The Best Junior Mining Gold Stocks (2015)

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Revision — October 07, 2015. Recent news and developments regarding Rubicon Minerals have necessitated the modification of this article. At this present moment in time, I cannot in good faith speculate on this most risky speculation.

By now, I’m sure readers can tell that I’m absolutely convinced that the precious metals sector will rebound in the future, and when it does, I’m anticipating the rise up to be tremendous! Now, when that magical time finally arrives is anyone’s guess (3-5 years, maybe?), and even the best-of-the-best analysts and market forecasters have been dead wrong on their predictions over these past 3-4 years.

Market timing is absolutely impossible, but it ultimately doesn’t matter. Who cares? The most important thing is that you have to be right on the thesis. In short — You win on the buy side of the trade.

Buy right, sit tight, and wait patiently!

Right now, it really doesn’t take a rocket scientist or genius to realize that the precious metals industry is probably the most undervalued and hated sector on earth right now.

Perhaps uranium energy stocks are even cheaper and more despised than the gold and silver miners, but I think we are a few years early on that turnaround story. We’ve had some good news recently with Japan deciding to restart its nuclear program, but public sentiment is still very much anti-uranium. Little do most people know that here in the United States, ~20% of our electricity needs are fueled by clean, non-polluting nuclear energy.

From the EPA:

U.S. electricity from nuclear energy in 2014: 19.5 percent, with 797.1 billion kilowatt-hours generated

Countries, such as China, have immense smog problems that they are constantly fighting, so no doubt uranium will continue to play an increasingly important role well into the future (there are more new reactors under construction today than pre-Fukushima).

But I digress… Moving back along to gold…

With so much turmoil and uncertainty in the world (and markets) today, it sets up a perfect opportunity for value speculators to get in on the right side of the precious metals trade NOW! Many high quality mining stocks are now trading for a fraction of their 2011 peaks. In many instances, these stocks have been slashed by as much as 80%, 90%, or more. I don’t know about you, but I LOVE a good bargain basement sale where all the merchandise must go! Even the finest inventory of goods…

The market is routinely irrational; in the short-term, they say it’s a voting machine. In the long-term, the market is a weighing machine. And right now, gold is in the doghouse… For whatever the reason, this fact should be immaterial to you. Ultimately, the only thing that matters is that right now you have a buying opportunity of a lifetime. One, that perhaps only comes around every few decades or so. A super sale where the very best-of-the-best companies and stocks are trading for a fraction of their intrinsic value.

Or, as deep value discount investors like to say:

  • The baby has been thrown out with the bath water.
  • You can buy now for pennies on the dollar.

Because the “best of breed” stocks are so cheap, you can further mitigate risks by speculating ONLY in the top-flight companies that are led by seasoned industry veterans who have a proven track record of success. There’s no need to take any gambles on high-risk, speculative plays that are backed by unproven management teams who are holding questionable resource deposits!

Market Cycles

Picking the right precious metals stocks can be a daunting task. Unlike your traditional companies, such as Johnson and Johnson (JNJ), Procter and Gamble (PG), Apple (AAPL), etc. these miners are highly, highly, highly, highly leveraged to an underlying commodity. So, if the spot price of gold (currently priced at $1,130/oz) continues to cave in (like it has over the last 4 years with gold falling from its 2011 high of $1,900/oz ), then business becomes excruciatingly more and more difficult to execute… no matter how outstanding and well-run your company is.

As such, you can basically throw out traditional valuation metrics such as: P/E, EPS, PEG, etc. Don’t waste your time. Sure, it’s definitely helpful to look at a company’s balance sheet, but even a metric such as Book Value or P/B won’t really tell you that much… Right now, practically all mining stocks trade at a P/B of below 1, which is almost unheard of in other industries…

To evaluate mining companies, you have to dig deeper and understand the story behind the industry… Perhaps more so than any other sector out there, the mining game is comprised of nothing more than boom and bust periods.

Extreme volatility.

Market cycles.

If you don’t pay attention to them, you will be burned! If you can’t stand volatility and insane price fluctuations on a daily basis, mining stocks should be the last thing you ever speculate in!

These stocks don’t know how to stand still! It wouldn’t be unusual to purchase a few shares today and watch them fall 50% in a matter of weeks… then explode back up over 100%. If you can’t stomach the inevitable rollercoaster ride that comes along with owning these stocks, then perhaps investing in the conventional Buy and Hold stocks would be a better fit for your personality.

Markets go up and markets go down! With mining stocks, they swing violently in both directions. Accept it or don’t speculate in the precious metals space.

In any case, it’s really a no-win proposition for the management teams within these mining companies. When the spot price of the commodity is low and falling precipitously further, profit margins can compress from marginal to slim, or basically none. Management will thus be forced to shutdown mines, lay off employees, cut necessary expenses, stop exploration, and basically try and hang on as best they can to remain solvent until the downturn reverses course. Often times, the bear market’s grip is so tight that the bad times can linger on for longer, and harder than anyone could have ever anticipated.

We are talking about prolonged, ugly bear markets that can stretch for 5+ years. That’s when the going gets tough and the sector gets absolutely decimated (like right now!). With an ugly bear market, even the higher quality tier of companies face the risk of bankruptcy.

Higher risk (relative to blue chip stocks) for potentially much higher reward! But I like to look at it this way — the deeper the fall is, the more astronomical the rise back up will be!

In addition, since mining is inherently a cannibalizing business, if profit margins become razor thin, a company will have to resort to high-grading their ounces to further slash costs. In other words, these miners will be forced into selling off their “low hanging, high quality fruit” at rock bottom, firesale prices! In essence, this “stay alive at all costs” strategy sacrifices profits from tomorrow to tread water today. It’s a sad story, but it happens so often in this cutthroat business…

However, when the tide finally turns (and it always does), at seemingly the speed of light, sentiment towards gold will go from unrelentingly bearish to overwhelmingly bullish. On a dime, it will feel like, the marketplace (shareholders, institutions, analysts, the media, etc.) will rush back into precious metals, sending DEMAND through the roof.

When the spot price of the commodity starts to rally, it tends to do so with a vengeance. As a consequence, over ensuing quarters, profits will start to SOAR! Unlike before, these companies will become overnight cash flow positive again (with ample margin to spare, no doubt) and revenue will start to compound at an astounding rate.

Wall Street will be quick to pick up on this wonderful news and look to exploit the massive profit potential from this turnaround story (those greedy bastards). The big institutions and investors will pile on in by the droves and hound corporate executives to INCREASE production RIGHT AWAY! After all, if the spot price of gold increases by $200/oz and your company produces 5,000,000 oz/year, well, that’s $1 billion in fresh, new profits (assuming expenses stay the same)!

Wow, that’s insane!

Just last quarter, this company was barely even scraping by and on the edge of bankruptcy! Now, this company, along with the rest of the sector, are the darling of Wall Street! But why stop there?

More, more, more!!!

Just as it is human nature, when times are good, people lose their heads! Incompetent management teams will cave in to investor demand and start overpaying for assets to replenish their perpetually depleting inventory. Further, these poorly run companies will take on more debt than ever to finance new construction projects of previously unprofitable mines. Just like that, exploration starts up again, the company hires more staff, opens up more offices, and the CEO’s salary increases by another $10 million.

Hey, don’t worry, we can afford it! Times are good again…

Until the tide finally decides to turn again…

Cut the Fat

Downcycles are healthy for the mining industry — it allows itself the opportunity to cleanse and consolidate. Crappy companies who own no real assets go out of business. Small juniors start to merge with the major players. Management is forced into becoming thrifty, economical, and practical. So, you get leaner, stronger, and much more efficient companies as a consequence.

Just look at Barrick Gold (ABX/ABX.TO) as a perfect example of this. They made a tremendous amount of mistakes during the last upcycle but seem to have learned their lesson. Barrick brought in new management, reduced costs, eliminated unnecessary expenses (e.g. middle management), closed down offices, and made an aggressive pledge to shareholders to reduce it’s debt by $3 billion in efforts to improve its extremely bloated balance sheet.

Quite frankly, you just won’t ever get this type of “battening down the hatches” behavior when times are roaring.

As a speculator, I’m all for it… But that doesn’t mean I want to speculate in a non-nimble, congested stock like ABX/ABX.TO either!

Playing the Next Cycle

As I get geared up for the next upcycle, conveniently, I’m able to analyze how companies performed during the previous cycles to aid me in my speculation decisions. To help readers, I will do my best to succinctly share my own points of view on this matter.

For starters, I’m not interested in buying into the largest gold producers on the market. A company like Barrick Gold has a horrendous balance sheet and they are one downgrade away from falling into junk bond category.

No thanks, I’ll pass.

As it pertains to the other majors, such as Newmont Mining (NEM) and Goldcorp (GG/G.TO), these companies are solid, obviously, but too large in my view to really help you ride the leverage up to new heights. Further, these large cap companies pay a dividend so shareholders will no doubt demand a larger piece of the growing pie as times get better. Let’s just focus strictly on share price appreciation with these speculations!

Quite frankly, what I’m really looking for are smaller up-and-coming producers, developers, and explorers who weren’t really around during the last market cycle to screw things up. In other words, the companies that I’m looking for are the ones who aren’t encumbered by an overwhelming degree of bad debt.

I want companies who were just starting up around 2011 and were able to observe and learn from all the stupid mistakes that the major producers made…

A fresh start, or clean slate are positives in my book. I want my speculations to start the race to the upside at the starting line, not 20 yards behind (like ABX/ABX.TO).

These quality junior companies should now be just entering production, far along in development, or on the cusp of completing a very attractive Feasibility Study to further validate their project so that they can position themselves as a strong candidate as a takeover target from a major producer.

Those are the types of companies I want to speculate my hard earned dollars into!

People, People, People

In the mining business, you actually never really do speculate in a company. Rather, you speculate in the people who run the show. Unlike perhaps any other business out there, when speculating in a mining company, you had better select the right management team! Nothing will doom you to failure or mediocrity more than backing the wrong horse(s)!

Just look at Randgold Resources (GOLD) as the perfect example of what a high quality management team can do for a stock. Whereas most mining shares are down 80% to 90% over the last 5 years, GOLD has held together much more firmly, down just ~43%. In this type of blood bath environment, those are some pretty impressive results to say the least!

