GSHRF - Gold And Silver Development Optionality Plays (Part 1 Microcaps)

Summary

• A list of gold and silver developers with large resources.
• Estimated valuations for each company on the list.
• Optionality plays are one way to identify a good risk-reward opportunity.
• If gold & silver prices rise, then companies that have large resources in the ground become more valuable.

Introduction

An optionality play is a company that has a large amount of gold/silver in the ground that has never been developed into a mine. Ideally, you want to find large deposits that are highly undervalued compared to a company’s FD (fully diluted) market cap.

To avoid confusion, my list uses AUEQ (gold equivalent). I am using the current spot price and the number of AUEQ ounces a company has in the ground (Note that I have made AUEQ estimates for some companies, and I could be wrong). Then I compare that value to their FD market cap.

I am also estimating the in-situ value. In-situ is another term for how much AUEQ they have in the ground. For in-situ, I am using 10% of the deposit’s AUEQ value. Plus, I am using $100 AUEQ per oz for a second valuation.

There are many factors that skew the valuations of companies, so this is only meant to be a starting point for you to do your own due diligence. For instance, my AUEQ estimates can be off and will change in the future. The location of the projects and the quality of the management teams impact the value. And there are many other factors that come into play to value a company. One huge one is the ability to finance a project. If a company can’t finance the capex, then its valuation can languish.

I’ve always liked to find good optionality plays, especially for companies that could find more gold/silver through additional exploration. If you can buy AUEQ ounces in the ground for low valuations, then there is a good chance those ounces could be worth more in the future if gold/silver prices rise. Plus, as a company de-risks a project using a PEA, PFS, DFS, and permitting, the value of a company tends to rise.

While I like finding undervalued optionality plays, the risk level is quite high. In fact, you have to treat these as speculation bets and expect to lose money. In fact, I am underwater on quite a few of the stocks on this list. They might do well in the long term if gold/silver prices rise, but I might end up losing money on most of my optionality plays. That said, the potential for big returns is real. If gold/silver prices take off, there are not that many undeveloped projects with large resources. Demand for them should be significant.

Development Optionality Plays (Microcaps)

(Sorted by Upside at $100 AUEQ Per oz.) (Click on the image for better detail).

This list includes development companies that trade in North America and Australia. The Main Symbol is the exchange where they are based. V is the Canadian Venture in Toronto. AX is Australia. TO is Toronto. CN is the smaller exchange in Vancouver. Those without a suffix trade in New York.

The Risk column is somewhat of a misnomer. There are no moderate risk mining stocks. Consider High to mean very high and Moderate to be somewhat high.

The Cat column is for the category. J-LS stands for Late Stage Development. JS-NP stands for near-term producer. These are companies that are building their first mine. A near-term producer is within one year of production.

FD Mkt Cap ("MM") stands for fully diluted market cap in the millions of dollars.

My Estimated AUEQ ("MM oz") is my estimated gold equivalent in millions of ounces.

My Estimated Mkt Cap per oz is a calculation of the current FD market cap divided by the AUEQ ounces.

10% In-situ value ("MM") at $1750 gold is a calculated value of the number of AUEQ ounces multiplied by $1750. This column is 10% of that total.

Value ("MM") at $100 AUEQ per oz is a calculation using the number of AUEQ ounces and multiplying that by $100.

Upside at 10% In-situ is a calculation that compares the FD market cap to the 10% In-situ value.

Upside at $100 AUEQ Per oz is a calculation that compares the FD market cap to the value in the $100 AUEQ per oz column.

Okay, let me list each stock on the list in the same order as the list above. I will include the company description from the GSD database. Some of these descriptions are not recent, so keep that in mind. This list is only a starting point for you to do your own DD. (Company descriptions from the GSD (GoldStockData) database.)

Citigold Corp

Citigold Corp (CTOHF) stock has a 50-bagger potential at higher gold prices. They (claim to) have 14 million oz of gold at 14 gpt (nearly all inferred). Plus, they think they can find more ounces on their flagship Charters Towers mine in Australia. It is a past producing mine that requires an investment to lower costs. They have very little cash. This is a very high-risk speculation stock, but worth watching. This stock could be a 5 bagger very quickly if they get financing for the capex. It is permitted and shovel-ready.

