CA - Gold & Silver: Don Durrett's 3 Easy Picks 2 Favorites And 4 ETFs

2023-11-27 07:30:00 ET

Summary

• Gold and silver expert Don Durrett recommends three "easy" picks for investors: Montage Gold, Heliostar Metals, and West Red Lake Gold.
• Durrett suggests that ETFs are a good option for investors who don't want to analyze individual mining stocks or own a large number of stocks.
• Durrett highlights Avino Silver and Hummingbird Resources as two undervalued stocks with significant potential for growth.

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Gold and silver expert Don Durrett shares 3 'easy' picks (0:36). Unless you want to own 25 stocks, it makes more sense to own 4 sector ETFs (4:05). Don's two favorite miners (6:15). This is an abridged version of our recent conversation .

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Transcript

Rena Sherbill: Don Durrett , welcome to Investing Experts Podcast. It's great to have you on the show.

Don Durrett: So I'll start off with Montage Gold ( OTCQX:MAUTF ). So the management team came from Red Back Mining, beautiful management team, one of the best in the business in the junior space. I really like these guys. They have 5 million ounces of gold. Last year gold was at 1650 last year at Beaver Creek, and basically couldn't get the bankers to loan them the money to get the finance and the CapEx.

I go to the Beaver Creek and they tell me, Yeah, we got it, Don. We're going to build this mine. I was, like, so excited. The market cap is $70 million. It's a 5 million ounce project. They're going to mine 300,000 ounces a year with an AISC of $1,000. It's just a total slam dunk. I don't see how this thing doesn't work. That's one example. That's what I mean by easy.

Another one would be Heliostar ( OTCQX:HSTXF ) down in Mexico. They stole, basically, they didn't steal it, but Argonaut ( OTCPK:ARNGF ) wanted to get rid of their Mexico properties. So Heliostar, they got a hold of their Ana Paula Mine down in Mexico, which is a beautiful mine that was discovered by Newstrike, and everybody was excited about this discovery that Newstrike made, then Newstrike drilled it out, then Newstrike sold it to Timmins, Timmins drilled it, added to it, and then they got into trouble, and they couldn't advance its production, and they sold it to Argonaut.

Then Argonaut, they drilled a little bit and it was actually put in a decline. It was kind of an advanced project, and then Argonaut ran into some problems, and they never advanced it. So you have three companies who are advancing this project. It was a good project, Ana Paula. And then Argonaut decides to sell it. They gave it to Heliostar. Heliostar didn’t pay very much for it.

Now, Heliostar is drilling it, and they're shocked at how good the drill holes are. It's basically, it's another one. It's like the Montage story. It's kind of a slam dunk. I mean, it's economic at current prices. I don't really see gold going down here. That's another beautiful one, which I consider easy, if you will.

And the next one would be West Red Lake Gold ( OTCQB:WRLGF ). West Red Lake Gold is another story, it's another similar story to Montage and Heliostar, where well, they acquired the Madsen Mine from Pure Gold and Pure Gold kind of messed it up.

They had a really nice mine. They built this beautiful mill, brand-new, and they only – I think they only had production for, like, six months, and they just ran out of money, and they just went from ramp up to bankruptcy in, like, six months. It was an unbelievable story.

And then West Red Lake Gold acquired that for, I think, they paid, like, $6 million plus they gave the bankruptcy, the guy that, Sprott, who basically owned the loan, they gave them 22% of their company. And now they're going to drill for 18 months and restart the Madsen Mine, but it gets better. So the Madsen Mine has a lot of exploration potential on it.

So you basically – they got all that for basically free. We don't know how many ounces they're going to find on that mine. And on top of that, they owned – West Red Lake owned a deposit called Rowan that's really, like, not that far away. And they're going to truck the ore from Rowan over to Madsen. And Rowan just had a drill hole of eight meters at 70 grams per ton, which is a gram meter hole of 560, and it was already an 800,000 ounce deposit.

So that one drill hole probably doubles Rowan. So you got 1 million plus of ore at Rowan that they can just truck over to the Madsen Mill. So those three – that's just three fantastic examples of what I call easy.

RS : What are your thoughts on ETFs for investors?

DD : Yeah, I think ETFs – I wrote a book How to Invest in Gold And Silver . It's got really good ratings. I've updated it nine times. Nobody else had written one. It's the only book that teaches you how to invest in gold and silver. And so I talk – I have a chapter on ETFs.

ETFs make a lot of sense for people who don't know how to analyze mining stocks. That's number one.

Number two, they make a lot of sense for people who don't want to own, say, 25 stocks. If you don't want to own 25 stocks, then it makes much more sense to own like 4 ETFs. You have (GDX), you got (GDXJ), you got (SIL) and you got (SILJ).

