August 19th, 2024 | 07:00 CEST
Alamos Gold, Prismo Metals, Hudbay Minerals - Gold breaks out, copper turns, act now!
After a brief pause, gold returned with a brilliant breakout and crossed the USD 2,500 per ounce mark for the first time. This new all-time high has generated a striking buy signal. The conditions, with further escalation in geopolitics, provide the best opportunities for continued price increases. Copper also sent out positive signals. Despite economic concerns, the industrial metal may have found a bottom after the correction of recent weeks.
time to read: 4 minutes
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Author:
Stefan Feulner
ISIN:
ALAMOS GOLD (NEW) | CA0115321089 , PRISMO METALS INC | CA74275P1071 , HUDBAY MINERALS INC. | CA4436281022
Table of contents:
"[...] We have a clear strategy for neutralizing sovereign risk in Papua New Guinea. [...]" Matthew Salthouse, CEO, Kainantu Resources
Author
Stefan Feulner
The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
He is passionate about analyzing a wide variety of business models and investigating new trends.
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Alamos Gold - A pearl with strong outperformance
While producers like Barrick Gold and Newmont are still a long way from their highs, Alamos Gold, valued at CAD 11.01 billion, shines with significant outperformance even compared to the underlying asset. The Alamos share has gained over 50% since the beginning of the year, while the gold price has only increased by around 22%. The Toronto-based company reached a new all-time high in early May this year, and since then, the share price has continued its strong upward trend, currently trading at CAD 26.24 with increasing volume.
In the first quarter, Alamos Gold reported gold production of 135,700 ounces, compared to 128,400 ounces of gold in the March quarter of 2023. Adjusted earnings rose from USD 45.4 million to USD 51.2 million in the same quarter of the previous year. Free cash flow also more than doubled to USD 24.2 million from USD 10.5 million in the previous year.
The Canadians currently operate three producing gold mines, including the two Canadian mines, Young-Davidson and Island Gold, as well as the Mexican Mulatos mine. The Company is expanding its portfolio with a fourth mine, the Magino mine, which was previously operated by Argonaut Gold Inc. At the end of March, Alamos Gold announced the takeover of Argonaut Gold Inc., which will be completed through a share swap with a volume of USD 325 million. The acquisition, which is proceeding according to plan, was recently approved by Argonaut shareholders.
The Magino Mine, which is located in close proximity to Alamos' Island Gold Mine, is particularly attractive to the Company as the combination promises significant synergies.
Prismo Metals - Promising gold, silver, and copper player
If the gold price continues its long-term upward trend, smaller exploration companies are likely to outperform the broader market, as evidenced by history. Initially overlooked at the beginning of a gold price increase, stocks like Prismo Metals tend to act as a leveraged play on the underlying price during subsequent upward movements. Prismo shares have already bottomed out. After a double test of the CAD 0.12 mark in May 2022 and January 2024, the share began a countermovement to the CAD 0.26 area and then corrected to the current level of CAD 0.20.
The all-time high for Prismo Metals was CAD 0.80 in October 2020. It cannot be ruled out that the Company, led by CEO Alain Lambert, will reach higher levels in the long term, as the composition of its portfolio opens up considerable potential. Currently, the market capitalization is just CAD 10.68 million. Prismo Metals is exploring a total of three copper, gold, and silver projects in Arizona and Mexico.
With the Hot Breccia copper-gold deposit in the Arizona Copper Belt, Prismo owns a property that could increase significantly due to its excellent location and infrastructure. Just 4 km away is the Christmas Mine, which has historically produced around 25 million tons of ore containing 363 million pounds of copper, 2.1 million ounces of silver, and 55,026 ounces of gold. The Resolution mine, owned by Rio Tinto/BHP, which brought more than 1.6 billion tons at 1.5% copper to light, is also located in the extended neighbourhood. According to Prismo management, Resolution represents a model of sorts for Hot Breccia mineralization due to the similar historically productive geological units.
Prismo Metals recently received approval for 10 drill holes, the first stage of which will be a 5,000 m drill program. Drilling is scheduled to start in the third quarter.
In addition to Hot Breccia, the Palos Verdes project in Sinaloa, Mexico, is currently in the spotlight in cooperation with Vizsla Silver. A drilling program has started here with the aim of extending the high-grade mineralization, continuing the vein across an intersecting fault zone and exploring the northeastern extension of the Palos Verdes vein system. This should provide a positive news flow in the coming weeks, bringing the stock into the spotlight.
Hudbay Minerals - Increase in production
The development of the industrial metal copper, which is fundamental to the energy transition, is different to that of the gold price. While the red metal reached a new all-time high of USD 11,105 per tonne in May, it has since fallen by around 20% due to a weakening economic outlook. In the long term, according to commodities guru Eric Sprott and numerous other industry experts, the price of copper will likely start a new super cycle due to the transition to clean electrical energy.
The current correction offers investors another opportunity to acquire top shares from the peer group at a significantly reduced price. One of these top picks could be Hudbay Minerals, as the Company boasts an excellently compiled portfolio and operates the two Canadian mines, Copper Mountain and Snow Lake, as well as the Peruvian mine, Constancia. The mines are rich in by-products such as gold, silver, and zinc and characterized by considerable longevity.
Hudbay Minerals recorded consolidated copper production of 28,578 tons and gold production of 58,614 ounces in the second quarter. The addition of the Copper Mountain mine in British Columbia, in which the Company holds a 75% interest, contributed to a 32% increase in copper production and a 20% increase in gold production compared to the same quarter last year.
As a result, Hudbay has reaffirmed its full-year 2024 consolidated production guidance for all metals: 137,000 to 176,000 tons of copper and 263,000 to 319,000 ounces of gold. Financially, although the mining company reported an increase in quarterly revenue from USD 312.2 million in the previous year to USD 425.5 million, the net loss widened by USD 5.4 million compared to the second quarter of 2023 due to increased tax expenses.
Historically, the price of gold has never been above USD 2,500 per ounce. This benefits producers such as Alamos Gold. In a prolonged uptrend, smaller exploration companies like Prismo Metals will likely outperform the market. Hudbay Minerals reported an increase in both gold and copper production in the second quarter.
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