10 More Gold And Silver Producers For 2019
All have large resources and solid production numbers.
All are highly leveraged to higher gold/silver prices.
All are in good locations and have quality management teams.
All have good balance sheets and cost structures.
In my previous article, I listed 15 gold and silver producers. These were the stocks that I thought would perform the best in a rising gold/silver price environment. It was inevitable that I would leave out some stocks that deserved to be included.
This article adds 10 more gold and silver producers, although with a bit different criteria:
Solid producing properties in good locations. Good balance sheets and costs structures. Quality management teams. Significant upside potential. The likelihood to perform well if gold and silver prices rise.This list has lower risk than the list in my previous article and lower overall upside potential. These companies also have better balance sheets and cost structures. It is still important that you do your own due diligence to understand the risk involved. The key risk is if gold and silver prices fall. Also, recognize that some of these stocks can be highly volatile.
One of the key criteria is upside potential. For this reason, I left off any majors as well as large mid-tier producers that have limited upside potential. Stocks such as Kirkland Lake (NYSE:KL), B2Gold (NYSEMKT:BTG), St Barbara (OTC:STBMF), and Oceanagold (OTCPK:OCANF) probably will perform well, but they were left off because of this criterion.
I like this list of stocks because they are all mid-tier producers and the criteria used. These are the stocks will "perform" if gold and silver prices rise, and their balance sheets and cost structures should limit their risk and volatility. All of them are highly leveraged to higher precious metals prices.
Mid-tiers are the stocks that generally have the best risk/reward profiles. The reason why is because they generally are growth-oriented stocks and have a strong enough balance sheet to find a way to grow. It's not unusual at all to see a mid-tier producer double or triple in size in a short period of time.
I personally like to buy mid-tier producers with an FD market cap valuation around $150 million. This generally requires either buying before they begin producing or waiting for a producer to drop in value. Often, this requires a lot of patience and years of waiting for corrections. If you are a long-term investor, then you want to get the best entry price you can. But I also know that gold has been in a 7-year correction which could be ending. We might be at a time where you can no longer be patient, and you have to buy mid-tiers at higher valuations.
The stocks in this list all have FD market caps above $150 million. In fact, only one has an FD market cap under $450 million. For this reason, they are lower risk stocks with higher quality management teams.
Normally, I wouldn't be that interested in mid-tier producers with FD market caps over $500 million. However, currently, the HUI is trading under 160 and was trading above 600 during the last high in 2011. The HUI is an index that includes mostly large-cap gold producers. That means the stocks on this list will likely follow the HUI. If you do the math, you will recognize that those are outsized potential returns.
So, if we do get a new cycle in gold and a new high, the mid-tiers are going to do exceedingly well. And all we need for that to occur are higher gold prices. It's really that simple. The chance of mining costs rising dramatically at the same time that the price of gold is exploding is very unlikely. Instead, their free cash flow will likely be exploding.
Once you recognize the attractiveness of mid-tier producers, you realize that you have a few choices to make. First, which mid-tiers do you want to own? Do you focus on those with lower FD market caps with high upside potential, or do you focus on the larger companies that have lower upside potential, but perhaps a better risk/reward profile? Or, do you buy both?
I have 800 gold and silver mining stocks in my database, and I analyze all of them. In fact, I have been analyzing the stocks listed below for years. Most of them annually. I know all of the producers, and I know their strengths and weaknesses. These are the good ones on a risk/reward basis.
Of course, even the good ones can get into trouble if gold and silver prices fall. But if gold and silver prices rise, I want to own several mid-tier producers. I may own a few majors and a few juniors, but what gets me excited are my mid-tier producers because I know they are going to perform well with higher gold/silver prices.
This list is in alphabetical order. I will rank them at the end of the article. If your stock is not on this list, post a question below, and I will give you my opinion on why it didn't make the list.
