Analysis - Gold

Gold

5 Year Gold Prices - Gold Price Chart
Gold Ore

Gold (chemical symbol: Au) is a precious metal, just like silver, platinum and palladium, and one of the most valuable and highly sought after on the planet. Its main purpose is for investing or preservation of wealth, or a hedge against inflation. As small deposits with likewise small operations can already be profitable, gold juniors are the most abundant among junior miners on the various exchanges, but certainly the Canadian TSX Venture and TSX.

Articles:

Summaries:

  • Terraco Gold recently closed a $19M deal with Waterton, involving the Spring Valley royalties
  • As Waterton plans to advance the excellent Spring Valley project quickly and controls $2B in assets, Terraco can probably expect significant royalty payments in 3-4 years time
  • The company also aims at completing a PEA on the prospective Almaden/Nutmeg project in Q4 2016, which will be a big near term catalyst and significantly increase and indicate asset value
  • Terraco strives to become an established royalty player, and is looking to expand its portfolio rapidly

Executive summary

  • IDM Mining is developing Red Mountain, a small but high grade underground gold project in the Golden Triangle
  • The updated PEA was decent, but had relatively high capex and a short LOM, neutralizing the excellent after-tax IRR of 32.3% @$1250/oz
  • There are several realistic opportunities to improve LOM and economics considerably for the upcoming FS in Q1 2017
  • One of those being a likely significant increase in ounces, which will be defined by an updated resource estimate in November 2016
  • Recent sampling results on adjacent terrain, recently exposed through retreating glaciers, indicates excellent exploration potential

Executive summary

  • Dalradian Resources has a high grade gold project in miningfriendly Northern Ireland, Europe, very high profile management/backers and no shortage of cash
  • Their Curraghinalt project is one of the highest grade and most economic gold projects worldwide
  • The Dalradian share price suffered lately because of negative market commentary on continuity of mineralization, mining dilution and politics
  • In my view the concerns on politics are legit right after the Brexit, but this hasn't cristallized yet, and continuity issues did cause the latest NI43-101 update to contain less Measured and Indicated resources than expected, but concerns on mining dilution are probably unfounded
  • The upcoming Feasibility Study will probably present a smaller project because of this, but still with excellent economics, still implying a real investment opportunity

Executive summary

  • Mandalay Resources is primarily a gold producer, with 3 mines spread all over the world
  • The company buys underperforming assets in good jurisdictions, and turns them around through excellent management and engineering
  • After a sustained period of organic growth and converting resources into reserves, Mandalay Resources is strongly lagging behind peers based on valuation metrics
  • There is a distinct factor causing this disadvantage, and it is part of a deliberate strategy chosen by management
  • I will try to show why I have a different view on increasing shareholder value

Executive summary

  • True Gold has one of the most profitable gold projects worldwide, with economics at a gold price of $1100/oz of an after tax IRR of 30%, NPV5 of $106M
  • This Karma project is fully financed and progressing through construction, and commencing production in Q1 2016
  • The company had to overcome a violent local demonstration, resulting in lots of damages, which halted the project out of nowhere
  • Mark O'Dea of controlling Oxygen Capital was unpleasantly surprised and immediately replaced CEO Melrose by himself, and quickly found a new CEO, Christian Milau, who was the CFO of 500,000 oz pa producing powerhouse Endeavour Mining
  • My guess is Milau didn't leave Endeavour for no reason

Executive summary

  • Continental Gold has one of the largest and highest grade gold projects in Latin America, with 7.4M oz gold equivalent @ 9 g/t gold equivalent.
  • A Preliminary Economic Assessment (PEA) of its Colombian flagship project Buritica is about to be released soon, estimated PEA economics look impressive.
  • Notable risks are a lack of follow up studies like a PFS and FS before production, and permitting.
  • I don't expect the PEA to be a big catalyst, compared to the possible granting of an environmental permit in H2 2015.
  • A sum of parts valuation generates an estimated target range of $3.92-4.83 per share, for a profit of 74-115% when the permit would be granted.

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