From Google Finance:

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So, as I educated myself and learned more about the mining industry, one thing I realized early on is that you only want to speculate in the absolute best leadership teams out there. These are individuals who have a proven track record of delivering projects both on-time and on-budget. Further, these individuals need to have a history of not only creating billions of dollars of wealth for themselves, but more importantly, for their shareholders!

Believe it or not, the best-of-the-best mining executes are actually quite easy to pick out. They are ubiquitous within the industry, so you just have to do a little bit of homework to find out who the all-star players are…

I have spent literally hundreds of hours doing such research, so I’m more than pleased to share the results of my findings with you in this article. 🙂

Enough said, let’s get to my Top Picks in the junior mining resources sector!

Top Picks

The following companies and stocks are my absolute favorites to play in the upcoming turn in the gold market. Of course, I can’t guarantee that they will all perform spectacularly, but like an NFL Draft, for example, you just try and speculate on the highest reward/lowest risk prospects as best you can.

Please Note:

Any currency conversions made in this article will use the current rates (as of September 25, 2015) of $1 = C$1.33

From Google:

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Pretium Resources

CompanyPretium Resources
Ticker: PVG (NYSE); PVG.TO (TSE)
Current Share Price: C$7.72 ($5.79)
Market Capitalization: C$1.02 billion ($760 million)
Leadership: Bob Quartermain (CEO)
Jurisdiction: British Columbia; Canada
Main Project: Brucejack Gold Mine
Status: Final permits granted; latest round of financing completed; development of gold mine commencing
Production Estimate: 2017

From Google Finance:

Screen Shot 2015-09-26 at 9.03.10 AM

Premium Resources is led by Bob Quartermain, a geologist by trade, who is a seasoned mining veteran with over 38 years of experience. Prior to starting Pretium Resources, Mr. Quartermain was the president of Silver Standard Resources (SSRI/SSO.TO) from 1985 to 2010, where he helped take that company’s market capitalization from $2 million to $1.9 billion. Put in context, SSRI stock rose from about $0.78/share to $48.00/share, creating millions (and perhaps billions) for shareholders.

Mr. Quartermain is a legend in the mining industry. He has been exceptionally successful before in the past, and knows how to take care of his shareholders. Having Bob Quartermain lead the charge further incentives me to speculate into PVG/PVG.TO stock. As mentioned above, with mining companies, you only want to speculate in the very best people who have a strong track record of major success stories. With Mr. Quartermain, Pretium has the right man steering the ship.

What really intrigues me about Pretium Resources is the gold deposit that they control. Although they own two major projects, Brucejack and Snowfield, it’s Brucejack that is on everyone’s radar right now, which is on the fast-track to production in 2017.

From Pretium:

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The Brucejack gold mine is located in jurisdiction-friendly British Columbia. Further, Pretium owns 100% of the project. What makes the Brucejack project so intriguing to me is the combination of high grade and large quantity.

Typically, when it comes to gold mines, it’s a trade-off — You either find a deposit that is high-grade and small in size, or a mine that is large, but of low-grade quality.

With Brucejack, you get the best of both worlds!!!

From Pretium:

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The Feasibility Study, completed in 2014, shows that the Valley of the Kings (the key location within Brucejack that contains high-grade visible gold stringers) contains at least 6.9 million ounces of gold, grading out at an insane 15.7 grams per tonne gold (g/t)!

From Continental Gold, another developer (and competitor) who controls the high-quality Buritica gold mine in Columbia:

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Brucejack sits all alone at the top RHS of the chart (high grade + large resource)! When it comes to undeveloped gold deposits, Brucejack ranks among the very best on an extremely short list of comparable projects. Quite simply, in this industry, you seldom come across such a tremendous find; Brucejack is indeed world-class!

Feasibility Results:

Here are the key takeaways from Feasibility Study (June 19, 2014):

From Pretium:

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In regards to the technicals, Brucejack is highlighted to contain 7.27 million ounces of gold. The mine life is estimated to be 18 years, with an annual production rate set to 404,000 ounces, for the life of the mine.

All-In Sustaining Costs (AISC) are a ridiculously low $448/oz, which is well, well, well below industry standard. This is all made possible due to the aforementioned high-grade ore found in this world class mine.

So, should the spot price of gold ever rise to an absurd level in the near future, a company like Pretium will most definitely benefit on the leverage to the upside; the increase profit margins will be most apparent! Further, in a downmarket, Pretium will present a lower risk option for speculators because the company will still be profitable, even at say $700/oz gold… While most other gold producers are already struggling at generating positive cash flow at $1,100/oz gold, Pretium should have ample margin to help cushion any further declines in the price of gold to the downside.

Key Stats:

Net Present Value (NPV), using 5% discount rate; $1,100/oz gold, is C$1.93 billion ($1.45 billion), after taxes.

Internal Rate of Return (IRR) is a robust 28.5%, assuming $1,100/oz gold.

Enterprise Value is C$961.46 million ($720.93 million).

PVG.TO has a current market cap of C$1.03 billion ($770 million).

As already mentioned above, conventional evaluation metrics don’t work for most gold mining companies, especially not at today’s prices. Further, with junior explorers/developers, they aren’t yet generating any revenues/cash flow…

But for documentation purposes, here they are.

From Yahoo Finance:

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The estimated CAPEX for the Brucejack project is $746.9 million. With the most recent round of financing now completed, Pretium has raised an additional $540 million ($350 million through credit facility; $150 million through streaming deal agreement; $40 million in private placement.

The financing seems agreeable to shareholders, with a minimal amount of share dilution. There are currently only ~134 million shares outstanding.

Here are the details of the most recent private placement:

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In regards to top shareholders, Pretium is owned by the following:

From Pretium:

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Silver Standard Resources is Mr. Quartermain’s former employer, who sold the project to him. They control a large 12.81% ownership stake in Pretium. Zijin Mining completed a private placement back in December of 2014, buying up 12,836,826 shares at C$6.30/share ($4.72), for a total speculation of C$81 million ($60.74 million).

With Silver Standard Resources and Zijin Mining as major shareholders, Pretium is backed by some of the big boys of the mining industry.

Risks vs. Reward:

I wouldn’t go as far as to say that PVG/PVG.TO is a slam dunk, but it’s one of the safer junior mining shares you can purchase out there. The company is backed by outstanding leadership, the Brucejack gold deposit is world class, British Columbia is a very safe operating jurisdiction, and the project is on the fast-track to production in 2017, with permitting and financing now completed.

Since the total estimated cost of the project is $746.9 million, there will most likely be additional private placements occurring as the project advances along.

What are some of the risks? With PVG/PVG.TO, you will most likely end up paying a premium for such high quality; the secret is out and everyone knows about the tremendous opportunity the Brucejack project offers to speculators. Shares are currently trading around C$7.72/share ($5.79), so the company is definitely not trading as cheap as it was in the past. Further, with a market cap over C$1.0 billion ($750 million), such a stock will undoubtedly suffer from the law of large numbers… It’s feasible that PVG/PVG.TO could 2x, 3x, or even 5x on the next gold rush boom, but the more the stock rises (and it will keep doing so as the project advances), the more difficult it will become for it to hit 10x, or greater.

Also, since Pretium is not yet a gold producing company, there will exist concerns that are unavoidable when developing a gold mine project. As it pertains to Brucejack, the project is not straight-forward, nor is it cheap. Brucejack is larger scale, and the estimated capital required to take it to completion is substantial at $746.9 million. The higher the costs, the more potential there are for risks… If funds should run dry (although less likely now since they just recently raised an additional $540 million), Pretium will need to figure out a way to generate cash to keep the project moving along.

Hiccups, delays, increased burn rates, etc. are all issues that may crop up at some point in time during development… but again, these concerns are nothing new and ones that impact any project currently under construction. On the brightside, with decreasing fuel costs (due to the fall in oil prices), and a stronger USD, mining companies (in general), have been able to cut operating expenses, which is a good thing. You can’t time these type of things, of course, but my point is that the conservative numbers from the Feasibility Study may yet be improved upon in the upcoming future.

Let’s hope management can stay conservative with funds and execute on-time and on-budget. Given the leadership at the helm, with their experience and history, this should be the expectation. The good news is that construction is estimated to be completed in late 2017, with commercial production starting shortly thereafter. So, that’s really not too many years away…

And who knows where gold prices will be by then? If times are good again, the market will pay a premium for the best-of-the-best. And Pretium is just that! In addition, a major gold producing company can always come along to snatch up Brucejack at any given time; no doubt compensating existing shareholders with a generous premium to do so.

So, the downsides with this company are few, but it’s no guarantee either. At this time, I’m interested in establishing a position, but I’m going to be patient and wait for good entry points.

Bottom Line: I love high quality and Pretium Resources has that in spades across the board (leadership, project, jurisdiction, shareholder backing, etc.). PVG/PVG.TO is my Top Pick in the junior mining space.

Dalradian Resources

CompanyDalradian Resources
Ticker: DRLDF (OTCMKTS); DNA.TO (TSE)
Current Share Price: C$0.750 ($0.56)
Market Capitalization: C$122.74 million ($92.03 million)
Leadership: Patrick Anderson (CEO)
Jurisdiction: Northern Ireland, United Kingdom
Main Project: Curraghinalt Gold Mine
Status: Feasibility Study underway; target completion Q3 2016
Production Estimate: TBD

From Google Finance:

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Calling the shots at Dalradian Resources is Patrick Anderson, an exploration geologist with over 20 years of experience. He was the CEO and co-founder of Aurelian Resources, which was acquired by major gold producer Kinross in 2008.

As we have been emphasizing in this article, when speculating in the junior mining sector, you want to back management teams who have a proven track record of creating value for shareholders.

When Mr. Anderson sold Aurelian Resources to Kinross for $1.2 billion, he managed to do so while squeezing out a 63% premium for shareholders:

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The main reason for speculating in Dalradian Resources is to gain an ownership stake into its Curraghinalt gold deposit.

From Dalradian Resources:

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Although not to the same degree of size and grade as the Brucejack project, the Curraghinalt deposit is still high caliber, and an amazing find in its own right. Although Northern Ireland has not historically been a “go to” destination for mining and exploration, that quite simply only means that there is a lot of untapped potential in this region.

We’ll have to carefully watch how events unfold as the project advances, but as of right now, it looks like the government and the people of Ireland are in favor of Dalradian Resources moving forward and taking the mine into production.