Stock Name | Symbol (US) | Category | Share Price (US) | FD Shares | FD Mkt Cap 1/27/2019 |
Gold Producer | $4.02 | 415M | $1,668M |
Alamos Gold is a large producer that has been on a mission to become a major. They have acquired 4 companies in the past 5 years (including Aurico Gold and Carlisle Goldfields in 2015, plus Richmont Mines in 2017). They now have 23 million oz. in resources and are giving guidance to become an 800,000 oz. to 1 million oz. producer with cash costs around $700 per oz. They are currently producing 500,000 oz. and have 4 projects heading to production to add another 500,000 oz. Plus, they have another 2.8 million oz. project that could another 100,000 oz.
Alamos appears to be executing well. My only concern is that a significant portion of future production is in Turkey (350,000 oz.). If you have no problems with Turkey, this stock has high upside potential in the long term at higher gold prices. They have an FD market cap of $1.5 billion, and they are just getting started on their growth agenda.
Currently, they have $220 million in cash and no debt, but all of that cash and more will be needed to build the 4 mines that are getting close to construction. Once gold prices rise, they will be able to fund growth organically. They have good management team. Their only red flag is Turkey, although their cash costs were up ($800 per oz.) in 2018, and their share price dropped. They expect their cash costs to drop as they grow. I would like it a lot more if they sold their Turkey properties.
Stock Name | Symbol (US) | Category | Share Price (US) | FD Shares | FD Mkt Cap 1/27/2019 |
Gold Producer | $9.24 | 178M | $1,645M |
Detour Gold is an emerging major in Canada. They have a 20 million oz. deposit (1 gpt) in Ontario. Production began in 2013 and ramped up to 620,000 oz. in 2018. All-in costs (free cash flow) are around $1,150 per oz. Free cash flow is currently around $50 million per year. They have $250 million in debt and $132 million in cash. So, their net debt is only $120 million.
Investors are not happy with the stock price performance and have been complaining, but they are positioned well for higher gold prices. If they can keep their cash costs per oz. around $800, then this stock is going to be very profitable at higher gold prices. If we project cash flow of 650,000 oz. x $1,000 per oz., then we get $650 million. At 10x cash flow, that is $6.5 billion market cap. Currently, they have a $1.6 billion market cap. So, their upside potential is significant.
I expect this company to grow through acquisitions. Detour is going to be in a strong position to purchase projects from juniors once their cash balance increases. This could become a very big company long term. Once they get their debt down to about $100 million, I would expect their first acquisition, perhaps in 2020. Also, this likely is going to be a dividend paying stock.
If you check the news for Detour in 2018, you will see a lot of shareholder complaints. For this reason, there is a chance that the board could be open to takeover offers. It wouldn't be a surprise if they merged with a major.
Stock Name | Symbol (US) | Category | Share Price (US) | FD Shares | FD Mkt Cap 1/27/2019 |
Gold Producer | $2.73 | 186M | $507M |
Dundee Precious Metals is a mid-tier producer. They have one producing gold mine in Bulgaria (Chelopech) at 150,000 oz., with significant offsets in silver, copper, and zinc to make them a low-cost producer. Cash costs are under $600 per oz., with all-in costs around $1,000 per oz.
Their second mine (Krumovgrad in Bulgaria) is under development. It is scheduled for 85,000 oz. of production in Q4 2018 at $500 per oz. cash costs. Their goal is to produce 350,000 oz. of gold equivalent by 2020.
Their third mind (Timok in Serbia) is a 2 million oz. deposit that they acquired via the Avala Resources acquisition. It has a PEA but needs more development. It will come online around 2022. They currently have 10 million oz at 3.3 gpt. They also have a large smelter in Namibia that is very profitable and currently provides about 25% of revenue.
They have 3 exploration projects. Khalkos in Ontario, Canada is in a good location on 8,000 acres, where they have a 71% ownership. Lenovac and Tulare in Serbia are both early exploration gold projects. Their other asset is 10% ownership of Sabina Gold & Silver. They own 23 million shares of Sabina with warrants for another 5 million. If Sabina goes to $10 a share, that could be worth $280 million.
