Expert Notes Rising 2024 Gold Market Full of Surprises
The gold market usually follows its seasons, and Michael Fox, publisher of The Prospector, has seen many of them. But this year, gold's continued rise has bucked market tradition.
Michael Fox, owner and publisher of The Prospector, has been following the resource markets for more than 20 years and knows the usual seasons of gold: It gains life in the fall and peaks in March before dropping off after the annual Prospectors & Developers Conference of Canada (PDAC) in March.
But this year something different happened. After PDAC, "gold just took off," he said. The yellow metal hit a new high at that time of US$2,449.89 per ounce on May 20. After settling for two months, it hit a new high of US$2,487.40 overnight Tuesday, Kitco reported. It stood at US$2,465.82 on Thursday.
Some experts, like Bloomberg Senior Commodity Strategist Mike McGlone, have predicted that it will only be "a matter of time" before gold hits US$3,000.
"The traditional 'sell in May and go away' isn't really at play here," Fox told Streetwise Reports about this year's gold market in a recent interview. "The gold price spiked, ran against the counter-seasonal trend, and then has managed to maintain those highs. So, I think we're looking at a situation where we're looking at a next leg up."
Fueling the fire, Fox said, is inflation, geopolitical issues, and especially the large amount of the yellow metal being bought by offshore central banks. Fox said he remembers McGlone's original US$3,000 prediction last year, "and people were laughing" at him.
"This year, he maintains his position, and there's a lot less people laughing at him this time around than there was a year ago," he said.
Central Banks Pushing Upleg
The yellow metal is traditionally seen as a safe asset, which Fox said it is, calling it "an insurance policy. It's one of those things that you buy and put in your drawer, and I hope you never need to use it . . . Some people will treat it as a speculation, but realistically, it's an inflationary hedge."
However, the increasing role of the central bank purchases are definitely having an effect, experts said.
The World Gold Council's 2024 Central Banks Gold Reserves Survey showed four in five respondents expected reserve managers to increase their gold holdings in the next year, the website reported, according to a report by Stockhead on June 18.
Seventy central banks were polled by the Council. Nearly 30% said they are planning to add to their own gold reserves this year and 57% said gold will account for a higher proportion of global reserves within five years.
"Extraordinary market pressure, unprecedented economic uncertainty, and political upheavals around the world have kept gold front of mind for central banks," the Council's global head of central banks and head of Asia-Pacific, Shaokai Fan, said, according to Stockhead.
"Many of these institutions have become more aware of the asset's value as a way to manage risks and diversify their portfolios," Fan said.
Fox said it's still important to note that there is still the possibility of a hard overcorrection. "I think this is a time when one should buy the dips," he said.
He's More Bullish on Silver
But Fox said he's actually more bullish on silver than he is gold. He said it is predominantly an industrial metal in addition to being a precious metal. When silver hit US$49.50 in 2011, gold was also hitting highs. He said that does not mean there's a direct connection between the two, but psychologically investors "tend to believe the correlation of gold and silver is important."
Fox noted that if that psychological link proved true and gold hit US$3,000 or higher, you'd be looking at a silver price that would approximately be US$75 to US$80 per ounce.
"There's potentially a larger upside to the silver market," he said.
No matter the metal, Fox said his investment philosophy centers around the people running the company. If they are "serially successful," they are likely to be again, he said.
No matter which metal hits new highs this year, Fox said higher prices with larger profit margins will hit the major and intermediate players in the markets first before moving their way "further down in the supply chains to the explorers and developers."
This could mean opportunities for investors looking to play the long game and be rewarded downstream. Here are some explorers and producers you can look at to see if they're a right fit for you and your portfolio.
Seabridge Gold Inc.
Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) recently announced its first mineral resource estimate (MRE) for the Bronson Slope deposit at its 100%-owned Iskut project in northwest British Columbia's Golden Triangle.
Streetwise Ownership Overview*
Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT)
*Share Structureas of 7/19/2024Source: Thomson ReutersThe MRE found an Inferred Resource of 517.3 million tonnes (Mt) at 0.33 grams per tonne gold (g/t Au) for 5.4 million ounces (Moz), 0.09% copper (Cu) for 1.06 billion pounds, and 2.7 g/t silver (Ag) for 45 Moz.
Seabridge's flagship KSM project is only 30 kilometers by air from Iskut. According to analyst Lucas N. Pipes of B. Riley Securities, who has rated the stock a Buy with a target price of US$60 per share, KSM is the world's largest undeveloped gold project by reserves and resources.
In an updated research note last month, RBC Capital Markets analyst Michael Siperco said the key catalyst for Seabridge remains finding a partner for KSM.
"The ongoing exploration at Iskut indicates potential for a larger gold/copper deposit (similar to the KSM deposits)," wrote Siperco, who rated the stock Outperform/Speculative Risk with a US$30 per share target price. "Longer term, the property could become more of a focus for Seabridge post-KSM partnership."
Three helicopter-portable drills are deployed at Iskut this summer to test for source copper-gold porphyries for the intermediate sulfidation epithermal mineral systems recognized by the company in 2023.