Citigold has an FD market cap of $11 million, which is about $5 per oz for their future reserves. That makes it one of the cheapest gold stocks. Investors do not like the uncertainty. If you value this company at $2500 gold, it is extremely cheap. The long-term cash flow could be something like 100,000 oz x $1,000 = $100 million per year. That equates to a potential $1 billion market cap at higher gold prices.

It has several red flags. In 2015 made a deal with KIG to sell 60% of the project for $72 million. That was not exactly shareholder-friendly, although the deal did not close. Also, it has very ugly share dilution: 2.8 billion shares. It's trading at less than a penny. Plus, they are giving no guidance for the capex, production costs, or production oz at startup. This is odd, as it leaves investors in the dark. The only guidance they are giving is the goal to ramp up to 300,000 oz of low-cost production in 5 years.

Even with these red flags, it's worth watching with that much high-grade gold. Big, high-grade mines are very rare, and it could be very profitable. They think cash costs could be under $400 per oz using a mine optimizing investment. What's odd is that there is so little investor interest in this project even though it is big and economic and high grade. It's trading as if there is a legal issue, but I think this issue is management and uncertainty.

In a recent presentation, they said they need funding to begin producing, but they did not say how much. They also say they need to build a ramp, but do not say how long it will take. I think part of the lack of investor interest are the narrow veins, which adds risk. The recovery rates could be much less than anticipated. I've followed this stock for several years and management has not given very much guidance.

Note: Their OTC stock (Pink) in the US has very little volume, which adds risk. It's better to buy it on the ASX exchange.

8/23/2022: Citigold is ready for production (shovel-ready). Citigold requires a $120M investment to be in full production. The company is seeking either a JV partner to fund the capex, or a bank loan to fund the capex. A bank won't loan the money, so Citigold is likely stuck waiting for a good JV deal.

Batero Gold

Batero Gold (BELDF) (BAT:CA) has a low-grade open pit project in Colombia. It has a 3 million oz resource (.6 gpt). Surprisingly, Batero Gold has a low valuation of $7 million fully diluted. The stock has crashed 99% from $3.80 per share in 2011 to 5 cents today. Batero's Quinchia project has 3 deposits on 3,500 acres, and 8 drilling targets. The company has about $3 million in cash and no debt. Expect share dilution soon.

The company presentation is from 2019, and is only 7 slides, which is not a good sign. The good news is that they updated the resource for the La Cumbre oxide deposit to 730,000 oz (at 1.5 gpt). It should have higher recovery rates and could be a good starter mine. The Dos Quebrada deposit is 950 meters long and growing. La Cumbra is 700 meters long and growing. El Centro is smaller but of significant size.

This could be a 25+ bagger if they develop and operate the property on their own, which is their intent. They released a PEA in 2013, and it was marginally economic, with an after-tax IRR of 21% at $1400 gold. The capex was $110 million. That's a high capex for only 55,000 oz of annual production. However, the PEA was based on only half of the deposit.

It has a tiny market cap versus its value. At $5 per oz for future reserves, that is about as cheap as you can get for 2 million oz of resources. If gold prices rise and they have exploration success, this stock is going to do incredibly well from this tiny valuation. It is being valued as if gold prices will never rise and they will not get financing. One of the best things about this stock is one family owns more than 50% of the shares. Thus, I do not expect them to sell the project.

There are red flags. It has low economics and a high capex for low production. Plus, management has not made much progress. The PEA was back in 2013, and they have not advanced to a PFS. There is still a lot of work to do, and production is at least 3 years away. Until management makes some progress and shows a path to production, this is a high-risk stock. The good news is that it is currently economic at $1800 gold, and they can probably finance the project.

Eventually, they will have the motivation to build this mine, and if it gets built, the stock should take off. With their resources, they should be able to reach 75,000 oz of production. Plus, they have exploration potential. The big unknown is the location. Open pit mining is not always easy to permit in Colombia, due to environmental concerns.

There has been very little activity. They released an update in November 2021 and said they were working on the EIS and engineering scoping for an oxide heap-leach mine (those are not easy to permit in Colombia). They plan to update the PEA in 2022.

10/22/2021: NR ( News Release ) ...Finalizing all studies required by the national environmental authority -ANLA- (National Ambiental License Authority) to acquire the environmental license.

