Although leisure travel to faraway places remains largely restricted, the movement of investment capital and people for work purposes have not faced nearly the same degree of difficulty. North American investors have looked to other economies for better returns when the outlook seemed more promising there than at home. By and large, industrial activities resumed once COVID safety measures were put in place. Meanwhile, a much-increased money supply has found its way into all manner of markets, driving up prices. Inflation concerns have bolstered demand for gold (also benefiting from a devalued US dollar).
Since mid-2018, gold prices have climbed higher from US$1,300 an ounce, reaching more than US$2,000 an ounce last August before sinking to US$1,700 and bouncing upward anew to about US$1,900 at May's end. (The price stood at US$1,770 as of June's end.) In this climate, Raymond James Financial mining analyst Craig Stanley advises investors to consider picking up shares of two small precious metals companies working overseas to produce a steady, long-term supply of gold at a reasonable cost relative to commodity prices.
Mr. Stanley boasts more than 15 years of corporate and market experience related to mineral resources. In addition, he holds a master of science degree in geology from the University of Western Ontario. He joined Raymond James last June.
The analyst considers Montage Gold Corp. (TSXV-MAU) and Rio2 Limited (TSXV-RIO) to both be "strong buys", the equivalent of "best buys" at the financial services firm.
Montage Gold's flagship project is Kon?(C) in C??te d'Ivoire, where operations are moving towards permits by 2022, according to Mr. Stanley. "At a gold price of US$1,600 per ounce, the May 2021 preliminary economic assessment (PEA) estimated . . . average annual production is 206,000 ounces of gold per year at all-in sustaining costs (AISC) of US$975 an ounce," he says. Per exploration so far, the site hosts inferred resources of 4 million ounces of gold at a grade of 0.59 grams per tonne of ore (g/t). As of late June, the company's infill assaying program is "95 per cent complete" and continued to show promising results, the analyst notes.
Montage plans to release an initial indicated resource report in the third quarter followed by a feasibility study in the fourth quarter. Company management says it intends to submit an environmental and social impact assessment (ESIA) and apply for a mining permit from the C??te d'Ivoire government then as well. ESIA field work is already complete and the project is in public consultation.
Mr. Stanley says the company is fully funded to execute these plans. "Montage had $25 million in cash on hand as of the end of April and management expects to have $10 million remaining upon completion of the feasibility study for Kon?(C) by the end of this year."
He expresses confidence that the company will receive the permits soon after application, pointing to comparable recent examples in C??te d'Ivoire. "In December 2020, Roxgold announced it received the exploitation, or mining, permit for the S?(C)gu?(C)la gold project. This followed September's announcement that environment ministry had approved the ESIA. Also, in December, Tietto Minerals was granted the mining permit for its Abujar gold project that had no published economic study at the time."
Rio2 Limited operates in Chile. The company's flagship property is the Fenix project in Atacama, a region of Copiapo province and part of the Maricunga mineral belt, home to 70 million ounces of gold.
At present, Mr. Stanley assumes the company will achieve initial production in the first quarter of 2023. Rio2 released a pre-feasibility study (PFS) in September based on reserves of 1.8 million ounces at a grade of 0.49 g/t and daily throughput of 20,000 tonnes of ore. The PFS assumed AISC of US$997 per ounce and average yearly production of 93,000 ounces in the first 13 years.
"The 2019 Fenix PFS was designed to reduce upfront capital requirements and commence production in the shortest possible time frame." says Mr. Stanley. "However, management is looking at a potential future expansion to the 80,000-tonnes-per-day processing rate outlined in a 2014 PFS."
The company intends to follow the same road map as its namesake Rio Alto Mining (Rio2's president and CEO Alex Black held the same positions at Rio Alto): building mines with a focus on minimizing capital expenses, then financing expansion through cash flow. Mr. Stanley underlines that Mr. Black took over Rio Alto when it was a $12-million development company in 2009, built two heap leach mines in Peru, and then sold it to Tahoe Resources in 2015 for $1.2 billion.
"Mr. Black looked at more than 60 projects before gaining control of Fenix through Rio2's 2018 all-share merger with Atacama Pacific Gold," says the analyst.
This is an edited version of an article that was originally published for subscribers in the July 16, 2021, issue of Investor's Digest of Canada. You can profit from the award-winning advice subscribers receive regularly in Investor's Digest of Canada.
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