BMO Metals & Mining 2014 coverage

In the mining sector, there’s an investment conference somewhere on earth every day of the year.

Well, it’s time for the 2014 BMO Metals & Mining Conference.

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Kitco’s Daniela Cambone interviews Don Coxe at the BMO Metals & Mining Conference in Hollywood, Florida.

BMO’s event is considered the best attended and most productive institutional focused event of the year by the CEO’s we’ve interviewed.’s dynamic lead journalist Daniela Cambone is reporting live from the three day event.

Follow @DanielaCambone on Twitter, and watch for her exclusive interviews from BMO 2014.


NCQ – Paulson and Others to Maintain Pro Rata Positions in NovaCopper Following $20M Raise

NCQ Chart
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NCQ:TSX | 53,527,862 Shares O/S (basic) | $80,827,000 Market Cap | $1.45 – $2.20 Year Range | $1.50 Last Trade (halted)


NovaCopper Inc which is developing the large, high-grade polymetallic Upper Kobuk Mineral Projects in Alaska, announced after market today that it would raise $20 million of which $10 would be allocated to three strategic investors representing ownership of 45% of NovaCopper.

The other $10 million is being raised on a best efforts basis underwritten by RBC Capital Markets and Cormark Securities.  The offering will be priced once marketing commences.

The three major shareholders participating in their pro-rata amount of the $10 million raise are Paulson & Co, Electrum Strategic Resources LP and The Baupost Group.  The use of proceeds include continued exploration and development at their Upper Kobuk Mineral Projects as well as permitting and environmental work there.

The company's Upper Kobuk Mineral Projects are 200 miles west of Red Dog in Alaska (Image: NovaCopper Inc.)

The company’s Upper Kobuk Mineral Projects are 200 miles east of Red Dog in Alaska (Image: NovaCopper Inc.)

In September of last year, the company released a preliminary economic assesment on the most advanced of their deposits, the Arctic deposit.  This report showed a 12 year mine-life producing 210 million pounds of copper equivalent per year at total “all-in” cash costs of $1.26/lb of payable copper.

The project is located in Alaska which has seen very public opposition to certain large-scale mining projects, however these projects are 200 miles east of the world’s largest and highest grade zinc mines, Teck’s Red Dog mine (51.3Mt at average grade of 15.7% Zn).

As of November 30, 2013 the company had $6.5 million in cash.

Environmental permitting remains the key catalyst.

Read: NovaCopper Files Preliminary Prospectus Supplement and Announces Concurrent Private Placement

TGM – True Gold Gathers Equity Portion of Karma Financing, Closes $51.9M

TGM Chart TGM data by YCharts

True Gold Mining (TGM:TSXV) has support from some of the biggest and brightest resource investors, including their Chairman Dr. Mark O’Dea, Canadian mining behemoth Teck Resources and giant US mutual fund Liberty Mutual.  Today, the company announced it has closed a total of $51.9 million in equity.

This financing makes the company’s flagship Karma gold project located in Burkina Faso, West Africa, principally financed on the equity side.  According to the December 2013 feasibility study, the Karma project has a price-tag of $131.5 million of which potentially $70 million (including warrant exercise) is now financed via equity.

Liberty Metals and Mining is part of Boston-based Liberty Mutual (Image: Liberty Mutual Insurance)

Liberty Metals and Mining is part of Boston-based Liberty Mutual (Image: Liberty Mutual Insurance)

The company closed its $42.9 million bought deal financing which was completed at $0.40 per unit with each unit consisting of a share and a half warrant exercisable at $0.47 until August 18, 2014.  The warrants could bring in another $30.4 million.

True Gold also closed the first tranche of their non-brokered private placement with Liberty Metals and Mining (True Gold’s largest shareholder) for their pro-rata amount of the raise, roughly $9.9 million (of which $8.6 million is currently closed).  They expect to close the remaining $1.3 million later today.

