Gold, silver, and the GDX gold stock ETF all rallied last week, but until the GDX rallies more few people are going to pay any attention. Gold and silver made a peak last August and began a correction/consolidation phase. I think that’s coming to an end as they both turned up this month, but the precious metals markets need to rally more before the masses will jump in.
That’s creating investment opportunities in ignored stocks. Sonoro Gold (TSXV: SGO), is one I own that is at the top of my list as it’s in a position that few junior mining stocks are in right now as it’s planning on going into gold production within twelve months.
Most pure exploration stocks, without production, reach market caps of roughly $25 million USD in a metals bull market. Sonoro’s is roughly half of that right now. Meanwhile, Sonoro’s CAD $0.18 share price is about half the annualized rate of potential free cash flow of USD $0.34 (CAD $0.41) per share that it can realistically be producing by this time next year using a $1700 gold price. And if gold’s price keeps going up that is a whole other very bullish story.
But this is only the tip of the iceberg as Sonoro’s Cerro Caliche project in Sonora State Mexico, looks set to be a lot bigger than expected. On April 5th Sonoro announced more near-surface high-grade gold results including 15.24 meters (50 feet) averaging 2.039 g/t Au, and multiple narrower high grade intercepts up to 6.729 g/t Au along with an exceptionally long intercept of 74.67 meters (250 feet) of 0.605 g/t Au – well in the ball park for building a big gold inventory for future low cost bulk mining and heap leach gold production. It is important to keep in mind that the gold deposit Sonoro is developing begins on surface, meaning mining costs are close to the ultra-low operating costs of a gravel pit. As an example miners with similar operations in the area are making record profits with average grades of 0.3 g/t Au.
One of the key takeaway’s from the news release is that the more they drill, the more evident it is becoming that the multiple gold zones mapped on the property’s surface covering over 5 square miles, are in fact linked together to form a few very large gold deposits. The latest example of this is at the Japoneses zone where drilling recently showed that it actually continues uninterrupted to another gold zone called the Buena Vista. At the same time drilling at the Buena Suerte continues to increase its size in all directions, but most significantly the expansion of its western flank has brought it within roughly 300 feet of the Buena Vista-Japoneses. It seems only a matter of time before this gap is closed too; as on surface within the gap there are multiple outcropping quartz veins of the same kind that are seen at the Buena Suerte and Buena Vista and Japoneses. These veins are the original conduits for the gold saturated fluids which deposited the gold which is now found in abundance within the Cerro Caliche’s 17 gold zones.
The significance of this cannot be overstated. As these zones merge, what engineers once calculated as waste rock that cost money to remove, should be converted into high value payable gold containing rock which adds to the mine development’s size and the cash flow it can generate. In mining terms this results in reduced stripping ratios and as it occurs we should anticipate additional material increases in the Cerro Caliche gold resources and the operation’s size. And material increases are what Sonoro Management is in fact forecasting.
At the same time Sonoro is, at least for now, relatively unknown to investors, which explains its bargain price despite the fast that it is a low risk multi-year development and growth story run by some of the industries most storied executives. Sonoro appears only months away from beginning construction of a heap leach mining operation (HLMO) at what is rapidly growing into a major gold deposit at its Cerro Caliche project in Sonora State, Mexico where it expects to begin producing gold as a late this year or in early 2022.
Disclosure: Mike Swanson owns shares of Sonoro Gold Corp. 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 was compensated by a third party (Leadgopher LLC DBA Pinnacle Ad Network) to conduct an investor awareness advertising and marketing campaign for Sonoro Gold Corp. This third party paid Timingwallstreet Inc., $10,000 to produce and disseminate similar articles as this one and send traffic to them through paid advertising campaigns for 30-days from the date of this post (1/04/2020). 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.