Despite near record gold prices and relatively high silver prices, Hart says the share prices of companies focused in this sector are nowhere near their highs. Pic: Robbie Goodall via Getty Images
Experts
MoneyTalks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to hear what’s hot, their top picks, and what they’re looking out for.
Today we hear from Canary Capital executive director Paul Hart. Canary Capital offers high conviction private placements in micro and small cap companies to sophisticated investors.
Hart says 2022 will be a year of increasing volatility, or in other words, a perfect environment for precious metals.
“Investors need to be prepared to implement the appropriate investment strategies to succeed in this environment,” Hart said.
“For the first time in more than 100 years, the global superpower is being confronted by two adversaries working in tandem.
“The US is having its power and influence questioned both on a political and economic front by China and Russia.
“One challenge or one challenger can be dealt with, but two challengers who can take turns to cut and thrust requires discipline and foresight if they are to be neutralised.
“A homogenous population, in full support of stated goals against the adversary is a minimum requirement for success and the alternative is volatility where no single decision is universally embraced and no win can be celebrated across the entire country.”
Hart said volatility requires both discipline and diversification.
“The one asset class that is relatively cheap and underrepresented in most accounts is precious metals, particularly gold and silver,” he said.
“An increased allocation to this asset class will help to reduce risk in portfolios when volatility rises.
“It will also protect accounts if an unforeseen shock were to arrive over the horizon.”
Despite near record gold prices and relatively high silver prices, Hart explaind the share prices of companies focused in this sector are nowhere near their highs.
And it is for this reason that Canary Capital believes investments made into quality companies focused on gold and silver exploration could deliver substantial near-term upside.
NXM is a company which Canary Capital believes could be on the verge of a major gold discovery.
The company’s Wallbrook Gold Project in the Eastern Goldfields of Western Australia is 140km east of Kalgoorlie.
Har says the scale of the Crusader Templar discovery appears to be “large” and could host a multi-million ounce gold deposit if the mineralisation over the strike length (which is currently 1,600m) and width of the mineralisation is confirmed to be consistent.
“The Crusader and Templar prospects have the four types of alteration – ‘the right rocks’- which are present in the 4.5m ounce Karari mine, owned by Northern Star (ASX:NST), about 30km to the south,” he said.
“Large gold deposits require a unique set of ingredients to form.
“The mineralisation within the Templar/Crusader prospects is associated with a gravity low corridor plus a magnetic low (within a magnetic high) and northeast structures to concentrate the mineralisation – so ‘the right ingredients’ with ‘the right rocks’.”
Canary Capital rates the management team highly, plus Hart added the managing director Andy Tudor is an experienced geologist who has been involved with a number of significant discoveries including King of the Hills, Bannockburn and Wafi-Golpu.
“Paul Boyatzis, the chairman and non-executive director, has more than 25 years’ of experience in equity markets, particularly with emerging growth companies in the resources sector,” he said.
“One thing that stands out to us is that there is no previous mining on this tenement and very little previous exploration, so we consider that this is virgin territory for a major discovery.
“Assay results from DDH #5, which intersected visible gold in a 30m zone of intense alteration the same as seen at NST’s Karari Gold Mine are due later this quarter as well as results from the first 10,000 metres of RC drilling from the current 30,000 metre campaign.”
Nexus recently constructed a 50-man camp at Wallbrook, which is a sign of the level of confidence the company has in the project, Hart said.
S2R won a highly competitive tender in October 2021 to apply for an Exploration Licence Application (ELA) over Block 4 of the North Central Victorian Gold Fields (NCVG).
The block covers an area of 394 sqkm abutting and surrounding the high grade, high margin Fosterville Mine operated by Kirkland Lake Resources (ASX:KLA, TSX:KL).
“Fosterville produced 134,772 ounces of gold in Q3 2021 at a grade of 23.6g/t Au with average recoveries of 98.7% and All In Sustaining Cost (AISC) of just $337 per ounce – one of the highest-grade and most profitable gold mines in the world,” he said.
“Block 4 has a strike length of 55km incorporating the northern and southern structural extensions of stratigraphy that host Fosterville, with multiple prospects, similar structures and known gold occurrences.
“The ELA is underway and initial community engagement has also commenced.”
Hart added that S2 Resources is working through historical datasets, incorporating extensive geophysical and geochemical surveys, which should give the company a significant head-start in defining targets to drill.
“Initial analysis indicates that key structures and stratigraphy hosting the Fosterville gold mine continues to the north and south into S2 Resources Block 4,” he says.
“S2 Resources has won what is arguably one of the most converted exploration licences in Australia and Hart expects a substantial amount of investor interest to be generated once the exploration licence is granted and work commences on the project, likely around the middle of 2022.”
Thomson Resources has a vision to become a major silver player in Australia where the silver focused minerals sector is not strongly represented, Hart said.
“Demand for silver is growing worldwide due to its precious metal status (silver is often referred to as the poor man’s gold) and increasing industrial demand driven increased usage in solar panels and electric vehicles.
“Around 75% of the world’s production of silver is as a by-product, so supply is production rather than demand driven. If industrial demand continues to grow and investment demand increases this could lead to a supply shortage in the near future.
“We would expect this to push up silver prices.”
Thomson Resources has targeted the New England Fold Belt region in northern New South Wales and southern Queensland near the border, which over a century ago, was a prolific and active silver mining region.
“TMZ has pulled together a number of projects with existing published resources, each at some stage having operated as a mine and they also have excellent exploration potential to add to those resources.
“The projects have been combined in a Hub and Spoke strategy, aggregating the resources, with a plan to build a central processing facility.
“This will provide scale, longer mine life and access to not just silver, but also other minerals associated with the silver projects including gold, zinc, copper, lead, tin and indium,” he said.
Thomson also spent the second half of 2021 going through all the data associated with these projects.
“This involved reviewing, verifying, re-logging, mapping and rethinking to produce new geological models,” Hart added.
“The aim of this work was to restate each of the published resources to JORC 2012 standards.
“The company also wanted to ensure that they have projects which are robust and sustainable to justify the development of a centralised processing facility.”
Mineral resource estimate calculations to JORC 2012 standards are currently underway at Silver Spur, Twin Hills and Mt Gunyan leveraging a total of 56,000m of historic drilling which will provide plenty of near-term news flow.
Canary Capital believes that Thomson Resources is positioning itself as a company that can develop long term, commercially sustainable silver production in Australia.
The views, information, or opinions expressed in the interviews in this article are solely those of the interviewee and do not represent the views of Stockhead.
Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.
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