Top 20 Gold Mining Stocks For 2018

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Includes: AAU, AGCBF, AKG, FPRGF, GDQMF, GLDLF, HUMRF, KNTNF, LMCNF, LRTNF, MDRPF, ORZCF, PMNXF, PZG, RPMGF, SPAZF, SSPXF, TGCDF, TSRMF
by: Don Durrett

Summary

Best risk/reward gold stocks.

All have large resources.

All are highly undervalued.

Stock Name

Symbol (US)

Stage

Share Price (US)

FD Shares

FD Mkt Cap 1/1/18

Amarillo Gold

AGCBF

Development

$0.24

90M

$22M

Almaden Minerals

AAU

Development

$1.03

118M

$121M

Asanko Gold

AKG

Producer

$0.70

220M

$156M

Falco Resources

FPRGF

Development

$.69

206M

$142M

Goldmining Inc.

GLDLF

Optionality

$1.06

152M

$161M

Goldquest Mining

GDQMF

Development

$0.29

293M

$85M

Hummingbird Res.

HUMRF

Producer

$0.46

354M

$163M

K92 Mining

KNTNF

Producer

$0.43

230M

$99M

Leagold Mining

LMCNF

Producer

$2.32

155M

$360M

Midas Gold

MDRPF

Development

$0.47

342M

$160M

Orezone Gold

ORZCF

Producer

$0.56

167M

$94M

Paramount Gold Nev.

PZG

Development

$1.30

20M

$26M

Perseus Mining

PMNXF

Producer

$0.29

1164M

$338M

Pure Gold Mining

LRTNF

Development

$0.44

227M

$101M

Rye Patch Gold

RPMGF

Producer

$0.22

484M

$110M

Sandspring Resources

SSPXF

Development

$0.26

160M

$42M

Spanish Mtn Gold

SPAZF

Development

$0.11

266M

$28M

Teranga Gold

TGCDF

Producer

$2.38

111M

$266M

Treasury Metals

TSRMF

Development

$0.49

137M

$67M

Vista Gold

VGZ

Development

$0.70

109M

$76M

Above are my Top 20 gold mining stocks for 2018. All of these companies have large resources and are highly undervalued based on their cash flow potential at higher gold prices. They are on this list primarily because of their upside potential. These are either producers or development stocks, although there is one optionality play (Goldmining Inc).

Below is my analysis from the GoldStockData website for each stock on the list. Some of these analyses are not recent; the date of each analysis is included.

Most of the stocks on this list have high risk and are dependent on higher gold prices. If you are a believer in higher gold prices, then many of these stocks provide excellent leverage to higher gold prices.

Note: The link to each company's chart is their symbol in the list above. The link to the company's website is the company name in the analysis below.

Amarillo Gold (10/11/2017)

Amarillo Gold has an excellent project in Brazil. The Mara Rosa project (1.3 million oz at 1.6 gpt) is economic (30% after-tax IRR at $1300 gold) with cash costs of only $550 per oz. They are working on the final feasibility study, which will be released in 2018. They have $8 million in debt, which is due in 2019.

Mara Rosa is on 150,000 acres and has significant exploration potential to expand production in the future. They own the project 100% and the infrastructure is excellent. The capex is forecasted to be $184 million for 120,000 oz of production for 8 to 10 years. The Lavras do Sul property is an early exploration project on 50,000 acres with several drilling targets. They have already found 500,000 oz (.8 gpt). Lavras do Sul is only owned 51 percent, but there is likely a mine to be found.

With a FD market cap of $20 million, Amarillo is incredibly cheap. They already have their Brazilian Preliminary License, which is the hardest one to obtain. The last two licenses (construction and mining) should not be a problem. Investors don't think they can finance it, but I think they can once it is permitted with a feasibility study. My guess is construction will begin in 2018 or 2019.

Almaden Minerals (6/7/2017)

Almaden Minerals has decided to build their flagship project in Mexico (Ixtaca). They spun out their 40 exploration properties to their stockholders in a new company (Almadex Minerals). Ixtaca has a PFS (pre-feasibility study) to produce an average of 8 million oz of silver equivalent (including gold) for 12 years. The silver equivalent (including gold) all-in cost per oz will be around $15 per oz.