The bought deal was led by RBC Capital Markets.  The 52.6 million warrants issued under the financing will commence trading on the TSX Venture on Feb. 18, 2014, under the trading symbol TGM.WT.

“This financing structure addresses the equity component of True Gold’s project finance needs and creates a pathway to production. With $70-million in cash and more than six months into the project debt process with our lead arrangers, we are positioned to begin construction of Karma in the second half of 2014. In the meantime, we are advancing barrage construction, finalizing detailed engineering and design, and continuing resource expansion efforts through ongoing drilling,” said Mark O’Dea, executive chairman, True Gold.

The company is now six months into discussions with their debt syndicate to coordinate the remaining funding necessary for the Karma project.  This should amount to less than $70 million and would represent less than 50% debt on the project.  The project is the type lenders like, with strong margins (0.89g/t gold in open-pit, heap leach) and good payback (1.4 years at $1,250/oz gold price).

Liberty Metals and Mining holds approximately 19.5% of True Gold common shares, while Teck owns approximately 11.5%.

Read: True Gold Mining Raises C$51.9-Million Through Bought Deal Financing and Private Placement

GCM – Gran Colombia Gold Doubles in February on Short Covering

GCM Chart
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Shares of Gran Colombia Gold (GCM:TSX) which came under severe pressure last year on the back of a dramatically dropping gold price and questions about their solvency, are up over 127% in February as the street feels the short squeeze.  Investors gained confidence in gold and gold equities in the early months of 2014 and caught some shorts offside.  It looks like shorts of Gran Colombia have been forced to cover in February as the gold equities look strong and the company restructures costs.

Gran Colombia is targeting a $400 per ounce reducton in all-in sustaining costs in 2014 (Photo: Gran Colombia Gold)

Gran Colombia is targeting a $400 per ounce reducton in all-in sustaining costs in 2014 (Photo: Gran Colombia Gold)

On February 3rd, the company announced a management shuffle which saw the company appoint long-time Latin American resource sector veteran Lombardo Paredes Arenas takeover as CEO.  The company announced plans to restructure operations at its Segovia gold mine in Segovia-Remedios mining district of Colombia.  The focus is on lower all-in sustaining costs from the 2013 average of over $1,300 per ounce to below $950 per ounce in 2014.  To achieve this, the company is focusing on the highest grade  The company will pay roughly $200 per ounce related to its gold-silver linked debt facility.

The company holds the Segovia underground mine and the Marmato development project.  Segovia is the 7th highest grade producing gold mine in the world and hosts 413,000 ounces at 16g/t gold in M&I resources and another 1.4 million at 11g/t gold in inferred.  Using $40 per M&I ounce and $20 per inferred ounce (mid-low end of recent gold transactions), the value of Segovia $44.32 million or $2.90 per share (currently at $2.17 and this doesn’t give any value to their other assets).

Recall Hochschild acquired Andina Minerals and their 6.6 million ounce Volcan deposit for $103 million or $15.61 per ounce of gold in the ground.

The Marmato project hosts the 18th largest undeveloped gold deposit in the world with over 14 million ounces (12.6 million in M&I) at 0.90g/t gold.  If you apply a low end metric to the insitu gold value of Marmato, say $10 per M&I ounce, that equates to a value of $126 million for Marmato or $8.25 per share.

Please read Gran Colombia Gold’s Cautionary Statement Regarding Forward-Looking Statements’s carefully.

AKG/PMV – Asanko and PMI Gold Gain Overwhelming Support from Shareholders for Merger

Asanko expects to start producing gold from Esaase in the second half of 2015 (Photo: Duncan Chard/Bloomberg)

Asanko expects to start producing gold from Esaase in the second half of 2015 (Photo: Duncan Chard/Bloomberg)

Asanko Gold (AKG:TSX) and PMI Gold (PMV:TSX) announced in mid-December that they intended to merge the two to take advantage of the synergies between their two assets in Ghana.  The two attempted to merge in late 2012, but was later terminated as PMI shareholders’ couldn’t agree.  Asanko has since significantly de-risked their project and is now fully-financed through to production.