From Dalradian Resources:

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When speculating in a quality mining company, it is of paramount importance that we consider any geopolitical issues within a region. After all, a gold mine is an immobile hard asset; good luck trying to relocate the deposit should turmoil ever erupt in a given jurisdiction!

Northern Ireland is a first-world constituent country of the United Kingdom. I wouldn’t anticipate running into any serious problems here, but I will be monitoring the progress of the Curraghinalt gold mine with keen interest. If the project can be completed on-time (or ahead of schedule), I’ll consider that a huge win in my book, and it will give me even more incentive to re-visit and speculate in any future resource projects in Northern Ireland.

PEA Results:

The most-recently completed Preliminary Economic Assessment (PEA), released on October 30, 2014 is shown below:

From Dalradian Resources:

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The Curraghinalt gold mine is a medium-sized project, having grown considerably by 6-fold since 2010. At present, the resource is estimated to contain 3.5 million ounces of gold (1.0 million ounces measured and indicated, and ~2.5 million ounces inferred). According to the PEA, annual production is scheduled for around 162,000 ounces/year, with a mine life of 18 years.

At 9.3 g/t, we are still in the realm of very high grade.

Cash costs of $485/oz look reasonable, so the mine should remain profitable even if the price of gold stays depressed for the coming years, or decade.

Key Stats:

Net Present Value (NPV), using 8% discount rate; $1,054/oz gold, is C$488.06 million ($366 million), after taxes.

Internal Rate of Return (IRR) is a strong 29.9%, assuming $1,054/oz gold.

Enterprise Value is C$88.42 million ($66.30 million).

DNA.TO has a current market cap of C$122.74 million ($92.03 million).

From Yahoo Finance:

Screen Shot 2015-09-26 at 12.18.58 PM

Initial CAPEX is estimated to be ~$249 million. As of June 30, 2015, Dalradian reported about $36 million of cash on hand. This project is still in the early stages of the game, but no doubt, additional private placements and fundraising will be necessary to take Curraghinalt all the way to production (unless the company is bought out before then).

As recently as September 15, Dalradian just finished another private placement to raise C$35 million in additional funding.

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The big money backing up this project are ubiquitous players in the precious metals game, who have been massively successful.

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Let me cut right to the chase here — When a multi-billionaire like Ross Beaty (who is held in the highest regard by those in the natural resources sector) is placing major bets on a project (to the tune of C$11.3 million), who am I not to follow?

Screen Shot 2015-09-26 at 12.37.35 PM

Ditto for Eric Sprott.

The smart money has clearly spoken; there is a ton of upside potential with this company and project!

Overall progress has been wonderful, and a Feasibility Study is anticipated to be back sometime around Q3 2016.

Here’s a quick summary of the work undertaken so far:

From Dalradian Resources:

Screen Shot 2015-09-26 at 12.29.31 PM

Risks vs. Reward:

Dalradian Resources is one of my favorite junior miner plays to buy in this current downcycle. Although the project still has a long ways to go until completion, I see this Top Pick as being one of the safer junior mining stocks out there that you can choose from. Similar to Pretium, Dalradian has the right leadership in place, a high quality project located in a safe jurisdiction, and the right partners backing them up.

Since the project is more uncertain, relative to say a project like Brucejack that is further along the road to full-scale production, shares of DRLDF/DNA.TO can be had for much cheaper. As the PEA showed, even when you use conservative estimates, the numbers still work. The NPV (assuming 8% discount rate; $1,054/oz gold) is C$488.06 million ($365.96 million) with a healthy IRR of 29.9%.

With a current market cap of C$122.74 million ($92.03 million), I would strongly argue that shares are undervalued right now.

Bottom Line: Just like with Pretium Resources, Dalradian Resources is another top quality junior mining stock with immense potential. It’s not a sure thing (the project is still many years out from completion), but a well rounded selection all across the board. And that’s not easy to find in the world of junior mining stocks!

First Mining Finance

CompanyFirst Mining Finance
Ticker: FFMGF (OTCMKTS); FF.V (TSXV)
Current Share Price: C$0.415 ($0.31)
Market Capitalization: C$41.98 million ($31.48 million)
Leadership: Keith Neumeyer (CEO)
Jurisdiction: Vancouver, British Columbia; Canada
Main Project: N/A
Status: Actively acquiring assets
Production Estimate: N/A

From Google Finance:

Screen Shot 2015-09-26 at 1.14.03 PM

With First Mining Finance, I’m not buying into a company for its one, outstanding “bonanza grade” deposit. Unlike with Pretium or Dalradian, my speculation into First Mining Finance is a pure play on speculating with the “best of the best”.

Quite simply, this pick is a bet on CEO Keith Neumeyer, who is someone who has shown in the past to have the skills, brains, and talent needed to turn micro-cap stocks into billion dollar companies. Mr. Neumeyer has a track record of “actions speak louder than words”, and he’s someone who has “been there and done that”.

First, he took a penny stock, First Quantum Minerals (FM.TO) and transformed it into one of Canada’s largest mining and metals company. Currently, FM.TO has a market cap of C$3.74 billion ($2.81 billion).

From Google Finance:

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Next, he started up a silver company, and helped make First Majestic Silver (AG/FR.TO) one of the largest pure silver producers on the planet.

From Google Finance:

Screen Shot 2015-09-26 at 1.43.29 PM

Third time’s still a charm, right (I sure hope so!)?

With the gold industry as beaten up as it is today, frankly, the odds of Mr. Neumeyer succeeding spectacularly yet again increase every single day that the sector continues to suffer.

When times get tough, junior companies either: close up shop, go bankrupt, merge with a major, or sell off assets for pennies on the dollar.

Mr. Neumeyer, with his business acumen and finance background, clearly understands the concept of “buy low and sell high“. Perhaps better than anyone else out there. He employs this winning strategy over and over again… No different than with First Quantum Minerals and First Majestic Silver, Keith is it again, picking up quality assets at deep discounts.

From First Mining Finance:

Screen Shot 2015-09-27 at 9.18.24 PM

In a recent interview, Mr. Neumeyer remarks that in his 30+ year career in the resource sector, he quite literally has never seen assets selling for such a discounted rate. In good times, companies can acquire undeveloped gold projects for about $50/oz or $100/oz… Right now, he’s gobbling up gold assets for as low $9/oz…

Incredible.

It cannot be overstated — To succeed in the cutthroat resources game, you must speculate in the shrewdest people who know what they are doing.

And Mr. Neumeyer is building up quite the portfolio for the company and its shareholders. Here’s a cursory glance with several projects highlighted:

From First Mining Finance:

Screen Shot 2015-09-27 at 9.18.12 PM

I’m not that smart and I sure as hell don’t want to speculate on some unproven leadership team. Speculating on the rebound of gold/silver prices is challenging enough as it is! Let’s not make life any more difficult for ourselves than necessary…

Keith’s latest venture, First Mining Finance, is something entirely different from his previous companies. This time around, Mr. Neumeyer has no intention of growing the company into a major producer. Rather, his plan is to buy high quality assets for pennies on the dollar during this prolonged bear market and later flip them for a profit, or to partner up with other companies/partners to help push a project further into development/production. As a part of the partnership, First Mining will most likely structure some type of streaming, ownership stake, or royalty deal. At this juncture, I can’t say I have a crystal clear idea of what will ultimately become of this company, but I have enough trust in management to give them the benefit of the doubt to do the right thing for shareholders.

Risks vs. Reward:

Because of the nature of the company that is First Mining Finance, I’m not going to get into the same level of details that I did with Pretium or Dalradian; this company doesn’t currently possess any “proven and high probability” resource deposits that are on the clear path to production.

So, as it pertains to risk vs. reward, this is a tricky question to answer; it’s still a little hazy right now. But it should be obvious to anyone that a company such as First Mining Finance is more speculative. As such, FFMGF/FF.V currently trades at only a C$41.98 million ($31.48 million) market cap.

There’s a lot of upside potential here if you believe in Keith Neumeyer and his management team. Further, if you have conviction that the First Mining Finance team knows what they are doing and are indeed buying high quality projects at Goodwill, the $1 store, and other thrift-like outlets, then this speculation may be one worth chasing.

A picture is worth a thousand words:

From First Mining Finance:

Screen Shot 2015-09-27 at 9.18.36 PM

If I was a betting man (which I sort of am), I wouldn’t bet against Keith Neumeyer. Mr. Neumeyer helped grow First Quantum Minerals and First Majestic Silver from penny stocks into billion dollar market caps. Further, Mr. Neumeyer has gone on record to state that his plans are no different with First Mining Finance — The objective is to one day make this his third billion dollar company. Sounds good to me!

For certain, First Mining Finance is still far too new, raw, and unproven to know for sure how things will ultimately turn out, one way or another. We’ll just have to monitor the story and watch how events unfold over time.

Bottom Line: A speculation within a speculation! First Mining Finance has the right team in place to succeed brilliantly, but right now this company and its assets remain an unproven commodity (pun intended). This story will take time to unfold, but it’s most definitely a much higher return type of proposition for the patient speculator.

Rubicon Minerals

CompanyRubicon Minerals
Ticker: RBY (NYSE); RMX.TO (TSE)
Current Share Price: C$1.04 ($0.78)
Market Capitalization: C$410.54 million ($307.84 million)
Leadership: Michael Lalonde (CEO)
Jurisdiction: Red Lake, Ontario; Canada
Main Project: Phoenix Gold Mine
Status: Final stages to Q1 production
Production Estimate: Q1 2016

From Google Finance:

Screen Shot 2015-09-26 at 4.18.03 PM

Rubicon Minerals is a junior miner that I am most excited about. Rubicon operates in Red Lake, Ontario, which has a history of being an incredibly resource-rich town. Gold was first discovered in Red Lake way back in 1926. More recently, Goldcorp moved in and made new discoveries in 1995 showing that the Red Lake Mine contained some of the highest grade gold mineralization found in the entire world (the High Grade Zone averages over 2 troy ounces of gold per tonne!). In 2014, the Red Lake Mine alone produced 414,000 ounces of gold for Goldcorp.

If the Red Lake District is good enough for Goldcorp, it’s good enough for just about any other miner out there (like Rubicon), no doubt!

