The Good, the Bad, and the Hopeful amid the 2020 Gold Bull backdrop

To follow up on my earlier price study of the Goldminers where I stated that not all are equal, this review focuses on a few reports we received this week. I call it the Good, the Bad, and the Hopeful.

A Good Story

B2 Gold ($BTG) reported a solid Q1 with 250k oz produced, which was well above budget, at an outstanding all-in sustaining cost of just under $700 and at a much higher Gold price, which explains why the stock has appreciated so much this past month. For all of 2020, the guidance of 1 million oz at an AISC of $800 means that this company will remain a winner in the current Gold Bull. The dividend was increased and is now offering a stable yield of +1.5% on the current stock price that closed yesterday at US$5.42.

FD: I hold BTG in my Gold and Natural Res portfolios. I did lighten my position this week at an average of US$5.285, and may sell off a bit more into strength this week unless Gold lifts by a couple of percent; however; BTG is a leader in my Gold portfolio and so I will continue to buy during almost every dip. My cost basis in the two portfolios is US$3.613 and US$3.356.

One That is Not So Good

Pan American Silver ($PAAS) was once a Silverminer that interested me; however, I need to see earnings, and this was another difficult quarter despite all that Gold has going for it.

Prior to the report, the consensus EPS estimate was $0.13 (+160.0% Y/Y) and the consensus revenue estimate was $388.84M (+67.2% Y/Y). That would have been solid; but, what the company reported yesterday ATC was a downer. GAAP EPS of -$0.37 missed by $0.53 and revenue of $358.4M (+54.1% Y/Y) missed by $30.44M.

The Company can say what they want, but I am not buying it. No pun intended because I will not buy it. There are too many Gold/Silver companies that are meeting and exceeding expectations – companies like B2 Gold.

The Hopeful

After a recommendation from Kaimu of the Cara Community, a top mining analyst and I took a quick scan of the Mako Mining (MKO.V) and decided to give the project a green light. It is as the Company says a high grade leachable open-pit deposit. It is currently a small deposit but will kick out some nice cash flow. The Preliminary Economic Assessment (PEA) in the presentation supports the commentary. The cash flow will allow for further infill and deeper exploration without the need for excessive dilution to current shareholders. The high grade is very impressive and hopefully will be maintained as the deposit is expanded. It looks to us like management through various entities tied to a US private equity company owns a chunk of stock, so it might be useful to see when the stock options expire. The market capitalization is high with ½ billion shares outstanding at C$0.42 = C$210 million, so we would be careful regarding trading strategy. The Company needs to build on the tonnage and not just rely on grade.  However, the beauty of heap leaching is the ability to generate quick cash flow from small projects. It looks like they will be in production in the 4Q2020, so CAPEX must have been completed (C$21 mil.) This story of hope reminds us of Glamis Gold and Chester Millar in the early 1980s.

Another hopeful story, and perhaps a better one, is of Roscan Gold ($ROS.V), which is trading at about the same price C$0.36 as Mako Mining. Roscan has a market cap of about C$70 million and also has consistent high grade (up to 5g/t) resources but has identified substantially more tonnage along strike and at depth at high grade. We think Roscan will be joint ventured or acquired by a larger company. The Roscan property is in southern Mali nearby our Good story of the week, B2 Gold ($BTG). You can bet B2 Gold will be looking closely at Roscan along with Barrick ($GOLD).


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