like they could pass. Well, then they returned results that didn’t meet the markets expectations and the stock got a serious haircut. And now, those interested parties are gone and they had to do one of these crummy flow through financings that I and many others in the sector hate.
I’m not so concerned about these developments that I’m ready to drop the company from coverage. They have a high-grade discovery, they are doing geophysics that can hopefully help them better understand the known veins and help to find more. Plus, with the flow through funding, they will have plenty of cash for drilling.
Southern British Columbia is currently going through a cold snap that has brought cold temperatures and a lot of snow which will slow them down for a couple weeks. I’m looking forward to seeing the results of their geophysical work and news on the upcoming drilling.
Viva Gold Corp. (VAU.V)
Viva Gold had news out yesterday, announcing drill results that included 100 metres of 1.33 g/t gold, starting close to surface. This is from their Nevada project where they had previously reported high-grade gold.
This is a good combination, some high-grade gold as well as thick intersections of attractive grades for an open pit operation. The high-grade gold is what caught my attention and why I made them a pick, but, I’m equally as impressed with the broad intersection of plus 1 gram results as well.
Another key reason that I picked them is they have a very tight share structure and a modest valuation. Until recently they were a patchy trader, with the results they have delivered, I see that will change. I expect it will enable them to trade more aggressively, be able to lock up funding for more drilling and also see their valuation improve.
Stay tuned for more news from this one, it is a real up and comer.
In addition to finding stocks, another important thing I do is following their developments. Glad I was able to provide some good updates in this report.
I also wanted to let readers know that I’ve tentatively arranged an online interview for tomorrow. It will be with Michel David, he runs Walker River Resources (WRR.V), a recent pick with a high-grade gold discovery in Nevada.
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.