Upcoming catalysts for Seabridge include finding a joint venture (JV) partner for KSM, obtaining Substantially Started designation at KSM, and continued drilling at its 3 Aces Project located in Southeastern Yukon, Canada.
Reuters provided a breakdown of the company's ownership and share structure, where management and insiders own approximately 3% of the company. According to Reuters, CEO and Chairman Rudi P. Fronk owns 1.41%.
Reuters reports that institutions own about 55% of the company. According to Reuters, Friedberg Mercantile Group Ltd. owns 13.34%, National Bank of Canada owns 5.15%, Van Eck Associates Corp. owns 4.2%, Kopernik Global Investors, L.L.C. owns 3.71%, Paulson & Co. Inc. owns 2.36%, and Sprott Asset Management L.P. owns 2.24%.
According to Reuters, there are 87.69 million shares outstanding, while the company has a market cap of CA$1.8 billion and trades in a 52-week range of CA$12.62 and CA$23.
StrikePoint Gold Inc.
StrikePoint Gold Inc.'s (SKP:TSX.V; STKXF:OTCQB) flagship project, Cuprite, is very close to other successful projects in Nevada's Walker Lane gold trend, including Centerra Gold Inc.'s (CG:TSX; CADGF:OTCPK) Gemfield deposit and AngloGold Ashanti Ltd.'s (AU:NYSE; ANG:JSE; AGG:ASX; AGD:LSE) project.
Streetwise Ownership Overview*
StrikePoint Gold Inc. (SKP:TSX.V; STKXF:OTCQB)
*Share Structureas of 7/18/2024Source: Thomson ReutersLast month, the company announced results of its inaugural drill program at Cuprite, which included five holes totaling 3,100 meters of reverse-circulation drilling. The program hit multiple gold and precious metal intercepts, including 6.1 meters of 0.74 grams per tonne gold (g/t Au) and 14.75 g/t silver (Ag).
"Gold and silver assay results from this first drill program are encouraging," President and Chief Executive Officer Michael Allen said. "Reportable gold-silver mineralization in four of the five holes over a distance of approximately 1,600 meters is coincident with the extensive surface mercury anomaly and the geophysical work the company has completed. These results confirm the potential of this epithermal system to host higher grade mineralization."
Gold was encountered in four of five holes completed at Cuprite. Based on associated elements, mineralization appears to be caused by a low-sulfidation, epithermal system, similar AngloGold's nearby, newly discovered Silicon and Merlin deposits, the company said in a release.
"In the Walker Lane of Nevada, low sulfidation systems create several mines, most notably the multi-million Au oz Round Mountain Mine operated by Kinross," the company said.
In addition to Cuprite, StrikePoint controls two advanced-stage exploration assets in British Columbia's Golden Triangle: the past-producing high-grade silver Porter-Idaho Project and the high-grade gold Willoughby Project.
Industry veteran and newsletter author Jeff Clark, who has taken over Gwen Preston's The Maven Letter as Paydirt Prospector, said StrikePoint has an established team and three impressive projects. He also compared Cuprite to Anglogold's Silicon gold project.
"Based on the geology at Cuprite, management believes it is a Silicon look-alike," he said.
He also pointed out that "the stock is owned by Eric Sprott, Crescat Capital, US Global, and many other institutional investors. A wide swath of money managers obviously see potential here."
Reuters provided a breakdown of the company's ownership and shares structure, where management and insiders own approximately 1.49% of the company.
According to Reuters, Executive Chairman Shawn Khunkhun owns 0.44% of the company, President and CEO Michael G. Allen owns 0.72%, Director Ian Richard Harris owns 0.11%, and Director Adrian Wallace Fleming owns 0.03%.
Reuters reported that institutional and strategic investors own approximately 22.37% of the company, as 2176423 Ontario, Ltd. owns 11.31% of the company, U.S. Global Investors Inc. owns 1.04%, and Sprott Asset Management LP owns 0.95%.
According to Reuters, there are 263.89 million shares outstanding, while the company has a market cap of CA$7.92 million and trades in a 52-week range of CA$0.03 and CA$0.09.
Dolly Varden Silver Corp.
Dolly Varden Silver Corp. (DV:TSX.V; DOLLF:OTCQX) last month released the first drill results from its 2024 exploration at its 100%-owned Kitsault Valley project in British Columbia's Golden Triangle.
Streetwise Ownership Overview*
Dolly Varden Silver Corp. (DV:TSX.V; DOLLF:OTCQX)
*Share Structureas of 5/17/2024Source: Dolly Varden Silver Corp.The cores intersected high-grade silver mineralization at the Moose and Chance veins. Hole DV23-387 at the Moose vein assayed 977 g/t Ag over 5 meters, including 3,670 g/t Ag over 0.79 meters. Hole DV24-388 at the Chance vein intersected 206 g/t Ag over 23.03 meters, including 597 g/t Ag over 1.4 meters and 749 g/t Ag over 0.5 meters.