Fast forward one year, and it seems PMI shareholders have had a change of mind and now believe the two companies are more valuable as one instead of as two separate entities.  This morning, the two announced that their shareholders had voted, overwhelmingly, in favor of the transaction.  Both have significant late-stage gold development projects nearby to each other in Ghana.  Asanko management believes the two will be able to save upwards of $100 million by merging.

Of the votes cast, 99.5% of PMI shareholders and 99.6% of Asanko shareholders voted in favor of the merger.  Under the terms of the arrangement, each PMI shareholder will receive 0.21 shares of Asanko valuing PMI at roughly $0.44 per share representing a 79% premium to the 20-day VWAP at announcement.  The total deal is valued at roughly $183 million which equates to Asanko paying roughly $40 per reserve ounce (net of PMI’s $90 million cash).  Both companies’ shareholders will hold 50% of the combined Asanko.

Asanko's Esaase and PMI's Obotan are both expected to produce 200,000 ounces/year from an open-pit operation (Photo: Carla Gottgens/Bloomberg)

Asanko’s Esaase and PMI’s Obotan are both expected to produce 200,000 ounces/year from an open-pit operation (Photo: Carla Gottgens/Bloomberg)

The companies have determined that Asanko’s Esaase project should be developed first which will then be followed up by PMI’s Obotan.  Esaase hosts 2.4 million ounces in 2P reserves at an average grade of 1.4g/t gold.  The project is expected to produce 200,000 ounces annually for an 11 year mine-life with $843 per ounce all-in costs.  Esasse is a low capital intensity project with an estimated capex of just over $280 million.

Asanko expects to release an updated feasibility study over the next few months which could show a later phase of capex if the company determines it is ideal to truck ore from Obotan to an increased processing facility at Esaase.  PMI’s Obotan project is slated to also produce 200,000 ounces annually over a 10 year mine-life.

The combined Asanko will have approximately $280 million in cash and an additional $150 million in a project facility from Red Kite.  The Asanko management team is well-equipped to lead the combined company.  The combined Asanko will produce 200,000 ounces per year within the next two years and could double that within then next five (or sooner).

PMI is seeking a final order of the Supreme Court of British Columbia to approve the arrangement, which is expected to be granted on February 4th. Once the final order is received, the arrangement is expected to be completed on or about February 6th.

Read: Asanko And PMI Shareholders Approve Acquisition Of PMI By Asanko

Also read: Second Time’s a Charm: Asanko Tries Again to Acquire PMI Gold

David Beatty’s Edgecrest Capital Acquires Stonecap Securities

Edgecrest Capital is led by David Beatty, the co-founder of Westwind Partners and Yamana (Image: Edgecrest Capital Corp.)

According to reports this afternoon the rumor that Edgecrest Capital was in talks to acquire Stonecap Securities appear to be true as the two announced the acquisition after the market closed today.  The price wasn’t disclosed, but the move by Edgecrest allows them to enter the US market via Stonecap’s FINRA registration without having to go through the lengthy regulatory process.

“When markets are absolutely terrible and in the dumps is when you can attract the people in the brokerage business,” David Beatty, 56, CEO of Edgecrest, said in a phone interview from Toronto to Bloomberg. “You can only kick a dog so far down into the hole, and then you make a contrarian move. That’s why we did this.”

Beatty co-founded Yamana Resources as well as Westwind Partners.

The Toronto-based firm that was created last year is adding 10 employees from Stonecap, including two investment bankers, three salespeople and four research analysts. They have not disclosed who the individuals are.  They are in discussions to bring a number of investment banking teams over and expect to grow to over 50 employees within 2 years.

Stonecap recently shutdown its Calgary office as a causality of the lengthy bear cycle in the resource sector.   In April of last year, Fraser McKenzie announced it was closing its doors as a result of the downturn in the resource sector.

