January 2020 in Review: Barometric Bedlam

Source: Michael Ballanger for Streetwise Reports 02/03/2020 Sector expert Michael Ballanger charts last month’s market moves. Back in the 1980s, I had a boss that was right out of Monty Python. A Canadian by birth, he was the son of a very wealthy English nobleman who spent a number of years in Brazil as CEO of Brazilian Traction, where he was raised by servants and nannies and attended private boarding school at Upper Canada College in Toronto. “James” was a thoroughly English gentlemen on the outside but a scandalous hell-raiser in private quarters. I recall him at a squash club banquet standing on the dining table wrapped in the Union Jack, tumbler of gin in hand, reciting a totally X-rated, four-stanza limerick that began “The once were three nuns from Birmingham (pronounced BIR-MING-UM), and here is the story concerning ’em. . .”. It was his saintly wife, “Jane,” who solemnly declared in the wee hours of one debaucherous morning in his basement that we had better “cease and desist with this unnecessary drinking,” never revealing what might be the definition of “necessary drinking,” a conundrum left unsolved for nigh-on thirty-five years. The reason I mention this is that as we await the reopening of Chinese markets after the New Year’s week closures, I am sure that many investors are engaged in “necessary drinking” as they await either a) the crash in virus-infected markets or b) the arrival of the Chinese central planner trading desk and legion after legion of stock-buying … Continue reading

Prime Mining Wants to Produce in 2022

Source: Bob Moriarty for Streetwise Reports 02/03/2020 Bob Moriarty of 321gold discusses the path he would like the company to take as it plans to bring a historical gold and silver mine into production. Prime Mining Corp. (PRYM:TSX.V) has picked up an existing gold mine in Sinaloa, Mexico with a production history going to the 18th Century. Guadalupe de los Reyes is estimated to have produced 500,000 to 600,000 ounces of gold and 40 million ounces of silver. Prime is buying the project for $6 million and a 1% NSR. The 6300 square km property comes with a 43-101 resource of 535,000 ounces of gold and over 10 million ounces of silver. To date only 40% of the project has been explored. When I talked to management at Prime they told me of their plans for going into production on a small scale within two years at a low capital expense. I’m hoping they change their minds. Their plan calls for a low cost heap leach with production of somewhere in the 60,000 to 70,000 ounce per year range. The project was bought from Vista Gold who spent in excess of $20 million on exploration. It lies in a nest of half a dozen other similar mines in the area including Minera Alamos, First Majestic, McEwen Mining and Chesapeake. Mining companies love heap leach systems because they are cheap to set up and mine. While the recovery leaves something to be desired, the low capex can turn a low-grade mine, … Continue reading

Getchell Wins the Nevada Lotto

Source: Bob Moriarty for Streetwise Reports 01/31/2020 Bob Moriarty of 321gold discusses a junior explorer that has taken on two major gold properties in Nevada. In every precious metals cycle there comes a time where a company has good assets but for one reason or another has failed to garner traction and has to pretty much give away projects. That point came for Canarc (CCM-V) last year. They pretty much gave away a high-grade gold project with over a million ounces of gold in a current 43-101 to a junior that was little more than a shell at the time. In October Canarc announced a binding agreement with Getchell Gold Corp. (GTCH:CSE) for an option on two major gold properties in Nevada. The Fondaway Canyon project is the subject of a 2017 43-101 report by Canarc showing a indicated resource of 6.18 g/t gold for 409,000 ounces as well as an inferred resource of 660,000 ounces at 6.4 g/t Au. Getchell Gold is paying $4 million in cash and shares over a four year period to get 100% ownership with a small, 2% NSR over the two projects. The 2nd project is called the Dixie Comstock project and shows signs of having some mining activity but there are no reports of production. There was a minor historic resource from a prior owner of the property dating back to 1991 of 146,000 ounces. There is a $1.45 million work commitment over the same four year period. The company has just completed … Continue reading

