Best of the Week
Most Popular
1.UK General Election BBC Exit Polls Forecast Accuracy - Nadeem_Walayat
2.UK General Election 2017 Seats Final Forecast, Labour, Conservative Lib-Dem, SNP - Nadeem_Walayat
3.UK General Election 2017 Forecast: Conservative 358, Labour 212 Seats - Nadeem_Walayat
4.Theresa May to Resign, Fatal Error Was to Believe Worthless Opinion Polls! - Nadeem_Walayat
5.UK House Prices Forecast General Election 2017 Conservative Seats Result - Nadeem_Walayat
6.The Stock Market Crash of 2017 That Never Was But Could it Still Come to Pass? - Sol_Palha
7.[TRADE ALERT] Write This Gold Stock Ticker Down Now - WallStreetNation
8.UK General Election Results Map 2017 vs 2015 vs Opinion Polls - Nadeem_Walayat
9.Orphaned Poisoned Waters,Severe Chronic Water Shortage Imminent - Richard_Mills
10.How The Smart Money Is Playing The Lithium Boom - OilPrice_Com
Last 7 days
Sheffield Broomhall Hanover Flats Tower Block Cladding Could Take Months to Remove! - 28th Jun 17
Shrinkflation In UK – Real Inflation Much Higher Than Reported - 28th Jun 17
Are the UK Elections a Forgone Conclusion? - 28th Jun 17
Is the Tech Stock Market Bloodbath is Finally Here? - 28th Jun 17
Crude Oil Sinks 20%: Why "Oversupply" Isn't the Half of It - 28th Jun 17
Important Money Management Tips For Teenagers - 28th Jun 17
The Coming Battery Bonanza - 28th Jun 17
Overlooked Stock Investments To Keep An Eye On in 2017 - 27th Jun 17
The Federal Reserve And Drug Addiction – A Prediction - 27th Jun 17
Charts Show Why Emerging Markets Will Be an Essential Part of Your Portfolio Going Forward - 27th Jun 17
Former Lehman Brothers Trader: I Bet My Reputation That Stocks Bubble Will Pop In A Year - 27th Jun 17
US Bonds and Related Market Indicators - 27th Jun 17
Stocks At Record Highs: Market Sentiment Still Bullish - 27th Jun 17
Stock Market Running Out of Steam - 27th Jun 17
Gold Back With A Vengeance As Bitcoin Bubble Bursts - 26th Jun 17
Crude Oil Trade & Nasdaq QQQ Update - 26th Jun 17
Gold and Silver Ongoing Consolidation May End Soon - 25th Jun 17
Dollar May Become “Local Currency of the U.S.” Only - 25th Jun 17
Sheffield Great Flood of 2007, 10 Years On - Unique Timeline of What Happened - 24th Jun 17
US Stock Market Correction Could be Underway - 24th Jun 17
Proof That This Economic Recovery Narrative is False - 24th Jun 17
Best Cash ISA for Soaring Inflation, Kent Reliance Illustrates the Great ISA Rip Off - 24th Jun 17
Gold Summer Doldrums - 23rd Jun 17
Hedgers Net Short the Euro, US Market Rotates; 2 Horsemen Set to Ride? - 23rd Jun 17
Nether Edge By Election Result: Labour Win Sheffield City Council Seat by 132 Votes - 23rd Jun 17
Grenfell Fire: 600 of 4000 Tower Blocks Ticking Time Bomb Death Traps! - 22nd Jun 17
Car Sales About To Go Over The Cliff - 22nd Jun 17
LOG 0.786 support in CRUDE OIL and COCOA - 22nd Jun 17
More Stock Market Fluctuations Along New Record Highs - 22nd Jun 17
Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - 22nd Jun 17
Green Party Could Control Sheffield City Council Balance of Power Local Election 2018 - 22nd Jun 17
Ratio Combo Charts : Hidden Clues to the Gold Market Puzzle - 22nd Jun 17
Steem Hard Forks & Now People Are Making Even More Money On Blockchain Steemit - 22nd Jun 17
4 Steps for Comparing Binary Options Providers - 22nd Jun 17
Nether Edge & Sharrow By-Election, Will Labour Lose Safe Council Seat, Sheffield? - 21st Jun 17
Stock Market SPX Making New Lows - 21st Jun 17
Your Future Wealth Depends on what You Decide to Keep and Invest in Now - 21st Jun 17
Either Bitcoin Will Fail OR Bitcoin Is A Government Invention Meant To Enslave... - 21st Jun 17
Strength in Gold and Silver Mining Stocks and Its Implications - 21st Jun 17
Inflation is No Longer in Stealth Mode - 21st Jun 17
CRUDE OIL UPDATE- “0.30 risk is cheap for changing implication!” - 20th Jun 17
Crude Oil Verifies Price Breakdown – Or Is It Something More? - 20th Jun 17
Trump Backs ISIS As He Pushes US Onto Brink of World War III With Russia - 20th Jun 17
Most Popular Auto Trading Tools for trading with Stock Markets - 20th Jun 17
GDXJ Gold Stocks Massacre: The Aftermath - 20th Jun 17
Why Walkers Crisps Pay Packet Promotion is RUBBISH! - 20th Jun 17

Market Oracle FREE Newsletter

The MRI 3D Report

Top Junior Gold Producer

Commodities / Gold and Silver Stocks 2014 Jul 03, 2014 - 04:43 PM GMT

By: Zeal_LLC

Commodities

The Timmins gold district is by far the most productive within Canada’s prolific Abitibi greenstone belt.  It has produced in the neighborhood of 70m ounces of gold, and operations are still going strong.  Namesake mining company Timmins Gold is forecasting 2014 output of 120k ounces, making it one of North America’s top junior gold producers.  But provocatively not one of Timmins’ ounces is coming from within the Timmins district.