Earlier this week,  Edgecrest announced it was underwriting a $75 million convertible debenture and warrants deal for North American Palladium (PDL:TSX).

Read: Edgecrest Capital Buys Stonecap Securities in Canada (Bloomberg)

‘Big Mick’ Davis Seeks to Raise $3 Billion Before he Makes Acquisition for X2 Resources

Mick Davis net worth is estimated to be in excess of $5 billion (Photo: Gianluca Colla/Bloomberg)

Mick Davis net worth is estimated to be in excess of $5 billion (Photo: Gianluca Colla/Bloomberg)

According to a Bloomberg article last week, ‘Big Mick’ Davis, the former CEO of Xstrata Plc, is seeking to raise $3 billion for his private, X2 Resources, prior to him acquiring any assets.  Davis, the 55 year-old South African, has raised $1 billion from investors including private equity firm TPG and Asia’s largest metals trader, Noble Group.  With that amount of cash, X2 may be able to target acquisitions in excess of $12 billion when combined with a debt.  According to the sources, Davis may first limit investors to six or seven at $500 million each.  It is rumored that Australian private equity fund IFM is set to be one of those investors.

Davis originally oversaw one of the great transactions in the mining business between BHP and Billiton to create the world giant, BHP Billiton.  Then, he followed that success up by growing Xstrata Plc’s market value from $500 million to over $50 billion in the course of a decade through a number of accretive acquisitions which eventually led to its merger with Glencore.

According to sources close to Davis, he favors copper, coal and/or zinc assets.  Additionally, he is looking to acquire mines already in production or ones that are close to producing.

Davis plans to keep his new venture private and may consider selling once it grows enough to return value to its investors, according to the sources.

Read: Ex-Xstrata CEO Davis Said to Seek $3 Billion to Buy Mines

WKM/ANV – West Kirkland to Buy Allied Nevada’s Hasbrouck Property for $30 Million

Hasbrouck and Three Hills are located in Nevada which is one of the best heap leach locations in the world (Image: Infomine)

Hasbrouck and Three Hills are located in Nevada which is one of the best heap leach locations in the world (Image: Infomine)

This morning, $6 million market cap junior, West Kirkland Mining (WKM:TSXV) (halted at open)announced they intended to acquire Allied Nevada Gold’s (ANV:TSX) Hasbrouck gold project in Nevada for $30 million.  The deal is subject to West Kirkland being able to obtain the necessary financing.  According to their third quarter financials, West Kirkland had less than $900,000 in cash on the balance sheet.  Allied Nevada has also agreed to sell the Three Hills project which consists of six patented mining claims and 100 unpatented mining claims located nearby in Nevada to West Kirkland.

West Kirkland has agreed to pay $19.5 million upon closing (April 2014 expected).  With the final $10 million to be paid within 30 months of closing unless Allied intends to maintain an interest in the property or West Kirkland cannot make the final payment.  In that case, Allied Nevada would retain a 25% interest in the project.  West Kirkland has already made a $500,000 good-faith payment.

Allied Nevada released a preliminary economic assessment on the project in April 2012.  That report envisioned an open-pit heap leach operation with average annual production of 135,000 ounces of gold and 540,000 ounces of silver at an average annual adjusted cash cost of $555 per ounce for a five year mine life.  The production plan assumes mining and processing the nearby Three Hills mineralization ahead of Hasbrouck mineralization.

The project requires significantly more drilling to update its current resource and mine-plan which hosts 1.2 million ounces of gold and 29.3 million ounces of silver in the inferred category (grading 0.009 opt Au and 0.228 opt Ag).  The potential to extend the mine life exists as the Hasbrouck deposit remains open.