The project is economic with a 40% aftertax IRR at $18 silver and is very likely to get built. They have $18 million in cash to fund the feasibility study, which is due to be completed in 2018. Their production target is 2019. They have 118 million fully diluted shares and should not have to dilute their shares significantly until they finance construction. With their upside potential and path to production, this is an ideal risk/reward stock at their current valuation.

They have enough resources (2 million oz of gold and 100 million oz of silver) to produce more. Plus, there is exploration potential to increase their resource totals. This is a company with excellent exploration experience. Thus, their production totals are likely to increase.

They seem to be focused on becoming a producer. However, they have sold two other large projects in the past and have a conservative approach. If they get an offer for Ixtaca, my guess is that they will take it. And because they have low insider ownership, any hostile offer will probably be approved by shareholders. Hopefully, that won't happen and they will take Ixtaca to production.

I'm surprised this project hasn't been taken out yet by a larger company. Once they complete the feasibility study and permitting, I would expect someone to make an offer. Whatever company gets this project is going to add a lot of value for their shareholders. Hopefully, it will be a company with an FD market cap under $1 billion.

Asanko Gold (12/30/2017)

Asanko Gold (formerly Keegan Resources) is a new mid-tier producer in West Africa (Ghana). They have two flagship projects and are heading towards 400,000 oz of production in 2021. Their 1.7 million oz Nkran open pit project is producing 220,000 oz at around $800 per oz cash costs. Free cash flow is around $20 million annually at $1300 gold. Their second mine (Esaave) has 3.7 million oz (1.2 gpt), with cash costs around $700 per oz.

They recently completed a feasibility study for Essave, with a $350 million capex. It is permitted. They plan to finance the expansion by issuing stock and using free cash flow. They made an announcement that they plan to raise $300 million from issuing stock. That will dilute share substantially, more than 100% of current shares at 220 million shares.

I would expect Esaave to be producing in 2020. They currently have $60 million in cash and $150 million in debt. The capex is a bit high and one of the reasons investors have dumped the stock. There were also two companies that shorted the stock and released information for why they shorted. These articles hurt the stock. Their main argument was that their current producing open pit was close to caving in and would bankrupt the company. The share price has crashed value from a $559 million FD market cap to $155 million today. The stock price is down 82% if the past year.

They own 90% and the Ghana government owns 10%. If you don't mind investing in Ghana (currently a stable democracy with several large mining operations, such as Newmont and Kinross), this stock has significant upside potential. The key will be higher gold prices and cleaning up their balance sheet. The red flags are the location (although Ghana isn't a bad place to mine), Ghana’s high taxes (35%, plus 5% royalty), their debt, and looming dilution. I would consider it a high-risk speculation stock until they clean up their balance sheet and resolve their potential cave-in issue. However, I am making it a top pick because of the potential for higher gold prices. This company will be extremely valuable at $1400 gold. If you want a leveraged stock to gold, this is one.

Falco Resources (9/2/2017)

Falco Resources has a large gold project in Quebec on 175,000 acres. The Horne mine is a 5 million oz deposit at 2.6 gpt, with significant amounts of silver (25 million oz), copper (260 million lbs) and zinc (1.2 billion lbs) for offsets. The gold equivalent is 8.8 million oz. Revenue is projected at 67% gold, 15% zinc, 10% copper, and 8% silver. Cash costs are projected to be under $500 per oz because of offsets. Cash costs could be even lower with higher silver prices.

The capex is larger than I would like at $680 million. That will be difficult to finance. Also, the after-tax IRR is only 18% at $1300 gold because of the high capex. They plan to produce 230,000 oz of gold annually, but that is a bit misleading because of the large offsets. Revenue could be a lot higher than just the gold production. I would like to see what the gold equivalent production is going to be, along with the gold equivalent cash costs. The feasibility study is due in Q3 2017. They are cashed up with $35 million to complete the feasibility study and permitting.

Production at Horne stopped in 1976, but it still has significant infrastructure and should be easy to permit. The CEO is a proven mine builder and operator. What I like about this stock is their potential to find another mine on their 175,000 acres in a gold district. It's usually the second mine where you make your big returns.

