Newmont
Goldcorp Corp. (NEM:NYSE, $39.30) has underperformed this year, largely
due to concerns surrounding the acquisition of Goldcorp, which closed in
April. Many Newmont shareholders believe the company overpaid for bad assets.
Not all Goldcorp's assets are "bad," of course, and Newmont's
strong operational history should see some of these underperforming assets
turn around. In addition, the recent pact with Barrick Gold Corp. (ABX:TSX;
GOLD:NYSE) on the two companys' Nevada assets should see synergies and lower
costs over time.
Lastly, Newmont can now be flexible in disposing of some non-core assets,
as it promised during the takeover of Goldcorp. The asset review process is
still underway. Proceeds will reduce debt taken on to buy Goldcorp, as well
as sharpen the company's focus and improve synergies. We are holding.
Is this time for real?
Yamana
Gold Inc. (YRI:TSX; AUY:NYSE; YAU:LSE, US$3.62) continues to struggle
with a weak balance sheet. Earlier this year, it sold one of best assets,
Chapada, to help pay down debt. The company has negative working capital,
negative returns and profitability. Despite its high debt load, it increased
its dividend and announced a stock buyback, actions intended as a sign that
the company's financial issues were behind it, but most investors would have
rather seen further reductions in debt. Operationally it is moving in the
right direction, and the new Aqua Rica could add to NAV (net asset value) and
to cash flow.
But Yamana has disappointed so many times in the past. Right now, its cash
flow goes completely on G&A (general and administrative expenses) and
debt service. We think the second half could see improved revenues and a high
stock price if gold remains strong. Given the stock is at its highest since
January 2018 and has not been much higher for three years, we are holding.
Positioned for changed market
Altius
Minerals Corp. (ALS:TSX.V, CA$11.17) has had to contend with weak copper
and other base metals prices. Even potash, which had offset the general
weakness in the resource sector, now looks set for weaker prices as Chinese
demand is affected by U.S. tariffs. The stock is close to the low for the
year, and the company has renewed its stock buyback program given the strong
balance sheet, with nearly $24 million cash, net debt of $94 million, plus a
portfolio of junior equities valued at almost $54 million as of the end of
June, and undoubtedly more today.
Some $7.7 million was raised during the quarter from portfolio sales,
which went to cutting debt. Now, a stock buyback seems justified. There is
$85 million available on a line of credit. There may be no immediate
catalyst, but Altius, with strong, contrarian management, is a buy at these
levels.
The good and the bad, no ugly
Evrim
Resources Corp. (EVM:TSX.V, CA$0.35) continues to move projects and get
work commitments. Earlier this week, drilling commenced at its Ball Creek
gold-copper porphyry targets in British Columbia, funded by a new junior
partner. Although previous partner Antofagasta Plc (ANTO:LSE) spent over $2
million over the past two years in exploration on Ball Creek and another
property, this will be the first drilling on the property since 2012. Evrim has
also extended an agreement with another junior on the Cerro Cascaron
property, despite somewhat uninspiring results from the first round of
drilling.
Offsetting these positive developments, Coeur Mining Inc. (CDE:NYSE)
decided to relinquish its option on the Sarape project, after a fairly modest
maiden drill program testing for blind mineralization. It would have been
somewhat against the odds to find anything attractive in such initial
drilling, and the property needs much more drill testing before killing it.
But Coeur has its own financial issues at present. Sarape, near Ermitaño, a
property discovered by Evrim and later sold to First Majestic Silver Corp.
(FR:TSX; AG:NYSE; FMV:FSE), is on track for first production at the end of
next year to produce feed for First Majestic's Santa Elena mine, which is
running out of ore. Another company will likely want a shot at Salape.
In other developments, the company's vice president of exploration,
Charles Funk, stepped down, and was replaced by seasoned geologist Dave
Groves. Charles was energetic and well respected in the time he had been with
the company, but has other fish to fry. Groves brings 35 years of experience,
including at Newmont and Centerra Gold Inc. (CG:TSX; CADGF:OTCPK), and has
most recently been a consultant for Evrim, so can hit the ground running.
