Brought to you by:
Advance Gold (AAX.V) - Sirios Resources (SOI.V)
Walker River Resources (WRR.V)
One of the questions I often get from folks new to investing in gold stocks is what are some picks that will go up a lot, but aren’t too risky. After I stop chuckling and telling them there are no guarantees, these are stocks I start from the biggest and work my way down.
So let’s start today with some of the larger picks that I follow. I have three producers on the list that are fairly young in their lives as gold miners and have strong growth prospects going forward. Following that, I have a few exploration stocks as well.
We are into such a strong gold bull market, a good strategy is to buy the dips on down days, we will see fewer down days than up days, and the down days won’t last as long as the rally days.
Gold Mining Picks
Pretium Resources (PVG.T) has been a pick several times in the reports. Originally the first pick was in the 3 dollar range after they had been beaten down when they reported their first resource estimate. Since then they have gone through trials and tribulations prior to starting mining operations and in the early days of mining. Over the past couple quarters they have got on top of their growing pain issues with a new mine. Key characteristics of the mine are high-grade gold and low cost. This will generate a lot of profits to fuel their future growth. I think this will enable them to be an acquirer of other companies to help them grow. With all the mergers and acquisitions over the past decade, there aren’t nearly enough middle tier gold producers. The middle tier used to be active in M&A using the cheque book to grow. The majors have bought many of them up for their own growth, they have grown themselves out of the ability to even look at a lot of projects because they just aren’t big enough to move the needle. This creates a fantastic opportunity for a company like Pretium that is generating a lot of profit, they also have a healthy stock price so they can acquire with cash or stock. I can see them growing into a major gold focused miner in the future with a lot of their growth ahead of them. For those looking for exposure to gold stocks, with minimal risk, Pretium should be on your shopping list.
Equinox Gold (EQX.V) is a relatively new pick, that is a new mining company, that I picked a few times under 1 dollar. They are run by Ross Beatty, a serial mining entrepreneur with a career of stellar performance for his shareholders. They have been growing their mining operations buying mines that they thought had room for improvement. The game plan that Ross Beatty has promoted is he sees a big gold bull market coming and wanted to build the company as rapidly as possible. This has lead them to have a fair amount of stock out, and their recent news was they are going to do a reverse stock split, on a 5 old for 1 new basis, which will enable them to get a listing on one of the big American stock exchanges. The market has been moving up nicely over the past couple months and I like their short and long term prospects to outperform their peers.
Premier Gold Mines (PG.T) is another fairly new gold miner, with a strong portfolio of projects to drive them forward to becoming a much larger company. Long term readers of the reports are well aware of this company as they have been a pick since they first went public as a gold exploration company. Their roots are in exploration, and they have been buying their way into gold mines, then adding value with the drill rig. This is the way that gold miners used to grow, and I like this old school approach with Ewan Downie at the helm. His family has been in mining for decades and Ewan is an exploration guy at heart who has surrounded himself with a serious team of miners. As gold has started to perform better in the past couple months, their stock has as well. I love their business model for growth, and their portfolio of projects and can see them growing to being a much larger company as the price of gold gains strength in the current gold bull market. This one is a must have on the shopping list for those looking for exposure to gold stocks with a modest amount of risk.
Now for Some Exploration Stories
Throughout my career in the mining sector, exploration is what I have focused on the most. Not only because it has the best bang for the buck upon success. There is another crucial reason, for most of my 3 decades in the mining sector, the industry has not been finding and building enough to replace the old mines.
This has made the supply chain very weak and it puts companies that have success in exploration in a very good spot. The majors and even the companies I mentioned earlier will need to grow through buying smaller companies.
Amex Resources (AMX.V) has an exciting new high-grade gold discovery in Quebec, which is one of the best jurisdictions in the world for exploration, mine development and mining. I started following them as a pick in the report when they were much cheaper around half a buck. They then went to nearly $1.50 and have settled down to around its current price of $0.90. They have a small share count and are tightly held, as time goes on it will get tighter. I started following them early in their discovery as I was impressed with the grades and the potential for them to keep delivering. They have done just that, yet the stock is sort of at the middle point of their high and low range. They are well funded to drill throughout the remainder of this year, so they will have strong news flow. At this point, they are very cheap and offer a lot of speculative value to investors in the space that want to swing for the fences and take on more risk. Having said that, from the fundamentals of what they have reported so far, for an exploration company, their risk profile is fairly modest.
Walker River Resources (WRR.V) has more stock out than Amex, which is often a red flag for me, I don’t like stocks that have heavy share dilution. It makes it harder for the stock to move because of the stock overhang. For me to consider a stock like that, I need them to be looking for something very big. Size and grade can overcome a certain amount of stock overhang and one of the best places on the planet to look for that combination is in Nevada. I started following Walker River at around 10 cents, and around that price became a shareholder as well. What impressed me enough to overlook the share count was what they delivered with the drilling. Their project looks to me like it can deliver a multiple million ounce discovery of high-grade gold in Nevada. Another great thing about Nevada is the costs are low for exploration so now that they are gaining traction, they should be able to fund future exploration with modest stock dilution. They are currently cashed up to drill throughout the remainder of the year, and should start reporting drill results fairly soon from their spring/summer drilling campaign. As a shareholder, and having them as a website sponsor, I have my fingers crossed they will have some good drill results soon. Watch this one closely because when things get exciting in Nevada for an exploration company, things can move very quickly.
I take the dilution of an exploration stock very seriously, which is a key reason that of all the explorers I follow, Advance Gold (AAX.V) where I’m the CEO has the lowest share count. We are at an exciting juncture with our Tabasquena project in Mexico. We have found an epithermal vein system, with widespread gold and silver mineralization near surface and the boiling zone of the system yet to be drilled. To help us better target the deeper boiling zone we have completed a 3D model of the veins hit in previous drilling, and are currently doing a 3D IP geophysical survey. The geophysics will help us to see below the near surface drilling. In our most recent news release I pointed out that in the various mines around us, the boiling zones are in the rocks below the andesites. So far, our drilling has been confined to the first 300 metres and all in the andesites. The goal is to look for anomalies below our drilling in the rocks below the andesites. We should have the geophysical results back and be ready for drilling by early September. I’m looking forward to putting out the results of the geophysics because when combined with our near surface drilling, it will help make our exploration story clearer. We have a small share count, the stock is tightly held by a small group of investors, we are on the verge of important exploration work and have a tiny valuation that I hope significantly improves as we get more work done. The bottom line is that with our combination of quality projects, and a tiny valuation we are in a unique position compared to most exploration stocks.
Gold is having a blockbuster summer, and often during the summer mining stocks get soft, this year they are firming up. August tends to be a great buyers market that is close to late December for finding cheapies.
Much like the first quarter can give good stock pickers that take advantage of the December bargains big gains. We often see the same kind of action after Labour Day when folks are back from holidays and paying more attention to stocks if they take advantage of the August bargains.
Buckle up, the gold stock ride is about to get very exciting.
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.