BTG - Top 3 Gold And Silver Stocks With Insider Buying: Time To Invest?

Summary

• Insider buying in the gold and silver mining sector can be a sign of potential buying opportunities.
• Junior gold miners are presenting investors with the best buying opportunities right now; juniors are outperforming and playing catch up.
• Junior gold and silver mining companies may offer high potential returns in 2023 as they are undervalued.
• Ready to join the hunt for gold and silver stocks with insider buying activity? Here are three companies to evaluate.

Top 5 Gold And Silver Stocks With Insider Buying: Time To Invest?

Are you familiar with insider buying? It's when company insiders, like the management team or board of directors, buy shares of the company's stock on the public market or participate in an equity financing round. They usually only buy shares if they think the stock is cheap and the price will rise.

I've been tracking insider buying for over a decade, and while it's not a perfect science, I've noticed that insiders tend to time their purchases pretty well. (I share this information with subscribers to my marketplace service, although it's been a while since my last update!)

For instance, I previously published a subscriber-only post called " Gold Miners: Signs of a Bottom Are Here ," where I explained why I believe miners are undervalued and carry less risk as an investment compared to previous corrections.

While insider buying isn't a substitute for thorough due diligence, tracking it can help investors spot potential buying opportunities. And the good news is that insider buying and selling is public information (unlike insider trading, which sounds the same but involves making trades based on non-public information, which is illegal).

Why gold stocks, and why now?

I'm a long-term investor in precious metals stocks (gold in particular) for many reasons, including, but not limited to:

Gold mining companies are profitable, even with some rising costs from inflation. It typically costs major producers around $1,100 to $1,250 to produce one ounce of gold (all-in sustaining cost), so there are still strong profits of around $600-$700 per ounce with gold trading above $1,900/oz.

For example:

• Barrick Gold (GOLD) produced $758 million in operating cash flow in its most recent quarterly earnings , even with gold prices more than 10% lower ($1,722/oz) than current spot prices. Its strong financial position allowed for a base dividend of $0.10 per share and a performance dividend of $0.05 per share, totaling $0.15 per share for the quarter. Plus, Barrick has deployed a $1 billion share buyback program.
• Agnico Eagle Mines ( AEM ) is a similar story, reporting $575 million in operating cash flow , and $79 million in net income last quarter; for the last nine months, Agnico has generated $1.7 billion in cash flow, covering the $1.1 billion it has used in investing and financing activities.

I believe gold miners are set to report strong earnings across the board in Q1 2023, which should boost share prices.

They are in strong financial shape overall. The gold mining sector is better prepared to handle potential declines in gold prices compared to the 2013 sell-off.

• For example, Barrick Gold had over $10 billion in debt in 2013. Now, Barrick has a net cash position of $145 million ($5.24 billion in cash vs. $5.09 billion debt) and is actively buying back its shares and paying a dividend.
• Agnico is in a similar position, with cash and cash equivalents of $821 million and just $1.24 billion long-term debt as of the end of its last quarter.
• The sector as a whole has $6 billion in net debt, compared to $32 billion in 2013, according to a study by Metals Focus.

In addition, many gold and silver miners now pay a dividend, and many are increasing the dividend payout consistently.

• For example, Newmont Mining ( NEM ) stock yields over 4%, B2Gold ( BTG ) yields 3.97%, and Barrick yields 3%, all higher than the S&P 500's dividend yield of 1.74%.

They’re undervalued compared to the price of gold. Gold mining stocks ( GDX ) offer the potential for leverage to the price of gold and should outperform in 2023. This means that the value of gold mining stocks can potentially rise more than the price of gold due to the miner’s ability to extract and sell gold at a profit.

The ratio of the price of gold mining shares compared to the price of gold is currently lower than historical averages.

For example, the ratio of the HUI index (a benchmark index for gold mining stocks) to the price of gold trades at .13, well below its 30-year average of .25-.30. This low reading indicates that gold mining stocks are relatively inexpensive compared to the price of gold.

