Value Recognition:
Another Mining Research Group Recommends Calibre Mining Corp.
In early June, Raymond James Ltd. added Calibre Mining Corp. (CXB-TSX; CXBMF – OTCQX) to their list of favored gold stocks. Their strong buy recommendation was based on a detailed analysis of the company that included three central investment themes:
(1) Hub & Spoke Strategy
(2) Exploration Expansion
(3) Exploration JVs on Large Concessions Can Unlock Future Value
In Q1, 2020, CXB demonstrated a key processing milestone. Gold ore from El Limon, Pavon, and La Libertad were blended and processed at the La Libertad mill. The recovery rate for all three sites was 94%. It is essential to achieve high gold recoveries from blended ores to take full advantage of the Hub & Spoke Strategy. For example, if there are temporary production shortfalls in one place, they can be made up in another. This way, total quarterly and annual gold production will not be materially affected.
Exploration drilling continues its goal of expanding the known deposits in the form of resource expansion and delineation drilling. In addition, new stand-alone targets are showing strong gold intercepts.
CXB intends to spend about $15 million on exploration in 2020. In future years it expects to fund exploration programs of similar size in the foreseeable future. It has been said that “exploration is the lifeblood of the mining industry.” CXB management has proven themselves very capable of expanding upon known deposits by their past efforts, and this time should be no different.
CXB is leveraging its “1st mover” status in Nicaragua by attracting Rio Tinto and IAMGOLD to fund future exploration of large concessions controlled by CXB known as the Borosi Projects and the Eastern Borosi Gold Projects.
Rio Tinto can earn up to a 75% interest in Calibre’s 100% owned Borosi Projects, and IAMGOLD is currently exercising a second option to continue to advance the Eastern Borosi Gold Project.
The projects hosts inferred resources of about 700,000 ounces of gold and just over 11,000,000 ounces of silver.
CXB expects that IAMGOLD will earn into its 70:30 joint venture.
As a further “vote of confidence,” Rio Tinto has entered into a five-year generative exploration and concession acquisition alliance on the “Rest of Nicaragua.”
Summary & Wrap Up
On June 29, 2020, a noted fund manager and long-time advocate for gold, Frank Holmes, CEO of US Global Investors gave an interview on Kitco.com. He laid out a very positive case for gold, based upon the FED’s actions and the fiscal policy response of various governments in response to the worldwide health pandemic that has interrupted the functioning of the global economy. The main takeaway from the interview was: (paraphrased)
“Gold miners that show discipline will have higher returns on invested capital. Generalist investors will become attracted to companies that show growth in revenue, growth in free cash flow, and the capacity to pay dividends. They will be handsomely rewarded; the ones that don’t will be punished.”
This is a very important observation because it shows how top-performing gold companies will become revalued as more and more generalist investors enter the marketplace. It is also clear that a strong and rising gold price will accelerate the decision of generalist investors to buy gold stocks.
Companies like CXB are prime investment choices, particularly as they continue to meet the economic performance milestones noted by Mr. Holmes.
-John Top
Equedia Initiation Price: CDN $0.75
Current Price: CDN$1.37
Disclosure:
Disclosure: We are biased towards Calibre Minning Corp (CXB) because the Company is an advertiser on www.equedia.com. We currently own shares of CXB and have been granted options by CXB. Please also contact Raymond James Ltd. for their full disclaimer and disclosure of their research report on CXB.
