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Headed to 5k? Gold Mining Companies to Watch Closely

Gold Mining
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EDITOR NOTE: Central banks are printing money, causing stocks and assets to skyrocket without any true fundamentals behind them. It is a precursor to a seemingly unavoidable crash coming soon, which is terrible for the world economy, but good for gold. Diego Parrilla, who manages the $250-million Quadriga Igneo fund, correctly predicted the last gold rally in 2016. Now, he believes gold is poised to rise to unprecedented heights of $3,000 to $5,000 per ounce. Even the more conservative prediction of Goldman Sachs has a $2,300 price target on gold, which is 22% above current prices. The world gets set to reckon with the “massive long-term damage [that] has been caused by wildly loose monetary and fiscal policies.” This makes certain major gold mining company's stock and buying non-CUSIP gold and silver look more attractive than ever. 

Asset bubbles may now be too big to burst, creating a situation that Central Banks around the world might be unable to control. If it all comes crashing down, we think there’s only one place to be …

Gold.  

The precious metal could rise as high as $3,000 to $5,000 per ounce in the next 3-5 years. 

That’s according to the same fund manager who predicted the 2016 gold rally. 

As cited by Bloomberg, Diego Parrilla, manager of the $250-million Quadriga Igneo fund that called the last gold rally, massive long-term damage has been caused by wildly loose monetary and fiscal policies, and everyone is underestimating the huge risk as central banks unwind stimulus, with assets soaring amid artificially low interest rates. 

“Central bank money printing isn’t really solving problems, it’s delaying the problem," Parrilla told Bloomberg. “Gold will benefit purely from being a physical asset that you cannot print."

But the rally may start even sooner …

Goldman Sachs is expecting gold prices to break out of their tight trading range this year, with inflation worries stoking demand. Goldman has a $2,300 price target on gold. That’s a 22% rally from current levels. 

That’s what is said to happen when you print money like mad. Stocks and assets rise dramatically … but without any link to true fundamentals. 

They may get a painful reality check. And we think gold will emerge as the big winner. 

If that all comes crashing down, a junior mining stock like Starr Peak Mining Ltd. (TSX:STE.VOTC:STRPF), which has recently doubled its drilling program amid a potential gold rush in Quebec after it found indications of gold--and more. 

Gold+ … A Basket of Base Metals Make This One Even More Attractive

In this atmosphere, it’s hard to imagine much that is better than gold. But there may be something: It’s a Volcanogenic Massive Sulphide, or VMS, deposit--a basket of precious and base metals--many of which are part of today’s major commodities surge. 

Zinc is priced near multiple-year highs, despite Chinese attempts to cool the situation down ...

Silver prices are set to rally--again ...

Copper prices have been on a run, with record highs, with only a recent China slowdown managing to pump the brakes a bit. 

And of course, gold. 

Add all of this up and it’s clear why VMS deposits could make a junior mining company even more valuable. They aren’t just wonderfully diverse, but they also give miners long-term production potential

And they are exactly what the major miners are looking for, but rarely find. 

Why? If you take Australia’s Kidd Mine--a famous VMS deposit--and look at those numbers, it becomes clear why these are the number one plays in the discovery path: Since 1966, the Kidd Mine has produced 9 million tons of zinc, over 3.4 million tons of copper, and 12,000 tons of silver.

That’s $27 billion in zinc at today’s prices, $32 billion in copper and $6.6 billion in silver. 

Source: Mining.com

So, not only is Quebec one of the most promising venues in the world for potential VMS deposits (not to mention gold, alone) …

But Starr Peak (TSX:STE.VOTC:STRPF) has discovered an indication of just that. And the company reports it only took two 2 drills to find it. 

Maiden Drills Surprised Investors

Starr Peak is an early stage exploration play. Some investors were fairly confident going into this one because they had been watching Amex Exploration, which made a high-grade gold discovery in 2019, right next to the past-producing Normetal Mine. 

Now, the Normetal Mine has historically produced ~10.1 million tonnes of 2.15% copper, 5.12% zinc, 0.549g/t of gold and 45.25 g/t of silver.

So, when Starr Peak stepped in and acquired the land adjacent to Amex’s … and then bought the Normetal Mine itself (along with a string of other acquisitions), it started to attract attention--not the least from some Amex founders and shareholders themselves, who may have jumped on board for a hoped-for repeat success.  

