Gold Season in Full Swing
It's easy to forget gold started 2015 under $1,200 per oz.
On January 2nd an ounce of gold was worth $1,172. This morning it is worth $100 more than that, after spending chunks of time last week above $1,300.
Gold companies and their bankers have clearly been awaiting this opportunity. Last week six companies announced bought deal financings, raising a total of $790 million (!).
Funds raised best a billion if you expand the time frame by a few days to include Yamana Gold's $260-million deal and Lydian International's $16.5-million raise.
The companies that announced deals last week were:
- Romarco Minerals: $300 million, shares only (no warrants)
- Detour Gold: $141 million, share only (no warrants)
- Osisko Gold Royalties: $200 million, shares and warrants
- Primero Mining: $75 million, convertible debentures
- Asanko Gold: $40 million, shares only (no warrants)
- Richmont Mines: $34 million, shares only (no warrants)
The flood of financings is a strong reminder of two things. First, seasonality is very real. Miners know about it and have likely been planning for months to wait until the January boost to raise money.
Second, while there are good reasons to think gold still has short-term legs, companies needing cash know better than to wait a few weeks in hopes of higher gold. After the bear market we've been through, they are making hay while the sun shines – which is what investors should be doing too.
It's also interesting to see that most of the recent deals did not include warrants – there was enough demand for shares that no sweetener was needed, even though the discounts-to-market were 10% or less.
The only company that did sweeten its financing with warrants was Osisko Gold Royalties, which didn't really need the money as it already had $270 million cash and no debt. The product a merger with Virginia Mines, the new Osisko Gold holds royalties on two operating mines and is seeking to add others to its suite – it was raising 'opportunity' cash rather than cash to build a mine or service debt.
Financings aren't the only way to take advantage of seasonality. News flow is also up as companies try to get the best share-price bang for their buck by releasing into a good market.
One of my favorites is up today after pulling precisely such a move: Rockhaven Resources announced an initial resource estimate for the Klaza project in Yukon. I had predicted a million oz. gold at a good grade, perhaps better than 5 grams gold per tonne. Rockhaven pretty much responded.
Klaza is now home to 7 million inferred tonnes grading 4.19 grams gold and 96.2 grams silver, for 948,000 oz. gold and 21.8 million oz. silver based on a 1.5-gram-gold cutoff grade.
Raising the cutoff grade to 3 grams gold boosts the average deposit grade to 5.91 grams gold and 120.5 grams silver while keeping the counts strong at 727,725 oz. gold and 14.8 million oz. silver.
Importantly, the resource extends to approximately 310 metres depth – but the gold and silver at Klaza run much deeper.
Of the nine mineralized structures at Klaza Rockhaven has focused on two, known as BRX and Klaza. Each of those divided into two by a post-mineral fault, creating Western BRX and Western Klaza.
At Western BRX, arguably the strongest of the four areas, the resource now extends to 320 metres. But last summer Rockhaven drilled one deep hole. And hit: 16.29 grams gold, 1,435 grams silver, 5.57% lead, and 6.23% zinc over 1.4 metres…at 520 metres depth.
In other words, this thing goes much deeper than the current resource. And deep is not a bad thing because Klaza is not an open pit-type deposit. The structures dip steeply through competent granodiorite, an ideal underground mining scenario, which means depth extent is just what the doctor/mining engineer/Yukon gold investor ordered.
I'll get more details from RK management over the next few days at Mineral Exploration Roundup, the invaluable technical conference put on every January by AME BC (Association for Mineral Exploration British Columbia). The conference is grounded in BC, Yukon, and Alaska, but over the years it has expanded to include the whole world.
I'm heading down there now to listen to technical talks and catch up with folks I love to chat with but don't often get the chance to see – geologists, management teams, analysts, prospectors, and investors. I'll keep you all posted!
I am 74 years old and despite my age, my risk tolerance is still considerable. I like base metals, but most of all I like the mine stocks you cover in your Maven letter. Thanks again for your kindness and congratulations on your work.
Hi Gwen: I was going to write a couple of days ago because I had not received anything regarding my subscription, so was happy to receive this yesterday.
I guess it was sometime in 2017 when I first subscribed to the Maven Letter because I was very disappointed with where my _____ newsletter subscriptions were going. I have been very pleased with both the style and contents of the letter, it reflects my interest in the junior market. I was really pleased with your excellent piece in the last issue regarding PP's and "free trade dates". But, more than anything I thank you for the Premium Service. It is a service that is excellent. In the past year we have had a number of issues that have soared and others that have been just great. There has only been one that disappointed, but even on that one I managed to almost break even and still have the warrants. Many thanks for a job well done.