Today all the major stock markets were down almost two percent but are clawing back as I write this. Meta fell 15% on a poor forward outlook and investors are awaiting Microsoft (MSFT) after the close.
Gold was up $4.30 to $2,342 an ounce.
Unsurprisingly some readers have asked me to update an article that was first produced by Outsider Club back in 2022 entitled, “The Highest-Grade Gold Mines in the World”.
Here is what Luke Burgess wrote at the time:
“When a mining company talks about ore grades, it is usually referring to the concentration of minerals contained within the rock. For gold, grades are typically reported to the public in grams per tonne (g/t).
A gold grade of five g/t simply means there are about five grams of gold contained within every ton of rock.
Gold mining companies use grades in various ways, from determining where to explore next to feasibility. But among the most important of a gold mining company’s grades are known as the “mill-head” and “recovery” ore grades.
Mill-head grade refers to the concentration of metal within ore as it goes to the mill for processing. And recovery grades measure the actual gold content of ore after processing. Both generally reflect the quality of the material processed.
As mentioned, gold grades are critical in determining the economic feasibility of mine operations. Mines with higher-grade ore tend to produce more gold at lower costs than mines with lower-grade ore.
And that’s simply because lower-grade mines have to process more material, resulting in higher costs.
For example, a mine producing gold from ore that grades two g/t needs to process 15.5 tonnes of material to produce one troy ounce.
One producing gold from ore that grades four g/t, on the other hand, needs to process half that (7.7 tonnes) to produce the same one-troy ounce of metal.
According to the World Gold Council, most of the world’s gold mines operate with grades in the one g/t to four g/t range. These are generally considered to be low-grade mines.
A high-grade mine is typically one that operates with recovery grades between eight g/t and 10 g/t.
High-grade gold mines are relatively rare. But there are a handful of commercial mines in the world that operate over 10 g/t. These are typically very small mines that are part of a much larger complex.
One of the best high-grade gold mines on our list is located in Ontario, Canada. The Island Gold Mine is owned and operated by Canadian miner Alamos Gold (NYSE: AGI) and has an inferred rate of 13.61 g/t.
As you can tell from this chart AGI has been in an uptrend and just hit a five-year high. If you bought when Outsider Club first wrote about it you’d be 102%. And it looks like it is going higher from here.
The company just reported earnings yesterday. Here are the highlights:
- Produced 135,700 ounces of gold, a 6% increase yoy.
- Sold 132,849 ounces of gold at an average realized price of $2,069 per ounce, generating record quarterly revenue of $277.6 million, a 10% increase from the first quarter of 2023.
- Total costs were $910 per ounce.
- Cash flow from operating activities of $108.9 million.
- Realized adjusted net earnings for the first quarter of $51.2 million, or $0.13 per share.
- Cash and cash equivalents increased 7% from the end of 2023 to $240.2 million, with no debt and $16.3 million in equity securities.
- Paid dividends of $9.8 million, or $0.025 per share for the quarter.
The company has a forward p/e of 27 and trades at two times book value. The Bank of Canada just put a price target at C$27 which is 35% higher than the C$20 (AGI.TO) price it trades at in Canada.
Junior gold miners are starting to pick up interest after many years in the wilderness. If you want to be in the sector I’d suggest you buy several junior miners with the first one being Alamos Gold Inc (AGI: NYSE).
These stocks are volatile, the rewards can be terrific but don’t bet the house.
All the best,
Christian DeHaemer
Outsider Club
