California Gold Mines Restarting; Investors Take Note

Summary

• The home state of the historic gold rush hosts two miners poised to impact investors.
• Castle Mountain mine in San Bernardino has restarted gold production after 15 years of inactivity.
• Idaho-Maryland Gold Mine may restart gold production at 100,000 oz after war shattered operations in 1942. Nevada County location holds sub surface mining as an "allowed use".

Sundry Photography/iStock via Getty Images

California earns a well deserved reputation for driving business and residents out of the golden state. After reading a 2019 recap of state mines, I offer some insights that should peak interest from gold mining investors who might otherwise ignore a state in decline. The more rocks you overturn, the greater your chance to uncover a stock that might be overlooked. I found two gold miners in California that deserve investor attention.

The first one is Equinox Gold (EQX) owned Castle Mountain mine in San Bernardino county California. Castle Mountain resumed commercial gold production on November 21, 2020 after 15 years of inactivity and holds 4.2 million ounces proven and probable. The company estimates a 16 year life of mine with a huge production jump from 40,000 to 200,000 ounces expected in two years.

Castle Mountain gold mine-Equinox Gold

Production Year	Gold production
2020	5,338 ounces
2021 (Estimated)	35,000-40,000
2022 (Estimated)	35,000-40,000
2023 (Estimated)	35,000-45,000
2024-2039 Phase 2 (Estimated)	200,000 annual

Click to enlarge

(Equinox Gold site)

Investors should note that Equinox stock has declined on anticipated production loss at their Los Filos mine in Mexico due to a labor blockade. The company has restarted operations at the mine late in July but the stock has declined significantly in 2021. I am not doing a deep dive on this one, but would note that stock decline percentages tend to exceed the actual damage to results. Here is a chart of the recent stock performance.

Equinox has also purchased Premier Mines where shareholders experienced significant dilution. This SA article provides some further optimism for investors who wish to dig deeper on company prospects.

Rise Gold-Idaho-Maryland Gold mine restart

The Idaho-Maryland Gold mine in Grass Valley, California is a historic gold mine that was once the second largest U.S. lode gold mine. It was on the verge of doubling production when war (and a fixed $34 gold price) shut down operations in 1942. The mine is owned by Rise Gold Corporation (OTCQX:RYES) who anticipates production at 100,000 ounces annual from an underground mine that hosts an existing reusable shaft. The key catalyst will be Nevada County approval of a permit on land that by definition allows mining use. Rise has produced eye catching gold drill hits as high as 149 grams per ton.

(Rise Gold Corp.)

A June 24th survey revealed overwhelming support from Nevada county residents.

A recent survey of Nevada County conducted by J. Wallin Opinion Research demonstrates strong local support for the IMM Project and provides insight into community issues and priorities. A majority (59%) of respondents supporting the re-opening of the Idaho-Maryland Mine with only 34% of respondents opposed. Majority support for the project is consistent across all of the County’s five districts which are each represented by an elected supervisor. According to the survey results, respondents indicated jobs and economy, wildfires, homelessness, and affordable housing were among the top issues facing the community.

The County will vote to approve the use permit after receipt of an independent consultant Draft Environmental Report that is expected to confirm this historic gold mine can be restarted safely. The state of California defers to Nevada County on this mine permit. Rise Gold currently trades at only $.52 per share reflecting a market cap of $14 million. A positive environmental report release should begin to create positive momentum on the stock price but investors need to accept risk that California will find a reason to stop a miner from reopening a mine on privately owned land for which mining is an "allowed use".

The IM Mine Property is 100% owned by the Company and located on private land in Nevada County, California. As a result, the Project is subject to the Nevada County Land Use and Development Code. Subsurface mining and aboveground processing is an allowed use subject to County approval of a Use Permit.

This investment is only for those who are extremely patient and willing to accept a high degree of risk. Benjamin Graham would rightfully urge you to categorize this investment as "speculative". The upside is huge as drill results, history, and a 2017 technical report show significant recoverable gold.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of RYES either through stock ownership, options, or other derivatives. 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.

I do not own shares in Equinox Gold (EQX).

