NIA's latest gold stock suggestion Fiore Gold (TSXV: F) gained 84.78% within two weeks of NIA's profile. Fiore Gold is currently up 52.17% from NIA's suggestion price and remains NIA's #1 stock suggestion for 2019. However, for the very short-term, NIA is excited to announce a new gold stock suggestion that it believes is set to explode beginning next week and could rapidly double from its current price: Superior Gold (TSXV: SGI).
An article was published by Financial Post last week entitled, 'No brainer: Build shelter from recession risks with gold miners'. The article discusses how gold stocks, "carry leverage to gold and in a good gold market will outperform." It specifically mentions Kirkland Lake (KL) and Northern Star (NESRF) as being the two hottest gold stocks that investors should watch closely, pointing out that KL has been the #1 and NESRF the #3 best performing gold stocks in the Bloomberg World Mining Index over the last 12 months. Both KL and NESRF are major Australian gold producers!
Although U.S. investors are finally beginning to notice the major gold breakout that has occurred in recent weeks, gold in U.S. dollars remains well below its 2011 record high of approximately $1,900 per ounce. However, priced in Australian dollars, gold hit a new all-time high last month of $1,904.22 per ounce, surpassing its previous record high from 2011 of $1,822.79 per ounce! The truth is, 5 of the 6 best performing gold mining stocks of the last 12 months produce most of their gold in Australia!
The founder of KL the world's #1 best performing gold miner of the past year was Chris Bradbrook and he recently became the President & CEO of a new gold miner in Australia called Superior Gold (TSXV: SGI). SGI is the new owner of the Plutonic gold mine, one of the most successful gold mines in the history of Australia, after recently acquiring the mine from Northern Star (NESRF) the world's #3 best performing gold miner of the past year. Since 1990, the Plutonic gold mine has produced an incredible 5.5 MILLION ounces of gold!
SGI's Plutonic gold mine currently has a measured/indicated gold resource of 838,000 ounces grading an impressive 6.94 g/t with an additional inferred gold resource of 975,000 ounces grading 4.64 g/t. SGI also owns the adjacent Hermes gold mine, which has a measured/indicated gold resource of 303,000 ounces grading 1.97 g/t with an additional inferred gold resource of 104,000 ounces grading 1.85 g/t. All together, SGI has a total gold resource of 2.22 million ounces grading 5.01 g/t!
SGI has been completely overlooked by the investment community. Despite the fact that SGI grew revenue last quarter by 17.52% on a year-over-year basis, which was close to KL's revenue growth of 26% at a time when most gold miners reported declining revenue, SGI is trading for near its 52-week low vs. KL hitting a new all-time high today and NESRF hitting a new all-time high last month!
SGI at its current price of $0.76 per share has a USD market cap of only $55.36 million and is sitting on a HUGE cash position of USD$22.1 million with NO debt, which gives it an insanely low enterprise value of only USD$33.26 million. SGI is currently producing around 25,000 ounces of gold per quarter for annualized production of 100,000 ounces. At the current gold price of $1,318 per ounce, SGI is currently generating annualized revenue of USD$131.8 million. This means SGI's current enterprise value is only 0.25X revenue!
With KL currently trading with an enterprise value/revenue ratio of 7.44 and NESRF currently trading with an enterprise value/revenue ratio of 5.05, SGI is an absolute no-brainer at its current enterprise value/revenue ratio of 0.25!
SGI's average gold grade last quarter was only 2 g/t vs. KL's average gold grade of 13.3 g/t and NESRF's average gold grade of 4.6 g/t. Considering that SGI's average gold grade last quarter was 0.15X the average gold grade of KL and 0.435X the average gold grade of NESRF, we believe SGI deserves to be trading with an enterprise value/revenue ratio that is between 0.15X KL's enterprise value/revenue ratio of 7.44 and 0.435X NESRF's enterprise value/revenue ratio of 5.05. This would give SGI an enterprise value/revenue ratio of between 1.12 and 2.20.
An enterprise value/revenue ratio for SGI of between 1.12 and 2.20 based on its current annualized revenue of USD$131.8 million would give SGI an enterprise value of between USD$147.62 million and USD$289.96 million. Adding in SGI's USD$22.1 million cash position would give SGI a market cap of USD$169.72-$312.06 million or CAD$222.04-$408.27 million. Divided by SGI's 95.75 million shares outstanding would value SGI between $2.32 and $4.26 per share.
In recent quarters, SGI has been drilling lower grade gold from outside of its resource area. SGI will be returning to its higher grade resource gold in the upcoming quarters. Considering that SGI's resource gold has an average grade of more than double its recently produced gold, we could see SGI soon double its annualized gold production to over 200,000 ounces, without any major CAPEX spending! SGI's mill is capable of processing 1.8 million tonnes of ore per year and includes a three-stage crushing circuit feeding a semi-autogenous grinding mill and two ball mills. SGI has improved its gold recoveries to 88% last quarter up from 78% one year earlier.
Right now, almost nobody in the investment community is aware that SGI is about to experience a dramatic increase in its average production grade, which could cause its annualized gold production to double, but NIA believes word will spread in the weeks ahead and SGI will explode to the upside!
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.