In regards to jurisdiction, Red Lake and Ontario are about as good as it gets. Mining is a major industry here and the history is so well entrenched, let’s just call it tradition. No concerns, whatsoever.

The CEO ex-CEO of Rubicon Minerals is Michael Lalonde who has over 20 years of experience in developing underground gold projects. Mr. Lalonde hails from Goldcorp where he was a director of underground projects, so he has extensive knowledge and experience with the Red Lake District. Taking on the Rubicon Phoenix Gold project was assuredly a seamless transition for him. Mr. Lalonde joined Rubicon Minerals in June 2012.

The Phoenix Gold project is a very advanced project and we are nearing the final stages leading up to full-scale commercial production. Just this past June, Rubicon poured its first 741 ounces of gold!

Typically, building a gold mine isn’t a trivial task. To go from PEA, to Feasibility, to getting all the required permits, to obtaining financing, to actually building the mine can easily take 10+ years.

In short, pouring that first gold bar must have been so satisfying! Congrats to the entire Rubicon team for all their hard work and accomplishments!

Here’s a map of the historic Red Lake Gold District in Ontario.

From Rubicon Minerals:

Screen Shot 2015-09-26 at 4.40.45 PM

PEA Results:

As mentioned, Rubicon is knocking on the door and right on the cusp of commercial production. Here are the projected numbers from the SRK Consulting PEA (June 24, 2013):

From Rubicon Minerals:

Screen Shot 2015-09-26 at 4.43.45 PM

Rubicon is expecting to produce 165,300 ounces of gold each year for 13.25 years. Like my other Top Picks in this article, this is another high-grade story, at 8.1 g/t.

AISC are projected to be $870/oz. Rubicon Minerals isn’t slated to be the lowest cost producer on the market, but even at today’s low gold prices, the project can still work and generate good cash flow. Like with all these junior miners, it’s leverage to the upside that we are really fixated on. But like I mentioned in the earlier section of this report, my preference on playing the upturn in gold is to go after juniors who have proven resources and are not encumbered with huge debt burdens that were a consequence of making bad decisions during a boom period. Rubicon is starting out on a clean slate with an even cleaner balance sheet.

Here are some figures from the latest PEA company update:

From Rubicon Minerals:

Screen Shot 2015-09-26 at 4.54.29 PM

Key Stats:

Net Present Value (NPV), using 5% discount rate; $1,200/oz gold, is C$423.1 million ($317.29 million), after taxes.

Internal Rate of Return (IRR) is a solid 19.1%, assuming $1,200/oz gold.

Enterprise Value is C$393.78 million ($295.27 million).

RMX.TO has a current market cap of C$410.54 million ($307.84 million).

From Yahoo Finance:

Screen Shot 2015-09-26 at 4.50.27 PM

Rubicon Minerals currently holds about C$77 million ($57.78 million) in the bank. The Phoenix Gold project was partially financed by Royal Gold (RGLD/RGL.TO), through a streaming agreement.

Here are the details of the Royal Gold streaming deal:

Screen Shot 2015-09-26 at 4.56.15 PM

Risks vs. Reward:

When it comes to speculating, I like to make sure I balance out my picks by including a surplus of “safer” selections. Similar to Pretium Resources and Dalradian Resources, Rubicon Minerals is a very solid junior miner that should do extremely well when gold finally becomes in favor again. Rubicon is in the hands of a capable management team with years of experience operating in the Red Lake District.

What I love most about this stock? Rubicon is not far away from revenue and cash flow; at this time of writing, the company anticipates full-scale commercial production commencing in Q1 2016. Because time to money is nearly imminent, one could convincingly argue that Rubicon is less risky than developing stories such as Pretium or Dalradian.

Further, Ontario is a first-rate mining jurisdiction, so you’ll get a lot of peace of mind with this stock selection. Unlike an internet start-up company that you can operate ANYWHERE in the world, a hard asset like a gold mine is forever stuck into the ground. Picking the right properties requires prudent selection of safe mining jurisdictions that have the best odds of avoiding any geopolitical issues.

From Rubicon Minerals:

16775803982_1f8a5a73fc

In these uncertain times, it really doesn’t take much to go wrong for trouble to brew and halt mine production entirely (e.g. just look at Eldorado Gold (EGO/ELD.TO) and the problems they are currently having with the Greek government). So, you can speculate in the highest quality gold deposits in the world, but if you gamble in a high-risk, politically unstable jurisdiction and the company someday isn’t allowed to operate, what good will that do you?

Of course, with high quality, you usually end up paying a premium for it. I can’t emphasize this point enough — There are no free lunches. Luckily, when it comes to Rubicon Minerals, there are a lot more pros (+) than cons (-).

Another potential positive to look out for is this — Rubicon is a great takeover candidate from a major producer, which means a premium buyout is something that shareholders can realistically anticipate to happen in the foreseeable future. But if a merger/acquisition doesn’t happen, Rubicon still has all the ingredients to become a viable, mid-tier gold producer for years to come.

Let’s go over the cons now. For starters, the numbers presented earlier were all taken from PEAs and not from any Feasibility Study… There were none. Instead, “conservatism” was applied to the SRK Model:

From Rubicon Minerals:

Screen Shot 2015-09-27 at 9.53.29 AM

According to SRK (2013), there are 1.1 million indicated ounces and 2.2 million inferred ounces; the total resource base includes over 3+ million ounces of gold. To err on the side of “conservative”, the PEA accounts for only the 2.2 million inferred ounces.

Why is that? The Phoenix gold deposit runs deep and it would have been too costly to convert the inferred ounces to proven and probable. So, management decided to ultimately build the mine, anyway, in spite of insufficient “hard” data available. Instead, the company rationalized that they would worry about updating the numbers at a later time with future drill results (they were very confident the underlying thesis would hold up) .

So, it really depends on how you look at this decision… If you think that management is indeed conservative and looking to “under promise and over deliver”, speculators will be pleasantly surprised (and rewarded). Otherwise, the company’s aggressive decision to go ahead and start construction without first obtaining concrete data in hand will be seen as a huge negative, should they fail to deliver on results (the goods don’t turn out to be quite so good)… For now, we’ve got a few question marks, and the market generally hates uncertainty (thus the low share prices). Maybe the Phoenix gold deposit isn’t as robust and high-grade as we are being lead to believe? For awhile, the market was indeed punishing RBY/RMX.TO for these unknowns.

Is the glass half-full or half-empty?

Revision – October 07, 2015: The glass is indeed mostly empty now, with the recent news from Rubicon Minerals that the Ministry of Environment and Climate Change (MECC) has suspended mill operations due to elevated ammonia issues, among many other issues

CEO Michael Lalonde has also left the company, adding further shrouds of doubt to the Rubicon story.

From Rubicon Minerals:

7003670991_74bb7e5da7

Also, the company’s AISC of $870/oz is still economical, but the profit margins aren’t as lucrative as for some of my other top picks, such as Pretium.

Most recently, Rubicon did experience some start-up problems with its plant, but those issues seem to have been remedied (per the September 2015 Denver Gold Forum slides).

From Rubicon Minerals:

Rubicon_Plant

Further, although the Phoenix Gold mine has a lot of potential, the company doesn’t yet have an obvious “ace up their sleeve” exploration project to add even more value to the stock. Really, I’m nitpicking here… Rubicon has a lot more positive than negatives going for it…

Bottom Line: Rubicon Minerals is a junior miner who owns an outstanding gold deposit in the prestigious Red Lake Gold District in Ontario. The company is rounding the bend and clearing some final hurdles which should pave the way for full-scale commercial production (and revenue generation) as soon as early 2016.

Avoid this stock until at least all current issues are resolved and the SRK reconciliation study returns back favorably.

Pilot Gold

Company: Pilot Gold
Ticker: PLGTF (OTCMKTS); PLG.TO (TSE)
Current Share Price: C$0.370 ($0.28)
Market Capitalization: C$39.64 million ($29.72 million)
Leadership: Matt Lennox-King (CEO); Mark O’ Dea (Chairman)
Jurisdiction: Nevada (U.S.A); Turkey
Main Project: Kinsley Mountain (Nevada); TV Tower (Turkey); Halilaga (Turkey)
Status: Actively drilling
Production Estimate: TBD

From Google Finance:

Screen Shot 2015-09-26 at 6.14.40 PM
So far, I’ve given readers some high quality, “path to production” picks in: Pretium Resources, Dalradian Resources, and Rubicon Minerals. Now that the Top Picks have erred more on the side of “safety”, I’m going to give myself the freedom to speculate a little bit more on the “wild side” with this next selection. 😉

My next Top Pick is perhaps a little bit more uncertain than the others, but with this one, I’m swinging for the fences! Pilot Gold, led by the resoundingly successful duo of Matt Lennox-King and Mark O’Dea is my choice.

Mr. Lennox-King and Mr. O’Dea, if not already legends in the natural resources business, are quite convincingly starting to build up quite the reputation for themselves. Their last venture together, Fronteer Gold (2001-2011), was nothing short of a massive success. These men took a penny stock ($2 million market cap) company and developed 3 Nevada projects to the point where Newmont Mining was willing to pay C$2.3 billion ($2.32 billion) to acquire them in 2011. If you were fortunate enough to speculate in Fronteer Gold from inception to sale, not only did you get to profit from the AMAZING share price appreciation along the way, but in the end, the icing on the cake arrived when Newmont Mining paid C$14/share, a premium of 37%!

Screen Shot 2015-09-26 at 6.46.44 PM

And prior to the Newmont deal, Mark O’Dea and his team sold off uranium assets, held in its subsidiary, Aurora Energy to Paladin Energy for a large sum.

Screen Shot 2015-09-26 at 6.56.14 PM

Similar to Mr. Neumeyer (First Mining Finance), Mr. O’Dea just seems to have this instinctive knack for developing projects and building new businesses.

With Pilot Gold, I really can’t see the story being any different this time around. Just like with Fronteer Gold before it, I believe that the plan remains the same for the team — Continue building up high quality assets so that they can later sell them at the peak of the next bull cycle for a handsome premium.

If you ask me, that’s the PERFECT RECIPE for creating value for your shareholders! At the beginning of this article, I mentioned why I didn’t want to speculate in the bloated majors (e.g. ABX/ABX.TO), companies who shot themselves in the foot during the last period of peak gold by taking on debt and spending recklessly. Why would I? Not when I can speculate in people and teams led by competent money-making mangers such as Keith Neumeyer and Mark O’Dea!

