LONDON, Aug. 23, 2019 /PRNewswire/ -- What's it like to strike it rich? It's probably like finding gold in the middle of nowhere. Well, that's exactly what happened in a corner of a West African country, where miners uncovered a nugget weighing 1 kilogram worth $45,400. Mentioned in today's commentary includes Eldorado Gold Corporation (NYSE:EGO), Yamana Gold Inc. (NYSE:AUY), Agnico Eagle Mines Limited (NYSE:AEM), Kinross Gold Corporation (NYSE:KGC).
Then, it happened again: a second nugget, weighing 2.7 kilograms, worth $122,500...And what's still underground could change everything we know about the gold market.
It's all happened at the Kobada mine in southern Mali, owned and operated by African Gold Group Inc. (AGG.V, AGGFF). It's a project that sits amidst one of the biggest mineral belts on earth, in a part of West Africa that has just become the capital of the global gold industry.
It's a place where mining firms are spending hundreds of millions on new acquisitions. And AGG hopes to use Kobada to strike it rich in the next big gold boom.
The company has everything going for it:
A project that is planned to come on-line soon, with a total resource base of 2.2 million ounces of gold worth billions of dollars. A management team of dedicated professionals led by a titan of the mining world who has turned tiny firms into multi-hundred million dollar powerhouses. All this, at a time when gold prices look sure to hold steady, and maybe even increase. So there's every reason to bet that this tiny $12 million firm could realize a huge valuation or even potentially get gobbled up delivering a massive upside to investors who get in on the ground floor.
#1 The Kobada Find a $140 Million per Year Gold Mine in West Africa
The Kobada Gold Project is in southern Mali—which is important to note. While Northern Mali has had some trouble, southern Mali is stable, safe, and extremely favorable to extractive operations.
The belt stretches over 4 km within a larger 12 km strike length and is entirely owned by AGG. Studies have suggested a total resource base of 2.2 million ounces. The company believes it can hit 50,000 ounces a year and build upwards to 100,000 ounces a year in a short time frame, judging by initial technical and economic studies.
At current prices, that would be $140 million in gross revenue a year for a $12 million firm. And the company estimates the resource where these gold nuggets were just unearthed at 2.2 million ounces. And there could even be more, depending on what new tests may reveal.
Mineralization is evident at shallow depths, which means miners won't have to sink big pits or blast away too much rock to get at the ore deposits. That means lower cost—and less time to market.
It used to be South Africa that got all the mining attention. But increasingly, investors are shifting their focus West where the geology is just being discovered.
In Mali alone, there are at least twenty different mining companies setting up shop. And the regulatory environment couldn't be more ideal—the Malian government has embraced mining, Mali's biggest GDP contributor, and has streamlined the permit process.
For Kobada, licenses acquired from the Malian government expire in 2045 and cover an area of 135.7 square km
The area around AGG's (AGG.V, AGGFF) operation at Kobada is turning into a gold-mining hotspot. According to Mining Intelligence, 61 new assets are in production or construction stages, with 24 assets undergoing economic assessments and a colossal 367 assets in exploration.
#2 AGG is Inside The Multi-Billion Dollar Birimian Belt
Kobada is part of a massive belt running across a huge swath of West Africa. Mining here has been particularly lucrative, with Resolute and Barrick hitting it big. It's called the Birimian Belt. And it's paid out big time for companies who have gotten in on the action.
Take the Morila mine, in southern Mali, just east of Kobada. Operated by gold giant Barrick, the mine has been in operation since 2000. Or what about Tongon in Cote d'Ivoire, also run by Barrick, where 230,000 oz was dug up worth $322 million. Or consider the Syama Mine, in Mali, operated by Resolute, which estimates it will produce 300,000 oz of gold per year. At current prices, that's $420 million.
Kobada sits squarely in a belt of mines that have paid out to investors. Better yet, West Africa is only now growing into a new global gold hub which means things will hopefully only get better from here.
There are potentially hundreds of new assets that lie untapped. That means AGG (AGG.V, AGGFF) could be even bigger than investors realize.
#3 A $4 Billion Find
The discovery of 1kg gold nuggets could be just the tip of the iceberg at Kobada…a hint of what's to come. Combined with the earlier discovery of a 2.7kg nugget in 2008, this discovery indicates the potential of the find and it's bigger than you could imagine.
First, take the company's projected haul—50,000 oz a year. Valued at the current rate of $1400 per oz, that's revenue of $70 million. Not bad.