They have a good balance sheet with $50 million in cash (if you include their Sabina shares) and about $40 million in debt. However, they need to finance the $164 million capex of Krumovgrad, which is 75% completed. That will likely add more debt. With an FD market cap of $426 million, they are a bit pricey. But their management team is focused on growth.
I like the location of their mines and low cash costs. Their only red flags are the short mine lives at Chelopech and Krumvogard, both currently projected at 8 years, and a dependence on copper for their low cash costs. But I don't think their copper dependence is that big of a liability if gold prices rise. Their grades are not low.
Stock Name | Symbol (US) | Category | Share Price (US) | FD Shares | FD Mkt Cap 1/27/2019 |
Gold Producer | $15.84 | 109M | $1,727M |
Endeavour Mining is a large gold producer in West Africa, with 5 operating mines in 3 countries. Their market cap has jumped to $1.9 billion, so they aren't cheap anymore. They are producing 700,000 oz. with all-in costs (free cash flow) around $1,000 per oz. They have large resources at 17 million oz. and a multitude of drilling targets on 2.5 million acres. With their known projects, they are anticipating expanding production to 900,000 oz. by 2021. This is a major in the making.
They did a 10 to 1 reverse split in 2015, so they now have a tight share structure, with only 109 million FD shares. Their balance sheet isn't great with $94 million in cash and $350 million in debt. Plus, they will be adding more debt to build their next two mines (Ity and Kalana). However, at $1,300 gold, they generate about $100 million in free cash flow. They have everything in place to grow. Their red flags are high debt, potential political issues in West Africa, and their high valuation.
They will likely purchase another company or two by issuing shares. They did a takeover of True Gold in 2016 and Avnel Mining in 2017. So, they likely will continue to grow via acquisitions. This gives them more upside potential.
Stock Name | Symbol (US) | Category | Share Price (US) | FD Shares | FD Mkt Cap 1/27/2019 |
Silver Producer | $3.60 | 164M | $590M |
Fortuna Silver is a mid-tier producer in Mexico, Peru, and Argentina. They produce silver, gold, and base metals. In fact, they have 1 mine for each. San Jose in Mexico is a silver mine (8 million oz.), Caylloma in Peru is a base metals mine (mostly zinc and lead), and Lindero in Argentina is a gold mine.
They acquired Goldrock Mines in 2016 and their 2 million oz. Lindero gold project. This will give them an additional 90,000 oz. of gold production at low cash costs under $700 per oz. (starting in 2019).
It seems like all of the silver miners are building gold mines, and now, Fortuna has joined the trend. They will produce about 18 million oz. of silver equivalent in 2019. Their all-in costs (free cash flow) should be around $14 per oz., making them profitable. They have an FD market cap of $580 million, which is a bit pricey.
They have $175 million in cash and only $40 million in debt. However, they are adding debt to build Lindero (which almost completed). Their only red flag, besides not being cheap, is future growth. With only 45 million oz. of silver reserves (150 gpt) and 2 million oz. of gold reserves, they need more resources to keep up their growth pace.
The key for this company is going to be exploration or perhaps acquisitions. They have 9 exploration projects on their two large properties: Caylloma in Peru and San Jose in Mexico. They have a new high-grade discovery (Trinidad North) that looks exciting.
Stock Name | Symbol (US) | Category | Share Price (US) | FD Shares | FD Mkt Cap 1/27/2019 |
Gold Producer | $1.22 | 215M | $179M |
Guyana Goldfields is a mid-tier producer in Guyana, South America. They had been performing very well, and their FD market cap reached $740 million in 2018. They have a 7 million oz. property in Guyana. Production at their open pits (2 million oz.) was expected to be 200,000 oz. in 2018. However, they missed on grade by 30% (2 gpt versus projected 2.9 gpt), and production only reached 160,000 oz. Their market cap crashed 70% to $215 million today.
Now that it has crashed 70%, it has become very attractive. I think most of the selling is over and expect to see a new high in the long term. They have a good balance sheet with $82 million in cash and $40 million in debt. They do have to build their underground mine (5 million oz.), but they will have cash flow. I'm not sure of the capex for the underground mine, but they already have a mill.
