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COT Metals Charts: Speculator bets mostly lower this week

By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter

Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC).

The latest COT data is updated through Tuesday May 10th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets.

Metals speculator bets overall were lower this week with four out of the five metals markets we cover seeing lower bets on the week. The metals markets are seeing a cool off in their speculative positions as well as their prices as most of these markets are down from a short-term peak in early March.

The only market with higher speculator bets this week was Platinum (2,904 contracts).

The markets with declining speculator bets this week were Silver (-8,986 contracts), Gold (-5,853 contracts), Copper (-7,003 contracts) and Palladium (-493 contracts).


Speculator strength standings for each Commodity where strength index is current net position compared to past three years, above 80 is bullish extreme, below 20 is bearish extreme OI Strength = Current Open Interest level compared to last 3 years range Spec Strength = Current Net Speculator level compared to last 3 years range Strength Move = Six week change of Spec Strength


Data Snapshot of Commodity Market Traders | Columns Legend
May-10-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index
WTI Crude 1,736,594 0 310,803 2 -354,479 98 43,676 77
Gold 571,447 34 193,315 40 -227,756 57 34,441 57
Silver 142,752 9 19,082 41 -30,519 69 11,437 9
Copper 184,502 15 -22,626 26 19,249 73 3,377 45
Palladium 8,832 11 -3,245 3 3,434 96 -189 33
Platinum 66,064 32 1,363 5 -5,373 98 4,010 18
Natural Gas 1,108,451 6 -112,529 45 64,006 51 48,523 100
Brent 173,911 19 -31,215 59 30,562 44 653 18
Heating Oil 349,618 31 6,455 52 -32,434 37 25,979 88
Soybeans 694,454 20 174,608 72 -147,698 33 -26,910 26
Corn 1,510,783 23 470,908 90 -415,345 13 -55,563 11
Coffee 212,659 5 32,555 69 -33,559 37 1,004 0
Sugar 797,453 0 187,185 75 -220,611 26 33,426 49
Wheat 308,326 0 21,686 48 -17,779 34 -3,907 92

 


Gold Comex Futures:

Gold Futures COT ChartThe Gold Comex Futures large speculator standing this week reached a net position of 193,315 contracts in the data reported through Tuesday. This was a weekly lowering of -5,853 contracts from the previous week which had a total of 199,168 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 39.9 percent. The commercials are Bullish with a score of 56.8 percent and the small traders (not shown in chart) are Bullish with a score of 57.3 percent.

Gold Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 50.6 23.1 9.1
– Percent of Open Interest Shorts: 16.7 63.0 3.1
– Net Position: 193,315 -227,756 34,441
– Gross Longs: 288,947 132,251 52,098
– Gross Shorts: 95,632 360,007 17,657
– Long to Short Ratio: 3.0 to 1 0.4 to 1 3.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 39.9 56.8 57.3
– Strength Index Reading (3 Year Range): Bearish Bullish Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: -24.1 21.0 19.4

 


Silver Comex Futures:

Silver Futures COT ChartThe Silver Comex Futures large speculator standing this week reached a net position of 19,082 contracts in the data reported through Tuesday. This was a weekly fall of -8,986 contracts from the previous week which had a total of 28,068 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 41.4 percent. The commercials are Bullish with a score of 69.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 9.5 percent.

Silver Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 41.9 36.9 17.4
– Percent of Open Interest Shorts: 28.5 58.3 9.4
– Net Position: 19,082 -30,519 11,437
– Gross Longs: 59,829 52,637 24,862
– Gross Shorts: 40,747 83,156 13,425
– Long to Short Ratio: 1.5 to 1 0.6 to 1 1.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 41.4 69.0 9.5
– Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: -29.1 30.3 -9.9

 


Copper Grade #1 Futures:

The Copper Grade #1 Futures large speculator standing this week reached a net position of -22,626 contracts in the data reported through Tuesday. This was a weekly lowering of -7,003 contracts from the previous week which had a total of -15,623 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 26.1 percent. The commercials are Bullish with a score of 72.7 percent and the small traders (not shown in chart) are Bearish with a score of 44.8 percent.

Copper Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 31.2 50.6 9.3
– Percent of Open Interest Shorts: 43.4 40.1 7.5
– Net Position: -22,626 19,249 3,377
– Gross Longs: 57,510 93,318 17,183
– Gross Shorts: 80,136 74,069 13,806
– Long to Short Ratio: 0.7 to 1 1.3 to 1 1.2 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 26.1 72.7 44.8
– Strength Index Reading (3 Year Range): Bearish Bullish Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: -38.3 38.9 -19.5

 


Platinum Futures:

The Platinum Futures large speculator standing this week reached a net position of 1,363 contracts in the data reported through Tuesday. This was a weekly rise of 2,904 contracts from the previous week which had a total of -1,541 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 5.3 percent. The commercials are Bullish-Extreme with a score of 97.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 17.9 percent.

Platinum Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 43.6 39.8 12.2
– Percent of Open Interest Shorts: 41.5 47.9 6.1
– Net Position: 1,363 -5,373 4,010
– Gross Longs: 28,774 26,293 8,029
– Gross Shorts: 27,411 31,666 4,019
– Long to Short Ratio: 1.0 to 1 0.8 to 1 2.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 5.3 97.6 17.9
– Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: -18.1 21.2 -38.4

 


Palladium Futures:

Palladium Futures COT ChartThe Palladium Futures large speculator standing this week reached a net position of -3,245 contracts in the data reported through Tuesday. This was a weekly decrease of -493 contracts from the previous week which had a total of -2,752 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 3.0 percent. The commercials are Bullish-Extreme with a score of 96.1 percent and the small traders (not shown in chart) are Bearish with a score of 32.9 percent.

Palladium Futures Statistics SPECULATORS COMMERCIALS SMALL TRADERS
– Percent of Open Interest Longs: 11.5 59.0 11.1
– Percent of Open Interest Shorts: 48.2 20.1 13.3
– Net Position: -3,245 3,434 -189
– Gross Longs: 1,013 5,209 982
– Gross Shorts: 4,258 1,775 1,171
– Long to Short Ratio: 0.2 to 1 2.9 to 1 0.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct): 3.0 96.1 32.9
– Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index: -7.1 11.8 -48.4

 


Article By InvestMacroReceive our weekly COT Reports by Email

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.

Gold Suffers Its Fourth Straight Week Of Declines

By Ino.com

Editor’s Note: I will be speaking at an upcoming conference The Vancouver Resource Investment Conference in British Columbia on May 17 and 18. For more information please click the link above.

Gold opened at $1977 on Monday, April 18, and this would mark the beginning of four consecutive weekly declines. As of 5:10 PM EDT gold futures basis, the most active June 2022 Comex contract is fixed at $1810.30 after factoring in today’s decline of $14.30 or 0.78%. Today’s decline in gold occurred without the benefit of dollar strength. The dollar index declined by 0.36% and is currently fixed at 104.515

Kitco Gold Index (KGX)

The image above is a screen-print of the KGX (Kitco Gold Index) which was taken at 4:37 PM EDT. At that time spot gold was fixed at $1810.80 after factoring in a decline of $10.70. Market participants were active sellers resulting in a $14.30 price decline. Dollar weakness provided mild tailwinds adding $3.60 (+0.20%) in value.

The decline this week was the strongest percentage drawdown of the four weeks losing 3.87%. Considering that over the last four weeks gold’s value has decreased by 8.44%, almost half of that decline occurred this week. This correction devalued the price of gold by $167 per ounce, with $73 of that decline occurring this week.

Gold Update - DX Weekly Chart

Over the last four weeks, a major factor pressuring gold prices lower has been dollar strength. The dollar has gained value for the last six consecutive weeks. Over the last four trading weeks, the U.S. dollar has gained 4.15% in value. This means that dollar strength accounted for just under one-half of gold’s price decline.

Gold Update - DX Bi-Monthly Chart

The dollar has been trading in a defined range since the beginning of 2017. In January 2017 the dollar index opened at 102.80 and traded to a high of 103. 78 becoming the first instance of dollar strength at this level since 2003. Since 2017 the dollar index has traded to this level on three occasions.

Both the 2017 top as well as the second instance which occurred in March 2020 created a double top. In both instances, dollar strength peaked at these levels resulting in a price correction that followed these tops. This month the dollar not only challenged the highs created during the double top but effectively closed above them on a daily, weekly, and monthly chart.

The dollar index declined today by – 0.36%. However, the dollar had a strong weekly gain. Currently, the dollar index is fixed at 104.515 and the last time the dollar was this strong was the fourth quarter of 2002.