"These excellent results from the first hole at the Moose Vein from the 2024 program (exhibit) similar geological and mineralization features to the Wolf deposit located 1,400 meters south," said Chief Executive Officer Shawn Khunkhun. This "suggests that this area has potential to emerge into the northernmost silver deposit along the 5-kilometre-long trend that also hosts the Dolly Varden, Torbit, and North Star deposits."
Three rigs are currently drilling at the project and results are expected throughout the year, the company has said. The program will be split about 50/50 between the Dolly Varden and Homestake Ridge properties (which together make up the Kitsault Valley project). The drilling will also be split into thirds overall between the Homestake Silver deposit area, the Wolf deposit, and project-wide exploration for new discovery targets.
"This season's introduction of directional drilling technology will allow for highly accurate placement of drill intercepts," Khunkhun has said.
Analyst Stuart McDougall of Research Capital Corp. released an updated research note last month, maintaining his Speculative Buy rating with a CA$1.45 per share target price.
"Although it's still early days, the grades and widths are similar to those in the known zones located to the south," McDougall wrote. "Accordingly, we continue to value the company on the basis of its successful expansion of existing resources."
Clark, author of The Gold Advisor and Paydirt Prospector, wrote in June that the area Dolly Varden is drilling in is bigger than it looks on the map with plenty of places to still find resources.
Both Bob Moriarty of 321gold.com and the Golden Opportunities newsletter are among the other experts who like Dolly Varden Silver.
The company offers investors "a big silver-equivalent resource in British Columbia's Golden Triangle to leverage rising silver prices and exciting, discovery-driven growth," Golden Opportunities stated.
According to Dolly Varden, 48% of the company is held by institutional investors, including Fidelity Management & Research Company LLC, Sprott Asset Management LP, U.S. Global Investors Inc., Delbrook, and Extract Capital.
About 44% is with strategic investors, including 19% with Fury Gold Mines, 15% with Hecla, and Eric Sprott owns 10% himself.
The rest, 8%, is with retail and high-net-worth investors.
The company has 285.07 million outstanding shares. Its market cap is CA$319.96 million, and its 52-week trading range is CA$0.58-1.29 per share.
Silver X Mining Corp.
Another silver company to consider is Silver X Mining Corp. (AGX:TSX.V), a silver developer and producer that owns the 20,000-hectare Nueva Recuperada Silver District in Central Peru and produces silver, gold, lead and zinc from its Tangana Project in the district.
Streetwise Ownership Overview*
Silver X Mining Corp. (AGX:TSX.V)
*Share Structureas of 7/11/2024Source: Silver X Mining Corp.Earlier this month, the company announced it continued to increase production during the second quarter of 2024 at the mine. The company said there was a growth in tonnage of 20% from Q1 2024 and 33% from Q2 2023. The production of silver equivalent (Ag Eq) ounces increased by 8%, Silver X said, as the company processed 362,800 ounces Ag Eq in Q2 2024.
"We are reporting our third consecutive quarter of increased tonnage mined and mill throughput and expect to continue this trend throughout the rest of the year whilst also concentrating on optimizing grade to the mill," said Chief Executive Officer Jose M. Garcia. "We plan to announce financial results for the second quarter, which benefited from stronger metal prices, within approximately 45 days."
The company also reported "solid underground development, enabling new development phases for both production and resource development" at the project.
Analyst Timothy Lee at Red Cloud Securities, in an updated research note at the time, said that the "overall production is about in-line with our estimates."
"Tonnage processed exceeded our estimate, but the lower grade led to Ag Eq production that was 6.7% below our estimate," wrote Lee, who rates the stock a Buy with a target price of CA$0.70 per share. "Overall, while there is some variability in metal grades, we believe the continued production ramp-up is the key for Silver X at this stage."
The results released showed that Silver X mined 42,866 tonnes in the second quarter, an increase of nearly 34% year-over-year (YoY); and processed 44,601 tonnes, an increase of 26% YoY. The average head grade was 253 g/t Ag Eq, about 6% down YoY, the company reported. The property produced a total of 284,027 Ag Eq, up 14% YoY, the company said.
According to the company, Silver X has 200.4 million shares outstanding.
Silver X said management and insiders own approximately 15% of the company. According to Reuters, President and CEO Jose Garcia owns 7.10% of the company, and Vice President Sebastian Wahl owns 7.14%.
The company said institutional investors own 10%, including Baker Steel Resources Trust Ltd., which owns 9.73%.
The rest is in retail.
Silver X has a market cap of CA$54.1 million and a 52-week trading range of CA$0.16 and CA$0.35 per share.
| Want to be the first to know about interestingSilver andGold investment ideas?Sign up to receive the FREE Streetwise Reports' newsletter. | Subscribe |
Important Disclosures:
Seabridge Gold Inc., StrikePoint Gold Inc., and Dolly Varden Silver Corp. are billboard sponsors of Streetwise Reports and pay SWR a monthly sponsorship fee between US$4,000 and US$5,000. In addition, Silver X Mining Corp. has a consulting relationship with an affiliate of Streetwise Reports, and pays a monthly consulting fee between US$8,000 and US$20,000.As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of StrikePoint Gold Inc., Dolly Varden Silver Corp., and Silver X Mining Corp. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.For additional disclosures, please click here.