And then – and there's a couple others in, there is too. Now there's probably three or four additional ones. Sprott has one. There's another one in England, I think. And so you have, like, six, seven, eight of these ETFs you could choose from. You can just buy all these ETFs.

So the one thing about ETFs, they're not super pricey, they're like a half a percent a year on expenses, which is nothing. So I actually own four ETFs. I think they work great for hedging. So ETFs make a lot of sense. But if you want to make big alpha, ETFs aren't going to work.

As far as I'm concerned, it's pointless to own 10 or 20 mining stocks because that's not enough for diversification, you're actually exposing yourself to too much risk. You're allocating too much.

I actually think you should have at least 30 in order to do proper allocation, proper risk management. If you're going to do 10, 15, 20 stocks, you have to be a trader. And in order to be a trader, you got to be kind of a special individual. It's not easy to trade stocks.

If you're going to be a trader, you have to get up every single morning and be ready to trade a stock. If you're not ready to trade a stock on a daily basis, especially involved to miners, you shouldn't be trading miners. It takes a special personality and it doesn't fit me.

But if you can trade, you're going to make much more money than me. The traders are always going to make the most money, the good traders. I mean, we've seen guys take $10,000 and move it to a $1 million because they are good traders. I don't have that personal mentality.

I will mention my two favorite names because these two names just make no sense.

The first one is a Avino Silver (ASM). So Avino Silver is trading at about $0.50, which is just unbelievable. And market cap they have 350 million ounces of silver equivalent after they acquired the La Preciosa from Coeur ( CDE ) and it’s near their mill and all they have to do is basically permit this thing.

They don't have to spend very much on CapEx. They're going to build a decline and then from the decline, they're going to do three – they already know, it’s been drilled out. They already know where the silver is. They're going to do three different areas from the one decline.

So it's not going to cost a lot and they're going to do 500 tons per day. So they're basically going to ramp up in three phases. Keep adding 500 tons a day. And it basically is slam dunk once that, you know, they're going to get their permits, but we have to wait probably 18 months before they go into production.

But it prints as a 50 bagger. I mean, this thing is just unbelievably cheap. It's the cheapest producer out there. I don't see how you don't make a boatload of money if silver goes to $50 silver because they have - they just have so much silver, like I said, 350 million ounces of silver equivalent and they're only producing, I'm not sure exactly how much - I think maybe 3 million ounces a year, but they're going to ramp that up to 7 million. If you do the free cash flow, it's just, it’s fairly stunning.

Once they get to 5 million, 6 million, 7 million ounces, but with that much silver, they're eventually going to get to 7. And at 7 million ounces that's where they print as a 50 bagger. That one is just insanely cheap. That's the cheapest producer out there that I'm aware of.

Back in 2009, there were no 50 baggers like this on the table, when you get these big corrections. So Avino is just insanely cheap.

The other one that’s insanely cheap is Hummingbird (HUMRF). Nobody wants to own this stock. They're ramping up their second mine. They're going to - next year they're going to be a 200,000 ounce producer generating a lot of free cash flow and they're valued under $100 million.

I've been waiting for their Board just to throw in the towel and say, look, nobody's going to buy our stock. Let's just give it to somebody else because it's just, it's basically a 25 bagger.

If you value companies the way that I do, if you have a 200,000 ounce producer with really solid margins, let's say they're all in as $1,500. So that's basically $1,500 at $3,000 gold, $1,500 per ounce, 1,500 times 200,000 I think it’s $300 million. So if you just give it a five multiple, that's $1.5 billion. So that’s with the five multiple. So if you get it 10 multiple, it's $3 billion.

And they're valued under 100 million. So if gold goes to 3,000 the leverage on Hummingbird is just insane.

But usually when you see - now Avino, I don't think Avino will get taken out. I don't think that company - they've been around for a long time. I think they're going to stick around. I'll be very disappointed if they sell because they know what they have.

But Hummingbird, I think Hummingbird will probably get taken out. It's just - companies are just, they just never perform like this, but I have my fingers crossed they don't, but it - one thing about Hummingbird that kind of blows my mind is, they don't support the North American market.

They're on the London Exchange and they trade in the Pinks in the US and they're a mid-tier producer. And they don't trade in Canada. And I've told them, come on man, you need to trade either QB or QX.

I'm going to send them an email today. I'm going to send a link to this. I'm going to send them a link to this and say, listen to this podcast, what I said about you guys, about how cheap you are and how you're going to throw in the towel and your Board is going to throw in the towel because -- and come on, support the North American market. This is ridiculous.

To be QX on the OTC is hardly any money at all. All you have to do is send in your financials to the SEC. It's ridiculous that they don't support it.

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