Yesterday I addressed that recent price changes in the dollar and gold have been headlined driven based upon fundamental events. Because technical studies by nature are lagging indicators there is an inherent disconnect. I was blessed to be mentored by two great market technicians one being Larry Williams. He told me a story that illustrated the shortcoming of only using technical indicators.

To paraphrase: A market technician is analogous to someone standing at the stern of a boat and using the wake from the propeller to indicate the direction the ship was headed. While it indicated where the boat had been, only the captain knows when he will turn the wheel.

In this instance, the Federal Reserve is at the helm attempting to steer the ship through a storm brought on by rampant inflation

For those who would like more information simply use this link.

Wishing you, as always good trading,
Gary S. Wagner
The Gold Forecast

By Ino.com – See our Trader Blog, INO TV Free & Market Analysis Alerts

Source: Gold Suffers Its Fourth Straight Week Of Declines

 

Analyst’s Big 3 Royalty Companies Have Strong Reports

Source: Adrian Day   05/10/2022

In today’s Bulletin, analyst Adrian Day reviews the recent results from the big three royalty companies, all strong, with rock-solid balance sheets, but with a shortage of large projects in which to invest.

The big three royalty and streaming companies reported last week, though there had been pre-announcements to various extents. All three had good quarters, reporting close to expectations, and maintaining annual production guidance. All three have undertaken small transactions in recent months, though no large ones. And all three are now debt-free, with rock-solid balance sheets.

Wheaton Has Higher Production in Sector

Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE) reported broadly in line with expectations, though sales were a little stronger on slightly weaker production, due to sales from inventory.

Production was affected by maintenance and heavy rains at its largest streaming asset, Salobo. The expansion at that mine is now 90% complete, and Wheaton reiterated its guidance for the year of between 700,000 and 760,000 gold-equivalent ounces (GEOs).

Debt-free, Wheaton increased its cash balance to $376 million, with liquidity of $2.4 billion.

All of the “big three” royalty and streaming companies are long-term holdings for us and form the foundation of our gold portfolio.

Under its dividend policy of distributing about 30% of the prior year’s free cash flow, the dividend remains for the next two quarters but may increase thereafter; the current yield is 1.36%. If you do not own Wheaton, this is a good price level, but, given the near-term uncertainty on the gold price, we would look for additional weaknesses to add.

Franco’s Oil Boosts Revenues 

Franco-Nevada Corp. (FNV:TSX; FNV:NYSE) reported slightly higher than expected, mainly due to better-than-expected oil and  gas revenues. It maintained its full-year guidance of between 680,000 and 740,000 GEOs (which now include oil and gas). Like Wheaton, Franco did a few small transactions in the last couple of quarters, but no large deals. Also like Wheaton, Franco has some growth “baked in” from existing assets, in its case the ongoing ramp-up at its largest asset, the gold stream on the Cobre Panama copper mine.

Franco has $1.7 billion in available liquidity, including $723 million in cash and no debt. Franco remains a core holding, but we would look for additional weaknesses before buying, especially if the broad market is weak.

Royal Pays Off Debt

Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX) also reported slightly better than expected, due in its case to higher gold from its major asset, Mt Milligan. It is maintaining its full-year guidance of between 315,000 and 340,000 GEOs. Like the other two, Royal has built-in growth this year, from the ramp-up in the new Khoemacau copper mine in Botswana, on which Royal has a silver stream.

Having paid off its debt in the last quarter, it too is debt-free, with $184 million in cash, and $1 billion on its credit facility. Royal’s stock had the largest increase earlier in the year—for a reason—and has retreated less. We would wait to add to positions.

Expensive for a Reason 

The royalty and streaming companies tend to be expensive, with valuations multiples above the miners. But the balance sheets are stronger for the most part, with the certainty of cash flow higher and the exposure to inflation—as well as other costs and risks—lower. At today’s prices, Wheaton is trading lower than Franco on all metrics: 3.1 times price-to-book versus 3.7 times; cash flow of 24 times vs 30; and free cash flow 66 versus 74. Royal, at 19 times, is lower on cash flow, and in the middle on price-to-book at 3.4 times. Royal is the smallest of the three, with a market cap of $8.5 billion with Wheaton at $20 billion and Franco at almost $29 billion. Franco has the highest cash, the most diversified portfolio, and the deepest pipeline, but all three rate highly on all these criteria.

All of the “big three” royalty and streaming companies are long-term holdings for us and form the foundation of our gold portfolio. We are holders, but looking for lower prices to add.

Barrick, With a Strong Balance Sheet, Doubles Payout

Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) already pre-announced production and other financial results (Bulleting #818 and #819), so their quarterly results did not have many surprises. Although production was down in the quarter, they remain on track to meet their full-year guidance. The first quarter is usually a lower one for production, while the second quarter is always lower in terms of free cash flow since the quarter included semi-annual bond payments as well as additional tax payments.

There are near-term increases expected from the restart of Porgera (with the restart now pushed back to the third quarter); then increases from the planned expansion at Pueblo Viejo; and lastly the giant Reko-Diq copper project in Pakistan. Costs, as we discussed, were higher than expected. With Barrick already increasing guidance for 5% above earlier estimates, it is now estimating an additional 3% or so to costs. Some of this comes from higher royalty payments as the price of gold increases, but though Barrick is controlling costs well, inflation will affect them, as it will all miners.

The company has a very strong balance sheet, with net cash, boosted recently by the receipt of $300 million in dividends from the Kibali mine in the DRC. S&P upgraded its debt to BBB+. Including $3 billion undrawn on its credit facilities, it has total liquidity of $8.9 billion. Although it bought back no shares under its new repurchase program—which the company seems to view as a contingency, for extraordinary circumstances—it did increase the dividend under its new policy, effecting doubling it, putting Barrick on track for a sector-leading 3.6% yield. (Only B2Gold has a higher yield, just over 3.7%.)

Barrick is one of our top picks among the major producers. If you do not own it, it can be bought here. Much depends on the direction of gold for the near-term stock price, of course, and we would look to add to positions on weakness.

Transaction for Vista’s Project Nearing

Vista Gold Corp. (VGZ:NYSE.MKT; VGZ:TSX) has completed its 26-hold drill program at Mt Todd, looking for connecting structures between the two main ore bodies, with assays pending. Such drilling can increase the size of the project, but the major focus now is on seeking a partner for some kind of transaction. The company has $12.8 million in cash, and with the completion of the exploration program at Mt Todd, the total spend rate is expected to fall to $1.5 million a quarter. The cash should be sufficient to take the company through to a transaction. CEO Fred Earnest said he expected a transaction that would answer how the project will be financed, “a very important catalyst for unlocking value.”

Buy.

TOP BUYS this week include, in addition to above, Osisko Gold Royalties Ltd. (OR:TSX; OR:NYSE); Altius Minerals Corp. (ALS:TSX.V); Midland Exploration Inc. (MD:TSX.V); Ares Capital Corp. (ARCC:NASDAQ); Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE)); Orogen Royalties Inc. (OGN:TSX.V); and Pan American Silver Corp. (PAAS:TSX; PAAS:NASDAQ).

I AM OFF for two weeks for three back-to-back conferences, the Monday Show in Las Vegas, then a private conference in Palm Desert, and finally the Resource Conference in Vancouver. Let me know if you are planning on attending

Originally published on May 7th, 2022.

Adrian Day, London-born and a graduate of the London School of Economics, is the editor of Adrian Day’s Global Analyst. His latest book is “Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks.”

Adrian Day’s Disclosures

Adrian Day’s Global Analyst is distributed by Investment Consultants International, Ltd., P.O. Box 6644, Annapolis, MD 21401. (410) 224-8885. Publisher: Adrian Day. Owner: Investment Consultants International Ltd. Staff may have positions in securities discussed herein. Adrian Day is also President of Global Strategic Management (GSM), a registered investment advisor, and a separate company from this service. In his capacity as GSM president, Adrian Day may be buying or selling for clients securities recommended herein concurrently, before or after recommendations herein, and may be acting for clients in a manner contrary to recommendations herein. This is not a solicitation for GSM. Views herein are the editor’s opinion and not fact. All information is believed to be correct, but its accuracy cannot be guaranteed. The owner and editor are not responsible for errors and omissions. ©2021. Adrian Day’s Global Analyst. Information and advice herein are intended purely for the subscriber’s own account. Under no circumstances may any part of a Global Analyst email be copied or distributed without prior written permission of the editor. Given the nature of this service, we will pursue any violations aggressively.

Disclosures

1) Adrian Day: I, or members of my immediate household or family, own securities of the following companies mentioned in this article: All. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. Funds controlled by Adrian Day Asset Management, which is unaffiliated with Adrian Day’s newsletter, hold shares of the following companies mentioned in this article: All. I determined which companies would be included in this article based on my research and understanding of the sector.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.

