Precious metals investors are a conflicted bunch right now. Most are happy with the recent action, and still expect rising gold and silver to send high-quality mining stocks to the moon. But most were also caught a bit off-guard by the miners’ recent spike. For every investor who loaded up on, say, First Majestic Silver at $2 in January and rode it to $20 in August, dozens more watched from the sidelines. Few today own all they’d like of their favorite miners.
So a correction, while lowering the value of current holdings, would be a welcome chance to load up on the shares that recently got away. And based on current trends (metals down a bit, miners down considerably more), a correction might be in progress as this is written.
Which makes this a good time to kick off a series highlighting the top picks of trustworthy precious metals analysts. First up is Jay Taylor, whose J Taylor’s Gold, Energy & Tech Stocks newsletter has been uncovering winners in this sector for 35 years. Three current favorites, in Jay’s words:
Golden Predator (Toronto- GPY / USOTC-NTGSF)
I have been talking about this company’s very exciting 3 Aces near-surface high-grade prospects in the Yukon, but investors should not overlook the bird in the hand, so to speak. Golden Predator has an advanced-stage open-pit heap leach project known as Brewery Creek on which a preliminary economic assessment (PEA) was completed in Q4 2014. Now with an improving gold market, management is moving this project forward once again and this past week it announced a 1,600-meter drill program with its focus on the Golden, Lucky, and Kokanee pits, which were previously mined in the 1990s, but where historical data indicate oxide portions of those pits were not completely mined out.
The PEA that was completed in 2014 revealed a 5% NPV of US$23.3 million with gold trading at $1,250. Management feels a revised economic study will show better economics, even if based on $1,250, given reduced costs for fuel, labor, and machinery. Of course the price of gold has risen by about $100 since the study’s assumed $1,250 price, so if we are truly in a new leg up in the gold bull market of a lifetime, as I believe, the economics could improve dramatically further.
While I believe the recent rise in the company’s share price has been driven by 3 Aces excitement, I view Brewery Creek as a bread-and-butter asset that by itself justifies the current share price. But make no mistake, the excitement and major upside for this company is its 3-Aces. UPDATE: The stock gained another 10+% on August 15 when GPY reported the discovery of a new vein containing visible gold. There are few projects I am more excited about than the 3-Aces.
Auryn Resources (AUG / GGTCF)
Auryn was a top five pick of mine even before it recently acquired two projects in Peru and another in B.C, all of which have the potential in my view to become “company-making projects.” And this past week Auryn announced still another possible property acquisition in Peru when it signed an option to acquire the Sombrero Property from Alturas Minerals Corp. on July 13. If it exercises its option, it will have three high quality targets in Peru, one in B.C. and of course its Nunuvut project which alone would cause me to own this stock.
One thing I know about Auryn is that the company is not picking up any projects that do not have world-class size potential to them. Were the Nunavut [Canada] property the only project in its portfolio, this would have remained in my top five. But now with the addition of three or four more, which means we can look forward to year-round exploration results, I think Auryn has to be one of my very top favorites
SilverCrest Metals (SIL /SVCMF)
I officially added this spinoff company to my list on December 11 2015, and would encourage you to review that report to refresh your memory about this story. The company has several projects, but the flagship property and the one that I think will set this stock on fire is the Las Chispas Gold Mine in Sonora, Mexico.
The company’s tried and proven management team was was responsible for the founding of SilverCrest Mines, recently spun out to First Majestic Silver. One of the main sticking points in the merger was the spinout company’s desire to retain Las Chispas. I noted then that it’s a good thing they prevailed because Las Chispas has enormous upside.
Keep in mind that though these shares have risen dramatically, there are only 40.3 million shares outstanding, giving the company a rather modest market cap of US$90 million. That isn’t all that high if this company is in the early days of a major discovery. It is my expectation that there will be many more high-grade assays flowing our way through this summer and into the fall from the existing three veins that have been exploited in the past, not to mention prospects from the numerous veins that have never yet had a drill hole put into them. And given the fact that it is predominantly a silver play with strong gold credits, if you like silver this is one you should strongly consider owning.
It’s important to note that exploration companies are by their nature lottery tickets. Most of them disappear without at trace, but the successful minority can be ten-baggers or better. So as a group they are generally not a buy-and-hold proposition. Investors who understand them pay close attention and will bail quickly when expectations aren’t met. And they don’t hesitate to take some money off the table in good times like the present. As Jay puts it:
From the lessons of the past, my best advice is to take some profits to cover your costs if you can and as long as you see significant upside, continue to hold for more. Optimistic as I am about the stocks on my list, I know from experience it’s prudent to keep greed in check!