As far as I’m concerned, a speculation made in Pilot Gold is the easiest way there is for me to speculate in Mr. O’Dea. It can’t be said enough — To succeed in the natural resources sector, you MUST speculate in the very best management teams!

Now, let’s take a look at the projects in Pilot Gold’s portfolio!

Halilaga:

Pilot Gold’s first project is Halilaga, located in Turkey. This is a joint venture with Teck Resources (TCK/TCK-A.TO), where Teck Resources owns 60% of the project and Pilot Gold controls 40%.

From Pilot Gold:

Screen Shot 2015-09-27 at 2.07.54 PM

From Pilot Gold:

“Halilaga is a copper-gold porphyry project located 20 kms southeast of TV Tower. In 2012, Pilot Gold completed an initial NI 43-101 resource estimate and an NI 43-101 preliminary economic assessment (PEA¹) for the property. The PEA illustrates the concept of a straight-forward, open-pit mining operation. The project hosts a number of key attributes, including favorable terrain, low elevation, access to infrastructure, and high grades at surface. There also exists potential to improve project economics through contract mining and equipment leasing, metallurgical improvements and government tax incentives.”

Here are the technicals of the Halilaga project:

Screen Shot 2015-09-27 at 1.57.02 PM

The PEA (revised January 29, 2015) shows highlights the following:

From Pilot Gold:

Screen Shot 2015-09-27 at 1.52.08 PM

Halilaga Key Stats:

Net Present Value (NPV), using 7% discount rate; $1,200/oz gold; $2.90/lb copper, is C$632.01 million ($474 million), after taxes. Applying Pilot’s 40% ownership stake gives us a NPV of C$252.8 million ($189.6 million).

Internal Rate of Return (IRR) is an impressive 43%, assuming $1,200/oz gold and $2.90/lb copper.

Enterprise Value is C$30.46 million ($22.84 million).

PLG.TO has a current market cap of C$39.72 million ($29.78 million).

From Yahoo Finance:

Screen Shot 2015-09-27 at 2.02.02 PM

TV Tower:

The second project is TV Tower, which is also located in Turkey, similar to Halilaga. With this project, Pilot Gold owns a majority ownership stake, at 60%. The remaining 40% of the project is owned by the Turkey subsidiary of Teck Resources.

There is a lot of excitement and buzz concerning the TV Tower project; for the most optimistic, there are dreams of building out a full-blown mining district!

From Pilot Gold:

Screen Shot 2015-09-27 at 2.18.45 PM

From Pilot Gold:

“TV Tower is a high-sulphidation epithermal and porphyry gold-copper property located in the Biga District of northwestern Turkey, close to established infrastructure. Discovered by Teck Resources and Pilot Gold (formerly Fronteer Gold), the project hosts numerous gold discoveries to date and abundant untested targets.  A project-first resource estimate on the KCD target returned an Indicated Mineral Resource of 996,000 AuEq ounces (23.06 Mt at 1.34 g/t AuEq) and an Inferred Mineral Resource of 351,000 AuEq ounces (10.77 Mt at 1.01 g/t AuEq) 2.  Recent drilling has focused on the Kayal and Karaay targets (collectively “K2”) in the southern part of the tenure.  Work at K2 demonstrates the presence of a 4-km-long silica cap with multiple gold-oxide targets, associated supergene copper zones and two copper-gold porphyry systems. Drilling by Pilot Gold has returned some of the highest-grade gold, silver and copper intervals ever reported in northwestern Turkey.”

From Pilot Gold:

Screen Shot 2015-09-27 at 2.14.55 PM

From Pilot Gold:

Screen Shot 2015-09-27 at 2.11.55 PM

Kinsley Mountain:

The last major project in the Pilot Gold portfolio is a domestic project, Kinsley Mountain, located in Nevada. Pilot is the lead operator and owns 79% interest in this project. Intor Resources, a subsidiary of Nevada Sunrise Gold Corp (NVSGF/NEV.V) controls the remaining 21%.

Kinsley Mountain had been a gold producer before in the past when gold mineralization was first discovered in 1984. Alta Gold company purchased the property in 1994 and began open-pit mining in 1995, producing ~135,000 oz/year up until 1999. The mine ceased production when Alta Gold filed for bankruptcy during a period of depressed gold prices. Kinsley Mountain is located near Long Canyon, a multi-million ounce gold deposit currently owned by Newmont Mining which was purchased from the same Pilot Gold team (previously operating under the Fronteer Gold label) back in 2011.

From Pilot Gold:

Screen Shot 2015-09-27 at 2.37.21 PM

From Pilot Gold:

“Kinsley Mountain is a Carlin-style, sediment-hosted gold property located south of Newmont Mining’s Long Canyon deposit, with a stratigraphic, structural setting and gold mineralization similar to other sediment-hosted gold systems in the underexplored area east of the Carlin Trend in northeast Nevada1.  Located in southeast Elko County, Nevada, approximately 90 km from Long Canyon, Kinsley hosts a past-producing mine with an extensive exploration database and numerous, untested gold targets.

2014 was a pivotal year at Kinsley Mountain, with a new, high grade discovery at the Western Flank target and ‘proof of concept’ of Pilot Gold’s exploration model. The 2015 exploration program will build on exploration successes to date and will begin to address the district scale potential of Kinsley with the goal of identifying additional areas of high-grade mineralization in the Secret Canyon Shale horizon.”

From Pilot Gold:

Screen Shot 2015-09-27 at 2.12.29 PM

Risks vs. Reward:

A speculation into Pilot Gold provides entry into three distinct projects. Of the lot, Halilaga is the furthest along in development, with a PEA showing a robust IRR of 43%, with a NPV (assuming 7% discount rate; $1,200/oz gold; $2.90/lb copper) of C$252.8 million ($189.56 million) (reflecting Pilot’s 40% ownership stake).

Because PLGTF/PLG.TO shares are currently so heavily discounted by the market, with a present market cap of just C$39.2 million ($29.39 million), The Halilaga project alone justifies the price of entry. Essentially, TV Tower and Kinsley Mountain can be had for free!

That is a wonderful proposition for any serious speculator!

Further, both Halilaga and TV Tower are joint partnership projects with Teck Resources, a major producer with deep pockets. This should come in handy, as Pilot Gold is purely an exploration company, without the means to advance any projects into development.

In regards to free working capital, Pilot Gold has ~C$13.5 million ($10.12 million) of cash on hand.

From Pilot Gold:

Screen Shot 2015-09-27 at 2.57.42 PM

With exploration companies, it is necessary to issue more shares through private placements when additional capital needs to be raised to fund continued exploration and drilling. With C$13.5 million ($10.12 million) on hand, Pilot Gold should have sufficient capital to help them get through 2016. As it pertains to risk, share dilution is something to consider, as the path to money is nowhere in sight (there are no projects ready for prime-time production and revenue generation). Still, with an absurdly low current market capitalization of just C$39.64 million ($29.72 million) and an enterprise value of only C$30.46 million ($22.84 million), shares of  PLGTF/PLG.TO really couldn’t be any cheaper than they are right now! Speculators are getting three high-quality projects with a ton of upside potential for literally pennies on the dollar.

The reward side of the equation is of course predicated on exploration continuing to advance so that one of the projects in the portfolio can move forward towards advanced development/production stage. The ultimate “payout” will arrive when a major producer decides to step in and initiate an acquisition, similar to what happened when Newmont Mining acquired Fronteer Gold in a 2011 buyout for a 37% premium. But that dream scenario won’t happen again unless future drill results keep showing good results and Pilot can clearly prove to the market that its projects are economically feasible. So far, so good.

For the speculator, the risks are that the project(s) do not ultimately get acquired, and that the burn rate becomes too great for the company to continue operations. From the signs of the most recent PEA for Halilaga, and the continued progress being made over at TV Tower and Kinsley Mountain, this concern does not seem to be justified at this time.

Bottom Line: Pilot Gold is an exploration company led by Matt Lennox-King and Mark O’Dea, both of Fronteer Gold fame. The company holds three major projects in its portfolio: Halilaga, TV Tower, and Kinsley Mountain. Shares of PLGTF/PLG.TO appear to be heavily discounted, as the total market cap of the company is currently priced for less than the NPV of Halilaga alone. Right now, a speculator can essentially acquire the TV Tower and Kinsley Mountain projects for free. Pilot Gold is more uncertain and higher risk, but the potential reward is immense.

True Gold Mining

CompanyTrue Gold Mining
Ticker: RVREF (OTCMKTS); TGM.V (TSXV)
Current Share Price: C$0.180 ($0.13)
Market Capitalization: C$71.69 million ($53.76 million)
Leadership: Christian Milau (CEO); Mark O’Dea (Executive Chairman)
Jurisdiction: Burkina Faso, West Africa
Main Project: Karma Gold Mine
Status: Construction at 70% completion
Production Estimate: Q1 2016

From Google Finance:

Screen Shot 2015-09-27 at 7.35.06 AM

For my final Top Pick, I thought long and hard over which company I wanted to include in the basket. With solid anchors such as: Pretium Resources, Dalradian Resources, and Rubicon Minerals in place, I decided that I wanted to roll the dice, so to speak, with the final selection.

With that said, we are going to ride with True Gold Mining, another one of Mark O’Dea’s ventures. True Gold recently appointed Christian Milau as CEO this past April, but as speculators all know, it’s no secret who really calls the shots at this company.

True Gold is an interesting selection for many reasons. The company has an advanced-stage open pit, heap leach mine located in Burkina Faso, West Africa. The Karma project, relatively speaking, is a pretty straight-forward and simple proposition. Currently, the Karma gold mine is ~70% complete, and the first gold pour is anticipated to occur in early 2016. Thus, many of the risks associated with early stage development projects have already been cleared; we are that much closer to commercial production!

From True Gold:

ADR

So, while the gold mine project itself is a “no brainer”, the complications (and risks) associated with this project lie solely in its jurisdiction — Burkina Faso, West Africa.

From True Gold:

Burkina_map_0

Burkina Faso is one of the poorest countries in the world. Further, it’s located in West Africa, a region that is often shunned by prospective speculators as being too risky. And for good reason… There is a lot of truth to these claims, especially as it pertains to a unstable region like Burkina Faso. Most recently, True Gold was a victim of vandalism (costing the company ~$6 million) and was forced to suspend construction activities earlier this year. When the news broke out, shares of RVREF/TGM.V plummeted 25%.

