If it looks like a bull market (technical breakout in gold), smells like a bull market (significant negative yielding debt) and feels like a bull market (funds flowing into gold), it must be a bull market. Our analysis shows that equities in smaller sized companies outperform during a bull market. However, not all junior miners are created equal, and we believe there are three keys to picking them.
Sailfish Royalty Corp.
Sailfish Royalty Corp. is a precious metals royalty and streaming company. Within Sailfish’s portfolio are two cornerstone assets on advanced stage projects in the Americas: a 3.5% NSR on the Tocantinzinho gold project in the prolific Tapajos district of northern Brazil; and a gold stream equivalent to a 3% NSR on the San Albino gold project (~3.5 sq. km) and a 2% NSR on the rest of the 138 sq. km area surrounding San Albino in northern Nicaragua. Sailfish intends to aggressively grow its portfolio and become a yield-focused company by paying dividends to its shareholders.
Sailfish Royalty Corp. has announced the completion of the all-share acquisition of Terraco Gold (TSXV:TEN) at an implied value of C$17.8M. This adds another royalty in a top-tier jurisdiction to the portfolio. Our preliminary view of valuation implies that Sailfish is undervalued, and we expect that as San Albino approaches production, the company should re-rate.
Mako Mining Corp (TSXV:MKO) & Sailfish Royalty Corp (TSXV:FISH) – One Project Poised to Re-Rate Two Companies
Our view is that the San Albino project is poised to re-rate both the operator, Mako Mining (TSXV:MKO) and the royalty holder, Sailfish Royalty (TSXV:FISH), when it comes online next year. We recently had the opportunity to visit Mako Mining’s San Albino project in Nicaragua where construction is underway. Additionally, the company has ramped up exploration on what we believe is a prospective land package and our visit combined with recent results suggests to us that this resource is likely to grow materially. Our preliminary view of valuation implies that both Mako and Sailfish are undervalued, and we expect that as San Albino approaches production, both stocks should re-rate.