Comments

[Beaver Squeezer]

Total Return
EQX
RYES
1 Month Return
-7.98%
-4.97%
3 Month Return
-29.44%
-7.06%
6 Month Return
-33.82%
-14.01%
9 Month Return
-38.09%
-32.17%
YTD Return
-38.68%
-32.89%
1 Year Return
-45.67%
-28.83%
3 Year Return
45.25%
-32.89%
5 Year Return
-15.45%
-60.85%
10 Year Return
-
-98.66%

[Beaver Squeezer]

This ill fated, doomed to failure proposal will not be tolerated. Even if Mossman has indeed bribed 3 supervisors to vote in favor of this fiasco, publicly induced litigation will see that this venture will never, ever, see the light of day. Mossman reneged on his promises and trashed the environment in his own nation, Canada, then declared bankruptcy, and then, cut and ran, leaving his own bretheren to foot the bill to clean his toxic mess of failure.
Do you expect Mossman to treat another nation, USA, a nation where he has no loyalty, any differently than how he treated Canada?
We, in Nevada County, will NEVER allow this cretin to harm our community...

[H Rose]

With all due respect, Mr. Paul, I believe it’s a conflict of interest when you advocate investing in a company that you own stocks in. The objective truth is that this is a bad investment. Mr. Mossman, CEO of Rise Gold, is still in hot water for the mess he left on Gitxaala land. It WAS one of the most important food gathering areas that they had used for thousands of years. The people of Grass Valley are not stupid and anyone who looks at the details of this mine and the fact that approximately 300 residents in the vicinity will loose the quiet enjoyment [Quiet enjoyment is a right to the undisturbed use and enjoyment of real property by a tenant or landowner. The right to quiet enjoyment is contained in covenants concerning real estate.] It’s already happening and not many in the community support this mine. We do need jobs, but not at the expense of everything else.

[Christy Hubbard]

Beware investments that look too good to be true. Rise Gold is one to be sure. The opposition is so strong in the community (www.minewatchng.org) that CEO Ben Mossmand hired a marketing firm to create a grossly misleading poll, then used it to claim that the majority of residents support the mine (www.theunion.com/opinion/columns/darrell-berkheimer-mine-snow-job-fails/). Mr. Mossman is also still in court in Canada facing charges for his previous mining venture, which polluted tribal waters and went bankrupt.

[1504661]

Gold is likely rangebound, but might go lower from here.
If the greater market plunges, gold isn't going to levitate. No gold position.

The malicious "anti-American" conspiracies about CA being a terrible place are false. A minority of extremists like to perpetuate the myth that CA is a failed state, a train wreck, a lost cause, etc (take your pick of the absurd) but as such tantrums persist, CA "still" has the 5th largest economy on the planet.
No other place in the USA can claim a better or stronger economy.
It's almost as if facts no longer matter to the desperate barbarians.

[Tim Paul]

@1504661 California had the highest poverty rates in the nation based on the Census Bureau's cost-of-living-adjusted standard. Last year, 135,000 more Americans left the state than came here. The California exodus is a real phenomenon.
If you are a regular reader of these editorial pages, you know about the state's myriad challenges (all of which predate the pandemic): median home prices of more than $750,000 statewide and above $1 million in some metro areas; an exploding homeless crisis; crumbling infrastructure; water shortages; lousy public schools; growing crime rates; and various governmental scandals. Is the Census lying?

[Zookcheryl00001]

The CEO’s first gold mining venture went bankrupt & left Canadians a toxic mess to cleanup. Not a good track record when looking to invest in a company. Plus the community has moved past its industrial era over 50 years ago and is now a thriving eco tourist, art centric and budding tech community.

[Sandy Lighthouse]

@Zookcheryl00001 Pretty much nailed it. Sometimes in a more rural location that is true to its blue collar roots (like Jackson) these kinds of things can gain traction. But Grass Valley doesn't fit this description and is a bedroom community for ultra liberal Sacramento.

[Sandy Lighthouse]

I wish Rise luck. The mine is almost in the town of Grass Valley and it's not the percentages of voters, it's who can raise the biggest stink.

