Fresh From Toronto: Three Mexican Beauties

Don’t know the reason, stayed here all season
Nothing to show but this brand new tattoo
But it’s a real beauty, a Mexican cutie
How it got here, I haven’t a clue…” —
Jimmy Buffet, Margaritaville

No, I wasn’t down on the beach in Mexico with Jimmy Buffet, nor did I get a new tattoo. But I did spend four days in Toronto at PDAC – the largest mining conference in the world, sponsored by the Prospectors & Developers Association of Canada.

This was the first PDAC conference in over two years, since March 2020. After that (I’m sure you recall!), much of the world shut down for Covid. But now it’s all getting back on track and this year’s event was one for the record books. For example, there were lots of people – so many that the Toronto Police were outside for crowd control.

Much happened in Toronto this past week, but I’ll skip the vignettes and nail down on the main point.

After a period of not being able to travel, visit sites, keep up to date with things, etc., at PDAC I reconnected with three great Mexican mining plays, and each one is a “real beauty” per the Buffet approach.

One is an up-and-running producer that mines ore and makes money. One is a prospect generator that’s doing quite well in the search for copper, silver and gold. And the third is a promising silver explorer, working in classic silver country.

Here’s a summary:

The producer is Avino Silver & Gold Mines Ltd. (NYSE American: ASM | TSX: ASM) (Avino). The company works near Durango, in a silver district that dates back to the mid-1500s (yes, almost 500 years!). Spanish conquistadores found silver, and successors mined the area for several centuries. The silver made Durango quite a wealthy venue for a time.

Since 1968, Avino has been taking the old Spanish and Mexican mines even deeper, into richer and richer ore bodies. I visited the site a while back, and in one excursion to the 800-foot level, I saw a massive face of near-pure sphalerite (ZnS) – zinc sulfide. This is just some of what comes out of the lifts, other ores bearing lead, silver and gold.

Like many companies, Avino was forced to slow down during Covid, but it’s now firing back up to a hot pace. It sells high-quality metal concentrates into a strong market – one key buyer is Korean giant Samsung. Now, Avino is on a growth track, and whatever happens with the rest of the stock market – crashing lately, you may have noticed – this “beauty” is positioned to move ahead and do well through the turmoil and out into the other side.

The next “beauty” is Riverside Resources Inc. (TSXV: RRI | OTCQB: RVSDF), a company that has been working in the northern state of Sonora for 20 and more years. Over time, Riverside has accumulated a large portfolio of mineral claims. Its business model is to team up with third parties to spend what management likes to call “other people’s money” on exploration and early-stage development.

Right now, the strong suit for Riverside is its relationship with mining giant BHP. That is, BHP is funding a major effort by Riverside to identify large-scale copper plays in Mexico. In this regard, BHP pays the overhead while Riverside works through its list of exploration prospects to match geologic potential to what BHP wants to see.

There’s serious upside from the fact that Riverside has already identified a good number of copper deposits that may suit BHP, as well as other deposits that are not exactly a BHP-match, yet still hold great upside for other development by other companies down the line.

In a world of future high demand and fading supply for critical minerals, Riverside is positioned to shine.

The final “beauty” on the list is a silver exploration play called Minaurum Gold, Inc. (TSXV: MGG | OTCQX: MMRGF). And yes, the name says gold but the exploration focus is definitely silver.

Minaurum works around the town of Alamos, in southern Sonora. This too is an old silver district from Spanish days, when miners pulled native silver – elemental “wire silver” – out of massive veins near the surface. In fact, there was a Spanish mint there for quite a while, which coined silver currency for use across old Mexico and the Spanish empire.

Old-style mining could only go so deep, though. And today we know that there’s a massive complex of mineralized rock remaining to be explored. It all lies beneath a vast, ancient, caldera-collapse volcano, with extensive “ring dikes” spreading outwards in all directions.

I’ve visited the site, and while it’s quite rugged it is also a promising exploration locale. Minaurum has released strong drilling results to date, with more to come. And again, in a world of monetary turmoil and looming shortages of critical metals – silver among them – this “beauty” deserves a good, hard look.

That’s all for now. Best wishes to everyone as we all navigate the current market and monetary rough seas.

Byron W. King

How to Play the Coming Market Cleanup – Including Five Names To Watch

Broad markets are down this week in a wide, deep selloff. Or for optimists out there it’s a general cleanup across the spectrum, punishing the overly ambitious. Gold is down too, as I’ll discuss below.

Here’s what’s going on, and towards the end I’ll list five “mine and minerals” ideas on how to play it all.

First, and obviously, markets have declined based on negative sentiment. And why? After all, is there any good news out there? Consider:

  • War in Ukraine, rapidly emerging as a new, generational East-West struggle.
  • Structural, built-in inflation across every economy in the world.
  • High oil and natural gas prices, with production and supply issues worldwide that have translated into shortages.
  • The nat-gas shortages have led to a lack of fertilizer which – rolled in with high oil/diesel prices – foretells of eventual, widespread food scarcity.
  • All of the above, while the global cargo ship economy remains mired in clogged ports, amplified by Covid shutdowns in China.
  • And people have finally caught onto the racket of those high flying, profitless tech companies with business plans that lose money, seemingly forever.

