3 Great Ways To Play The 2020 Gold Rush
- FN Media Group Presents Oilprice.com Market Commentary
LONDON, Aug. 21, 2020 /PRNewswire/ -- With gold prices breaking new records daily now and some analysts saying its heading directly for $2,500, it's time again to pay close attention to the discovery world because buying it before it comes out of the ground is the most efficient way to make money on this precious metal. And there's every reason to be bullish, and not just at the moment. Mentioned in today's commentary includes: Yamana Gold Inc. (NYSE:: AUY), Newmont Corporation (NYSE: NEM), Barrick Gold Corporation (NYSE: GOLD), Kirkland Lake Gold Ltd. (NYSE: KL), Kinross Gold Corporation (NYSE: KGC).
- Goldman Sachs has revised its 12-month forecast to $2300 per ounce--or a 20% gain.
- UBS has a $2,000 price target on gold for the end of September, while Deutsche Bank is targeting $2,000-$2,100.
- JPMorgan has a $2,000 price target, and Bank of America says $3,000 by the end of 2021.
This is only the first three innings of the next gold bull market. Almost everyone should be holding gold in their portfolio now. The only thing left to do is decide how to bet on gold, and Wall Street will be the first to tell you: either play it safe with a low-risk/low return stability move like a tried-and-true mid-cap miner that has weathered the coronavirus storm, or …
Find the junior miners with major potential upside. They're wildly undervalued if it turns out they're sitting on gold assets. When the dust settles on the COVID pandemic, the next gold to come out of the ground could mint another class of millionaires.
Here are the top 3 gold trends for the third inning of this bull run:
#1 Exposure Is Everything
Yamana has already seen its stocks gain over 10% since early June--a clear testament to rising gold prices. But there's much more to this story than that: This is a company that focuses strongly on its financial health and likes to keep its shareholders happy.
Even the COVID pandemic that caused Yamana to slow down operations at two of its mines in March did not upset this basket. In fact, despite the slowdown, Yamana managed not only to come back with a resumption of operations, but also beat expectations at one of its key Canadian assets: Malartic.
It also reported $92 million in Q2 cash flow and yet another quarter of free cash flow generation. That's five quarters in a row--even when gold wasn't exactly shining. That means it's one of the best-positioned gold companies to actually take advantage of soaring gold prices now and in the future. The rest of the mid-caps will just be playing catch-up. Right now, for these mid-caps, investors are strongly focusing on balance sheets, and this is one of the strongest ones out there.
Canadian-based Yamana has five producing assets in its portfolio, with a production platform of 1 million gold equivalent ounces at low all-in sustaining costs--and it's also on our new discovery radar.
#2 Friendly Jurisdiction
Starr Peak Exploration Ltd. (STE.V; STRPF) shares have surged over 380% in 12 months, primarily because it's sitting on a major past producing gold venue in Quebec AND right next to a mega discovery that's being proved up right now. It's gaining extra momentum as we speak because it just made another major acquisition and it's getting ready to drill. The icing on the cake is that it's one of those rare small-caps (~$40M) that's fully funded for an ambitious drill campaign, so there's not going to be any waiting around to make the next move.
Starr Peak has positioned itself to replicate the major success of its neighbor, Amex Exploration, whose own shares surged over 7,000% in the past year on the heels of a world-class gold discovery. Not only that, the founders of Amex believe they know exactly what Starr Peak is sitting on, so they also jumped in right away as shareholders. And it's all going down in Quebec, one of the most lucrative and friendly gold-mining venues in the world, with massive infrastructure already in place.
Right before Amex made its huge discovery, Starr Peak jumped in and acquired the property adjacent to and adjoining Amex's property. AMEX hit very high-grade gold in three distinct zones here, including on its Perron Gold Project: a massive 45 square kilometers with two significant faults covering more than 15 kilometers of strike along a wildly underexplored Abitibi Greenstone Belt. Amex currently has $25 million in cash and is now fully funded for its ongoing 200,000-meter drill program. They have 6 drill rigs working around the clock and have basically announced high-grade results hole after hole--with no sign of anything slowing down. And what they're working towards is Starr Peak's property border.
Amex is now about 1 kilometer from Starr's Peak's boundary line, and the closer it gets with the drill, the better the numbers get. But Starr Peak didn't stop with that first acquisition. It's been very aggressive, doubling down and expanding the initial property adjacent to Amex in June this year.
And it didn't stop there, either: On August 10th, it moved to acquire another prime land package: Normétal Mine, the past-producing mine on the other side of Starr Peak's boundary. This time, Starr Peak acquired a 100% interest in three major gold properties, orchestrating what can only be described as a mining coup for a small-cap company like this.
The blockbuster acquisition not only solidifies Starr's main NewMétal property, which directly adjoins Amex, but it adds to additional prospective gold claims to the portfolio: Rousseau (a bloc of 12 claims covering over 470 hectares in the Rollmac gold zone) and Turgeon Lake (2 claims on 113 hectares with high-grade drill hole assays).
Now that it's made its pincher movement, Starr Peak (STE.V; STRPF) is ready to drill. The best part: It's fully funded and just signed on the top geological consulting firm in Quebec, Laurentia Exploration--the same one behind the Amex discovery--to ramp it up …
#3 High Grade Exploration
AMEX Exploration Inc (AMX.V) has been a flurry of drills and hits. Over the past 18 months, AMEX has produced some of the highest-grade gold exploration holes in all of Canada.
