It’s been a long painful slide for gold and silver – but if today’s trend continues the worst may very well be over.
In a recent article entitled, “Why Gold May Trend Up for the Rest of 2013”, MiningFeeds guest contributor Adrian Ash looked at three reasons why the sector could be poised for a recovery.
1. Japan is doubling its monetary base inside two years, while the People’s Bank of China has taken to one-day injections of almost $3 billion for the financial system, boosting shares after a scary jump in bank interest rates.
2. Wage talks in South Africa’s gold mining industry stalled recently, with management offering 5% where the unions want a raise of 60-100%.
3. Giant banks who swerved around the financial crisis 5 years ago are now risking a crash in summer 2013. Barclays bank – “widely regarded as one of the UK’s strongest” according to the BBC – is nearly £13bn short of capital requirements (almost $20bn). Deutsche Bank paid €630m ($830m) in April-to-June alone to settle lawsuits from customers mis-sold rubbish US mortgage investments.
Coupled with yesterday’s geopolitical news out of Egypt, it looks like the winds may be changing for precious metals and precious metal equities. At the time of publication, gold is currently up $26 to $1,386 (+1.9%) and silver is up a whopping $1.12 to $23.06 (+4.9%).
Given the potential “sea change” we take a look at three precious metal stocks that could also be poised for recovery.
1. Balmoral Resources Ltd. (Stock Profile – TSXV:BAR & OTCQX:BALMF)
Tomorrow is graduation day for Balmoral Resources – the company’s shares will begin trading on the TSX big board.
As per usual the company has been quietly getting things done. On August 6th Balmoral reported that drilling resumed on the company’s Martiniere Property in Quebec, with several holes already completed. The Martiniere Property forms part of the company’s wholly owned Detour Gold Trend Project which spans over 82 kilometres along the Sunday Lake Deformation Zone in Quebec.
Around this time last year the company announced bonanza-grade intercepts of 1,530 g/t (44.6 ounces per ton) gold over 0.55 metre (1.8 feet) and 409 g/t gold (11.9 ounces per ton) over 0.50 metre (1.6 feet) from Martiniere. Let’s see if Darin Wagner and his team can deliver the goods again this year.
2. Pilot Gold Inc. (TSX:PLG & OTCQX:PLGTF)
Often referred to as one of the top junior gold miners in the sector, Pilot Gold is well positioned financially for a recovery. The company currently has just under $30 million in net current assets (as reported on August 13, 2013) or roughly $0.30 per common share.
In a 2012 exclusive interview with MiningFeeds, Pilot Gold was highlighted by Canaccord’s Chairman Peter Brown as one of his top picks. Mr. Brown pointed out, “The company has an excellent management and geological team.”
On July 23, 2013 Pilot Gold announced results from its flagship property TV Tower. The KCD target returned 15.3 grams per tonne (g/t) gold over 45.2 metres keeping pace with previously announced results from the area.
About the results, Dr. Moira Smith, chief geologist of Pilot Gold commented, “The current phase of drilling, focused on areas to the north and west of the original discovery, confirms the presence of high-grade gold mineralization extending into sparsely drilled areas predicted to host gold based on our geological model. These exceptional drill results will allow us to model high-grade gold in the upcoming resource estimate with greater confidence.”
3. Silver Wheaton Corp. (TSX:SLW & NYSE:SLW)
With silver rocketing up nearly 5% today we would be remiss not to include a silver company. Silver Wheaton is the largest silver streaming company in the world. Silver streaming, the process of securing silver from mining companies through long term price contacts, provides Silver Wheaton with a stable long term supply of the shiny grey metal. The company also has a smaller gold stream with 145 thousand ounces of gold forecast for 2013.
In response to the company’s second quarter results issued yesterday, Raymond James analyst Phil Russo comments, “Silver Wheaton’s attributes continue to hold in the current environment with its low cost asset base and production growth equating to healthy cash flow generation even at low metal prices. While a lighter quarter earnings wise, we expect Silver Wheaton to gain momentum in the second half of 2013 particularly as inventory levels have traditionally cleared towards the end of the year.”
TD Securities analyst Daniel Earle notes, “We are adjusting our numbers for Q2/2013 results and raising our target multiples consistent with those we assign to Franco-Nevada. Overall, our 12-month target price rises to $34.00/share (from $27.00) and we are maintaining our Buy recommendation.”
The company represents a leveraged hedge to the price of silver. Today the company’s shares are up 7.1% last trading at $27.72.
Disclosure: at publication date Balmoral Resources is a client of MiningFeeds.