While senior equity indices rallied hard yesterday, the junior mining sector was fairly mixed. The damage inflicted last week is the sort of stuff that leaves a mark, markets won't repair this sort of technical damage for weeks/months. Of course, there is also the distinct possibility that the 10+ year equity bull run has reached its zenith and a bear market is just beginning.
While my crystal ball is a bit foggy this morning, what I do know is that I couldn't conjure up a much more bullish backdrop for gold. Gold still might get sold for 1-2 day periods during market liquidity panics (simply because it is a liquid market that is up year-to-date). However, strong disinflationary/deflationary forces working against a backdrop of massive global debt/deficits is the perfect recipe for global central banks to throw the kitchen sink at the situation while making the price of money as cheap as possible (think negative rates).
I don't know about you but I prefer taking my chances holding a gold bar as opposed to loaning money to a government at negative rates and being guaranteed of both a nominal and real loss on my money.
UPDATE: Fed cuts 50bps in another sign of desperation while sending a clear message to markets that money is getting cheaper.
While I don't know what the future holds for gold mining shares I do see some really attractive valuations out there this morning:
Westhaven Ventures (TSX-V:WHN) - Below C$.60 this one is dirt cheap and last week's brief dip below C$.50 was fortunate for those who had the dry powder to take advantage of others panicking. Both Gren (Chairman) and Gareth (CEO) have purchased shares on the open market in recent days and this morning Westhaven announced a slew of drill targets at Shovelnose as they added a second drill rig with drilling underway.
Amex Exploration (TSX-V:AMX) - One of the best charts in junior mining just a couple weeks ago, and even during the recent correction AMX remained above its rising 200-day moving average. This is a winner and I like it a lot below C$1.50. This morning, Amex announced results from hole PE-19-144 which extends the HGZ by another 210 meters down to a vertical depth of approximately 775 meters.
AMX Chairman Jacques Trottier offered the following comments:
"This was an aggressive exploration hole that extends the HGZ by another 210 metres down to a vertical depth of approximately 775 metres. This is very significant as it confirms the depth potential of the gold system and the high-grade nature of the mineralized body. We are currently wedging off hole 144 with the objective of confirming grade continuity between these large 200+ metre step out holes. With only four holes drilled into the eastern extension of the HGZ we have defined an additional 400 vertical metres of high-grade gold mineralization."
New Carolin Gold (TSX-V:LAD) - New Carolin has been among the bigger disappointments of the last year. After reaching C$.145 per share in September 2019, LAD shares have tumbled to a recent low of C$.04. Why the big drop?
The answer is a combination of factors that include some management miscues, and the recent market panic. However, the fundamental story of a large property package within a two hour drive to Vancouver which includes 144 square kilometers of contiguous mineral claims and crown grants remains intact. The Project is located near Hope, BC in the prospective and under-explored Coquihalla Gold Belt, which is host to several historic small gold producers including the Carolin Mine, Emancipation Mine and Pipestem Mine, and numerous gold prospects.
LAD is a textbook contrarian play at this point, and at C$.04 per share and a sub-$3 million market cap the stock is cheap as chips. The tailings pile (estimated to contain 20,000-30,000 ounces of recoverable gold) at Ladner is probably worth more than the current market cap.
Fireweed Zinc (TSX-V:FWZ) - Fireweed just received big news from the Yukon Government on road upgrades, construction etc. which will make Fireweed's MacPass Project that much more attractive economically. The cost of road and bridge upgrades has been one of the challenges for economics at MacPass. In fact, roughly 1/4th of the capex envisioned in the 2018 PEA was due to road and bridge upgrades/construction. Now with government help Fireweed has a new shot in the arm and kick in its step heading into summer exploration season in the Yukon.
Fireweed is another classic contrarian play as the base metals sector has been suffering through a couple of lean years - the corona virus panic has only made things worse for copper, zinc. etc.
Fireweed CEO Brandon Macdonald offered the following comments:
“This announcement is a major step forward toward eventual mine development at Macmillan Pass. I want to thank the Yukon Government and the Ross River Dena Council for their efforts to get this agreement in principle done as well as their ongoing cooperation and support for our project over the years.”
Disclosure: Author owns shares in all companies mentioned (AMX.V, FWZ.V, LAD.V, and WHN.V) at the time of publishing 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. 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.