Juniors remain historically cheap. The smaller gold and silver development and exploration companies (sub-$500 million market cap) are even cheaper than the mid-tier and senior producers and look like very compelling bets in 2023.

For example, the junior miners ETF ( GDXJ ) still trades more than 80% below its 2011 highs! But the juniors have started to make up ground, with the GDXJ returning 11.68% year-to-date - outperforming gold ( GLD ) and gold miners, as of writing on Jan. 23.

Now, let's take a look at some recent insider buying activity. You can scroll down to the key takeaways section for a quick summary.

[To track insider trading, I use MarketBeat's website, SEDAR, CanadianInsider.com, and I follow MinerDeck's weekly reports on Twitter. The figures and charts shown in this post are in Canadian dollars, unless stated otherwise.]

5 Gold & Silver Stocks With Insider Buying

1. Dolly Varden Silver

Dolly Varden Silver ( DOLLF ) is a mineral exploration company with a mission to uncover precious metals in the mining-friendly jurisdiction of the Golden Triangle in British Columbia, Canada.

The company's primary focus is on advancing its 100% held Kitsault Valley Project, which spans a 163 sq. km. area and includes the high-grade silver and gold resources of Dolly Varden and Homestake Ridge, as well as past-producing Dolly Varden and Torbrit silver mines.

Dolly Varden believes its Kitsault Valley Project has the potential to yield a large precious metals deposit thanks to its location on the same structural and stratigraphic belts that host other successful, high-grade mines such as Eskay Creek and Brucejack.

Additionally, the Big Bulk property within the project is prospective for porphyry and skarn-style copper and gold mineralization, similar to deposits found at Red Mountain, KSM, and Red Chris.

Insiders appear to agree with this investment thesis, as they have been buying shares lately:

• On Dec. 23, the senior silver miner Hecla Mining ( HL ) privately acquired 2.33 million shares of Dolly Varden Silver at a price of C$.83, as part of Dolly Varden's $22.6 million private placement financing. This allowed Hecla to maintain its 10.21% ownership stake.
• Fury Gold Mines owns a 23% stake in Dolly Varden while investor Eric Sprott holds a 10% stake, according to company documents.

Dolly Varden is well-financed following this latest capital raise. Its past exploration results include stellar assays such as 27.44 g/t gold and 463 g/t silver over 9.13 ( 11/29/22 ) and 1,049 g/t silver over 3.60 meters ( 11/21/22 ).

However, investors should note that since its an explorer with no cash flow from operations, Dolly Varden is highly likely to raise additional funds via share issuance in the future. So shareholder dilution is certainly a concern to keep in mind.

Dolly Varden is a high-risk, high-reward gold and silver explorer worth taking a close look at in 2023. I believe the company has a great shot at success this year as it ramps up drilling to expand its resource.

2. Nighthawk Gold

Nighthawk Gold ( MIMZF ) is a Canadian-based gold exploration company with a promising portfolio of assets. The company owns 100% of over 930 km2 of land in the Indin Lake Greenstone Gold Belt, located approximately 200 km north of Yellowknife, Northwest Territories, Canada. Its primary focus is on advancing several highly prospective gold exploration targets, with the Colomac Gold Project being one of the most notable.

The Colomac deposit comprises of the Colomac Centre and Satellite deposits and has mineral resources of 58.2 million tonnes grading 1.44 g/t Au for 2.69 million ounces in the indicated category and 19.7 million tonnes grading 2.10 g/t Au for 1.33 million ounces in the inferred category.

However, this 4+ million ounce resource estimate is still growing. For example, in November Nighthawk says it struck 916 g/t gold over .50 meters at the Cass deposit. This indicates the potential for even more gold to be discovered.

With a district-scale land position in a region known for its gold potential, Nighthawk Gold Inc. is a company worth keeping an eye on for those interested in gold exploration.

