Gold & Silver Are Surging; So Are These Penny Stocks
If there’s one thing markets don’t like, it’s uncertainty. In light of that safe-haven stocks like mining penny stocks have held a special place in traders’ hearts. Pair this uncertainty with trillions in stimulus money, deflated currencies, and renewed market volatility, and you could have a perfect storm for precious metals and mining stocks. Something to keep in mind, especially if you still like volatility, it’s what I’m about to tell you.
During periods of bullish momentum in precious metals, the small cap stocks are some of the top performers. Simply put, when there’s a strong uptrend, the rising tide tends to lift all ships. Obviously, for a company like Barrick Gold (GOLD Stock Report), a move of a few dollars is nice but equates to a nominal percentage change. On the other hand, a few-dollar move in stocks under $5 is more than noticeable.
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With that, it’s also worth mentioning that mining penny stocks could be experiencing a 1:2 punch right now. Not only is there sector momentum, but smaller stocks are also gaining more attention right now. Take a look at the Russell (IWM ETF) and it gives a clear idea of the state of small cap stocks right now. Since the start of the week, the IWM has climbed 6.5%, which is a considerable spike for the ETF itself.
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This phenomenon was realized earlier this year when we saw tons of gold stocks surge with the price of gold. Since the start of 2020, the precious metal has climbed as much as 37%. It also made new, all-time highs of $2,089.20 in August.
Aided by all of the catalysts listed above, investors have sought out safe havens amid the chaos to find that many penny stocks produced some of the largest gains in the market during the first 8 months of the year. Now that the election is upon us and still undecided, the excitement surrounding the gold trade is growing once again.
Then again, you also have to take silver into consideration as well. While gold’s 37% move was great, it didn’t compare to the move that silver prices made this year. Since January 2nd to 2020 highs, silver soared 67%. So when looking for strength in small cap stocks with exposure to precious metals, you might not want to write-off silver penny stocks either.
Mining Penny Stocks To Watch: Walcott Resources Ltd.
Walcott Resources Ltd. (OTC: WALRF Stock Report)(CSE:WAL) is more of a newcomer to the mining space. The company previously focused on a mining asset in British Columbia, Canada, Cobalt Hill. However, there are several key developments to take a closer look at that might bring things into a bit more of a brighter light for the company. The first is the completed acquisition of a controlling stake in the Tyr silver project in Australia. Building on previous work, Walcott is fast-tracking plans for a site visit to review previously determined prospective silver targets in order to formulate an inaugural drilling campaign. For lack of better wording, this is literally a groundbreaking development for the company.
When you’re talking about penny stocks, whether it’s biotech, cannabis, or mining, the focus is on early potential in these companies. According to Walcott, the property has conservative inferred resource estimates and many high-grade surface mineral occurrences up to 4,710 grams per ton of silver (g/t Ag). Putting this into perspective on a global scale, Buenaventura’s Uchucchacua mine, located in Peru, is the highest-grade silver mine in the world. It holds reserve grades of 445 g/t Ag. Furthermore, looking locally, South 32’s Cannington Mine produces 6% of the world’s silver; it has a measured mineral resource of 56Mt @ 193 g/t Ag.
Current efforts will focus on generating potential targets for drill testing subject to site visit verification. While Walcott is only just beginning this exploration phase, there could be much to keep an eye on with the Tyr project.
“The fact there are two historic silver mines and numerous reported mineral occurrences, potentially within a 20 km by 4 km potentially mineralized system, suggests that a considerable future pipeline of work is warranted. Leveraging earlier work, we aim to rapidly deploy field teams to the Tyr Silver Project to commence reviewing preliminary targets and accelerate the formulation of our inaugural drilling campaign.”
CEO David Thornley-Hall
Mining Penny Stocks To Watch: Iamgold Corporation
Iamgold Corporation (IAG Stock Report) is one of the gold penny stocks to watch this week. With the rapidly rising price of gold, even this year’s early mining production slowdown might not be a factor. The long and short of it is the lower supply and higher demand situation might create optimal conditions for gold. Iamgold Corporation has benefited and fell short in the market due to the price of gold. If you look at the overall trend, you’ll see that it mirrors the precious metal relatively closely.
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However, what might have become an additional factor to consider this week is its Q3 earnings results. Revenues came in at just over $335 million with an average realized gold price of $1,908 per ounce. the company also saw a 45% increase in net cash, over the second quarter. At the end of Q3, net cash was $105.1 million. Free cash flow was in a strong position over its second quarter as well. With a sum of $80 million, it was 51% higher than Q2 free cash flow.
“In the quarter, we successfully completed our new bond issuance, lowering our interest costs, extending the maturity to 2028 and enhancing our financial flexibility with a cash balance of approximately $900 million. This cash position, along with access to our largely undrawn $500 million credit facility, brings our total liquidity to over $1.4 billion.”
Gordon Stothart, President and CEO of IAMGOLD
Mining Penny Stocks To Watch: McEwen Mining Inc.
Another one of the mining penny stock reporting earnings recently was McEwen Mining Inc. (MUX Stock Report). At the end of October, McEwen released its third-quarter results. Cash and liquid assets plus working capital were just under $19 million and $21.5 million respectively. The production also bounced back during the quarter. This came as McEwen, as with other mining companies, restarted operations.
Production for Q3 2020 was 23,100 gold ounces and 575,000 silver ounces, or 30,400 gold equivalent ounces. The company guided between 31,500-34,000 gold equivalent ounces of production for this quarter. Something to keep track of right now if MUX stock is on your list is its Black Fox project.
During the quarter, the company began delineation and definition drilling. McEwen reported favorable results from that program. It was also enough to see the company fast-track the drill program to begin evaluating additions to mine planning inventory. You’ve also got the Froome developments, another underground deposit. It’s within close proximity to the Black Fox Mine and plans to reach the main deposit are planned for next year’s Q2. What’s more is that commercial production at Froome is expected before the end of next year; specifically in Q4.