There are a few red flags: takeover target, financing needed to build mine, potential share dilution to finance the mine, and the timeline until production. I would expect production around 2021. Permitting will be the key, which is projected to complete in 2019. A delay in permitting will delay production. Management appears to be solid, delivering both an updated 43-101 and a PEA relatively quickly in 2016.

Goldmining Inc. (10/10/2017)

Goldmining Inc. (previously Brazil Resources) stated strategy is to acquire advanced stage projects. They have done an incredible job achieving that strategy. In 2012, they acquired the Cachoeira project. After their initial drilling, the resource size increased from 750,000 oz to 1.3 million oz (1.2 gpt). Since then they have not attempted to move it to production, or advance any of their other projects towards production.

In 2013, they acquired Brazil Gold and their 1.7 million oz Sao Jorge project. This may now become their first mine. It has a PEA to produce 100,000 oz at $650 cash costs. The after-tax IRR is 33% at $1300 gold, thus it is very economic. I'm waiting for them to give guidance that a feasiblity study is underway. They have $16 million in cash and no debt.

In 2015, they acquired the Whistler project in Alaska from Kiska Metals. It is a 5 million oz deposit (.5 gpt), with copper offsets.

In 2016, they acquired the Titiribi project in Colombia from Nova Copper. It is an 8 million oz deposit (.5 gpt), with copper offsets.

In 2017, they acquired the Yellowknife project in Canada (Northwest Territories) for 4 million shares from Tyhee Gold. It is a 2.2 million oz (2 gpt) resource on 35,000 acres with significant exploration potential. The feasibility study calls for producing 100,000 oz for 15 years. It is not economic to finance at current gold prices, with a 20% pretax IRR at $1400 gold. That's around a 10% IRR post-tax at $1300 gold.

In 2017, they acquired the La Mina project (1.5 million oz) from Bellhaven Gold & Copper for $10 million by issuing shares. They gave Bellhaven shareholders 6% ownership of Goldmining Inc. They only paid a 20% premium, which was a fantastic deal for Goldmining Inc.

In 2017, they acquired the Crucero project in 2017 for 3.5 million shares and $750,000. The price they paid was a steal. It is an advanced 2 million oz (1 gpt) deposit. It's on 4,600 acres in Peru.

They also have several large properties in Brazil: Maua (25,000 acres), Pireneus (250,000 acres), Apa (500,000 acres), and Artulandia (12,000 acres). Once they get some cash flow, this will likely be a growth company. Their FD market cap has exploded from $36 million to $194 million, but it is still very cheap versus their resources.

I think this is a company with potential to become a very large company, once they decide to become development company. They have 800,000 acres of exploration targets and an aggressive management team. I get the feeling that they are not for sale (insiders own 25%) and want to grow this company. My concern is that they appear to be more about deal-making than mine building. I'm starting to think it is ironic that they renamed their company to Goldmining Inc. I'm not sure they want to be a mining company. However, worst case I think they will be a 5 bagger from their large projects and potentially more on the way. Once gold prices rise, they are going to have several large advanced economic projects.

Note: 9/16/2017. The jurisdiction for their Titiribi project in Colombia is considering banning all mining. If it passes, not only will Goldmining Inc's share price take a hit, but all development/exploration stocks in Colombia will get downward pressure. Each jurisdiction in Colombia can decide if they want mining.

Goldquest Mining (6/7/2017)

Goldquest Mining has an advanced gold project in the Dominican Republic. The Romero project is 2 million oz at 2.5 gpt with a 28% after-tax IRR at $1300 gold. It looks solid, with a capex of only $158 million. Cash costs are projected to be $400 per oz with copper, zinc, and silver offsets. But without the offsets it is still economic. Their FD market cap is $91 million with 10 bagger potential at higher gold prices and exploration success. They have $19 million in cash to complete permitting and the feasibility study, plus do more drilling.

They released a solid drill hole in May 2012 of 231 meters at 2.4 gpt. That single drill hole pushed the stock from 7 cents to $1. Then they released a monster hole of 258 meters at 4.5 gpt in July 2012. The stock doubled to $2. However, after that it crashed 90% to 8 cents. Today it is at 31 cents, although there has been significant share dilution since 2012. FD shares are now 293 million and they will likely dilute to build the mine.

