Equities tumbled after U.S. regulators closed two banks last week
A leading crypto bank is winding down and liquidating its operations
Gold/silver prices rallied on safe-haven buying, and increased financial instability; crypto prices rallied as well
Our near-term outlook for gold/silver prices, and the US$
A junior explorer under coverage discovered graphite in a project previously known to host nickel. Shares of this junior are up 57% YTD.
FRC Top Picks
The following table shows last week’s top five performers among our Top Picks, including five junior resource companies. The top performer White Rock Minerals (OTCQX: WRMCF), was up 20%. White Rock is advancing gold/copper assets in Australia and Alaska. Our prior reports can be viewed here.
* Past performance is not indicative of future performance (as of March 13, 2023)
Companies on our Top Picks list were up 53% on average since we initiated coverage vs -32% for the benchmark (TSXV).
Total Return
1 Week
1 mo
3 mo
6 mo
1 yr
3 yr
Since launch
Mining
-2.7%
-7.1%
-3.0%
-12.4%
-42.8%
23.0%
26.9%
Cannabis
0.0%
-7.1%
34.1%
-65.3%
-85.2%
77.7%
-11.7%
Tech
5.0%
-28.8%
-47.5%
-27.6%
-55.8%
150.5%
200.4%
Special Situations (MIC)
-10.2%
-15.6%
-0.6%
-20.6%
-40.5%
76.3%
-20.0%
Private Companies
N/A
N/A
N/A
N/A
4.7%
25.3%
16.4%
Portfolio (Total)
-4.0%
-9.4%
-2.7%
-16.0%
-39.8%
70.1%
53.2%
Benchmark (Total)
-4.9%
-1.6%
5.7%
-6.1%
-25.8%
62.3%
-31.5%
Portfolio (Annualized)
-
-
-
-
-39.8%
19.4%
4.7%
Benchmark (Annualized)
-
-
-
-
-25.8%
17.5%
-4.0%
1. Since the earliest initiating date of companies in the list of Top Picks (as of March 13, 2023) 2. Green (blue) indicates FRC’s picks outperformed (underperformed) the benchmark. 3. Past performance is not indicative of future performance.
Our complete list of top picks (updated weekly) can be viewed here.
Weekly Mining Commentary
Last week, global equity markets were down 3.4% on average (up 1.7% in the prior week), primarily due to the closure of two major banks in the U.S. Regulators shuttered Silicon Valley Bank (US$209B in assets), and Signature Bank (US$110B in assets), amid concerns of insufficient liquidity, driven by a steep decline in the value of their investments due to higher rates. The U.S. government and the Fed have guaranteed all deposit accounts at both institutions, and installed a program to provide funding to other banks facing withdrawal requests from depositors. As a result of these developments, the US$ retreated, and gold/silver/crypto prices rallied, driven by increased expectations of the Fed slowing or pausing rate hikes. Due to increased financial stability risks, we are expecting stronger gold/silver prices, and continued downward pressure on the US$ in the near-term.
Source: FRC/Various
Gold/silver prices rallied, amid a weaker US$.
Valuations of gold producers were down 1% last week (up 5% in the prior week); base metal producers were down 7% (up 7% in the prior week).
06-Mar-23
13-Mar-23
Gold Producers
EV / R (forward)
EV / EBITDA (forward)
EV / R (forward)
EV / EBITDA (forward)
1
Barrick
3.31
7.04
3.22
6.84
2
Newmont
3.16
7.65
2.99
7.24
3
Polyus
3.00
n/a
2.97
n/a
4
Agnico Eagle
3.67
7.78
3.50
7.42
5
AngloGold
1.90
4.40
2.09
4.85
6
Kinross Gold
1.82
4.84
1.73
4.62
7
Gold Fields
2.17
4.47
2.44
5.02
8
Sibanye
0.69
1.92
0.76
2.05
9
Yamana
3.73
6.64
3.66
6.52
10
B2Gold
1.84
3.62
1.73
3.36
11
Alamos
4.37
9.21
4.24
9.02
12
Harmony
0.90
3.93
1.01
4.47
13
Eldorado Gold
1.94
5.12
1.82
4.76
Average (excl outliers)
2.50
5.55
2.47
5.51
Min
0.69
1.92
0.76
2.05
Max
4.37
9.21
4.24
9.02
Base Metal Producers
EV / R (forward)
EV / EBITDA (forward)
EV / R (forward)
EV / EBITDA (forward)
1
BHP Group
3.19
5.80
3.00
5.49
2
Rio Tinto
2.46
5.31
2.33
4.99
3
South32
1.66
4.92
1.47
4.43
4
Glencore
0.41
4.21
0.40
4.03
5
Anglo American
1.51
4.06
1.48
3.96
6
Teck Resources
2.46
5.02
2.22
4.56
7
First Quantum
3.18
7.78
2.86
7.02
Average (excl outliers)
2.12
5.30
1.97
4.93
Min
0.41
4.06
0.40
3.96
Max
3.19
7.78
3.00
7.02
We are maintaining our metal price forecasts.
