When investing in precious metals mining companies, investors need to know their catalysts and their potential effects, good and bad. Jocelyn August, senior analyst at Sagient Research, knows her catalysts from pre-exploration to production. In a November 19, 2012 Gold Report interview, she described the eight catalysts. One of those catalysts was the completion of construction and one was the start of production. Here is what Jocelyn August had to say about these two catalysts:
"We have identified the completion of construction as a large-impact catalyst, with an up or down 8% move. Interestingly, construction moves stock prices more than the start of production, which moves the stock just over 5%."
In this article, I will feature three mining companies that are currently ramping up gold production with the completion of construction being the next catalyst for these stocks.
1. Thompson Creek Metals Company (TC) is a growing, diversified North American mining company. Thompson Creek has two large operating molybdenum mines, a large copper-gold mine under construction, a stand-alone metals roasting facility, and a number of additional metals properties in various stages of development. All operations are located in the United States or Canada.
The company reported the full year 2012 financial results on February 25 with the following highlights:
During the third quarter of 2012, the company recognized a non-cash goodwill impairment charge of $47.0 million, representing the remaining balance of its goodwill. During the fourth quarter of 2012, Thompson Creek recognized a $530.5 million non-cash pre-tax write down of its share of the property, plant, equipment and development assets at the Endako Mine.
The company is currently estimating an aggregate of approximately $1.5 billion to construct and develop the Mt. Milligan copper-gold mine of which approximately $390.0 million of expenditures remain to be spent, plus an additional $40.0 million to $50.0 million of estimated future cash capital expenditures for a permanent operations residence at Mt. Milligan, which is expected to be completed in 2014. Mt. Milligan's average annual production is expected to be higher during the first full 6 years of production (approximately 89 million pounds of copper and 262,000 ounces of gold in concentrate), compared to annual life-of-mine production. The company will provide production and cash cost guidance for 2014 once Mt. Milligan is operational.
The Mt. Milligan copper-gold project's commissioning and start-up is expected to commence in the third quarter of 2013, and commercial production of copper and gold is expected in the fourth quarter of 2013. The company has the necessary financing to start the mine. The stock has a $8.75 price target from the Point and Figure chart. There have been five insider buy transactions and there have not been any insider sell transactions in the past six months. The latest insider buy transaction was in March this year. There are three analyst buy ratings, 10 neutral ratings and two sell ratings with an average target price of $5.48. The stock is trading at a forward P/E ratio of 2.75 and the company has a book value of $8.30 per share. I currently have a long position in the stock.
2. Banro Corporation (BAA) is a Canadian gold mining company focused on production from the Twangiza oxide mine and development of three additional major, wholly-owned gold projects, each with mining licenses, along the 210 kilometre long Twangiza-Namoya gold belt in the South Kivu and Maniema provinces of the Democratic Republic of the Congo. Led by a proven management team with extensive gold and African experience, Banro's plans include the construction of its second gold mine at Namoya, at the south end of this gold belt, as well as the development of two other projects, Lugushwa and Kamituga, in the central portion of the belt.
The company reported the full year 2012 financial results on March 27 with the following highlights:
On March 27, Banro announced that it seeks to raise up to $100 million financing package.
Banro's guidance for 2013 is as follows:
Gold production at Twangiza gold project
85,000 to 100,000 ounces
Gold production at Namoya gold project
16,000 to 22,000 ounces
Cash cost per ounce
700 to 900
The company is currently developing an open-pit heap leach gold mine at Namoya with anticipated average annual production of 124,000 ounces of gold per annum over a seven year mine life. Pre-construction activities at Namoya began in the fourth quarter of 2011, followed by full mobilization of construction and development activities during 2012. Commissioning of the Namoya gold mine is planned to be completed during the fourth quarter of 2013.
The Namoya gold mine is expected to start producing gold in the fourth quarter this year. There have been 45 insider buy transactions and there have not been any insider sell transactions during the past six months. The latest insider buy transaction was in March this year. The company has an insider ownership of 6.06% and institutions own 80% of the company. There is one analyst buy rating, one neutral rating and zero sell ratings with an average price target of $4.70. The stock is trading at a forward P/E ratio of 1.50 and the company has a book value of $2.10 per share. Banro's total measured and indicated mineral resources are 10.18 million ounces of gold. The company's target is to achieve annual gold production of more than 400,000 ounces from the Twangiza-Namoya gold belt oxide sources by 2017. I currently have a long position in the stock.
3. Pershing Gold Corporation (OTCQB:PGLC) is a gold exploration and development company focusing on acquiring, exploring, and developing gold deposits in Nevada. The Relief Canyon Mine property in Pershing County is owned by Gold Acquisition Corp., the company's wholly owned subsidiary.
The company reported the full year 2012 financial results on April 1 with the following highlights:
Net cash used in operating activities
Pershing Gold also holds 22 million shares of Valor Gold (OTCQB:VGLD). Valor Gold trades currently at $0.44.
The company spent approximately $5.2 million on exploration activities in 2012, and plans to spend approximately $3.2 million on exploration in 2013.
In addition to the exploration program, Pershing Gold is preparing to recommission the gold processing facility and ancillary support facilities on the Relief Canyon Mine site, which is currently in a care and maintenance status. The company expects the cost to recommission the facility will be approximately $2.4 million, and Pershing Gold's goal is to have it recommissioned by the end of 2013. Pershing Gold's estimated total cost for 2013 of exploration, permitting, landholding, facilities recommissioning and general and administrative is approximately $12.0 million, which includes the 2013 exploration and recommissioning amounts. The company expects to require external funding not only to pursue its exploration program but also to maintain its operations beginning in the third quarter of 2013.
Gold production in the Relief Canyon Mine will begin in 2014. On January 24, the company reported a mineral resource update at Relief Canyon that shows a measured and indicated resource of 553,000 ounces of gold and an inferred resource of 101,000 ounces of gold. The initial target gold production will be 50,000 ounces per year starting in 2014. The Relief Canyon Mine is a past producing mine that already has a ready-to-operate heap leach facility along with most of the permits to begin production again in place.
There have been recent insider buy transactions in March and throughout the past twelve months by Director Barry Honig, who filed a 12.78% ownership in the company on March 27. The largest shareholder is Dr. Phillip Frost: his Frost Gamma Investment Trust owns 53,218,879 shares, or approximately 19.5% of common stock. Pershing Gold's officers and directors beneficially own 51,791,847 shares, or approximately 18.0% of common stock. Frost Gamma Investments Trust together with the company's officers and directors beneficially own in excess of 37.5% of outstanding common stock. Insider buying in a closely held company can be a positive signal for investors. I have no position in the stock currently.