The first discovery in this gold patch last year netted investors 7,000% returns.
A potential second could net them even more.
These are the types of gold plays that come along only once-in-a-lifetime.
Amex Exploration (TSX:AMEX) made the first discovery of high-grade gold discovery last year in its Perron Gold project.
Right before that announcement, another small-cap miner, Starr Peak Mining Ltd. (TSX:STE.V; OTC:STRPF), bought up most of the land adjacent to Amex.
And then it scooped up the nearby past-producing Normetal Mine, which has given the market ~10.1 million tonnes of 2.15% copper, 5.12% zinc, 0.549g/t of gold and 45.25 g/t of silver.
But for us the real excitement began earlier this month when Starr Peak came out with its first drill results … and they were way beyond our expectations.
The results didn’t just indicate gold …
They indicated something much bigger. A VMS deposit–a basket of base metals like copper and zinc whose prices are now skyrocketing, along with the hoped-for precious metals such as gold and silver.
Big miners have been searching this area for evidence of a major VMS deposit for decades. They’ve never found it … but Starr Peak just might have.
Starr Peak only started its drill campaign in February this year. Three weeks into it, the company reported they brought on a second rig, and on May 21st, they announced that they deployed a 3rd rig to the Newmetal property, “owing to significant [VMS] intercepts in the Company’s first drill holes”.
They’re also increasing their drilling program from 5,000 meters to 20,000 meters.
Is This the VMS Deposit Everyone’s Been Looking For?
VMS stands for Volcanogenic Massive Sulphide, and these deposits can be rich in base metals such as copper, zinc, silver, gold and other minerals.
VMS deposits are included among the richest deposits in the world.
New discoveries of VMS deposits have been few and far between over the past decade, so large-cap miners may be extremely interested in finding them—possibly even more so if a small-cap explorer could find it for them.
We think that could be great news for Starr Peak.
The first batch of drill results that Starr Peak (TSX:STE.V; OTC:STRPF) announced this month had highlights of 20.94% Zinc, 0.43% Copper, 39.58 g/t Silver and 0.21 g/t Gold over an intercept of over 12.1 meters. They also highlighted a new discovery at depth with additional massive sulphides.
It wasn’t a single drill hole, either. The company reports they’ve had a dozen drill holes so far and not a single miss.
The company is now expecting lab results any day, and we think the timing couldn’t be better.
A copper shortage has some analysts predicting prices will soar from around $9,000/metric ton to $13,000 in the coming months.
Some are also extremely bullish on zinc, which has already hit multi-year highs.
Combine that with the gold and silver potential, and we think that Starr Peak (TSX:STE.V; OTC:STRPF) could be even better positioned that Amex was last year because VMS is gold+.
Amex, of course, has been doing more than just watching this one closely.
Just a week before Starr Peak announced its VMS discovery, the Amex Chairman and Founder was appointed as Starr Peak’s Chief Technical Advisor in what looks to us like a huge vote of confidence.
We think it may also have helped motivate Amex to keep drilling right next door. And based on Starr Peak’s results and everything Amex has already delivered, some analysts are estimating Amex’s market cap could potentially push up to $1 billion as they continue to drill. Amex reports it now has about $30 million in the bank to keep drilling.
Amex is already a major name on the Canadian gold scene thanks to its discovery and the windfall it gave to shareholders.
Starr Peak could be ready to join these same ranks.
The exploration results they’ve achieved so far is something has eluded the big miners for almost a century, and which we think could be setting Starr Peak up to be the next potential big name in Canadian gold. When lab results come in from the maiden drill’s VMS discovery, we expect big investors may be circling around this, just like they did with Amex.
Majors are looking for a major score as well:
AngloGold Ashanti (NYSE:AU) is a Johannesburg, South Africa-based gold mining company and is the third-largest gold mining company by production volume. Whileit has had some problems over the past decade, specifically in the early 2010s when the gold market took a major hit forcing many miners, including AngloGold to shutter operations, the mining giant has persevered. AngloGold is one of the more diverse miners on the planet, shielding itself from country-specific regulatory troubles or civil strife. It has operations on four continents including Africa, Australia, South America and North America.
AngloGold has been recording highly impressive bottom-line expansion. The miner’s performance has been underpinned by a record year at Geita as well as remarkable performances at the Kibali, Sunrise Dam, Iduapriem, Siguiri, and AGA Mineração operations. The expected earnings increase is partly due to the significant increase in gold prices last year and weaker local currencies offsetting inflationary increases across operating jurisdictions.
Though AngloGold hasn’t performed quite as well as some of its peers over the past year, it has shown that it still has the potential for long-term growth. Back in 2015, the company’s share price dropped to just $5.97, but since then, investors who have been able to hold onto the stock have seen a 401% return over a five-year period.