[Tim Paul]

@Sandy Lighthouse Nevada County Board must approve the permit on a majority vote. With 5 Board members, it will require 3 yes votes. The Board is supportive of reopening this historic mine, assuming a 3rd party Consultant report confirms there will be no significant environmental issues.

[suareztribe]

@Tim Paul the Board has not stated that they are supportive of the mine, so this is untrue. Also there would need to be a rezoning of the parcel. According to the general plan, extractive mining is not light industrial. and any Board members that vote in favor of this will be voted out of office next year.

[Sandy Lighthouse]

@Tim Paul I don't see how there can't be noise and dust issues being essentially in town.

[BeaBaggage]

with POG at 1800 or so, we are seeing a lot of incremental mining coming online as some of these places are profitable.. the World Gold Council report shows increasing central bank buying, weak Indian buying as you'd expect and of course the fickle ETF trading.. overall though miners have done a good job of controlling costs without going crazy in projecting development at high prices. So overall I still think most miners offer good value w strong free cash flow etc.

[Tim Paul]

@BeaJawa True. Cash flow is gushing across most miners. The country is experiencing devastating inflation in cost of living due largely to the devaluation of our currency by the FED. Gold prospers as a hedge against price inflation since it can not be printed or created out of thin air. Supply is limited, while the FED's ability to print dollars is unlimited. My reading of currency history leads me to believe that our currency will not survive. Gold becomes the most widely held money to back a new currency.

[BeaBaggage]

@Tim Paul yes I am long several and will add EQX to my watch list. MX has become increasingly hostile to mining under AMLO but u/e is a bad thing for any 2nd or 3rd world country so this should pass. Pays to be diversified across several miners for sure as there is always a 'pothole' somewhere with even the best of them. Bea

[fhbecker]

Be very careful when investing in companies principally located in CA. Look to China to see what happens when the government wants a piece of what you have.

[Tim Paul]

@fhbecker That is why this investment is "speculative". California is falling apart due to government mismanagement-can not even supply electricity to residents. This Idaho-Maryland mine is a restart of an existing mine, located on land that allows "mining". The county holds jurisdiction as opposed to the Governor. Jobs and tax revenue are badly needed as residents flee the state in the thousands every day.

[fhbecker]

@Tim Paul Excellent points, fully agree with your speculative call. After my PG&E experience, I prefer to just avoid CA, as their politicians have a knack for changing the law to get re-elected. Ok, many other state's politicians also have that knack.....

[Tim Paul]

@fhbecker good points.

[turtle108]

You might want to look deeper into Rise Gold. The survey they took locally was a sham. There is tremendous local opposition to this mine. Tremendous concerns about water, traffic, dust, the environment. This mine will not pass and if it does it will be with a LOT of backlash. People do NOT want this mine. You should do better research before representing the local community. Rise Gold is mining paper- don't be sucked into them.

[Tim Paul]

@turtle108 I have performed extensive research into Rise Gold. In California, there is local opposition to everything but solar panels and electric powered vehicles it seems. You are entitled to your opinion and I suspect you are an unhappy local, but I stand by my article and do not tell me that I should do more research when you have no idea what you are talking about.

[Hoosier1978]

@turtle108 - You wrote: "There is tremendous local opposition to this mine. Tremendous concerns about water, traffic, dust, the environment. This mine will not pass and if it does it will be with a LOT of backlash."

I am confident this is true. This is exactly why I will not invest in California businesses with predominate in-state operations. The anti-business climate is pervasive. No new gas stations or pumps in Petaluma. No new nuclear. No new oil refineries. All new homes required to have solar. Prop 65, which is a national punchline to jokes. Now, the attitude of "no mining", rather than "we can find a compromise." I plan to stay here in Texas where we citizens and governments work with businesses to create jobs. Of course that excludes Autin which is becoming known as California Texas.

- Hoosier

[Tim Paul]

@Hoosier1978 much truth in your take. Always exceptions to the majority rule. Equinox Gold restarted Castle Mountain mine-San Bernardino county in 2020-open pit mine with heap leaching. Rise Gold mine is an underground mine (less invasive)located on private property, which is deeded for mining.