The best time to get bargain pricing on a winter coat is when you don’t need it -- after winter is over. Better yet, when the sun is blasting every day and the grass has died.

The best time to pick up high-quality junior mining stocks for cheap? Right now. It’s tax-loss-selling season and this year, the bargains are even better. Gold has plunged from summer highs of US$1,365/oz to the current (chilly) $1,1128/oz, pummelled further by the US Fed rate hike. Obituaries are being written for the glittery metal and there are sightings of blood on the streets. Buy the silence, sell the trumpets -- and we’re definitely in a quiet period for gold.

Legendary value investor Warren Buffett is well-known for his dislike of gold as an investment, describing it as a “non-productive asset.” Even so, he’s not averse to referencing its value, in this quote for example: “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”

It’s a sentiment echoed recently by value investor Ian Cassel, the founder of investor community MicroCapClub.com. Junior mining value hunters should take these words to heart: “You only have to find a few great investments early to beat the market and to change your life. Be Diligent - Wait for your pitch - Swing hard.”

It’s a sentiment we at Resource Opportunities take to heart. Here are three gold-focused junior mining companies whose share prices are on sale, even as the quality of the underlying merchandise improves. When the gold market turns, each stock offers handsome speculative upside. Until then, it could be a bumpy ride.

1. Strategic Metals (SMD-V)

Strategic Metals is a Yukon-focused project generator that has honed value creation into something of an art form. Strategic has a cash balance of more than $18 million, equal to about half its market cap. Strategic finances when its share price surges and buys back stock when its paper drops below reasonable levels.

For example, SMD completed flow-through financings in May, July and August, months that saw gold range from US$1,212 an ounce to $1,365. Two of those were priced at significant premiums to the stock when they were announced. The company recently renewed its buyback program, and in the past has aggressively bought back stock when there’s a disconnect between price and underlying value. There is now: Strategic shares are trading below working capital.

Strategic is the Yukon’s largest claims holder with more than 100 claims, most of them wholly owned. The company also has stakes in a multitude of junior mining companies, the biggest of them being:

  • 41.4% of Rockhaven Resources (RK) - market value $7M
  • 33.4% of Precipitate Gold (PRG) - market value $4.6M
  • 8.3% of ATAC Resources (ATC) - market value $3.6M
  • 16.5% of Silver Range Resources - market value $1.14M

But Strategic’s most under-the-radar -- and potentially exciting -- holding is wholly owned subsidiary TerraCO2 Technologies. A private greentech company, TerraCO2 is developing a technology that both captures CO2 and treats acid rock drainage in a single process. TerraCO2 recently qualified for the semifinals of the US$7.5-million CARBON XPRIZE competition. Terra plans to construct a pilot plant by July 2017. It’s well-positioned to attract funds from both governments and private clean-tech funds.

Price: .42
52-week range: .245-.86
Market cap: $37.4 million

2. IDM Mining (IDM-V)

IDM Mining has capped off a busy 2016 with more high-grade gold assays as well as progress on the feasibility study for its flagship Red Mountain gold project in B.C.’s Golden Triangle. The area is known both for its endowment of freakishly high gold grades -- Pretium’s Brucejack is the best example -- and deposits of size. Seabridge’s KSM gold-copper-silver project is one of the world’s largest undeveloped gold deposits. On the downside, the Golden Triangle is also known for its winter snowstorms and remote, forbidding geography, although infrastructure has improved in recent years.

The feasibility study, expected to land in spring 2017, is being done by Northern mine builders JDS Energy and Mining. It will incorporate an updated resource estimate, adding ounces to the current 441,500 gold ounces (Measured and Indicated) at average grades of 8.36 g/t (at a 3.0 g/t Au cut-off). Red Mountain has a further 107,500 Inferred gold ounces and more than 1.5 million ounces of silver in all categories. IDM has consistently been hitting high-grade gold in its winter program, whether it’s infill, metallurgical or stepout drilling. Because it’s high-grade gold, those holes should move the needle on the resource, CEO Rob McLeod notes.

IDM’s plan at Red Mountain is to build a small-footprint, profitable underground gold mine and leverage that operation to grow the deposit at the 17,000-hectare property. Red Mountain is road-accessible from Stewart and close to cheap BC Hydro power. A PEA released earlier this year showed a 5-year mine life with underground mining 8 months of the year and processing year-round at a rate of 1,000 tonnes per day. Pre-tax IRR was calculated at 42.4% and after-tax IRR of 32.3%, with average life-of-mine head grades of 7.0 g/t Au and 21.5 g/t Ag. Total capex is estimated at $152.3 million, a figure that could drop in the FS through further optimization and efficiencies, including the use of used processing equipment.

I visited Red Mountain in July during the height of the summer exploration season and the operation had the feel of a mine. Underground drilling and dewatering were taking place and I accompanied CEO McLeod to Lost Valley, a nearby discovery that could eventually provide ore feed for the mill. Following completion of the feasibility study and further environmental permitting, an investment decision is expected in early 2018.

IDM is helmed by McLeod, a geologist, and executive chairman Mike McPhie, a veteran mining executive. For McLeod, the project is personal -- Stewart is his hometown and both his father Ian and uncle Don McLeod were miners and mine builders of some renown, including in the Golden Triangle. An important edge for IDM is gold’s continued strength in Canadian dollar terms, a more relevant measure than USD gold.

Price: .125
52-week range: .08-.26
Market cap: $34.9 million

3. Terraco Gold (TEN-V)

Terraco Gold is an under-the-radar gold royalty company whose flagship asset is a valuable 1-3% royalty on Waterton’s Spring Valley gold project in Nevada. Most of the deposit is covered by a 3% NSR and Terraco also has a 2% royalty on Waterton’s Moonlight exploration project next-door.

Spring Valley is a PFS-stage project that hosts an NI 43-101-compliant gold resource of 4.37 million ounces, Measured and Indicated, and a further 1.07 million ounces Inferred. It was once one of Barrick Gold’s flagship development projects, but was sold last year as Barrick struggled to get a handle on high debt and refine its focus on core assets. Waterton picked up Spring Valley for about US$83 million in December 2015 from 70% owner Barrick and 30% owner Midway Gold.

Terraco also owns the advanced-stage Nutmeg Mountain gold project in western Idaho, a low-sulfidation epithermal hot springs-like system. Nutmeg Mountain hosts 864,000 ounces Measure and Indicated and another 84,000 ounces Inferred, all within 90 metres of surface. Possibilities being considered include further exploration drilling -- to identify a potential high-grade feeder system -- or completion of a PEA in 2017.

Terraco’s challenge as a public company is owning a royalty on an asset that is being developed privately. However, Waterton is a serious $2.5-billion private equity player that has been adept at picking up assets when they are cheap, developing them and selling them to majors. And the royalty business model is a bullet-proof one. Earlier this month, Waterton sold some of its other Nevada gold properties, which should sharpen the focus on 5-million-ounce Spring Valley. Terraco shares are a bargain at this level.

Price: .115
52-week range: .09-.19
Market cap: $16.8 million

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Disclosure: Strategic Metals, IDM Mining and Terraco Gold are Resource Opportunities sponsors, which makes us biased. Resource Opportunities currently has four sponsors (the other is Columbus Gold) that help keep the cost of the newsletter low. This publication is provided for informational purposes only and is not a recommendation to buy or sell any security. Always do your own thorough due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can lose 100% of their value so read company profiles at www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.