We have been hitting big trades in junior mining and small cap exploration stocks so far this year. The fact that gold and silver had been consolidating now for months on end, since July of last year, has taken a lot of people’s eye off of this small cap space and that has created opportunities for us to invest in true value plays.
If you have been following my work you saw the type of gains this can lead to in the action in Pacific Ridge Exploration last month as it went up almost 80% in four weeks to close out the month at an all time high. Now I want to tell you about another stock today that from a fundamental perspective is in an even better position!
I’m talking about Xtra-Gold Resources Corp. (“Xtra-Gold”), which trades on the Toronto stock exchange as XTG and on the US OTC market as XTGRF. This is an advanced stage exploration stock that not only has enough money in the bank to fund its coming drill programs for its properties, but is actually already making money.
In fact, this company has not had to raise any money from the markets for over ten years. That has kept its trading float small and helped it create an army of strong shareholders for itself. The company has the rights to drill and mine gold on a package of properties covering five mining leases of 55,094 acres in the Kibi Greenstone Belt in Ghana. With a GDP of over $66 billion Ghana, has a legal system based on British common wealth law and a democratic government, making it ranked as one of the most politically stable countries in Africa by independent geopolitical experts.
Ghana has been a central mining location for large mining companies for decades, with over 150 million ounces of gold discovered and an annual production of 4.5 million ounces, it is the largest gold producing country in Africa. Newmont, AngloGold Ashanti and Kinross Gold all operate there.
Xtra-Gold has zero debt and revealed in its 2020 annual audited financials that it has over nine million in assets and generated a net income of $1,862,249 from gold sales last year. These sales have been generated through contracted alluvial gold mining (“contract mining”) over the last 7 years, generating gold sales/cash flow of approximately US $5 mil. per year.
Here is the CEO of Xtra-Gold with some of the beautiful bars the company sold.
It is hard not to exaggerate the importance of what gold sales like this mean for a small exploration company. It means they do not have to keep raising money from the market by selling more stock and causing more share dilution. It’s a tightly traded stock and is going to remain that way. It’s why I think it can do great on the next gold rally and why now is the time for an investment opportunity in it, while gold is still below $1800 and the masses are not paying attention.
Here is the stock chart. As you can see the stock has been consolidating since roughly July much the price of gold has been going sideways since then.
When gold rallied last year from March to July Xtra-Gold stock more than tripled. Gold rallies create multiplier runs in the top small cap mining stocks. Buying this stock close to $1.00 is a steal.
Xtra-Gold announced its “Maiden Discovery in August 2012 of 278,000 oz’s of gold in Indicated category (3.38 mil. tonnes grading 2.56 g/t) and an additional 147,000 oz of gold in Inferred category (2.35 mil. tonnes grading 1.94 g/t). The resource is open ended, with potential to add significantly by doing additional follow up drilling.”
“Over the last several years, the Exploration Team has identified over 6 newdrill targets through grass roots exploration. All of these drill targets have the potential to add significantly to our Maiden Discovery, and are drill ready.”
Xtra-Gold owns its diamond drill rigs which has reduced its drilling costs by roughly 80%,and will expedite the expansion of the resource. It’s two rigs are currently drilling in Zone 3 of the Kibi Gold Project to show significant expansion potential of Maiden Discovery.
They are looking to increase its resource estimate to over one million ounces of gold and go from there. Here is a slide from their corporate presentation to give you an idea of what part of their work area looks like.
There is a lot of potential here. Consider this. On the average a premium gold asset should get approximately 10% the value of gold in the ground. For example, if gold is trading at US$1,500, and an exploration company can prove up 2 mil. ounces the fair value on take-out price should be US $300 mil. Xtra-Gold has less than 50 mil. shares outstanding so that equates to US$6 per shares. If gold moves to the US$2,000 plus level than fair take-out at 2 mil. oz resource, would be US$8.
Currently, Xtra-Gold Resources is on track to grow the resource to 1 mil. oz soon. If this new zone they are drilling holds to depth they should be ready to surpass the 1 mil. oz in the next 90 to 120 days. The longer term goal for them would be to then grow the resource to 2 mil. over the next 18 to 24 months.
Four of the top five public gold trading companies are operating in Ghana: Newmont Mining, Anglo-Ashanti, Goldfield’s and Kinross. All four of these majors have depleted their reserves over the last 10 years plus in Ghana, and none of them invested much is grassroots exploration. Hence, if Xtra-Gold hits a major discovery, getting a potential bidding war among these companies is a high probability.
Look, nothing is guaranteed, but small cap stock investing is about getting in something big early. That’s why you buy a dozen or so and look for a few to pay off huge, some to go up, and the rest to be so-so. The tough part though is that you can get in winning company and still not do well in the stock overtime, because most small cap stocks get diluted. That’s the story of the so-so stocks. That is not going to be the case with Xtra-Gold and why it is my top small cap stock pick for this month. There is no brainier buy for me right now. Go XTG! Go XTGRF!
-Mike Swanson
Disclosure: Mike Swanson owns shares of Xtra-Gold. Because Xtra-Gold 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 (05/02/2021). 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 Xtra-Gold Resources. This third party paid Timingwallstreet Inc., $12,000 to produce and disseminate this and other similar articles and send traffic to them through paid advertising campaigns for 30-days from the date of this post (5/02/2021). 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.
