Paradigm Capital's top picks for Q3/16 include gold and zinc mining
companies with upcoming catalysts worthy of investors' attention.
On the base metals side, the companies that Paradigm analysts have
selected to include in the July 5 Quarterly Top Picks Q3 2016 report include Heron
Resources Ltd. (HRR:ASX), Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.MKT), Sherritt
International Corp. (S:TSX) and Trevali Mining
Corp. (TV:TSX; TV:BVL; TREVF:OTCQX).
Heron, Nevsun and Trevali are all have exposure to zinc which, the report
notes, "has been the best-performing base metal YTD owing to mine
depletions pushing the market into a production deficit."
The Q3 catalyst for Trevali is the expectation that the Caribou mine will
enter production in 2017, which should "more than double Trevali's
zinc-lead production" and enable the company to become free cash flow
positive. "Achieving commercial production at Caribou is a major
derisking (and growth) event that should dispel any lingering skepticism of
the technical viability of this past-producing mine," the report states.
Heron Resources, like Trevali, is one of the "few primary zinc
producers through which investors can gain exposure to this market." The
company's Woodlawn zinc/copper project in Australia is fully permitted and
has a "very positive bankable feasibility study." Paradigm expects
the mine to go into production in 2018.
Canada-based Nevsun is the third zinc producer mentioned in the report.
The company's Bisha mine is expected to commence zinc production, which
should result in "a significant improvement in 2017 as zinc production
should exceed 230Mlb." The company also recently completed acquisition
of Reservoir Minerals, acquiring the Timok asset in Serbia.
The catalysts for Sherritt International, which is a nickel producer with
operations in Canada, Madagascar and Cuba, include a restructuring of debt.
Prices in the nickel market are stable, but "potential supply
shocks" could prompt an increase in those prices, according to the
report.
On the gold and precious metals side, Paradigm's top picks include Alamos Gold
Inc. (AGI:TSX; AGI:NYSE), Integra Gold
Corp. (ICG:TSX.V; ICGQF:OTCQX), Klondex Mines
Ltd. (KDX:TSX; KLDX:NYSE.MKT) and SEMAFO Inc.
(SMF:TSX; SMF:OMX).
Alamos Gold's mines became "free cash flow neutral" in the first
quarter, and the company should "handily beat 2016 guidance," the
report notes, adding that "exploration sizzle from the La Yaqui and
Cerro Pelon deposits is also possible."
SEMAFO, according to Paradigm, "has a great base and lower-risk
growth pipeline." The Q3 catalyst "is an inaugural resource at the
Yama deposit will add to the overall resources at Mana," the company's
project in Burkina Faso.
Klondex Mines has several catalysts in the second half of 2016, including
new resources for True North, "an official production decision before
year-end" and the revision of analyst forecasts "to reflect this
new operation." The company's shares are "poised to regain a
portion of their ~18% underperformance versus peers over past three
months," the report states.
Paradigm notes that Integra Gold's project is "unique" given
that it is undeveloped, capable of producing 100 Koz annually for more than
10 years, and has a fully permitted mill. The Quebec, Canada-based company is
focused on development of Lamaque South. "In H2/16, an updated PEA and
resource are expected," the report notes.