Timmins Gold CEO and founder Bruce Bragagnolo did grow up in Timmins, which gives his company roots in this famous Canadian gold district.  But TGD is finding its mining success on the other side of the continent, along the Mexican portion of the Mojave-Sonora Megashear.  And its San Francisco mine ranks as one of the finest in all of Mexico.

Timmins Gold was one of the first movers into a country that has been party to a massive gold rush.  This rush has led to widespread exploration and development, which has translated into production volume that has increased by a whopping 390% over the last decade.  With 2013 output that exceeded 3.2m ounces, Mexico now ranks as the world’s 8th-largest gold producer.

Timmins’ Mexican success rests on the shoulders of Bruce Bragagnolo’s partner and co-founder Arturo Bonillas.  Bonillas, who is a Mexican national, is a mining engineer with vast experience in his home country.  His extensive connections and understanding of Mexico’s social and legal frameworks allowed Timmins to snatch up an advanced-stage project that was primed for development.

The San Francisco project is located in north-central Sonora, only 2km off the Pan American Highway.  And this project was the perfect play to get Timmins off the ground to take advantage of the new gold bull market.  San Francisco was a past-producing mine, and there were still significant resources in the ground.

One huge advantage to San Francisco was its past production occurred in the not-too-distant past.  It ran as a modern heap-leach mining operation, producing 300k ounces of gold up until its closure in 2000.  And since this closure was purely for economic reasons as gold dipped to brutal secular-bear lows nearing $250, it would only be a matter of time before San Francisco got another look.

When Timmins gained its initial interest in San Francisco in 2005, it was already known to hold in the neighborhood of 700k ounces of resources.  And TGD’s expert geological team aggressively took to the drill bit in order to prove up the resources and ultimately feed a feasibility study.

Timmins did just that, and after delivering a positive study and procuring permits and financing, it built its mine.  San Francisco poured its first gold in December 2009.  And this mine’s best years were yet to come.

One of the keys to success in this second phase of San Francisco’s mining life involves a major tweak to the process flow.  In its past life San Francisco’s recoveries were quite low given its ore was placed on the leach pads with either minimal or no crushing.  But Timmins determined that the extra costs involved in systematic multi-stage crushing were more than offset by higher recoveries and thus higher output.

Once it had the process flow dialed in, Timmins wasted no time seeking to expand operations.  And affording this was a huge growth to the resource base.  TGD quickly discovered that the mineralization in San Francisco’s mesothermal system was still wide open, so it continued with aggressive exploration well beyond mine commissioning.

This project has now seen in excess of 500k meters of drilling to date, including 240k+ meters just since 2012.  And this has led to big upgrades and expansions to the in-ground inventory.  Per the latest resource estimate, San Francisco’s deposits contain 3.7m ounces of gold in all categories, including 1.6m ounces of proven-and-probable reserves.  It now ranks as one of the largest primary gold deposits in Mexico!

Timmins would be foolish not to expand operations considering San Francisco’s large resource base.  It thus rolled out a series of expansions, with the latest that was completed in early 2013 increasing throughput by 140% over initial feasibility-study levels.

The San Francisco mine is now producing at a rate of 24k metric tons per day, which yields gold at a rate of 120k ounces per year.  Even at this newly-expanded rate, the mining life will still exceed 10 years based on the latest reserve count.  But as existing resources are upgraded and new ones are found, we should see a mining life that greatly exceeds this.

On the cost front San Francisco operates in the lower quartile of industry average.  In 2013 its all-in sustaining costs came in at an impressive $872/ounce.  And in Q1 2014 they continued to impress, coming in at only $790/ounce.  Timmins Gold is one of the rare miners with the ability to turn a profit even at today’s anomalously-low gold prices.  And with life-of-mine all-in sustaining costs projected at less than $850/ounce, it’ll be doing this for a long time to come.

Looking forward Timmins has its sights set on further expansion.  And this expansion would likely come from the La Chicharra pit, less than 2km from the pit that is currently being mined.  La Chicharra’s ore would need its own dedicated crushing unit.  And it’s been tossed around that this would bring total throughput to 30k tpd.  This expansion should only require a modest capex commitment since the existing ADR plant has the capacity to process a much higher throughput rate.

And best of all is this potential expansion isn’t likely to be a burden to investors.  Timmins Gold has funded all previous expansions from cash flow.  And with a strong balance sheet to support what should be substantial net free cash flow in the future, developing La Chicharra should also be a self-funded endeavor.