From Mining.com:

Screen Shot 2015-09-27 at 9.06.59 AM

Fortunately, the unrest subsided and full construction of the Karma project resumed on June 1, 2015. To help mitigate any potential conflicts in the future, the True Gold team was able to reach a tripartite agreement between the company, government, and representatives of the community.

From True Gold:

Screen Shot 2015-09-27 at 9.14.54 AM

This good news, unfortunately, was short-lived and yet again overshadowed by some more recent turmoil impacting Ouagadougou, which is the capital of Burkina Faso, on September 17, 2015.

From BBC:

Screen Shot 2015-09-27 at 9.18.21 AM

At the time of writing (September 27, 2015), the following developments have now taken place:

From The Guardian:

Screen Shot 2015-09-27 at 9.21.07 AM

For now, it appears order has been restored. The next presidential and legislative election is scheduled for later this year, on October 11, 2015.

So, we’ll just have to sit tight and wait to see how things unfold…

Burkina Faso is a riskier jurisdiction, no question. But how do the numbers look? Do the rewards outweigh the risks? Let’s find out.

Feasibility Results:

Here are the projected numbers for Karma from the most recent Feasibility Study (December 2014):

Screen Shot 2015-09-27 at 7.52.36 AM

The Karma gold mine is a smaller-scale type of project, with ~1,000,000 ounces of gold in the ground, at low-grade of 0.80 g/t. Annual production is expected to hit 97,000 oz/year.

Although the Life of Mine (LOM) is a short 8.5 years, there are plans to expand the scope of the project by developing the nearby North Kao deposit, which would be expected to add an additional 2.5 years and 118,000 oz/year in gold production.

From True Gold:

Screen Shot 2015-09-27 at 10.51.38 AM

The AISC is ~$700/oz, which makes the Karma gold mine economically feasible, even at challenging spot gold prices.

Key Stats:

Net Present Value (NPV), using 5% discount rate; $1,250/oz gold, is C$265.4 million ($199 million), after taxes.

Internal Rate of Return (IRR) is a spectacular 46.3%, assuming $1,250/oz gold.

Enterprise Value is C$48.56 million ($36.41 million).

TGM.V has a current market cap of C$71.79 million ($53.83 million).

From Yahoo Finance:

Screen Shot 2015-09-27 at 12.31.23 PM

With a NPV (assuming 5% discount rate; $1,250/oz gold) of C$265.4 million ($199 million) and market cap of only C$71.79 million ($53.83 million), shares of TGM.V look heavily discounted. Without question, the market is mispricing the value of True Gold due to the uncertainty and chaos that has engulfed the Burkina Faso region.

Risks vs. Reward:

Obviously, the main risk surrounding True Gold is the fact that the Karma gold mine is located in the politically unstable Burkina Faso region of West Africa.

However, it is worth noting that True Gold is NOT the only mining company operating out in these parts of the woods. Roxgold (ROGFF/ROG.V) is another gold developer who has a project, Yaramoko, also currently under construction in Burkina Faso. Commissioning and production at Yaramoko is currently slated for Q2 2016, which should be just a few months following Karma.

Just to quickly address the Burkina Faso concerns yet again, some reassuring news did recently come out from both Roxgold and True Gold that should help reassure shareholders that both projects are indeed proceeding to plan, in spite of the recent headwinds as a result of the coup in Ouagadougou. The Yaramoko project is ~200 kilometers southwest from the capital, and Karma is ~185 kilometers away.

From Roxgold:

Screen Shot 2015-09-27 at 12.37.59 PM

From True Gold:

Screen Shot 2015-09-27 at 12.42.43 PM

As was previously mentioned, Burkina Faso is one of the poorest economies that can be found anywhere in the world. Yes, there are geopolitical risks associated with this jurisdiction, but it should be noted that mining is a very important industry here, both for the government and local people.

Burkina Faso is currently Africa’s 4th largest gold producer. Outside of Roxgold and True Gold, you also have companies such as Endeavor Mining (EDV.TO), IAMGOLD (IAG/IMG.TO), B2Gold (BTG/BTO.TO), etc. who own gold mines in Burkina Faso. In other words, the recent events should definitely be concerning for speculators, but in the grand scheme of things, they should not be viewed as the final dagger in the coffin that forever halts mining here.

A speculation into a company like True Gold must carefully balance out the risk vs. reward potential. On the brightside, the market cap of the company is so depressed right now, that should the price of gold ever rebound fiercely in the future, it is conceivable to anticipate the share price of TGM.V skyrocketing upwards of 5x, 10x, and perhaps even as high as 20x. There is an enormous amount of upside potential with this penny stock. Granted, this would of course need to assume that stability ultimately reigns supreme in this troubled region.

Most recently (after the vandalism events of 2014), Mark O’Dea has continued adding to his position in TGM.V, and now owns over 9 million shares.

From Seeking Alpha:

Screen Shot 2015-09-27 at 1.08.30 PM

At the moment, the balance sheet of True Gold looks strong, with over C$33.34 million ($25 million) in cash, and C$98.68 million ($74 million) in total, remaining funds. The Karma project should be well financed to production.

From True Gold:

Screen Shot 2015-09-27 at 10.51.45 AM

The remaining funds, outside of cash, come from streaming agreements True Gold has reached with major royalty companies Franco-Nevada (FNV/FNV.TO) and Sandstorm Gold (SAND/SSL.TO).

In regards to future expansion, The North Kao deposit is a strong candidate to help extend LOM from 8.5 years to 11 years, with a gold output of 118,000 oz/year.

From True Gold:

Screen Shot 2015-09-27 at 8.03.13 AM

True Gold’s Karma mine project is simple, straightforward and very economical. What I really like most about this project, relative to many others, is the very high IRR of 46.3%* (using $1,250/oz gold and NPV at 5% discount rate) due to the initial low CAPEX of just $131.5 million.

Unfortunately, the deposit is located in Burkina Faso, one of the riskier jurisdictions out there. As a result, the share price of TGM.V has been decimated in the recent year, falling ~50% over the last year. With every additional 50% haircut the stock takes, the upside reward potential just increases that much more…

For instance, when shares were trading at C$0.40/share ($0.30/share), the stock would need to rise to C$4.00/share ($3.0/share) to increase 10x. At the current price of just C$0.18/share ($0.13/share), the rally up by the magnitude of 10x now only requires the stock move to C$1.80/share ($1.35/share), which should be infinitely easier to accomplish than the former scenario.

Yes, there are risks associated with this speculation, which makes the risk vs. reward profile for True Gold more intriguing than any of the other Top Picks. It will be up to readers to decide if they want to roll the dice with this play.

*From True Gold — The IRR drops (very slightly) to 43.1% when factoring in for True Gold’s 90% effective interest in the  Karma project, with the remaining 10% allocated to Burkina Faso’s carried interest and all government and contractual loyalties.

Bottom Line: True Gold’s Karma gold project is back on schedule and should commence commercial production in 2016. The Karma deposit is economical and should generate solid cash flow from Day 1, even with depressed spot gold prices. Unfortunately, the Burkina Faso region is politically unstable, and this presents much risk to the speculator. This speculation is very high risk for some potentially very large returns. Not for the faint of heart!

Summary

The Top Picks are in! For 2015, the best junior mining gold stocks are: Bob Quartermain, Patrick Anderson, Keith Neumeyer, Michael Lalonde, and Mark O’ Dea.

Wait a minute… Oh right, companies. Let me revise that — Pretium Resources (PVG/PVG.TO), Dalradian Resources (DRLDF/DNA.TO), First Mining Finance (FFMGF/FF.V), Rubicon Minerals (RBY/RMX.TO), Pilot Gold (PLGTF/PLG.TO), and True Gold Mining (RVREF/TGM.V).

Those are my Top 6 picks. But I selected each company for different reasons. Now, let’s try to break them down by category.

Lowest Risk:

If I was to rank each company, as it pertains to potential risk, I would sort the Top Picks as follows:

  1. Pretium Resources
  2. Rubicon Minerals
  3. First Mining Finance
  4. Dalradian Resources
  5. Pilot Gold
  6. True Gold Mining

Please note, when it comes to junior mining stocks, there are inherently risks associated with EVERY company! These stocks have never been and they will never be “buy and sleep well at night” propositions. Instead, as a speculator, you have to “buy and monitor very carefully”.

Pretium Resources tops the list of “lowest risk” candidates because the Brucejack project is a world-class gold deposit that is not only large in scale, but also exceptionally high-grade. Further, Pretium is led by Bob Quartermain who has 38 years of industry experience. Mr. Quartermain helped transform Silver Standard Resources from a small, million dollar company to a large, billion dollar one; the man knows what he is doing. With An AISC of $448/oz, Pretium will be able to withstand a prolonged period of low-priced gold better than most other companies. In addition, British Columbia is a proven and safe mining jurisdiction. With 70%+ of the financing needed to fund the massive $746.9 million project in hand, and all major regulatory permits obtained, it’s full steam ahead to construction! Yes, the scale of this project is massive, but the potential is huge as well. In a strong bull market, I can easily see this premiere developer/producer outperforming many of its peers/indexes. The first gold pour is scheduled for late 2017.

Rubicon Minerals is up next because its Phoenix Gold project is nearly completed and should enter full-scale commercial production in Q1 of 2016. As this stage of the game, the company is simply working out some minor kinks. Similar to the Pretium story, Rubicon has cleared most of the major hurdles. With an AISC of $870, cash flow will be tight, but should still register in the GREEN at low gold prices. The Red Lake Gold District in Ontario is an outstanding jurisdiction to operate in, so no concerns with that. The only concern with this story is if inferred ounces turn out to be less than modeled. So far, drilling results have given speculators no reasons for concern. But any unfolding developments into 2017 are worth monitoring, until full stability is reached.

First Mining Finance is relatively “low risk” because Keith Neumeyer is in charge and he has a history of knowing how to “buy low and sell high”. Unlike a company like Kinross Gold (KGC/K.TO) who was out making lousy acquisitions during the peak of the last gold bull market, Mr. Neumeyer is out right now, when assets are selling for pennies on the dollar, acquiring gold deposits as low as $9/oz. Buying low and selling high seldom gets you in trouble, especially in a cyclical market like that of gold. Especially not when leadership knows what they are doing. But for now, there isn’t an avenue for revenue generation, so there will be risks involved.

