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How to Play the Gold Pullback (NYSEAmerican: NGD) (OTC US: GOLHF) (NYSE: GOLD)

By: OTC

2020 has been a banner year for many markets. For most of the year, gold was the unchallenged big winner. But, in recent weeks, the yellow metal has experienced a sharp pullback bringing it back into an attractive zone that could provide a nice entry for investors seeking exposure ahead of an anticipated jump in inflation.

The jump in inflation expectations can be seen directly in BofA’s latest Fund Manager Survey, which showed an all-time high in FMS investors expecting a steeper yield curve (73%) – a factor directly related to inflation expectations. It’s not hard to imagine why: over the course of the year in 2020, we have seen over $22 trillion in global fiscal and monetary stimulus, and now we have clear sights set on a viable vaccine solution.

That’s a powerful context for inflation, especially because policymakers are unlikely to be quick on the trigger in terms of taking away the punchbowl once we start to see a jump in economic activity and inflation rates start ticking higher.

In fact, according to information from the US Federal Reserve in September, the Fed has adopted a new paradigm that benchmarks according to what is known as “Average Inflation Targeting”, which boils down to a moved goal post for policy mandates, allowing the Fed to stay at maximum accommodation even long after the data shows a return of inflation above its target level.

With all of this in mind, we take a look at some of the most interesting names in the gold miner space, including: New Gold Inc. (NYSEAmerican:NGD), Delta Resources Ltd (OTC US:GOLHF), and Barrick Gold Corp (NYSE:GOLD).

 

New Gold Inc. (NYSEAmerican: NGD) frames itself as an intermediate gold mining company that engages in the development and operation of mineral properties. It explores for gold, silver, and copper deposits.

The company’s principal operating properties include 100% interests in the Rainy River gold-silver mine located in Ontario, Canada; and New Afton gold-copper mine located in British Columbia, Canada. It also holds 100% interests in the Blackwater gold-silver project located in British Columbia, Canada; and operates the Cerro San Pedro gold-silver mine in Mexico.

New Gold Inc. (NYSEAmerican: NGD) recently reported its Q3 results, including total production of 115,536 gold equivalent (gold eq.) ounces (78,959 ounces of gold, 171,825 ounces of silver, and 18.2 million pounds of copper), which puts it on track to achieve to meet revised production guidance estimates.

“We are very pleased with the results from the Rainy River Mine as the operations met, or exceeded, target levels. Supported by the strong operational performance delivered in the quarter and with all deferred site construction capital substantially complete, the operation is well positioned to deliver on its life of mine plan that includes strong production growth at lower costs along with a significant and corresponding reduction in capital requirements.” stated Renaud Adams, CEO. “Our improved operational performance has allowed New Gold to complete key corporate transactions during the year that supported the restructuring of our balance sheet and strengthened our liquidity position. As we enter the final quarter of the year, we will continue to build on the progress made during the year as we position the Company for the future and deliver free cash flow generation beginning in 2021.”

And the stock has been acting well over recent days, up something like 2% in that time. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -8%.

New Gold Inc. (NYSEAmerican: NGD) pulled in sales of $231.6M in its last reported quarterly financials, representing top line growth of 3.1%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($556.2M against $251.8M).

 

Delta Resources Ltd (OTC US: GOLHF) bills itself as a new Canadian mineral exploration company born at the end of June 2019.  The Company is focused on growing shareholder value through the acquisition of high-potential gold and base-metal projects in Canada, exploring these projects with state-of-the-art methods, and potentially developing these projects into mines.

Delta is currently focused on exploring its high-potential Delta-1 (Eureka) and Delta-2 projects respectively in the Thunder Bay area of Ontario and in the Chibougamau Mining Camp of Quebec while evaluating other projects in Canada deemed to have a strong potential for new discoveries.

Delta owns a 100% interest in the Bellechasse-Timmins gold property and deposits located in the Beauce Region of Southeastern Quebec, Canada. The Bellechasse-Timmins deposit contains a 43-101 compliant gold resource of 171,000 ounces at an average grade of 1.83 g/t gold in the indicated category and an additional 95,000 ounces at an average grade of 1.36 g/t gold in the inferred category. On July 3rd, 2020, Delta announced the sale of the Bellechasse-Timmins project to Yorkton Ventures Inc. for $1.7M payable over a period of 15 months following signing. The non-dilutive influx of capital will be directed on advancing the Delta-1 and Delta-2 projects.

Delta Resources Ltd (OTC US: GOLHF) most recently announced the beginning of a 5,000 metre drilling program at its Delta-2 Property in Chibougamau, Quebec. Drilling contractor Miikan Drilling Limited of Chibougamau, Quebec mobilized on Sunday and started drilling at the Snowfall Gold occurrence.

According to the release, Delta will be drill-testing six new gold-rich polymetallic targets in the southern portion of the Delta-2 property, including the Snowfall Gold-Silver-Copper area. This initial phase of drilling will consist of a minimum of 12 drill holes for a total of at least 2,000 metres.

And the stock has been acting well over recent days, up something like 37% in that time. Shares of the stock have powered higher over the past month, rallying roughly 32% in that time on strong overall action.

Delta Resources Ltd (OTC US: GOLHF) had no reported sales in its last quarterly financial data. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($1.7M against $303K).

 

Barrick Gold Corp (NYSE: GOLD) engages in the exploration, mine development, production, and sale of gold and copper properties. It has ownership interests in producing gold mines that are located in Argentina, Canada, Ivory Coast, the Democratic Republic of Congo, Dominican Republic, Mali, Papua New Guinea, Tanzania, and the United States.

The company also has ownership interests in producing copper mines located in Chile, Saudi Arabia, and Zambia; and various other projects located throughout the Americas and Africa.

Barrick Gold Corp (NYSE: GOLD) recently announced it has completed its transaction pursuant to which Skeena Resources Ltd. exercised its option to acquire the Eskay Creek project and Barrick waived its back-in right on the Eskay Creek project.

As previously announced, consideration for the transaction consists of: (i) the issuance by Skeena of 22,500,000 units, with each Unit comprising one common share of Skeena and one half of a warrant, with each whole warrant entitling Barrick to purchase one additional common share of Skeena at an exercise price of C$2.70 each until the second anniversary of the closing date; (ii) the grant of a 1% NSR royalty on the entire Eskay Creek land package; and (iii) a contingent payment of C$15 million payable during a 24-month period after closing.

The stock has suffered a bit of late, with shares of GOLD taking a hit in recent action, down about -5% over the past week.

Barrick Gold Corp (NYSE: GOLD) managed to rope in revenues totaling $4.7B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 31.8%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($6.3B against $2.3B).

 

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