Starr Peak started drilling in January this year at its NewMetal property. 

In March, it released its first results, showing large intervals of high-grade sulfide mineralization.

In May, they raised the stakes significantly, with drilling results indicating a potential VMS deposit, with rock containing multiple base metals, including zinc, copper, silver, and gold.

Then, in July, the best, highest-grade results yet, intersecting mineralization in every single hole:

  •   Upper Zone (above 400m vertically)

o   STE-21-09: 8.30 m of 10.09 % ZnEq including 2.70 m of 24.44 % ZnEq

o   STE-21-17: 11.00 m of 9.01 % ZnEq including 3.00 m of 16.56 % ZnEq

o   STE-21-27: 20.55 m of 7.04 % ZnEq including 5.10 m of 11.09 % ZnEq

o   STE-21-29: 15.55 m of 9.94 % ZnEq including 10.10 m of 13.16 % ZnEq

  •       Deep Zone (below 400m vertically)

o   STE-21-14: 6.65 m of 18.07 % ZnEq which includes 1.05% Cu

o   STE-21-21: 8.70 m of 8.82 % ZnEq including 2.15 m of 13.38 % ZnEq

And Now, Starr Peak Is Doubling DownAfter intersecting high-grade gold, silver, copper, and zinc on its first two drills at the past-producing mine it acquired earlier this year, the company looks to be fast-tracking expansion. 

In May, it expanded drilling from 5,000 meters to 20,000 meters. In late July, when it announced its highest-grade result to date, Starr Peak said it would double drilling, to 40,000 meters. 

When a company expands its drilling campaign to this effect, it tells us a lot about their level of confidence; and in this case, the VMS indications so far may be reason enough. 

VMS deposits occur along tectonic plate boundaries, and finding one of these deposits puts Starr Peak in a position to become rich in metals that will continue to increase in value over time.

The most promising fact that comes from all of this is that as of July 2021, Starr Peaks has a 98% hit rate on its drill targets.

Recap: Results, Results, Results

Starr Peak (TSX:STE.VOTC:STRPF) has proved to be clever with its decision to purchase the land adjacent to where Amex Exploration made their huge discovery. So far they have made some promising findings and based on their investments and efforts, they are quite confident with what they hope to continue to find. Starr Peak could prove to be a rather exciting opportunity, just based on the return that early Amex Exploration shareholders saw--without a VMS deposit.  

  • Starr Peak now has over 2,800 hectares of highly prospective gold property, including a past-producing mine
  • It’s operating at a 98% hit rate for its drilling and has landed on high-grade indications of a potential VMS deposit, which position it to be very attractive to major miners combing wildly untapped Quebec for a juicy basket of metals
  • It’s just added significantly to its drilling for a second time from 40,000 meters to 60,000 meters based on its positive results so far, and it’s fully funded to keep drilling (with CAD$7.5 million in the bank as of July 22nd, 2021)
  • Amex earned early-in shareholders tons of returns, Starr Peak is setting themselves up for a potential repeat--or better.

This is an early-stage exploration play, but so far, it’s looking like one of the most exciting gold+ narratives we’ve seen in a very long time. It’s high-risk, high-reward, but with each drill hole, Starr Peak is further de-risking at a relatively fast pace. 

Gold Majors Are Making Big Moves

AngloGold Ashanti (NYSE:AU) a South African mining company, is responsible for some of the most important discoveries in modern gold mining. They were one of the first companies to use laser technology to find gold deposits and create new mines.  This innovative process helped them revolutionize the world's metals market with their laser-assisted exploration systems that can detect and map mineral reserves at depths up to 5 kilometers below ground level.

AngloGold is one of the most diverse and exciting miners on the planet, shielding itself from country-specific regulatory troubles or civil strife. It has operations on four continents including Africa, Australia, South America and North America. And though it has had some problems over the past decade, specifically in the early 2010s when the gold market took a major hit forcing many miners, including AngloGold to shutter operations, the mining giant has persevered.

Sociedad Química y Minera de Chile (NYSE:SQM) is a Chilean company that has been in operation for over 100 years and operates the most profitable commercial mine in the country. SQM produces more than 55 minerals, including lithium, iodine, potassium nitrate and copper. The company's headquarters are located on Avenida Kennedy, Santiago which was once an industrial area of the city with as many of 300 factories built there during its heyday between 1880 to 1930s.

