How Are My Gold Stocks Doing? A review by Nigel Somerville...

Canadian Overseas Petroleum rule-breaking and deception gets much worse – share suspension, cleansing statement and full disciplinary enquiry needed now. Letter to FCA HERE

It has been a while since I took a look at my gold stocks so here is an update, including AIM-listed Ariana Resources (AAU), Panther Metals (PALM) of the Standard List and Centamin (CEY) and Golden Prospect Precious Metals (GPM) on the full list. For Ariana, the big news was a deal with Newmont Corporation which involved a subscription by Newmont at 4.11p per share (I think that’s what it meant, for the RNS stated £0.411….oops) to raise $2.5 million as the two signed an exploration deal via Ariana’s 75%-owned Western Tethyan Resources in an area previously explored by Newmont across south-eastern Europe. Newmont will make its database available and is to provide several proprietary exploration technologies over the next five years, and the funding will come from Newmont’s subscription with further payments of up to $16 million to follow if a suitable project is identified and that project transferred into a separate company. If Newmont decides to develop a mining project further funding will be on a pro-rata basis, with Newmont holding 75%. If WTR elects not to contribute at that point, Newmont’s share will rise to a maximum of 85%. There are exit terms as well. OK, so what does all this mean? Clearly they all think there is a project available, and for Newmont to be interested - and cough up $2.5 million - it must be pretty good, especially with a company the size of Ariana. So this looks very positive – and now Ariana can boast a big name on its shareholder register. I can’t say I’m all that happy about the dilution involved as although Newmont paid a 10% premium I think Ariana’s shares are worth a good bit more than that. But if the deal delivers a cracking project then naturally, as a loyal shareholder, I won’t be complaining. In any case, the dilution is just 4.2% which I can live with – especially if the deal comes up trumps.

Read HERE: Distil – how ‘pleasing’ really is its trading update?...

So the worst-case scenario for me is that nothing comes of the deal and as such my 7p price target is knocked down to 6.7p. Under a better case scenario, the deal is aiming at a JORC resource of at least 2 million ounces of Gold and if that happened, even a conservative operation would surely be looking to chuck off 100,000 oz a year. If costs were, say, $1000 per oz and the gold was sold for $2,000 that would be income of $100 million a year over twenty years for the partners. Even if Ariana and Western Tethyan did not contribute further, Ariana would end up with 11.25% (given that it holds 75% of Western Tethyan) so that income would be worth a little over $10 million a year once construction costs have been repaid. I’d say that’s pretty handy – and it could be more if Ariana/WTR ponys up towards costs post-pre-feasibility study. But the biggest attraction here is Newmont – which surely would not be wasting its time with a minnow like Ariana if the chances of success were small or it could not see a decent-sized project emerging. So overall I’m very happy with the deal, but I won’t be altering my target price of 7p just yet. At 3.85p per share, and comfortably below what Newmont has just paid, I think the stock is a steal – especially when you consider the surely imminent go-ahead at second gold-mine Tavsan (read HERE) and the IPO of Venus Minerals which should also lead to a mine in around a year’s time.

Still a buyer of shares in Imperial Brands says Chris Bailey HERE

Also amongst the minnows, I was pleased to see that Panther Metals share price has moved a little higher again, to close the week at 10.15p – nicely up from the recent placing price at 8p, although there is still a way to go to recover to the 12.75p scored at the start of the year. Of interest has been news from down-under where its 36.6%-owned counterpart has been drilling to good effect, which has seen Aussie Panther move up to AUD 0.25, putting it on a market capitalisation of AUD 13.11 million – or £7.5 million, which is worth £2.75 million to Panther. UK-Panther’s market capitalisation now sits at £6.2 million, which means its Canadian assets are valued at just £3.45 million so if it has a good strike the shares will roof it. There is clearly upside in Australia as operations move to drilling at its “Eight Foot Well” gold project, where a 2,500 infill programme is due to get underway, now that very successful drilling operations at Coglia – where the company reported decent nickel and cobalt intercepts and more are awaited as efforts to reach a maiden JORC compliant resource continue. At 10.15p I still rate this a speculative buy – strictly not for widows and orphans, though – with a target of 25p.

How do we get $14,000 Gold? Video HERE

Fully-listed Centamin has been a terrible disappointment. First there were the ground movement issues which hit production and now the company is chopping the dividend more-or-less in half – which had been a major attraction. But I continue to hold firm and in many ways the company is now in a stronger position with its reduced dividend (at least for the foreseeable). The issue here is that, whilst the company has been handing out cash to shareholders, it hadn’t been making pots of cash as it recovered from the ground movement issues and redrew its production plans. And with a hefty round of capital expenditure to come perhaps it was inevitable that the chop would come. The stock in now 91.4p and offers a dividend of 5 US cents for next year, which still works out at a fairly healthy 4.2% yield and, with longer term production rises to get back over 500,000 oz gold a year, it is surely only a matter of time before thoughts turn to perhaps a more generous payment once again. Bearing in mind the currently favourable fundamentals for gold I think there is a decent chance of a rise to around $2,500 perhaps by year-end – and if that happens I could see Centamin recovering to around 150p as it surprises the market with a better than expected dividend as the improved margins flowed through into cash generation. So there is certainly every reason to hold on here. Finally, investment trust Golden Prospect Precious Metals has been challenging the 50p mark – a welcome improvement from the doldrums days down in the 30s, and the NAV per share had held up well at just shy of 59p as gold corrects from its recent assault on the all-time high. At the current 47.6p, the shares trade at a tasty NAV discount but the real attraction is that Golden Prospect tends to move much more sharply than the underlying gold price and with, what I strongly believe, a very strong period ahead for the yellow metal my expectation is for a huge outperformance both from Goldens’ underlying portfolio and as the discount narrows in the face of renewed investor enthusiasm. So I’m sticking with my £1 target, which I’m looking for this year if everything plays out as I expect.

Sosandar – FY Trading Update Ahead Of Expectations: So A Buy? Not Yet. Read more from Nigel Somerville HERE

Filed under: gold, Canadian Overseas Petroleum, Distil, Imperial Brands, Sosandar

2022-04-06 11:03:26

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