Hasbrouck Peak is slated to produce 135,000 ounces of gold per year (Image: The Northern Miner)

Hasbrouck Peak is slated to produce 135,000 ounces of gold per year (Image: The Northern Miner)

The initial capital cost of $78.1 million (life-of-mine capital cost of $90 million) for a conventional run-of-mine and crushed heap leach facility is manageable on its own, but combined with a $20 million upfront payment and West Kirkland will, already, be into this acquisition and development for $100 million.  Again, the company’s market capitalization is $6 million.  Although heap-leach mines are attractive in this environment, due to their simplicity and low capital intensity, this seems like a tall order for a micro-cap company to attempt.

The project economics are quite robust, with a 60% after-tax IRR and an after-tax NPV (6%) of $98.7 million.  Analysts valued Hasbrouck at much higher values, with Scotia’s analyst, Trevor Turnball, believing the value to be closer to $75 million.  Cowen and Co’s Adam Graf believes the market value is closer to $60 million.  The steep discount could be due to the fact that Allied Nevada has its hands full with Hycroft and needed to shore up the balance sheet in case of further weakness in the gold price.

According to Allied Nevada’s website, base line environmental studies have begun at Hasbrouck to initialize the permitting program and it is anticipated that the mine could receive permits to begin construction in the second half of 2014.  Given the change of ownership and the fact West Kirkland may elect to try and optimize the project to fit their financing abilities, a 2014 start may be tough.

Read:  Allied Nevada Announces Divestiture of Non-Core Hasbrouck Property to West Kirkland Mining for US$30 Million

BTO – B2Gold Releases Inferred Resource Estimate for Wolfshag Zone Which Should Provide High-Grade Feed to Otjikoto

B2Gold expects to spend $8 million in 2014 on exploration around Otjikoto (Photo: Mining News)

B2Gold expects to spend $8 million in 2014 on exploration around Otjikoto (Photo: Mining News)

This morning, Clive Johnson’s B2Gold (BTO:TSX) released an inferred resource estimate for the Wolfshag zone near the company’s Otjikoto gold project in Namibia.  The Wolfshag zone sits adjacent to the east and northeast portion of the pit for the Otjikoto deposit.  This initial resource estimate was comprised of 703,000 ounces of gold at an average grade of 3.2g/t gold.  The Otjikoto open pit has an average grade of 1.42g/t gold so this Wolfshag zone indicates a potential expansion zone, high-grade feed zone and/or an extension of the mine life at Otjikoto.  Construction at the mine is on budget and on schedule to start in the fourth quarter of this year.

B2Gold engineers will now work to develop conceptual mine plans to determine when Wolfshag material could be fed to the Otjikoto mills.  The company is budgeting roughly $8 million to exploration around Otjikoto in 2014.  This will focus mainly on the northern portion of the Wolfshag zone to increase the density of drilling to 50m x 25m.  The company also intends to test the southern extension of the zone.  They expect to release an updated indicated resource estimate by the end of the year.

The Wolfshag zone remains open down plunge to the southwest but insufficient drilling has been completed to date to allow for classification within a resource.  The inferred estimate was based on 119 drill holes and over 33,015m.  The Wolfshag zone comprises a series of en-echelon stacked, shallow easterly dipping mineralized shoots which plunge at 10 to 15 degrees to the southwest. The shoots subcrop below calcrete cover to the north and have been traced to the south down plunge for 1,600 metres strike length.

Based on the positive drill results from the Wolfshag zone to date, B2Gold plans to expand the Otjikoto mine in 2015, increasing throughput from 2.5Mtpa to 3Mtpa.  They will spend $15 million on the expansion in order to buy a pebble crusher and additional mining equipment and tanks.  They believe the expansion will grow average annual gold production to 170,000 ounces per year from 141,000 ounces per year.

The company has successfully improved the economics of their Nicaraguan operations by finding nearby high-grade gold (Photo: B2Gold Corp.)

The company has successfully improved the economics of their Nicaraguan operations by finding nearby high-grade gold (Photo: B2Gold Corp.)

