How A Junior Miner Might Have Sparked A New Canadian Gold Rush
May 19, 2021 at 08:15 AM EDT
LONDON, May 19, 2021 /PRNewswire/ -- Gold plays like this only happen very rarely. Since a major gold discovery last year in Quebec saw a small-cap miner buy up all the adjacent property, many investors have been watching closely. When that same miner then acquired one of the province's biggest past-producing mines, the excitement became palpable. Mentioned in today's commentary includes: Barrick Gold Corporation (NYSE: GOLD), AngloGold Ashanti Limited (NYSE: AU), Teck Resources Limited (NYSE: TECK), Turquoise Hill Resources Ltd. (NYSE: TRQ), Sociedad Química y Minera de Chile S.A. (NYSE: SQM).
Then, the small-cap miner started drilling and, against all our expectations, produced first-drill results before any of us had time to digest the news. And it was bigger than we anticipated.
The junior miner may have hit a deposit that hasn't previously been found even after decades of exploration work going on looking for it—with some exploration going on for almost a century. Now, they're aiming to spark another gold rush of potentially historical proportions.
Amex Exploration (AMEX) made the original high-grade gold discovery last year in Quebec--one of Canada's premier gold territories and the playground of the super major miners.
Amex's founders knew what they started, with this discovery that had eluded big miners for decades. Amex had set up stakes in the area because it was close to the past-producing Normetal Mine Historically, Normetal has produced ~10.1 million tonnes of 2.15% copper, 5.12% zinc, 0.549g/t of gold and 45.25 g/t of silver.
The "closeology" logic that has enriched the mining industry for centuries was a play here, as well. Many people thought the mother lode was nearby. Amex started drilling on its Perron Property, just west of Normetal. They ended up with a huge discovery that turned them into one of the best-performing stocks on the TSX Exchange in 2019 and among the top 50 best companies on the OTCQX in 2020. It also helped them reward shareholders with up to 7,000% returns. No one will forget that any time soon.
What was going quietly on the sidelines of this discovery, looks set to be even more promising. Before we had time to blink, Starr Peak Mining Ltd. (STE.V; STRPF) strategically acquired most of the land adjacent to Amex's big discovery. But the even bigger coup was this: They also scooped up the Normetal mine itself.
It was a very bold move for such a small company, which we think could mean a solid potential upside for this junior's value even compared with Amex. Shortly afterwards, in February this year, Starr Peak announced a fully funded 20,000-meter drill campaign.
After only three weeks of drilling, the company announced they brought on a second drill rig. That's a major expense that a company usually only takes so early in the game if drilling is going really well. Now, they are reported to have ordered a 3rd drill rig to the property.
On May 4th, we think anyone watching this would have been very excited. The maiden drill results were released, and they were very positive. Now, more investors are starting to watch, and this is why:
Starr Peak probably had high confidence in its drill targets going into this, but the results may have surprised even them. What they hit was more than gold. They discovered evidence of a VMS deposit with rock containing multiple base metals, including zinc, copper, silver and gold. And the company reported that they didn't just hit it in one drill hole. They hit it in 12--so far. They apparently haven't missed once.
VMS deposits are included in the richest forms of deposits in the world. VMS stands for Volcanogenic Massive Sulphide, and these deposits can be rich in base metals such as copper, zinc, silver, gold and other minerals.
There have been very few new VMS-style deposits discovered over the past decade, and finding one could mean attracting the attention of the big miners who have been searching in vain. That might put Starr Peak on some very serious radar.
The first batch of drill results that Starr Peak announced this month had highlights of 20.94% Zinc, 0.43% Copper, 39.58 g/t Silver and 0.21 g/t Gold over an intercept of over 12.1 meters. They also highlighted a new discovery at depth with additional massive sulphides.
Results from the lab are expected any day, and when they do come, we think there is potential for this company to raise the excitement levels about their possible strike in a huge way.
There is nothing the major miners latch on to more tightly than a junior discovery of gold--not to mention the potential bounty of a VMS, which makes a play less dependent on gold alone.
We're experiencing a copper shortage right now, with soaring demand, and analysts targeting $13,000 a metric ton in the coming months, from just over $9,000 today. Zinc, too, is benefitting from bullish sentiments that have driven prices to multi-year highs. And silver is looking to break out, along with gold. Starr Peak (STE.V; STRPF) could be right at the center of it all with its latest results.
And they were only looking for gold, which might have been good enough to catapult this company to the attention of the industry. A VMS discovery makes this a much bigger game. Amex certainly seems to think so.
One week before the VMS discovery was announced by Starr Peak, the Amex Chairman and Founder was appointed as Starr Peak's Chief Technical Advisor, making him--and his world-class reputation--the head geologist. It was a major move of confidence.
Starr Peak may be set to become Amex II, which is enough for us to expect to start seeing investors circling around this one. Over the past three years, Amex has grown from a small junior gold company to now a major gold name with a market cap of approximately $300 million. Again, Amex investors saw returns of up to 7,000%. And Amex reports they're still drilling, right next door to Starr Peak, with about $30 million in the bank to keep at it. Analysts are calling for Amex's market cap to potentially push up to $1 billion as they continue to drill.
Starr Peak has also progressed well in the past 12 months, attracting some early-stage Amex shareholders from the beginning. This VMS discovery means something very significant for Starr Peak--just for starters. In our view, this isn't just a junior miner anymore. It's an approx. $75 million market-cap contender.
