Making the Harte case for gold
A chorus of well-known billionaires from Ray Dalio to Carl Icahn have all made the case for gold in recent months, and when investors who’ve amassed fortunes equal to the GDP of small nations speak up, it’s good to listen. Early stage mining companies are sometimes the downfall of investors; the lure of a promising company with a convincing story, strong tenements and a slick presentation have lured in many billions of dollars over dozens of boom-bust cycles, but the fact remains that, in a bull run, there is serious money to be made with juniors for those who know what to look for, and Harte Gold Corp. (TSX: HRT) (“Harte Gold”) ticks many boxes.
The yellow metal
Gold has long been prized for its beauty and, more importantly, as a long-term store of value. Throughout history, human societies have prized gold as a lock-box during turbulent times. And with the world in its longest ever bull market save for one, at the same time as valuations are stretched beyond historical comparison but for the dotcom boom, the calls for a safe haven asset are getting louder.
However, for those looking for gold exposure, there are a few things to know. Foremost is that the price of gold stocks have so far not closely tracked the increasing value of the metal, although this is changing right now. We expect junior mining companies to receive additional investor attention throughout 2018 as the major companies have begun to spend big bucks on expansion projects.
Whenever an up-cycle comes along, the spending begins, and it’s every miner’s hope that a multi-billion-dollar company will come sniffing around their patch. But the question is of course, which gold stocks to buy? As mentioned up top, junior miners are certainly capable of taking your investment dollars and turning them into a zero, but if you know what to look for, you can tilt the odds in your favour.
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First of all, a market capitalisation that implies some serious money is behind it. In the case of Harte Gold, that market cap is around $250 million, implying that this company presently could not be further from financial trouble. This is backed up by a cash position of $35 million. That figure buys a lot of operating days at an early stage mine site, meaning bills are paid and the lights stay on.
The next thing to look for is analyst coverage. These guys are the so called “smart money” and won’t bother covering a stock or business that doesn’t have solid prospects and a decent chance of executing its plans. To this end, Harte Gold Corp has four analysts following it, including notable multibillion dollar asset manager Macquarie Group.
In junior mining, a critical check-box to tick is quality management. Put simply, if a manager is a dud, he is highly unlikely to have a long-term track record in the industry, as investment dollars and management positions gravitate towards proven performers. On that front, Harte is well positioned, with the three main executives, the CEO, CFO and Operations head collectively having close to 100 years of experience. The remainder of the management and senior executive team also chips in with another ~120 years of experience. It’s comforting to think that over 220 years of industry experience is looking after your investment.
The golden rule
While the technicalities of a promising mine life, JORC estimates and other details can overwhelm investors, Harte Gold has a pleasingly simple investment thesis. It will be digging up saleable resources in 2018 and selling in commercial quantities, it is fully funded to first production and it has a highly experienced management team steering the ship. Not bad for a relatively undiscovered junior miner on the TSX.