SRK CONSULTING - PERU SA completed and delivered, to the Company's satisfaction, the engineering studies for the deposits of low-grade and sulphide stockpile located at Matecaa, as well as stockpile of oxide-transition material, leaching pad, processing plant, agglomeration plant and waste dump located in La Perla area.

Engineering studies for Deposits of organic and inert material, located at north of pit, was performed by R&DC-COLOMBIA, which developed Pit's Geotechnical stability and seismic risk studies as well.

Minnova Corp.

Minnova Corp (formerly Auriga Gold) (AGRDF) (MCI:CA) is a potential producer if it can get financing. The company needs to raise $30 million to begin production approximately 12 months later. Minnova wants to begin production on its PL property (5,000 acres) in Manitoba, Canada, as soon as possible.

It is only a 600,000 oz (5 gpt) project, but they are going to initially produce 40,000 oz on the open pit (4 gpt), and another 10,000 (6 gpt) from the underground. Cash costs are projected to be about $700 per oz for the open pit (which is small) and $800 to $900 underground. The IRR is about 160% at $1500 gold. The NPV is $96 million at 5%.

They have another early exploration project in Peru (La Esperanza), but they are focused on PL.

Minnova has an FD market cap of only $5 million, and a good share structure of 51 million fully diluted shares. The problem is their balance sheet with its $1.6M in current deficit and $5m in total liabilities. This is a potential 10+ bagger if they can finance the mine, but that won't be easy. The red flag is the high capex versus the NPV, and a short mine life of 5 years.

A few positive notes: The location is excellent. The property is large with exploration potential. They think they can find at least 1 million oz, which will extend the mine life. They do not have much of a website, and I do not know when permitting will be completed. (Source: 11/4/2021: Phone call with CEO). Potential loan coming in 2022 for $20 to $25 million. No hedging, no streaming required.

The capex is around $30 million. The mill is rated at 1000 tpd. It was only used for 1 year. They plan to begin at 600 tpd, which is around 50,000 oz per year at 6 gpt.

They will begin underground mining and then add open pit mining (probably an additional 10,000 to 20,000 oz per year).

Mineralization is open in 3 directions. Likely a 1 million oz deposit. Excellent grade at both surface and UG.

They still need to permit for open pit mining (they will file an amendment after they begin mining UG, which will only take a few months to achieve).

The CEO owns 10% and does not want to dilute his shares into the ground. But expect significant dilution to pay for the capex. At least 50%. The CEO wants to be patient to finance the capex the best way possible for shareholders.

They likely will do test mining and bulk sampling, which will cost around $5 million in 2022. This will likely be needed to get the larger loan and satisfy the bankers.

Silver Elephant Mining

Silver Elephant Mining (SILEF) (ELEF:CA) (previously Prophecy Development) is a project generator focused in Bolivia. They have a large silver project called Pulacayo-Paca (8,000 acres). The good news is that it is a large project, the bad news is that it is in Bolivia, where investors could be timid to invest. They are drilling and think it could be a very large mine. In fact, they gave guidance of finding 300 million oz by 2022 (it did not happen), and it is currently only about 120 million oz (70 gpt).

Next to Pulacayo is another potential large discovery (Paca), which has 40 million oz (50 gpt). There are a lot of targets on both Pulacayo and Paca that need to be drilled, and the reason for their high expectations. Note that Pulacayo is a past-producing mine with a mill. It also has a feasibility study from 2012. The CEO thinks it could be permitted in 12 months if they decide to be a producer.

They recently acquired three more properties in Bolivia: Sunawayo (environmental permit is currently suspended) is 15,000 acres and Triunfo is 6,500 acres. Both are early exploration. Surface samples look really good and they plan to drill soon. The CEO is excited about these properties and thinks they could easily add another 100 million oz on top of the expected 300 million from Pulacayo and Paca. That kind of exploration potential makes Silver Elephant an exciting spec stock.

If you don’t mind the political risk of Bolivia and the assumed exploration expectations from their management, then this is a good spec stock. Two things that will help this stock are higher silver prices and good drill results, both of which are likely to happen. Also, large silver projects are rare, so they will get a lot of hype. Additionally, you can consider this an optionality play. Their silver in the ground is currently valued around 50 cents an ounce, plus they will find more.