The Wolfshag zone allows B2Gold to continue their trend of acquiring or finding higher grade ore deposits near existing mines.  This allows the company to utilize the fix cost assets such as the mill and processing facilities with more and higher grade ore feed.  This reduces the overall cost of the mine, but increasing the average grade.  Grade dilution remains the largest cost increase mines around the world face.  B2Gold were successful in finding close by higher grade ore in their Nicaragua operations.

Given the company’s production profile (guiding 395,000-420,000 ounces in 2014) and existing reserve/resource base, this news will not have much of an impact on the share price, even though it should prove to significantly increase the economics of the Otjikoto mine in time.

Read: B2Gold Corp. Announces Initial Resource for Wolfshag Zone at Otjikoto Project in Namibia

BTO/RIO – Mid-Tier Gold Producers B2Gold and Rio Alto Deliver Strong 2013 Production

B2Gold and Rio Alto both deliver on expectations and should be rewarded for it (Photo: Andrew Caballero-Reynolds/Bloomberg News)

B2Gold and Rio Alto both beat Q4 guidance and delivered strong 2013 production numbers (Photo: Andrew Caballero-Reynolds/Bloomberg News)

This morning two high-growth mid-tier gold producers, B2Gold (BTO:TSX) and Rio Alto (RIO:TSX) announced strong fourth quarter and 2013 production numbers.  The performance in the fourth quarter of these two companies shows the strength of this tier of gold company, even in todays environment.  They are producing at record levels and have been able to maneuver more easily and adapt to the changing investor sentiment of investment returns versus big ounce production.  The smart mid-tiers have used 2013 to optimize current production and new development projects in order to secure high return growth.

B2Gold met expectations in their full-year 2013 guidance, producing 366,313 ounces of gold over the year (representing an increase of 132% over 2012).  B2Gold produced record quarterly production in Q4, producing 105,577 ounces over the 3 month period.  The company didn’t provide cash costs, but they estimate them to be on the low end of the $675-$690 per ounce guidance.

The company provided 2014 guidance of 395,000-420,000 ounces of gold over the year at a decreased cash cost forecast of $667-$695 per ounce.  B2Gold believes the plan to expand Ojikoto to 3Mtpa is a good one given they are in a strong financial position to grow.  They expect to spend $15 million to increase throughput there.  This is expected to increase production from 140,000 ounces to 170,000 ounces by the end of 2015.  The company has $240 million in cash and $100 million of a $150 million facility undrawn.

Here’s the 12-month B2Gold chart:
BTO Chart
BTO data by YCharts

Rio Alto provided the market with a similar release, announcing record quarterly gold production in the third quarter of 70,551 ounces.  They beat their 2013 production guidance of 190,000-210,000 ounces of gold and produced 214,742 ounces over the year.  The company continues to mine and process more tonnes at a higher grade.  No cash cost estimates were provided for 2013.

Over 2014, the company expects to produce in line with last year at between 190,000 to 210,000 ounces of gold.  They are targeting cash costs of $629-$695 per ounce and fully-loaded all-in cash costs of $990-$1,094 per ounce.  Rio’s management team expects to spend $34.5 million in sustaining capital at their La Arena Phase 1 oxide gold mine and another $26 million in capital to be spent on their Phase 2 expansion.  This $26 million includes a feasibility study, power line and substation and surface rights acquisitions.

Here’s the 12-month Rio Alto chart:
RIO Chart
RIO data by YCharts

Strong operating performances by these mid-tier companies offer investors shelter from the storm in the gold sector.   It is these types of environments, when resource assets are on sale, that the most successful gold companies are built.  Without acquiring anyone else, B2Gold is already slated to grow production by nearly 70% over the next few years.

We are awaiting another mid-tier gold with low cost growth, Endeavour Mining (EDV:TSX) which should be releasing 2013 results as well as 2014 guidance in the near-term.  Their previous guidance was targeting 33% production growth this year alone, from 300,000 ounces to over 400,000 ounces in 2014.