They have 75,000 acres in the Dominican, including a 30 mile trend with five discoveries to drill. With their exploration potential, they should find more gold. I consider this an excellent speculation stock. If they make it to production in 2019 without damaging their cash flow potential with financing, they could be a growth stock. They are currently working on a feasibility study, which is due in Q4 2017. The only red flag is they could get taken out by a larger company, although they probably have enough insiders to prevent one.

Hummingbird Resources (11/5/2017)

Hummingbird Resources has two advanced open pit gold projects in West Africa (Mali and Liberia). It looks like a can't miss stock. They have 6.4 million oz at 2 gpt and another 150 targets on 1 million acres. The Yanfolila project (2.2 million oz at 2.5 gpt) in Mali is a near-term producer (Q1 2018) at 100,000 oz, with cash costs of only $650 per oz. The $80 million capex is funded ($70 million equity financing) and it has a 50% after-tax IRR. They will use this project as leverage to finance Dubge in Liberia.

They have a smart management team and know that cash is king in the mining business, keeping their cash balance high. They have $50 million in the bank and construction at Yanfolila is 86% completed. Plus, they will have significant cash flow in 2018 to advance Dugbe, their next mine.

The Dugbe project (4.2 million oz at 1.5 gpt) is also economic (29% IRR at $1300 gold) and heading toward production of 125,000 oz in 2020. The capex is $212 million, but should be easy to finance. They have a very good management team and it is a shallow open pit, which is easy to mine. And Liberia is a mine friendly country. Perhaps the best place to mine in West Africa.

It's no longer cheap, with a FD market cap of $180 million. However, it could still be a 10 bagger if they build both mines and gold prices rise. I could be wrong, but if they aren't a 5 or 10 bagger, I'll be surprised. They have all of the factors I look for: large resources, low to moderate costs, economic projects, a pipeline for growth, strong management, a path to production, likelihood of financing, and a decent ore grade. It's not in a great location (West Africa), but Liberia and western Mali aren't too bad.

K92 Mining (9/2/2017)

K92 Mining is an emerging mid-tier gold producer in Papua New Guinea. They purchased a past producing mine (2006 to 2009) from Barrick Gold for $2 million, plus $60 million in future payments. The Kainantu mine has about 1.5 million oz at 7 gpt, with extensive exploration potential and an additional 1.3 million oz of historical resources. Once they reach 1 million oz of production, or M&I resources, they have to pay Barrick $20 million (they currently have 250,000 oz M&I). Then they have to pay another $40 million as resources increase in size ($5 million increments for every 250,000 oz). I spoke with them and this will not likely get triggered for at least 7 years. Plus, the agreement expires after 10 years.

They began production in Q4 2016 at Irumafimpa. The CEO said he expects their cash costs to be about $600 per oz, with all-in costs (free cash flow) around $1000 per oz. They raised about $20 million to resume production. About half is debt, about 1/3 is a gold loan for 20,000 oz (paid over the first 36 months of the mine life), and the rest in equity financing.

They planned to reach full commercial production of 50,000 annual production in September 2017. However, this has been delayed 30-60 days due to vandalism. This caused their share price to drop.

In addition to their Irumafimpa mine and mill, which has about a 7-year mine life, they have a second deposit. Kora is already 1 million oz at 7 gpt. They plan to add Kora production of about 100,000 annually to their Irmafimpa mill in 2018. That will take production to 150,000 oz. Plus, they recently found a step out discovery at Kora that is 500 meters away. If that vein connects to Kora, then they just found a lot of gold to expand the mine life.

Kainantu is a large property (100,000 acres) with a lot of exploration potential. The CEO thinks they could find 8 million oz. If they find half that much, this stock should do really well. They have a solid team and with just a little bit of luck they will be able to grow. The risk/reward looks very good.

They have a strong board and will likely be successful. The key is going to be exploration and production growth, as well as higher gold prices. Plus, they need to hit their guidance targets for costs and production.

