Gold Mining Stocks Look Ripe As Bullion Rises

Gold Mining Stocks Look Ripe As Bullion Rises
  • Price of gold recently hit a 4-month high near $1900 per ounce
  • Gold mining stocks, and exploration stocks in particular are currently bargain-priced




Don’t look now, but the gold sector appears to be creeping back into bull market territory. The spot price of gold hit a 4-month high this week, touching above $1890 per ounce.

For more technically minded investors, the price of gold has crossed above both its short-term and long-term moving averages.


A new rally may have just begun. For more experienced investors, the moment they hear “gold market rally” they think “mining stocks”. Why?

Gold mining stocks outperform in any rally

In a word, leverage. Gold producers provide natural leverage versus the price of gold. And this leverage also extends to the gold exploration and development companies.

But it’s more than that.

Not only do mining stocks outperform bullion prices in a rising market, but they typically lag the start of that rally. Get in early with these stocks in a new gold rally and the gains can be both quick and spectacular.

With the price of gold showing indications of a breakout, the share prices of mining stocks are sitting at below-average valuations – when looked at over the long term.



Again, this picture doesn’t tell the whole story. The HUI tracks larger gold mining stocks. These companies are typically more fully valued.

We get a bit better idea of the current opportunity in gold mining stocks with a look at the mining-ETF, GDXJ.



Even here, though, the ETF is heavily weighted with mid-tier and larger mining companies. Where investors always reap the largest gains in any new gold market rally is with the junior mining stocks.

And these companies are generally hurting – at least in terms of share price. Many of the exploration and development companies have fallen by half or more from 2020 highs. This is with the price of gold less than 15% from its all-time high of $2067 per ounce.

Opportunity knocks.

The right time, the right place

Opportunities abound at present among gold mining stocks. But for mining investors looking for a home-run, they may want to put some of their investing dollars into Leviathan Gold (CAN:LVX / US:LVXFF).

Officially, Leviathan is an early-stage gold exploration company. However, that’s a bit of an over-simplification.

Yes, Leviathan is looking for new gold discoveries. But it’s exploring for gold on huge land packages that have a history of high-grade gold mining.

This high-grade gold mining is in Australia. And it took place over a century ago, during Australia’s “gold rush”.

At that time, mining technology couldn’t go below the waterline, which (in this geology) is at ~100 meters depth. That’s shallow mining by today’s standards, and modern mining technology has no difficulty with ore extraction well below the water line.

It gets even more interesting.

This historic ‘gold country’ is heating up again. Why?

Three words: Fosterville Gold Mine.

The flagship mine for senior gold producer, Kirkland Lake Gold (US:KL/ CAN:KL), Fosterville boasts numbers that would make any mining investor drool.1
 
  • Mining 500,000+ ounces of gold per year
  • Reserve grades above 30 g/t Au
  • Cash costs below $150 per ounce
  • Recoveries of ~98%
1 Source: Kirkland Lake Gold

The Fosterville Mine is less than 100 kilometers from Leviathan’s two large land tenements: Avoca and Timor.

And just as the gold market is heating up, exploration is also heating up at Avoca. Leviathan currently has two drill rigs on site. Assays for the first few drill holes have now been reported. Already, Leviathan is locating high-grade gold mineralization.

Drillhole EH003:
 
  • 8.24 g/t gold (starting at 161.95 meters depth) over 6.63 meters, including 11.54 g/t over 1.83 meters and 82.1 g/t over 0.28 meters

Drillholes EH005:
 
  • 5.40 g/t gold (starting at 84.37 meters depth) over 11.02 meters, including 17.72 g/t over 2.19 meters

That’s from only the first five drill holes.

Leviathan is in the early stage of a 30,000-meter drill program, targeting (first) Avoca and then Timor.

Lots of drill results coming in the weeks/months ahead, in geology that is known for high-grade gold mineralization – but which is virgin territory at depths below 100 meters. A greenstone opportunity in a lucrative brownstone gold belt.

For mining investors, it’s the right time and the right place for a highly prospective investment.

Despite the promising results from its early drill holes, Leviathan has actually traded lower from where it began trading when it had its IPO in late-February. As noted, the junior mining stocks have been under significant pressure in recent months. That’s part of the reason why these companies outperform by such a large margin over the course of any significant rally: because they start these rallies seriously oversold.

Leviathan Gold is seriously oversold – as it hits high-grade gold intercepts in one of the most prospective places on the planet to explore for gold today.

The right time. The right place. The right price.




DISCLOSURE: The writer holds shares in Leviathan Gold. Leviathan Gold is a client of Dynamic Wealth Research.

 
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