Plus, consider the current outlook for gold. Despite recent news, including the decision by the Fed to cut interest rates, consolidation in the gold market means we can expect the $1400/oz rate to hold steady, or to trend upwards.
With China`s gold buying spree ramping up and increasing international trade tensions, industry experts expect the prices to go up to $2000. And AGG (AGG.V, AGGFF) has a team that knows what it's doing. They know how to execute on big projects.
#4 World Class -- Billion-Dollar -- Management Team
The team at AGG is an all-star group of mining industry professionals and financial whizzes who have spun iron ore into gold for decades and are ready to do it again at Kobada.
Two directors, Sir Sam Jonah and Bruce Humphrey, have a hundred years of combined experience working the finances for mining operations. Jonah served as CEO of Ashanti Goldfields Company Ltd in the mid-1980s, while Humphrey was CEO and President of Desert Sun Mining and COO of Goldcorp, one of the world's largest gold mining firms. But the real shocker here is Stan Bharti, the company's new CEO. With thirty years of experience and a jaw-dropping resume, Bharti could lead AGG into a golden age.
His accomplishments include:
- Started and founded Desert Sun in 2002 at $0.40 a share sold 2006 $750 million or $7.50 a share
- Started and founded Consolidated Thompson 2004 at $0.25 a share sold in 2011 for $4.9 billion or $17.50 a share
- Started Avion Gold 2008 at $0.40 a share and sold in 2012 for $400 million or $0.88 a share
- Started Sulliden 2009 at $0.40 a share and sold in 2014 for merged value of $464 million or $ 1.47
He's amassed more than $3 billion in investment capital for his companies and released countless billions to his shareholders.
His prior experience in Mali was with Avion, acquired for $20 million in 2008. In the middle of the biggest financial crisis in history, Bharti turned Avion around and sold it off for $500 million in 2012.
That's a 20x growth rate. And Bharti's ready to do it again.
"It feels like we are in 2003 again," Bharti said, "at the cusp of a great run in gold and gold stocks."
With Bharti and his friends injecting $3 million into the Kobada mine project, construction could start soon.
#5 Invest Now, Before it's Too Late
Gold mining stocks are soaring, and while gold majors are taking center stage, it's the junior miners are really moving the needle.
Take Eldorado (NYSE:EGO), for instance. In 2018, it's like the company foresaw the gold rush, ramping up production to net over 349,000 ounces of gold, well above its previous expectations, and boosted production even further this year Additionally, Eldorado is planning increased cash flow and revenue growth this year.
Eldorado's President and CEO, George Burns, stated: "We expect this will allow us to generate significant free cash flow and provide us with the opportunity to consider debt retirement later this year. "
As a result of its efforts, Eldorado has jumped from $4 in early June to over $8.50 today.
Or Yamana (NYSE:AUY), who has just finished its Cerro Moro project in Argentina, giving its investors something major to look out for. The company plans to ramp up its gold production by 20% through 2019 and its silver production by a whopping 200%. I
Recently, Yamana signed an agreement with Glencore and Goldcorp to develop and operate another Argentinian project, the Agua Rica. Initial analysis suggests the potential for a mine life in excess of 25 years at average annual production of approximately 236,000 tonnes (520 million pounds) of copper-equivalent metal, including the contributions of gold, molybdenum, and silver, for the first 10 years of operation.
Canadian based gold producer, Agnico Eagle Mines (NYSE:AEM) is an especially noteworthy company for investors. Why? Between 1991-2010, the company paid out dividends every year. With operations in Quebec, Mexico, and Finland, the company also is taking place in exploration activities in Europe, Latin America, and the United States.
Though the company joins a long list of gold majors that reported losses in 2018, its cash flow deficit is largely attributed to its growth in production and new projects coming online.
Kinross (NYSE:KGC) is another company which has posted a stellar year. While Kinross posted a significant loss in the fourth quarter of 2018, the company has making strong moves to turn around its earnings, including the hiring of a new CFO, Andrea S. Freeborough.
"Andrea's successful track record at Kinross and throughout her career, including accounting, international finance, M&A, and deep management experience, will be an excellent addition to our leadership team," said Mr. Rollinson
Like the rest of the industry, the VanEck Vectors Junior Gold Miners ETF, one of the most popular small-cap mining ETF's, has gone up 50% in the last 2 months.
By. Ian Jenkins
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