Most companies never make this important transition…
Institutional Investors Lining Up for the Birth of a Major Gold Producer
Editorial Feature | Aug 23, 2024
Fidelity, Invesco, and Franklin Investments have been pouring money into Calibre Mining (TSX:CXB, OTC:CXBMF) as it ramps up production from junior to mid-tier miner.
Now, the Toronto Stock Exchange just added Calibre to its composite index — Canada’s S&P 500.
With over US$140M cash on hand, significant cashflow from operations, and US$25-$30M dedicated to expanding existing assets with drilling already underway, Calibre Mining (TSX:CXB, OTC:CXBMF) is one of the most exciting Canadian gold miners operating today.
Disseminated on behalf of Calibre Mining. Please see “Disclaimer” for important additional information.
There are two moments in the life cycle of a mining company that lead to real growth.
The first is when a company first proves it has assets in the ground. When potential goes from theory to reality, and risk dissipates.
The second is when a junior miner’s production graduates to the mid-tier class, and enters into a virtuous upward cycle.
With enough production, there’s plenty of cash flow to support more exploration and potentially grow production.
With exploration and production success, along with facility processing capacity, there are plenty of opportunity for valuation growth.
Like a snowball rolling downhill, mid-tiers can enter a stage of rapid growth.
Most exploration companies fail before proving any resources, never even getting to that first stage.
Calibre Mining (TSX:CXB, OTC:CXBMF) has just entered the second stage.
With mines operating in Nevada and Nicaragua, Calibre produced 283,000 oz of gold last year, generating a $200 million cashflow from operations, at an average realized gold price of $1,940/oz. Now keep in mind, gold is currently trading at over $2,300/oz.
Some of that cash flow was used to purchase the Valentine Project in Newfoundland, Canada.
And now, with Valentine production coming online in 2024, Calibre’s analysts are projecting approximately 500,000 ounces of gold a year by 2025-2026E.1
That puts it firmly in the mid-tier group.
Valuation vs Peer Producers
Less Risk, More Reward
Aside from the increase in size and profit, simply becoming a mid-tier often leads to increased exposure.
One reason? Mid-tiers are large enough companies and have sufficient trading volume that funds, ETFs, and other institutional investors can get involved.
And that’s already happening with Calibre Mining (TSX:CXB, OTC:CXBMF) today, as institutions look ahead to increased gold production.
Today, Invesco Funds, Sprott, Franklin Funds, and Fidelity all have stakes in Calibre.
The GDX Gold Miners Fund has invested, and now owns ~9% of outstanding shares.
Major gold miner Franco-Nevada (FNK), one of the largest in Canada, believes so strongly in the Valentine Project that FNK bought a 3.0% royalty on it.
And as of June 21, the Toronto Stock Exchange has added Calibre Mining to its composite index — Canada’s equivalent of the S&P 500.
Juniors trade at a discount due to the risk of being smaller, more speculative companies.
By the time a business is producing hundreds of thousands of ounces of gold annually, much of the speculative risk is gone.
You are no longer investing in an idea, or in potential — but in realized, actual production.
That’s why graduating from a junior to a mid-tier producer is so valuable.
But it’s not the only reason a gold producer warrants investigation.
In fact, there are four conditions to look for when judging a gold producer for its potential.
And Calibre Mining (TSX:CXB, OTC:CXBMF) satisfies all four.
Factor#1: Record Gold Prices
This is fairly self-explanatory. A rising tide lifts all boats — so it is with gold mining companies and the gold market.
And the gold market today is running red-hot.
At a price of around $2,350 an ounce, gold is near its all-time high in absolute terms.2
Over the past 30 years, gold has outearned oil, the S&P 500, even the Dow Jones index.
Not bad performance from what is traditionally considered a safe investment, and a hedge against both economic shocks and inflation.
The reason gold has performed so well recently?
We are right in the middle of a secular bull market for gold.
You probably learned about cyclical secular markets in Econ 101. They are simply the markets balancing supply and demand.
When supply exceeds demand, the price of gold falls.
When the price of gold falls, explorers stop exploring, miners stop developing projects, and investors look elsewhere.
