Gold isn’t just back—Central Banks are on a buying spree like it’s WWII, and the biggest names in mining say we’re running out of physical gold.
China and Russia are staking enormously on the precious yellow metal. By the end of 2018, Central Banks had bought up 74% more gold than the year before—and they’re still going strong. Russia is hedging against the dollar heavily. China, too.
The World Gold Council says it hasn’t seen anything like this since 1967.
It’s a combination of global events that could send gold prices soaring abruptly.
All the biggest names in gold agree one thing: We’re running out of physical gold.
Ian Telfer, CEO of Goldcorp, the biggest mining company in the world, says “we’re right at peak gold”. Franco-Nevada chairman Pierre Lassonde says the coming years will see a significant dip in gold production. And Seabridge Gold chairman Rudy Frink says gold reserves are shrinking noticeably.
These fears are real. Discoveries in the past decade have paled in comparison to earlier times.
When a little-known company suddenly manages to do the impossible and secure a license for one of the biggest gold and copper mines in the world, the finance world sits up and takes note.
Now watch what’s happening in Romania, one of the richest gold venues in Europe.
Romania’s historical Ro?ia Montan? mine is the stuff of lore and legend—not just because it’s in the land of Dracula…
But because it’s home to legendary gold and copper resources that the government hasn’t let anyone touch.
As one little-known company just became the first non-state-owned entity to receive a ratified mining license to get at what could become one of the biggest gold discoveries of the century.
Using cutting-edge exploration and production techniques such as drone surveying and 3D geo-mapping, the company is aiming to dig up some $13 billion in gold and copper reserves.
And this year, the massive resources near the Ro?ia Montan? mines could be resurrected at exactly the same time that the world is running out of gold, and as gold is staging its biggest comeback ever.
Welcome to the world class Rovina Valley Copper-Gold Project … now fully owned by a company that analysts say could be worth 180X its current value …
Where investors are zeroing in on a clean-tech shale-style revolution for Gold. This is Gold 2.0, and it’s all about clean tech, zero cyanide, and getting more gold for every exploration buck.
Euro Sun isn’t only sitting on massive acreage in one of Europe’s most pre-eminent venues; but it’s also right next door to another hugely profitable mining estate in Europe. And better yet—we’re already running out of gold.
#1 Ridiculously Undervalued Stock
Euro Sun Mining currently has a market cap of $40 million—a ridiculously low valuation for a company that just made an unprecedented jump in Europe’s second-largest gold mine, and one of the biggest in the world.
Compare it to Timok—a very similar asset located in neighboring Serbia (that recently sold for $1.4 billion).
Euro Sun Mining’s Rovina Valley Project contains significantly more gold and copper resources than Timok and is located just four hours away by car. Indeed, Rovina Valley contains 40 percent more reserves than Timok and features 36 percent lower capex.
It’s interesting to note that a Chinese firm recently bid $1.4 billion for Timok. That would make Rovina worth 90X more.
Rovina’s low AISC (All-in Sustaining Costs) of $752 an ounce leaves a healthy profit margin of $550 an ounce at current gold prices and a $60-$70 million free cash flow every year.
A preliminary economic assessment estimated Euro Sun Mining’s average gold production of 196,000 ounces and 49.4 million pounds of copper each year over a 19-year lifetime.
This implies that Rovina and, consequently, Euro Sun Mining, should be valued at no less than $3 billion.
To put a finer point on things, that would make Rovina worth 180X more than its current value.
The sizeable valuation disparity can almost entirely be chalked up to the constant comparisons with Gabriel Resources and Ro?ia Montan?. Yet, to associate Euro Sun Mining with Gabriel Resources is unequivocally incorrect and absolutely misses the point. None of the many issues that have plagued Gabriel Resources apply to Euro Sun Mining.
The company’s clean technologies have a much smaller environmental footprint—something that has endeared it to the government as evidenced by the mining license ratification process. Euro Sun Mining is well in the process of getting all the necessary permits, while Gabriel Resources is basically doomed.
It’s important for investors to bear in mind that the company will re-rate materially higher when the mining license ratification is complete.
#2 The Gold Rally
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Source: CNN Money
Since 2011, gold traders have endured a torrid period amid one of the longest economic expansions in history. Low levels of financial market stress, asset purchases by global banks on a massive scale and extreme bullishness in equity markets led to a cooling off for gold stocks.