4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for 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. Streetwise Reports does not endorse or recommend the business, products, services, or securities of any company mentioned on Streetwise Reports.

5) From time to time, Streetwise Reports LLC and its directors, officers, employees, or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in the securities mentioned. Directors, officers, employees, or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company release

Vancouver Junior Publishes Impressive Copper-Silver Resource

Source: Streetwise Reports   05/09/2022 

One Vancouver-based junior exploration company just went from one to two flagship projects with the release of the maiden resource estimate on a copper-silver project in Colorado. Could this be a game-changer for shareholders?

Metallic La Plata Location Map

Metallic La Plata Location Map
The location of Metallic Minerals Corp.’s La Plata project in Colorado in relation to other large mines in the area.  Source: Metallic Minerals Corp.

Metallic Minerals Corp. (MMG:TSX.V; MMNGF:OTCQB) La Plata copper-silver porphyry project in Colorado has its first resource estimate, and it will give copper-hungry companies seeking assets something to chew on as copper prices continue to hover around $4.50 per lb, down from their all-time highs in early March.

The National Instrument 43-101-compliant La Plata resource rings in at 889 million lb copper and 14.975 million ounces silver (Moz Ag) in a constrained model containing 115.7 million inferred tonnes at an average grade of 0.39% copper-equivalent (CuEq) (0.35% Cu and 4.02 grams per tonne silver (4.02 g/t Ag), using a 0.25% CuEq cutoff grade.

The resource focuses on the central Allard copper-silver porphyry deposit.

The mineralized zone that forms the resource is a single porphyry intrusive-hosted sulphide system that was drilled over an area measuring about 1 kilometer by 400 meters, with the spacing between holes typically varying between 50 and 100 meters (some spacing is 150 meters).

The deepest hole drilled ended in mineralization about 1 km below surface.

“It’s a big system. And that central hole — and others in this area — basically started in mineralization and then ended in mineralization. What that tells us is we have got to keep drilling to understand how big it’s ultimately going to get,” Metallic Minerals Chief Executive Officer and Chairman Greg Johnson told Streetwise Reports.

Metallic Acquired La Plata at the Bottom of Metal Price Cycle

 

Metallic acquired La Plata (which translates to “the Silver” and was discovered by Spanish explorers in the 1700s) in an equity-based transaction in late 2019. The deal was for a total of 10 million Metallic “units” and $500,000 cash, once certain milestones are completed through 2023. Each unit consists of a share and a half purchase warrant that is subject to certain terms.

There is also a 2% NSR that can be bought down to 1.5% (neither amount is likely to impede any takeover bid as producers acquiring copper properties in the current copper price environment are paying much more for lesser assets, often in more volatile jurisdictions).

Before La Plata found its way into Metallic’s hands, Kennecott (Rio Tinto Plc’s (RIO:NYSE; RIO:ASX; RIO:LSE; RTPPF:OTCPK) U.S. exploration group), Exxon Mobil Corp. (XOM:NYSE) (when oil and gas companies still looked for base metals deposits) and Phelps Dodge (now Freeport-McMoRan Inc. (FCX:NYSE)), had drilled a combined 56 holes totalling almost 13,000 meters on the property.

Since acquiring the project in late 2019, Metallic has completed an additional 1,980 meters of core drilling, resampled historical drill core, and took underground samples from the Allard deposit. The junior also conducted airborne and ground-based geophysics and surface sampling across the broader property. The resource was calculated by SGS Geological Services using the recent and historical data.

The work Metallic has done at La Plata is really the only modern exploration undertaken on the property in about 50 years. Through focused confirmation drilling the company was able to develop a NI 43-101 resource estimate for the property in fairly short order.

A model of the Allard deposit at the La Plata copper-silver project in Colorado.  Source: Metallic Minerals Corp.

Drill results along the Allard porphyry system have shown some impressive numbers. Hole LP-03 returned 395 meters grading 0.57% copper equivalent (CuEq) (0.51% Cu, 6.3 g/t Ag, 0.017 g/t Au), while hole LP-01 intersected 854 meters grading 0.26% Cu, including a higher-grade interval of 254 meters grading 0.41% Cu — both holes started and ended in mineralization.

Allard remains open to expansion at depth and along strike. And 16 more untested porphyry centers have been identified using advanced machine learning technology on the greater La Plata property area. Metallic is working with Goldspot Discoveries Inc. (SPOT:TSX.V), a Vancouver-based firm that uses geological and geophysical data, in tandem with artificial intelligence, to better “understand” metal deposits.

Johnson says some of those targets have similar or even stronger mineralization signatures than the Allard system itself.

Metallic plans more follow-up drilling and geophysical surveys in 2022, especially in the epithermal zones outside the porphyry core. Johnson believes those zones could hold precious metals mineralization, perhaps not dissimilar from their Keno Silver project in Yukon.

“We would anticipate adding value as we drill the system more to test its ultimate size extent and to bring in value for gold and  other metals as well. In particular, there is good potential to bring in high-grade epithermal silver and gold systems that are nearby but aren’t in this (resource) right now,” Johnson told Streetwise Reports.

A Two-Flagship Project Company?

 

Keno Hill Mine Complex
The Keno Hill Mine complex in Yukon.  Source: Metallic Minerals Corp.

With Metallic advancing its flagship Keno Silver property in Yukon, and now La Plata, it provides more options for shareholders, Johnson says.

“We are effectively a two-flagship company now,” Johnson explained. “Already we are seeing interest from producers based on the quality and ‘blue sky’ potential of the two assets.”

“Our belief is that La Plata is a really good project and adds value to what we were already being valued on for our half of the Keno Hill District. We’ll be able to advance these (projects) in parallel, and down the road, the nice upside for shareholders is that we may determine that there are actually two company-makers here,” Johnson told Streetwise Reports.

At $25/oz silver and $4.50/lb. copper, it doesn’t take long to calculate that the current in the in-the-ground metal value of 15 Moz Ag and 900 Mlbs Cu is about $4.4 billion. Even at a 75% discount rate to current metals prices to account for the inferred grades, potential capex, and mining costs, etc., La Plata remains a potential billion-dollar asset in the making.

Even without the maiden resource at La Plata, Vancouver-based equity research firm Couloir Capital had a 12-month “fair value” target on Metallic of CA$0.68.

Renowned mining investor Eric Sprott owns 16% of Metallic, while San Antonio, Texas – based US Global Investors and Hungarian firm OTP Funds are also large shareholders. Management and insiders own about 19%.

Metallic has a current market cap of about $60.5 million and trades in a 52-week range of CA$0.66 and CA$0.42.

Disclosures

1) Brian Sylvester compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He and members of his household are paid by the following companies mentioned in this article: None. His company has a financial relationship with the following companies referred to in this article: None.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Metallic Minerals Corp. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

3) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal  disclaimer. This article is not a solicitation for 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. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

4) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Metallic Minerals Corp., a company mentioned in this article.

 

James Dines, the ‘Original Goldbug,’ Remembered by His Peers

Source: Streetwise Reports   05/06/2022

James Dines, financial analyst, author, and editor of The Dines Letter, died in April at the age of 90.

Colleagues paid tribute to the legendary goldbug and financial analyst James Dines who edited The Dines Letter for more than six decades.

Brien Lundin, editor of Gold Newsletter, noted on April 20th, “We just learned that Jim Dines, a long-time friend of mine and of all investors, passed away last week. Jim was an absolutely brilliant market analyst and a true pioneer in the newsletter industry, and I’m glad that I had the opportunity to tell him so over the many years that I knew him. He will be greatly missed.”

Lex Column of the Financial Times noted, “Mr. Dines has done for Technical Analysis what Graham & Dodd has done for Fundamental Analysis.”

Adrian Day, in the April 24th issue of Adrian Day’s Global Analyst, wrote, “The editor of the long-time The Dines Letter and a fixture at gold conferences for decades, has died. An avid market technician and student of investor psychology, he called himself “the original gold bug,” and liked to recount the story of how he was fired from Wall Street for recommending gold at $35 an ounce. He was a showman, famous for his dress, his humor, and for the “Dinettes,” attractive young ladies who would grace his booth, guaranteeing a large gathering! I shared many a panel, and many a dinner, with Dines and he was always good company.”

Gerardo Del Real, on a podcast published on April 26th on Daily Profit Cycle, said, “We lost an original in our space and a mentor to a mentor of ours. We lost Mr. James Dines. We should all be so lucky to live the colorful, original, unique, long life that that man lived. I know he was somebody that was an inspiration to a lot of people way before my time. I’m 43 years old. In hip hop you say, Jay-Z’s your favorite rapper’s favorite rapper? Well, in the newsletter business, he was your new favorite newsletter writer’s favorite newsletter writer. That’s who Mr. Dines was.”

