Why Miners With Positive Cash Flow Deserve Your Attention: Philip Ker

TGR: Are there other names you would like to share with our readers?

PK: I don't formally cover Claude Resources Inc. (CRJ:TSX) or Balmoral Resources Ltd. (BAR:TSX; BAMLF:OTCQX) but I have participated in recent site visits to their respective operations. Former Claude CEO Neil McMillan recently stepped down after about 20 years in that role to become chairman of Cameco Corp. (CCO:TSX; CCJ:NYSE). He was replaced by Brian Skanderbeg, who has extensive experience with the geology at Claude's Seabee operation in Saskatchewan. The real story for Claude going forward is the Santoy Gap Zone at the Seabee mine. That high-grade gold system helped support a 44% increase in production in 2014 from 2013.

In the near term the Santoy Gap mine plan should provide grades targeting 7.0 g/t gold and supporting management's guidance of 60–65 Koz in 2015. A new mine plan and reserve update by Q2/15 should demonstrate to the market that a change in mining methods at the deposit will help minimize costs and support the company's ability to generate free cash flow in the upcoming quarters and years.

TGR: And Balmoral Resources?

PK: Most investors in the junior exploration and development space should know of Balmoral President and CEO Darin Wagner. He has an excellent track record, particularly within the Abitibi Greenstone and Timmins mining camps. Balmoral's Grasset nickel discovery is on its way to becoming a world-class asset. With no formal resource established yet to date, back of the envelope calculations put the deposit at about 6–7 Mt with broad intercepts consisting of favorable underground mining widths and nickel grades averaging ~1.4% , plus strong platinum group elements, elevated copper and gold by-product credits. Grasset could rise above 10 Mt once the company drills further targets at depth and along strike.

Late in 2014, Balmoral completed an extensive airborne electromagnetic survey and is set to initiate its winter drilling program, where management plans to drill test ~15 new electromagnetic anomalies containing similar signatures to Grasset. Should an additional system be discovered, Balmoral is off to the races. Furthermore, investors have gold exposure with Balmoral's Martiniere property, a high-grade system just west of Grasset. There are definitely multiple avenues with blue-sky potential when considering Balmoral.

TGR: What should precious metals investors focus on most in 2015?

PK: It's simple: cash flow. If management teams haven't corrected their operations to endure these hard times in a suppressed market, they likely don't deserve your attention. Don’t fall in love with your favorite high-cost stock hoping for a soon-to-come turnaround; move on to quality companies that possess viable assets with proven profit margins and strengthening balance sheets. These are the up and comers who have merger and acquisition potential and contain the ability to build and deliver on new growth objectives.

TGR: Thank you for talking with us today, Philip.

Philip Ker Philip Ker is a mining analyst for PI Financial. He has field experience as an exploration geologist working across Canada on gold, diamond and base metal projects. He holds a Master of Business Administration degree in finance at the University of Alberta and also completed a Bachelor of Science degree in geology.

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1) Brian Sylvester conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides ...

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