My only concern is how they monetize their silver. If they do a JV or sell the project, then shareholders won’t get huge returns. I’m hoping the CEO realizes that silver prices are going higher and won’t give it away. He owns about 5% of the company that he paid $3 ((CAD)) and needs the share price to go higher for a big return. They did a 10-to-1 reverse split in 2022 and now will likely dilute shares to raise money to drill. It's always bad when an exploration stock does a reverse split. This will hurt investor sentiment with the stock. Plus, drill results in 2021 were not good. 3/30/2022: The CEO tweeted that they are working on permitting to begin production in Bolivia. We need to see a PEA.

Paramount Gold Nevada

Paramount Gold Nevada is developing two gold projects with 5 million oz. It was a spinout of Paramount Gold & Silver in 2015, which sold their San Miguel project. That left them with the Sleeper project in Nevada. Sleeper is very large with about 4 million oz, plus 35 million oz of silver (3 gpt). The problem is that it is low grade, and the recovery rates will be low for both. The economics are not great, with a 20% after-tax IRR at $1300 gold. The capex is $175 million to produce 100,000 oz annually, but production could increase. But it gets exciting at $1700 gold or higher. The IRR is 30% at $1500 gold.

Instead of waiting for higher gold prices to build Sleeper, they acquired Grassy Mountain in Oregon (1.1 million oz). They recently released a positive PFS with a 27% IRR, but the market has ignored it. They plan to mine the underground first at 50,000 oz (7 gpt) per year for 7 years. The cash costs are projected to be low at around $550 per oz.

They are not giving guidance for when permitting will be completed, so it could require another 1-2 years. Once permitting is completed, they plan to finance and build the mine. I would expect the build to be around 1 year because the capex is only $100 million. I like $100 million projects because they are large enough to create cash flow and not too large to finance.

Their FD market cap is only $37 million, giving them 10+ bagger potential. Their future reserves are valued at about $12 per oz. Once investors realize what they have, it should quickly double in value. Insiders own about 30%, which should be enough to prevent a hostile takeover. Usually, stocks this cheap with large resources get taken out. Let's hope that doesn't happen.

Once they get into production, they will begin to focus on advancing Sleeper. I think this stock is being overlooked. Their Grassy Mountain project has exploration potential to expand the mine life, plus Sleeper has exploration potential. Once they get some cash flow and become a producer, they are going to have significant growth potential.

Unigold Inc.

Unigold Inc. (UGDIF) (UGD:CA) has a large gold discovery in the Dominican Republic. Their Neita-Candelones property (50,000 acres) is approaching late-stage development. They have already found 2.1 million oz (inferred) and have 25 more targets. It is both an open pit (2 million oz at 1.5 gpt) and underground (100,000 oz at 5 gpt).

They need to release a PEA (preliminary economic assessment), but have not given guidance for when it will be completed. Instead, they have decided to do a phase one, small open pit oxide project (120,000 oz). In 2022, the need to complete a feasibility study and permitting. It appears they don't have the cash, so expect more share dilution. The capex is $36 million for a 3-4 year mine life. Once it is up and running, they will focus on their flagship project.

We don’t yet know the capex for phase two, or how long until production. It’s basically the same open pit, so permitting should not be difficult. It’s not a stretch to think it could happen in four years. But first they need to get their oxide project into production.

Eric Sprott owns 12% and management 7%. They don’t want to give it away. If I was Eric Sprott, I would buy it today and take it private. It has an FD market cap of $10 million and a solid flagship project that is likely to grow in size. It makes no sense that this is cheap other than potential permitting issues in the Dominican Republic, which has not been mining friendly of late. Goldquest Mining (GDQMF) (GQC:CA) has been having permit issues.

Goldshore Resources

Goldshore Resources (GSHRF) (SMDXF) (GSHR:CA) is a new company formed in 2021. They acquired the Moss Lake project from Wesdome Mines (WDOFF) (WDO:CA), who accepted shares of Goldshore, and currently owns 27% of the company. Management owns another 11%, making it tightly held. They are cashed up with about $7 million and plan to drill 100,000 meters over 2021 and 2022. They also plan to update the historical PEA and resource in 2023. This is likely a 3 million oz open pit project. It currently has 1.5 million oz of M&I and 2.5 million oz of inferred at 1 gpt.