Last year, AMEX launched its first large-scale drill program in Quebec, setting out to drill about 50,000 meters but ending up drilling more than 100,000 meters and working towards 200,000. They have six drill rigs going at full bore. That's a massive amount of activity--but the play is clearly worth it. That's why AMEX has a budget to drill as much as it possibly can. By the end of the year, we're expecting a resource calculation that looks set to be substantial.
Everyone has known that this area is a huge gold system because of the massive historic production, but the majors failed to find the motherlode because they were only drilling on gravity lows. AMEX went for the gravity highs and hit the motherlode.
The Perron Property is the size of an entire district at about 45 square kilometers, and it's 100% owned by AMEX. We're looking at two significant faults in this property that cover more than 15 kilometers of strike along a wildly underexplored Abitibi Greenstone Belt.
Already, they've hit very high-grade and visible gold in three different zone--the Eastern Gold Zone, the Gratien Gold Zone and the Grey Cat Gold Zone. That's across a 2.7-kilometer corridor of gold mineralization.
Now, AMEX is sitting on some $28 million in cash and $19 million in warrants. Nothing can stop them from a massive drill campaign at this point. And AMEX is doubling down: They are also betting that Starr Peak is sitting on the same motherlode.
Now, as AMEX drills down further east, the grade keeps getting higher and higher and the depths keep getting shallower and shallower. That means increasingly higher-grade gold for lower and lower extraction costs. And all the while, it's closer and closer to Starr Peak. Right now, they're only about 1.2 kilometers from Star Peak's property, and the numbers just keep getting better.
AMEX now has a market cap of $250-$300 million and, even at that, it's still likely undervalued. Retail investors haven't caught on because this has been an institutional play until now. Take your pick: Starr Peak or AMEX; either way, it's one of the biggest gold discovery stories in decades, and it's all going down in the No. 1 venue for companies and investors.
Bonus: Large-Cap Miners
Newmont (NEM) may be the biggest gold mining company on the planet, but that doesn't mean that it doesn't still have significant upside potential. 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.
Last year, Newmont acquired Goldcorp – a move that seemed somewhat controversial for shareholders at the time. But its $10 billion acquisition has paid off in a big way as gold prices soared to record highs as investors, spurred by the COVID pandemic and weakening U.S. dollar, piled into safe haven assets. Since the acquisition, gold prices have soared from $1282 to $2006 per ounce, fueling a 90% rally in the company's share price.
Barrick Gold (GOLD) is another top-tier gold miner with a global footprint. The Toronto-based gold giant operates in 13 countries, including Argentina, Canada, Chile, Côte d'Ivoire, Democratic Republic of the Congo, Dominican Republic, Mali, Papua New Guinea, Saudi Arabia, Tanzania, the United States and Zambia. Though Newmont surpassed Barrick as the largest gold miner when it acquired Goldcorp, Barrick is still a force to be reckoned with.
Barrick Gold is on track to produce to produce between 4.6 to 5 million ounces of gold and between 440 to 500 million pounds of copper in 2020. At current prices, that could equate to as much as $1.5 billion in revenue from just its gold and copper assets.
Though Barrick dipped in March as the COVID-19 pandemic took global markets by surprise, year-to-date, Barrick has earned investors a handsome 56% return – in addition to its healthy dividends. With even more market makers turning bullish on gold, Barrick's investors could see even higher returns by the end of the year.
Kirkland Lake Gold (KL) is another one of Toronto's finest gold miners. Though not quite as established as Barrick or Newmont, Kirkland 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.
According to a joint press release on August 18th, "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"
This alliance will provide Kirkland with cash flow to evaluate new alternatives for the future of the mining complex, dive deeper into its existing properties, and weigh other opportunities where the two gold companies may be able to find common ground in the future
Kinross Gold Corp. (KGC) is another one of the somewhat new miners in the race. Though it's only been around since 1993, the $11 billion gold company is no stranger to the scene. Operating in Brazil, Ghana, Mauritania, Russia and the United States, Kinross is slowly expanding its global footprint, and its moves are paying off.
In just the past five years, Kinross has earned investors with a strong stomach over 400% in returns. And just since January, the company's share price soared by 85%. – which is impressive by any and all metrics.
And Kinross is showing no signs of slowing. With a healthy balance sheet, favorable earnings reports, and governments, banks, and retail investors piling into safe haven assets, it's likely to continue climbing. If gold continues its dramatic rise, who knows where gold companies like Kinross could end up by the end of the year.
By. Susan Melonie
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This news release 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 release include that prices for gold will retain value in future as currently expected; that Starr Peak can fulfill all its obligations to acquire its Quebec property, including receiving stock exchange approval; that Starr Peak's Quebec property can achieve drilling and mining success for gold; that historical geological information and estimations will prove to be accurate; that high-grade targets exist; and that Starr Peak will be able to carry out its business plans. 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 the Company may not get TSXV approval; it may not be able to finance its intended drilling program; Starr Peak may not raise sufficient funds to carry out its plans; geological interpretations and technological results based on current data that may change with more detailed information or testing. The forward-looking information contained herein is given as of the date hereof and the Company assumes no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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