Leagold Mining (4/10/2017)

Leagold Mining is a new company that is mostly ran by the Endeavour Mining team. The purchased the Los Filos mine in Mexico from Goldcorp for $280 million. They used $150 million in debt and the rest through equity financing. Los Filos is a large open pit, producing 200,000 oz a year at $750 per oz cash costs. They plan to add a nearby underground mine (Bermejas) in 2019, with another 100,000 oz in annual production. The capex is $47 million and construction is scheduled to begin in 2017. The cash costs at Bermegas are projected to be very low, around $500 per oz.

The recovery rate for Los Filos is around 70% and projected to be around 80% at Bermejas. I reduced their M&I resources because of these low recovery rates, but they still have 9 million oz of M&I. It will have an FD market cap of around $250 million after they complete their financings (and 150 million FD shares). It's tightly held with Goldcorp and Management holding about 40% of the shares. The property is large (150,000 acres) in a good location for exploration. If they find a third mine, this stock could do really well.

Midas Gold (7/2/2017)

Midas Gold has a very large gold project in Idaho that is heading to production around 2022. Stibnite is a 6.4 million oz resource (1.6 gpt) that is growing in size, and has significant exploration potential. They have an FD market cap of $190 million, and the project will produce 400,000 oz of gold at low cash costs (years 2-8). The low cash costs (around $500 per oz) are from offsets in silver and antimony (used in batteries and flame retardants). Production is forecasted to drop to 300,000 oz in years 9-14, and cash costs will increase, but with exploration success that production drop likely won’t happen.

It's possible that Midas could maintain production at 350,000 oz for 15 years. Also, they could take that cash flow and buy another mine to grow the company. Thus, the upside potential is significant. It pencils to a 5+ bagger at $2500 gold. That said, there are three significant risk issues. 1) They need to get financing without substantially diluting the stock or hedging profit. 2) They need higher gold prices to finance such a large project. 3) They need to get permits in a timely manner. This mine likely won’t begin construction until 2020, so the timeline risk is significant. If they were further along in mine development, with permitting and financing completed, I would like the stock a lot better. That said, it is an economic project at low gold prices and will get built.

Midas will become takeover target once they obtain final permits and the project is de-risked. With Stibnite's large resources and low cash costs, they are likely to get taken out by a major once gold prices rise. The last red flag is their debt. They have $38 million in convertible notes at .27 cents per share. That means they will likely add 142 million shares (this dilution is part of the current FD shares total). It is redeemable in 2020, but I would expect those shares to be converted before then.

They do have 37% insiders, which could prevent a takeover. However, projects this big tend to get taken out by majors.

Orezone Gold (11/11/2017)

Orezone Gold has a late-stage project in West Africa (Burkina Faso). Their first mine (Bombore) should begin production in 2020 (if it can be financed). It is a 4.5 million oz open pit deposit. They recently had another company analyze the deposit and it was reduced from 4.8 million oz to 3.5 million oz. This caused the stock price to crash by more than 50%. However, this is probably a buying opportunity. It's still a big mine and the economics are good with a .9 gpt surface mine.

If they use heap leach for the 1 million oz of oxides, production will start at around 100,000 oz with all-in costs around $950 per oz. They are also considering a mill at 150,000 oz, with a higher capex. My guess is they will go with heap leach to begin and an 85% recovery rate. It is fully permitted. With financing, they could begin construction in 2019. A final feasibility study is due in Q2 2018.

If you don’t mind investing in West Africa, this looks like a good risk/reward stock at this value. It pencils as a potential 10 bagger at higher gold prices. The current FD market cap is $93 million. That is cheap for a company with 4.5 million oz of resources and significant exploration potential.

Red flags are (1) the large capex ($250 million), which might be difficult to finance. (2) The location (Burkina Faso), which had some political strife recently. (3) They are a takeover candidate because of their large resources.

Paramount Gold Nevada (8/16/2017)

Paramount Gold Nevada is developing two gold projects with 7.5 million oz. It is a new company that was a spinout of Paramount Gold & Silver in 2015, which sold their San Miguel project. That left them with the Sleeper project in Nevada. Sleeper is very large with about 6.5 million oz of gold equivalent (including silver). It has 5.8 million oz (.35 gpt) of gold and 35 million oz of silver (3 gpt). The problem is that it is low grade and the recovery rates will be low for both. The economics are not great, at about 20% after-tax IRR at $1300 gold. The capex is $175 million to produce 80,000 oz annually, but production will increase. This project won't get financed until $1400 gold.

