CEO.CA Weekly Wrap
A look at some of the week’s best chats and charts on CEO.CA, a community and platform for Canada’s venture stock markets.
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In this week’s Weekly Wrap we have a special treat. @MiningBookGuy (Nick) likes to focus on Africa and he regularly puts companies on my radar that I probably would have never looked into otherwise. Nick also publishes YouTube videos in which he delves into some of his favorite stock picks in greater detail. In January, Nick laid out his rationale for why Sarama Resources (TSV-V:SWA) was a strong speculative buy at $.05 in a well constructed YouTube video:
It turned out that Nick’s timing was impeccable as SWA shares soared more than 100% over the next six weeks:
SWA.V (Daily - 1 Year)
Sarama shares have been consolidating between $.075 and $.11 since early March and volume has tapered off considerably in recent weeks.
Last week, Sarama announced that it had commenced oxide-focused drilling at its South Hounde Project in Burkina Faso. The aim of this program is to materially add to the existing 600,000 ounce oxide gold resource. In addition, Sarama intends to drill test its “Ben Prospect” for the first time. According to the Sarama NR dated June 12th Ben is “a new early-stage target that has been generated by geophysical and geochemical surveys and is yet to be drill tested. The prospect area has the potential to open a new horizon of mineralisation to the west of the main mineralised corridor and presents an exploration opportunity which may deliver further additions to the oxide and free-milling inventory of the Project.”
@MiningBookGuy offered the following comment on Sarama and its latest news release:
"It's good to see that Sarama will have a significant drilling program before the rainy season starts in Burkina Faso. A relatively small increase in oxide resources at Sarama's South Hounde project will have a material impact on the project, whether it remains standalone, or is combined with Semafo's Bantou project next door (which seems more and more likely with a new discovery there)."
In my estimation, Sarama has the sorts of gold projects that a mid-tier like Semafo will find attractive. Exploration success which expands the oxide resources at South Hounde could be the catalyst that motivates Semafo or another producer to come in and swoop up Sarama’s assets at what is still a very low valuation. However, even without much additional exploration success Sarama has a substantial asset portfolio with a solid resource base totaling nearly 3 million ounces of gold, which more than supports the current C$20 million market cap, in my opinion. Australian gold producer Silver Lake Resources (ASX:SLR) seems to agree as SLR took a 11.78% stake in the company via a C$2.5 million investment in Sarama’s latest private placement financing at C$.085 per share.
Irving Resources
A company we have discussed previously, Irving Resources (TSX-V:IRV), had a news release Thursday morning in which the company reported more assay results from hole 19OMS-002 from its Omu Sinter Project in Hokkaido, Japan. There weren’t any eye-popping grades reported, however, it was significant that Irving intersected 152 meters of continuous gold and silver mineralization including multiple significant vein and vein breccia zones.
Irving also noted that hole 19OMS-005 intersected an approximately 7.5 meter long intercept with vein material similar to the bonanza grade intersection in hole 190MS-002 (.32 meters of 118.50 g/t gold and 1410 g/t silver). Parts of hole 19OMS-004 have been split, sampled and shipped to the laboratory for assay. Splitting and sampling of hole 19OMS-005 is currently underway.
The Irving update helped to trigger a fresh round of buying and IRV shares reached a new all-time high of $3.19 at last Thursday’s session high:
IRV.CA (Daily)
Technically speaking there’s not much to argue about in the Irving chart, IRV's share price has been moving from the bottom left to the upper right of the chart in a very clear and powerful uptrend. The above chart is the epitome of the word “uptrend”.
Irving clearly has a large contingent of supporters who believe that IRV is the go to play for gold exploration in one of the last gold frontiers in the world, Japan. However, Irving also has plenty of detractors who feel the company has jumped to a discovery valuation without a discovery. After Irving’s NR last Thursday CEO.ca founder Tommy Humphreys (@tommy) offered a couple of cautious comments on the IRV channel:
Tommy is correct, timing is everything.
In the depths of the 2015 junior resource bear market Gold Canyon received a very modest valuation for substantial assets. Today, due to the “pie in the sky” potential of Japan and more specifically, Irving’s project portfolio, the market has granted IRV a full discovery valuation without yet making a discovery. Usually a situation like this one ends badly for shareholders, however, Irving is a unique situation and the company has managed to continue to keep a tight grip on its share structure.
At its fully diluted share count of 56.6 million shares and Friday’s closing share price of C$3.05 IRV has a C$170 million market cap. This market cap is larger than Pure Gold’s (TSX:PGM) current market cap which is C$152 million. Meanwhile, PGM has a completed feasibility study with probable mineral reserves of 1.0 million ounces grading 9.0 grams/tonne gold at its Madsen Gold Project in the Red Lake Gold District of Ontario, Canada. By most accounts PGM will likely have more than two million ounces of gold at Madsen once all is said and done and there is a relatively low initial capital requirement of C$95 million which helps to support a 36% IRR and a C$247 million after-tax NPV(5).
How could a company that has only drilled a few holes into a completely new target have a higher market valuation than a company that has more than a million ounces of high-grade mineral reserves in one of the great Canadian mining jurisdictions?
For me the answer to this question is multi-faceted:
- Japan is an exciting new “final gold frontier” and Irving is well positioned with some of the most attractive exploration projects in the entire country.