This leads to stagnant and, eventually, falling supply, as existing properties exhaust themselves.
Once demand exceeds supply, the price of gold rises.
This is happening currently – with central banks buying in record amounts over the last few years – and offers a clear indication about what is to come.
As the price of gold rises, explorers search for deposits, miners develop new projects or restart mothballed ones, and eventually supply rises.
When supply exceeds demand, triggering the price of gold to fall again, the cycle begins anew.
Because it takes years for a project to go from discovery to production, the cycle is a long one, with bull runs that can last a decade or more.
As you can see in the chart above, the price of gold has risen steadily since 2016.
Since 2016, supply has barely budged.
In fact, gold obtained through mining has stagnated or shrunk most years.
Gold recycling has made up the gap, but that isn’t sustainable long-term.
So not only are we in a secular bull run, but until global supply starts increasing, the price of gold is likely to keep heading upwards, hitting multiple new highs before the market shifts.
That is reason enough for the market to give a boost to gold producers.
But there are other factors driving the price higher as well.
- Central banks have been hoarding gold the past few years, with China leading the charge.3
- Increased geopolitical danger is driving gold purchases both amongst countries, and amongst individuals and investors.
- Inflation is driving many investors to hold more of their wealth in gold as well. Even if gold merely holds its nominal value, the shrinking worth of the dollar is driving up the price.
Put it all together, and conditions in the gold market are strong enough that most companies working in the space have seen a rise.
Indeed, the market is so robust that the GDX ETF — which holds a basket of gold miners including Calibre — has risen almost 33% just since March.
However, there is good reason to believe Calibre could outpace the general market.
And that starts with the second driver.
Factor #2: Potential To Scale
The second value driver for any gold producer is if they believe a miner has more gold in the ground than currently announced.
Here again, Calibre Mining (TSX:CXB, OTC:CXBMF) is a standout.
Already, the company’s newest acquisition, the Valentine Project in Newfoundland, is looking like their richest deposit.
With 5 million ounces of proven resource4, Valentine is an impressive project. 5 million ounces is a rare find in Canada, one of the best mining jurisdictions in the world (and one of the most stable, friendly countries, as well).
And the company has made rapid progress moving toward production on the project, with a recent news release touting construction of the Valentine Mine reaching 73% completion.
But the Valentine Project isn’t even 20% explored yet.
In fact, all 5 million proven ounces are contained in only 8 km of a 32-km fault line that runs across the Valentine property.5
The remaining underexplored 24 km fault line has barely any exploration done. But there is good reason to believe there is significant potential with similar mineralization.
The geology of the Valentine Project is also very similar to the well-known Sigma-Lamaque project in Val d’or, Quebec. That’s one of the reasons Calibre was interested in Valentine in the first place.
Over the course of its life, Val d’or has produced about.6
Given its slightly larger size compared to Val d’or, Calibre believes its crown jewel could contain significantly more– especially when looking at the multiple kilometers of potential along the fault.
A 5-million ounce deposit is rare enough. Valentine one of the most valuable gold resources ever discovered in Canada, and a find of global significance.
Calibre has already set aside $$5-10 million to further explore and define Valentine.
And, beyond Valentine, Calibre Mining (TSX:CXB, OTC:CXBMF) has a $144 (as at the end of April 2024) war chest to make further acquisitions.
The management team at Calibre have been successfully identifying geologically promising projects and quickly exploring them, building them out, and producing gold responsibly.
Valentine is just the latest example.
And it is already so successful — and holds so much further potential — that it gives Calibre one more reason for institutions to take notice.
Factor #3: Stellar Acquisition Track Record
When your projects have the potential for much greater resources than you’ve yet proven…
And when the world’s appetite for gold is driving prices higher…
You can become an acquisition target.
To be clear — Calibre Mining (TSX:CXB, OTC:CXBMF) isn’t actively shopping itself around, nor has it announced any inquiries or interest from larger mining interests.
But, it is simply the nature of the industry. Any major would love to have a proven — and to keep Calibre from becoming a major itself and a potential competitor.
