In my last FNN article, I wrote about physical gold and the junior gold market potentially being the best bets to take advantage of the possible upcoming gold rush.
In March, I attended and spoke at the Prospectors & Developers Association of Canada (PDAC) conference, the leading voice of the mineral exploration and development community with an estimated 25,000 attendees from over 135 countries.
With the global economic challenges stemming from the COVID-19 coronavirus outbreak, I feel more steadfast than ever that gold holds a lot of potential in these perilous times.
Global stock markets have been on a roller coaster ride as Central Banks are battling the economic impact of the COVID-19 outbreak with aggressive monetary and fiscal policy measures.
The United States, Canada and the United Kingdom all cut interest rates since the outbreak started. The European Union and Japan already had interest rates in the negative territory prior to COVID-19’s spread. Central Banks around the globe are buying bonds.
It remains to be seen whether these policies will work by keeping deeply impacted businesses and people solvent during travel restrictions and social distancing, or if it will merely temporarily prop up the stock market thanks to an abundance of liquidity.
While the Dow Jones has substantially rebounded off its lows from a month ago, the price of oil — a key indicator of global economic activity — has continued its freefall even after OPEC agreed to a steep production cut. In the meantime, loose monetary policy and low interest rates have helped to result in the price of gold challenging all-time highs against the U.S. Dollar and other currencies.
While buying and holding physical gold could be a good idea, junior gold explorers can hold a lot of upside potential. A drill hit or even the speculation of a drill hit on an outstanding property in a great location can send a junior explorer’s stock price up several-fold or more, subject to markets.
Many junior miners have tanked despite the gold price remaining strong. Many mining operations have been scaled back or have shut down around the world amid the COVID-19 outbreak. But this should only be a good thing for gold in the long run. In times of crisis, people stock up on supplies, sometimes irrationally. It's bullish times for gold, toilet paper and sadly, guns.
Below are my three gold and mineral stocks that I think could do quite well starting this spring through to the end of 2020 and beyond...
I believe that investors who are looking to invest in junior gold companies need to be selective in their choices. They should make sure to choose companies with quality management and knowledgeable geologists who can maximize the chances of picking the right drill targets. Even when doing this, exploring for gold is not a perfect science so you have to be aware of the many risks.
I believe that these three small cap explorers have what it takes to find gold and/or copper and other valuable resources on their prospective properties and could add tremendous value for their shareholders.
Crystal Lake Mining (TSX-V: CLM / OTC US: SIOCF)
Out of the hundreds of publicly traded junior mining explorers, Crystal Lake is my favorite despite a tumultuous several months. Its TSX Venture listing stock price traded between $0.07 – $0.095 on April 22, well off its 52-week high of $0.42 despite the anticipated bullish gold market and some positive preliminary drill results.
There has been some management turnover and several rounds of financing as drilling in northern British Columbia, Canada, is expensive. I believe that the low stock price resulting from events in the past could represent a tremendous buying opportunity for new investors to get in relatively cheaply right before the start of a possible new spring/summer drilling season.
Crystal Lake is the owner and operator of the Newmont Lake Project in the prolific Golden Triangle region in northern British Columbia. The property is just south of Galore Creek which is jointly owned by Newmont Mining Corporation (TXS: NGT / NYSE: NEM) and Teck Resources Limited (TSX: TECK.A / TECK.B / NYSE: TECK) and northwest of several projects in the Eskay Camp.
Based on the amount of drilling activity and resource finds immediately surrounding the Newmont Lake area, it is highly prospective for large economic discoveries of gold, copper and other minerals. Thanks to the activity in the area, infrastructure such as paved roads and transmission lines already exist and the local community is supportive of mining.
These factors will result in a lower cost and a potential lower risk mine — both of which favor becoming a possible takeover candidate should economic discoveries be made.
The recent retreat of glaciers on the property has only now made it possible to drill for resources, which is one of the reasons how and why Crystal Lake managed to secure it from Romios Gold Resources in 2018 in the first place. (There are some more shares and monies to be given to Romios, along with possibly more exploration commitments, for Crystal Lake to earn 100% in the Newmont Lake project.)
Dr. Peter Lightfoot, Technical Advisor for Crystal Lake has referred to the property’s potential for mineralization as jaw dropping, and the results from last year’s drill program backs up his opinion.[1] In October, the company announced initial diamond drill assay results at Burgundy Ridge that included near surface mineralization of 91.26 meters of 0.38% copper, 0.30 grams per tonne gold and 4.12 grams per tonne silver.[2]
In January, the company followed up October’s results at Burgundy Ridge with a channel/trench sample that cut a hydrothermal breccia exposed on the surface which assayed 22.00 meters of 2.00% copper, 2.27 g/t gold, 34.26 g/t silver, and 4.69% zinc.[3]
While Crystal Lake has been delivering on their exploration property end of the junior gold explorer equation, it has also been solidifying its management team. The company recently brought on Cole Evans as CEO, a man who I believe to be a true leader after meeting him personally and reviewing his CV.
