Last week, Sonoro Gold announced a private placement offering for investors. The placement will be used to fund a 10,000-meter drilling campaign, commencing this month, at the Company’s Cerro Caliche Gold Project in Sonora, Mexico. I last made Sonoro Gold my “top stock pick for the month” in July, because the best small cap mining stocks tend to go up more than the big cap mining stocks during bull runs in the metals markets. However, private placement offerings can provide the best way for accredited investors to invest in small cap companies, because most of them have attached to them a warrant, which is a long-term option, usually lasting for several years, to buy more shares at a higher price. In other words buying a placement gives investors what is essentially a free long-term option. If the price goes up the investment gains can be compounded up.
This time of year, though, there are very few mining companies doing placement offerings. For one thing, the price of gold stabilized in October, so a lot of companies are probably thinking they’ll just wait for gold prices to rise and take their own shares price up with it before doing any financings. Secondly, at this time of year, from now to the end of the year, there is just typically less activity going on in the financing world in the holiday season. Thanksgiving week typically sees less trading volume than any other week in the US stock market and December also tends to see less volume too.
The Sonoro offering is for 20,000 shares at a price of 18 cents CAD per share. With each share is a two year warrant to buy another share at 30 cents CAD. SGO spent over two months trading over 30 cents a share this summer. As you can see from this slide from a recent company presentation, the stock does good trading volume and 18 cents appears to be a support area for it.
You can find this entire company presentation here:
Sonoro is a pre-production gold company. In October it filed an updated PEA report for its flagship Caliche Gold Project on Sedar. It summarized in a press release the following:
“Pre-Tax NPV (5% discount rate) of US$68.7 million and an IRR of 52.7% with a price of US$1,750 per ounce of gold and US$22.00 per ounce of silver.
After-Tax NPV (5% discount rate) of US$41.5 million with an IRR of 32.4% with a price of US$1,750 per ounce of gold and US$22.00 per ounce of silver.
7 years Life of Mine (“LOM”) producing 323,500 ounces (“oz”) of gold equivalent (“AuEq”)
Gold recovery of 74% and silver recovery of 27% produced from a 3-stage crushing circuit, crushing the ore to p80 of ½”.
LOM annual average production of 45,700 oz AuEq.
Years 1 to 3 annual production of 56,500 oz AuEq with average grade of 0.51 g/t AuEq.
Initial CAPEX costs of US$32.2 million, including US$3.8 million in contingency.
Sustaining capital costs of US$4.8 million.
OPEX costs of US$1,227/oz AuEq.
All-In Sustaining Cost (“AISC”) of US$1,351/oz AuEq.
Payback period of 2.2 years.
Updated Mineral Resource Estimate Highlights at 0.207 g/t Au Cut-off:
Measured and Indicated Mineral Resources of 349,000 ounces of gold at a 0.41 g/t Au grade.
Updated Inferred Mineral Resources of 71,000 ounces of gold at 0.40 g/t Au grade.
Also noted in Micon’s report, a range of the potential mineralization that may conceptually exist outside of the resource pit shells has been included in the report. Utilizing the same 0.207 g/t Au cut-off grade as the current resource estimate, the range of the potential mineralization is believed to be from 19,250,000 to 34,370,000 tonnes containing:
204,000 to 365,000 ounces of gold.
1,683,000 to 3,005,000 ounces of silver.
The reader is cautioned that the potential mineralization ranges are conceptual in nature and that despite being based on a limited amount of exploration drilling and sampling outside the current resource pit shells, it is uncertain that further exploration will result in the mineralization targets being delineated as a mineral resource.
The PEA is preliminary in nature and includes inferred resources that are considered too speculative to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and there is no certainty the estimates presented in the PEA will be realized.”
From a production standpoint the key figures for me are the “initial CAPEX costs of US$32.2 million, including US$3.8 million in contingency” and “sustaining capital costs of US$4.8 million” with a “Pre-Tax NPV (5% discount rate) of US$68.7 million and an IRR of 52.7% with a price of US$1,750 per ounce of gold and US$22.00 per ounce of silver.” In other words with a gold price of $1,750 the company can double its investment on this property if it is put into production. Further drilling is being initiated to make those numbers even more favorable to increase the value of this property to make it more attractive for investors or even other companies to offer proposals for it. Drill programs can also provide positive news flow to a stock and attract further buyers.
I think that all makes the timing of this placement offering compelling. If you are interested in it, getting the forms, or finding out more just contact David Skarica at email@example.com.
Disclosure: Mike Swanson is the head editor of this website and owns Timingwallstreet, Inc. Because Sonoro Gold. is a small cap stock with a market cap of less than $100 million USD he has put himself on a trading blackout on Sonoro Gold and will not buy or sell a share of its stock for at least 30-days from the date of this post (11/22/2021). 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 in July. This third party paid Timingwallstreet Inc., $12,000 USD to produce and disseminate similar articles as this one and to send traffic to them through paid advertising campaigns for Sonoro Gold during the month of July. Tmingwallstreet, Inc. also did a similar campaign in January of 2021 for Sonoro Gold. 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.