They plan to begin the permitting process in 2022, which should take at least 3 years, although it is a past producing mine, which should speed up the permit process. They are giving guidance of doing a PFS in 2023 and possibly a DFS in 2024 if the PFS is economic.

I like the low valuation, excellent location, and high insider ownership. But the length of time until first pour is a red flag. I would not expect production until 2026. However, at this crazy low valuation of $24 million, it will likely be a 10 bagger long before first pour.

Aftermath Silver

Aftermath Silver (AAGFF) (FLMZF) (AAG:CA) is a developer with two projects in Chile (Challacollo, Cachinal) and one in Peru (Berenguela). It’s an exciting company that is undervalued. The downside is that it is a long-term investment. They won’t be producing for at least 4 years, and perhaps 5 or 6. Usually, you want to avoid development stocks that are this far away from production, because dilution is inevitable and it will reduce your upside potential. But for Aftermath, you might make an exception because there are so few silver stocks this undervalued. I say it’s exciting because they have three projects with more than 175 million oz at around 100 gpt.

None of their projects have a PEA or 43-101. However, all of them have historic resources that are somewhat reliable. They plan to do a 43-101 for Challacollo and Berenguela in 2021. They are cashed up with about $8 million. So, we can count on those being completed. They plan on producing a pre-feasibility study for Berenguela within 36 months, so by 2024.

Berenguela was acquired from SSR Mining in 2020 for $13 million, plus a 1.5% NSR. They owe $12 million, which is due over 6 years. This will be their new focus. It’s a 125 million oz (90 gpt) open pit project. They will likely mine about 100 million oz, perhaps a bit less. So, that is a 4 million oz a year project. That project alone gives them 10 bagger potential. The low-grade could require $25 silver to get financed/built. But in a few years, I think that is likely.

Plus they have two smaller projects in Chile. Challacollo has 45 million oz at 150 gpt, and will be their second mine. That mine could add 2 million oz per year. Then they have Cachinal, which has another 20 million oz at 100 gpt. For Cachinal, it has a 5% NSR and they only own 80%. But that is their third mine.

Eric Sprott owns 20% of the company and likes their chances (that creates high insider ownership). Plus, they will likely have success with exploration and expand the size of their mines. If that happens, this stock will blast off. This is a legitimate 10+ bagger, although it is a long-term investment for big upside. Their CEO said that water could be a challenge for Berenguela, but they are confident it can be resolved.

Their stock has crashed 80% in the past year. That is a red flag. Perhaps Berenguela is in a bad location in Peru or has a water issue. Stocks usually don't crash that hard without an issue. Plus, the company presentation is 8-months old. That is also not a good sign. 6/11/2022: Sold Cachinal, which was their smallest project with only 20 million oz.

NorZinc Ltd

NorZinc Ltd (NORZF) (NZC:CA) (previously Canadian Zinc) has a zinc/silver/lead project (Prairie Creek) in the Northwest Territories. They are heading towards production, but still need financing ($368 million capex). They have a large zinc/silver deposit (75 million oz at 4 opt). Production will begin at 120 million lbs of zinc ($1.30 lb), 100 million lbs of lead ($1 lb), and 2.5 million oz of silver. So, it will begin as a base metals mine. Once silver reaches $60, the silver revenue would match the zinc revenue (unless zinc prices also increase).

The after-tax IRR is only 15% at $18 silver. I would not expect them to get financing until silver reaches at least $25. They already have zinc off-take agreements and are ready to begin construction. They might need a partner, but are giving guidance they are going it alone.

If they sell, they will crush their shareholders from all of the dilution required to develop the mine. The share price was over $1 in 2011. Today it is at 3 cents. How many shareholders bought above 10 cents? Quite a few. One shareholder holds 44% of the shares and is a fund. They likely need a much higher price to break even.

I like their potential to find more silver and increase production because very little drilling has been done on the Prairie Creek property (20,000 acres and a 10-mile trend). They have a lot of high-grade zinc (9%) and lead (9%), which could make this a low-cost silver mine if silver prices ever blast off.

