In the past few months, investment banks have updated year end views on gold (“Au”) to US$4,500-$5,100/oz vs. the current price of ~$4,380. For example, Goldman Sachs reaffirmed a $4,900 year-end target on Aug 28, citing ~50 tonnes/month of central-bank buying.
Wells Fargo trimmed its target range to $4,900–$5,100, while Citigroup lifted its 6–12-month target to $5,000. Although not base cases, JP Morgan and a few others have bull case scenarios of $5,500-$6,000.
Au hit an all-time-high just shy of $5,600 in late January, then pulled back to the upper $3,900s in July. There appears to be meaningful support around $4,000, a price few dreamed possible 2-3 years ago (Au averaged $2,166/oz from 1/1/23 to 12/31/24)…
Producers are meaningfully stepping up the pace of strategic investments into juniors. Combined, Agnico, Barrick, and Newmont have made nearly two dozen investments into attractive projects in the past few years.
Others staking claims in promising projects and/or companies include; Freeport McMoRan, BHP, Rio Tinto, AngloGold Ashanti, Centerra Gold, Gold Fields, Teck Resources, Kinross Gold, Lundin Mining, B2Gold, South32, Pan American Silver, First Quantum, Fortescue Ltd., OceanaGold, and Evolution Mining.
The following table shows examples of M&A in the past year. While these deals are mostly in the C$ billions, a tsunami of small-to-midsize transactions is increasingly likely going forward. Juniors with market caps in the C$100s of millions will attract a lot of attention.
Strikepoint Gold (TSX-v: SKP) / (OTC: STKXF) is graduating from micro-cap to small cap with a truly ambitious acquisition of a meaningful Au project in Nevada, USA. Last month StrikePoint agreed to buy Newmont’s Northumberland for upfront consideration of US$70M (~C$97M), plus two contingent US$25M (~C$35M) payments.
Kinross, AngloGold Ashanti & Centerra surround Strikepoint…
One payment would be after delivery of a Feasibility Study, (probably not before 2029-30) the other after commercial production has begun. Some investors no doubt fear management is biting off more than it can chew.
One of the biggest risk factors is raising the C$97M due to Newmont, a huge sum compared to Strikepoint’s current market cap. However, a Canaccord-led bought deal financing was announced, and soon after upsized due to strong investor demand. Gross proceeds raised could be up to C$190m.
Northumberland hosts a meaningful 2.86M Au Eq. ounces in the Indicated category + 1.57M Inferred. Using the full US$120M (~C$167M) potential acquisition cost, the Company’s paying ~C$38/oz, quite attractive for Nevada assets. Compare that figure to peer Nevada-focused juniors at pre-PEA and PEA stages.
Look at peers, Northumberland stands out as a brownfield, past-producing site on substantial private/fee land, which could potentially shorten surface-access and permitting friction versus claim-heavy green field projects.
It already has pits, pads, ponds, roads, and a decline, among other infrastructure assets. The scale is larger than the peer average, (+111%). And, there’s dual oxide-plus-sulfide optionality here.
In addition to double the resource size, upon the deal closing, Strikepoint’s Northumberland would have an +81% higher Au Eq. grade, yet the Company is valued at a 62% discount on an EV/Au Eq. ounce basis. The Project’s resource is 65% Indicated vs. ~29% Indicated for peers (three have 0% Indicated).
I tracked down CEO Mike Allen to ask him some questions about the Northumberland transaction. It’s certainly a game-changer, can his team pull it off?
Please describe the proposed Northumberland Gold Project transaction. In what ways is this seemingly large price tag (relative to initial company size) structured in such a way as to be financially manageable and operationally flexible?
It’s a relatively simple transaction, an acquisition with an associated financing. Granted, it’s a very large acquisition & financing relative to our size. The initial payment to Newmont is ~C$97M, which will be paid out of a bought deal financing.
There are two milestone payments of ~C$35M each, one due 120 days after delivery of a full Feasibility Study, the other 120 days post commercial production. So, several years away, and a few years between the two.
One of the biggest risk factors is raising the cash to close the deal and fund exploration & development expenses + working capital for the next year or two. Our bought deal financing, assuming it closes reasonably as planned, addresses that significant risk.
After a 10-for-1 rollback and C$2.00/share financing, what will StrikePoint’s fully diluted share count, pro forma cash (incl. assumed exercise of all pro forma options/warrants), and pro forma enterprise value be?
Post roll back, there will be 6.24M shares of SKP outstanding. With the sidecar and assuming a full upsize of the bought deal to C$190M, there would be ~102.24M shares with a modest number of options & warrants. Estimated EV (market cap – cash) would be ~C$112M (after C$97M payment to Newmont).
Is Strikepoint buying Northumberland for its current multi-million ounce resource or for its exploration potential to get even bigger?
Both. The Northumberland transaction puts a multi-million ounce resource, 65% of which are Indicated into StrikePoint. It’s a significant change in the company going from a junior explorer, to a company thinking about potential development scenarios.
However, Northumberland has substantial exploration upside potential. For reference, a resource was done on the project in ~2010 that used $895/oz Au. The 2026 pit constrained resource estimate used $3,500/oz.
This allows lower-grade mineralization to be included, giving larger more continuous resource. In addition, the edges of the deposit, where grades were marginal in 2010, are now wide open using current prices.
Importantly, there are exploration opportunities that could significantly impact total ounces across the property. Two potential game-changing targets are the Eastern Limb and White Canyon targets, both outside the existing resource estimate.
If your team successfully raises C$160M, or up to C$190M, how long will that cash fund the Company?
The original thought was that the C$140M raise would give us 1 year of working capital. The extra capital from the announced upsizing (C$160-$190M) should give us up to two years of funding, maybe more, depending on how aggressive we are. We expect to have enough to get us through a PEA in 1H 2028.
What can be said, if anything, about the prospects for obtaining permits for Northumberland given surrounding communities, private vs. public land, etc.
One of the interesting things about Northumberland is it’s well positioned for success. Historically, there was a land swap done that creates a significant parcel of private land that’s right over the resource.
Generally speaking, on private land in the USA, the lead permitting agency becomes the State. Nevada regulators are well educated in all things mining, so there’s a potential advantage here. Northumberland is ~25 miles from Kinross Gold’s Round Mountain, so the neighboring communities also know mining.
Surrounding the private parcel is Federal land under claim. For exploration and mining on these claims it’s a well documented pathway to obtain permits.
Thank you Mike, exciting times. I look forward to hearing more from you and your team after the private placement closes and the deal is completed, both coming up fairly soon!
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