Our Canada Unearthed column wraps the news driving mining and exploration stocks listed in Canada, mostly on the TSX and TSX.V.
The Aussie gold sector, especially now that Newcrest has disappeared, are mostly junior companies on the global stage, says Lion Selection Group’s Hedley Widdup.
“As Aussies we feel our exchange is the universe, if not most of it,” he told * last month.
“But the North American markets (Toronto and New York, with a bit of help from London) host some far larger companies, especially in the precious metals world.
“Purely by function of this, the biggest, longest life gold projects are largely distributed away from ASX.”
$15bn capped Northern Star (ASX:NST) and $7.5bn capped Evolution (ASX:EVN) are the only truly mid-tier ASX stocks on a global scale.
Of the developers, De Grey Mining (ASXEG) might sneak in if the $1.3bn Hemi project reaches its predicted ~530,000ozpa run rate.
Besides that, the cupboard is bare.
Meanwhile, Toronto is home to some of the biggest and best gold and silver stocks globally. 5.3Moz Newmont (TSX:NGT), 4.1Mozpa Barrick (TSX:ABX), 3.3Mozpa Agnico Eagle Mines (TSX:AEM) and silver-gold streaming co Wheaton Precious Metals (TSX:WPM) top the TSX resources cohort with a collective market cap of $160bn.
Newmont’s portfolio alone contains more than half the world’s tier 1 gold mines.
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Source: Newmont.
All up, the TSX has 35 precious metals stocks with a market cap above $1bn. The ASX has 13.
Meanwhile, both the TSX and TSXV has become a breeding ground for the next generation of large cap producers, with IPOs over the past couple of months including well received precious metals stocks. Prime Mining Corp (TSXRYM) which listed in December with a high grade discovery in Mexico, is up 31% year to date.
On the TSXV, Dryden Gold (TSXVRY) listed with the backing of Sprott and founder of Goldcorp, Rob McEwen.
US$2,500-$3,000/oz ‘not far-fetched’
Toronto is the place for gold/ silver exposure, especially in 2024. Sprott managing partner John Hathaway says there is a “clear and compelling” investment case for gold stocks.
Despite a strong gold price, mining stock valuations are the lowest in 25 years. The average annual gold price is up 20% since 2011. Mining stocks are down 40% over the same period.
There is a good chance gold stocks will bounce higher in 2024, even if prices don’t rise, Hathaway says.
“In our view, those factors have been excessively discounted,” he says.
“In our opinion, there is near-term potential for a substantial mean reversion trade even assuming no further rise in the gold price.”
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Gold mining equites vs. average gold price.
The investment case for gold mining equities is clear and compelling, Hathaway says.
“It is based on considerations of value and circumstances. The unknown element is the requisite patience before investors discover the attraction,” he says.
“In our view, that uncertainty is easily outweighed by the asymmetric proposition of minimal downside offset by outsized upside potential.
“Our view that the metal would be more properly priced in the range of $2,500-$3,000 does not seem far-fetched.”
Meanwhile, profit margins are also set to move higher as higher inflation dissipates.
“Inflation has started to cool off thanks to the Federal Reserve’s (Fed’s) tight money campaign,” Hathaway says.
“More importantly, this capital-intensive industry has made significant advances in productivity that will drive margin expansion.
“BMO Research forecasts a decline in production costs (All In Sustaining Costs or AISC) of 14%, 11% and 25% for large-, mid- and small-cap producers, respectively.”
DEG Price at posting:
$1.19 Sentiment: Buy Disclosure: Held
EG) might sneak in if the $1.3bn Hemi project reaches its predicted ~530,000ozpa run rate.
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