Zonte Interview, SALT, Nat Gas breaks out, BIR, Gold&Gold stocks
Struthers Report V29 # 9.7
I have a version of my short Moderna on Seeking Alpha here. I also did an interview with Terry Christopher of Zonte Metals that you can find on Youtube here. We went through the K6 target and how Zonte has advanced the target to drill ready stage.
Highlights:
Explains geological methods and how they relate;
K6 is about drill ready, Terry lining up drillers;
K6 is large but actually one of the smaller targets, project wide;
The one K6 drill hole (2019) had the highest alteration on the project;
Previous drilling focused on Mag and Gravity highs but best copper has now been confirmed outside this drilling;
I encourage you to watch the whole video ( 18 minutes). I think you will find it educational and very good insight on actual exploration methods and the time and effort involved.
The stock rebounded quite a bit since my last update and I believe the main reason is a seller in the market finished selling. There is resistance between 12 and 13 cents, so I would try bids around 12 cents and lower, sounds like we have a 2 to 4 weeks before drilling starts.
Atlas Salt - - - - TSXV:SALT - - - - - Recent Price - $1.35
Entry Price – 0.80 - - - - - Opinion – hold, buy on break out above $1.60
Atlas Salt has appointed Rick LaBelle as CEO and director. Mr. LaBelle brings a stellar record of operational expertise and private equity success to the CEO position for Atlas Salt, at a pivotal moment in the company's history. There is a new video interview with the CEO out today.
Mr. LaBelle highlights from news release:
40 years of experience in the mining sector (private equity and public markets), including 27 at the executive leadership level;
Has delivered over $5-billion in mining consumables and services sales, coupled with value creation through a series of game changing M&A (merger and acquisition) transactions, by effectively executing key strategic initiatives;
Has partnered with the world's leading private equity firms, and originated, negotiated and transformed some of the largest M&A deals in mine services, drilling services, commercial explosives, mining consumables and ground control/support;
Most recently was president and CEO of Dumas Mining from 2017 until his retirement in 2022. Mr. LaBelle was the leader who created the platform and the step change for Dumas's turnaround and subsequent sale to private equity. It is currently one of the largest and most respected underground mine builders in the world;
CEO of Norcast Wear Solutions (2009 to 2012), which was the world's leading mill line producer, taken private for $87-million (U.S.) and sold within a three-year period under Mr. LaBelle's leadership for $190-million (U.S.);
Significant owner of Boart Longyear and group general manager of drilling services for Canadian and international business units (held by Anglo American until 2005), where he was responsible for the management of operations, including the acquisition and integration of several companies in Canada, Brazil, Central America, Russia and Africa.
Mr. LaBelle commented: "I'm delighted to join Atlas Salt. It's a privilege and a rare opportunity in the mining sector to be involved with such a top tier asset as Great Atlantic with the potential to produce profitability for generations, creating a legacy of accomplishment. I'm quickly going to assemble a world class team to advance this tier 1 asset, which will very soon be anchored by an independent Feasibility Study. I have a record of unlocking shareholder value, a key part of my strategy with Atlas Salt."
There has been no rebound in the junior markets and the TSXV actually dropped in August so far, but we are seeing some of our juniors bounce up some. It looks to me that some of the better ones have put in their bottom like Zonte above and you see on this chart of SALT below. SALT bottomed around $1.00 and has a rising trend of higher lows (blue line). First resistance is around $1.60 and a break above that would be very positive. I would buy on a pull back to around $1.30 or a close above the $1.60 resistance.
Oil has been trading above $82 and now Natural Gas has broke to the upside last week. It has come back down some, but I believe the bottom is in and you can see the slight uptrend from the June bottom.
My favourite Canadian Nat Gas play, Birchcliff reported earnings last Thursday.
Birchcliff Energy - - - - - TSXV:BIR- - - - - - - - - Recent Price - $8.25
Entry Price - $8.65 - - - - - - - - Opinion - buy
The board of directors has declared a quarterly cash dividend of 20 cents per common share for the quarter ending Sept. 30, 2023. At current prices the dividend yield is a strong 9.6%.
"In Q2 2023, we generated adjusted funds flow of $69.7-million and free funds flow of $4.9-million, with average production of 77,510 boe/d. In addition, we returned an aggregate of $63.5-million to shareholders in Q2 2023 through our base common share dividend and common share repurchases," commented Jeff Tonken, chief executive officer of Birchcliff.
"We are maintaining our production guidance at 77,000 to 80,000 boe/d for 2023 despite a significant outage on a third party NGLs pipeline that persisted into May. We are also maintaining our F&D capital expenditures guidance of $270-million to $280-million, which includes capital spent in the Elmworth area to provide Birchcliff with optionality for future growth beyond our assets in Pouce Coupe and Gordondale. We anticipate strong production performance for the remainder of 2023, which we expect will result in more than $100-million of free funds flow in the second half of the year."
It looks to me that BIR is through the trough with the low prices and lower earnings and cash flow and has covered their dividend. They expect much stronger free cash flow in 2nd half of 2023. If we get the rebound in energy prices that I am expecting, the stock is going to continue it's up trend. The stock broke 1st resistance around $8.30 and is holding above. In blue I circle two morning doji start reversal patterns around $7.50 so we have a pretty solid bottom in the stock. Chart from last Friday, not much change.
My comments here and chart on gold is from last Friday and it is going lower this week, as I expected it might. “ I am expecting a market correction September/October and maybe it has already started from a July top in equity markets. It looks like the energy market is playing out as I expected and predicted, but the jury might be still out on gold. I called a July 4th bottom and reversal in gold. That is still holding and being tested now. My concern is short term, if inflation moves higher next month and perceived interest rates may go higher, it may be negative for gold. And if we get a steep abrupt market sell off, sometimes gold gets sold off to cover margin calls. It does it's job as a hedge.”
“We could see gold move down to it's next support around $1890 that is a much stronger support level. Gold has been in a bull market since the 2015 low just below $1100. It almost hit bear status with the October 2022 low that was -18.5% below the July 2020 high, based on a weekly chart. After a +23% bull move that peaked this May, gold has only dropped -8% and if it hits my next lower target, it is only a -11% correction. This is normal market correction trading.”
The bigger frustration for investors is that the gold stocks have performed much, much more poorly than gold. This is rare, but it is what it is. The HUI gold bugs index peaked in 2020 around 360 and hit bear status in early 2021, then dropped further that year to about 225, which was a -38% decline. There was a good rally to 335 in 2022 but then a drop to the September low around 175 which comes to an approx. -51% decline from the 2020 top, far worse than how gold has traded. The current bull cycle hit a high of 285 so up about +57% from last September. Since the May 2023 peak we have dropped -21% so barely back in bear territory. I think we could see a bit lower low this fall before the next leg up. And I believe that this leg up will be the big one.
Refer to this HUI Gold Bugs Index chart. The HUI dropped a bit further yesterday (Tuesday Aug 15) to around 218.
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