Results Season

Vein Gold in Core

It is a cliché that junior exploration companies live and die by the drill. However, it is not until the drill core has been assayed and the results of those assays press released that investors can really gauge how well a company has done.

For companies exploring in Canada summer is usually, but not always, peak drilling season. The fact is that a company can drill in winter as well and in some areas, especially swamps and lakes, winter drilling is really the only alternative.

With most of the drilling occurring between late April and early November, drill core begins to come into the labs in early summer and continues to be assayed right through the fall. Which means that there is usually a flow of press releases beginning in September and going right through until the Christmas doldrums.

Market reaction to drill results can be counter-intuitive. A set of solid results may be taken as a sell signal in some market conditions. In fact, the tone and tenor of the market, as much as grams per ton of gold tends to determine any particular results' reception.

Gold $3000 | Silver $60 is about how to make significant money in a precious metals rally. In such a rally, particularly in the later stages of the rally, decent drill results can trigger huge rises in share price. Not because they are, in themselves, brilliant. Rather, because they draw the attention of an already excited market to a particular stock.

In my view, we are just entering the first leg of a multi-year precious metals rally similar to the 2008/2011 rally. There are going to be ups and downs while gold works its way back to its 2011 peak of $1889, fully $350 over its current price. As that first leg is built, companies will be releasing this years drilling results into a firming but not yet exuberant market. Good results will move stock but not by nearly as much as they will move them next year when the precious metals rally is in full spate.

Watching the results come out in the next few weeks will give early investors a good look at which Canadian juniors are proving to have prospective ground. Looking at White Gold's (V.WGO) anticipated series of results from its huge Yukon holding and keeping an eye on Aben (V.ABN) Resources Golden Triangle results from northern British Columbia will position an early investor to be ready when solid, hard, news comes.

Canadian results are robustly seasonal, but there are also Canadian listed companies which are drilling in less climatically challenging environments and which can produce drill results year-round. Goldplay Exploration (V.GPLY) has established a 43-101 compliant silver resource on its Mexican property. But it is also finding a good deal of gold and releasing news very regularly. Right now Goldplay is under the radar but it is exactly the sort of story which could explode in a major metals rally.

Each of these companies is trading well below its 2019 high. The fact that we are in the early stages of a precious metals rally actually gives investors a bit of time to accumulate positions at relatively low prices. Once the rally takes root shares in junior explorers will begin to attract speculative investment from people who don't want to miss out. At that point, a single good drill hole can double or triple a stocks' value literally overnight.

Perversity in the Junior Market

I have been following Victoria Gold (V.VIT) for at least eight years. I have visited their Yukon site twice and spent a fair bit of time talking to CEO John McConnell. I know the company and its prospects well.

On September 17 Victoria Gold poured its first gold a month ahead of schedule and right on budget.

First Gold Pour at Victoria Gold's Eagle Mine Yukon

On September 12 Victoria Gold closed at $0.64. You would think that with the completion of the mine and the first gold pour the share price would go up. You would be wrong. On the 17th it traded at $0.61, on the 18th it closed at $0.56 and today it is trading at $0.52.

What happened?

I have no idea and I very much doubt anyone has. It could have been a single large investor taking profits on shares bought years ago in 2014 for $0.09 or it might have been people who were tired of holding shares they bought for $0.74 in 2017. Plus the price of gold is off a bit. And, obviously, the market's appetite for VIT shares is temporarily sated.

However, I suspect the biggest reason for what I am pretty sure will be a short term drop in the share price is that when it poured its first gold, Victoria went from being an exploration development company to an operating gold miner. What that does is change the way in which a company is evaluated and it places limits on the company's "blue sky" potential.

In my book, Gold $3000 | Silver $60 I talk about how different sorts of companies will respond in the coming precious metals rally. There is no doubt in my mind that V.VIT will do brilliantly and I suspect it will trade on up to $1.50. (Although it may consolidate its outstanding shares and/or be taken private by its dominant shareholder Orion Mine Finance.) However, as a producer, while the shares will be rerated they will be closely tied to the price of gold and the performance of the mine.

If the gold price doubles the chances are excellent that VIT will, at least, double right along with it. But the 10X or 25X returns in a serious gold rally will be coming from companies which are pure explorers.