Dalradian Resources owns a wonderful project, Curraghinalt, which is probably one of the few out there that has a good shot of surviving it through this ugly commodities bear market. When you can buy the best merchandise on sale, why settle for less? With that said, the project is still many years out, so at this point in time, there is uncertainty with how things will ultimately play out. Northern Ireland appears to be a first-world mining jurisdiction, but without a strong history entrenched with mining, it’s too early to say if permitting will become an issue as the Curraghinalt project moves forward. A Feasibility study should be completed by the end of 2016, and if the results are good, that will further help de-risk the project. I will point out that my own fears for speculating are much abated by knowing the fact that some of the major speculators buying into this story include mining legends such as Ross Beaty and Eric Sprott. Dalradian Resources is backed by smart (and strong) money.

Pilot Gold is a Mark O’ Dea play and looking less risky everyday (the stock is currently trading at absurdly low levels). By speculating into this story, you essentially pay for the Halilaga story and get TV Tower and Kinsley Mountain for free. The NPV, IRR, and payback for Halilaga all look strong, per the most recently revised PEA. Further, having a large company like Teck Resources as a partner (Halilaga and TV Tower) will come in handy, should expenses start to pile up. Because many members of the Pilot Gold team are comprised of ex-Fronteer Gold employees, the core is intact and strong. If Pilot Gold can repeat the success, or even 1/2 of what Fronteer Gold was able to accomplish, we have a strong winner on our hands.

True Gold Mining is another Mark O’Dea company, and the highest risk of all the Top Picks. Although that statement is not meant to be an indictment of the company in and that of itself, True Gold is risky because Burkina Faso is a politically unstable jurisdiction. And with a hard asset, such as a gold mine, there’s no getting around this important fact. With that said, the mining industry is extremely important to the local economy of Burkina Faso, so a prolonged shutdown or stoppage does not appear to be in the cards. However, whenever you have instability and turmoil, all bets are off. Bottom line, there are many much safer alternatives in the junior gold mining space (like the companies outlined above).

Highest Upside Potential:

If I was to rank each company, as it pertains to highest upside potential, I would sort the Top Picks as follows:

  1. True Gold Mining
  2. First Mining Finance
  3. Pilot Gold
  4. Dalradian Resources
  5. Rubicon Minerals
  6. Pretium Resources

True Gold Mining was the riskiest speculation of the Top Picks, so it is fitting then, that it is also the company with the highest upside potential. TGM.V is a penny stock, but even so, it’s trading for fractional pennies relative to its intrinsic value. The Karma gold mine will be a cash flow positive asset when production commences (hopefully sometime in Q1 2016, as planned). If the Burkina Faso dark clouds ever get lifted, shares of TGM.V could easily double overnight.

I really love how economical this project is. The NPV (5%; $1,250/oz gold) is C$265.4 million ($199 million), after taxes. The IRR is 43.1%, and the payback (after taxes) is only 1.3 years. Tons of upside potential here.

With a longer-term perspective, shares of TGM.V could easily 5x, 10x, or even 20x on the next gold rush renaissance. High risk, extremely high reward. There is no middle ground with this stock.

From True Gold:

Screen Shot 2015-09-27 at 4.57.41 PM

This slide was obtained from a Corporate Presentation issued on June 17, 2013. At the time, the 5 year objective for the company was to grow True Gold into a $5-10 billion valuation. Today, the market cap of TGM.V shares sits at C$71.69 million ($53.76 million).

10x would get us to C$716.9 million ($537.6 million).

20x would take us to C$7.169 billion ($5.376 billion). Actually, even a 20x increase would put us on the “low end” of the 5 year objectives target.

For fun, I looked up the price of TGM.V shares on June 17, 2013. TGM.V was trading for C$0.28/share ($0.21). About 2x from where we are today…

So, are those goals realistic?

Obviously, not in today’s deflationary market environment. But if Karma can deliver, North Kao can make it online, and the spot price of gold can rally much higher, anything is possible. Conservatively speaking, 2x to 5x gains seem a lot more realistic at this juncture.

For speculators, it may be prudent to hold out until after the next presidential and legislative election is scheduled for later this year, on October 11, 2015, so that more clarity can be gleaned on the Burkina Faso situation.

First Mining Finance has tremendous upside potential because the newly formed company is buying up assets at rock bottom prices. Typically, that’s a winning strategy for building a sound business. In addition, Keith Neumeyer is in charge of First Mining Finance, and history shows us that he has the know-how on how to grow companies from essentially micro caps into large caps.

Pilot Gold allows us to “buy one, get two free”. Shares of PLGTF/PLG.TO are so discounted right now, that the NPV of the Halilaga project pays for the entire market cap valuation of PLGTF/PLG.TO. Speculators can jump in now and get TV Tower and Kinsley Mountain for free. If Mark O’Dea can work his magic again, there is a good chance that shares of PLGTF/PLG.TO will outperform many of its peers on the way back up.

Dalradian Resources owns a world class gold deposit, and the market tends to overpay for quality on the rise back up. The Feasibility Study is underway and if the results surprise to the upside, the share price should follow suit. So, lots of untapped potential with this advanced-stage development project. Further, Dalradian has buyout opportunity, which could help speculators boost their returns.

Rubicon Minerals is on the brink of becoming a full-time commercial gold producer. Thus, a market premium will start to price itself into the stock (although surprisingly that hasn’t really happened yet; shares are still cheap). Like Dalradian, this company also has buyout potential, which is another plus.

Pretium Resources is my favorite pick, but currently has the least amount of upside potential because the stock has been on fire lately. Shares are currently trying for C$7.72/share ($5.79/share). I missed my opportunity to get in at C$6.08/share ($4.56/share) just a few short weeks ago. And the more this stock rises, the more difficult it will be for it to multiply on the way up. Still good value, but I’m going to try and hold out for the latter price; hopefully another buying opportunity presents itself in the near future.

Overall Ranking:

With speculation, just like with regular investing, we must balance out our preferred risk vs. reward profile as we establish our portfolio.

I don’t believe there is a right, or wrong answer; what works best for one person may not for another. We all have different appetites for fear and greed.

In a Speculation Portfolio comprised of the Top Picks stocks, I would allocate in the following manner:

  • Pretium Resources (25%)
  • First Mining Finance (20%)
  • Rubicon Minerals (20%)
  • Pilot Gold (15%)
  • Dalradian Resources (15%)
  • *True Gold Mining (5%)

Disclaimer:

Speculating in the junior mining stocks can be risky! These stocks are extremely volatile and it isn’t unusual to watch them rise by 20% (or more) and then fall by 20% (or more) the subsequent day. Companies do go bankrupt and shares can fall to ZERO. Please proceed with caution and ONLY speculate with capital that you can afford to lose.

Further, these Top Picks are stocks that I am buying for my own portfolio, but they may NOT be appropriate for anyone else; I am NOT making any recommendations in any way, shape, or form. Full Disclosure — I am long: PVG, RBY, FF.V, PLG.TO, DNA.TO, TGM.V

*Although I greatly appreciate the potential associated with True Gold Mining, another wonderful alternative to that Top Pick is Teranga Gold (TGCDF/TGZ.TO), a company operating the Sabodala gold mine in Senegal. Senegal is also a West African play, but a much safer jurisdiction than Burkina Faso. Further, Teranga is already a gold producing company that generates positive cash flow and has ZERO debt. Shares are currently trading at a modest C$0.60/share ($0.45/share).

Wrapping Up

And there you have it! The Top Picks are in, and now I have a plan in place to execute for my own Speculation Portfolio. I like to buy on the dips and will use any significant down days in the market to establish and build positions.

Again, I’m only speculating with capital that I can afford to lose; there’s absolutely no guarantee that any one of these companies will ultimately end up successful. For all I know, every single one of them could end up going BUST! With speculating, that’s just the nature of the natural resources sector and a risk you have to accept upfront if you are going to play!

In addition to the junior miners, I am also purchasing shares of the mid-tier gold/silver producing companies. My own preference is to allocate 70% of my Speculation Portfolio to mid-tier producers, and the remaining 30% to junior miners (the companies outlined in this article). In general, the juniors offer a higher risk/higher reward profile, relative to the mid-tier/major producers.

The ugly downturn in commodities these past 4 years has completely devastated the mining companies, with even the best-of-the-best stocks down 80% to over 90%. In the process, companies have folded, merged, consolidated, and cut costs to a bare minimum in order to survive. Companies are now emerging from the storm stronger, leaner, and more efficient than perhaps ever before. This is a great thing for the entire mining industry!

Further, what goes down must come back up again! The mining industry, in particular, will survive because the world will ALWAYS need commodities, especially precious metals like gold.

Please note — It’s prudent to purchase these type of stocks in tranches (multiple batches over time as opposed to all at once) because they are so inherently volatile. For myself, I only like to average back in on down days, at a reduced cost basis. If any particular stock runs away, so be it… odds are quite good that you will get another crack at it again in the future.

Further, in a deflationary environment, these shares CAN and WILL fall even lower! With each losing day in the RED, however, the absolute ROCK BOTTOM floor for these stocks only gets reduced more and more. As a consequence, the upside potential becomes that much more spectacular.

Gold will eventually rally and re-emerge from this dark abyss; it is an inevitable certainty (use history as your guide).

150727CDDchart1

Market timing the EXACT date when that will occur is an impossible task for ANYONE, but ultimately, it doesn’t matter; you don’t need to call the absolute top or bottom to succeed brilliantly! As a speculator, you just have to aim close enough where you’re essentially in the ballpark somewhere. And right now, where we stand couldn’t be any more obvious…

The meltdown has already occurred!

With these mining stocks, most everyone (especially a savvy speculator) should be able to conclude the following:

Future upside >>>>>>>>>>> Any remaining downside

If you love a good sale, well, the merchandise is now being offloaded at 80% to 90%+ off retail price right now! Everyone knows to “buy low and sell high” but hardly anyone ever does it… Demand for these stocks are at all-time lows. Just go to Seeking Alpha and check out how many gold-related articles get published everyday… almost none!