In the same podcast, Nick Hodge added, “A long life, well-lived, over 90 years old. And a fantastic newsletter, well written and well-published and long-lived as well. I counted up the editions, monthly issues, of The Dines Letter since 1960, over 730 of them. That is some staying power. Had the courage to leave his Wall Street firm to write the letter to back the hard money movement. And like you say, I think every newsletter writer’s favorite newsletter writer. I had the privilege of helping him market the newsletter in some of its later years. And of course, we both got to meet him and colorful is the right word, for sure. Whenever you asked him how he was doing, Mr. Dines, at least to me, would say, ‘Never better, my boy; it’s a great day to be alive.’ And on his voicemail message would encourage you to ‘Have a great rest of your day, no, have a great rest of your life.’ And so [he] was always wishing the best for others as well. And that’s part of the High States that he wrote about in one of his books.”

James Dines began his career as a junior security analyst with Auerbach, Pollak & Richardson and rose quickly within the ranks of Wall Street. After just two and a half years with AM Kidder & Co., he was promoted to a senior security analyst. Dines began writing the firm’s weekly market letter, which just one year later Kidder renamed The Dines Letter.

Dines’ contrarian views were to become legendary. In 1960, when gold was trading at $35/oz and the price was fixed by the U.S. government, he predicted that gold would see a “historic bull market” and rise astronomically, to over $400/oz. Against conventional wisdom, over the next 15 years gold rose to $486/oz, and in 1980 hit $850/oz, earning him the moniker “The “Original Goldbug.”

Kidder fired Dines when he refused to renounce his bullish gold predictions. This led him to begin publishing The Dines Letter independently, and he remained actively involved with the newsletter until his death.

In 1980, The Wall Street Journal wrote, “Metals mania vindicates such economic Cassandras as James Dines, who for years have urged investment in gold as a safe hedge in an inflation-weary world.” In the same year, Barron’s noted, “James Dines’ prediction—that the price of bullion would someday cross the Dow-Jones Industrial Average—begins to look like one of the most fantastic investment calls on record.”

Over the years, Dines continued to make controversial calls that would come to fruition. Financial Sense Wealth Management notes that Dines, after a trip to China in 1977, “predicted that ‘China would dominate the 21st Century’ after Mao died; he was the first to prominently recognize the bull market in internet stocks; he predicted a ‘uranium boom’ when the metal was at $8/lb before it rose as high as $138/lb; and a proponent of rare earth metals at their proverbial rock bottom before they skyrocketed.”

Dines authored a number of books, including, in 1972, one of the first books on technical analysis, “How The Average Investor Can Use Technical Analysis For Stock Profits.” A Barron’s Magazine reviewer wrote, “It is the most comprehensive text ever written on the entire arcane field of investment analysis. This book was deliberately designed to attract the novice and then turn him into a pro. The established pro could learn much from it.” Lex Column of the Financial Times noted, “Mr. Dines has done for Technical Analysis what Graham & Dodd has done for Fundamental Analysis.”

Other books in Dines’ oeuvre include “The Invisible Crash: What it is, Why it Happened, How to Protect Yourself Against It,” in 1975; “How Investors Can Make Money Using Mass Psychology: A Guide to Your Relationship With Money,” in 1996; “Secrets Of High States,” in 2005; and “Goldbug!,” in 2009.

Dines served in the U.S. Army in military intelligence, graduated from Oberlin College, and received a law degree from Columbia University.

Disclosures

1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She owns, or members of her immediate household or family own, securities of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.

2) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of the information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for 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. Streetwise Reports does not endorse or recommend the business, products, services, or securities of any company mentioned on Streetwise Reports.

3) From time to time, Streetwise Reports LLC and its directors, officers, employees, or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in the securities mentioned. Directors, officers, employees, or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

Mining Co.’s PFS Slated for June Release

The study is expected to reflect improved project economics, afforded by updated resources and synergies between the incorporated deposits, noted a Singular Research report.

Seabridge Gold Inc.’s (SEA:TSX; SA:NYSE.MKT) recently updated mineral resource estimates for its Mitchell and East Mitchell (previously Snowfield) deposits are expected to improve the project economics of KSM and, thus, increase its appeal to potential joint venture (JV) partners, reported Singular Research analyst Jim Marrone in an April 22nd research note.

The next step for KSM is a preliminary feasibility study (PFS) that incorporates the updated resource estimates and, for the first time, East Mitchell. The completed report is anticipated in June 2022.Marrone noted the Canadian mining company added 12,000,000 ounces (12 Moz) of gold in the Measured and Indicated categories and reduced Inferred gold resources by 0.2 Moz since its previous, December 2020, resource estimate.

Together, the two deposits are “expected to  create a single, very large, open-pit mining opportunity with improved economic projections.”

Marrone highlighted the PFS will likely reflect the synergies between Mitchell and its upper continuation, East Mitchell. Together, the two deposits are “expected to  create a single, very large, open-pit mining opportunity with improved economic projections.”

As such, the mine plan will likely include an increase in Proven and Probable gold reserves and better grades in the first production years, Marrone indicated. Underground block cave development will likely come later in the plan, thereby deferring the need to pay the high capex associated with it.

“These expected gains, along with higher metal prices, are expected to help offset the impact of inflation on materials and labor costs, in the updated PFS,” added Marrone.

The analyst also pointed out that the expected benefits to KSM by including East Mitchell in the PFS and mine plan “are further impetus of a potential JV partner.” Now is an ideal time for JVs to be effected, given the belief a bull gold market is starting and given the large producers have depleted reserves but robust balance sheets.

“The value of [KSM] will ultimately be realized via a JV with a major mineral producer,” commented Marrone. “While progress at Seabridge will remain slow and steady towards a JV, the direction continues to be positive.”

On Seabridge, Singular has a Buy rating and price target of $30 per share versus its current share price around $18.79 per share. This target reflects Singular’s belief the mining company warrants trading at an enterprise value: ounce of 30x in the intermediate term, versus its current roughly 20x, given recent operational developments and the potential for higher gold prices.

 

Disclosures:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Seabridge Gold Inc. Click here for important disclosures about sponsor fees.

3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for 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. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

Important Disclaimers for Seabridge Gold Inc., April 22nd, 2022

The following disclosures relate to relationships between Singular Research and Millennium Asset Management, LLC
(“Millennium”) and companies covered by Singular Research and referred to in research reports.
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This research report is for our clients informational purposes only. This research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. Any opinion expressed in this report is subject to change without notice and may differ or be contrary to opinions expressed by other professionals or business areas of Singular Research or Millennium. We are under no responsibility to update our research.

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Trade Of The Week: Will Gold Prices See More Pain?

By ForexTime

The past few weeks have certainly not been kind to gold.

After almost kissing the psychological $2000 level back in mid-April, bulls ran out of steam – allowing bears to drag the precious metal to prices not seen since February 2022!

Last Friday’s strong US report compounded gold’s woes as expectations intensified over the Federal Reserve maintaining an aggressive approach towards monetary policy. This report was published two days after the Fed raised interest rates by 0.50 bps points for the first time since 2000.

With the dollar climbing to its highest level in two decades and treasury yields rising amid expectations the Fed may continue hiking rates to tame inflation, gold could be in trouble.

The week ahead promises to be eventful for the precious metal thanks to key US economic data, speeches by Fed officials, and ongoing geopolitical risks.

On the technical front, the path of least resistance points south with prices wobbling above the $1855 support as of writing. Although the balance of power currently swings in favour of bears, bulls could still strike in the right conditions.

Before we cover what to expect from gold over the next few days, it is worth keeping in mind that the precious metal has dropped roughly 6% since the 18th of April when prices almost hit $2000.

Gold is down almost 2% month-to-date and has extended its longest run of weekly losses this year.

With the 10-year Treasury yield rising to its highest level since November 2018, gold may struggle to shine. It’s worth keeping in mind that the precious metal offers no yield, making it less attractive for investors to own in an environment of rising Treasury yields.

US Inflation data & Fed speeches in focus 

The major risk event for gold may be the pending US CPI report.

Given how markets remain highly sensitive to inflation fears, the report could spark explosive levels of volatility in gold. The key question is whether the report will send the precious metal tumbling or provide a lifeline. According to an economist’s poll by Bloomberg, US inflation is expected to rise 8.1% year-on-year in April compared with 8.5% in March. A figure that exceeds market expectations could send the dollar higher, enforcing downside pressures on gold prices. Expect the gold to also feel the burn if speeches from Fed officials over the next few days revive expectations around a 75 basis-point rate hike in June.

