Special Report: The Golden Bull: 6 Junior Miners to Dominate 2018

In the second half of 2018, we'll likely see another big surge in gold prices — and junior miners.

We could talk at length about the reasons why...

Gold production cratered when prices collapsed from their record high of nearly $2,000. Now, the mines that are producing are running low on reserves. And the quality of those reserves is rapidly deteriorating.

Metals Focus projects 2018 gold mine output will be 3,239 tonnes, down from an estimated 3,241 tonnes in 2017 and 3,264 tonnes in 2016.

“Post-2013, we’ve seen some pretty significant reductions in new project development,” says Oliver Heathman, Metal Focus’ head of mining research.

Another metals consultancy, CPM Group, projects 2018 gold output will be 97 million ounces, compared to 97.8 million in 2017. And CPM says production will continue to slide through 2024/25.

Meanwhile, demand is once again skyrocketing in an uncertain global climate.

Dissatisfaction and anger have translated into major political shifts. We’re seeing more protests and riots — not just in the U.S. but worldwide.

Donald Trump's trade wars has undermined global trade - and the dollar.

The Brexit raised serious questions about the viability of the European financial system.

Will the euro survive?

No one knows.

This is precisely the environment in which precious metals shine the brightest.

And when gold rises, junior miners, which are leveraged to gold prices, rise much higher.

For example, the VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ) — which holds companies as small as $10 million — soared 183% in just one six-month period in 2016. In 2017, it went on a 30% run from May to September.

And we could easily see a similar surge as the year comes to a close.

Of course, this isn't to say that every gold miner has caught a windfall.

What many investors don't realize is that fewer than 5% of mining projects actually get developed into producing mines.

Some never get drilled, some turn up dry holes, some run into regulatory hurdles, some have issues with territorial claims...

Any number of things could go wrong.

And that's why investing in mining upstarts is so risky. But it's also why the companies that actually find success become so valuable.

When junior miner companies do strike, they strike it big with stock valuations that shoot up by factors of 10.

Now, because investing in junior miners has a tendency to be profitable but perilous, we've compiled this report with the six best junior stocks on the market today. If you're looking to invest in the high-risk, high-reward junior mining space, this is the place to start.

These are companies with strong management teams, high-quality assets, and formidable balance sheets.

Don't get me wrong: These stocks are not “sure things.” But they do stand above the competition, and they have a better-than-average chance of going the distance...

Midas Gold Corp. (OTC: MDRPF)(TSX: MAX)

Despite being a junior miner, Midas Gold Corp. offers a great way to leverage gold prices without a lot of risk.

You see, Midas has locked into a very lucrative find known as the Golden Meadows Exploration Project. It's actually a cluster of three gold deposits in a friendly mining jurisdiction in Idaho. All told, Golden Meadows harbors 6–7 million oz. of gold, grading 1.6 grams per tonne.

The site also contains nearly 3 million oz. of silver.

It's a great deposit in a great location. The district is located in the Central Idaho porphyry (Gold) belt with over 8 million oz. of past gold production. It was the largest gold, tungsten, and antimony producer in Idaho throughout its history and a major source of those metals from the 1920s through the 1950s.

Now, Midas is building a mine there. It'll take three to five years and approximately $880 million to complete. But once it's finished, the mine will produce 400,000 oz. of gold in its earliest stages.

Better still, production costs are projected to be just $900 per ounce.

This is key because it means that Midas would be profitable even if gold somehow falls back to $1,000 per ounce (something that's unlikely).

And if gold prices continue rising?

Well, that's when things will get really interesting...

A return to $1,500 gold would suggest a value of $216 million for Midas, compared to its current $173 million market cap. Gold trading at $1,750 per ounce would imply a value of $306 million, and a return to $2,000 would put the company's value over $400 million.

That's about what the company was worth when gold peaked back in 2012. The stock traded as high as $4.50 per share that year, compared to just $0.73 today.

Indeed, any investor who bought Midas Gold at $0.18 has a lot to be excited about. It almost certainly has further to run.

Midas ValuationClick to Enlarge

And we're not the only ones who think so, either...

Paulson & Co, the investment firm headed by famed billionaire investor John Paulson, recently injected C$55 million in financing into Midas. If you recall, this is the same man who made US$4 billion betting against the subprime mortgage market.

Pershing Gold Corporation (OTC: PGLC)

Pershing Gold is a $75 million company with one project: the Relief Canyon Mine in northwest Nevada.

The Relief Canyon Mine property includes three open-pit mines (North Pit, South Pit, Light Bulb) and a state-of-the-art, fully permitted and constructed heap-leach processing facility.Pershing Overview

The company's most recent drilling results showed a measured and indicated resource of 739,000 oz. of gold. This is 34% higher than the 552,000 oz. of measured and indicated resource estimated in March 2014.

Much of that gold has been of a quality grade, as well.

Among the results of this drilling program are multiple core holes with high-grade intercepts. Holes RC15-264, RC15-265A, and RC15-279 included gold intercepts of 76.8 grams per tonne (gpt.), 87.9 gpt., and 123.9 gpt., respectively.

