We’ve seen gold, silver, and the GDX mining stock ETF continue to consolidate this week as all three bounced off of their 50-day moving averages early in this week to come back down to them yesterday and then rally today before the opening bell. This type of sideways consolidation happens periodically during primary bull market trends and can last a few weeks up to a few months, but we are now getting closer to the end of this one.
This has been an interesting month for gold. We saw big news that Warren Buffett took a stake in Barrick Gold early this month to make it the only single stock that his Berkshire Hathaway company bought in the past quarter.
Now I own GDX and Barrick, but I also take positions in small cap mining stocks where successful speculations can lead to a bonanza. This has so far been the story for my top stock pick for August Inca One Gold. It trades on the US OTC as INCAF and on the Vancouver stock exchange under the symbol IO. Take a look at the chart.
Inca One shares gapped up on the first trading day of the month and have gone up more than 65% since then. They just touched a new high Thursday. This is a big rally and most likely the stock will end up consolidating in a range for a few weeks. The company operates a milling facility in Peru to produce gold and announced earlier this month that it exported 3,919 ounces of gold for $6.7 US million in the last quarter. If you multiply that by 4 you get over $24 US million in revenue. The stock is only trading with a market cap of $19.29 million USD. It is trading at a P/S ratio of less than 0.50. It has generated over $100 million revenue in the past five years and produced 25,000 ounces of gold last year.
I see this as still an undervalued stock. But I am not the only one. The folks at Fundamental Research Corp. put out a comprehensive twenty page analyst report on the stock dated August 19, 2020. They are giving it a “fair value” price of $1.44 a share. You can find this report on their website by clicking here.
The company also announced a debt restructuring with Equinox Gold to push its payments dates way out into the future. You can find the details in the press release issued by Inca One Gold. CEO Ed Kelly stated, “Equinox has been very supportive of our growth strategy. Agreeing to restructure this Note is evidence of their flexibility and belief in our business model allowing Inca One to keep sufficient levels of working capital as required in our space while maintaining their maximum level of ownership in the Company.”
Inca One Gold is fully funded with a nice revenue stream. Everything is a go with it – imho!
Gold, silver, and the mining stocks have all vastly been outperforming the stock market so far year to date even though they have been going through a pullback/consolidation since the end of July. That lull has made many take their eyes off of them, but I gave an overview of what I believe is happening with Jim Goddard of www.howestreet.com a few days ago in case you missed it.
-Mike
Disclosure: Mike Swanson owns shares of Inca One Mining. Because it is a small cap stock with a market cap of less than $100 million he has put himself in a trading blackout on the stock and will not buy or sell a share of it for at least 30-days from the date of this post. Wallstreetwindow.com, is owned by Timingwallstreet, Inc., which is being compensated by a third party (Leadgopher LLC DBA Pinnacle Ad Network) to conduct an investor awareness advertising and marketing campaign for Inca One Mining. This third party paid Timingwallstreet Inc., $5,000 to produce and disseminate this and other similar articles and send traffic to them through paid advertising campaigns. This compensation should be viewed as a major conflict with our ability to be unbiased, more specifically: This communication is for entertainment purposes only. Never invest purely based on our communication. For more on trading risks read our policy statement by clicking here.