Read: B2Gold Achieves Record 4th Quarter and Full-Year Gold Production in 2013. Operational Results Continue to Deliver on Guidance and 2014 Outlook Provides Continued Production Growth

Read: Rio Alto Produces a Record 214,742 Ounces of Gold in 2013

Related: Endeavour Mining: 2013 Results, 2014 Guidance, Agbao Mine Commissioning Coming Up

PDN – Paladin to Sell 25% Interest in Langer Heinrich Mine for $190M, Removing Debt Overhang

Langer Heinrich was originally discovered in 1973 and acquired by Paladin in 2002 for AUS$15,000 and AUS$0.12 per pound of yellowcake (Photo: Paladin Energy Ltd.)

Langer Heinrich was originally discovered in 1973 and acquired by Paladin in 2002 for AUS$15,000 and AUS$0.12 per pound of yellowcake (Photo: Paladin Energy Ltd.)

The African-focused uranium producer, Paladin Energy (PDN:TSX) has come under pressure in the past few years due to a decreasing spot price for uranium as well as $600 million in debt on their balance sheet.  The market has been worried about the company’s ability to meet near-term obligations and the stock has been on a steady decline since Fukishima.  Paladin has found a buyer (China National Nuclear Corp. (CNNC)) for 25% of their Langer Heinrich mine in Namibia.  CNNC has agreed to pay $190 million for the stake in the mine as well as a right to purchase a pro-rata share of the uranium production at market prices.  This not only gives Paladin a much need balance sheet boost, but also secures a production off take agreement.

If this successfully closes, Paladin will have add the $190 million to the existing $125 million it currently has in cash.  This should be sufficient for the company to repay $300 million in debt that is maturing in November 2015.  This sale essentially lifts the debt concerns overhanging the stock and should allow for some relief in its share price.

Langer Heinrich deposit hosts ore reserves of approximately 125 million pounds of U308 at an average grade of 0.052%.  This grade seems low relative to the Athabasca Basin, and it is, but >0.05% U308 is above the global average for uranium deposits.  The company gradually increased production quarter-over-quarter in 2013 from 1.23 million pounds in Q1 to 1.43 million pounds in Q4.  They have plans for an expansion to the mine, but have held off for stronger uranium prices.

PDN Chart
PDN data by YCharts

Read: Paladin Energy Ltd: Sale of Minority Interest in Langer Heinrich Mine, Namibia

2014 Junior Mining Forecast with Top Analyst Picks

In the following article, we offer our forecast for 2014 including five stock picks from each of our analysts. Compare 400+ precious metals stocks with a Free 14-day Trial to

2014 Venture Forecast

The TSX-V will be a stock picker’s market in 2014. In this environment, investors should stay cautious and the focus should remain on companies with strong balance sheets, top tier management teams, and projects in safe jurisdictions.

Financings were down 37% in 2013 and we anticipate that many junior exploration companies are in for a rough year. Out of the 410 junior exploration stocks currently covered in our database, the average cash position is less than $700,000. Further, about 30% of companies have less than $500,000. We expect this cash trend to continue until troubled companies become delisted, which will likely come after audited annual statements are due.

The average General and Administrative Expense Ratio, which measures the percentage of total expenditures going to items other than exploration, is above 65%. This indicates that the majority of companies are unable to “put money in the ground” in order to create value for their shareholders. In our database, currently 152 companies have ratios above 50% and 75 companies have ratios above 75%. These companies need to leave the exchange before any kind of “across the board” rebound can happen.

We expect the 975 level to continue as resistance for the Venture and for it to move considerably lower by the end of 2014. We expect it to break the 2013 low of 859 and retest 700.  (See below chart and trend of TSX-V)

TSX Venture Forecast 2014

While a rebounding of the Venture itself is unlikely for 2014, investors need to remember that watching the performance of the whole index can be fairly arbitrary. The TSX-V is made up of hundreds of companies – and though many may continue a downward trend, there are great opportunities out there for those who are patient and focused.