Insiders have been acquiring shares aggressively lately. Here's a summary of recent buying activity:

• Insiders have bought a net of 1.41 million shares over the past three months valued at close to C$1 million, according to TMXMoney and MarketBeat.
• Nighthawk's biggest net purchasers of stock include:
  • Robert Douglas Cuddly (774,500 shares purchased at prices between C$.36 and C$.39);
  • Keyvan Salehi (355,000 shares bought at C$.31 and C$.39);
  • Michael George Leskovec (145,000 shares acquired at C$.34).
  • Kinross Gold ( KGC ) and Osisko Development are also major shareholders of Nighthawk Gold.

One downside to investing in Nighthawk Gold is the strong likelihood that it will need to raise additional dilutive funds in the future via share issuance. Nighthawk is a gold explorer & developer that's nowhere near production, and therefore has no cash flow from operations.

Nighthawk Gold is a speculative junior gold developer, but it's stock looks like it's trading at very cheap levels. For one, Nighthawk points out in its company presentation that it has an enterprise value of approximately C$33 million and trades at an EV/resource of $6 per ounce; most explorers trade north of $20/oz. I view the stock as a speculative buy here.

3. Orezone Gold

Orezone Gold ( ORZCF ) is a Canadian mining company that operates the Bomboré Mine, an open-pit mine located in Burkina Faso, West Africa. The company is currently focusing on mining and processing Phase I near surface free-dig oxides, with a planned annual throughput of 5.2 million tonnes. But that's not all the company has in store.

Orezone believes that Bomboré has a significant underlying sulphide resource that could support a substantially larger Phase II expansion to produce 250,000ozAu annually. To that end, the company has an ongoing 77,000-meter infill and expansion drill program.

Once this program is completed, the company plans to issue an updated mineral resource and reserve statement, as well as a feasibility study, as part of the Phase II expansion. This process is expected to be completed in H2 2023, followed by a production decision.

Recently, Orezone provided favorable 2023 production and costs guidance.

The junior gold miner aims to produce up to 155,000 ounces of gold at $975 - $1,075/oz AISC. This guidance is based on the positive results it saw in December.

Insiders at Orezone Gold have been aggressive buyers of its shares in the public market over the past few months.

Presumably, insiders believe in Orezone's upside potential:

• Insiders spent approximately C$186,000 acquiring Orezone shares last quarter.
• Orezone's CEO Patrick Downey has been a major purchaser of shares, buying 150000 shares over the past 3 months, at prices between C$1.22 - C$1.25. Downey holds 5.167 million shares, according to filings.
• In fact, insiders now own 5% of its shares.

Orezone has a lot of positive momentum on its side entering 2023. The company was able to bring Bombore into commercial production on-time and under budget, and it's targeting a profitable 2023 while it pushes an aggressive expansion plan forward.

Orezone also appears to be a takeover candidate. I can easily see a mid-tier or senior gold miner, like Endeavour Mining ( EDVMF ) or Barrick Gold, put in a bid to acquire the company.

The only drawback I see to Orezone is the fact that it operates in Burkina Faso, West Africa, which is not the greatest mining jurisdiction. It poses several risks such as political instability, security concerns, and regulatory risks, which could affect the company's operations, production, and financial performance.

Another drawback is the possibility of additional shareholder dilution. While Bombore was fully financed in 2021, Orezone does have $86 million in debt compared to just $7.3 million in cash (as of its Q3-2022 earnings report ). So, if production at Bombore hits a snag, there's the possibility that Orezone may need to tap the markets for additional financing.

However, I think the reward potential outweighs the risk here, so I'm inclined to join insiders and purchase shares.

Gold & Silver Insider Buying: Key Takeaways

Here's a summary of this article:

• I think insider buying in the gold and silver mining sector can be a sign of potential buying opportunities. Insiders such as the management team or board of directors usually buy shares when they believe the stock is undervalued and the price will rise.
• The gold mining sector is in strong financial shape, with less debt than 2013 and many companies are now paying dividends. Additionally, gold mining stocks are currently undervalued compared to the price of gold and have the potential for higher returns.
• Junior gold and silver mining companies, with market capitalizations under $500 million, are particularly undervalued and may offer high potential returns in 2023.
• Dolly Varden, Nighthawk Gold, and Orezone Gold are high-risk companies, but they all look like potential buying opportunities here.

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