But now the exact opposite is beginning to happen…
We’ve just witnessed a shift from extreme optimism to deep pessimism. Trade wars, Brexit, bloody political upheaval in Venezuela and countless other global events have caused tectonic cracks in the global economy.
The U.S. is not immune, either. Growth was only 2.6% in the fourth quarter of 2018—down from 3.4 percent in the previous quarter. Suddenly, the Fed has changed its tune, canceling interest rate hikes and expressing concern about slowing growth.
In China, the situation is even worse. The economy is growing at its slowest pace in three decades.
And China’s biggest trading partner, the European Union, has just cut its near-term growth projections by an astounding 40 percent. The EU economy is expected to grow at only 1.3 percent.
Everywhere you look, signs that a global recession looms large abound, with the IMF recently cutting its 2019 outlook.
That is exactly the kind of backdrop that favors safe-haven investing. Gold is considered the ultimate fear hedge that outperforms other asset classes during times of economic stress—and gold charts are a clear testament to this fact.
Undervalued junior mining stocks like Euro Sun Mining Inc.(TSE:ESM, OTCPK:CPNFF) offer the best chance for solid returns as investors turn to gold to hedge their bets—especially when they’re suddenly sitting on one of the most alluring gold mines in the world.
Keep this in mind: There is an explosive upside to gold stocks when gold starts climbing, even modestly. That’s what happened in 2016, when gold prices jumped 26% in only 6 months, leading to outsized returns for miners. Endeavour Mining Corp gained 196% in 6 months. IAMGold gained 256%. Even the juniors skyrocketed: Argonault Gold’s share price jumped 298% in 6 months, and its peer Great Panther Mining saw its share price even jump by a whopping 340% in no more than 4 months after it reported a 19% increase in gold production.
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Even a 1% move in gold can send junior miners soaring 10% or more.
With analysts already putting a price target of 80% higher on Euro Sun, imagine what even a small jump in gold prices could do?
#3 World Class Gold Mine
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Euro Sun Mining is developing a world-class gold and copper mine that would put much bigger companies to shame.
The company now has 100 percent ownership for roughly 400 million tons of ore in three discreet bodies consisting of about 7.1 million ounces of gold and a billion and a half pounds of copper working out to about 10.1 million ounces of gold equivalent.
At a current gold price of $1320 per ounce, that’s more than $13.3 billion in potential revenue… and that for a company that’s currently valued at 30 million.
And it gets even better. Extraction costs at the Rovina Valley Project are much lower than that of neighboring mining districts.
The Rovina Valley mine is frequently compared to Timok, a legendary mining district in Serbia—yet it is much bigger and provides superior mining economics. Rovina Valley not only contains much more extensive gold and copper reserves, they are also cheaper to mine.
In November, the country’s National Agency for Mineral Resources (NAMR) officially endorsed the project and initiated the ratification process for the mining license. This is a short process that can be completed in a few months.
The license de-risks this play, which is already fully licensed by the Romanian government.
That’s why a $40-million market cap company is starting to look a lot like a $3 billion company—and analysts seem to agree.
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The Rovina Valley Project (RVP) is located in prime mining estate.
The plant location is about 3km away from a small town of 13,000 people. The town was home to a large mine for 80 years, and has a well-developed infrastructure network of rail, power, water-- they literally have it all.
#4 The Clincher? Clean Technology Combined with High Productivity
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All other natural resource sectors have had to move forward with revolutionary new technology—to enhance recovery and to spare the environment.
Gold is no different …
and Euro Sun is proving that in the ancient tunnels of Romania.
Not only is it safe and environmentally friendly; but it’s also a boon to gold recovery.
Euro Sun Mining (TSE:ESM, OTCPK:CPNFF) has put a lot of money into its research labs. It’s tried dozens of different chemicals and processes; and now it’s discovered the secret that makes those types of yields possible. The company is now able to extract 20 percent extra gold at zero extra cost.
The process is “dry stacking”, which virtually eliminates contamination though seepage of groundwater when gold is separated from the hard rock.
Gold recovery was formerly 68 percent …now it’s 82 percent.
The concentrate was 9 or 10 percent, previously--and now its 22 percent, with about 100 grams of gold.
In other words, the kind of grades that smelters would kill for.
That makes the term undervaluation itself undervalued.
#5 First Government-Backed Private Entity
Euro Sun Mining is the only government-endorsed private mining firm operating in Romania—thanks to its dedication to using clean mining technologies.
The company has already embarked on an Environmental and Social Impact Assessment (ESIA) and continue its work on a feasibility study on the Rovina Valley project.
