In an extensive research note titled “Going all-in on Nevada” GMP Securities highlights three Nevada-based gold explorers (Corvus Gold, Gold Standard Ventures, and Northern Empire Resources) and one Nevada junior producer (Fiore Gold). GMP places buy ratings on all four stocks with various price targets implying returns between 37% and 84%:
The 3 explorers highlighted by GMP have all significantly outperformed the junior sector in the last month with Northern Empire (TSX-V:NM) rising nearly 35% while GDXJ is flat over the same time frame:
The market appears to be rewarding Nevada junior explorers/developers while punishing junior producers such as Fiore, Northern Vertex, and Pershing Gold (to name a few). With that being said GMP takes a positive view of Fiore Gold (TSX-V:F) and places a C$.70 price target on the stock citing operational improvements at its flagship Pan Mine, and Fiore’s Gold Rock Project which is “years ahead of similar properties as it nears federal permits.”
I hope GMP is right as Fiore has been my worst pick of 2018 and it has been painful to be a shareholder in recent months. Despite trading at a mere 2x cash flow there has been a relentless offer in the shares which has continued to pressure the share price lower despite production growth at Pan:
Corvus (TSX:KOR) and Northern Empire both saw aggressive buying during today’s session, presumably as a result of the GMP report:
KOR.TO (Daily )
KOR shares rose nearly 10% during Wednesday’s trading session – a breakout above C$2.70 would target fresh all-time highs (above C$3.20) for KOR.
NM.V (Daily )
During Wednesday’s trading Northern Empire reached levels it hasn’t seen since early May on record trading volume. NM remains in a strong long term uptrend despite the steep April-June correction which saw NM shares shed more than 40% from high to low.
The most interesting aspect of the GMP note on Northern Empire is that they outline a path to production both for the Sterling Mine and the Crown Block of deposits; GMP sees production at Sterling beginning in 2020 followed by development at the Crown Block beginning in 2021 (with the benefit of cash flow from Sterling) followed by initial production in 2022.
The key theme here here is that analysts/investors are foreseeing significant gold sector M&A in Nevada over the next couple of years. This is primarily due to the simple fact that there are a scarcity of good projects in premier jurisdictions and it doesn’t get much better than Nevada if you’re a gold mining company.
To add a little bit more to the M&A intrigue John Kaiser recently mentioned that Northern Empire did not attend the Sprott Conference in Vancouver last week due to a ‘site visit’ by what was potentially a senior mining company. I have no further insights into this speculation other than the fact that Northern Empire did confirm that they had to pull out of Sprott at the last minute and they didn’t think it was fair to ask for a refund.
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