On the base metals side, the companies that Paradigm analysts selected for the July 5 Quarterly Top Picks Q3 2016 report include Heron Resources Ltd. (HRR:ASX), Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.MKT), Sherritt International Corp. (S:TSX) and Trevali Mining Corp. (TV:TSX; TV:BVL; TREVF:OTCQX).
Heron, Nevsun and Trevali all have exposure to zinc, which, the report notes, "has been the best-performing base metal YTD owing to mine depletions pushing the market into a production deficit."
The Q3 catalyst for Trevali is the expectation that the Caribou mine will enter production in 2017, which should "more than double Trevali's zinc-lead production" and enable the company to become free cash flow positive. "Achieving commercial production at Caribou is a major derisking (and growth) event that should dispel any lingering skepticism of the technical viability of this past-producing mine," the report states.
Heron Resources, like Trevali, is one of the "few primary zinc producers through which investors can gain exposure to this market." The company's Woodlawn zinc/copper project in Australia is fully permitted and has a "very positive bankable feasibility study." Paradigm expects the mine to go into production in 2018.
Canada-based Nevsun is the third zinc producer mentioned in the report. The company's Bisha mine is expected to commence zinc production, which should result in "a significant improvement in 2017 as zinc production should exceed 230Mlb." The company also recently completed acquisition of Reservoir Minerals, acquiring the Timok asset in Serbia.
The catalysts for Sherritt International, a nickel producer with operations in Canada, Madagascar and Cuba, include a restructuring of debt. Prices in the nickel market are stable, but "potential supply shocks" could prompt an increase in those prices, according to the report.
On the gold and precious metals side, Paradigm's top picks include Alamos Gold Inc. (AGI:TSX; AGI:NYSE), Integra Gold Corp. (ICG:TSX.V; ICGQF:OTCQX), Klondex Mines Ltd. (KDX:TSX; KLDX:NYSE.MKT) and SEMAFO Inc. (SMF:TSX; SMF:OMX).
Alamos Gold's mines became "free cash flow neutral" in the first quarter, and the company should "handily beat 2016 guidance," the report notes, adding that "exploration sizzle from the La Yaqui and Cerro Pelon deposits is also possible."
SEMAFO, according to Paradigm, "has a great base and lower-risk growth pipeline." The Q3 catalyst "is an inaugural resource at the Yama deposit [that] will add to the overall resources at Mana," the company's project in Burkina Faso.
Klondex Mines has several catalysts in the second half of 2016, including new resources for True North, "an official production decision before year-end" and the revision of analyst forecasts "to reflect this new operation." The company's shares are "poised to regain a portion of their ~18% underperformance versus peers over past three months," the report states.
Paradigm notes that Integra Goldís project is "unique" given that it is undeveloped, capable of producing 100 Koz annually for more than 10 years, and has a fully permitted mill. The Quebec, Canada-based company is focused on development of Lamaque South. "In H2/16, an updated PEA and resource are expected," the report notes.
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1) Tracy Salcedo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She owns, or her family owns, shares of the following companies mentioned in this article: None.
2) The following companies mentioned in the article are sponsors of Streetwise Reports: Klondex Mines Ltd., Trevali Mining Corp., Integra Gold Corp. The companies mentioned in this article were not involved in any aspect of the article preparation. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) During the past 12 months Paradigm Capital has assumed an underwriting liability for and/or provided financial advice for consideration to the following companies mentioned in this article: Intregra Gold Corp. Paradigm expects to receive or intends to seek compensation for investment banking services during the next 3 months from the following companies mentioned in this article: Intregra Gold Corp. Klondex Mines, Heron Resources, Sherritt International Corp., Alamos Gold and SEMAFO Inc. Paradigm owns greater than 1% ownership position in the following companies mentioned in this article: None.
4) The analyst who prepared comments on the companies mentioned in this article own shares in the following companies mentioned in this article: None. The analyst has a family relationship with an Officer/Director of the following companies mentioned in this article: None.
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