Romania has an incredibly rich mining culture, which means that the government is keen to get everything restarted—but it’s got to be clean.
Euro Sun Mining is devoted to using the latest technology with no environmental risks. And that speaks to ESG, which is all about environmentally and socially responsible investments.
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The shares shot up 50 percent when the company received a ratified mining license by the Romanian Government in November, and now it’s hoping to get production underway within 12 to 18 months.
For the first non-state owned company to be issues a mining permit since 2003, and the first company to be able to cleanly cut the vampires out of this Transylvanian gold, this is a discovery on multiple levels. It’s got serious legs that are running at breakneck speed.
Here are 5 more companies analysts are watching as precious metals gain speed…
First Majestic Silver (NYSE:AG): There’s a lot of bullishness around this stock, with earnings growth expected to be high over the next 3-5 years. The optimism is absolutely justified as this Canadian mining company has been operating in Mexico for nearly a decade and has over $770 million in assets including 5 of the most promising locations in the country.
Apart from its strong resource base in a proven jurisdiction, First Majestic Silver could see its share price go up significantly in the next 2 years, as a majority of world-renowned economists are now expecting a recession before the end of 2020.
In the short term, investors can look forward to a share repurchasing program. The company board has already approved an extension of the current share buyback, which allows the company to buy back up to 5,000,000 of its own shares.
Wheaton Precious Metals Corp. (NYSE:WPM) (TSX:WPM)
Wheaton is a company with its hands in operations all around the world. As one of the largest ‘streaming’ companies on the planet, Wheaton has agreements with 19 operating mines and 9 projects still in development. Its unique business model allows it to leverage price increases in the precious metals sector, as well as provide a quality dividend yield for its investors.
Recently, Wheaton sealed a deal with Hudbay Minerals Inc. relating to its Rosemont project. For an initial payment of $230 million, Wheaton is entitled to 100 percent of payable gold and silver at a price of $450 per ounce and $3.90 per ounce respectively.
Randy Smallwood, Wheaton's President and Chief Executive Officer explained, "With their most recent successful construction of the Constancia mine in Peru, the Hudbay team has proven themselves to be strong and responsible mine developers, and we are excited about the same team moving this project into production. Rosemont is an ideal fit for Wheaton's portfolio of high-quality assets, and when it is in production, should add well over fifty thousand gold equivalent ounces to our already growing production profile."
Agnico Eagle Mines Ltd (NYSE:AEM) (TSX:AEM)
Canadian based gold producer, Agnico Eagle Mines is an especially noteworthy company for investors. Why? Between 1991-2010, the company paid out dividends every year. With operations in Quebec, Mexico, and Finland, the company also is taking place in exploration activities in Europe, Latin America, and the United States.
Agnico is a company with a lot of exposure to gold, letting investors take advantage of long-term price movements.
Though the company joins a long list of gold majors that reported losses in 2018, but its cash flow deficit is largely attributed to its growth in production and new projects coming online.
Yamana Gold (NYSE:AUY) (TSX:YRI)
Yamana, has recently completed its Cerro Moro project in Argentina, giving its investors something major to look out for. The company plans to ramp up its gold production by 20% through 2019 and its silver production by a whopping 200%. Investors can expect a serious increase in free cash flow if precious metal prices remain stable.
Recently, Yamana signed an agreement with Glencore and Goldcorp to develop and operate another Argentinian project, the Agua Rica. Initial analysis suggests the potential for a mine life in excess of 25 years at average annual production of approximately 236,000 tonnes (520 million pounds) of copper-equivalent metal, including the contributions of gold, molybdenum, and silver, for the first 10 years of operation.
The agreement is a major step forward for the Agua Rica region, and all of the miners working on it.
Eldorado Gold Corp. (NYSE:EGO) (TSX:ELD)
This Canadian mid-cap miner has assets in Europe and Brazil and has managed to cut cost per ounce significantly in recent years. Though its share price isn’t as high as it once was, Eldorado is well positioned to make significant advancements in the near-term.
In 2018, Eldorado produced over 349,000 ounces of gold, well above its previous expectations, and is set to boost production even further in 2019. Additionally, Eldorado is planning increased cash flow and revenue growth this year.
Eldorado’s President and CEO, George Burns, stated: “As a result of the team’s hard work in 2018, we are well positioned to grow annual gold production to over 500,000 ounces in 2020. We expect this will allow us to generate significant free cash flow and provide us with the opportunity to consider debt retirement later this year. “
By. James Burgess
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