Following a sharp run-up in the gold price — up $100 in the past week — and now that the Fed's long-awaited rate cut now in the rear mirror, and given that the Chinese markets are closed from Tuesday for the rest of the week and that October is a seasonably weak month for the metal, gold may ease in the coming days.
Such may roll over into the gold stocks — up 16% in the past three weeks before Friday's fallback. We would be circumvent about being too aggressive in buying now, but any correction there in the coming days or weeks would present a good buying opportunity for the sector.
Problems at Barrick Mines Across the World as Growth Ramps Up
Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) saw four of its senior local employees arrested in Mali for "financial crimes," according to an anonymous source; the source said that a high bail had been set for the employees to be released. Neither the government nor Barrick has commented officially on the arrests.
A military government that came to power in a 2020 coup wants to increase its share of revenues from mining amid heightened tensions in the country, with a pivot towards Russia as France backs away from the region it once ruled, as well as increased jihadist violence.
Earlier, Barrick's CEO Mark Bristow expressed disappointment that more talks with the government had not taken place, and expressed some frustration that other North American companies made their separate deals with the government rather than presenting a united front. It has not commented on the arrests, which appear like gamesmanship by the government. Barrick owns 80% of the Loulo-Gounkoto gold project, with a 10-year mine life at 500,000 ounces of annual production.
Separately, Barrick temporarily suspended operations at its Porgera mine in Papua New Guinea after tribal violence in the region of the mine killed 20 people, including two employees, and a national state of emergency was declared.
CEO Focuses on Growth and Costs
In a small lunch with CEO Mark Bristow, the topics were wide-ranging. Bristow emphasized the company's organic growth, as well as plans to bring sustaining costs down.
He also called himself "not a person who underpromises," something I had commented on before when Barrick frequently missed its ambitious quarterly targets. As he has done before, Bristow said that while the company looks at M&A opportunities, it does not need high-premium acquisitions to reach its growth targets, which it can achieve from projects it already owns.
Nevada Still Has Growth Ahead and Room for Greater Efficiencies
Bristow put a big emphasis on the Nevada assets, saying that a recent analysis of the Nevada Gold Mines shows them being 20-30% less efficient than the company's African operations. Barrick has moved a top finance officer from Africa to focus on costs.
At the same time, the last time either Barrick or Newmont Corp. (NEM:NYSE) replaced their fleets, for example, was 10 years ago, prior to the formation of Nevada Gold Mines that combined their Nevada assets; NGM is operated by Barrick. Even as the company is working on improving efficiencies, it sees growth.
Notably Goldrush hitting commercial production in 2026 with 400,000 ounces per year targeted for 2028. Exploration continues to be encouraging, including at Fourmile ("looks like the next Goldstrike"), where Leeville can double Carlin's reserves into the 2040s, and Robertson, where a permitting decision is expected by the end of this year.
Major Copper Project Key to Growth
Barrick also emphasizes copper in its growth targets. The massive Reko Diq copper project in Pakistan continues, with the feasibility study scheduled for year end. Once complete, the mine will be among the world's 10 largest copper producers.
The Lumwana super-pit expansion in Zambia is key to the company's 30% end-ofdecade growth target. The expansion will be a long-life project $2 billion capex (excluding possible Barrick contributions to upgrading the power grid). Feasibility underway, to be completed by year-end, with the first production anticipated in 2028. It is estimated that the mine will have a 30-year life, with an internal rate of rate of around 50%.
Once complete, the expanded project will be #22 in terms of production globally. One of Barrick's four key growth projects, it will ultimately account for between 10% and 15% of the company's NAV. At the same time, The Zambian Chamber of Mines, whose members include Barrick, issued a strong statement opposing proposed changes to the mining law, adding that the government had demonstrated a "serial unwillingness" to consult meaningfully with mining companies, saying it "risks undoing all the good work" since it came to power in 2021. Zambia has an ambitious target to quadruple copper production, which the Chamber said was at risk.
We are holding Barrick.
Fortuna Has Strong Exploration Results
Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE) released ongoing exploration results from two projects in West Africa. At its Séguéla mine in Côte d'Ivoire, results focused on the Kingfisher deposit (with one assay returning over 14 g/t over nearly 17 meters); it is on track to release an initial resource estimate early next year.
Many of the intercepts had higher grades than the mine's reserve grade, suggesting that incorporating Kingfisher into the mine plan could increase the overall mining grade. At nearby Sunbird, drilling supports the potential for underground mining. These results indicate that the company's lowest-cost mine has a long life ahead of it.
At the Diamba Sud project in Senegal, results from summer drilling include 6.9g/t over 33.3m. Review of the drilling has generated multiple new targets, which the company intends to drill before beginning a PEA study. It also wants a clearer understanding of the relationship among the various deposits at the project. When Fortuna acquired the project a year ago, it has an historic resource of 4.7 million ounces.
Qualified by my general comments above, Fortuna is a Buy for those who do not already own it.