Geopolitical risks could provide cushion 

The heightened levels of uncertainty and volatility caused by geopolitical risks could direct investors towards gold’s safe embrace.

As the Russia-Ukraine conflict continues, global sentiment is likely to remain shaky with investors adopting a guarded approach toward riskier assets. Inflationary worries and increasing concerns relating to China could fuel the risk-off sentiment – lending some support to gold. Will this support be enough to counter the pressure created by an appreciating dollar, rising treasury yields, and Fed rate hike bets? Time will tell.

Gold ETFs favour bears 

According to an automated report from Bloomberg, gold ETFs cut 66,718 troy ounces of golf from their holdings last Friday, bringing this year’s net purchases to 8.42 million ounces.

The outflows could be the product of the strong US jobs report which boosted Fed rate hike bets and an appreciating dollar. A gold ETF provides investors exposure to gold without owning it physically. In this instance, outflows from ETFs are seen as bearish for the underlying asset.

Gold breakdown on the horizon?

The subtitle says it all.

Gold remains under pressure on the daily charts with prices wobbling above the $1855 support as of writing. Over the past few weeks, the precious metal has been battered by a stronger dollar, rising treasury yields, and Fed rate hike bets. Prices are bearish with a breakdown below $1855 opening a path towards $1820 and $1780. Should $1855 prove to be reliable support, prices may rebound back towards $1900 and $1920.

Zooming out on the monthly charts, prices remain in a wide range with support around $1700 and resistance at $2000. A major directional catalyst may be needed for gold to secure a monthly close above or below these key levels.


Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Why Mineral Royalties Are Powerful Financial Tools

Source: Maurice Jackson   05/06/2022

Rick Rule of Rule Investment Media and David Cole of EMX Royalty Corp. outline the history and benefits of mineral royalties for financial growth.

Financial Growth

Maurice Jackson:

Joining us for a conversation are two of the most prolific names in the natural resource space, both legends in their own right, as we are joined today with Rick Rule of Rule Investment Media and David Cole of EMX Royalty Corp. (EMX:TSX.V; EMX:NYSE.American).

I must say it’s an absolute delight to be speaking with you both today, as I hold you both in the highest regard personally and professionally, as we plan to discover why mineral royalties are powerful financial instruments. We have a lot of ground to cover today, gentlemen, so let’s get to it.

Mr. Rule, you have a proven track record of nearly 50 years as a wealth builder for you and your clients through resource stocks. What are you seeing right now that gives you the courage and conviction that resource stocks may present a once-in-a-lifetime opportunity?

Rick Rule:

First of all, you’re always not wise to contradict your host, but I’ve had a couple of these opportunities in my lifetime. So I don’t think it is a once-in-a-lifetime opportunity. But I, as you point out, have been lucky enough to see the opportunity before that’s in front of me now. And it was extremely pleasant to participate in. Natural resource bull markets are wonderful financial events if you participate in them early enough.

My own belief is that right now we are in the latter stage of the beginning of a precious metals bull market. And we’re probably in an earlier stage in a broader natural resource bull market. And the idea to participate in two real bull markets where the outcome is a probability, not a possibility, is extraordinary.

It is seldom before in my life to have the fundamental factors that are in front of me come together simultaneously that have given me the courage of my convictions with regards to the probabilities of the outcome, is what I’m talking about. And that’s what feels good to me now.

Maurice Jackson:

Given the reasons you just conveyed to us, investors and speculators alike are seeking prudent ways to preserve their capital, and if possible, sweeten the deal with the delivery of some nice returns. About a decade ago, you introduced me to a business model that offers investors both of these virtues, and I’m referring to the concept of mineral royalties. For someone new to the conversation, would you please share what are mineral royalties and why are mineral royalty companies a strategic part of your portfolio?

Rick Rule:

What I’ve learned over time is that having an economic interest in a revenue stream where my gross is my net is a very good thing. What a royalty is, is a part of the revenue stream of a mine or an oil well or something else. But you don’t bear any establishing capital risk, any sustaining capital risk, or any operating cost risk.

So to the extent, as an example, if you disagree with a management team over some of their expenses, it doesn’t matter. You just get the check. Your gross is your net. A mineral royalty too is a timeless interest pretty much. And that means that most of the surprises that may occur are pleasant surprises.

If you are lucky enough to own a royalty on a tier-one mineral discovery, my experience has always been that big discoveries yield surprises and small deposits yield surprises too. But big discoveries yield pleasant surprises, and small discoveries yield unpleasant surprises.

So a mineral royalty, which is established on a, let’s say, a 1 to 1.5 million ounce gold deposit, which feels attractive over 30 years, might end up producing two, two, and a half million dollars. The additional exploration expense that goes into establishing the lengthening of your royalty, the operating costs, the sustaining capital costs, the taxes, all that stuff doesn’t matter. Remember with a royalty, for the most part, your gross is your net, which is very pleasant.

David Cole:

With regards to mineral royalties, what also comes to mind is the concept of optionality. Mineral royalties are phenomenal financial instruments, particularly in an inflationary environment, for the very reasons that you laid out and that discovery optionality and advancement of engineering techniques, all of which are multiplicative, make royalties fantastic instruments to hold.

Maurice Jackson:

And David, if you would expand on that word optionality, that may be a new term for readers.

David Cole:

Sure. So that’s the chance that things might go super well or super bad. And a couple of guys, Black Scholes got a Nobel prize for defining a formula, how to calculate what optionality is worth and options trade in the marketplace. And with respect to royalties, what we’re talking about is the chance that things can go well.

And as Rick pointed out, the cost that goes into the exploration and discovery work, development work, production work et cetera, et cetera, is born by the counterparty, not by the royalty holders. So we’re exposed to all that upside optionality. And that’s one of the things that makes a portfolio of royalty so powerful.

Maurice Jackson:

Mr. Cole, you’re the CEO of the royalty generator and I’m referring to EMX Royalty. Please introduce us to the value proposition that EMX Royalty presents for investors along with your current share price.

David Cole:

Well, I’m more than happy to talk about that. And first of all, it all revolves around the concept that royalties are fantastic instruments, and different royalty companies accumulate royalties in different ways. There are royalty financings to advance mine projects. There’s purchasing of existing royalties. And then there’s royalty generation.

We love to generate royalties through the prospect generation business model, acquiring prospected mineral rights around the world, adding value by doing good geology and coalescing data, and selling that to an industry, hungry for discovery opportunities. And as Rick said, I’ve never seen an industry more hungry for discovery opportunities than we have today across the periodic table.

And we love doing that. We love selling them on for cash shares and of course, royalties. We also buy royalties to augment that portfolio, create that portfolio effect, and to further advance the optionality.

Maurice Jackson:

And you do that organically. That’s what I find very intriguing about your business model.

David Cole:

That is our defining factor. That’s our hedgehog, and we’ve sold by example, Maurice, 83 projects in the last four years. We have a track record of just selling projects right and left. And when I’m talking about selling projects, what I mean is we stake mining claims, or we acquire mining licenses from governments, add value, and then move them onto a counterparty, junior companies, and major companies.

And in the junior company deals, it’s commonly cash payments and share payments. We’ve done exceedingly well with the share payments over our nearly 20-year history and always a production royalty at the end. With major companies, which we also love to do business with, we’ve done six deals with Rio Tinto, the largest mining company in the world in the last four years, as one example. And there, it’s more focused on the inground expenditures, cash payments, and of course the royalty at the back end.

And we’re just delighted to have the capital across our portfolio being expended by our counterparties, but also their expertise employed across that portfolio, which is enhancing this concept of discovery optionality, which is where the big win comes from. Of course, there’s commodity price optionality as well, which is a hot topic in an inflationary environment.

Maurice Jackson:

Now, before we delve into specific projects, multi-pronged question. Mr. Cole, how many projects are in the EMX property bank, and how many of those projects are now in the harvest mode of generating royalties?

David Cole:

So when you use the word bank, that’s probably a good word to use. So we have approximately 300 mineral property positions globally, in more than a dozen countries. We’ve always taken a broad approach. We’ve cast a broad net to find value, and that’s a very strong base of a pyramid.

And then EMX does have half a dozen producing assets or assets that are just about to become produced at the top of the pyramid. And we’re at the transitionary point where we’re going from a junior company that’s been building a portfolio of mineral property positions and royalties to one that has strong cash flow. And we’re right at that tipping point this year.

Maurice Jackson:

And we’re going to highlight five of those here in just a minute. Rick, in the resource space, precious metals seemed to dominate the conversation. But I’d like to get your thought on base metals and in particular, the outlook for copper.

