Gold and Silver miners (Jr and Exploration)

[Edge83]

Lots of familiar names in his portfolio- Gold Portfolio Update: I Bought 2 New Gold Stocks And Sold 1

Apr. 18, 2017 7:41 PM ET| Includes: AEM, ALXDF, ARCTF, ATBYF, AUY, AVNZF, CANWF, CPKOF, DNGDF, EANRF, EDVMF, EXMGF, GDX, GG, ICGQF, IDMMF, KGILF, MRLDF, NGD, NULGF, OR, ORZCF, PLGTF, PVG, SAND, SRMMF, SVBL, TGCDF, TOGOF
Gold Mining Bull

Summary

My real-life gold portfolio has been performing well year-to-date.

I discuss the performance of this portfolio and recent changes.

I recently bought shares of 2 smaller royalty companies, and sold shares of one gold explorer, as I'll explain below.

Real-Life Gold Portfolio Update: 2 New Stocks Bought, 1 Sold

Things have gotten a little better since my last real-life gold portfolio update back in early March. I'll admit that February was not the best month, with the total account falling by 6.82% in value. But with gold prices rallying and a few of my positions reporting positive news, the portfolio is back on the right track.

As a reminder, the purpose of this portfolio is to gain leverage to gold and silver prices, and to outperform the benchmark indexes, including the VanEck gold miners index (NYSEARCA:GDX) and the Philadelphia Gold & Silver Index (XAU). These indexes contain numerous gold mining stocks, and I've outperformed the indexes dating back to 2010.

My positions in this portfolio are hand selected after putting in plenty of research. Many of the positions are smaller developers and gold explorers that have no cash flow from operations, so these are considered riskier stocks to own, but they also have more upside than producing miners.

As I've pointed out before, I don't recommend going all-in on just one or two gold stocks. My real-life portfolio contains 16 positions as of writing. I believe dollar-cost averaging is a good investment strategy, given the high volatility of these stocks.

The portfolio continues to perform well, despite a few duds. Following a 25.43% gain in Q1, the portfolio is up 2.95% in April. So far this year, the portfolio is up 29.13%, outperforming the Philadelphia Gold & Silver Index, which is up 13.31%, and the VanEck gold miners index, which has risen 16.23% as of writing.

As a reminder, last year this portfolio returned 109.01%, outperforming the Philadelphia index by 33%.

Here's a few quick updates before I discuss recent transactions:

- Alexandria Minerals (OTCQB:ALXDF) has been a top performer recently, with shares climbing from $.04 to $.07. The company recently announced high-grade gold intersections at its Orenada property, intersecting 24.10 g/t gold over 4 meters, just 140 meters from surface. It has increased the drill count to three rigs following the positive results. Then Alexandria announced and closed on a $2.575 million equity financing, which includes a $2 million strategic investment from investor Eric Sprott.

Alexandria makes up 14% of the total portfolio holdings by dollar value, and I haven't sold any shares yet as I think more upside is ahead with further drilling results to be released soon at Orenada. I may sell shares once they reach $.10, which would represent a 150%+ gain on my original investment.

- IDM Mining (OTCQB:IDMMF) is a relatively new holding of mine as I bought shares last month, following the investment made by Osisko Gold Royalties (NYSE:OR). As I pointed out last month, IDM Mining's high-grade (7.0 g/t gold) Red Mountain project is located in the prolific BC Golden Triangle, next to Pretium's (NYSE:PVG) Valley of the Kings deposit. I think the project has a great chance of getting built, given the high-grades, exploration upside and positive economics released so far by IDM.

The company recently announced recoveries for Red Mountain will average 89.4% gold and 86.1% silver, up from previous estimates. Processing plant design is 80% complete and IDM says it aims to release a feasibility study within two months. IDM makes up 5.1% of the portfolio, and I may look to increase my position shortly.

- Avnel Gold (OTC:AVNZF) shares haven't gone anywhere lately, but I remain bullish. My #2 overall gold stock pick for 2017 is a gold junior focused on developing its 80%-owned, 2+ million ounce Kalana Main project in Mali. The project is economical at current gold prices: a feasibility study outlines an 18-year mine life, with 1.82 million ounces of gold produced at all-in sustaining costs of $595 per ounce over the first five years and $784 per ounce over the life of mine; initial capital cost are very reasonable at $196 million.

The company announced positive drill results in March that went mostly unnoticed by the market; the company intersected 29.7 g/t gold over 11 meters and 22.6 g/t gold over 15 meters at the Kalanako deposit. With a market cap of $99 million on the TSX and a net present value of $321 million (after-tax) on its Kalana Main project, I think the stock remains highly undervalued.

