What has happened to gold stocks since 2012 could be called even worse than oil stocks over the last year. The collapse in oil has bankrupted many a small marginal driller, though large companies like Exxon Mobil (NYSE:XOM) are still profitable. The collapse in the price of gold however has made it difficult for almost all producers, big and small, to mine gold profitably. Some analysts predict a near term turnaround, and some are not so optimistic. One thing is certain, however. That is, the seemingly universal agreement that in order to continue existing, gold miners of all sizes need to be able to mine gold at all in sustainable cash cost [AISC] of less than $1,000. Those that can will have a big leg up on the rest of the industry when gold prices finally recover.
With this in mind, here are four small cap gold producers that meet, or look set to meet this criterion.
Richmont Mines Inc.
Richmont (NYSE:RIC) has two primary mines – one in Ontario called Island Gold Mine and another in Quebec called Beaufor. The former is the more productive of the two, and Richmont is currently undertaking a host of drilling programs at the property with the goal of expanding its output. Results to date look promising, and we’ll get further insight into indicated resource figures between now and April next year. At the Beaufor property, Richmont reported AISC of $936 for the third quarter of 2015, on 5,700 oz. produced. At Island Gold, the company produced at $968 AISC on 15,000 oz. mined. Weighted against the respective production levels, average cost comes in at circa $955 –below the $1,000 threshold required to maintain profitability under current conditions, but any further dip in gold prices could put Richmont in jeopardy.
Pershing Gold Corporation
Pershing (NASDAQ:PGLC) remains a promising company in the junior gold space as we head into 2016. It has a fully permitted, ready to go facility at its flagship property Relief Canyon in Nevada. The property sits right in the middle of some already producing mines, and drilling to date has revealed a little over 800,000 oz., measured, indicated and inferred. Pershing’s CEO Steven Alfers reported earlier this year that the decision as to when to hit go on production is an economic one, meaning he’s likely waiting for some gold price strength before commencement.
Estimates suggest, however, that even at current prices Pershing could maintain a profitable operation. Conservative estimates give Relief Canyon an AISC just shy of $870 per oz. More optimistic predictions suggest the property cold produce as low as $725. Whichever of the two predictions proves valid, Pershing should have little problem on the cost end, and even has a little room to play with if the price of gold dips further before recovering.
Sabina Gold & Silver Corp. (OTCMKTS:SGSVF)
In September this year, Sabina reported the results from a feasibility study at its lead property – the Back River project. The study suggested that the company can generate NPV $480.3 million on approximately 250,000 oz. annually for eight years, followed by four further years of 200,000 oz. each. The project will require a little over $415 million to hit production, and the company is yet to submit permitting applications (these can often cause long delays in the gold space), but once production starts, Sabina expects the property to produce at an incredibly low AISC of $620 per oz.
This more than accommodates the current weak gold prices, and leaves plenty of room for gold to slide further while still allowing for potential profitability. The initial capital will be the hurdle in this one – Sabina only had $19 million cash and equivalents on its books at the end of September, and expects this to decline to $17 million by year end – so this is something to keep in mind when considering an exposure. If it can raise the funds, however, and get the site permitted, there could be plenty of upside as we head into the latter half of the decade.
Claude Resources, Inc.
Claude (OTCMKTS:CLGRF) reported its Q3 financials at the beginning of last month. The company reported $5.7 million net income, making it one of only a handful of producers to pull in a positive bottom line. It also raised full year guidance to 75,000 oz., up from the 70,000 reported at the end of the second quarter. AISC at the company’s producing mine comes in at $832 per oz. for the quarter, down from $976 during the comparable period last year and also down on the year to date figure of $896 – suggesting the company could tighten up this figure further going forward. With about $27 million cash and bullion on its books, and results expected early next year from what looks to be a promising exploratory program at its Santoy Gap project, there’s plenty of upside potential on the company’s current market cap of $107 million – just a little over 4X Q3 revenues.
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