New Gold Inc. (USA) (NYSEMKT:NGD) is well-positioned to leverage potential higher gold prices while maintaining its claimed position as the world’s lowest-cost producer in the current market, according to Randall Oliphant, Executive Chairman. He was speaking at the Canaccord Genuity Global Resources Conference 2014, held at the New York Palace Hotel.
New Gold is an intermediate gold mining company with four producing assets and three development projects. Current production is coming from the New Afton Mine in Canada, the Cerro San Pedro Mine in Mexico, the Mesquite Mine in the U.S. and the Peak Mines in Australia.
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In addition, New Gold owns 100% of its Blackwater and Rainy River projects, both in Canada, as well as 30% of its El Morro project, located in Chili. Oliphant said the pipeline of its Blackwater, Rainy River and El Morro projects is projected to triple New Gold’s production.
The New Afton Mine “generates 70% of our cash flow,” Oliphant said. The company is looking at expanding its mill at the site and is exploring a new deposit area. The early exploration of the new area is yielding gold and copper grades that are higher than New Afton’s previous zones, Oliphant said. “We continue to find more material.”
The company financials claim 18.5 Moz gold reserves, with 900 Koz annual production potential from growth projects. Oliphant said the company’s 2014 guidance will be met in terms of production and costs. First half results show 181 Koz in gold production, with first half 2014 guidance of 380-420; 835 Koz silver production with guidance of 1350-1750; and 51 Mlbs. copper production with guidance of 92-100. Total cash costs are $253/oz, with guidance of $320-$340.
All-in sustaining costs are $707/oz. for 2014’s first half, with guidance of $815-$835. New Gold also expects to generate $200 per ounce incremental margin versus average of peer companies.
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Canada-based Dalradian Resources Inc (TSA:DNA) is on track with its Northern Ireland Curraghinalt gold mining project and should begin underground drilling early next year, according to CEO Patrick F.N. Anderson. He was speaking at the Canaccord Genuity Global Resources Conference 2014 in New York, held at the New York Palace Hotel.
“The government in Northern Ireland is receptive to what we want to do,” said Anderson. That reception has been more than talk — Dalradian has also received a $590,000 grant to support local job training efforts during the permitting and exploration phase of the project.
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Curraghinalt is a high-grade lode gold deposit with over 84,000 hectares under license, Anderson said. It was acquired four years ago. It is “a high margin deposit, with a low capex to build, and we’ve closed about $40 million in financing this year alone,” Anderson said. “It’s leaving us in a good position to push forward with our plans. We hold nearly 10% of the land mass in Northern Ireland in terms of the mineral rights and have only touched a small part of it in terms of potential.”
The company has started surface work at Curraghinalt, with some underground development to begin next month. Underground drilling will be started early next year, Anderson said. The EIA is anticipated to be approved next fall, with government approval slated to follow.
“It’s a pretty thorough permitting process,” Anderson said, although noting that it was transparent. There is minor opposition to the project locally, but Anderson claimed 800 letters in support and government enthusiasm for the jobs that will be created.
Current estimates are production of 145,000 gold ounces/year from the location, with cash costs of $532/ounce or $125/ton. The company has a cash position of $39 million as of August 6, 2014, with outstanding shares of 140 million and fully diluted of 176.7 million as of the August date, Anderson said.
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Kevin Cassidy, Analyst with Stifel, Nicolaus & Co., says Microchip Technology Inc. (MCHP) is making acquisitions in order to remain competitive as the Internet of Things trend continues to develop.
“Microchip that has been a leader in microcontrollers that are used in all types of what is now getting to be called the Internet of Things,” Cassidy says. “So we’ll just say that they have been in things like alarm systems and smoke detectors, sprinkler systems, your garage-door opener, things like that. Now though, they need to connect to the Internet, and they have been acquiring companies that maybe have a WiFi technology that they can include with their microcontroller and even a Bluetooth technology, or just any way to get the information of the product that they’re controlling, try to send some of that information through the Internet, so it can be either controlled remotely or the data it’s picking up can be used for some other purpose.”