These and many other intercepts encountered in the recent drilling program grade significantly higher than Relief Canyon's historic average of approximately 1 gpt. And since it's acquired so much of the surrounding property, there are ample targets for new exploration.

Again, Pershing's heap leach processing facility is already built and fully permitted. It has the capacity to process gold-bearing solutions from the leaching of 8 million tonnes of ore per year.

According to CEO Steve Alfers, the economic report will show production costs of between $600 and $800 per ounce. Alfers also says production will average 84,000 ounces per year over the mine's life span.

The only thing left to do is start production. And this, the company says, will likely happen within the next few months.

Pershing has no debt and roughly $13 million in cash on hand, having recently completed an $11.5 million raise.

There is a chance that the mine's opening could be delayed, but there's an equal opportunity for a larger competitor to swoop in and seize it.

Pershing Gold Estimates

GoGold Resources Inc. (TSX: GGD)(OTC: GLGDF)

GoGold Resources is in a position similar to Pershing, except it's already producing.

The company's flagship project is the Parral Tailings in Chihuahua, Mexico.

GoGold took control of the Parral Tailings Project in 2012 when it acquired Absolute Gold Holdings Inc., the site's original proprietor. The 141-hectare site hosts 21.3 million tonnes of tailings left over from 340 years of mining operations.

GoGold's 2013 pre-feasibility study defined a reserve of 35 million oz. of silver equivalent and another 12.6 million oz. of measured and inferred silver equivalent. There's a small amount of gold in there, as well.

The company says average silver grades over the life of the mine are expected at 38.4 grams per tonne (g/t), with average gold grades at 0.31 g/t.

The mine is processing 5,000 tonnes of tailings per day. And the cost of mining and processing that tonnage has averaged $6.50–$8.50 per tonne — almost half of the expected cost per tonne of $12. Silver is currently trading at $14 per ounce.

If this trend continues, sustaining capital costs could be substantially less than originally estimated.

The pre-feasibility study pegged sustaining capital costs at $27.5 million over the mine's projected 12-year life span. But this would be an overstated figure should the cost per tonne remain 41%–85% less than originally estimated.

The Parral project produced 163,991 ounces of silver and 1,630 ounces of gold for 292,273 silver equivalent ounces in the most-recent quarter.

In addition to the Parral Tailings project, GoGold is working to bring another mine on line in Sonora, Mexico.

This mine, the Santa Gertrudis, has an estimated resource of 810,000 oz. of gold indicated and a further 255,000 oz. inferred.

Projected life-of-mine average cash operating costs are $622 per ounce of recovered gold, while the total all-in cost of production is estimated at $699 per ounce of gold.

The Parral project is already making money for GoGold, and Santa Gertrudis isn't far behind.

GoGold hasn't accumulated very much debt, either. It has just $26 million in liabilities and $33 million in available capital.

GG Costs

There are 165.5 million shares outstanding. And at a recent price of C$0.38 per share, GoGold has a market cap of C$65 million. (Three analysts are covering the company with an average price target of US$2.05.)

That's a little small for a company that's anticipating almost $500 million in cash flow from its two flagship projects.

As with Pershing, GoGold is a quality company with proven reserves, low costs, and a leg up on production. It could succeed on its own or be taken over.

Liberty Gold Corp. (TSX: LGD)

Formerly Pilot Gold, Liberty Gold is an early stage explorer and developer of gold and copper. The company is free of debt and poised to perform quite well as the gold market rebounds more robustly.

Liberty has earned a reputation for "finding the sweet spot" with three major projects currently underway: Kinsley in Nevada, Goldstrike in Utah, and TV Tower in Turkey. The risk level in all three locations is considered low, with high potential for some plentiful and lucrative deposits.

In 2015, the company reported an initial resource estimate at Kinsley, including 284,000 indicated oz. at an average grade of 6.04 g/t gold in the Western Flank zone.

At Goldstrike, the 2015 drill program intersected gold mineralization in all areas tested over a 6 km.-long corridor, confirming that gold is widespread.

Over a 12-month period, Liberty compiled and digitized approximately 20 years of historical exploration and mining data at the site. The 2016 drill program targeted unmined or undrilled areas between and around the historic pits.

Both Goldstrike and Kinsley are under budget. Still, Liberty recently closed a C$4.47 million private placement to advance its work. The company has C$14 million in liquid holdings.

Meanwhile, the TV Tower project has returned some of the best results. It produced some of the purest gold, silver, and copper intervals ever reported in the northwestern region of Turkey. Results were strong enough that Pilot and its partner are expanding the footprint of two copper-gold porphyry discoveries in the southern part of the property.

A sum of parts valuation generates an estimated target share price of C$1 per share. And yet, the stock is currently trading below C$0.50.

Pilot Projects

Lydian International Limited (TSX: LYD)(OTC: LYDIF)

Lydian International is an emerging gold developer that's focused on precious and base metal assets located in Armenia and Georgia.


Its flagship is the Amulsar gold project, located in southern Armenia.

Test results show 3 million oz. of gold measured and indicated and also 2 million oz. inferred.