Rick Rule:

I think the two easiest things to think about are that the driver for copper is the ascent of humankind to the extent that there are almost eight billion people on earth and more people every day. And to the extent that humankind has a responsibility, I believe, to take the poorest half of humanity and increase their wellbeing, that automatically comes to copper.

Many readers may not know that 1.2 billion people on earth have no access to electricity. And another 2 billion people on earth have access to intermittent or unaffordable electricity. We’ve done a great job as humankind over the last 30 years in increasing the material for a lot of the poorest of the poor. But we have a lot more to do, and an important transition from a subsistence lifestyle to a more fulfilling lifestyle, at least part of the material translation is electricity, and electricity is copper.

At the same time that we need to continue to increase access to electricity for the poorest half of humanity, the other half of humanity wants to increase their electrical consumption to electric vehicles, power, gadgets, all those types of things. All require copper. While this happens, in other words, while demand for copper is inexorably higher and where the rate of increase is probably increasing, we have under-invested as an industry in copper exploration production for 30 or 35 years.

The truth is most of the world’s great copper mines are a bit like me. They’re old, they’re past their prime. Bingham Canyon has been producing for 120 years. Chuquicamata has been producing for 105 years. Grasberg has been producing for my whole lifetime, which is to say 69 years. You don’t stand at the top of a pit, throw in fertilizer and water and have it grow more copper. That’s not the way it works.

So five years from now, what you see is that these old behemoths become longer and longer and longer of tooth. While as a consequence of three decades of underinvestment and exploration production, there’s nothing to take their place. And if there is something to take their place, increasingly, there are political and economic roadblocks put in front of them. There’s a wonderful copper deposit here in the United States called Resolution that the world’s been talking about for 20 years. And it’s probably 10 years away from permitting and production, not in time to make any difference in a supply outlook.

So, to the extent that one is able to make a copper discovery, the appetite among the major copper producers to buy these projects, to replace the old behemoths, which are long of tooth. And the incredible interest that governments and consumers have in increasing the material wellbeing of their citizens, which is a fancy way of saying increasing demand for copper, means that an intelligently constructed copper exploration royalty development program, I say intelligently crafted. Part of the problem in the last 30 years has been that not only haven’t we invested enough money, we’ve invested most of the money that we’ve invested stupidly.

So we’ve been both unwitting and unscrupulous in the mining business with regards to copper. But the result of that is that successful efforts in the copper business pay absolutely tremendous rewards and will continue to, I think. Most people in the west when they think about copper, think about Tesla or something like that. And that’s fine. That’s wonderful.

I think there is going to be an increasing demand for electrification for well-to-do people. But the real opportunity is increasing the material living standards for the bottom half of humanity. We have an obligation to do it. We’ve done a good job of it over the last three decades, it’s going to continue. And the driver is going to be copper.

David Cole:

I’ll point out if you don’t mind that Dr. Richard Schodde is our consulting and advisor on the mineral economic side out of Australia, MinEx Consulting. He believes that conservatively, the planet will consume as much copper in the forthcoming 20 to 25 years as has been consumed by humanity throughout all the history cumulatively.

And when you think about that with respect to the under-capitalized situation in the copper industry, it’s a very, very dynamic situation. It’s very difficult not to be extraordinarily bullish on copper. And Rick mentioned that Bingham Canyon Mine, one of the largest open-pit mines in the world is where open-pit mining was first invented. The globe currently consumes the entire endowment of that deposit annually. So it’s an interesting situation for the copper business.

Maurice Jackson:

Sticking with copper, Mr. Cole, let’s visit the EMX property banking, and get acquainted with some of your royalties beginning in Chile at the Caserones Mine where EMX recently increased its position there. Tell us about the royalty and why the increase.

David Cole:

So well, first of all, as said, we’re very bullish copper and have always believed in having a diversified portfolio and copper has been a key component of that. Scott Close, who heads our investor relations team, likes to call Caserones, “Casherones.” This is a very long live asset. Officially, it’s a 17-year-mine life, but as geologists, we’ve looked at it. We see 25-plus years of production here just from the existing deposit as it is open-ended at depth, and copper cutoff grades have a long history of decreasing over time because of these various factors that we’re pointing out.

So these are very long-lived assets. It’s like having a 30-year bond that pays in pounds of copper. And we do see a little bit of upside with respect to production coming from that, but we’re very bullish copper prices. And we did have the opportunity to buy at a fair valuation, a 0.4% royalty on that deposit. And then the opportunity came along for us to augment that as additional family members who owned this royalty wanted to sell and liquidate.

“We have under-invested as an industry in copper exploration production for 30 or 35 years.” ~ Rick Rule

David Cole:

And so we had the chance to increase that, and we did it as that next bite was larger than we could afford by ourselves. We brought in Franco-Nevada as a partner, and we have a huge amount of respect for Franco-Nevada. They’re the leader in the mining royalty space. And if you would’ve asked me who’s the best company to be a strategic investor in EMX, I would’ve said Franco-Nevada. Very happy to get them across the line and become a shareholder in EMX, part, and parcel to us taking that further bite and increasing our exposure to Caserones. And that’s not our only copper exposure in the world. Of course, we have a royalty on the Timok Project, which is one of the largest ongoing copper-gold discoveries on the planet.

Maurice Jackson:

Why would Franco Nevada the biggest, most successful company in the mineral royalty sector want shares in EMX?

David Cole:

Yeah, everybody asks me this question and Maurice, please feel free to ask them. And the answer to the question, I know the answer. And it comes back to what we were talking about earlier, and that’s our hedgehog and that’s our organic growth strategy, so our royalty generation work. That’s what separates us from the crowd. And that’s why we’re the only junior or mid-tier royalty company that Franco Nevada has ever bought stock in and hold stock in currently.

“I think there is going to be an increasing demand for electrification for well-to-do people. But the real opportunity is increasing the material living standards for the bottom half of humanity. We have an obligation to do it. We’ve done a good job of it over the last three decades, it’s going to continue. And the driver is going to be copper.” ~ Rick Rule

David Cole:

And we’re delighted to have them on board. They’ve been giving us accolades for the royalty generation’s work for many years. We know these folks well from our history. I used to work with some of them at Newmont Mining Corporation, and they would come up to me. David Harquail once said, “Dave, we believe that your royalty generation work is topnotch, and hats off to you for doing that.”

And ultimately, it was that that carried him across the line and got them to invest in the company. But ironically, it was associated with a royalty purchase. But Franco Nevada recognized the power and the integration of buying royalties as well as growing them organically to build your portfolio.

Maurice Jackson:

All right, I’ve thrown you some softballs here. Here’s a tough one. EMX has recently deployed a substantial amount of capital lately acquiring cash flowing and/or soon-to-be cash flowing royalties and taking on debt to do so. Does this really make sense in the long-term health of the company? I mean, is this really in the best interest of the shareholders?

David Cole:

Absolutely, absolutely. So, our calculated risk-adjusted internal rate of return on the monies that we’ve invested into purchasing these portfolios of royalties vastly exceeds the cost of that capital. And speaking of the cost of capital, one of the important goals here is to populate the top of the pyramid, increasing our cash flow, and enabling us to move across that border from a junior company to a mid-tier company with strong cash flows, which will significantly reduce our cost of capital as we are able to form a relationship with major senior banks. And we’re in those discussions now.

So this is all part of our strategy to prudently grow our portfolio. And particularly in an inflationary environment, paying a 7% coupon rate to borrow some money to buy things that have double-digit internal rates of return is smart business.

Maurice Jackson:

Rick, as a shareholder, how significant is it when you see Franco-Nevada paying a premium to own a 3.5% stake in EMX?

Rick Rule:

I like good partners. I’ve been a Franco-Nevada shareholder on and off because of course they disappeared for a while since 1982, and I hold them in very high regard. Dave has done a good job, I think, of attracting other sophisticated shareholders in EMX.

But certainly, I’m attracted to EMX as a shareholder. What price they paid is really a matter of their own concern, the fact that they paid a premium. I think if you look at the nature of the royalty transaction, the premium was explained.

“That’s what separates us from the crowd. And that’s why we’re the only junior or mid-tier royalty company that Franco Nevada has ever bought stock in and hold stock in currently.” ~ David Cole

Rick Rule:

But the truth is that in Franco-Nevada, EMX has a partner that should they have an opportunity that is time-sensitive and attractive, they have a partner that could stroke a $250 million check or a $350 million check overnight without blinking an eye.

And a partner that has the sophistication and the courage to be able to do that, that’s what’s important.

Maurice Jackson:

Rick, we just highlighted copper. What is your outlook on the opportunity before us in nickel?

