As a result of adding a new analyst, we are transferring coverage of the following companies. As a result of a reallocation of resources, Red Cloud is discontinuing coverage of the following companies.
Due to the departure of the covering analyst, we are moving coverage of the following companies to Under Review.
Our commodities view from our Mid-Year Outlook continues to hold true with the bull market in gold continuing, silver starting to shine, and the market dislocations in the base metal and uranium space providing investors medium term opportunities. With commodities, currencies and particularly precious metals establishing new levels as the world adjusts to a COVID-19 induced “new-normal”, we are updating the metal price and currency estimates we use to value mining companies, resulting in target price changes. Additionally, considering recent share performance and coverage changes, we are updating our Top Picks, which had performed well since our Mid-Year Outlook (up 25%). We are adding two silver levered names as we expect the next leg up in the gold price to benefit silver as well. In our view, we believe the continued liquidity injections and stimulus needed to help the economy recover from the pandemic should eventually benefit all commodities with precious metals leading the charge.
Yesterday, Red Cloud hosted the first day of its three-day 2020 Oktoberfest Fall Mining Showcase, which featured 20 presenting companies including our keynote speaker David Rosenberg and had over 500 participants registered in advance of the event. With this note, we want to provide a quick recap of the highlights from the conference for those who were unable to attend the live event. Replays will be available next week on the Red Cloud website.
O3 Mining announced the positive results of a PEA completed on its 100%-owned Marban project at the Malartic property located between the towns of Val D’or and Malartic, Quebec. The PEA supports an open pit operation with a low initial capital cost and a high rate of return for a 11,000 tpd operation over a 15-year mine life. We expect the shares of O3 to materially re-rate over the next 6-12 months on the back of the PEA and as the company starts an aggressive drill program at Malartic which is poised to potentially make a new discovery on the property and uncover additional mineralization along strike from Marban.
O3 Mining announced that it has started drilling on its 100%-owned Malartic property located between the towns of Val D’or and Malartic, Quebec. The company also released several historic intercepts from the property that demonstrate its high-grade potential. The company has allocated 30,000m to Malartic out of the 150,000m drilling program. In our view, O3 has committed a significant amount of drilling at Malartic and is poised to potentially make a new discovery on the property and uncover additional mineralization along strike from Marban.
O3 Mining released positive drill results from six holes at its East Cadillac property from its extensive land package (~61,000 ha) southeast of Val D’Or, Quebec as part of its 150,000m drill program. The holes have expanded the North Contact mineralized structure. In our view, these results continue to discover mineralization at shallow depth and over mineable widths at East Cadillac with grades above those at the Chimo mine which the property surrounds.
At the start of 2020, we were bullish on precious metals, and while we have been proven correct, we did not forecast the pandemic or the market dislocations that it has created. Taking this into account, we are updating our outlook. At the mid-year point, we are very bullish on gold and silver equities, and believe the rotation down market cap has already started. Additionally, dislocations between supply (still offline) and demand (coming back) has made us more bullish on base metals, particularly copper. For more industrial metals (PGMS, rare earths and battery metals), we are taking a more cautious approach as these likely require a return to normalcy before picking. Additionally, we continue to be bullish on uranium, as the pandemic has accelerated the anticipated supply deficit. Taking these factors into account we are updating our Top Picks (Page 3). For additional information, tune into our webcast on Monday, July 27th at 2:00pm EST, where our analysts will discuss our Mid-Year 2020 Outlook and will answer your questions live.
O3 Mining released strong drill results from two holes at its East Cadillac property located within its extensive land package (~61,000 ha) southeast of Val D’Or, Quebec. The holes have identified two new high-grade zones, and returned some of the highest gold grades O3 has encountered to date. In our view, these results continue to discover mineralization at shallow depth and over mineable widths at East Cadillac with grades above those at the Chimo mine which the property surrounds.
As we anticipated, the massive liquidity injections and stimulus packages being introduced have started to drive gold and gold equities higher. We believe it is now time for investor to focus on smaller producers and large developers. If you had bought an equal-weighted basket of the larger companies we recommended in our previous note, it would have returned 60% (Top 3), and 68% (Wider Group). Based on history, we believe there are better returns to be made with smaller companies as this bull market matures. We are updating our “Precious Metals Hoarding List” and the junior producers that screened the best based on our criteria (Appendix A) are: Serabi Gold (TSX:SBI, not covered), Argonaut Gold (TSX:AR, not covered) and RNC Minerals (TSX:RNX, BUY, C$1.30 target, Derek Macpherson).