A technical report filed in November 2015 showed the project had initial capital costs of $370 million and the key all-in sustaining costs of US$585 per ounce.

Construction is scheduled to begin on the site this year. Once it's complete, production is expected to average 200,000 gold ounces per year over a decade.

The total recoverable amount of gold is estimated at 2.1 million oz. with accelerated after-tax cash flows of $567 million during the first five years of operations to support early payback of project debt and equipment financing.

The net present value (NPV) is $338 million, based on a discount rate of 5% and a gold price of $1,150 per ounce.

Yet, Lydian has a total market cap of just C$220 million with a share price of C$0.30.

Given its assets, the share price ought to be at least C$0.50 or even C$0.75 in the best-case scenario.

B2Gold Corp. (TSX: BTO)(NYSE: BTG)

B2Gold Corp. is a Vancouver-based gold producer with three operating mines (two in Nicaragua and one in the Philippines) and a strong portfolio of development and exploration assets in Namibia, Nicaragua, Mali, Burkina Faso, and Colombia.

In the most recent quarter, B2Gold reported gold revenues of $285 million, a 73% increase the same period in 2017. Gold sales were at 220,738 ounces at an average price of $1,290 per ounce compared with 131,737 ounces at an average price of $1,247 per ounce a year ago.

This is largely due to higher productivity and cost efficiency at the Otjikoto Mine — where a weaker Namibian dollar and also lower fuel and energy costs have provided a nice tailwind.

In all, the Otjikoto gold project has excellent exploration potential. Exploration drilling in 2013 discovered a new high-grade zone, called Wolfshag, with an inferred resource containing 703,000 oz. at 3.2 gm. of gold per tonne near the current planned open pit.

The mine was expanded in 2015, increasing ore throughout from 2.5 million tonnes per year to 3 million tonnes:


For 2018, production from the Otjikoto Mine is expected between 160,000 ounces and 170,000 ounces of gold, primarily from the Otjikoto Pit, at cash operating costs in the range of $480-$525 per ounce and AISC in the range of $700-$750 per ounce.

Better still, the new Fekola Mine, which is in its second full-quarter of commercial operations, is performing ahead of plan. It produced 112,644 ounces of gold in the quarter or 11% above budget. That led B2Gold to hike Fekola’s annual production guidance to 420,000-430,000 ounces of gold from the previous 400,000 to 410,000 ounces.

Agnico Eagle set another record for payable gold production in 2013 at 1,099,335 ounces of gold, with total cash costs per ounce of $672 on a by-product basis. The significant improvement in gold production was a result of strong operating results from all of our mines, in particular the Meadowbank mine. In 2014, payable gold production is expected to be approximately 1,400,000 ounces, while total cash costs per ounce are expected to be approximately $663 on a by-product basis. - See more at: http://www.agnicoeagle.com/en/Operations/Pages/Production-Summary.aspx#sthash.pFyaNpiW.dpuf
Agnico Eagle set another record for payable gold production in 2013 at 1,099,335 ounces of gold, with total cash costs per ounce of $672 on a by-product basis. The significant improvement in gold production was a result of strong operating results from all of our mines, in particular the Meadowbank mine. In 2014, payable gold production is expected to be approximately 1,400,000 ounces, while total cash costs per ounce are expected to be approximately $663 on a by-product basis. - See more at: http://www.agnicoeagle.com/en/Operations/Pages/Production-Summary.aspx#sthash.pFyaNpiW.dpuf
Agnico Eagle set another record for payable gold production in 2013 at 1,099,335 ounces of gold, with total cash costs per ounce of $672 on a by-product basis. The significant improvement in gold production was a result of strong operating results from all of our mines, in particular the Meadowbank mine. In 2014, payable gold production is expected to be approximately 1,400,000 ounces, while total cash costs per ounce are expected to be approximately $663 on a by-product basis. - See more at: http://www.agnicoeagle.com/en/Operations/Pages/Production-Summary.aspx#sthash.pFyaNpiW.dpuf


The bottom line: We're entering a period where gold demand is increasing but where it's also much harder to find thanks to lower production targets and declining asset quality.

Generally speaking, junior gold miners are a risky proposition, but they offer incredible returns due to their leverage.

Companies that have a greater chance of making a discovery will fetch higher prices. So, too, will quality deposits with robust economics.

Consolidation is ramping up, as well.

Larger world-class miners are looking to scoop up profitable assets while they're still cheap. We've already seen some acquisitions this year and more are likely to follow.

Just remember: The most successful prospectors aren't interested in mining their shareholders' pockets. This is often because they're large shareholders, as well, which means that management isn't interested in frivolous spending or dilution. Skin in the game is important. And so is experience.

There are good deposits out there. It just takes time and research to find them.

If you can weed out the 99% of companies that will never mine or sell anything, then you have a good shot at harnessing the most explosive upside this segment has to offer.

Companies like Midas, Pershing, GoGold, Liberty, B2Gold, and Lydian will play pivotal roles in this emerging opportunity.

Don't miss your chance to take part.

To your wealth, 

— Outsider Club Research Team

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