Freeport-McMoRan (NYSE:FCX) is primarily known for its copper business…but that doesn’t mean it isn’t familiar with the gold world In fact, its Indonesia Grasberg mine holds of the world's largest deposits of copper and gold. And that’s not all. Freeport has a global footprint, with extensive operations across the Americas, including mines in Arizona, Mexico and Peru.
It’s no secret that Freeport-McMoRan’s business struggled as global demand for copper took a hit last year. But it’s rebounded since, with panic-buying from China lifting prices higher in recent months. In addition to climbing copper prices, gold prices are approaching last year’s record levels which will add even more zest to the company’s already-promising portfolio.
Despite some setbacks, Freeport-McMoRan has had an incredible year, with the price of its stock bouncing off a low of $8.74 back in May 2020 to today’s price of $41.71, representing a near 400% increase in just one year’s time.
A gold investor is not always looking for the same things in a mineral company. Franco-Nevada (NYSE:FNV), with its gold mining and royalty business model, offers investors something different than many other companies on the market. The company's business model focuses on generating cash flow from royalties paid by miners who mine or purchase their minerals from Franco-Nevada to fund exploration of new properties. This approach allows Franco-Nevada to grow without taking any risk or spending money upfront seeking out new projects–a strategy that has been successful so far with high returns and low volatility for shareholders.
Strong demand for gold and an excellent portfolio has helped keep Franco-Nevada in the green this year. In fact, following a brief dip in March, Franco-Nevada’s share price has risen nearly 50% in just a couple of months, thanks to strong earnings and the most exciting precious metals market in decades. And that’s part of a historical trend—since its IPO ten years ago, FNV has performed beautifully, offering 400% returns to investors without counting dividends.
Legendary investor Warren Buffett finally changed his his long-held negative stance on gold on last year when Berkshire Hathaway disclosed a massive stake in Canadian Barrick Gold (NYSE:GOLD, TSX:ABX) at a time when gold was soaring. Berkshire Hathaway bought more than $560 million in Barrick Gold shares. Buffett often referred to gold as useless for the most part. . This flip flop towards gold by Buffett could affect how many other investors view it as an investment opportunity, as well. The Oracle of Omaha’s investment in Barrick and change in tune on the gold front shouldn’t come as much of a surprise, however. As the future of the economy looks more-and-more uncertain, and the Federal Reserve continues to print money at a record rate, solid gold miners like Barrick have drawn a lot of attention for investors.
The future is looking bright for Barrick Gold. In last year’s earnings recap, CFO Graham Shuttleworth noted, "The Board believes that the current dividend increase is sustainable and is reflective of the ongoing robust performance of our operations and continued improvement in the strength of our balance sheet, with total liquidity of $7.7 billion, including a cash balance of $4.7 billion, and a debt net of cash position of just $0.4 billion as of the end of the third quarter, as well as no material debt repayments due before 2033."
Newmont (NYSE:NEM, TSX:NGT), clocking in with a market cap of $58 billion, is the world’s largest gold miner…but that doesn’t mean it doesn’t still have room to grow! The company has a solid balance sheet with little debt and it’s still growing. Founded in 1916, and based in Greenwood Village, Colorado, Newmont is a veteran miner with one of the top executive teams in the business, and its operations span 11 countries, including gold mines in Nevada, Colorado, Ontario, Quebec, Mexico, the Dominican Republic, Australia, Ghana, Argentina, Peru, and Suriname. And as far as management is concerned, Newmont doesn't have any weak spots. Its board includes an all-star cast of mining executives like Bob McAdam of Barrick Gold, Tom Albanese of Rio Tinto, Joe Jimenez of Dow Chemical Company and John Wiebe of Kinross Gold Corporation.
Back in 2019, Newmont acquired Goldcorp, and though it was controversial at the time, the $10 billion acquisition has paid off in a big way. As gold climbed to record highs thanks to investors piling into gold due to the COVID pandemic, Newmont has seen a boom in its share price. This year, gold has soared from $1282 to over $2000 at one point, and Newmont’s stock rose with it, earning investors as much as 87% returns on their original purchase.
Yamana Gold (NYSE:AUY, TSX:YRI), another one of the world's top gold companies, has seen its share price hit especially hard this year. After falling to a yearly low in March, Yamana has seen a gradual climb up to its current price of $5.14. While it hasn’t risen back up to January prices just yet, it’s worth zooming out a bit. In just the last three years, it’s share price has climbed 74%, so while a little dip may be painful for short-term holders, long-term holders are still significantly in the green.
