Since time immemorial humans have been enthralled with gold, the precious yellow metal that people think they could instantly get rich with, “strike gold” as it were. Investors scour all across the world for possible large deposits of gold and claiming enormous stakes in gold properties. The capital markets, especially in Canada during a bull run, have also become a place to find large profits from the success of exploring a gold property, a burgeoning gold producer starting up or a mature producer that offers great discounted value. Today the market offers investors a myriad of different options when it comes to investing, ETF’s, large and mid cap names on the Toronto Stock Exchange (TSX) or earlier stage projects on the Venture Exchange (TSXV).
So what is one to do? Fortunately for some of us, we were around for the last gold bull market and some of the names we used to follow or own are coming back around. This makes the due diligence process a little less painful because we already have a knowledge base about the assets and people.
We are seeing early stage deposits that were previously drilled by one company starting to get drilled by another for confirmation or definition like Quebec Precious Metals $CJC.CA. These are relatively easy drill plays to buy because you know what to expect and you know the competence of the management team. We are also seeing some later stage exploration plays from the last bull market trying to push to production or getting acquired like the Barkerville Gold Mines Ltd $BGM.CA and Osisko Gold Royalties $OR.CA deal.
And then there are some plays like Monarques Gold Corp. $MQR.CA which started in the depths of the bear market, acquire assets out of receivership and build a nice operational baseline from which they have launched. $MQR.CA has done a great job of starting off with an old non-operating mine which they brought back to production in the last few years and subsequently built a company around the consolidation of assets in a known mining district: Val d’Or in Quebec.
Starting from zero a few years ago, per their Q4’19 and YE’19 results, they have built up to ~3.3M ounces of Measured and Indicated ounces across their assets and are producing north of 12,000 ounces per year. With an average selling price of YE’19 of USD $1,252 they have booked over CAD $30,000,000 in top line sales and gone from a net earnings loss of CAD $4.77M in YE’18 to a being positive, albeit in not immensely so, with CAD $485,905 in YE’19.
Operationally, the team at $MQR.CA have done a great job over the last year improving operational efficiencies and continue to state that their goal is to achieve 100k+ ounces per year in production. To further instill confidence, stability and long term viability of the company beyond the current bull market, we would like to see $MQR.CA implement a gold and FX hedge book that would secure the balance sheet and even potentially generate some extra revenue. Assuming a market cap of roughly $63M and a NAV around $80M we think there is a good risk/reward balance on $MQR.CA which trades at $0.24 on the Toronto Stock Exchange.
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