April 23rd, 2021 | 09:50 CEST
Yamana Gold, Scottie Resources, Newmont Corporation - Is bitcoin weakness, inflation hikes and lower US yields sending prices flying?
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"[...] Both the geology and the infrastructure around the project make for a very attractive cost structure. We expect to be able to produce at 50% of the current gold price. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
The native Rhineland-Palatinate has been a passionate market participant for more than 25 years. After studying business administration in Mannheim, he worked as a journalist, in equity sales and many years in equity research.
Yamana Gold - Investment in Ascot Resources goes down well with investors
When mid-tier producer Yamana Gold announced a week ago that it would invest roughly CAD 20 million in Ascot Resources as part of a private placement, it was not clear how this investment by the Toronto, Canada-based Company would go over with investors. The friendly acquisition of Monarch Gold in early 2021 helped the Company report strong double-digit reserve growth and thus halted the stock's slide. How much the investment in Ascot, an exploration Company operating in the British Columbia Golden Triangle, would add to the rest of its diversified portfolio was anyone's guess.
Now, one week later, we can say: quite ok. Since the announcement of the investment, the share price has risen by around 3%. Thus, the expansion strategy issued by Yamana through acquisitions in North and South America seems to continue to be successful, in addition to further expansion and optimization initiatives in existing projects. The path shown by the revaluation of its two major projects and the published 10-year strategic production forecast also seems plausible to us, even if an overall view is somewhat complicated due to the high degree of diversification.
After all, Yamana's projects have among the highest reserves compared to those of its competitors. It does not take into account the 56.25% stake in the MARA project in Argentina, for which no update on reserves has yet been reported. Currently, the stock is still about 30% below its all-time high from August 2020. If you are looking for a solid gold stock and want to benefit from the developments in the gold market, you might want to take a closer look at Yamana's stock.
Scottie Resources - Acquisition of AUX Resources creates good mood
Scottie Resources, a direct neighbor of Ascot Resources, operates exclusively in the British Columbia Golden Triangle. Also operating in this area is AUX Resources, whose complete takeover by Scottie Resources was announced on April 12. The transaction involves a one-for-one share swap, and upon completion, which is scheduled for June 2021, the former AUX shareholders will hold a roughly 31% stake in Scottie Resources. Shareholders of both companies should benefit significantly from the merger. Successful exploration of Scottie's two main projects, Scottie Gold Mine and Cambria, would pay off for AUX Resource shareholders; conversely, the success of AUX's flagship Georgia Gold Mine project would also be profitable for Scottie shareholders.
The Scottie Gold Mine project, which includes the Scottie Gold Mine (total production: about 95,000 ounces at a gold grade of about 16.2 g/t) already in production from 1981 to 1985, is located just 27 km south of the Brucejack Mine operated by Pretium Resources, which entered commercial production in 2017. About 1 million ounces have been produced there to date, and reserves are estimated at around 4.2 million ounces. About 20 km away is the Premier Gold Mine project operated by Ascot Resources, whose reserves are estimated at around 20 million ounces of gold equivalent (indicated + inferred). Ascot has only recently succeeded in raising CAD 55 million in fresh capital, partly through the entry of Yamana Gold. For the time being, the debt-free Scottie Resources, which has about CAD 6 million in cash after the merger, will not need this.
Scottie's other projects, such as the 15,000-hectare Cambria project, and the Georgia project contributed by AUX, have also delivered promising results so far, which will be verified by a massive expansion of exploration drilling from 7,000 meters to 12,500 meters. The chances of this happening are very good. The British Columbia Golden Triangle is considered one of the best mining regions in the world. The world's largest gold producer, Newmont Corporation, acquired GT Gold Corp. last month for CAD 461 million. We are a fan of Scottie, as are the shareholders, who have seen the stock price skyrocket about 27% since the acquisition was announced.
Newmont Corporation - Will the latest quarterly figures bring the upswing?
Shareholders of the world's number one gold producer are eagerly awaiting April 29. On this day, the Denver, Colorado-based Company will announce its figures for the first quarter of 2021. Despite the recent slight drop in gold prices, analysts expect the results to be in line with expectations. The planned quarterly dividend of USD 0.25/share is also calculated at a price of USD 1,200/ounce, so this is unlikely to change.
A USD 300 increase in the gold price would translate into an additional quarterly dividend of USD 0.15 to USD 0.225 per share. In general, the Company plans to distribute 40-60% of the additional cash flow generated (currently about USD 400 million per additional USD 100/ounce gold price) to shareholders. The other highlights expected to comprise this quarter's reporting are the March acquisition of GT Gold in the British Columbia Golden Triangle, the full repayment of the 2021 Notes, and the tying of its revolving credit facilities to several sustainability issues.
The latter is intended to demonstrate Newmont's commitment to environmental, social, and governance issues and translate into a higher ESG rating. For us, this makes Newmont a safe bank for the portfolio. With a current share price of just under USD 67, the Company's fundamentals also make it an absolute value stock. The Company, whose production capacities of currently just under 8 million ounces of gold per year are fully utilized until 2032, will benefit strongly from a rising gold price, especially as the expected dividend yield of just over 3% is still based on the current gold price.
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