somabull on oceana ( seeking alpha ) source : Investing In The Gold And Silver Sector With SomaBull
SomaBull has been investing in the gold and silver sector for almost 20 years, has maintained a strong track record of outperformance, and currently is a research consultant for high-net-worth clients investing in the precious metals market. He believes the gold mining stocks are on the verge of a substantial move higher. Join The Gold Edge to learn more about the incredible opportunity in the sector. We discussed the differences between development stage vs producing miners and red flags to look out for in mining projects.
But one at the very top of my conviction list is OceanaGold OCANF has been one of the worst-performing gold stocks over the last several years, as the Philippine government didn’t renew the mining license for the company’s Didipio gold/copper mine back in 2019. I warned at the time that this event wasn’t priced into OCANF, and the stock was a sell. The company was also struggling with its Haile gold mine in the U.S., putting even more pressure on the stock.
However, back in July of this year, the Philippines renewed the mining license for Didipio, and the operation is ramping back up. Didipio is a very high-margin gold mine thanks to its copper credits, and it’s expected to produce 120,000 ounces of gold annually at an incredibly low AISC of $200-$300 per ounce.
Jurisdictional risks might appear high with OCANF, but its other producing mines are in the U.S. and New Zealand. It’s also unlikely the Philippines will suddenly reverse its decision on Didipio.
Haile is still a work in progress and is the greatest risk to the bullish thesis, but the company just brought in the former GM of the Detour Lake mine to be the new GM of Haile, which I think sets up the operation for more success in the future. If that assumption is incorrect, Didipio back online more than offsets any future disappointment at Haile.
The market is also not pricing in the stellar exploration results at the company’s WKP discovery just 10 km north of the processing plant at its Waihi mine in New Zealand. OCANF has reported exceptionally wide, high-grade drill holes at WKP.
The Martha Underground mine at Waihi is also ramping up.
Cash flow is coming, as Didipio ramps up, as does Martha Underground. Again, we are looking forward, not backward.
Didipio alone is worth the price of admission, as the market cap of the company is only US$1.25 billion. I expect a sharp rerating over the next 6-12 months.
I think OCANF is likely an acquisition target by many companies in the sector.