Target Price Raised on Red Lake Gold Explorer

Source: Streetwise Reports 01/31/2020 An operations update on one of the company’s projects is provided in an Echelon Wealth Partners report. In a Jan. 28 research note, analyst Ryan Walker reported that Echelon Wealth Partners raised its target price on Pure Gold Mining Inc. (PGM:TSX.V; PUR:LSE) to CA$1.35 per share from CA$1 after updating gold price and forex assumptions in its model on the company. The company’s shares are currently trading at around CA$0.82 per share. Walker discussed Pure Gold’s latest news, which were announcements regarding new drill results and underground development, both at its Red Lake mine in Ontario. Drill results from infill and stepout drilling near the development and ore zones expected to provide initial mill feed in 2020 were “positive” and indicated “strong mine continuity and the potential for mining stope expansion,” Walker noted. Because holes PG19-714, PG19-716, PG19-717 and PG19-722 were stepouts of 4–18 meters from existing mining shapes, they represent potential new zones of mineralization for integration into the mine plan in the near term. As for specific assays, hole PG19-714 returned 2 meters (2m) of 6.1 grams per ton (6.1 g/t) gold, 1m at 7 g/t gold and 1.5m at 5.6 g/t gold. Hole PG19-716 demonstrated 1m of 10.6 g/t gold. Hole PG19-717 showed 2m at 8.9 g/t gold and 0.9m of 8.2 g/t gold. Hole PG19-722 intersected 1m of 13.2 g/t gold. Other new drill results could be added to the mine plan, Ryan stated. They include those from PG19-719, which yielded 79.4 … Continue reading

U.S. Petroleum Firm Positioned to 'Drive Growth and Value'

Source: Streetwise Reports 01/31/2020 The company’s robust Q4/19 and outlook for this year are addressed in a Raymond James report. In a Jan. 29 research note, Raymond James analyst Justin Jenkins reported that Marathon Petroleum Corp.’s (MPC:NYSE) Q4/19 was a beat and its current “risk/reward still remains positive.” Jenkins reviewed the downstream energy company’s “very strong Q4/19 performance” in which it “easily beat” consensus and Raymond James’ earnings per share (EPS) estimates. Marathon’s adjusted EPS came in at $1.56, versus forecasts of $0.80 and $0.85 by Raymond James and the Street, respectively. EBITDA was $3.2 billion, also above Raymond James’ $2.2 billion projection. With respect to Q4/19, the analyst explained that “the solid upside was driven by better all-in refining performance (margins/throughput/costs) coupled with some modest retail upside but partially offset by a slight miss in midstream and higher-than-modeled corporate costs.” Another positive that Jenkins pointed out is management guided to 2020 capex of about $4.35 billion, which is lower than the roughly $5 billion estimate of both Raymond James and consensus. Plus, Marathon expects capex to drop even more in 2021, “enough so that it expects to generate solid excess free cash flow.” Also of note, management continues to optimize high sulfur fuel oil between plants and import additional heavy sulfur fuel as feedstocks to fill its cokers, both in anticipation of the sulfur penalty it is likely to be hit with from IMO 2020. The company is benefiting, too, from exports of vacuum gas oil along the Gulf … Continue reading

Common Stock Warrants Are a Powerful Wealth Building Tool with Dudley Baker

Note from Dudley Pierce Baker, CommonStockWarrants.com I recently did this interview with Kerry Lutz and we walk through investment possibilities with mining shares and stock warrants. There is a short advertising break in the middle, so don’t leave the interview until completed. Common Stock Warrants Are a Powerful Wealth Building Tool with Dudley Baker   If you would like more information on stock warrants please download your Free copy of “The Stock Warrant Handbook, Your Personal Guide To Trading Stock Warrants”.

Oil & Gas Services Company Upgraded to Buy

Source: Streetwise Reports 01/30/2020 The reasons behind the changed rating and expectations for the firm’s Q4/19 are presented in an iA Securities report. In a Jan. 27 research note, analyst Elias Foscolos reported that iA Securities upgraded its rating on Pason Systems Inc. (PSI:TSX) to Buy from Hold “as upside has improved and U.S. drilling likely bottomed.” Foscolos previewed Q4/19 for the Calgary-based the oil and gas services company that provides “specialized data management systems for drilling rigs.” He wrote that iA Securities expects Pason Systems’ Q4/19 revenue to be down 11% quarter over quarter (QOQ) due to an 11% drop in rig counts to an average of 798 in the U.S. during that period. However, stability in Canada and a projected increase internationally should somewhat offset the lower revenue. The $30 million of EBITDA that iA Securities projects for Pason in Q4/19 is in line with consensus’ estimate. Foscolos noted that drilling in the U.S. has reached a nadir, and independent companies are feeling the brunt of it more than the majors. “As U.S. net oil production changes approach zero, a level of drilling will be reached where majors are at least drilling enough to replace aging production,” he added. The analyst highlighted that Pason warrants a higher valuation than its peers due to its “premium fundamentals,” which include about $150 million of net cash, a capex-light business, robust cash flow and a mid-double digit return on equity. Looking forward, iA Securities projected lowered EBITDA in Q4/19 and 2020, … Continue reading