Altius Takes Renewables Private
Altius Minerals Corp. (ALS:TSX.V) announced that majority owned Altius Renewable Royalties has agreed to be acquired in a go-private transaction. Altius Minerals will retain its controlling interest (now 57% vs 58% before the transaction); it also holds royalties on various of ARR's assets.
The purchase was at a 29% premium to the 20-day VWAP. Altius' interest in ARR is now valued at CA$225 million within its portfolio, a little under 20% of its current market cap. The decision to take ARR private was made in response to years of declining valuations in the public renewable energy sector, making its cost of capital high.
The market awaits a long-overdue decision on its arbitration with AngloGold over the extent of its royalty on the Expanded Silicon Deposit in southern Nevada, and any subsequent transaction. Though there is no guarantee that a sale will occur, estimates put a value of at least C$425 million on Altius' royalty even if they lose the arbitration (the central Silicon-Merlin royalty is not in dispute, other than a slither of it). That equates to fully one-quarter of the company's market cap.
Despite its strong recent run-up, Altius is by no means overvalued and is a solid long-term hold.
Metalla's New President Hunkers Down
Metalla Royalty & Streaming Ltd.'s (MTA:TSX.V; MTA:NYSE American) new president, Jason Cho, was in Denver, where I spent time with him and CEO Brett Heath. Cho, who spent 10 years as Chief Strategy Officer with Eldorado, sees Metalla as having reached the stage at which it makes sense to boost senior management.
In addition to helping with strategy, he will be making inroads into the institutional investor community. It was also revealed at my meeting with the company that the Australian silver mine Endeavour is now fully funded for a restart next year. This was Metalla's first cashflowing asset but has been closed for several years now.
The restart of this mine and revenue to Metalla would be a boost to the early build-up of revenue. The Tocantinzinho mine in Brazil will approach full production next quarter. Other mines are expected to generate revenue for Metalla next year, including, possibly Côté. Metalla's royalty covers only a part of the Côté deposit but all of the adjacent Gossilin, though that is not expected to begin production until 2031 at the earliest.
Consistent with the comments at the top of this letter, we would buy Metalla on any further pullback in the coming days.
Multiple Exploration Activities Underway at Midland
Midland Exploration Inc. (MD:TSX.V) announced a drill program underway with partner Wallbridge Mining, which is earning into 65% of the project on the eastern part of the Casault property, focusing on an unexplored portion of the property "up-ice" from an anomaly found last year.
Casault is in the Detour Trend, which hosts several mines, including Agnico's Detour Lake.
Several Catalysts in Current Programs
In our meeting at Beaver Creek, we discussed the extensive portfolio and various exploration programs, sole and joint or sole funded by others. In particular, we discussed possible catalysts. CEO Gino Roger is most excited about Barrick's gold exploration at Patris (where drilling currently underway); the j-v with Probe on Le Peltrie; and the RTZ alliance looking for lithium.
RTZ has already spent $7.5 million on this program, including a significant $6 million on one deposit, Galinée, which would suggest they are finding something. In all, the company's exploration budget for this year is $22 million, of which $19 million is from partners. The company continues to generate new gold projects in James Bay and elsewhere, with "lots of negotiations" underway for deals to come.
It is well funded, with around $7 million in cash and payments coming in. There is no denying that the stock has been frustrating and disappointing, but the company continues to make great strides, and it is as well-positioned to make a discovery as any.
Buy.
Orogen Has Silicon "Lookalikes" Available for Sale
Orogen Royalties Inc. (OGN:TSX.V) hosted a webinar on its prospect generation projects in Nevada.
The presentation was somewhat technical and was aimed primarily at potential partners for projects available for option or sale.
Nonetheless, the webinar was interesting for investors, demonstrating the depth and skill of the team, as well as emphasizing that the company has several other projects with high potential, including the four "Silicon lookalikes" presented in the webinar.
They are all part of a generative alliance with Altius. It is available on the company's website.
Kingsmen Partners With Netflix for Squid Game Attraction
Kingsmen Creatives Ltd. (KMEN:SI) announced a partnership with Netflix to design and develop in Korea an immersive attraction based on the popular Squid Game.
Kingsmen will also manage the operation and marketing of the sites, described as "an adrenaline-pumping, live-action immersion" experience. There will also be merchandise as well as special foods and cocktails.
No timeframe was provided for when the game will be available, nor the costs associated with it.
Kingsmen is a Strong Buy at this level.
ERRATUM In my recent follow-up on B2Gold Corp. (BTG:NYSE; BTO:TSX; B2G:NSX), I foolishly said that its Goose Bay project, currently underdevelopment, was in the Yukon.
It is not. It's in Nunavut (formerly part of the Northwest Territories). I knew that! Apologies. Thanks to E.L. for pointing out my error.
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- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Barrick Gold Corp., Fortuna Silver Mines Inc., Altius Minerals Corp., Metalla Royalty & Streaming Ltd., Midland Exploration Inc., Orogen Royalties Inc., and B2gold Corp.
- Adrian Day: I, or members of my immediate household or family, own securities of: All. My company has a financial relationship with: All. I determined which companies would be included in this article based on my research and understanding of the sector.
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