I'm projecting all-in costs of $10 per oz, which I think is conservative. Zinc and Lead combined sell for about $1 per lb. 220 million lbs x $1 = $220 million annually. Operating cash costs are projected to be less than $100 million in the first 5 years, thus by-product silver cash costs should be very low.

My worry is they will sell the silver in a streaming deal to finance the capex and then focus on zinc production (they are talking to Sandstorm). The capex is high, and they will be tempted to sell the silver in advance to finance the mine. That is my biggest concern. If they do a streaming deal, I will probably remove the stock from the database. If they don’t sell the silver, then will need to do a reverse split to dilute shares.

This stock is so cheap that it is better to wait and see how they finance the mine. If they don't do a silver stream to finance the capex, then it should triple in value very quickly once construction begins.

Permitting is completed. A feasibility study is due in 2022. They are planning to begin construction in 2023 (if they can get financing for the capex) with first pour at the end of 2024.

Management thinks this is a base metals mine. 50% Zinc. 30% Lead. 20% Silver. They don't even split out the silver revenue. They think zinc/lead will have demand. I still think they will give away the silver in a stream to finance the capex. The CEO seems to be very bullish zinc and lead, and downplays the silver. At current prices, silver is 20% of revenue, but that could change quickly if silver takes off.

Gowest Gold

Gowest Gold (GWSAF) (GWA:CA) is advancing to production in Canada. They only have one project (North Timmins), but it is large (27,000 acres) and has 15 targets. The Bradshaw deposit is a 1.2 million oz (6 gpt) resource that looks good. It is a high-grade surface and underground mine, where the grades are increasing at depth. The North Timmins property is located in the Timmins gold district in mining friendly Ontario, Canada. The after-tax IRR is 30% at $1,300 gold, making it economic.

The PEA (preliminary economic assessment) called for 95,000 oz of annual production with a $60 million capex. They have reduced that to 50,000 oz (40,000 oz after the gold stream) at a $22 million capex. When they expand production to 90,000 oz (phase 2), this stock should do extremely well from their low valuation, although they will need to have exploration success to expand the mine life.

They are currently trying to obtain financing for the phase 1 capex. They also need to fund debt on their balance sheet, with about $8 million due out of $16 million in debt. This debt overhang is part of the reason they have not been able to finance the capex. I would expect share dilution this year because of their debt issues which adds risk.

Gowest is very cheap, but management is not stellar. They have been consistently diluting shares (including a 10 to 1 reverse split in 2019). The share price recently crashed to a 5-year low at 11 cents. Today it is at 14 cents. Another red flag is they only have a 75% JV option on about 1/3 of their property (however, management said that this section is not a high priority target). They do have full ownership of the Bradshaw deposit.

If they can get financing and become a producer in Canada, the upside potential is significant. Then, if they can expand production, it could be a high flyer from this level.

8/26/2021: Hired a new CEO. He has operational experience. Hopefully, he will build and operate their mine.

1/24/2022: Raised $19M from a loan and share dilution.

7/4/2022: Looks like they have not paid their bills. They are being sued for $7M by a contractor: Gowest Gold Announces Receipt of Statement of Claim from Cementation Canada Inc., by @newsfile .

1911 Gold

1911 Gold (AUMBF) (AUMB:CA) is a new company that was able to consolidate the Rice Lake properties (125,000 acres) in Manitoba. It includes the True North mine (1 million oz at 5.8 gpt) and 1200 tpd permitted mill. This was owned by San Gold, which was valued at over $1 billion in 2012, when it was producing 75,000 oz. Plus, the Ogama-Rockland property has 300,000 oz at 8 gpt.

The new owners have to be excited. They acquired it for a bargain price. They have no debt and only 70 million FD shares with a small FD market cap of $19 million. I'm not sure why investors dislike it so much. The mill alone is worth much more than their FD market cap.

Investors seem to be valuing it as an exploration company. However, I think it is a development company. The CEO was the CEO of Tahoe Resources and knows how to build and operate gold mines. He said that if he finds another 200,000 oz, he will restart the mine. However, it will require about $30 million to refurbish the mill (that should be easy to finance at current gold prices). The True North mine is fully permitted.