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Another factor driving consolidating in the semiconductor market, Cassidy says, is the fact that automotive is the fastest growing end market.
“Those companies tend to have fairly long design cycles and even long qualification cycles, and I think they’ve preferred to have fewer and very large suppliers rather than many small suppliers,” Cassidy says. “So we think there could be a trend for those customers maybe pushing their suppliers to consolidate so that they can have fewer and higher-quality suppliers.”
Randy Smallwood, President and CEO of Silver Wheaton Corp. (USA) (SLW), says production is anticipated to grow 35% over the next four years. He was speaking at the Canaccord Genuity Global Resources Conference 2014 in New York, held at the New York Palace Hotel.
Silver Wheaton is a streaming company that makes upfront payments to mining companies in return for the right to purchase a fixed percentage of the future silver and/or gold production from a mine, Smallwood said. As the mine owner delivers precious metal to Silver Wheaton, an additional delivery payment is made to them. Silver Wheaton receives a percentage of life-of-mine silver and/or gold production.
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The delivery payments are typically subject to an inflationary adjustment of approximately 1% per annum after the third year of production. “The mining industry always has a need for capital,” Smallwood said. “That’s what we provide.”
The company is partnered with Vale, Glencore, Goldcorp, Barrick, Eldorado and several other companies. They are currently under contract with a total of 19 operating mines and five development projects. The company targets “high-quality assets with a long life,” Smallwood said.
Smallwood said production from its operating partners is forecast to grow 35% to 48 Moz Ag Eq. in 2018. Its Pacua Lama project is not in the 2018 forecast, but would add an additional 9Moz in its first five years, Smallwood said, adding that its forecasted operating cash flow more than offsets capital commitments, leaving over $950 million in available capacity for growth.
As of June 30, 2014, Silver Wheaton has $140M in cash, with capital commitments of $365M. The company has 358M share outstanding. Silver Wheaton generated $534 million in cash flow from operations in 2013 and has access to a $1 billion line in revolving credit that is undrawn.
The company has the financial capacity to do more deals, Smallwood said. “To be able to satisfy the need for capital is one of the keys for us continuing to grow.”
Seabridge Gold, Inc. (USA) (SA) is expecting Canadian government approval in November for its major KSM Project, according to Chairman and CEO Rudi Fronk. He was speaking at the Canaccord Global Resources Conference 2014 in New York City, held at the New York Palace Hotel.
Fronk acknowledged that Seabridge Gold had 45 million ounces of reserves by the end of 2013, which he claims places the company among the top 10 gold companies in the world, measured by reserves.
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Seabridge Gold’s focus is on its KSM Project in Northern British Columbia, which it acquired in 2000 and wholly owns. Fronk called it “the largest undeveloped gold deposit in the world” by reserves. KSM has proven and probable reserves of 38.2Moz gold plus 10B lbs. copper, Fronk said.
The KSM operations at the site will center on its Deep Kerr core zone, which is projected to generate 515 million tons of copper and gold, Fronk said. The inferred resource grading is 0.53% copper and 0.36 g/T gold. Deep Kerr’s grades compare favorably with some of the world’s largest most profitable, operating copper/gold mines, Fronk said.
If Canada approves, drilling on the high-grade Deep Kerr deposit will commence this year and is expected to add “size, grade and reliability to resource estimates,” Fronk said. The company has $16M committed for follow-up drilling at Deep Kerr and to test other potential higher-grade core targets. “I think what’s really exciting is the value we’re unlocking through additional exploration,” Fronk said.
Fronk said that the reserve grades at KSM are similar to mines operated profitably by major producers at today’s metal prices. Total costs — inclusive of initial capital, sustaining capital, operating costs and closure costs — are estimated at less than $700 per ounce of gold produced, Fronk said.
The company’s environmental assessment for KSM was approved by British Columbia at the end of July, and the company also has agreements with local tribes and early construction permits in place, Fronk said.
