It’s time for our annual Stocks to Watch list. 2013 is well underway and we’ve seen some very interesting developments in the mining markets.
Despite the obvious issues facing the global economy, there is a subtle optimism brewing that perhaps the worst is behind us. To some degree, watching the DJIA hit new 52 week highs since mid-January has helped restore investor confidence in the markets.
So what should investors be looking at in 2013?
Uranium stocks have rebounded sharply from 2012 lows and continue to move higher under the speculation that Japan will restart their nuclear power program at some point this year. This speculation has not had much of an impact on the price of uranium – yellowcake has rebounded only slightly and sits at $43.35 per pound. Prices of global thermal coal, another provider of energy, have also bucked a downward trend in 2012.
Base metal and tech metal stocks have seemingly turned the corner after the dog days of December. News that the U.S. economy is recovering and China’s economy is in the process of a “soft landing” has spurred gains. Coking coal looks to be in recovery mode as well in early 2013. Mitsubishi Chief Financial Officer Ryoichi Ueda recently stated, “It appears the prices (for coking coal) have bottomed out.”
Potash, phosphate and other mined plant nutrients have not recovered and are currently slipping lower. Mining stocks focused on delivering plant nutrients to our world’s farmers, however, are up 20% in 2013 according to the MiningFeeds Potash Stock Index. The MiningFeeds Diamond Index is on the rise this year as well – our basket of diamond stocks is up nearly 13%.
The only group that has underperformed so far in 2013 is precious metals: gold and silver. We took a look at gold and gold stocks in late January and identified a number of factors that were working against gold in the article, “What’s Going on With Gold and Gold Stocks?“.
The decline in silver and silver stocks has been less pronounced. According to Martin Arnold, research director at ETF Securities, “Silver is a hybrid metal and is likely to receive strong support in 2013, as industrial demand rebounds at the same time as we are seeing strong investor appetite for precious metals to hedge economic uncertainty.”
Note: for recent commodity prices and data visit Index Mundi – an essential research site for any mining investor.
To kick off our first Stocks to Watch article in 2013 (Year of the Snake – Happy Chinese New Year) we look at three mining stocks you may want to keep an eye on. In alphabetical order we first take a look at Golden Arrow Resources.
1. Golden Arrow Resources Corporation (Stock Profile – TSXV:GRG)
If you have never heard of Golden Arrow Resources I’m not surprised; neither had I until meeting with Paul Guedes, the company’s Director of Corporate Communications, at the AME BC Minerals Exploration Roundup Conference a few weeks ago. After speaking with Paul for 20 minutes I concluded that 2013 could be a breakout year for the company.
Golden Arrow, part of the Grosso Group of companies, has been operating in Argentina for over 20 years and to its credit has made some impressive discoveries. Most notably, the Gualcamayo gold mine – now owned by Yamana Gold (Stock Profile – TSX:YRI & NYSE:AUY) – containing 2.2 million ounces of gold (proven & probable) and another 1.1 million ounces (measured & indicated).
Until November, 2012 Golden Arrow held a 1% NSR royalty on the Gualcamayo gold mine and benefited directly from the production of the mine. The company decided to sell the royalty to Premier Royalty (Stock Profile – TSX:NSR) for cash consideration of $16.5 million and warrants to purchase one million shares valued at $1.25 million. The transaction boosted Golden Arrow’s cash position to $18 million and that cash, in part, funded a 6,500 meter drill program on the company’s flagship project – Chinchillas – along with a share buyback program.
The Chinchillas project is located in the prolific Bolivian silver-zinc-tin belt which extends into northern Argentina. On July 10th, 2012 the company announced drill results from Chinchillas reporting 29 meters of 631 grams per tonne silver including 6 meters of 1,873 grams per tonne of the shiny white metal. Two other holes were also announced containing 591 and 515 grams per tonne silver over 22 and 29 meters respectively.
Golden Arrow expects to release a maiden resource calculation by the end of April, 2013. The resource calculation is based on two seasons of drill results and will define ounces in the ground – a major project milestone.
In addition to Chinchillas, the company holds 30 other properties in Argentina including the Mogote copper-gold project that is under option to Vale (Stock Profile – NYSE:VALE). The Brazilian mining giant can earn an initial 70% interest in the project by completing US$6.8 million in exploration expenditures and making US$2.3 million in cash payments to Golden Arrow over 3 years. Work is ongoing at the Mogote project and the company plans to develop more of its assets as a project generator.
With just under 42 million shares issued, $12.5 million in the bank (est. at publication) and no debt the company is in strong financial shape in relation to most junior miners. The company’s shares are currently trading at $0.24 for a valuation of $10 million – a compelling reason why Golden Arrow is on our coveted 2013 Stocks to Watch list and is MiningFeeds newest client.
For 3 Mining Stocks to Watch in 2013 – Part 2 – CLICK HERE.