Instead of waiting for higher gold prices to build Sleeper, they acquired Grassy Mountain in Oregon. It is a 1 million oz (.6 gpt) open pit and 600,000 oz (5 gpt) underground project. The cash costs are projected to be low at around $600 per oz. They are currently working on the PFS (pre-feasibility), which is due in Q1 2018. They are giving guidance for permitting in 2018 and are targeting 2020 for production. The capex for the PEA was $120 million, but they think it can be reduced. The after-tax IRR is projected to be 25% at $1300 gold. This project looks good and seems to be progressing.

Their FD market cap is only $29 million, giving them 50 bagger potential. Their future reserves are valued at about $5 per oz. Once investors realize what they have, it should quickly double in value. Insiders own about 40%, which should be enough to prevent a hostile takeover. Usually stocks this cheap with large resources get taken out. Let's hope that doesn't happen.

Perseus Mining (6/3/2017)

Perseus Mining is a mid-tier producer in West Africa. In 2012 when I analyzed it, the FD market cap was a $1.3 billion market cap. Today it is down to $250 million, but they have doubled their resources to 15 million oz with the acquisition of Amara Mining. With the addition of Amara, they have one of the best pipelines of any mid-tier producer. They should become a 500,000 oz producer in 2021 with their current planned projects. They are projecting moderate cash costs and should be profitable at $1100 gold.

They will produce about 200,000 oz in 2017 (Edikan in Ghana). Cash costs are currently high, but they have been falling. In 2017, all-in costs should be under $1300 per oz. Their second mine (Sissingue in Cote D’Ivoire) will begin production (75,000 oz) in Q1 2018. Their third mind (Yaoure in Cote d'Ivoire) is large with 7 million oz of resources, but a few years away. They are currently working in the PFS, which is due in 2017.

They have a good balance sheet with $40 million in cash and no debt. One red flag is very high share dilution (1.1 billion shares). And they are mining in West Africa which has political risk and investor apathy. Even with these negatives, this stock has a very good risk/reward profile at this valuation. I'm not sure why investors are ignoring it.

Pure Gold Mining (11/11/2017)

Pure Gold Mining has an excellent gold project in Red Lake, Ontario. It is a large property on 12,000 acres and high grade. It is already a 1.8 million oz deposit at 9 gpt. Everything about this project looks good. That is probably why Rob McEwen owns 10% of the company. Plus, it's a Mark O'Dea project. He has a midas touch. He is a director and started the company. It has a permitted 500 tpd mill, so permitting should not be a problem. They have exploration targets all over their property, so their resources should grow in size. It's in an ideal location. The capex is low at $50 million. Cash costs are low, below $700 per oz. And the after-tax IRR is about 50% at $1300 gold.

They have $25 million in cash and no debt. However, they are burning through cash with an aggressive drilling program. They have not yet announced when they will begin a pre-feasibility study. The only red flag is that it is no longer super cheap (1 year ago it was trading at 7 cents). But I think they will be a 5 bagger long term, and perhaps more with exploration success. Some investors might question the geology since it is near the Rubicon fiasco, however management says that the geology is well understood. A recent drill hole (6 meters at 45 gpt) shows the exploration potential.

Rye Patch Gold (8/3/2017)

Rye Patch Gold is a near-term gold producer in Nevada. They recently purchased the Florida Canyon mine (1.5 million oz) for $15 million. They plan to begin production at 75,000 oz in Q3 2017. Construction is completed and they are ramping up production. They have funded Florida Canyon with $27 million in debt.

They also have Lincoln Hill, which has 1 million oz (although low grade), plus significant silver offsets. The Lincoln Hill project has a PEA with a 50% after-tax IRR at $1300 gold. The capex is only $30 million to produce 30,000 to 50,000 oz per year. They are advancing Lincoln Hill towards production in 2019. Plus, their Wilco project has another 1 million oz, which is likely to become their third mine. They have a total of 4 million oz of gold at Florida Canyon, Lincoln Hill, and Wilco, plus significant silver. These totals are likely to increase.