I could go on, but you get the picture. It’s a mess out there and getting messier. Not exactly the foundation of a booming global economy as 2022 unfolds.

So yes, people feel negative, sell out, and go to cash. They de-risk, so to speak.

Which brings us to gold, which is sliding. And here’s the quandary: Why sell gold into a de-risking market? Gold ought to represent long-term security in a time of risk, right?

The sell-side argument is that interest rates are rising, and rising rates raise the carry cost for holding gold. That is, physical gold is “just metal” and doesn’t pay a dividend. So, every ounce in the vault is a missed opportunity to generate cash. And the imputed loss on gold (i.e., versus holding cash) is greater when interest rates are high.

It’s not difficult to understand the argument, but I don’t buy it. Because look at the situation from a different angle.

Per the U.S. government’s own statistics, inflation is running in the 8.5% range – and the true number might be twice that if you follow what is called “shadow statistics.” In that respect, holding cash also has a cost, namely that 8.5% inflation rate (or more) per year of vanishing purchasing power.

Here’s the investor choice: hold cash and generate minor amounts of interest in an environment of rising inflation. Or hold gold and protect the wealth basis against declining purchasing power over time.

Indeed, the Fed threatens the world with small interest rate increases of 0.25% or even 0.5%. Okay, but that’s insignificant when compared with the 8.5% (or more) declining value of cash.

So, why have people sold gold down in recent days? Well, sometimes you don’t sell what you want to sell. You sell what you have to sell. Like if you need fast cash.

You sell gold because it’s liquid and always catches a bid. That’s not necessarily the case with many other investment ideas.

During market sell-downs the price of gold often drops early, such as when overstretched people need cash to cover margin calls. But after that early tumble, gold tends to be among the first plays to recover on the other side of the selloff and cleanup.

Along with the declining price of gold, metal miners often head down too. Good companies drop in value for no good reason. The list is long and includes names that hold great assets with serious ore in the ground, coupled with excellent geologic work, facilities, workforce and management teams.

There’s no saying how long the current selloff will last. Will the market find a bottom and then head back up? Or will more downside yet unfurl? Nobody really knows, and things can change in a matter of hours.

But along these lines, I have five names for you, companies in the gold and related metals space that have tumbled in recent days into bargain-hunt land:

One great up-and-running metal miner is Avino Silver & Gold Mines Ltd. (NYSE American: ASM | TSX: ASM). This company has operated near Durango, Mexico since 1968. The ore body is a deep-running series of veins that were first discovered in 1548 by Spanish explorers/conquistadores. There’s a full package of mineshafts, mills and processing facilities. Much of the operation was closed during Covid, but it’s all getting back into production. Ore grades are excellent, with continuing discovery as mining progresses. Plus, an offtake agreement with Samsung for all the metals.

And here are a couple of names for companies well-along in the exploration side, with superb results to date and great prospects ahead:

Take a look at American Pacific Mining Corp. (CSE: USGD | OTCQX: USGDF). This company controls a major copper exploration play in Madison, Montana and is partnered-up with giant Rio Tinto to explore a skarn-porphyry, mineral-bearing body. Progress – meaning mineralization uncovered – has been excellent over the past 18 months, with numerous unreleased drill results still to come. Meanwhile, Am-Pac holds 100% of two other outstanding, high-grade, near-surface gold plays in hard-rock mining country in Nevada.

And look at Group Ten Metals, Inc. (TSXV: PGE | OTCQB: PGEZF). This is another company that works in the nickel-platinum belt of Montana, adjacent to property controlled by Sibanye-Stillwater. Group Ten controls a vast land package and has had remarkable success identifying high-grade zones of copper-nickel, along with platinum group metals, gold, silver and even chrome. Indeed, it’s a “battery metals” play from numerous angles.

For early-stage gold exploration, look at TRU Precious Metals Corp. (TSXV: TRU | OTCQB: TRUIF). The company works in Newfoundland, in a highly prospective gold-copper belt. Its neighbors include two well-known names, Marathon Gold and Newfound Gold Corp., and TRU is directly on the geologic trend that connects these other two plays. Early sampling, mapping and geophysics are promising, with drill results offering strong promise.

And finally, another early-stage explorer, Romios Gold Resources Inc. (TSXV: RG | OTCQB: RMIOF). This is what geologists call a “hip pocket” play, an intriguing collection of historically explored and mined projects across Canada and in Nevada. Right now, the focus is on two high-grade works that were picked in the olden days, but abandoned to the mists of time due to low-priced gold. Modern geophysics and drilling reveal significant new mineralized zones. Romios is a small-cap play, but with the ability to move on news from the drill deck.

That’s all for now…  Thank you for reading.