Using our Tickerscores data on hundreds of previous metals companies, here we outline some stocks that we believe could “turn the corner” before the rest of the market. First, we’ll look at a few select metals of interest to us. Continue reading

MDW – Midway Gold Breaks Ground at Pan and Targets Third Quarter Mining

Midway expects to start pouring gold before the end of this year (Photo: David Paul Morris/Bloomberg)

Midway expects to start pouring gold before the end of this year (Photo: David Paul Morris/Bloomberg)

The Nevada gold developer, Midway Gold (MDW:TSX), has broken ground at their Pan project after receiving the final environmental permit from the authorities south of the border.  This morning the company announced that they have broken ground and that construction is now underway at Pan.  They expect the build out to take less than 9 months and for it to be complete by Q3/2014.

On December 20th, the company announced it had received a signed record of decision (ROD) on the final environmental impact statement (EIS) for the Pan gold project which signified full completion of the required National Environmental Policy Act (NEPA) and EIS process. The ROD represented the final step in the federal permitting process and allows construction to begin.

“This groundbreaking ceremony is the kickoff for building the Pan mine,” said Ken Brunk, Midway’s President and CEO. “It is an opportunity for us to acknowledge those who drove the process from exploration through permitting and development.”

The Pan project is expected to cost $99 million to construct and is expected to produce an average of 81,000 ounces per year.  The project hosts a low-grade, bulk tonnage, Carlin-style deposit with 1.1 million ounces at 0.44g/t gold in the Measured and Indicated category.

Gold Rock is located 8km away from Pan and has a planned start-up of 2016 (Image: Newmont Mining)

Gold Rock is located 8km away from Pan and has a planned start-up of 2016 (Image: Newmont Mining)

In speaking with one of the company’s largest shareholders, the project is unique, not only because it is a near-term, low-cost producing gold asset, but also because the ore body is very amenable to heap leaching.  Much of the ore will be run-of-mine, meaning that little to no crushing will be required.  This significantly lowers energy and processing costs.  Recoveries of +75% are still obtained under this method.  The deposit is shallow, with very little pre-stripping required. In fact, the LOM strip is only 1.8:1.  This enables the mine to operate at very low LOM operating costs.  They estimate fully-loaded costs to be approximately $824/oz over the life of the mine.

Midway also has a sister deposit to Pan called Gold Rock which is located only 8km away from Pan.  They are targeting a 2016 start-up for Gold Rock and believe they will be able to stream-line its development by utilizing the expertise from Pan.  Gold Rock is a small deposit now, but is open in all directions.  It would operate as another open-pit heap leach operation with similar geological characteristics to Pan.

Read: Midway Breaks Ground at Pan Project in Nevada

Are GMP Shares Signaling a Comeback in the Resource Sector?

GMP Chart
GMP data by YCharts

If GMP Securities’ business is fully integrated in the resource space, then you could reasonably expect the shares of the company to mirror the resource markets at large, especially the Canadian junior space (granted, many assumptions need to be made).

GMP runs a, predominately, institutionally-focused business whereby they underwrite or advise resource companies.  So their business model is completely dependent on the large resource investors, or ‘smart money’s', willingness to invest in the sector and/or other resource companies finding value in the sector.  Either of them increasing would be a positive sign for the sector.

GMP’s shares have been on a run as of late and appear to be breaking through resistance formed this time last year.  GMP is coming off a few large bought deal financings including Barricks +$3 billion deal and $150 million and $175 million deals for Hudbay and Platinum Group Metals, respectively.

The company’s shares typically perform well, along with the Canadian resource indices, in the first quarter of each year, but now the company looks to be headed towards levels not seen since January 2012.  Although not nearly at the 2007 levels, there are still many stories to be excited about this year.