- Irving has an all-star management team including Dr. Quinton Hennigh and CEO Akiko Levinson.
- Irving shares have benefited from an extremely tight share structure and well timed promotional efforts.
- Investors have an overwhelming tendency to “buy the sizzle and sell the steak”. IRV has the sizzle while PGM has the steak.
- Newmont Goldcorp’s recent investment in Irving offers a stamp of approval from the world’s largest gold miner. More importantly Newmont is likely to be an important source of capital as Irving reinvents the gold exploration industry in Japan.
While I agree that Irving is priced for perfection at its current valuation (anything but stellar drill results this summer is likely to be met with strong selling pressure), I couldn’t resist picking up some IRV shares a couple of weeks ago after reading the following quote from legendary hedge fund trader Paul Tudor Jones:
“...at the end of the day, your job is to buy what goes up and to sell what goes down so really who gives a damn about PEs? If it’s going up you’re supposed to be long it.” ~ Paul Tudor Jones
Irving’s valuation is big, just like its potential. IRV could grow to a billion dollar market cap in the event of tremendous exploration success over the coming years, or it could lose 90%+ of its value if its exploration efforts do not prove to be fruitful. All we know right now is that Irving is off to an encouraging start and the world’s largest gold mining company sees enough potential to invest US$6 million in the company.
Now i’d like to hand it off to @MiningBookGuy so that we can learn more about Africa as an exciting jurisdiction for mineral exploration.
Guest Contributor: Nick The Mining Book Guy
I'd like to thank @Goldfinger for inviting me as a guest on the CEO.ca Weekly Wrap, one of my favorite new features. Since I focus so much of my time on #Africa, it makes sense to talk a bit about that!
1. Excitement For Africa Discoveries
It's worth immediately asking yourself "Why should I immediately care about Africa?". A couple recent charts help answer that.
On June 3rd 2019, Predictive Discovery (PDI on the ASX) was an intraday 4-bagger (from 0.009 AUD prior to halt, to a high of 0.036 AUD the day it was un-halted for drill results):
On March 28th 2019, Compass Gold (CVB on the TSXV) was an intraday 6-bagger (from 0.115 CAD the prior day, to a high of 0.71 CAD the day drill results were announced):
CVB.V (Daily)
KEY TAKEAWAY- These are some of the most impressive intraday moves in 2019. Compass Gold is especially impressive, as TSXV listed companies in Africa NEVER got instant attention for drill results in prior years. In fact, I saw 100+ people in the Compass Gold room on the day of these results, the first time I've ever seen that for a company focused on Africa. Both of these companies are nano-caps that barely received attention prior to the results. While they have both come down quite a bit from intraday highs, these are legitimate juniors looking for real discoveries. They are excellent examples for why you could make a lot of money paying attention to obscure, African juniors. The market is ready for a major discovery in Africa.
(*Disclosure - @MiningBookGuy does not own shares of PDI or CVB)
2. African Company Of The Week
Here's the news release that stood out for me this week, on June 10th for Avesoro Resources (dual-listed as ASO on the TSX and LSE) :
Avesoro Resources Inc. Operational and Guidance Update
Boring headline. But check out what happened on the TSX chart below!
ASO.TO (Daily)
KEY TAKEAWAY- You can check the Avesoro Resources room to see thoughts from me on this poor news with a boring headline. While I would not touch the stock right now, Avesoro almost bounced 100% on the less liquid TSX listing (from a low of 0.415 CAD to a high of 0.79 CAD). Perhaps the bounce was primarily a technical trade. But importantly, Avesoro's largest shareholder is "Mr. MNG", a Turkish billionaire with many investments in Africa and other 'exotic' parts of the world. Go to the MNG Group website to learn more. Maybe the bounce is related to confidence that he will support the stock? Mr. MNG is just one of multiple billionaires with significant investments in emerging gold producers in Africa, and worth following.
(*Disclosure - MiningBookGuy does not own shares of ASO)
3. Stand-out Jurisdictions In Africa
I'd like to give a shout-out to @shakeypremis, who asked a question on June 13th that is perfectly relevant to this Weekly Wrap. See the question and my answer below:
And a shout-out to @zentrarian for a nice follow-up response below!
I think this is representative of growing interest in Africa at CEO.ca , with the realization that it's a large, diverse continent. This dialogue took place in the #MBGtrends room, a long-running room that I created. There have always been intelligent contributors lurking there, discussing a wide variety of topics with no trolling. If you enjoy this style of discussion, feel free to follow that room and join in!
One other way you can follow important trends in Africa is to sign-up for my free email list. I provide exclusive content, including my very first site visit, blasted out to the list a week ago. I visited one of the countries mentioned in my response to @shakeypremis.
If you would like to find out which country & company I visited, including a bunch of pictures & video links, please sign-up below. You will receive the full site visit report immediately after signing-up.
Join Mining Book Guy Email List!
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Disclosure: Author is long IRV and SWA shares at the time of publishing this article and may choose to buy or sell at any time without notice.
DISCLAIMER: The work included in this article is based on current events, technical charts, company news releases, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The views expressed in this publication and on the EnergyandGold website do not necessarily reflect the views of Energy and Gold Publishing LTD, publisher of EnergyandGold.com. This publication is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.