Solid company, very cheap
With a market cap slightly under CA$30 million, Evrim is trading for less
than the value of its cash on hand and the royalty it retains on Ermitaño.
The rest of the company is free, including several option agreements,
regional alliances and 100%-owned projects. The excitement and subsequent
disappointment over its Cuale property last year is the main reason the stock
is languishing. It is a great buy here, all the more so since it has top
management and a rock-solid balance sheet. It is one of the great buys
in the sector right now that doesn't depend on higher gold prices.
Adrian Day, London-born and a graduate of the London
School of Economics, heads the money management firm Adrian Day Asset
Management, where he manages discretionary accounts in both global and
resource areas. Day is also sub-adviser to the EuroPacific Gold Fund (EPGFX).
His latest book is "Investing in Resources: How to Profit from the
Outsized Potential and Avoid the Risks."
[NLINSERT]
Disclosure:
1) Adrian Day: I, or members of my immediate household or family, own shares
of the following companies mentioned in this article: Altius and Evrim. I
personally am, or members of my immediate household or family are, paid by
the following companies mentioned in this article: None. My company has a
financial relationship with the following companies mentioned in this article:
None. Funds controlled by Adrian Day Asset Management hold shares of the
following companies mentioned in this article: Newmont Goldcorp, Yamana,
Altius and Evrim. I determined which companies would be included in this
article based on my research and understanding of the sector.
2) The following companies mentioned in this article are billboard sponsors
of Streetwise Reports: None. Click here
for important disclosures about sponsor fees. The information provided above
is for informational purposes only and is not a recommendation to buy or sell
any security.
3) Statements and opinions expressed are the opinions of the author and not
of Streetwise Reports or its officers. The author is wholly responsible for
the validity of the statements. The author was not paid by Streetwise Reports
for this article. Streetwise Reports was not paid by the author to publish or
syndicate this article. Streetwise Reports requires contributing authors to
disclose any shareholdings in, or economic relationships with, companies that
they write about. Streetwise Reports relies upon the authors to accurately
provide this information and Streetwise Reports has no means of verifying its
accuracy.
4) This article does not constitute investment advice. Each reader is
encouraged to consult with his or her individual financial professional and
any action a reader takes as a result of information presented here is his or
her own responsibility. By opening this page, each reader accepts and agrees
to Streetwise Reports' terms of use and full legal disclaimer.
This article is not a solicitation for investment. Streetwise Reports does
not render general or specific investment advice and the information on
Streetwise Reports should not be considered a recommendation to buy or sell
any security. Streetwise Reports does not endorse or recommend the business,
products, services or securities of any company mentioned on Streetwise
Reports.
5) From time to time, Streetwise Reports and its directors, officers,
employees or members of their families, as well as persons interviewed for
articles and interviews on the site, may have a long or short position in
securities mentioned. Directors, officers, employees or members of their
immediate families are prohibited from making purchases and/or sales of those
securities in the open market or otherwise from the time of the interview or
the decision to write an article until three business days after the
publication of the interview or article. The foregoing prohibition does not
apply to articles that in substance only restate previously published company
releases. As of the date of this article, officers and/or employees of
Streetwise Reports (including members of their household) own securities of
Newmont Goldcorp, Altius and Evrim, companies mentioned in this article.
Adrian Day Disclosure: Staff may have positions in securities discussed
herein. Adrian Day is also President of Global Strategic Management (GSM), a
registered investment advisor, and a separate company from this service. In
his capacity as GSM president, Adrian Day may be buying or selling for
clients securities recommended herein concurrently, before or after
recommendations herein, and may be acting for clients in a manner contrary to
recommendations herein. This is not a solicitation for GSM. Views herein are
the editor's opinion and not fact. All information is believed to be correct,
but its accuracy cannot be guaranteed. The owner and editor are not
responsible for errors and omissions. ©2019.
