The Canadian gold stocks we’ve discovered have high operating leverage and could benefit the most from an uptick in the gold price
SmallCapPower | October 7, 2019: Operating leverage measures the degree to which a firm or project can increase operating income by increasing revenue. A Company that generates revenue with a high gross margin and low variable costs has high operating leverage. In the mining industry, operating leverage can be measured by a company’s cash costs per ounce produced. Today we have dug up four Canadian gold stocks, junior gold miners with high cash costs per ounce produced. In theory, these companies would have the strongest reaction to any upward movement in the price of gold, as margins are more levered.
*Share prices as at October 3, 2019, data obtained from S&P Capital IQ
*Costs are in Canadian Dollars
Leagold Mining Corporation (TSX:LMC) – $2.69
Leagold is a mid-tier gold producer with a focus on high-yield targets in Latin America. Currently, the Company owns four active mines. Its flagship project, Los Filos, is located 240km south of Mexico City, Mexico, while the remaining three mining projects are concentrated in Brazil. Current consolidated guidance is estimated at 380K-420K oz/Au production in 2019. In June 2019, Leagold completed a $400M debt financing ($200M credit revolver and $200M short-term loan). With funding in place, the Company plans to launch a development plan that positions Leagold to become a 600K-700K oz/Au producer.
- Market Cap: $766.3M
- 90-Day Return: +33.3%
- YTD-Return: +54.9%
- 90-Day Average Trading Volume: 673,550
- Cash Cost per Ounce: $1,135/oz
TMAC Resources Inc. (TSX:TMR) – $4.50
TMAC Resources focuses on the exploration, evaluation, development and mining of the Hope Bay mineral property in the Kitikmeot Region of Nunavut, Canada. TMAC has 100% interest in Hope Bay, which consists of three gold deposit trends. The Company announced its Q2/19 financial results on August 14, 2019, which showed gold production of 38,520 oz. During the quarter, the Company generated revenue of $66.1M and had cash costs of US$729/oz of gold sold and all-in-sustaining costs of US$1,081/oz of gold sold. On August 16, 2019, the Company closed its royalty amendment and private placement with Maverix Metals Inc. for proceeds of US$43M.
- Market Cap: $513.0M
- 90-Day Return: -23.7%
- YTD-Return: -34.4%
- 90-Day Average Trading Volume: 140,440
- Cash Cost per Ounce: $1,184/oz
Golden Star Resources Ltd. (TSX:GSC) – $3.89
Golden Star Resources is a Toronto-based gold producer and explorer. The Company’s two flagship projects include the Wassa open-pit gold mine in western Ghana, the Wassa underground mine, and the Prestea open-pit mine and the Pressa underground project, also located in western Ghana. The Wassa mining operations produced ~137,000 oz/Au in 2018. The Company also holds interests in various gold exploration projects in Ghana, West Africa, Brazil, and in South America. Meanwhile, the Prestea mine is expected to produce between 190,000 to 205,000 oz/Au in 2019.
- Market Cap: $425.0M
- 90-Day Return: -25.2%
- YTD-Return: -8.3%
- 90-Day Average Trading Volume: 127,470
- Cash Cost per Ounce: $1,156/oz
Argonaut Gold Inc. (TSX:AR) – $2.25
Argonaut Gold engages in gold mining, mine development, and mineral exploration activities at gold-bearing mineral properties in North America. The Company’s primary assets are the El Castillo and San Agustin mine, located in Mexico. Argonaut also has operations in Sonora, Baja California Sur, and Guanajuato, Mexico, as well as the Magino Project in Ontario, Canada. Argonaut Gold produced 165,117 oz/Au during 2018. On August 7, 2019, Argonaut Gold announced Q2/19 financial results, which were highlighted by revenue of $56.0M, cash flow from operations of $11.3M, and net income of $5.4M. The Company is targeting gold production of between 200,000 to 215,000 oz/Au for 2019.
- Market Cap: $403.8M
- 90-Day Return: +23.1%
- YTD-Return: +45.2%
- 90-Day Average Trading Volume: 627,290
- Cash Cost per Ounce: $1,081/oz
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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