Speaking of investors, Timmins Gold has the make-up to be an investor favorite as gold’s bull gets its legs back underneath it.  There aren’t many low-cost unhedged gold producers with exceptionally strong longevity.  And TGD is among the best.  It has performed very well with gold in the past.  And it ought to continue to do so in the future.

Interestingly Timmins Gold made a name for itself as one of the top-performing gold stocks following the infamous 2008 stock panic that dragged gold down with it.  From its late 2008 low to 2011 high, TGD was up a staggering 1585%.  Compared to gold’s impressive 167% gain from its own late 2008 low to 2011 high, I’d say TGD exhibited darned-good positive leverage, a staggering 9.5 to 1 to be exact.

What I’m more interested in though is how TGD has performed relative to gold subsequent to gold’s late-2011 high.  This has been a pretty crazy last three or so years for gold and its mining stocks, a period that truly has tested the resolve of this entire sector.  It started out with a normal and healthy correction and consolidation period.  But then the selling spiraled out of control, underscored by an anomalous panic that made this sector the most hated in all the markets.

Amidst this three-year period, gold stocks’ typical positive leverage to gold has gotten somewhat out of whack.  Even stocks that exhibited consistent leverage in the past have struggled.  But as you can see in the chart above, for the most part TGD has still continued to deliver.

Gold has had four meaningful uplegs following its 2011 all-time high.  And in the first two during 2012 Timmins remained a gold-stock all-star.  In each upleg gold rallied 15%, with TGD posting spectacular trough-to-peak gains of 72% and 90%!  This represents outstanding positive leverage of a remarkable 4.7x and 5.9x respectively.

Timmins of course tanked with gold like every other gold stock in 2013.  There was however one meaningful upleg coming out of the Q2 panic that TGD had the opportunity to participate in.  But as you can see, it didn’t.  And this disconnect was actually quite perplexing.  Yes Timmins had a rough Q2’13 with much lower year-over-year profits along with a small impairment charge.  But this was pandemic for the sector.  We’ll chalk this up as an anomaly, especially considering the follow-up action.

Things reverted back to normal amidst gold’s latest upleg in early 2014.  TGD positively leveraged gold’s 16% gain by 4.4x, soaring 71%!  And just over the last few weeks, TGD has really embraced a rare summer gold rally by surging 48% to gold’s 6.7% (stellar 7.2x leverage).  Time will tell whether a new gold upleg is being born, but what is clear is that TGD is wound tight and ready to spring on any upward momentum in its underlying metal.

Overall Timmins Gold has everything it takes to be an elite junior gold producer.  It has a spectacular mine that will be producing low-cost gold for a long time to come.  It has a top-shelf management team adept at exploration and development.  It has a solid financial standing.  And its stock has demonstrated the ability to superbly leverage the underlying metal.

Timmins is a proven leader of the junior-gold-producer sub-sector.  This sub-sector does carry more risk than the larger more-diversified miners, which can lead to sharp downside leverage.  But the rewards can be exceedingly great on the upside.  These stocks are small enough that it doesn’t take much investor interest and thus capital inflows for them to explode higher.  And when gold regains its legs, it won’t take long for this capital to find them.

With gold poised to shoot higher, now is the time to load up on gold stocks, with heavy emphasis on the junior gold producers.  At Zeal we’re gearing up to add to our positions as gold nears its seasonally-strong demand cycle.  And with this metal still radically oversold, its surge should be epic.  If gold’s next upleg is indeed massive, you can imagine what gold stocks will do as they leverage it to the upside.  Subscribe today to one of our acclaimed newsletters to find out what and when we are trading!

As to the what, we pull from our expert world-class research, the fruits of which are available via our popular sector reports.  And our brand-new report published just a few weeks ago profiles our favorite dozen junior gold producers.  Our several months of deep research identified what we believe are the highest-potential stocks out of all those that trade in the US and Canada.  If you’d like the full Timmins Gold fundamental profile along with those of 11 other exciting stocks, buy your report today!

The bottom line is Timmins Gold is one of the industry’s top junior gold producers.  This company skillfully executed a plan to develop an advanced-stage Mexican project in order to take advantage of gold’s secular bull market.  And it did just this with production from what is now one of the country’s finest gold mines.

The San Francisco mine is a long-life low-cost beauty with ample resources and huge upside exploration potential.  And for this reason investors have latched on to Timmins’ stock.  TGD is a proven high-positive-leverage play that ought to continue to greatly outperform as gold’s bull market presses on.

By Scott Wright

So how can you profit from this information? We publish an acclaimed monthly newsletter, Zeal Intelligence , that details exactly what we are doing in terms of actual stock and options trading based on all the lessons we have learned in our market research as well as provides in-depth market analysis and commentary. Please consider joining us each month at … www.zealllc.com/subscribe.htm

Thoughts, comments, or flames? Fire away at scottq@zealllc.com . Depending on the volume of feedback I may not have time to respond personally, but I will read all messages. Thanks!

Copyright 2000 - 2014 Zeal Research ( www.ZealLLC.com )

Zeal_LLC Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife