Six Gold Explorers Priced Below $6 Per-Ounce
Jan 24
Tomorrow’s production has got to come from somewhere; so what is a reasonable price for gold that’s still in the ground? My goal is not to provide the answer, but simply highlight a metric that can help you sift through the rubble that is the Canadian Venture Exchange. “Price-per-ounce” can be used to value and compare gold exploration stocks quickly. Simply divide market capitalization by the total number of measured, indicated, and inferred resources, and you’ve got your answer!
An example
With a current market value of $8.4 million, Sarama Resources (CVE: SWA) has 1.5 million ounces of inferred gold resources. With a little quick math [8.4 divided by 1.5] we get $5.60 on a price-per-ounce basis. In other words, buying Sarama Resources is the equity equivalent of paying $5.60 for an ounce of gold. Why so cheap? Perhaps few people are interested in buying hypothetical gold that’s still in the ground, and I can appreciate that.
Another valid reason is the market knows (or is predicting) that Sarama’s South Hounde Project will never become a gold mine. By making that prediction the odds are in their favor, because only 1 of 1,000 gold occurrences are expected to produce commercial quantities of gold. Despite the long odds, speculators can gain levered exposure to gold via ounces that are still in the ground (think of it as a cheap call option), and with a little bit of luck, coupled with a healthy amount of due diligence, multi-bagger profits can be had.
Who knows, Sarama might be one of those better-bets. Its Burkina Faso land package spans 722,783 acres, so no shortage of places to look, and its recent $14 million agreement with Acacia Mining (formerly African Barrick) should advance South Hounde further towards a production decision while growing the underlying gold resource.
Here’s six more gold exploration stocks priced below $6 per-ounce…
Of course, you’ll want to dig deeper into each name before making a purchase decision, and bookmark Penny Stock Experts for future analysis.
1) Temex Resources (CVE: TME)
Led by Ian Campbell, P.Geo, Temex controls two advanced gold projects in northeastern Ontario. Its Whitney project (approx. 70% Temex/30% Goldcorp) is located on the Porcupine-Destor Fault in the heart of Timmins Gold Camp. Already permitted, Ian plans to use the $2M cash on-hand and perhaps a million worth of borrowed money to move Whitney toward small scale production. Hypothetically, Temex could negotiate with its partner and neighbor [Goldcorp] to run a bulk sample of 100,000 tonnes, potentially generating over $10M in cash flow.
Combining the resource bases at Whitney and Juby, Temex controls 4.6 million ounces of gold. As of the most recent market value, $11.2M, the cost per-ounce in the ground is just $2.43!
2) PC Gold (CVE: PKL)
After securing strategic claims in 2014, “PC Gold is by far the largest land holder in the Pickle Crow Gold Camp”, according to CEO Peter J. Hooper. The past producing Pickle Crow gold mine was a long life (1935-1966), consistent money-maker. Total gold production was 1.47 million ounces at 16.14 g/t Au— more than half an ounce per ton! Further investments are required to access the underground workings and refurbish a 225tpd mill located onsite.
PC Gold’s inferred resource is estimated to contain 1,299,000 ounces of gold from 10.3 million tonnes of material. With a market cap of $6.7M PC Gold’s price-per-ounce is $5.16.
3) Alexandria Minerals (CVE: AZX)
Led by its co-founder Dr. Eric Owens, Alexandria’s land package comprises 20 properties stretching 35 km along the Cadillac Break, a regional fault zone that has produced some 100,000,000 ounces of gold since the early 1900’s. Strategic shareholders include Agnico Eagle (8%), IAMGold (3%), and Teck (3%). Alexandria’s exploration work includes drilling 130,000 metres to define three distinct resources at its Aksaba, Sleepy, and Orenada projects.
Alexandria’s in the ground cost is $5.05, $8M divided by 1,583,920 ounces of gold.
4) Moneta Porcupine Mines (TSE: ME)
Another exploration stock with dreams of gold mining in Northeastern Ontario’s Abitibi Greenstone Belt, Moneta is led by Ian C. Peres. Not unlike the others, Moneta’s stock has been trending from upper left to lower right. According to its preliminary economic assessment (PEA – Dec 2012) Moneta’s Golden Highway Project has a NPV of $748M and an IRR of 24%, assuming $1,350 per-ounce US. A capital investment of $607M is required to build the mine. Assuming Moneta survives long enough, it would be unlikely to see commercial production unless gold’s over $1,500… an outright sale is a more likely scenario.
Any-how, Moneta’s estimated underlying gold resource is 4,295,000— roughly $2.80 per-ounce at a market valuation of $12M.
5) North Country Gold (CVE: NCG)
Sailing north from Ontario across the Hudson Bay and Northwestern Passages, P.Geo John Williamson has outlined a relatively large high-grade resource called Three Bluffs (Nunavut). Via North Country Gold, John and team are exploring what could be a 300 km long greenstone belt. They’ve secured a land package of 250,000 acres just in case they’re right! Yeah, Three Bluffs is remote, but with drill intercepts such as Hole 04TB010 (48m @ 7.37 g/t), Hole 04TB009 (56m @ 4.55 g/t), and Hole 03T005 (9m @ 24.8 g/t), it’s worth the cost of admission.
Speaking of numbers, Three Bluffs has roughly 1,648,000 ounces of 5 g/t Au material in the indicated and inferred categories… with a $4.3M market value that runs you $2.61 each.
6) Eagle Hill Exploration (CVE: EAG)
Taking a round trip back to the Abitibi region, John Proust and co are working the 12,400 hectare Windfall Lake Property. Depending on the area, mineralization is found 30 metres from surface and as deep as 870 metres. After completing a reverse split, Eagle Hill has just over 23 million shares outstanding.
The most recent resource projection at Windfall Lake is 1,475,000 ounces. Grades are respectable, between 7.37 and 9.75 g/t Au. After crunching the numbers I come up with $5.98 per-ounce of gold, stored safely, underground.
Bottom Line: if Joe Banker and Joe Sixpack want gold in their hands tomorrow and ten years from now it has got to be mined from somewhere. Today’s “resource” (albeit only 1% of them) is tomorrow’s gold mine, so gold in the ground is worth more than $0 per-ounce, given the price is high enough.
*Mineral “resources” are not mineral reserves and have not demonstrated economic viability. The quantity and grade of reported measured, indicated and inferred resources are estimations and are conceptual in nature. There has been insufficient exploration to define these resources as mineral reserves; it is uncertain if further exploration will result in upgrading them.
**author has a long position in Temex Resources
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