SmallCapPower | January 22, 2016 It may be a New Year but sentiment seems to have stayed the same, as gold and gold stocks continue to be caught in the jaws of a bear market. Regardless, this sector has performed well historically in Q1 and the market environment continues to put pressure on the smaller players to merge. For the bigger, well-funded companies this is an opportunity to buy ounces on the cheap, and the gold juniors we’ve identified look appealing.
Detour Gold Corp. (TSX: DGC): It would take a big fish to swallow this C$2.6 billion market-cap gold miner but, then again, Detour produced more than 500,000 ounces of gold in 2015 and has Proven & Probably reserves of nearly 15 million gold ounces. Its project is also located in a desired jurisdiction (Ontario). The Company has managed to reduce its All-in Sustainable Costs by about 35% during 2015 yet it is still expects to come in at between US$1,040 and $1,060 per ounce sold. Detour Gold recently announced exploration drill results from its Lower Detour zone, which included 4.35 g/t gold over 14.0 metres. This could add some much-needed grade that would likely reduce the Company’s production costs in the future.
Lake Shore Gold Corp. (TSX: LSG): A less expensive option, Lake Shore’s two producing mines in northern Ontario, a market cap of about $540 million, and exploration upside gives it some glister in the eyes of a potential suitor. The Company produced 183,000 ounces of gold in 2015 and forecasts All-in Sustainable Costs to fall below US$950 an ounce in 2016. Lake Shore is also sitting on about $100 million in cash. The acquisition of Temex Resources and its Whitney project added more than 700,000 Measured & Indicated ounces at about 7 g/t.
Pilot Gold Inc. (TSX: PLG): With a market cap of just $27 million it seems to offer good value for the money as the gold project developer has an interest in two projects in Turkey with joint venture partner Teck (40% interest in one and 60% in the other), as well as a 79% interest in the Kinsley Mountain property in Nevada, which has results that included 8.53 g/t gold over 36.6 metres. Kinsley is located south of Newmont Mining’s Long Canyon deposit and Newmont has a 13% stake Pilot Gold, which would make it the logical buyer.
Teranga Gold Corporation (TSX: TGZ): Teranga, which mines gold in Senegal, West Africa, has a market cap of a little more than $150 million, yet it has about $30 million in cash, no debt, and its 6 million Measured & Indicated gold ounces could command a valuation of $240 million, using a conservative estimate of $40 per ounce in the ground. The Company expects to produce 230,000 to 240,000 gold ounces per year over the next three years at All-in Sustainable Costs of US$900 to $975 per ounce.
Kaminak Gold Corporation (TSXV:KAM): There’s been a lot of buzz in the junior mining circles over the past year about Kaminak and its Coffee Gold Project in the Yukon. A recent Feasibility Study showed an average life of mine annual gold production of 184,000 ounces at All-In Sustaining Costs of US$550 per ounce, based on a US$1,150/ounce gold price assumption. Its current market cap is $142 million. Resource Maven Gwen Preston likes Kaminak saying, among other things, the recent feasibility outlines a better mine than did the PEA, with lower costs. (See her entire commentary here).
Claude Resources Inc. (TSX: CRJ): Claude’s stock price has been climbing steadily over the past two years yet its market cap is just $174 million. The Company has an operational gold mine (Seabee) as well as a gold project (Amisk) in Saskatchewan. Claude expects to produce 65,000 to 72,000 ounces of gold in 2016 at All-In Sustaining Costs of US$850 – $935. It is currently sitting on about $40 million in cash and bullion.
Pretium Resources Inc. (TSX: PVG): Although its Brucejack gold project in northern British Columbia isn’t expected to go into production until 2017, the 6.9 million ounces of Probable reserves in its Valley of the Kings area grading 15.7 g/t is difficult to ignore. A Feasibility Study done in June 2014, estimates average annual gold production of 504,000 ounces during the mine’s first 8 years at All-in Sustaining Cash Costs of just US$448 per ounce using a US$1100 gold price assumption. Silver Standard Resources has a 12% stake in Pretium and China’s Zijin Mining Group has a 9% interest.
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