Gold juniors that gained traction in 2014 ! [Update] Gold juniors that gained traction in 2014
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2014-12-31
It has been another lacklustre year for gold and gold equities, with the spot price dipping below last year’s close and down 14% from the high reached in March, to exit 2014 at US$1,182.90 per oz. Despite the dim backdrop, some emerging gold producers have performed considerably well, posting notable year-over-year share price gains. Here are some of those percentage winners:
Detour Gold (TSX: DGC; US-OTC: DRGDF) ended the year at $9.49, up 131% from its 2013 close of $4.10. Detour intends to complete the ramp up of its wholly owned Detour Lake gold operation in northeastern Ontario by year-end.
Paul Martin, the company’s president and CEO, describes 2014 as a “very satisfying year.” “During 2014, our first full year of operation, we validated the operation by confirming our block model and demonstrating that we designed and built the appropriate mill for this deposit,” he said in an email.
The Toronto-based company closed September with cash and short-term investments of US$139 million, leaving analysts divided on whether Detour would need to raise additional funds to pay down its long-term debt. Desjardins analyst Michael Parkin believes “the market is somewhat unduly concerned with Detour’s balance sheet” and that the junior will have enough cash for the next 12 months. He recommends a “buy” on the stock with a one-year target of $13.50.
Detour is guiding 2014 production of 450,000 to 480,000 oz. at total cash costs of US$900 to US$975 per oz. sold.
Martin says Detour is currently in a “good position” financially and that the company next year will build upon the successes it had in 2014. The junior will release its 2015 guidance in January.
Guyana Goldfields (TSX: GUY) jumped 72% year-over-year to close at $2.82. The junior raised US$226.5 million in two financings this year to develop its flagship Aurora gold project in Guyana, slated to start commercial production in mid-2015. The SAG mill recently arrived on site, where the company has more than 700 workers.
Gold production over the mine’s 17-year life should average 194,000 oz. a year at cash costs of below US$600 per oz. Cowen and Co. analyst Adam Graf believes the low-cost project could attract a merger and acquisition transaction. He has a $6 target and an “outperform” rating on the stock.
Lake Shore Gold (TSX: LSG; NYSE-MKT: LSG) has had a stellar year, climbing 61% to end 2014 at 78¢.
The company operates the Timmins West and Bell Creek gold mines in Ontario and is on track to meet the top end of its production guidance of 180,000 oz., while beating its cash cost target of US$675 per oz. “So it’s a record year for the company,” Mark Utting, the firm’s vice president of investor relations, says.
Lake Shore expanded the Bell Creek mill to 3,000 tonnes per day in late 2013, which helped it significantly increase production and bring down unit costs this year. Given the improved operations, the junior generated more free cash flow and repaid a total of US$45 million in debt this year. It expects to exit 2014 with cash and bullion of US$60 million, Utting says.
The firm plans to continue drilling the 144 Gap zone near its Timmins West mine, along with its mines, with the goal of replacing reserves in 2015.
Lake Shore is targeting 2015 production of 170,000 to 180,000 oz. at cash costs of US$675 to US$775 per oz. Despite the flat year-over-year guidance, Haywood Securities analyst Kerry Smith has a “buy” and a target price of $1.30 on the stock, while BMO analyst Brian Quast rates the stock as “underperform” with an 80¢ target.
Rio Alto Mining (TSX: RIO; NYSE: RIOM) has had a busy year, while gaining 59% to exit 2014 at $2.82.
The gold producer acquired developer Sulliden Gold in a friendly $300-million all-share deal in August. Rio Alto, which operates the La Arena gold mine in Peru, anticipates putting Sulliden’s nearby Shahuindo heap-leach gold project in production by January 2016 at start-up costs of US$70 million, nearly half the amount that its previous owner had estimated. “This is extremely cheap capex for starting up a gold mining operation anywhere in the world,” the company’s president and CEO Alex Black said in an email.
Earlier this year at La Arena, the company received an environmental approval to build an 18,000 tonne-per-day copper-gold sulphide project to expand the mine’s life, a possibility it is still investigating. A reserve update in February showed gold oxide production could continue until at least 2019, which Black believes could be extended given the positive drill results to date.
There’s no slowing down for Rio Alto next year. “I expect this momentum to continue in 2015 as we continue to generate significant cash flow from our La Arena gold mine whilst bringing Shahuindo into production,” Black says.
BMO’s Quast has a $3.25 target and an “outperform” rating on the stock.
Probe Mines (TSXV: PRB; US-OTC: PROBF) advanced 33% to end Dec. 31 at $2.84.
The firm recently completed a $41.6-million cash-and-share deal to consolidate its Borden land package near Chapleau, Ont. Probe intends to aggressively drill the new areas, particularly the wedge zone, before releasing an updated resource and a maiden preliminary economic assessment in the first half of 2015.
The company’s CEO David Palmer is set to receive the 2015 Prospectors & Developers Association of Canada’s Bill Dennis Award for the Borden gold discovery. “Borden keeps evolving and it keeps improving,” Palmer says. “I think that the market likes the fact that there is still some excitement left in the project in the exploration, even though we have reached the critical mass in terms of development, but there is still a lot of upside on the exploration.”
Palmer says the company will focus on both exploring and developing the project next year, noting Borden could “grow into a district-scale exploration project.”
Raymond James analyst David Sadowski has a $3.20 target and a “market perform” on Probe.
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