After 80 years of exploration by major miners, we believe that Starr Peak might have found the mother lode, and we are eyeing its potential to become another industry success story, like Amex.
Majors Are Looking To Win Big In 2021 Too
After years of shunning gold and gold miners, one of the world's most notorious investors, Warren Buffett, has finally changed his stance on precious metals. In an announcement last year, Berkshire Hathaway said it was buying $564 million worth of Barrick Gold (GOLD) shares at a time when gold was soaring. This flip flop towards gold by Buffett could affect how many other investors view it as an investment opportunity, as well. The Oracle of Omaha's investment in Barrick and change in tune on the gold front shouldn't come as much of a surprise, however. As the future of the economy looks more-and-more uncertain, and the Federal Reserve continues to print money at a record rate, solid gold miners like Barrick have drawn a lot of attention for investors.
Barrick is a top-tier gold miner with a global footprint. The Toronto-based gold giant operates in 13 countries, including Argentina, Canada, Chile, Côte d'Ivoire, Democratic Republic of the Congo, Dominican Republic, Mali, Papua New Guinea, Saudi Arabia, Tanzania, the United States and Zambia. Though Newmont surpassed Barrick as the largest gold miner when it acquired Goldcorp, Barrick is still a force to be reckoned with.
AngloGold Ashanti (AU) is the third-largest gold mining company by production volume. And though it has had some problems over the past decade, specifically in the early 2010s when the gold market took a major hit forcing many miners, including AngloGold to shutter operations, the mining giant has persevered.
AngloGold is one of the more diverse miners on the planet, shielding itself from country-specific regulatory troubles or civil strife. It has operations on four continents including Africa, Australia, South America and North America.
AngloGold has been recording highly impressive bottom-line expansion. The miner's performance has been underpinned by a record year at Geita as well as remarkable performances at the Kibali, Sunrise Dam, Iduapriem, Siguiri, and AGA Mineração operations.
The Commodity Boom Is In Full Swing
Teck Resources Limited (TECK) is one of Canada's largest and most diversified resource companies, with operations across the globe. While its primary mining and mineral development plays focus on steelmaking coal, copper and zinc, Teck also has a major stake in renewable energy ventures.
In a release on Teck's website, the company explains why this investment is so important: "Flow batteries – such as the zinc-air battery developed by ZincNyx, with its flexible and low-cost scaling, long-term storage properties and the ability to separate the energy storage function from the power generation source – could provide a more efficient alternative for large-scale energy storage."
Turquoise Hill Resources Ltd. (TRQ) is another key player in Canada's resource and mineral industry. Like Teck Resources, Turquoise Hill is a major producer of coal and zinc, two resources with distinctly different futures. While headlines are already touting the end of coal, zinc is a mineral that will play a key role in the future of energy for years and years to come.
In addition to its zinc operations, Turquoise Hill is also a significant producer of Uranium. Uranium is a key material in the production of nuclear energy, which many analysts are suggesting could be a major component in the global transition to cleaner energy. While the mineral has not seen significant price action in recent years, there are a number of new projects set to come online across the globe in the medium-term, which could be a boon to Turquoise Hill.
Sociedad Química y Minera de Chile (SQM) has seen its stock price nearly double from $23 in mid-May 2020 to its current price of $46. Sociedad Química y Minera, for example, signed in December a long-term supply deal with LG Energy Solution, which in turn supplies batteries to carmakers such as Tesla and GM. Under the deal, SQM will supply battery-grade lithium carbonate and lithium hydroxide to LG Energy Solution between 2021 and 2029.
The Chilean firm also announced a capital increase of up to US$1.1 billion, most of which will be used for lithium carbonate expansion in Chile, where SQM plans to more than double its production. Sociedad Química y Minera sees the lithium industry growing at around 20 percent per year in the long term, supported by rising EV sales and emission reduction goals from China to the United States.
By. Christine Bachmann
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This publication contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this publication include that prices for gold, silver, copper, zinc and other base metals will retain their value in future as currently expected, or could continue to increase due to global demand and political reasons; that Starr Peak can fulfill all its obligations to acquire its Quebec properties; that Starr Peak's property can continue to achieve drilling and mining success for gold and other metals; that historical geological information and estimations will prove to be accurate or at least very indicative; that high-grade targets exist; and that Starr Peak will be able to carry out its business plans, including timing for future exploration and drilling; that the preliminary drilling results will be confirmed as further exploration continues; that Starr Peak will gain the attention and interest of larger mining companies; that Starr Peak's exploration results will continue to show promising results justifying ongoing exploration and possible development efforts. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that politics don't have nearly the strong effect on gold and other base metal prices as expected; that demand for base metals may not continue to increase; that the Company may not complete all its announced mineral property purchases for various reasons; that the Company may not be able to finance its intended drilling and exploration programs; Starr Peak may not raise sufficient funds to carry out its business plans; that geological interpretations and technological results based on current data may change with more detailed information or testing; that the preliminary drilling results may not be confirmed during further exploration; that Starr Peak will fail to gain the attention and interest of other mining companies; that Starr Peak's exploration results may fail to find additional promising results justifying ongoing exploration and/or development efforts; and despite promising results from drilling and exploration, there may be no commercially viable minerals or ore on Starr Peak's property. The forward-looking information contained herein is given as of the date hereof and we assume no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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