Mr. Evans is the Co-Founder of HEG & Associates Exploration Services Inc., one of Western Canada’s largest exploration service companies focused on British Columbia’s Golden Triangle and South-Central regions. His work at HEG led him to gain familiarity with Crystal Lake’s Newmont Lake project. He calls Newmont Lake an exceptional land package in the heart of BC’s Golden Triangle, tremendously undervalued and still in its infancy of discovery.[4]
Mr. Evans backs up his beliefs as he currently owns over 11 million TSX: CLM shares and 8 million warrants, having participated in private placements as well as having bought on the open market.[5] He brings with him a good sense of both market and geological experience, especially in the Golden Triangle region. Former interim CEO Maurizio Napoli remains with Crystal Lake, reverting back to his vital position as Vice President of Exploration.
Crystal Lake’s market capitalization is approximately CAD$14 million with about 150 million shares outstanding. For comparison, Pretium Resources Inc. (TSX: PVG / NYSE: PVG) has a market cap of CAD$12.16 billion based on its Brucejack Mine in the Golden Triangle region. It has an estimated 6.4 million ounces of gold reserves.[6]
If Crystal Lake is able to discover anything (within the coming years) remotely close to that, it goes without saying that its upside could be multiples of where it is trading today.
Millrock Resources (TSX-V: MRO / OTCQB: MLRKF)
Millrock looks like a prime candidate to potentially experience a big year, despite recent challenges.
Drilling commenced at its 64North Gold Project located in the Goodpaster Mining District in Alaska, but unfortunately has been put temporarily on hold due to the COVID-19 outbreak.[7] However, initial drilling shows some promising results.
Drilling at Hole 20AU-001 was completed to a depth of 462.4 meters and Hole 20AU-002 was drilled to a depth of 194.5 meters, suspended short of the planned 600-meters. Both holes intersected quartz veining, alteration and sulfide mineralization.
Highlights from April 27, 2020 Drilling Results:
The company spent five years acquiring all but 34 claims of 64North while gold prices were depressed and the claims could be purchased cheaply. As a result, Millrock has staked claims on 64,200 of the 66,060 hectares of this project, which is adjacent to Northern Star’s Pogo Mine in a region where mining has been permitted and infrastructure already exists.[9]
Between already mined resources and reserves in the ground, Northern Star has reported over 10 million ounces of gold at Pogo.[10] Millrock believes that discoveries at Pogo will extend onto 64North. If this is the case, there is potential for 64North to be a multi-million ounce resource property as well.
Millrock completed a raise of CAD$1.5 million at $0.12 on the Venture Exchange in February, so its bank account is cashed up in preparation for a heavy drilling season. The company plans to use $300,000 to advance exploration of current projects, $400,000 for the generation of new projects and $150,000 for the marketing of projects to funding partners.[11]
Investors might think that is a small budget for such ambitious plans in 2020 until they realize that Millrock negotiated a very shareholder-friendly deal with earn-in partner Resolution Minerals (ASX: RML) for 64North.
Resolution can earn up to a 60% interest through exploration expenditures of US$20 million, payment of US$200,000 cash and issuance of 38 million Resolution shares to Millrock.[11] This includes a commitment to spend $5 million on drilling the property in 2020 in order to earn the first 30%.
Resolution has already successfully raised the necessary funds so there are no roadblocks to achieving this commitment. Initial drilling began this month at the Aurora target on the West Pogo Block with four holes totaling 2,000 meters planned. This initial plan has an estimated budget of US$1.0 to $1.2 million according to Millrock’s CEO Greg Beischer.[13]
Like Crystal Lake, Millrock’s CEO Gregory Beischer has also been buying through participation in the private placement and buying on the open market.[14]
Millrock's stock price has performed well considering the struggles of its peers and the market at large. It recently broke out of its $0.12 to $0.18 range to make a new 52-week high of $0.26 on the Venture. It closed at $0.185 on April 27.
Millrock’s entire market capitalization is only CAD$21 million as of April 27, but Resolution Minerals has committed US$20 million worth of drilling plus a US$200,000 cash payment and 38 million Resolution shares.
If the results over the course of the drilling program turn out to be stellar, I hope the management team is prudent enough to spend some funds to get the word out.
Currently, Resolution seems to have little issue with spending a lot of money in order to earn up to a 60% stake in 64North. More importantly, it had no issue in filling an oversubscribed private placement for its Australian listing.
There is clear demand for this prospective gold property by those who are willing to sign checks, which is a very bullish sign for investors.
Trilogy Metals (TSX: TMQ / NYSE: TMQ)
Trilogy Metals, another U.S. player based in Alaska, is dedicated to advancing exploration on its 172,675-hectare Upper Kobuk Mineral Projects high-grade copper-zinc-lead-gold-silver-cobalt properties. This includes the Arctic Project which is one of the highest-grade copper deposits known in the world with an average grade of 5% copper equivalent along with the Bornite Project, another high-grade copper deposit.[15]
With the recent fluctuations in the market, Trilogy has seen its stock price drop by more than a third since February, though it has bounced back nearly 50% from its 52-week low.