Hence the seeming perversity of the junior market. The wild, and profitable, gyrations of junior explorers reflect the far greater uncertainty as to their project's value. A solid, producing, proven mine like VIT's has effectively eliminated that uncertainty and with it the speculative frenzy junior explorers can attract towards the last third of a major precious metals rally.

Right now, in my view, especially with the sell-off, Victoria is a buying opportunity. Tripling your money is never a bad thing.

But if the rally gets going, it might be a good idea to look down the road to McConnell's wife, Tara Christie's, early-stage exploration company, Banyan Gold ( V.BYN). Same part of the Yukon, just down the road from the Victoria Gold mine and same VP Exploration - Paul Gray. But Banyan is trading at $0.055. In a major precious metals rally, one good drill hole and Banyan could easily hit $1.00. And, at the moment, there is virtually no downside risk.

Work Done - Golden Predator

Golden Predator - The Long Valley

In my book, Gold $3000 | Silver $60 I spend some time looking at junior gold and silver companies which rocketed during the last precious metals rally only to fall back to earth when that rally ended.

I use Golden Predator (V.GPY) as an example.

At the end of 2008 Golden Predator traded at a low of $0.88. As the rally took hold it headed skyward and, by October 2010 was trading in excess of $10.00 a share. At which point the shares headed downwards and, by 2014, were trading around $0.10 a share where they stayed stuck until 2016 when they began to show some signs of life.

As I write, GPY is having a good day and has traded as high as $0.435.

Other than as an illustration of the importance of entry points and the volatility of junior mining shares, Golden Predator is also a textbook case of a company severely underrated in the carnage of the junior resource sector.

From 2008 to the present day, GPY has raised and spend millions of dollars exploring its 3 Aces gold project, bulk sampling that project, building a full processing plant to extract the gold from the bulk sample and, near Dawson City, preparing to recommission the past-producing Brewery Creek mine.

In short, Golden Predator is much further advanced now than it was in 2010.

As it has progressed, GPY has attracted the attention of very savvy investors including Eric Sprott, Rob McEwen of McEwen Mining Inc., Pat DiCapo (Power One Capital Markets) and CIBC Private Wealth. These are investors who are knowledgable about the gold mining business and serious about due diligence.

I've interviewed CEO Janet Sheriff a number of times for motherlodetv.net (most recently for an article which appeared August 7, 2019) and a couple of years ago followed Chairman Bill Sheriff over a cliff to look at visible gold at the Three Aces project. They understand the exploration business but, perhaps more importantly, they understand that producing gold is the main priority.

Producing gold is exactly what Golden Predator does with its bulk sampling program and what it will do as it recommissions Brewery Creek.

Back in 2010 Golden Predator was a $10.00 stock with no real prospect of producing gold in the relatively near (say five years) term. Now it is a $0.38 cent stock which is producing gold from its bulk sampling and getting ready to reprocess 10 million tons of rock at an existing facility with a low CAPEX and excellent explorations prospects.

So, what the Hell happened?

There are lots of reasons why stocks crash but really only one reason why they stay crashed: investors bailed on the junior resource market when the precious metals rally ended at the end of 2011 and they have not come back.

The thesis of Gold $3000 | Silver $60 is that the rise in gold and silver prices during a prolonged rally will draw investor attention back to the companies in that sector. First into the larger producers and royalty holders and ETFs, then mid-tier producers and then junior gold and silver explorers and developers. It is not an overnight process and there is every chance that the junior sector, while firming, will remain ignored by investors until there is a "triggering" event. While it is hard to say what that trigger will be, there is every reason to believe that when it happens junior gold and silver companies will do very well indeed.

Right now GPY has a market cap of a bit over 60 million dollars. If we are looking at an extended gold and silver rally, that value is likely to be significantly re-rated over the next 12 to 18 months.

However, where a company like Golden Predator can soar is when it is able to give the market news the market wants to hear when the market wants to hear it. I suspect that the rally will be in full spate just as Golden Predator is able to announce the first gold pour at Brewery Creek. And, as Sheriff pointed out in our most recent interview, the geologists are beginning to understand the structure of the 3 Aces project which will likely mean more successful drill and trench results.

If this rally is at all like the 2008-2011 rally, companies like Golden Predator could easily become 10x or even 15x their current price. However, this time, those prices will reflect actual value.