Rick Rule:

Well, nickel, you could also say is also an electric metal. It’s in tighter supply than copper. Most of the marginal nickel production that we’ve seen in the world in the last 30 years is lateritic nickel, which is nickel that occurs in tropical environments, often in Indonesia and the Philippines. And the production of lateritic nickel is extremely environmentally degrading and also extremely energy-intensive. So you need to break down nickel between lateritic nickel and primary sulfide deposits.

Primary nickel sulfide deposits are very rare and extraordinarily valuable. A primary nickel mine, even at today’s nickel, makes an awful lot of money. In the very near term, the nickel price looks inexorably higher because the world’s most important nickel producer is Russia. The political difficulties between Russia and the rest of the world, including the fact that because Russia has been kicked out of the SWIFT banking systems means that even if they sell nickel, they can’t get paid for it in any currency that they can spend.

But looking beyond that, the uses of nickel in batteries, in stainless steel, in metallurgical applications, nickel is tied very, very directly like copper to the ascent of humankind. But primary nickel deposits are even rarer than high-quality primary copper deposits.

Maurice Jackson:

David, about two weeks ago, EMX announced that it had made a strategic investment in privately held Premium Nickel Resources, which holds a trio of defunct nickel, copper and cobalt mines in Botswana of all places. Now, this seems to be a big deviation from the EMX business model. What’s going on there?

David Cole:

Well, it’s actually a key part of our business model to make strategic investments. And so it’s quite synergistic with our royalty generation work. We’ve got smart economic challenges around the world, identifying properties to acquire. And occasionally, they come across an opportunity to invest in a company where we cannot, not buy the stock.

And you may recall the investment that we had in Russia of all places, that we liquidated at a substantial profit. That was a strategic investment in an ongoing copper and gold development story. We did exceedingly well on and were happy to have our money out of Russia back in 2018 and have not gone back, I’ll point out.

But that’s an example of us making strategic investments. Our track record over a nearly 20-year pathway here has been quite good. We’ve netted out over 50 million USD from our strategic investments. And we’ve had a couple of bumps on the chin. We’re comfortable with taking risks and the wins have far outweighed the losses.

This is our next major strategic investment, absolutely delighted for the very reasons that Rick pointed out to have that nickel exposure. And we think that the premium nickel asset in Botswana is going to be in the top five nickel sulfide systems on the planet. We’re very bullish about that opportunity.

Maurice Jackson:

Multimillion-dollar question here, can you provide us with an update on the situation with Zijin Mining in Serbia at the giant Timok copper-gold mine?

 

David Cole:

Everybody wants to know the answer to that. Of course, I can selectively disclose information, but I can say that we are in negotiations with Zijin. They’ve been quite professional and communicative to work with, and I’m confident that we’ll come to a mutual agreement.

 

Maurice Jackson:

All right. The Balya silver-lead-zinc mine in Turkey, it’s been ramping up for a while now. What’s the latest there?

David Cole:

So the exploration results have been phenomenal. The deposit continues to grow. They’ve decided that they will build a second mill, which we’re delighted that will substantially enhance our cash flow long-term. And they are entering into commercial production now. I expect the first royalty check to come in within the next couple of months, actually. And I do expect production to ramp up from multiple underground headings over the course of the next five years. Five years from now, it’s going to be a substantial annual royalty for us.

Maurice Jackson:

Can you give us an update on the Gediktepe gold oxide and polymetallic mine? And when will this royalty begin cash flowing?

David Cole:

That one’s also just a couple of months away, Maurice. And so that’s an interesting royalty in that the royalty on the upper oxide zone, which is gold and silver enriched, is 10%. That was part of the sales price when the predecessor to SSR sold that on to the current operator, Lidya, and that 10% kicks in after 10,000 ounces have been poured. And we’re right at 4,000 ounces right now. They are in production, they’re placing ore on the pad. They did have a tough winter season, so that slowed them down a little bit, but they’re only a few weeks behind.

And we’re seeing greater production as they head into summer. As soon as they cross the 10,000th ounce, which will be just a few months out, probably June or July, then we’ll start to receive royalty payments on that, and that is a 10% royalty. And that’s on the upper oxide zone, which we believe will have about a five-year mine life. And then it goes into the polymetallic sulfide zone, which is dominated by zinc and copper, two commodities we love. And that’s a 2% royalty in perpetuity on that zone.

So that’s another key asset within the portfolio that starts to cash flow in a few months.

Maurice Jackson:

Now that 10% is just remarkable. With all the new royalty cash flow and pending royalties poised to begin paying, what will the cash flow look like for EMX for the remainder of 2022?

David Cole:

Yep. So we will be coming out with guidance in two quarters, and we’re diligently working on that. And our bankers are talking to us about that. And that’s part of our shelf filing that we’re also in the process of, and this is all part of our maturing from a junior company that’s been building a portfolio to a mid-tier company with strong cash flows. And so, as soon as we provide that guidance, Maurice, you’ll be one of the first to know.

Maurice Jackson:

Right, looking forward to it. Leaving the property bank, Rick, I know you have very stringent, selective criteria for companies that make the grade, if you will, before you will commit your capital. Now, we just heard Mr. Cole referenced that EMX has five attractive royalties and more on the way along with an attractive share price, in my opinion.

That all sounds compelling, but you taught me years ago that the competitive advantage for a shareholder is found in the board of directors, management, and technical team. Why are the people equally, if not more, important to you as a shareholder than the given project, and specifically the team that comprises EMX royalty?

Rick Rule:

Bad people can screw up good rocks. If the wrong team controls the cash flow, they get it and the shareholders don’t, simple as that. The second thing, of course, is that luck favors the trained observer. And you need luck in exploration. Dave has done a great job over 20 years. He’s a geologist himself, but I would say his true talent is hiring and motivating, and keeping very good geologists.

So, what has always attracted me to EMX has been the technical IQ per dollar of market cap. The fact that although the team has done a decent job of buying royalties, what I think is the real secret sauce is the fact that they have generated royalties by generating 300 exploration concepts that other people have bought into. It can take a decade for prospect generation to work for you. But prospect generation, in my own portfolio, has been by far the most capital-efficient exploration speculation that I have done. What the EMX team did is they figured out a better payment mechanism.

For most of my life, I invested in teams that had great intellectual capital that generated projects, and they ended up getting a carried interest in the project. The problem with that is that they sometimes didn’t have the ability to carry the load as the project went into production. And well, they had a lot of exploration expertise, they maybe didn’t have construction or development expertise.

What David did is he really simplified the way they got paid. Rather than get paid in the ability to own on a subsidized basis, a minority interested in operation that they may not know how to operate, he developed a circumstance where they got paid a carried interest by way of a royalty, which is ultimately a safer and probably a more valuable instrument.

The same intellectual capital that he has hired and deploys in the exploration business can be used to both sources and evaluate either merchant banking opportunities, which is to say those companies that he invests in strategically or royalties. So I think it’s important that the exploration IQ that has been assembled within EMX turns out to be a strategic advantage in moving their asset base forward.

Maurice Jackson:

Now, Rick, we’ve heard you convey the merits of owning mineral royalties, and we’ve heard the virtues that EMX royalty presents to the market. Before we close, what did I forget to ask?

Rick Rule:

Well, I think, the important question to ask any company that’s beginning to mature is how are the capital allocation decisions made. What would be as, an example, the capital cost assumptions around the debt that they took on, and what sort of pro forma delta would occur between the cost of capital to return on capital employed? How strategically will the decision be made internally as to whether to emphasize the merchant banking business, the royalty generation business, or the royalty acquisition business?

And then finally, I think, the royalty acquisition business is extremely competitive. I would ask Dave to describe the competitive advantage that he may feel against the 30-some-odd other players in the mineral royalty space.

Maurice Jackson:

All right, Mr. Cole. So, you know what’s up for our next interview.

David Cole:

It boils down to our alpha, which is on the technical side. And we believe that astute business decisions are rooted in solid technical understanding. And we’ve always had a strong technical team here at EMX to drive those business decisions so that we can have that astute allocation of capital.

Buy the depths, yeah. As Rick likes to say, you want to use the cycles to your advantage rather than be used by the cycles.

Maurice Jackson:

Mr. Cole, for someone that wants to learn more about EMX royalty, please share the website address.

David Cole:

www.emxroyalty.com, Maurice.

Maurice Jackson:

Gentlemen, it’s been a pleasure speaking with you today. Wishing you both the absolute best.

Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.

 

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Mining Co. Poised to Win Legal Case Over Zinc Project

The final ruling on the Aznalcollar project, from the Spanish Criminal Court, is expected this year, noted a Clarus Securities report.