They are currently cashed up with about $8 million and are drilling 4 target areas at Rice Lake (Tinney, Bidou, Wallace, and Currie's Landing). In addition to True North, they have two properties in Ontario (Tully and Denton-Keefer), both of which are early exploration. And they have significant exploration potential on their large Rice Lake property.

Goldsource Mines

Goldsource Mines (GXSFF) (GXS:CA) is advancing a gold project in Guyana (South America). They plan to produce around 70,000 oz annually. A PFS will be completed in 2022 or early 2023. Until then, it’s hard to guess their production and cost estimates. My guess is the capex will be around $150 million, with cash costs around $750 per oz.

If the PFS is solid, they will begin permitting in 2023, then do financing and construction in 2024. It’s a long wait until first pour, and the reason it is so cheap.

The Eagle Mountain property has around 1.7 million oz (1.1 gpt) and should grow (12,500 acres) with exploration success. I have confidence they can develop Eagle Mountain. Plus, they recently had a new discovery hole of 123 meters at 1.9 gpt. They have been doing a lot of trenching that has returned good grades. There seems to be a lot of surface gold on their property.

Over 90% of their M&I resources is within 50 meters of surface. That will not be expensive to mine. I think this is a 2 million oz property. The key will be if they can make it to first pour without selling it to a larger company? Once we get to mid-2023, it is going to look extremely cheap at its current valuation.

Guyana is mining-friendly, and perhaps the best place to mine in South America.

Maritime Resources

Maritime Resources (MRTMF) (MAE:CA) has a past producing property (Green Bay) in Newfoundland (2000 to 2004). It is about 1 year away from restarting production with financing. They completed a PFS in 2017, and it is economic with about a 35% after-tax IRR at $1300 gold, with cash costs of only $500 to $600 per oz. The capex is only $57 million to produce 60,000 oz annually. A feasibility study and permits are due in 2022. Production is likely in 2023.

It is two deposits: Hammerdown and Orion. They plan to begin production at Hammerdown for the first 5 years and then expand to Orion. The resource is 1 million oz at 6 gpt (500,000 oz M&I). That's a pretty good starter mine. It's on 12,000 acres, so they could extend the mine life with exploration success. Drill results have been excellent at Orion (4 meters at 26 gpt near surface). I don't know why investors hate it, with the FD market cap at only $26 million.

They recently added another larger property next to Green Bay called Whisker Valley (50,000 acres). This gives them significant exploration potential to extend the mine life. I like their chances. Anaconda Mining tried a hostile takeover in 2018 and failed due to high insider ownership (40%). I think this is a good sign of management's commitment to shareholders.

The one red flag is their high share dilution and low share price. To build the mine, you can expect them to dilute about $20 million in shares. That's about 100 million shares if their share price does not rise. Plus, companies tend to want a bit extra cash as a backup, which could be another 50 million shares. That's a lot of potential dilution. The good news is they are finding gold. If they can double their resources, the dilution won't matter.

Bunker Hill Mining

Bunker Hill Mining (BHLL) (previously Liberty Silver) began trading in 2017. They have done a good job progressing with their plans to return the Bunker Hill mine in Idaho back to production. They have raised $50 million in debt, and the rebuild is underway. The mine is scheduled to return to production in H2 2023.

Investors are not excited, giving them only a $37 million FD market cap. If they can hit their target of H2 2023 production and not go too far over budget, they could be a highflyer. But the risk is substantial. They need silver prices to rise, and they need them to hit their targets. I expect capex overruns and share dilution, but if they only need to raise another $15 million or so, and silver prices rise, they should be fine.

They think they can find 150 million oz (10+ opt) AGEQ, including lead and zinc. If they find half that much, this stock is undervalued. Note that there was a study done in 1991 that identified 59 million oz (11 opt) AGEQ of reserves. The mine has 160 kilometers of tunnels, 28 levels, and 40 known ore bodies. It was last mined in 1981.

They have to pay the EPA $19 million over 7 years. Some of that money will likely come from share dilution unless silver prices rise. The good news is they own 100% of the mine, and I don’t think there is an NSR. Also, the location is ideal, in a large mining district in Idaho. Overall, it looks like a pretty good spec stock at its current $37 million FD market cap. It would be a top pick, but there are a lot of unknowns, and management is a question mark.

For further details see:

Gold And Silver Development Optionality Plays (Part 1 Microcaps)