While I’m not that bullish on copper in the near-term, I think this possibly represents a great entry point as a long-term play. Trilogy’s market cap is CAD$314 million as of April 22 so it’s much larger than the other two picks. But like the other two, insiders have been buying Trilogy shares on the open market.[16]
I like this as management is putting up its own money in support of its company’s projects — one of the key components I look for when determining the viability of an investment.
Just like Millrock, Trilogy has set up a situation where drilling will actively take place on its property without it spending any of its own funds or needing to dilute.
In February, Trilogy created the Ambler Metals joint venture with South32 (ASX: S32), an AUD$10 billion company. Trilogy contributed all of its assets associated with its Upper Kobuk Mineral Projects to earn its 50% stake in the JV while South32 contributed US$145 million.[17]
A US$22.8 million budget has been set for drilling in 2020 by Ambler Metals.[18] This includes a 10,000 meter drilling program at the Arctic Project this summer and a 2,500 meter drill campaign in the Volcanogenic massive sulfide (VMS) belt. No drilling is planned for the Bornite Project, though geological mapping and geochemical soil sampling will take place in order to prepare it for the 2021 drill season.
Trilogy recently confirmed that there have been no changes to its scheduled work program in 2020 due to COVID-19, but the situation is being monitored for possible adjustments or cancellations for the year.[19]
Since Ambler Metals should be self-funded thanks to the US$145 million from South32, Trilogy expects not be spending any of its own cash on drilling until that money runs out, which could be a while. Its burn rate should decrease substantially this year as its field employees will be transitioned over to Ambler.
Trilogy had $19.2 million in cash as of December 31, 2019 and the company expects that this will be sufficient to operate for three or more years.[19] The combination of active drilling with no need to raise funds makes Trilogy an ideal target for speculative investment this year.
I suggest that investors do your own due diligence and take a close look at Crystal Lake, Millrock Resources and Trilogy Metals as potential opportunities in the expected gold rush in the Northwestern end of North America.
Happy Investing!
Kal Kotecha, PhD
for Investors News Service
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DISCLAIMER: Investing in any securities is highly speculative. Please be sure to always do your own due diligence before making any investment decisions. Read our full disclaimer here.
Disclosure: Crystal Lake Mining and Millrock Resources are Kal Kotecha portfolio holdings under his Junior Gold Report. Dr. Kotecha is currently engaged and paid by Crystal Lake Mining for marketing services. His relationship with Crystal Lake should be deemed a potential conflict of interest.
[1] FTMIG. “Dr. Peter Lightfoot of Crystal Lake Mining - FTMIG: Mining Interviews”, YouTube.com
[2] October 2019. “Crystal Lake Announces Initial Diamond Drill Assay Results From Burgundy Ridge – Results Include 91.26m Of 0.38% Cu, 0.30 G/T Au, 4.12 G/T Ag Near Surface On 180m Step Out”, www.crystallakemining.com
[3] January 2020. “Crystal Lake Cuts 22 Metres Of 2.00% Copper, 2.27 G/T Gold, 34.36 G/T Silver, And 4.69% Zinc On Surface At Its Newmont Lake Project In BC; Discovers Possible High-Grade Source Of Multi-Element Burgundy Ridge System”, www.crystallakemining.com
[4] January 2020. “Crystal Lake Mining Appoints New CEO And Director”, www.crystallakemining.com
[5] Insider filings for Crystal Lake”, www.canadianinsider.com
[6] Brucejack Mine”, www.pretivm.com
[7] March 2020. “Millrock and Resolution Announce Temporary Suspension of Drill Campaign On Aurora Target, West Pogo Block, 64North Gold Project, Alaska”,www.millrockresources.com
[8] https://www.millrockresources.com/news/millrock-and-resolution-announce-drill-results-from-hole-20au001-aurora-target-and-planned-drilling-restart-west-pogo-block-64north-gold-project-alaska
[9] 64North”, www.millrockresources.com
[10] August 2019. “Northern Star Set For Further Production Growth As Reserves and Resources Jump +30%”, www.nsrltd.com
[11] February 2020. “Millrock Announces Increase in Non-Brokered Private Placement Financing”, www.tmxmoney.com
[12] February 2020. “Millrock Provides Corporate Update Drilling to Begin at West Pogo, Alaska”, www.tmxmoney.com
[13] February 2020. “Millrock Resources CEO Greg Beischer on Upcoming 2,000-Meter Drill Program with JV Partner Resolution Minerals at the 64North Gold Project in Alaska”, www.resourcestockdigest.com
[14] Insider filings for Millrock Resources”, www.canadianinsider.com
[15] Project Overview”. www.trilogymetals.com
[16] Insider filings for Trilogy Metals”, www.canadianinsider.com
[17] December 2019. “South32 and Trilogy Metals to form Upper Kobuk Mineral Projects Joint Venture” www.tmxmoney.com
[18] February 2020. “Trilogy Metals Announces the 2020 Program and Budgets for the Upper Kobuk Mineral Projects”. www.tmxmoney.com
[19] February 2020. “Trilogy Metals Reports Fiscal 2019 Year End Results”. www.tmxmoney.com
