Precious Metals Exploration
Capital drought for junior players
Gold prices in the past months have been subjected to a dynamic interplay of economic, geopolitical and market forces. The Federal Reserve's strategic move to raise interest rates 11 times aimed at taming inflation profoundly impacted the precious metals segment. As interest rates increased, the dollar strengthened, and gold faced intensified competition from other investments, leading to shifts in demand and subsequent price fluctuations.
On the other hand, the outbreak of the Israel-Hamas conflict in October changed the direction of gold prices, showcasing the market's immediate response to geopolitical events. Ongoing tensions globally tend to elevate the appeal of safe-haven assets like gold. On the other hand, many assume that the Federal Reserve has concluded its interest rate hikes and may initiate rate cuts in the first half of 2024, weakening the dollar and spurring gold prices, flirting with records.
Despite this favorable recent trend in gold prices, the markets have not been the best for the junior precious metals segment. There is a weak sentiment prevalent among investors in this segment, in part driven by the boom on the green energy minerals. "The spotlight has undoubtedly shifted towards critical minerals, primarily due to the initial rush associated with new opportunities, much like the gold rush or Klondike days of the past. The current market sentiment is not particularly favorable regarding precious metals," stated Darcy Marud, president and CEO of Western Exploration, a Reno-based Nevada-focused precious metals exploration company.
John Watson, CEO of NV Gold, agrees with Marud. NV Gold has been focusing during 2023 on its Triple T project in Nevada, where it has successfully drilled 14 holes, intersecting potentially economic grades of gold. Additionally, it conducted an on-site field program to identify new drill targets. However, the company decided to put several upcoming drill programs on hold, both in the Triple T as well as in other projects like the SW Pipe Gold and Slumber Gold project, until market conditions improve: "Considering the current market conditions, which, in my opinion, have not improved enough for financing, coupled with our low stock price, raising funds without substantial dilution is challenging. Consequently, we are currently on pause and internally financing the company through loans from insiders to sustain operations," explained Watson.
Low valuations present an opportunity for investors to explore and many C-executives from the junior segment remain bullish on the fundamentals of gold. "The flattening out of rate hikes in the past couple of months indicates a potential shift, which may lead to a significant upswing in gold prices," stated James Hesketh, president and CEO of Viva Gold.
Viva conducted an RC drill program at its Tonopah project where it encountered shallow, high-grade gold zones. "These discoveries included 9 m at 2.4 g/t ; 9 m at 3.0 g/t; and 41 m at 1.5 g/t, all starting at 24 m of the surface," shared Hesketh.
“There is a notable lack of liquidity in the market, and new capital is not flowing abundantly into the junior mining space. To stand out in this environment, companies must differentiate themselves and offer investors greater certainty and lower risk.”
Darcy Marud, President and CEO, Western Exploration
The perks of the US as a mining jurisdiction
To attract investors, the sole value of the deposits is not enough. Juniors must showcase a clear strategy and pathway for de-risking operations with minimal capital expenditure. While there is no perfect recipe for success, the triangulation of a proven team, a safe jurisdiction, and a promising deposit works as a strong foundation.
Chelsea Hayes, director of business development at North Peak Resources, explained that what sets the company apart from other juniors is its team’s track record. The company was founded in 2020 by the same team that founded Kirkland Lake Gold. After promising drilling results in Nevada’s Eureka district, they decided to acquire, in 2023, the Prospect Mountain property. North Peak also owns the Kenogami Lake project in Ontario. “One of our critical criteria when identifying potential targets is securing assets in politically stable environments. Ontario and Nevada are known for their solid regulatory environments and mining-friendly communities,” explained Hayes.
Another company that bet in the Western US is U.S. GoldMining. The Alaska-focused junior is a spinout of GoldMining and completed an IPO at the end of April 2023, listing on NASDAQ and raising US$20 million to explore the Whistler gold-copper project in Alaska. “With gold trading in the range of US$1800-2000 over 2022, GoldMining saw the opportunity to launch the U.S. GoldMining ‘spinco’ to unlock value in the Whistler project,” commented Tim Smith, president and CEO of the company. The Whistler project is a gold-rich copper porphyry style and has indicated resources of approximately 3 million oz and inferred resources of around 6.45 million oz.
Article header image courtesy of American Pacific Mining