For 2019, I would expect all-in costs to remain around $1,100 per oz., even with the lower grades. Cash costs in Q3 were $700 per oz. The open pit goes until at least 2023, then underground mining until 2030. Both mines are likely to be extended with their resources. They have many exploration targets on their two large Guyana properties (Aurora and Aranka on 200,000 acres).
Stock Name | Symbol (US) | Category | Share Price (US) | FD Shares | FD Mkt Cap 1/27/2019 |
Silver Producer | $2.14 | 518M | $1,109M |
Hochschild Mining is a large silver/gold producer in South America. They will produce 38 million of silver equivalent (including gold) in 2018. All-in costs per oz. are about $13.50 (silver equivalent, including gold). They currently have 4 operating mines in Peru and Argentina. They are also doing exploration in Chile and Mexico. They plan to increase production to 40 million oz. of silver equivalent in the long term.
This stock was cheap in 2015 but has since risen in value from 71 cents to $2.22. Their FD market cap is now $1.1 billion. It's not cheap, but probably has 5-bagger potential. It's a potential cash flow machine, with a very good management team. Also, the dividend is currently 1.9%, which could explode as they increase in value. The only thing I don't like is that it is based in London and only trades OTC in North America.
Hochschild has about $180 million in cash and $291 million in debt. With that balance sheet, they do have some risk, but if silver prices stay above $14, they should be fine. And even at $12 or $13, they should be able to last a while. All they need are higher silver prices, and their balance sheet will look much better. One family owns 54% and controls the company. They are highly motivated to build this into a large company and likely won't sell to a major.
They have a large gold project in Chile (9 million oz. Volcan deposit) that they obtained from Andina Minerals for a very cheap price. It is low grade, but once gold prices rise, this project will get built.
Stock Name | Symbol (US) | Category | Share Price (US) | FD Shares | FD Mkt Cap 1/27/2019 |
Gold Producer | $1.19 | 217M | $259M |
Premier Gold Mines is a mid-tier producer with growth potential. They currently only operate one mine (Mercedes), which is in Mexico. They paid $123 million, plus 6 million shares, for the 800,000 oz. Mercedes deposit. That seems high, but they expect to produce 90,000 oz. in 2018, and it has 500,000 in reserves. They must think they can expand the mine life. They also have a 40% interest (40,000 oz. annual production) from Goldcorp's (NYSE:GG) South Arturo project in Nevada.
Premier's flagship project is their 50% interest in a large 7 million oz. project (Greenstone) in a good location in Canada (Ontario). It has good grades of about 1.5 to 2 gpt surface and 5 gpt underground. The PEA came out in 2014 with a $400 million capex. Production is projected to be 250,000 oz. for 15 years, with an after-tax IRR of 19% at $1,250 gold. They made a deal with Centerra (OTCPK:CAGDF) for 50% of the project. Centerra has to pay Premier $64 million and then spend the next $140 million on the feasibility and scoping before they begin 50/50 expenditures. A feasibility study was completed in 2017. They are currently permitting the project.
Premier could become a growth company. They also have three additional development projects. Their Cove and McCoy project in Nevada is a 1.5 million oz. open pit with a PEA due in 2017. Their Hasaga project is a 1.7 million oz. open pit in Red Lake, Ontario. Plus, they have a 44% JV with Goldcorp (Rahill-Bonanza in Red Lake, Ontario) that looks exciting. I can see why the FD market cap is $502 million. If it was cheaper, it would be an interesting stock, but still has high upside potential at higher gold prices. Management seems intent on building this into a large company.
Stock Name | Symbol (US) | Category | Share Price (US) | FD Shares | FD Mkt Cap 1/27/2019 |
Gold Producer | $2.15 | 327M | $703M |
Semafo Inc. is a mid-tier producer in West Africa with an FD market cap of $710 million. They will produce 400,000 oz. in 2019 with cash costs around $600 per oz. They have a pretty good balance sheet with $86 million in cash and $120 million in debt. With their solid free cash flow, they should be able to pay down their debt quickly. This is the reason their valuation is not cheap.
