Two high-conviction stocks to leverage record gold prices
At the time of writing on Thursday, gold traded at US$3,373.3 per ounce, just shy of the all-time-high set just last month, having gained over 40 per cent year-over-year and almost 100 per cent since 2020, reinforcing its reputation as a safe-haven investment during economically trying times.
Gold's gains have mitigated risks associated with the COVID-19 pandemic, which dropped the TSX by 30 per cent in March 2020; inflation driven by quarantines lifted across the globe; ongoing conflicts in Ukraine and the Middle East; as well as renewed price pressures from U.S. president Trump's global tariff initiative. At the same time, higher gold prices are improving economics from exploration to production, enticing investors back into the space now that there's real money to be made.
The lowest-hanging fruit in the gold stock universe will likely be found in producers with differentiated income statements and balance sheets, most of their growth likely behind them, making them best suited for moderate long-term returns.
There is, however, a higher risk-reward option capable of delivering potentially exponential returns, supposing you're willing to size up early-stage mining projects and stick with them through development and hopefully production. We're of course talking about junior mining stocks, whose underlying pre-revenue operations rely on geological expertise, mining cycle timing and sound capital allocation to traverse the often volatile path to shareholder value.
In the newest edition of Stockhouse's Weekly Market Movers, I'll introduce you to a pair of junior gold stocks equipped with assets and management teams worth believing in when it comes to generating leverage beyond the gold price. Chesapeake Gold
Our first high-conviction stock to optimize your gold exposure is Chesapeake Gold, market cap C$96.44 million, whose flagship Metates project in Durango State, Mexico, hosts one of the largest undeveloped gold-silver deposits in the world.
Metates' resource comes in at an estimated 16.77 million ounces of gold measured and indicated and 2.13 million ounces inferred, representing over US$60 billion in gold in the ground. The project's 2021 preliminary economic assessment details a pre-tax net present value of C$1.43 billion and initial capital costs of only C$359 million at heavily discounted base cases of US$1,600 gold and US$22 silver.
Supported by C$11 million in treasury at year-end 2024, Metates' ample room for resource expansion, a management team with decorated histories in exploration and development in the Americas, as well as a recent acquisition of sulfide leaching technology that vastly increases recoveries and project economics (slide 8), there's no good reason Chesapeake should be trading at a 90 per cent discount to its peers on an enterprise value/ounces basis (slide 16).
Jean-Paul Tsotsos, Chesapeake Gold's chief executive officer (CEO), spoke with Stockhouse's Lyndsay Malchuk about the benefits of the company's news sulfide leaching technology. Watch the interview here.
Chesapeake Gold stock (TSXV:CKG) has given back 41.91 per cent year-over-year and 65 per cent since 2020. Shares last traded at C$1.40.
Our second high-conviction junior gold stock, Tectonic Metals, market cap C$37.37 million, was founded by a team whose past successes speak for themselves, as highlighted by ushering Kaminak's Coffee gold project from a C$3 million venture through bankable feasibility, followed by a C$520 million sale to Goldcorp (now Newmont). As a whole, the team is responsible for: Over 30 million ounces in gold discoveries.
18 feasibility studies.
20 projects permitted.
More than $3 billion in M&A transactions.
More than $2 billion in capital raised.
Tectonic is keen on expanding its track record with its flagship Flat gold project in Alaska, located only 40 kilometres from Novagold's Donlin project, host to one of the largest undeveloped gold deposits in the world at an estimated 39 million ounces.
The 99,800-acre Flat has yielded 1.4 million ounces in historical placer gold production and delivered a 100-per-cent drill success rate to date, intersecting gold in all 86 drill holes across 3 kilometres of mineralized strike up to 325 metres deep. The company has identified six potential district-scale deposits on the project, granting Flat multi-million-ounce potential.
With numerous analogous mines (slide 17) strengthening Flat's case for a company-making initial resource estimate, and C$12.5 million in funding in place for phase-I drilling to follow up on 2024's Alpha Bowl discovery – 65.53 metres grading 1.22 grams per ton (g/t) of gold – Tectonic is a reasonable candidate for transforming robust exploration upside into an outsized stock price re-rating.
Tectonic Metals stock (TSXV:TECT) is up by 12.5 per cent year-over-year but remains down by 59.09 per cent since 2020.
Tony Reda, Tectonic Metals' founder, president and CEO, sat down with Coreena Robertson to discuss the company's recently closed funding round. Watch the interview here.
Thanks for reading! I'll see you next week for a new edition of Stockhouse's Weekly Market Movers. Here's the most recent article, in case you missed it.
Join the discussion: Find out what everybody's saying about these junior gold mining stocks on the Chesapeake Gold Corp. and Tectonic Metals Inc. Bullboards and check out Stockhouse's stock forums and message boards.
This is sponsored content issued on behalf of Chesapeake Gold Corp. and Tectonic Metals Inc., please see full disclaimer here.
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