November 11th, 2021 | 13:58 CET
Yamana Gold, Tembo Gold, First Majestic Silver - Three top opportunities in mining shares
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"[...] We have a clear strategy for neutralizing sovereign risk in Papua New Guinea. [...]" Matthew Salthouse, CEO, Kainantu Resources
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 - Price unjustifiably low
The share of the Canadian precious metal producer Yamana Gold is one of the papers that currently puzzle. Thus, with the publication of the Q3 figures a few days ago, the Company announced a sales increase of 8% compared to the corresponding quarter of the previous year. A profit of USD 0.03 per share was generated, adjusted even USD 0.07. Shareholders were promised a dividend of USD 0.03 for the fourth quarter.
In addition, the Company expects that Q4 will break the sound barrier of annual production of 1 million ounces of gold equivalent. The Company cites the Canadian Malartic gold project in Province Québec, which has an existing resource estimate of approximately 1.9 million ounces of gold at a grade of 2.56 g/t on a proven and probable basis, as the main driver. Of course, last year's weaker numbers due to COVID-19 also represent a low benchmark. Still, Yamana will nevertheless succeed in taking an important step by crossing the threshold to becoming a million-dollar producer.
And yet, the market is not reacting as one would expect. On the contrary, after the announcement of the figures, the share price initially took a downward turn. In the meantime, however, investors seem to have changed their minds, and the share price has recently risen. Analysts also expect a low P/E ratio of just 11 for 2022. What is also not on the minds of many is the 56.25% share in the Argentine MARA copper and gold project that Yamana is currently developing with Newmont (25%) and Glencore (18.75%). Experts believe that the MARA project alone has an NPV of over USD 4 billion, of which Yamana accounts for USD 2.5 billion. The mine is expected to go into production in 2026 and have a mine life of 26 years. Estimates suggest reserves of 11.7 billion pounds of copper, 7 million ounces of gold and 100 million ounces of silver.
Tembo Gold - Ready for a promising fresh start
For gold producers to produce, they first need appropriate locations for their mines. Although finding mine sites is becoming more and more professionalized, the topic of mine exploration is mainly dealt with by smaller "soldiers of fortune" who hope for a big discovery to then sell their project to a large gold producer. One of these exploration companies is Tembo Gold, which also sails under the Canadian flag. Based in Vancouver, Tembo Gold's focus is on African gold projects, specifically Tanzania.
This specialization has been a problem for Tembo Gold in recent years. Because the Tanzanian government had no interest in mining for some time, it resulted in an enforced pause of no less than seven years for Tembo Gold. After a change of government, however, the traffic light in the mining sector is now green again. Since then, investments in the mining sector have suddenly increased by 725%. And Tembo Gold did not take long to announce an extensive drilling campaign in its property in the Lake Victoria goldfield, which has grown to 174 sq km and is located in the immediate vicinity of the Bulyanhulu (Barrick Gold) and Geita (AngloGold Ashanti) mine sites.
The CAD 2.3 million capital increase required for financing has already been completed. Artificial intelligence has been used to identify 57 potential targets as part of the drilling program, targeting 7,000m. Since these announcements, the Company's share price has leaped upwards and is currently trading just below its five-year high. Nevertheless, the Company is moderately valued with a market capitalization of around CAD 27 million.
First Majestic Silver - Sales stop of silver stocks
Already when announcing the production figures for the third quarter a few weeks ago, First Majestic Silver announced that it had decided not to put about 1.4 million ounces of silver on sale because of the low price level but to store them in anticipation of rising prices. Now, the effects were also reflected in the financial figures. Thus, sales decreased by 1% to CAD 124.6 million. At an average silver price of CAD 23.10 per ounce of silver in the quarter, a sale of inventory would have given the Company CAD 33.2 million in additional revenue. In addition, costs (AISC) at the Jerrit Canyon gold project increased due to the construction of a new lift station.
The inclusion of the project also caused capital expenditures to increase to CAD 14.09 per silver equivalent ounce. Overall, this resulted in a net loss of CAD 18.4 million for the quarter. Adjusted, this corresponds to CAD 0.07 per share. Nevertheless, there was a cash flow of CAD 0.09 per share. The Company then announced the payment of a quarterly dividend in the form of a cash dividend of CAD 0.0049 per share, which was affected by the quarterly loss. Still, it holds out the prospect of a higher dividend for the subsequent quarters if the inventory of silver is sold off.
Indeed, not all that glitters is gold. However, the stocks presented should be among the winners in the event of a gold price increase. Those who want to play it safe here should stick with heavyweights Yamana and First Majestic. However, the explorer Tembo Gold is attractive for those willing to take more risk for a higher return.
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