Junior gold miners are set to benefit from a precious metals and real assets rally that will make the 2011 rally look small in comparison
Jeb Handwerger | April 21, 2017 | SmallCapPower: Gold is breaking above the 200 DMA, which is very positive for the junior mining sector, especially junior gold miners, as huge capitals of inflow occur usually from generalist investors on this technical move. The last time gold broke above the 200 DMA to the upside was in early 2016 and led to a powerful five-month upward leg higher.
Editor’s Note: This was originally published on April 6th, 2017 at http://goldstocktrades.com/blog
The time for my readers to benefit from precious metals and junior miners could be right around the corner for those who waited for years for the sector to base and reverse off those lows. The U.S. dollar could be on the verge of a devaluation under Trump as he knows the Chinese have been manipulating their currency lower to take away our manufacturing and mining.
That is why Trump is meeting with the Chinese Premier right now in what may be the new Cold War, which could send the U.S. dollar lower and precious metals and commodities soaring. Gold and silver are basing and prepping for a breakout above 200 DMA. The S&P 500 and Dow is way overbought with record amount of margin debt. This leads to painful corrections, which may not be good for overbought stocks but great for cheap gold miners and explorers.
You see during a bull market in stocks it’s hard for precious metals to gain momentum. During previous market routs investors flocked to gold and silver, sending precious metal valuations through the roof. I expect that could happen possibly within the next 3-5 years if not sooner. As the bubble in real estate ends throughout the world due to easy credit, I expect another rally in precious metals and real assets that will make the 2011 rally look small in comparison.
The miners are set up for a major reversal as they are sitting on huge cash positions. Look at the recent Goldcorp deal with Exeter to partner with Barrick or their recent moves into the Yukon with Kaminak. These producers have been reducing debt, cutting fat and beginning to once again generate free cash flow, which could bring back a lot of investors seeking capital preservation during a volatile risky geopolitical time. Some large miners are even increasing their dividends.
They need growth and the mining sector needs new high-grade discoveries. I expect as the gold price continues its uptrend, which began in early 2016 after a five-year bear market that a lot of marginal mines could get back in the money. Be careful with producers who are having difficulty with cost overruns or permitting.
It’s been a very exciting time for this gold explorer in Burkina Faso, which may be onto an exciting new high-grade gold discovery. The success in Burkina Faso and the institutional interest has been great over the past few years with the success of producers True Gold, Roxgold Inc. (TSX: ROXG) and Endeavor Mining.
This little junior has Roxgold’s exploration manager working full time on what could be his next big discovery in the country. There was a quartz vein outcropping that looked exciting that they sampled. The results were quite exciting as eight of the 11 samples were high grade, including one sample that came back close to 3k grams per tonne. This caused a major run through early February. Now the stock has based for eight weeks on the verge of what may be its next leg higher if they continue to see exploration success with drilling.
The Company raised about C$2 million earlier this year to drill this property, which has never been explored before with modern methods. Eight out of the nine holes intersected gold with one intercept of 27 g/t over 5 meters, which was very shallow only 58 meters below surface. This Company is moving fast with the exploration and I hope to hear exciting news as assays are pending and drilling is ongoing. This is the first exploration program on the property and they are hitting high grade.
The Company thinks they may have about a 1 km strike. Burkina Faso is a gold-producing country with only about 20 years of modern exploration. There has been some great success there including True Gold, which was acquired by Endeavor Mining for close to C$250 million. This little explorer is in the same belt and trades at less than 1/10th of that takeout valuation.
This Company’s greatest strength is the countrymen in Burkina who have that track record of success with Roxgold and were able to secure top exploration assets in the center of the gold belt. According to the Company they could add one or two top-notch exploration assets, creating a nice portfolio of top-notch, high-grade gold exploration projects in a jurisdiction that has witnessed huge growth of several new producers and increasing M&A. News could come any day. Make sure to listen to my interview with the COO of this junior gold explorer in Burkina Faso by clicking here.
In addition, I recently discussed a new optimization plan with this near-term gold producer in the southwest U.S. They recently put out news about proposing a power line be built to the property, which could save the mine $16 million over five years. The power line is much better than the generators that were planned, as it will reduce emissions considerably and save money. This is exciting for all the fundamentals of the project that are already extremely impressive.
The job creation could create an economic boon to the region, especially if the Company finds more mineralization below the vein at depth. They are actively drilling and had some exciting results weeks ago showing some exciting upside potential. The mine could definitely help out the region which, has been hit hard with high unemployment and could improve some of the nearby infrastructure and roads.
Remember this Company owns one of the lowest-cost gold mines going into production with all in sustaining costs way below US$700 per ounce. I am shocked that more mid-tiers or majors have not at least taken an equity stake in this project of just under 20% or 10%. Construction is underway and over $45 million has been put into this project to date.This Company is on the doorstep of production, however pay attention to the step-out drilling they are doing that could significantly expand mine life and resources. I would say the next couple of months could be quite exciting for this emerging gold producer as they advance the mine closer to production in 2017. After highlighting the Company earlier this year the stock shot up in price allowing existing warrant holders to exercise their positions strengthening the treasury and improving the balance sheet.
Listen to my full interview with this emerging gold producer’s CEO by clicking here.
Disclosure: I own shares and warrants in both these linked companies and they are both website sponsors so I have been paid an advertising fee and have a conflict of interest as I could benefit from price appreciation.
This should not be taken as investment advice but only as an advertisement. I am not a financial advisor. This contains forward looking statements which may not come to fruition as small cap mining stocks are risky. I may buy/sell without notice to subscribers.
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Jeb Handwerger is known throughout the financial industry for his accurate, in depth and timely analysis of the general markets, particularly as they relate to the precious metals, nuclear and rare earth sector. Jeb utilizes both fundamental and technical analysis, especially the study of price volume action to understand the long term macroeconomic trends in the natural resource market. A true renaissance man, Jeb has a strong background in stock market history, investment psychology, geopolitics, mining engineering and economics.
Disclosure: Neither any of the principals at Small Cap Power, nor their family members, own shares in any of the companies mentioned above.
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