Expanded margins have created an optimal environment to invest in miners, but investors should still watch for jurisdictional risks, including the inability for miners to access their sites due to the ongoing pandemic, said Brent Cook, founder of Exploration Insights.
“If the company can’t get to site, that drops them down in terms of our interest,” Cook said.
Cook’s top picks for mining companies include Bluestone Resources (TSXV: BSR.V), Westhaven Gold Corp. (TSXV: WHN.V), and Clean Air Metals (TSXV: AIR.V).
In addition, mergers and acquisitions activity have been slowed by COVID-19.
“Due diligence required to do mergers and acquisitions and such, has been put pretty much on hold. A lot of companies aren’t able to get out with their technical personnel to site to evaluate a property, to evaluate a management team,” he said.
While operating results are company-dependent, as a whole, the investors should expect a strong third quarter for gold miners as a result of this year’s higher gold price, Cook said.
“With these gold prices where they’re at right now, close to $1,900, [miners] are making a lot of money. Most of the major companies have been pretty conservative in upping their reserves, and the gold price they used for reserves, so we should see pretty good cash flow coming into the majority of mining companies,” he said.
Cook said that while margins have improved across the board in the industry, high margin projects still remain a top criteria on his stock screening radar.
“We are always about margin, and I think the major mining companies, you see what they’re using for their price tag for gold price: $1,250 to $1,400. They’re focused on margin too. Our experience, and philosophy is that we’re after, and the major mining companies are after, the highest margin deposits they can come across,” he said.