Sociedad Química y Minera,signed in December a long-term supply deal with LG Energy Solution, which in turn supplies batteries to carmakers such as Tesla and GM. Under the deal, SQM will supply battery-grade lithium carbonate and lithium hydroxide to LG Energy Solution between 2021 and 2029. Sociedad Química y Minera sees the lithium industry growing at around 20 percent per year in the long term, supported by rising EV sales and emission reduction goals from China to the United States. And SQM doesn’t just produce lithium, either, making it well positioned in the resource boom.

Freeport-McMoRan’s (NYSE:FCX) roots date back to 1871, when it was founded as the Arizona Mining Company. In 1928, after experiencing a number of name changes and acquisitions, the company became Freeport-McMoRan Inc. While it’s primarily known for its copper production, it also produces gold. In fact, its Grasberg mine in Indonesia holds of the world's largest deposits of copper and gold. But that’s just scratching the surface of the miner’s global assets. Freeport-McMoRan also has extensive operations across the Americas, including mines in Arizona, Mexico and Peru.

The miner has long been recognized as a leader in safety practices and environmental stewardship with its sustainable development initiatives. The company is also committed to protecting human rights within their supply chain through an aggressive anti-corruption policy that includes detailed reporting on progress made towards these goals.

Kinross Gold Corp. (NYSE:KGC, TSX:K)
 is a Canadian-based gold mining company with operations in Africa, North America and Russia. They are one of the largest gold producers in the world and have been publicly traded on both the Toronto Stock Exchange (TSX) and American Stock Exchange (AMEX) since 2003. Their headquarters are located in Toronto, Ontario, Canada but they maintain offices all over the world including Johannesburg, South Africa; Denver, Colorado; Moscow, Russia; Kinshasa Democratic Republic of Congo; Lima Peru as well as Vancouver British Columbia Canada.

Similar to AngloGold and many of its other peers, Kinross has been enjoying dramatic improvements in profit margins and cash flow thanks to the surge in gold prices--and this trend appears set to continue with the gold outlook remaining decidedly bullish. With all factors remaining constant, Kinross should be able to realize high single-digit EPS expansion in the current year.

Kirkland Lake Gold (NYSE:KL, TSX:KL) is a Canadian gold mining company that has been in operation for over fifty years. They are one of the world's largest producers of gold, with their mines located throughout Canada. The company focuses on using sustainable practices to ensure they are leaving behind an environment that can be enjoyed by generations to come.

Recently, Kirkland and Newmont signed a $75 million exploration deal that could wind up being a game-changer for the industry. The two companies have agreed to split the cost 50/50 over five years with each company investing $15 million every year into joint projects between both companies for exploration purposes only - at this point it seems like a win. According to a joint press release in late 2020, “Newmont has acquired an option from Kirkland on the mining and mineral rights subject to a royalty payable by Newmont to Royal Gold, Inc. (the Holt Royalty) in exchange for a $75 million payment to Kirkland Lake Gold. Newmont can exercise the Option only in the event Kirkland intends to restart operations at the Holt Mine and process material subject to the Holt Royalty”

Barrick Gold (NYSE:GOLD, TSX:ABX) is a mining, exploration and production company. It has operations in Canada, the US and South America with mines in North America (Nevada), Chile and Argentina. Barrick also operates an open-pit mine at Pascua Lama on the border of Chile and Argentina.  The Company's growth strategy includes expanding its Carlin Trend gold deposit in Nevada through selective acquisitions of key properties to provide meaningful leverage to rising gold prices as well as increased exploration for new deposits both within existing assets such as Porcupine District, Yukon Territory; San Dimas District, Sonora State, Mexico; Cortez Gold Project Colorado; El Peñón Mine Complex Santa Cruz Province Argentina) or outside them (Porco project).

Barrick is a  top-tier gold miner with a global footprint. The Toronto-based gold giant operates in 13 countries, including Argentina, Canada, Chile, Côte d'Ivoire, Democratic Republic of the Congo, Dominican Republic, Mali, Papua New Guinea, Saudi Arabia, Tanzania, the United States and Zambia. Though Newmont surpassed Barrick as the largest gold miner when it acquired Goldcorp, Barrick is still a force to be reckoned with.

