There are plenty of reasons why market participants should be excited about the prospects of gold and silver, having a tremendous year in 2020.
It has been years since gold has caught the attention of the mainstream, partly due to the emergence of new technologies such as bitcoin and blockchain.
However, it is very important to remember that gold will never be replaced as a store of value due to its tangibility, physical properties, and history of being the oldest form of money.
With the mania behind the recent run-up in numerous different cannabis and tech stocks over the last few years, the stage is set for the gold price in US-denominated terms to begin to run this year. The US economy is presently in a tailwind as consumer spending, which accounts for about 70% of the US economy is being driven purely by debt.
If the gold price continues on its upward path, it’s worth having some exposure to some gold miners. The company that we have been following for many months has been Superior Gold (TSX-V: SGI), which is a Canadian-based gold producer that owns the Plutonic Gold operation located in Western Australia. The mine has been in continuous production since 1990 and has produced more than 5.5 million ounces of gold and is considered one of Western Australia’s largest historic gold producers.
The reason why it’s worth highlighting Superior Gold is because of how cheap it is relative to its peers within the marketplace. The company has recently gone through a period of turbulence due to unanticipated higher costs. However, management has put a strong plan in place to return the company to a place of profitability and growth in the years to come. (Click here, to view 5 year plan)
First and foremost, the company is a gold producer and targets to produce around 85,000 ounces of gold in 2020. In October, the company announced a five-year mine plan and has set guidance for delivering all-in sustaining costs that average less than $1,100/oz over the next five years, which demonstrates a very hefty margin at current gold prices. The company also has a secondary mill on care and maintenance which requires very little capex to reboot to process more ore and delivery more ounces if the price of gold continues higher.
With the addition of cleaning up its underground operation with lower costs and overall stability, it is worth noting at some point in Q1 of 2020 the company has stated they will be releasing a new life of mine plan for their open-pit operations. This is significant because it can potentially add ounces to its annual production profile as the company strives to become a 100,000-ounce gold producer in the years to come.
With the addition to its production profile, shareholders can also be leveraged to future discovery holes, which was on clear display in December as the company announced results from 43 drill holes for a total of 1,750 meters of drilling.
Key Findings included:
- 39 intersections encountered more than 5g Au/t
- 22 intersections encountered more than 10g Au/t
- 9 intersections encountered more than 25g Au/t
- 3 intersections encountered more than 50g Au/t
- 3 intersections encountered more than 100g Au/
The drilling took place in an area where no previous drilling was done with Chris Bradbrook, CEO of the company going on to say:
“We are very pleased with these initial results, which we believe illustrate the upside potential of both the Baltic and Baltic Deeps Zones. They demonstrate the potential to fill the gap between the two zones and extend the Baltic hanging wall mineralization into the Baltic Deeps. The drilling was completed over a strike length of more than 150 metres and a vertical extent of more than 100 metres. Mineralization remains open up and down dip and along strike. The Baltic and Baltic Deep Zones are key components of the recently announced five year underground Life of Mine (“LOM”) plan, and consequently, the results illustrate the potential to extend this plan beyond five years. We will continue to release other drilling results in some of the other key areas of the LOM plan, including Timor, Indian and Baltic in the near future. To fully explore the potential of the Baltic hanging wall mineralization, we are identifying potential locations to drill to greater depths.”
The company allocates $6.5 million in exploration annually, so I’m sure we will see lots more news releases in 2020, reporting on its exploration results and discoveries.
The company has a strong revaluation opportunity in the months to come, given all these exciting developments. To give some perspective below is a chart that displays Superior Gold amongst its peers, which clearly shows the value opportunity at its present valuation, which will only come to fruition if the company meets guidance and continues to improve operations. But if you’re looking for a company that gives you leverage to the price of gold, Superior Gold at its present valuation is defiantly worth considering adding to your portfolio.