And while the team at Calibre Mining (TSX:CXB, OTC:CXBMF) is happy with their current position, they have been willing to sell in the past,
This is the same management team that founded New Market Gold, discovered one of the highest-grade underground gold mines in the world, and sold in 2016 to Kirkland Lake for C$1 billion. The merged company then went on to see significant new highs, as shown in the below chart.
Calibre Mining (TSX:CXB, OTC:CXBMF) could follow a similar pattern if an attractive enough offer came along.
However, while the potential of an acquisition always piques interest, it isn’t a necessity.
Calibre Mining (TSX:CXB, OTC:CXBMF) has multiple paths to growth.
Factor #4: Diverse Holdings
Calibre Mining’s gold processing plant could refine nearly $1 billion of gold a year at today’s price.
We have focused much of our attention on the Valentine Project — as it’s Calibre’s largest, newest, and is still actively being explored and defined.
But it’s not Calibre’s only holding.
In fact, the exploration of Valentine is being funded by revenue coming from other sites…
In Nevada, Calibre has ramped up production at the Pan Gold Mine projected, with Measured and Indicated Resources of 340,000 ounces. Calibre has two more nearby projects in Nevada awaiting exploration later this year.
Three mines in Nicaragua combine to host over 1.8 million ounces of Indicated Resources. One of those mines — the Limon Mine — has a mill that can process 500,000 tonnes of ore a year at full capacity and Libertad has a mill that can process 2.2 million tonnes of ore a year, currently only being used at 50% capacity.
And in Washington state, Calibre has added a known mine which has already produced 4 million ounces of gold, with another 2 million ounces measured and indicated for future production.
Just as with investment portfolios, it pays for mining companies to have diverse holdings.
Both as protection against unforeseen events…
And also to get multiple bites at different apples, each one with the potential for upside.
The management of Calibre Mining (TSX:CXB, OTC:CXBMF) has already proven aggressive, adding new properties to the company’s portfolio regularly.
They’ve also proven wise, with each project either producing handsomely, or well on its way towards that goal.
And, with $144 million in cash, strong cash from operations, Calibre’s assets have only been increasing and could continue to increase.
Even without Valentine, Calibre has strong production with predictable growth.
Add in the district-scale potential of Valentine, and it’s easy to see why institutions are so taking notice of Calibre Mining (TSX:CXB, OTC:CXBMF).
Whether it’s the overall market driving increased value…
The potential for further discovery in the unexplored 26 km of Valentine Project fault line…
Or institutions adding one of Canada’s best gold mines to its holdings…
Calibre Mining (TSX:CXB, OTC:CXBMF) is one of the most attractive mid-tier producers on the market today.
If you’d like to take advantage of the current gold bull, do your due diligence on Calibre Mining (TSX:CXB, OTC:CXBMF). Click here to get the most up-to-date drilling results and outlook for the company.
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Learn More About Calibre Mining (TSX:CXB, OTC:CXBMF) at your brokerage today!
Learn More About Calibre Mining (TSX:CXB, OTC:CXBMF) at your brokerage today!
1 https://www.equedia.com/calibre-mining-cxb-near-key-break-out-level-on-chart/
2https://mugglehead.com/calibre-minings-q1-23-financials-show-promising-growth-in-gold-mining-sector-bmo/
3https://goldprice.org/
4https://elements.visualcapitalist.com/charted-30-years-of-central-bank-gold-demand/
5https://elements.visualcapitalist.com/charted-30-years-of-central-bank-gold-demand/
6https://elements.visualcapitalist.com/charted-30-years-of-central-bank-gold-demand/
7https://elements.visualcapitalist.com/charted-30-years-of-central-bank-gold-demand/
8https://thenugget.prospectorportal.com/what-is-the-difference-between-resources-and-reserves
9https://www.calibremining.com/news/calibre-continues-to-expand-the-new-high-grade-gol-5048/
10https://www.calibremining.com/news/calibre-continues-to-expand-the-new-high-grade-gol-5048/
11https://www.calibremining.com/news/calibre-continues-to-expand-the-new-high-grade-gol-5048/
12https://investingnews.com/innspired/nevada-largest-gold-producer/
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