FRC Forecasts
Current Price
2023E
Long-Term (2025+)
Gold (US$/oz)
$1,904
$1,825
$1,400
Silver (US$/oz)
$21.83
$22.00
$18.00
Copper (US$/lb)
$4.05
$3.50
$3.00
Zinc (US$/lb)
$1.33
$1.25
$1.10
Nickel (US$/lb)
$10.43
$10.00
$8.00
Source: FRC
Source: FRC
Key sector developments are listed below (positive):
– Artemis Gold (TSXV: ARTG) has obtained a permit to construct a gold mine in B.C.
– In 2022, gold/copper exploration spending in B.C. was up 18% YoY, to $559M (Source: Ernst & Young).
– We believe the above two developments are highly positive for B.C.-based explorers/developers, especially considering that permitting has been a major risk for projects in the province.
Positive – Acquired an outstanding 3% net smelter royalty/NSR on its flagship Copperstone project for US$2.5M. In our last report, we had assigned a value of US$8.4M for this NSR, implying that the acquisition price is highly attractive for SGLD. The company also repaid $3.2M of debt through cash/share payments.
Expands energy transition metals portfolio with high-grade graphite discovery at Nagvaak (Nunavut)
FRC Opinion
Positive – Discovered high-grade graphite (8 m of 22.2% Cg and 4 m of 21.2% Cg) at the Nagvaak project, which was previously known to host nickel. The company is planning additional surface sampling and drilling to evaluate the project’s potential to host graphite.
Positive – Proceeds will be used to advance exploration at the NISK project in Quebec, where the company is completing a maiden nickel/copper resource estimate.
Announces a maiden resource estimate for the BamaStar graphite project in the U.S.
FRC Opinion
Positive – Although the maiden resource is relatively small, it is open-pittable, implying potential for low OPEX. Management is aiming to complete a PEA by Q1-2024. Tesla (NASDAQ: TSLA) had recently entered into an offtake agreement with Magnis Energy Technologies (ASX:MNS). Magnis is planning to build an anode (graphite) production facility in the U.S.
The opinions expressed in this report are the true opinions of the analyst(s) about any companies and industries mentioned. Any “forward looking statements” are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts will materialize. Actual results will likely vary. Certain companies mentioned are covered by FRC under an issuer paid model. FRC or companies with related management, and Analysts, may hold shares/securities in some companies mentioned in this report, including STGX. Distribution procedure: our reports are distributed first to our web-based subscribers on the date shown on this report then made available to delayed access users through various other channels for a limited time. To subscribe for real-time access to research, visit https://www.researchfrc.com/website/subscribe for subscription options. This report contains “forward looking” statements. Forward-looking statements regarding the Company, industry, and/or stock’s performance inherently involve risks and uncertainties that could cause actual results to differ from such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company’s products/services in the marketplace; acceptance in the marketplace of the Company’s new product lines/services; competitive factors; new product/service introductions by others; technological changes; dependence on suppliers; systematic market risks and other risks discussed in the Company’s periodic report filings, including interim reports, annual reports, and annual information forms filed with the various securities regulators. By making these forward-looking statements, Fundamental Research Corp. and the analyst/author of this report undertakes no obligation to update these statements for revisions or changes after the date of this report. Fundamental Research Corp DOES NOT MAKE ANY WARRANTIES, EXPRESSED OR IMPLIED, AS TO RESULTS TO BE OBTAINED FROM USING THIS INFORMATION AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OR FITNESS FOR A PARTICULAR USE. ANYONE USING THIS REPORT ASSUMES FULL RESPONSIBILITY FOR WHATEVER RESULTS THEY OBTAIN FROM WHATEVER USE THE INFORMATION WAS PUT TO. ALWAYS TALK TO YOUR FINANCIAL ADVISOR BEFORE YOU INVEST. WHETHER A STOCK SHOULD BE INCLUDED IN A PORTFOLIO DEPENDS ON ONE’S RISK TOLERANCE, OBJECTIVES, SITUATION, RETURN ON OTHER ASSETS, ETC. ONLY YOUR INVESTMENT ADVISOR WHO KNOWS YOUR UNIQUE CIRCUMSTANCES CAN MAKE A PROPER RECOMMENDATION AS TO THE MERIT OF ANY PARTICULAR SECURITY FOR INCLUSION IN YOUR PORTFOLIO. This REPORT is solely for informative purposes and is not a solicitation or an offer to buy or sell any security. It is not intended as being a complete description of the company, industry, securities or developments referred to in the material. Any forecasts contained in this report were independently prepared unless otherwise stated, and HAVE NOT BEEN endorsed by the Management of the company which is the subject of this report. Additional information is available upon request. THIS REPORT IS COPYRIGHT. YOU MAY NOT REDISTRIBUTE THIS REPORT WITHOUT OUR PERMISSION. Please give proper credit, including citing Fundamental Research Corp and/or the analyst, when quoting information from this report. The information contained in this report is intended to be viewed only in jurisdictions where it may be legally viewed and is not intended for use by any person or entity in any jurisdiction where such use would be contrary to local regulations or which would require any registration requirement within such jurisdiction.
