NIA's brand new #1 ranked stock suggestion Coral Gold (TSXV: CLH) was the 4th best performing gold stock last week with a market cap of at least CAD$20 million. CLH gained by 25.64% last week vs. VanEck Vector Gold Miners ETF (GDX) declining by 3.96% and VanEck Vector Junior Gold Miners ETF (GDXJ) declining by 4.21%!
CLH is building MAJOR momentum and you have seen nothing yet. With only 47.7 million shares outstanding, CLH's market cap at $0.49 per share is still only CAD$23.37 million when the company has CAD$18.21 million in cash and no debt! This means CLH's enterprise value at $0.49 per share is still only CAD$5.52 million (USD$4.197 million)!
NIA is 100% sure that CLH's sliding scale NSR royalty in the Robertson Gold project alone is worth MANY times more than CLH's current enterprise value. Robertson is an advanced gold exploration project that is directly adjacent to the Cortez Gold Mine, which produced 1.265 million oz of gold in 2018! Cortez is owned/operated by Nevada Gold Mines, the newly formed joint venture between the world's two largest gold miners Barrick Gold and Newmont Mining. Barrick spent $10.4 BILLION to acquire 60% of Cortez in 2006 and $1.7 BILLION to acquire the remaining 40% in 2008.
CLH defined an inferred gold resource at Robertson in 2012 of over 2.7 million oz before selling Robertson to Barrick in mid-2017 and retaining an NSR royalty worth 1.5% today and will be worth 2.25% once gold surpasses USD$2,000 per oz. Drilling conducted by Barrick at Robertson in 2017/2018 not only confirmed CLH's assays but found thicker gold grades than CLH's drilling had indicated. This caused Nevada Gold Mines to ramp up drilling at Robertson in 2019, devoting 2/3 of their entire Cortez 2019 exploration budget to Robertson!
In 2020, Nevada Gold Mines will release a Prefeasibility study for Robertson, and we expect it to show a larger gold resource than what CLH had defined while upgrading the entire gold resource into the measured/indicated category! The Prefeasibility study will likely include an official average annual gold production estimate along with an estimated date of first production!
All signs point to Robertson adding between 200,000-300,000 oz of gold per year to Cortez's annual production. We expect the market to begin valuing CLH in 2020 based on the likely future income that its NSR royalty will generate using the Prefeasibility study's estimate of Robertson's future annual production!
On January 18, 2019, Sandstorm Gold (TSX: SSL) paid USD$32.75 million cash to acquire a 0.9% NSR royalty in Lundin Gold's Fruta del Norte gold project, which is expected to average annual gold production of 330,000 oz.
On March 8, 2018, Osisko Gold Royalties (TSX: OR) paid CAD$98 million cash to acquire a 5% NSR royalty in Victoria Gold's Eagle gold project, which is expected to average annual gold production of 200,000 oz.
On December 18, 2017, Sandstorm Gold (TSX: SSL) paid USD$45 million cash to acquire a 2% NSR royalty in Endeavour Mining's Houndé gold mine, which is expected to average annual gold production of 235,000 oz.
In our opinion, a fair value for CLH's Robertson royalty in 2020 will be somewhere in between the USD$32.75 million (CAD$43.1 million) that SSL paid for their 0.9% NSR royalty in Fruta del Norte and the USD$45 million (CAD$59.22 million) that SSL paid for their 2% NSR royalty in the Houndé gold mine. Combined with CLH's cash position of CAD$18.21 million, CLH will deserve a market cap of between CAD$61.31 million-$77.44 million. This will value CLH at a share price of between $1.29 and $1.62!
Past performance is not an indicator of future returns. NIA is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This message is not a solicitation or recommendation to buy, sell, or hold securities. Never make investment decisions based on anything NIA says. This message is meant for informational and educational purposes only and does not provide investment advice.