I think Rye Patch could become a growth stock, but it all depends on management execution. Currently they are focusing on 5 projects. They have 44,000 acres to explore in Nevada and the cash to do it. They are drilling at Independence Hill and Goldridge. Rye Patch is extremely leveraged for higher gold prices. With higher prices they will be able to improve their balance sheet and fund production growth and exploration. They could easily become a large player in Nevada. Their only red flag is their high share dilution, which could lead to a reverse split.

Note: Newmont Gold has a 70% back-in option for Wilco that is triggered after Rye Patch releases a feasibility study. This could reduce Rye Patch's future potential production.

Sandspring Resources (4/2/2017)

Sandspring Resources has a large gold project and is highly undervalued. However, they will not begin production on their South American Guyana property (Toroparu) until they raise the $500 million capex (they need another $325 million). They have a 10 million oz (1 gpt) open pit. Their future reserves are valued at $9 per oz, giving them 25 bagger potential. Investors for some reason do not like the project. The FD market cap is only $64 million. They seem to be a sitting target for a takeover with only 15% insiders.

They raised 30% of the capex by selling 10% of gold production to Silver Wheaton for $400 per oz, plus 50% of silver production for $4 an oz. But where do they get the rest of the capex? I don't think they can finance it until gold goes to $1400, because the after-tax IRR is only 20% at $1300 gold. So, there will likely be a delay until it gets financed. They are not giving guidance for when construction could begin. I'm not sure if they need a final feasibility study, or which permits are outstanding. They claim that it is construction ready, but they are not showing a timeline to production, which is what most construction ready projects provide.

The cash costs will be around $700 per oz, with all-in costs around $1100. Once gold prices rise, it will get built and have huge cash flow. But by who? They have the option of building a hydro-electric plant for $120 million, and reducing their all-in costs by several hundred dollars per oz. They might choose that option if they can finance it. While this stock prints as a potential 25+ bagger, share dilution could reduce those lofty returns to build the mine.

Their property is on 150,000 acres with a lot of drilling targets. It's very likely that they will find more gold if they get the chance to explore. They already have two additional discoveries (Sona Hill and Wynamu) totaling about 500,000 oz at 1 gpt). I expect them to add 1 million oz through exploration. They currently have 4 million oz of reserves, but they likely will mine about 7 million oz. Why aren't the majors in a bidding war for this project? It can be had for $100 million.

Spanish Mountain Gold (12/31/2017)

Spanish Mountain has a large (7 million oz at .45 gpt) open pit gold project in Canada (British Columbia). They recently updated their PEA, which reduced the capex to $400 million, decreased cash costs to $700 per oz, and increased their after-tax IRR to 20% at $1300 gold. This project now looks very attractive at this valuation, although it will probably require $1400 gold to get financed.

They have an FD market cap of $28 million, with future reserves valued at $6 per oz. Even if they give away half of the project, they could easily be a 10 bagger. The only risk is if they sell the project for a small premium. That is a very real possibility, because shareholders are unlikely to turn down an offer from a company that will build the mine. Plus, the CEO is an accountant who has never built a mine. I think that is part of the reason the stock is so cheap. The other reason is the low grade, which large mining companies tend to avoid.

Production won’t begin for at least 5 years, which is a long wait for a big payoff. They have not begun permitting and still need to pay for pre-feasibility and final feasibility reports. Both reports will require significant share dilution. On a positive note, this is a project likely to get built. The only question is by who, and how much Spanish Mountain shareholders benefit. I like it quite a bit as an optionality play. At $1400 gold, this is a very valuable project.

They are going to build the project in two phases. The first phase will cost $400 million and only produce 150,000 oz annually. The second phase does not have a capex yet, but could be funded organically from cash flow. It's always nice to have a pipeline for growth, which this project provides.

Teranga Gold (11/12/2017)

Teranga Gold is a mid-tier producer in Senegal. Their production should increase over of the next few years from 200,000 oz in 2017 to 300,000 oz in 2020. They get about 80% of the profits at Sabodala (200,000 oz annual producer). Cash costs are projected to be around $750 per oz, with all-in costs under $1100 per oz in 2017. It is a profitable company that is leveraged for higher gold prices. They also have a good balance sheet with $77 million in cash and only $14 million in debt. Plus, they have significant exploration potential.

