2 Gold stocks on my watchlist - Mar.09/2024

Gold once again broke it's highest weekly close, the mining stocks are not responding much yet, but there have been some outliers.

What a week for the price of Gold, we had a very convincing breakaway on the weekly timeframe, there is no historical resistance left, it is blue skies ahead. In saying this you would think the mining stocks would be flying right now, but that isn’t the case at all. There has been some decent moves in some of the producers, but the smaller developers/explorers really haven’t taken off.

My thesis with the precious metals is that once the Fed starts the inevitable rate cutting cycle, this will start the Gold bull market. Which has always been the case in recent history. So the fact that Gold is already at these levels gets me extremely bullish on the metal. With the wall of worry and disinterest in the sector, I think there is legs for a massive move here.

If we compare the GDXJ to price of the Gold, you can see that the miners are historically cheap to the metal, we aren’t far off Covid levels right now.

I think the gold mining stocks are presenting an opportunity here that is only seen every few years. Here are 2 gold stocks that made my watchlist this week and may present opportunities ahead.

Soma Gold - Market Cap $54 Million

Soma is a small gold producer and the current price of gold is going to give them great leverage. Volume really came in to the stock at the end of this week as the stock was up nearly 10% on Friday. It has some resistance to clear in the near term, but I believe it will be a winner.

The company operates the Cordero mine in central Colombia, they also own 2 mills in close proximity to operations. The second mill is expected to be started this Quarter. The company expects to produce 650 TPD by the end of Q2 and expects to product 100k ounces annually by 2028.

This is a production growth story and if they are successful, the stock will see a huge re-rate from the current market cap. They expect to produce just over 40k ounces this year.

Rio2 Limited - Market Cap $96 Million

Rio recently acquired the coveted environmental approval for their project in Chile, the stock seen a nice uptick at that time but has been consolidating since that breakout. The company has to finalize financing before any construction commences at the project. Once that financing occurs I expect this to have a really nice re-rate up until first pour.

They expect the mine to be operational by late 2025, the mine will produce around 80k ounces annually for a 17 year mine life.

At $1750 gold the company has a Post tax NPV @ 5% of $210 Million USD and an IRR of 28%. At the current gold price these numbers look much better, the Post tax NPV @ 5 % is closer to $500 Million USD and the IRR is 50%. I think this stocks present a good opportunity going into a gold bull market.

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