And it’s easy to see why. Yamana is always on the move! In fact, just recently, Yamana signed an agreement with Glencore and Newmont Goldcorp to develop and operate another Argentinian project, the Agua Rica. Initial analysis suggests the potential for a mine life in excess of 25 years at average annual production of approximately 236,000 tonnes (520 million pounds) of copper-equivalent metal, including the contributions of gold, molybdenum, and silver, for the first 10 years of operation. The agreement is a major step forward for the Agua Rica region, and all of the miners working on it.
Though it weighs in with a modest $4.9 billion market cap, Yamana’s $5.19 per share price is accessible for all types of investors. And if that wasn’t enough, it also has a long history of increasing its dividends which gives investors even more incentive to grab a few shares and hold on for the long haul.
Kinross Gold Corp. (NYSE:KGC, TSX:K), is a profitable company–consistently. It’s a safer bet, if not one that will deliver you stunning upside. This is for the more cautious gold investor. Kinross has grown earnings per share (EPS) annually by 44%, compound, for the past three years. The company mines for gold across six continents, with operations in Brazil, Ghana, Mauritania, Russia and the United States. It also operates a joint venture with AngloGold Ashanti Limited that provides mining services at two sites in West Africa—one of which was recently awarded an environmental permit from the government of Guinea.
Just like AngloGold, Kinross has been enjoying dramatic improvements in profit margins and cash flow thanks to the surge in gold prices–and this trend appears set to continue with the gold outlook remaining decidedly bullish. With all factors remaining constant, Kinross should be able to realize high single-digit EPS expansion in the current year.
Since 2015, Kinross has seen its share price rise by as much as 400%. In fact, this year alone, it’s already up by as much as 30%. And Kinross is showing no signs of slowing. With a healthy balance sheet, favorable earnings reports, and a growing number of analysts predicting much higher gold prices in the years to come, Kinross is looking good.
Kirkland Lake Gold (NYSE:KL, TSX:KL) is another one of Canada’s most exciting gold miners. Kirkland’s production largely comes from three high-quality operations, including the Macassa Mine and Detour Lake Mine, both located in Northern Ontario, and the Fosterville Mine located in the state of Victoria, Australia. Kirkland Lake Gold’s solid base of quality assets is complemented by district scale exploration potential, supported by a strong financial position with extensive management expertise.
While Kirkland might not be as established as Barrick or Newmont, it’s is no stranger to striking headline grabbing deals in the industry. In fact, just recently, Kirkland and Newmont signed a $75 million exploration deal that could wind up being a game-changer for the industry. The two companies have agreed to split the cost 50/50 over five years with each company investing $15 million every year into joint projects between both companies for exploration purposes only – at this point it seems like a win.
According to a joint press release in late 2020, “Newmont has acquired an option from Kirkland on the mining and mineral rights subject to a royalty payable by Newmont to Royal Gold, Inc. (the Holt Royalty) in exchange for a $75 million payment to Kirkland Lake Gold. Newmont can exercise the Option only in the event Kirkland intends to restart operations at the Holt Mine and process material subject to the Holt Royalty”
By. Roger Freeman
**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ
This publication contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this publication include that prices for gold, silver, copper, zinc and other base metals will retain their value in future as currently expected, or could continue to increase due to global demand and political reasons; that Starr Peak can fulfill all its obligations to acquire its Quebec properties; that Starr Peak’s property can continue to achieve drilling and mining success for gold and other metals; that historical geological information and estimations will prove to be accurate or at least very indicative; that high-grade targets exist; that Starr Peak will be able to carry out its business plans, including future exploration and drilling programs; that the preliminary drilling results will be confirmed as further exploration continues; that the lab results from Starr Peak’s initial exploration program will confirm evidence of a significant VMS deposit; that Starr Peak’s exploration results will gain the attention and interest of larger mining companies and investors; that Starr Peak’s exploration results will continue to show promising results justifying ongoing exploration and possible development efforts. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that politics don’t have nearly the strong effect on gold and other base metal prices as expected; that demand for base metals may not continue to increase; that the Company may not complete all its announced mineral property purchases for various reasons; that the Company may not be able to finance its intended drilling and exploration programs; Starr Peak may not raise sufficient funds to carry out its business plans; that geological interpretations and technological results based on current data may change with more detailed information or testing; that the lab results from Starr Peak’s initial exploration program may not support evidence of a significant VMS deposit; that the preliminary drilling results may not be confirmed during further exploration efforts; that Starr Peak will fail to gain the attention and interest of other mining companies and investors; that Starr Peak’s exploration results may fail to find additional promising results justifying ongoing exploration and/or development efforts; and despite promising results from drilling and exploration, there may be no commercially viable minerals or ore on Starr Peak’s property. The forward-looking information contained herein is given as of the date hereof and we assume no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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