Emerita Resources Corp. (EMO:TSX.V; EMOTF:OTCMKTS; LLJ:FSE) has prevailed at all levels of Spain’s Criminal Court regarding its legal action concerning the Aznalcollar project, “a trend we firmly believe will continue,” noted Clarus Securities analyst Varun Arora in a May 3rd research report.

“A favorable resolution on Aznalcollar will drive a step-change in the [company’s] valuation,” wrote Arora.

The analyst explained that the legal dispute began in March 2015, when Emerita appealed the granting of the Aznalcollar project tender to Minorbis-Grupo Mexico. COVID-19 and several judges taking early retirement stalled the progress of the case, and a final decision remains pending.

Should this be the outcome, as is expected, the Canadian company will gain in Aznalcollar a significantly derisked project.

However, the proceedings are in the last phase, oral hearings, a starting date for which is expected soon, noted Arora. A judge has been assigned for them, a sign the process is underway. Clarus anticipates the case will finally get resolved this year.

If the judge finds any of the 16 defendants guilty, the original Aznalcollar tender will be revoked and granted to the subsequent bidder, Emerita.

Should this be the outcome, as is expected, the Canadian company will gain in Aznalcollar a significantly derisked project, including a past-producing mine, which could be advanced quickly to underground production, in the next five years, of about 12.6% zinc equivalent, Arora highlighted.

“We expect the two assets to produce at a combined rate of 550,000,000–600,000,000 million ounces of zinc equivalent per year at the lowest quartile costs,” Arora wrote and added that this would yield at least US$300 million in free cash flow annually.

Arora indicated that between now and the final court decision, investors could expect results from Emerita’s Roman-era project, where drilling began last month with four rigs. They also can expect exploration updates from the company’s El Cura and Nuevo Tintillo projects.

“Continued drilling success will drive continued rerating,” wrote Arora.

Clarus has a Speculative Buy rating and a CA$5 per share target price on Emerita, the current share price of which is around CA$1.81.

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Disclosures for Clarus Securities Inc., Emerita Resources Corp., May 3, 2022

Within the last 24 months, Clarus Securities Inc. has managed or co-managed a public offering of securities of this [Emerita Resource Corp.] company. Within the last 24 months, Clarus Securities Inc. has received compensation for investment banking services with respect to the securities of this company.

General Disclosures: The information and opinions in this report were prepared by Clarus Securities Inc. (“Clarus Securities”). Clarus Securities is a wholly-owned subsidiary of Clarus Securities Holdings Ltd. and is an affiliate of such. The reader should assume that Clarus Securities or its affiliate may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein.

The opinions, estimates, and projections contained in this report are those of Clarus Securities as of the date of this report and are subject to change without notice. Clarus Securities endeavors to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, Clarus Securities makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein, and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to Clarus Securities or its affiliate that is not reflected in this report. This report is not to be construed as an offer or solicitation to buy or sell any security. No part of this report may be reproduced or redistributed without the written consent of Clarus Securities.

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Analyst’s Certification: Each Clarus Securities research analyst whose name appears on the front page of this research report hereby certifies that (i) the recommendations and opinions expressed in the research report accurately reflect the research analyst’s personal views about the Company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst’s compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.

 

3 High Quality Silver Miners To Consider

By Ino.com

– While the Gold Miners Index (GDX) has been a sanctuary in the turbulent market environment, the Silver Miners Index (SIL) has not fared as well. This is evidenced by its 2000 basis point underperformance vs. the GDX, partially explained by the weaker margin profile for silver producers. The good news is that this underperformance is setting up a buying opportunity, with a few names trading at more reasonable valuations.

The Silver Miners Index is made up of several silver miners, but like the GDX, 70% of the miners in the index have short mine lives based on reserves and slim margins. This makes owning the SIL ETF difficult, given that companies within the index need to acquire other companies to replace reserves vs. accomplishing it organically, which often leads to share dilution. One of the ways to reduce exposure to the sector laggards is by owning the highest-quality names, and in this update, we’ll look at three names that stand out that do make for worthy investments: Hecla Mining (HL), SilverCrest Metals (SILV), and Wheaton Precious Metals (WPM).

The first name on the list is Hecla Mining (HL), a silver producer with operations in Idaho, Alaska, and Quebec (Canada). The company also has organic growth potential in Montana and Nevada, and it expects to produce over 43MM ounces of silver this year from its three operating assets. While there are a few producers with larger production profiles than Hecla, its key differentiator is that it’s focused on high-grade assets in safe jurisdictions, as the chart below displays.

Silver Miners

Source: Company Presentation
 

In addition, Hecla has some of the highest margins among its peer group, expecting to produce silver at less than $12.00/oz, with the potential to beat this cost guidance due to higher zinc prices which will help with by-product credits. Given this mix of high-grade reserves, steady reserve replacement at its assets, and safe jurisdictions, it is one of the sector’s better buy-the-dip candidates. It would become very interesting below $4.80 per share, near its multi-year support level.

Silver- Hecla Mining Chart

Source: TC2000.com
 

The second name on the list is Wheaton Precious Metals (WPM), a royalty/streaming company. For those unfamiliar, royalty/streaming companies provide an upfront payment to gold/silver producers and or gold/silver developers to help finance their project’s initial construction or future expansions. In exchange, royalty/streaming companies receive a portion of production over the asset’s life.

In WPM’s case, the company’s business model is focused on streams, which entitle the company to purchase a portion of metals over the mine life, but it must make a small payment for each ounce delivered. In the example of its recent stream with Sabina Gold & Silver (SGSVF), it paid $125MM to receive 4.15% of gold production from the Goose Mine for the first 130,000 ounces for 18% of the spot gold price ($324/oz at $1,850/oz gold).

In addition to the stream on the Goose Mine in Nunavut, which is under construction, Wheaton has made several other bets over the past year, including the Curipamba Copper-Gold Project and the Marathon Platinum Group Metals Project. These acquisitions have improved the company’s 10-year outlook to 910,000 gold-equivalent ounces [GEOs] per annum, a massive improvement from its previous guidance of 830,000 GEOs and FY2022 guidance of ~730,000 GEOs.

Silver - Wheaton Precious Metals Chart

Source: FASTGraphs.com
 

Since the end of the 2015 secular bear market, WPM has traded at ~35x earnings and currently trades at ~30x earnings at a share price of $44.00. However, with gold and silver in the upper portion of their 8-year ranges, I would argue that WPM could easily command an earnings multiple of 38, translating to a fair value of $55.10 based on FY2022 earnings estimates ($1.45). So, if the company were to trade 25% below this level ($41.30), where investors have an adequate margin of safety, this would present a buying opportunity.

The final name on the list is SilverCrest Metals (SILV), a silver company ready to graduate to producer status at its Las Chispas Project in Mexico. The company has a strong track record of success, having been acquired just seven years earlier for its Santa Elena Mine in Sonora State, and to date, it’s done an excellent job at Las Chispas. This includes uncovering one of the highest-grade projects globally with an average grade that’s just shy of 1 kilogram per tonne silver equivalent, with higher-grade pockets of the resource that come in above 1,300 grams per tonne silver equivalent.

As it stands, SilverCrest has a 130MM ounce resource base, and its high grades contribute to the company being on track to have some of the lowest costs sector-wide at ~$8.00/oz or less. It’s worth noting that this resource does not include its El Picacho Project, which could potentially boost the mine life and production profile down the road (material could be trucked to Las Chispas). This 130MM ounce resource is based on only one-third of the known veins on the Las Chispas Property.

Silver - SilverCrest Metals

Source: Company Presentation
 

Typically, we see an upside re-rating when silver developers graduate to producer status, and I would be shocked if this wasn’t the case for SilverCrest. In fact, I would not be surprised to see the stock head above $11.00 per share once the asset ramps up to full production by Q1 2022, given that it should receive a premium valuation for being one of the highest-margin producers in the sector. Hence, I see this pullback below $7.50 as a low-risk area to start an initial position in the stock.

While the silver sector can be a minefield due to the large number of low-quality producers that cannot execute successfully, WPM, SILV, and HL are exceptions. Therefore, I believe these are three names worth keeping at the top of one’s watchlist for investors looking for exposure to the space.

Taylor Dart
INO.com Contributor

Disclosure: This contributor held a long positions in SILV at the time this blog post was published. This article is the opinion of the contributor themselves. Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information in this writing. Given the volatility in the precious metals sector, position sizing is critical, so when buying small-cap precious metals stocks, position sizes should be limited to 5% or less of one’s portfolio.

By Ino.com – See our Trader Blog, INO TV Free & Market Analysis Alerts

Source: 3 High Quality Silver Miners To Consider