Avnel makes up approximately 4% of the portfolio, and I may look to buy more shares soon.

2 New Buys and 1 Sell

Here's an update of recent trading activity inside the gold portfolio.

Abitibi Royalties (OTC:ATBYF)

I bought some shares of Abitibi Royalties recently at $6.80 per share. This is a small royalty company that owns several attractive assets and has solid growth potential in my opinion. The stock was a solid outperformer in 2016, returning 161%.

While 2017 cash flow is estimated to be just $2 million - $2.5 million, this is expected to grow to more than $4 million by 2019 from its existing royalties. Abitibi owns several royalties on the Canadian Malartic Mine, operated by Yamana Gold (NYSE:AUY) and Agnico Eagle (NYSE:AEM), plus several development royalties near currently producing mines in Canada, such as Goldcorp's (NYSE:GG) Red Lake mine and New Gold's (NYSEMKT:NGD) Rainy River project.

The company has $41.8 million worth of investments ($20.1 million in Agnico Eagle shares and $13.5 million in Yamana Gold shares), $8.2 million in cash and zero debt as of writing. With a market cap of $103.8 million, this gives it an enterprise value of approximately $62 million. With its cash flow potentially doubling to $4+ million by 2019 and the potential for further growth, I think the stock is a good value here.

I also think Abitibi is a strong takeover target, with the most likely suitor being Osisko Gold Royalties, given its particular focus on Canadian gold royalties (such as its 5% royalty on Canadian Malartic).

Aurico Metals (OTCPK:ARCTF)

I previously held a small position in Aurico and sold it, but have re-entered the stock with a small position. Aurico owns an attractive package of gold royalties on producing mines, as well as the massive Kemess gold-copper project in Mexico (which contains 12+ milion gold equivalent ounces in total).

I previously listed Aurico as a top gold stock to own in late 2016 and I've grown more bullish on shares since then.

Aurico announced two positive news releases recently. First, on its 2% NSR on the Fosterville mine in Australia, Kirkland Lake Gold (OTCPK:KGILF), the operator of that mine, says reserves increased by 66%, to 643,000 ounces of gold, while gold grades also rose by 27% to 9.2 g/t. Measured and Indicated mineral resources also increased by 23% to 2.79 million ounces of gold, with grades rising 25% to 5.7 g/t.

Next, Aurico announced it has received environmental approval for its Kemess underground project. While the project still requires some other licenses and permits (expected by early 2018), this is a big announcement for the development of Kemess. I still believe Kemess will draw the interest from a major gold and copper producer at some point in the near future, as the underground project carries reasonable upfront costs and strong economics at current gold and copper prices.

Pilot Gold (OTCPK:PLGTF)

I recently sold my position in Pilot Gold. I've grown frustrated by this stock's performance and lack of any real positive catalysts.

While I still like the potential of Pilot Gold's U.S. assets - mainly, its Black Pine and Kinsley projects- I'm frustrated that Pilot has yet to realize any value from its TV Tower and Halilaga projects, which it has spent millions on in exploration and development. It has stopped developing these two Turkish assets and is looking at strategic options, but given the high capital requirements, it's possible no majors are interested. Some news on these assets would be welcome.

While I could be proven wrong on Pilot Gold, I've grown impatient on the stock and I just feel there are better opportunities right now, so I sold my shares.

Other Key Positions: Mostly unchanged. I own the following stocks:

Orca Gold (OTCPK:CANWF), Castle Peak Mining (OTC:CPKOF), Dynacor Gold (OTC:DNGDF), Eastmain (OTC:EANRF), Endeavour Mining (OTCQX:EDVMF), Excelsior Mining (OTCQX:EXMGF), Integra Gold (OTCQX:ICGQF), Kirkland Lake Gold, Mariana Resources (OTCPK:MRLDF), NuLegacy Gold (OTCQX:NULGF), Nevada Sunrise Gold (OTCPK:NVSGF), Orca Gold (OTCPK:ORZCF), Sandstorm Gold (NYSEMKT:SAND), Sarama Resources (OTC:SRMMF), SilverBull (NYSEMKT:SVBL), Teranga Gold (OTC:TGCDF) and TomaGold (OTC:TOGOF).

Disclosure: I am/we are long ALL OF THE STOCKS MENTIONED EXCEPT PILOT GOLD, AGNICO EAGLE, NEW GOLD, GOLDCORP AND YAMANA GOLD.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

https://seekingalpha.com/article/4063209-gold-portfolio-update-bought-2-new-gold-stocks-sold-1