They have 2 producing mines in Burkina Faso. Mana is a 4 million oz. deposit (2 gpt) on 500,000 acres. It is producing about 200,000 oz. at $700 per oz. cash costs. Boungou is a 2.5 million oz. deposit (3 gpt) that is producing about 200,000 oz. at $500 per oz. cash costs.
In 2015, they acquired Orbis Gold, which had several early development projects in Burkina Faso. This gives them a solid pipeline to build a few more mines. They have several exploration projects where they plan to spend $6 million on drilling.
Investors like this stock because it is profitable, and they have a good pipeline of projects. That has pushed the valuation up to the point where it is no longer undervalued. It does have significant upside at higher gold prices with their low cash costs and pipeline. Their only red flag is their location, although their resources are a bit low for their market cap. I consider this a growth stock with their cash flow and properties. The only question is how fast can they grow? Eventually, this should turn into a dividend paying stock.
Stock Name | Symbol (US) | Category | Share Price (US) | FD Shares | FD Mkt Cap 1/27/2019 |
Gold Producer | $3.27 | 141M | $462M |
Wesdome Gold Mines is a mid-tier producer in Canadian with an FD market cap of $397 million. They recently stumbled a bit in 2016 and 2017, with production decreasing from 96,000 to 55,000 oz. However, they had an excellent 2018, with production coming back to 75,000 and their share price doubling. Now, they are well-positioned for growth. They are so well-positioned that I expect them to be acquired soon.
Their Moss Lake project is a 3 million oz. resource (1.1 gpt) and will likely begin production in 4-5 years ($400 million capex). Their Kiena property (1 million oz.) looks promising for resource expansion, with several discoveries. Kiena is permitted with a mill and can be restarted with higher gold prices. I expect them to reach at least 150,000 oz. production. All of their projects are in mining-friendly areas of Canada.
Wesdome's all-in costs (free cash flow) will be around $1,100 per oz in 2018. They have a good balance sheet no debt and $23 million in cash, plus about $10 million in free cash flow at $1,250 gold. They have low reserves (500,000 oz.), but pretty good total resources (5 million oz.). They have a strong management team with a lot of experience and exploration potential on 30,000 acres.
Their only red flags are low reserves, and they need higher gold prices for their two development projects, plus it's not a cheap stock. However, they have the resources to be very successful. And it's always nice to be a producer in Ontario and Quebec, the two best places to mine in the world. As a stock with significant upside potential, they look pretty good.
Conclusion
Which stocks on this list would I buy first? Or, how would I rank them? That's probably a question you have. Below is my ranking.
The two stocks on this list that are most attractive to me are Guyana Goldfields and Premier Gold Mines. Both of these stocks could have been on the previous list. The other stocks are pricey if you are looking for large gains. However, if you are looking for stocks that are going to double or triple in value, then any of these accomplish that goal.
Here is my ranking:
Guyana Goldfields Premier Gold Mines Hochschild Mining Fortuna Silver Alamos Gold Endeavour Mining Detour Gold Wesdome Gold Mines Dundee Precious Metals Semafo Inc.Other than Guyana Goldfields and Premier Gold Mines, all of these stocks have similar upside potential based on future cash flow potential versus their current market cap. Similar stocks are almost impossible to predict which management teams are going to execute the best. For this reason, I usually just buy them all, unless they have a red flag that I am not comfortable with.
Learning how to spot the red flags is what makes you a good investor. The main red flags that get my attention are location, management, limited upside potential, high costs, poor balance sheet, and a short mine life.
As a reminder, I never have more than 3% of my cost-basis allocated to a single stock and prefer to keep it at 1% or lower. For the stocks on this list, which I consider quality stocks, I am comfortable with 1% allocation.
Disclosure: I am/we are long DRGDF, EDVMF, FSM, GUYFF, WDOFF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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