Top Miners' Share Prices Compelling as Growth Continues

Top Miners’ Share Prices Compelling as Growth Continues

December 7, 2021 ( Newswire) Adrian Day, in the Global Analyst newsletter, reviews developments at several companies, three of his favorite large miners and one favorite junior, all of which he says are at very compelling levels to buy. Pan American Silver Corp. (PAAS:TSX; PAAS:NASDAQ) reported a somewhat disappointing quarter, though with optimism on the period ahead, as it missed earnings expectations mainly on lower-than expected production (which included some net inventory build), and costs higher than expected. This was the fifth quarter in a row with disappointing results on the back of operational difficulties.

Costs were higher as foreign currencies (of countries in which it operates) appreciated. In addition, ongoing COVID restrictions added to costs. Gold all-in sustaining costs (AISC) were $1,176, up 16% on the quarter, while silver cash costs were $16.30, flat on the quarter but higher than expected.

Though the company lowered its full year guidance, the guidance still indicates very strong production in the current quarter, which the company confirmed. The ventilation shaft issues at La Colorada have been fixed, resulting in lower on-going capital and higher throughout. At Dolores, another mine that has experienced difficulties, a new pad should see higher production though not till Q1.

At La Colorada skarn deposit, the company reported results of recent drilling, 39 holes in all, both in-fill and step-out holes. These are some of the highest-grade intercepts drilled here. Because of the potential for expansion, the company decided to postpone the preliminary economic assessment planned for completion by the end of the year. CEO Michael Steinmann called them “really astonishing drill holes,” exclaiming “the width, it’s amazing.” The company now considers it has potential to increase the resource significantly. Another 60,000 meters of drilling is planned for 2022.

Game-changers await the go-ahead

The company has available liquidity of $815 million, including $315 million in cash and minimal debt. The operational difficulties that have plagued Pan American at several mines are all in the process of being resolved. It has significant growth potential at three properties; in addition to the La Colorada skarn, it has two projects currently awaiting permission to mine, Escobal in Guatemala, and Navidad in Chubut, Argentina. At the former, the government-led consultation process is now advancing again, after several COVID-related delays. There is no timetable.

We like Pan American for its top management, reasonably conservative approach, and game-changing upside from these two projects, not valued in the stock price. Pan American is a top buy at this price.

Barrick transformation continues, with prospective exploration

Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) reported slightly better than expected, with production up on better-than expected recovery from Nevada Gold Mines (following the Goldstrike mill failure), while AISC declined, at $1,034, due mainly to lower sustaining capital expenditures. It is expecting a strong fourth quarter, with ongoing ramp-up at Valadero and Bulyanhulu; continued recovery from the Goldstrike mill failure; and good contributions from copper operations. Costs remain contained, and Barrick is seeing robust free cash flow. This is good news after a somewhat disappointing first half.

In addition to increased production from some existing mines, it has several prospective exploration projects; in particular, the area between Turquoise Ridge and Twin Creeks, in Carlin, has identified some very promising targets. It has also recently made an exchange of assets with i-80 Gold in order to consolidate the South Arturo property in the Carlin Trend.

The third and final $250 million capital distribution promised in 2021, from several asset sales, will be little over 14 cent per share, and payable mid-month. The company is essentially net-debt neutral.

Barrick lagging in Canada

While other companies are making major acquisitions in Canada – recently, for example, Newcrest’s purchase of Pretium and Agnico’s acquisition of Kirkland – Barrick, despite its avowed intention of increasing exposure to Canada, has so far been taking very incremental steps. It recently, for example, acquired an option on a property in Ontario (from Kenorland). CEO Mark Bristow talks of “adding or consolidating” ground in one of more of Canadian gold belts.

As part of what Barrick sees as its more realistic emissions targets than some, it has a trial of electric trucks in Nevada. Bristow somewhat caustically comments, “they are great when they work; (it’s) essentially an R&D laboratory.”

The second largest gold producer in the world, Barrick has made great strides since it acquired Randgold, bringing Bristow as CEO with it, on operations and the balance sheet, as well as completing a merge of Nevada operations with Newmont. It has world-class assets, a solid balance […]

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