Texas Oilfield Services Firm 'Well Positioned for 2020'

Source: Streetwise Reports 01/29/2020 The factors contributing to the company’s status and financial expectations for this year are discussed in a Raymond James report. In a Jan. 21 research note, Raymond James analyst Praveen Narra reported that Halliburton Co. (HAL:NYSE) is “well positioned for 2020” after “solid Q4/19 results.” North American cost cuts and international revenue growth have gotten the energy company to its current state. As for its North American business, Halliburton shrank it to its forecasted 2020 activity levels and concentrated on more stable customers, Narra noted. These changes should significantly improve full-year utilization and lead to fewer cost absorption issues. Also, they should boost 2020 margins beyond those generated through the company’s cost saving program. “With guidance of 95% hydraulic horsepower dedicated in Q1/20, we expect Halliburton can focus on higher-return work despite overall pricing softness,” Narra commented. In Raymond James’ model on the Houston, Texas-based energy company, its North American revenues in 2020 drop 14% but EBIT margins rise by 40 basis points year over year (YOY). Boosting that EBIT is an expected, $450 million YOY tailwind from reduced fixed costs and lower depreciation, depletion and amortization. Regarding international growth, Halliburton achieved double digit revenue growth in that business segment in 2019, and it is expected to continue that trend in 2020, albeit at a slower pace, Narra relayed. Raymond James anticipates a 9% YOY revenue slowdown, but even with that, Halliburton’s 2020 revenue would still will exceed that of the industry as a whole, which … Continue reading

Junior Exploration Companies on Adrian Day's Buy List

Source: Adrian Day for Streetwise Reports 01/29/2020 Fund manager Adrian Day writes about junior exploration companies in his portfolio that he is recommending for purchase. Evrim Resources Corp. (EVM:TSX.V, Toronto, 0.315) is coming closer to generating long-term revenue. The Ermitano project it discovered and sold to First Majestic keeping a royalty is on track for a Q1 2021 production start-up. The property is adjacent to First Majestic’s Santa Elena mine, which is running low on ore. FM has been aggressive in exploring Ermitano, and now ramp construction has commenced. For the initial couple of years, some 40% of the Santa Elena mill feed will come from the higher-grade Ermitano, moving up over time. The current resource is 57.8 million ounces of silver, with a PEA expected this quarter. Analysts of First Majestic are looking at up to nine-year mine life. Undervalued on hard assets alone Evrim has cash of C$10 million (US$7.7 million), while the Ermitano royalty has an NPV of around US$16 million (on reasonably conservative assumptions). With a market cap of C$26 million, it is clearly valued close to the value of these two hard assets alone, with the rest of the company—the joint ventures and alliances, and other properties—essentially free. In calculating the value of the royalty, we assumed a static gold price. Given the royalty revenue is off the top, any increase in the gold price will have a meaningful impact on the value of that asset. Importantly, a royalty such as this one could be … Continue reading

Coverage Initiated on Oil Company with 'High Growth Ambitions'

Source: Streetwise Reports 01/29/2020 The compelling aspects of this investment opportunity are outlined in a Pareto Securities report. In a Jan. 20 research note, analyst Tom Eric Kristiansen reported that Pareto Securities initiated coverage on PetroNor E&P Ltd. (PNOR:OSE) with a Buy rating and an NOK 1.3 target price. The current share price is NOK 0.98. Kristiansen, noting the company has “high growth ambitions ahead,” presented the highlights of the PetroNor story. For one, the energy company “delivered solid production growth” and a 25%-plus return on capital since securing four oil fields in offshore Congo’s Pointe Noire Grand Fond (PNGF) Sud block in 2017. Three years later, these fields are expected to produce 2,400 barrels of oil equivalent per day (2,400 boe/d) net in 2020, a greater than 50% increase, at a lower operating expense of US$12 per boe versus $26. This is due in large part to workovers of existing wells being done at a low cost. Thus, late last year PetroNor increased Proven and Probable reserves there by 28% to 11,200,000 boe. “We estimate that PetroNor E&P will generate an average annual fixed capital outlay of US$18 million in 2020 to the end of 2022 at Brent US$65 per barrel oil that likely will be reinvested info further growth,” Kristiansen commented. Also late in 2019, PetroNor engaged in several transactions to pursue overlooked potential on the Aje block in offshore Nigeria and thereby potentially grow the company further. When the Aje transaction closes, it will increase PetroNor’s production … Continue reading