Following its acquisition of Goldcorp, Newmont (NYSE:NEM, TSX:NGT) has now become one of the world's largest gold producers. It is clear that this company knows how to produce and market gold on a large scale. The company also owns several mining operations in North America, Australia, and Asia Pacific regions. They have developed many different methods for extracting gold from mines all over the world including open pit mining techniques as well as underground extraction techniques.

In addition to producing and marketing their own mined resources, Newmont Goldcorp offers consulting services where they provide guidance on exploration projects around the globe. This company is an industry leader in exploration both domestically and abroad with offices located in 12 countries across 5 continents! Newmont works with their suppliers to find the best way to extract these materials from various sources including hard rock mines (rocks), soft rock mines (sedimentary rocks) or surface deposits of minerals like salt lakes or sand-based beaches.

Yamana Gold (NYSE:AUY, TSX:YRI), is a well-known gold mining company, with operations in Brazil and Argentina. The company has been producing gold for over 50 years and operates two mines: the Canadian Malartic mine in Canada and the Minera Florida mine in Chile. It also owns three other properties: Agua Rica, Tapada do Norte, and Caiena.  One of Yamana's most notable mines is Chapada mine in Brazil which has been operational since 2011.

Earlier this year, Yamana signed a deal with industry giants Glencore and Goldcorp to develop and operate another Argentinian project, the Agua Rica.  Initial analysis suggests the potential for a mine life in excess of 25 years at average annual production of approximately 236,000 tonnes (520 million pounds) of copper-equivalent metal, including the contributions of gold, molybdenum, and silver, for the first 10 years of operation.

Harmony Gold (NYSE:HMY) is a gold mining company that was founded in 1924. It has been listed on the Johannesburg Stock Exchange since 1928 and it incorporated in 1956. The company's headquarters are located in Johannesburg, South Africa. Harmony Gold operates mines in Australia, Ghana, Papua New Guinea and Tanzania as well as exploration properties across Africa including Namibia, Congo-Kinshasa and Mali.

Harmony is another South African miner which has exploded onto the radars of investors. In 2020, Harmony raised a whopping $200 million to partially fund a key acquisition of AngloGold’s assets in its home country. The deal is expected to more-than-triple its gold production to as much as 1.8 million ounces per year.

First Majestic Silver (NYSE:AG, TSX:FR) is an exploration and development company with operations in Mexico. First Majestic Silver has been developing the San Jose mine for over 20 years, and it is now one of the world's largest silver producing mines. With a team of experienced geologists, engineers, metallurgists, miners and other professionals, First Majestic Silver strives to develop high-quality resources that maximize shareholder value.

First Majestic Silver's goal is to provide shareholders with a secure investment in precious metals while maximizing profitability for each project. They are committed to enhancing economic growth by creating jobs through sustainable mining practices which will contribute positively to their local communities as well as society at large.

While its primary focus remains on silver mining, it does hold a number of gold assets, as well. Additionally, silver tends to follow gold’s lead when wider markets begin to look shaky. And with analysts sounding the alarms of a global economic slowdown, both metals are likely to regain popularity among investors.

Wheaton Precious Metals Corp. (NYSE:WPM, TSX:WPM) is a leading global precious metals mining company with extensive experience in exploration, development and production activities on six continents. The Company produces silver, gold and other related minerals from various mines in North America, South America and Africa. As one of the largest ‘streaming’ companies on the planet, Wheaton has agreements with 19 operating mines and 9 projects still in development. Its unique business model allows it to leverage price increases in the precious metals sector, as well as provide a quality dividend yield for its investors.

Recently, Wheaton sealed a deal with Hudbay Minerals Inc. relating to its Rosemont project. For an initial payment of $230 million, Wheaton is entitled to 100 percent of payable gold and silver at a price of $450 per ounce and $3.90 per ounce respectively.

Randy Smallwood, Wheaton's President and Chief Executive Officer explained, "With their most recent successful construction of the Constancia mine in Peru, the Hudbay team has proven themselves to be strong and responsible mine developers, and we are excited about the same team moving this project into production. Rosemont is an ideal fit for Wheaton's portfolio of high-quality assets, and when it is in production, should add well over fifty thousand gold equivalent ounces to our already growing production profile."

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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