Gold Stocks Remain the Safest Bet With Widespread Vaccine Still Months Away
FN Media Group Presents Microsmallcap.com Market Commentary
Nov 17, 2020, 08:50 ET
NEW YORK, Nov. 17, 2020 /PRNewswire/ -- Pfizer and BioNTech's potential vaccine announcement may have knocked gold off of its high horse temporarily, but analysts say the lasting effects of the global health crisis and the timeline for a widely available vaccine will continue to support gold prices. Even if the virus goes away, the economic damage has already been done. Since the beginning of the pandemic, the Fed's balance sheet has ballooned to over $27 trillion and is expected to continue growing as the virus rages on. The dip in gold prices hasn't had a detrimental effect on gold stocks, with producer Barrick Gold (TSX:ABX) (NYSE:GOLD) recently beating earnings per share (EPS) estimates by 48%. In Q3 2020, IAMGOLD Corporation (TSX:IMG) (NYSE:IAG) experienced a 45% increase in operating cash flow quarter-over-quarter, while Agnico Eagle Mines Ltd. (TSX:AEM) (NYSE:AEM) increased its dividend by 75%. Kirkland Lake Gold (TSX:KL) (NYSE:KL) also posted strong earnings for Q3 2020 and is ramping up its exploration efforts. Then, there is junior gold explorer GoldON Resources (TSXV:GLD) (NCMBF), which has secured funding and continues to advance exploration at its four discovery-stage properties in the prolific Red Lake Gold Camp of northwestern Ontario.
GoldON's immediate focus is on its flagship West Madsen Project, which is quite literally surrounded by recent high-grade gold discoveries. The original claim package is an option/JV with Great Bear Resources and adjoins the Pure Gold Red Lake mine project where they are gearing up for the first gold pour by Christmas.
Pure Gold's reserves and resources are hosted in a seven-kilometer-long gold system that follows the major crustal break or contact between the Balmer and Confederation rock assemblages. This same Balmer-Confederation contact has been exposed in outcrop 1.6 kilometers (km) west of the Pure Gold property boundary and is interpreted to continue for ~8 km across GoldON's property. In fact, GoldON's West Madsen property boundary is just 270 meters away from one of Pure Gold's most recent discoveries, the Wedge zone, where previous drilling has intersected bonanza-grade gold, including 108.5 g/t gold over 1.0 meter.
GoldON is gearing up for an extensive Phase 2 drill program at West Madsen to follow up on its Phase 1 drilling earlier this year that resulted in a new gold discovery and the identification of key Balmer Assemblage rocks that host all major gold deposits in the Red Lake Camp. A diamond drill will be mobilized later this month to focus on testing for the Balmer-Confederation contact across the eastern portion of GoldON's property from the boundary nearest Pure Gold's Wedge zone.
Wealth is created with the drill bit in the mining and exploration business, and GoldON's risk/reward ratio is compelling when you consider its current market cap is under CA$15 million versus Pure Gold with a market cap approaching CA$1 billion.
Gold Producers Report Gains Despite Gold Price Drop
The gold price just came off of a rocky week following news that Pfizer's potential COVID-19 vaccine had a 90% efficacy rate, but analysts warn that the economic damage from the pandemic will cause lasting effects and stimulus is likely to continue. What's more, a widespread solution is still months and months away, meaning things will likely get worse before they get better.
The gold price may have dropped from previous highs, but gold companies are still posting gains and continuing with business as usual. Barrick Gold (TSX:ABX) (NYSE:GOLD) reported record free cash flow of over $1.3 billion in the third quarter and increased its net earnings per share to $0.50, beating estimates by 48%.
Canadian gold producer Agnico Eagle Mines Ltd. (TSX:AEM) (NYSE:AEM) has also been faring well. The company reported net income of $222.7 million, or $0.92 per share, and near-record level gold production of 492,693 ounces in the third quarter.
During the same period, mid-tier gold miner IAMGOLD Corporation (TSX:IMG) (NYSE:IAG) increased its free cash flow to $80 million, a 51% increase from the previous quarter, and grew its revenue to $335.1 million, up $50.5 million from Q2 2020.
Kirkland Lake Gold (TSX:KL) (NYSE:KL) reported net earnings of $202 million in the third quarter and record free cash flow of $275.7 million, a 22% increase from the previous quarter. The company is also continuing to ramp up its exploration drilling at three of its properties, including Detour Lake in Northern Ontario, which produced 140,067 ounces in Q3 for a revenue of $262.5 million and free cash flow totaling $64.0 million.
Meanwhile, junior gold explorer GoldON Resources has assembled the same drillers and exploration team used by Great Bear Resources for their upcoming Phase 2 drill program at the West Madsen Project. The team is designing a comprehensive exploration program on a prime target area that sits right beside Canada's next gold mine in the heart of the Red Lake Camp.
For more information on GoldON Resources, please visit this link.
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