In 2016, they obtained Gryphon Minerals and their 3.5 million oz (1.8 gpt) Banfora project in Burkina Faso. This is now their expansion focus, with production scheduled for 2019. They also have two additional early exploration projects in Burkina Faso: Golden Hill and Gourma. They both have a lot of drill targets on large land areas and another potential mine. Plus, they have 4 projects in Cote D'Ivoire with significant potential.

Their long-term goal is 400,000 oz of production at $1000 all-in costs. Let’s assume they reach that target and gold prices are $2,500 in 5 years. 400,000 x .80 = 320,000 oz x $1000 (estimated free cash flow) = cash flow of $320 million. At 5x cash flow, the FD market cap would be $1.5 billion. They are highly undervalued with an FD market cap of $219 million.

Treasury Metals (6/5/2017)

Treasury Metals has an advanced gold project (Goliath) in Ontario, Canada. It is an open pit (800,000 oz at 2.5 gpt) and underground (700,000 oz) mine. The PEA was updated in 2017 for a capex of $96 million to build the open pit and mill. It will require an additional $30 million to begin underground mining in year 2. The project has a 13-year mine life (88,000 oz annual production). It is economic with a 28% after-tax IRR at $1300 gold, with around $550 cash costs.

There has been some local resistance to the project. However, there is also considerable support. A local group requested a second provincial EIS, in addition to the required federal EIS, but was denied. Management is confident they will be able to permit the project before the end of 2019. The goal is to begin construction in 2019, but it might slip to 2020. In 2018, they will complete the feasibility study. In 2019, they will attempt to complete permitting, and finance the capex.

Goliath is a large property (12,000 acres) with exploration potential and the deposit is open at depth. I would expect them to extend the mine life to at least 15 years. The CEO is confident they will find at least 2 million oz and thinks the property could contain 3 or 4 million oz. The management team is optimistic that they will increase production from exploration success.

The red flags for this stock are a lack of a pipeline, some local resistance to the mine, and they are a takeover candidate by a mid-tier producer. Also, they don't yet have 2 million oz, which is my comfort level for a flagship project. However, I think they will achieve this level and grow production to 100,000 oz. They have $6 million in cash, which is enough to complete the feasibility study and permitting. They might raise more money before funding the capex, but it won't cause much dilution.

Vista Gold (10/8/2017)

Vista Gold has a large project in Australia called Mt Todd (8 million oz at .8 gpt, with 82% recovery rate). The stock is currently cheap with huge upside potential. One red flag is they might not be able to finance the capex, which is projected to be over $500 million. Another is they will not begin production until approximately 2020. Another is they might sell or option the project to a partner. This is property a major will want to own at higher gold prices.

They recently sold 2 large gold projects at huge discounts versus their upside potential. I thought Los Cordones and Guadalupe in Mexico were very valuable projects. If they are a production company, then why are they giving away their projects at a discount? They did keep Long Valley, which has 1.8 million oz. Also, the CEO said they would probably need a partner for Mt Todd. That's code for we will likely sell once it is de-risked (final permits obtained) and gold prices rise.

It has about a 15% after-tax IRR at $1300 gold. They will probably need at least $1400 gold to finance the project. The upside potential is dependent on if they build and operate Mt. Todd. If they do, this could be a 20 bagger at higher gold prices. Plus, it is a large property (275,000 acres) with more exploration potential to add more ounces.

They have a clean balance sheet with $20 million in cash and no debt. The final feasibility study is due in Q1 2018 and permitting should be completed in 2018. Once that is done they can attempt financing, which if successful, will be followed by a 2-year mine build. The only red flag for this stock is the possibility of a buyout from a major. I don't think they have enough insiders to hold off a takeover attempt. Plus, management does not seem focused on building a large company. Once gold reaches $1450, look for a buyout offer from a major.

Disclosure: I am/we are long AGCBF, AAU, FPRGF, GLDLF, HUMRF, KNTNF, LMCNF, MDRPF, ORZCF, PZG, PMNXF, LRTNF, RPMGF, SSPXF, TGCDF, TSRMF, VGZ, SPAZF.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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