As an investor/speculator who loves to buy assets at the bottom of a cycle, I couldn’t care less what other people are doing…

I am establishing my holdings NOW, when the entire sector is utterly hated and despised by everyone. NOW, when I can pick up quality shares for pennies on the dollar. For myself, I want to get well positioned ahead of the herd so that I can catch the next flight on time.

Because when the hour arrives when it’s finally time for these stocks to soar again, the rise to the top will be EPIC!

Revision October 07, 2015 — There is no substitute for a top-flight management team. At the time this article was published, I prioritized management as NUMBER ONE for many of the Top Picks, but swayed, with the preference of project and jurisdiction for some others (i.e. Rubicon Minerals).

That turned out to be a mistake… An outstanding deposit can still be wrecked by a poorly run, border-line incompetent management team.

I apologize for not performing enough proper due diligence.

Lesson learned. The highest quality management team trumps all else.

 

Happy Speculating!

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Ken ArnoldGarveyTedFI FighterKen Recent comment authors
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bob
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bob

Very well done. Very well written. You clearly have spent a tremendous amount of time researching and compiling data.

Gold needs to break $1156 for there to be the next leg up. Lets see if that happens. If gold can rise swimming upstream against a strong dollar that will be really telling. Lets watch!

Mike
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Mike

At what point were you going to let the readers know about the 2 pending class action law suits against pretivium?

Andrew
Guest

I should have 3500 in capital by the 8th of October, and I was wondering what overpriced dividend stock to buy. I mean I think we are at a point here where most dividend stocks are overpriced and any little bad news seems to send them running for the hills. I have to agree 100% that the miners are way oversold here and I think its time to scoop some up. I think I will start a position in PAAS & or AG next week. I wouldn’t be surprised if they fell another 50% from here, but I think it is inevitable that the metals will rise. Buying low and selling high is the name of the game. The nice part is I can still collect the dividend from PAAS in the meantime. I think both of those companies have pretty solid cash to debt ratios vs coal stocks I was looking at that are also beaten down.

Good Luck
Andrew
SHM

Investment Hunting
Guest

Thanks so much for the detailed article on this sector. I must admit I currently avoid stocks like these because I have not taken the time to fully evaluate the sector. This post is a good starting point for my analysis, for that I thank you.

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[…] I mentioned in my previous article, I’m a huge fan of First Mining Finance, and this junior miner is one that I want to build up a strong position in. But rather than […]

Jon
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Jon

I struggle to buy individual stocks given my restrictions at work. Would you recommend any ETFs?

Tim Oliver
Guest

The Rubicon flagship Phoenix project went C$178 million over a C$272 million dollar initial capex budget. That’s 65%. It’s built on a PEA. This is what happens when hot shot Jrs. Think they can skip engineering stages. It was inevitable.

The project hit a big snag underground with a rock fall in July. Though dismissed in corporate communications as a “short-term startup issue” the incident delayed project startup from September 2015 to the first quarter 2016, at least five months. That’s a big problem in my opinion. It could kill them.

The PEA on which the project was approved showed a 5% discount rate after-tax net present value (NPV5) of $531 million with an IRR of 27% with gold at US$1200 per ounce.

By my calculation, the cost overrun and delay combined have turned this IRR 27% project into a marginal project with a NPV5 of C$313 million and an IRR of about 14%. I didn’t run it at $1150 gold.

Add recent events and this one sure looks like a loser to me.

Tim Oliver
Guest

You and your readers should check in on the chat room at CEO.ca. Yesterday my friend and colleague, Brent Cook, weighed in on why he avoided RMX. His reasons are geological.

Also, it’s a lively, and usually civil, debate on the world of mining and Canadian venture stocks.

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[…] arbitrage), Pilot Gold (PLG.TO), and True Gold Mining (TGM.V) were recently featured in my “Best Junior Mining Stocks” article. Teranga Gold (TGZ.TO) was a “runner up” but a company I still very much […]

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[…] This isn't a dividend play, but more of a speculation stock that just so happens to pay a dividend. I personally have been investing in hard assets since before 2008 through garage sales, estate sales and auctions. This is my first “paper silver” investment. I purchased them because silver has been in a bear market for years now and I feel it is reaching the bottom, or near the bottom anyway. If you are into precious metals and the miners, FI Fighter did a wonderful write up on The Best Junior Mining Gold Stocks of (2015) […]

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[…] first covered Keith Neumeyer when I wrote The Best Junior Mining Gold Stocks (2015), published earlier this […]

Ken
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Ken

Wow! Such naked speculation!!! To me, that’s a recipe for losing your ass, financially.

Your “Best Junior Gold Miners”??? NOT ONE has any earnings! It’s all “pie in the sky”.

I really was curious on your list to see if you had identified and listing perhaps THE BUY in the Junior Gold Miner space: Claude Resources (CLGRF)! It’s a firm that, in the last cycle, DID have major problems like you outline for many — and also then got management acts together and squeeked by and didn’t go backrupt. AND NOW IT IS MINTING MONEY — EVEN NOW! In fact, they’ve in the last quarter become DEBT FREE by effectively having more value in inventory and reserve then they still owe in debt!

Presently, their only “problem” is to determine where to put the cash flow other than into their mattress! They will either:

1) Start development in earnest of a whole new tract that they’ve owned.

2) Return cash to investors in special payouts.

or

3) Perhaps go onto acquire one or more other, less fortunate Junior miners who have – in their determination – a lot of upside and little in purchase cost. (What do they say about “one man’s loss…?”

That is truly, in this Junior Gold Miner space, the most enviable position to be in. BUT WHERE IS THIS FIRM IN YOUR LISTING OF “BEST”??? Go ahead…TRY to pick Claude apart! You simply can’t do it! 🙂

Ted
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Ted

one of the best reads out there.
do you have any new opinions and updates, especially that POG is starting to move, Burkina Faso had the elections, TGM almost producing etc ?

I’m heavily invested in TGM and was curious to read some new opinions you’d have.

Ted
Guest
Ted

thanks for the reply.
I have done just that, bought and sold a few times and have a good position now. With all gov. issues been more clear than a year ago and gold pouring in March, I am trying to figure out a good exit. The way the economy is going I have a lot of faith that gold will climb in the next year or so.

As per your topic #3: sometimes your original gut feeling is the right thing to do. As you picked at beginning the TGM high risk and even higher reward, it looks to be true…
What do you think TGM could be by July 2017, after the 1.4 yr payback?

Ted
Guest
Ted

Hey Firefighter,
this is Calgary_AB from Stockhouse…
TGM was the best thing to me. I got lucky so many times to be able to sell high and buy low in very short time…increased my position to 1.25 mill TGM at the time of exchange for EDV at a rate of 0.044
1.25 x 0.044 = 55,000 EDV.
April I quit my job (94,000/year), I sold 100,000 worth of EDV and now I’m playing with it. Bought 12,000 T.TCK.B at 9.20 and sold at 14.20 within 20 days…so I figure if I do this twice a year I do very well…not to mention EDV went to over 19.00 the other day and still lots of room to grow there.
I now own in my play account: NMX = 41,500 shares @ $1.10, LIX = 20,000 shares @ $1.97, ABR = 600,000 shares @ $0.05.
I just lost on PE, bought (against my red flag insider selling like crazy) 20,000 shares at 0.82 and sold them at 0.485….the only stock ever that I lost money selling it.

Ted
Guest
Ted

oops, sorry FIFighter (previous post “Firefighter”) my mistake

Ted
Guest
Ted

thanks for the CRE suggestion, I’ve been keeping an eye on it too.
Missed buying before the jump. I’ll find a good entry point soon.
I did sell NMX today, I’m sure a correction is coming. Usually people overbuy in high expectations of a meeting next week, however I’ve seen it many times where no one releases any news immediately and SP starts correcting… waiting for it to correct and buy back in. I hope I’m right. 🙂

Garvey
Guest
Garvey

Was wondering if you know of any GOOD Copper/Gold explorers in South America and was wanting to know your thoughts on Tim Coughlin’s new venture “Royal Road Minerals.” He was the man behind the Amulsar discovery in Armenia with Lydian International.

Ken Arnold
Guest
Ken Arnold

Sorry. Presently don’t know of any good buys on Junior Gold Miners since my GREAT play recommendation a few months ago of Claude Resources. (Since then, it got bought out at a handsome profit by Silver Standard. But Silver Standard is no darling and overpriced like so many others now…).

I myself am waiting for a major stock market drop which will take gold, and gold miners, down with it. I’m hoping that will occur in the next 60 days or less. Then I’d back the truck up! Presently, there’s perhaps a few SILVER miners who’s valuations are so high (i.e. 10 times the firm’s liquidation value) that they’re BOUND to take regardless of the general market. But again: They’ll go down now when the overall market drops.

Perhaps the biggest “wait to buy in” stock I see IS, coincidentally, Lydian International. 🙂 Didn’t know about the gentlemen you mentioned. But I’ve been waiting for both a market drop AND Lydian to be closer to production to buy in – big time. I think this Amenian mining could be HUGE. And getting in on the ground floor, once the price drops a bit from the approx. 30 cents/share it’s lately been, will be a great longer term (3-5 year) play.

Garvey
Guest
Garvey

The Amulsar deposit in Armenia was a good find and the margins were exceptional until the Armenian government stepped in and set the project back over a year with their heap leach BS. That made this, from an investor perspective, much less desirable as the costs incurred from the Armenian governments midnight hour kibosh significantly cut into Lydian’s margins and this is reflected in the company’s share price. Now the financing they secured is a stream finance and makes this even less attractive. I was thinking about re-entering this when it was trading @ 0.27 but held off. No way I buy this at 0.47. Strange isn’t it? a few years ago I bought this at a higher price than it is trading at now and felt it was a good buy and now at these lower prices and gearing towards production I feel it is a mediocre buy I sold Lydian when the stock was trading around $2.00 per share and even though it is much more advanced now and just climbed above 0.30 a few weeks ago, I don’t have the same bullish spirit you do on this and feel there are much better investment opportunities out there. Tim Coughlin who made the Amulsar discovery, by accident I might add, is now off to a new venture in South America and from what I am being told it is a land package with significant potential and was once held by Anglo Ashanti. They have done nothing yet and not turned a drill but I feel the project carries a lot of clout just on the fact that Tim Coughlin is behind it.

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