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CFO Jim Slattery of Capstone Mining Corp. (TSE:CS) says the company’s Pinto, Arizona flagship operation now has a projected mining life of 12 years, an upgrade that has boosted its appeal to workers and suppliers. Mr. Slattery was speaking at the Canaccord Genuity Global Resources Conference 2014, held in New York City at the New York Palace Hotel.
The Pinto operation, acquired in 2013 by Capstone, is the only operating copper mine in the area. The open pit mine is expected to produce 66.3 tons of copper this year, in line with 2014 guidance, Slattery said.
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Capstone, headquartered in Vancouver, Canada, is a self-described intermediate copper producer with a corporate philosophy of low-risk operations focused on the Americas. “We have a heavy emphasis on measured, conservative, disciplined growth,” Slattery said. He added that Capstone hopes to create a platform of five or six operating or development companies to deliver up to 300,000 tons of copper per year.
The company currently has three operating assets — the aforementioned Pinto Valley; a mine in Cozamin, Mexico, near Zacatecas; and Minot, located in the Yukon, Canada. Capstone is also developing operations in Santo Domingo, Chile, a midsize mine projected to yield iron ore, copper and some gold deposits; and an operation in Kutcho, BC, Canada. The operating mines are producing 100k tons of copper annually, Slattery said.
The company is focused on organic growth but is also exploring acquisitions, Slattery said, adding that any additions will be in copper and in the Americas. “We like the stability of that jurisdiction,” Slattery said.
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Copper Mountain Mining Corporation (TSE:CUM) is cash-flow positive and actively pursuing acquisition opportunities, according to CFO Rodney A. Shier. He was speaking at the Canaccord Genuity Global Resources Conference 2014, held in New York City at the New York Palace Hotel.
Copper Mountain started production at its open pit mine in July, 2011, a site located 300 miles east of Vancouver, BC, Canada. “The best way to think of it is as a brand new mine on a former mine site,” said Shier.
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The company is focused on maximizing copper production at the site, Shier said, and is targeting operating throughput at 35,000 tons per day, with a mining rate average of 175,000 tons per day. Copper Mountain is on target with 2014 guidance, Shier said.
The site has a 17-year mine life “as we know it today,” Shier said, and operational improvements are underway to enhance cash flow.
The company’s 2014 objectives, Shier said, are to complete installation of a secondary crusher in order to increase throughput and copper production; increase its ore processing capacity; achieve copper production guidance of 80 million to 90 million pounds; install a mine dispatch system to improve utilization of mine equipment; enhance its mill expert system to maximize performance; and continue with exploration programs focused on organic growth and new discoveries.
The long-term goal is to establish a reserve base sufficient to sustain milling for 25-plus years, Shier said.
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Kevin Cassidy, Analyst with Stifel, Nicolaus & Co., says he is positive on Micron Technology (MU) because the company is benefiting from consolidation in the DRAM market.
“We think that DRAM supply and demand will remain in balance for the next few years, and we think gross margins continue to expand,” Cassidy says.
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Cassidy says Micron’s gross margins are currently in the 34% range, and he thinks margins can expand to the 40% range. He said that improvement would add a lot of leverage to Micron’s earning power.
“And right now, Micron is only trading around eight times our forward earnings,” Cassidy says. “So we see that as an example as a GARP-y company, growth at a reasonable price.”
Roth Capital Partners Analyst Krishna Shankar says Applied Micro Circuits Corporation (AMCC) is a good play on processors and network accelerators. He says AMCC is introducing a new 64-bit ARM-based server and system-level SoC chips targeting the $10 billion-plus data center server processor and SoC market.
“We believe that ARM-based server and SoC companies, over time, will likely capture market share from the Intel quasimonopoly within data center server processors,” Shankar says. “Intel currently has over 95% of the server processor market. AMCC is the early production ramp of its 64-bit ARM server SoC and claims multiple design wins with server, networking and Web scale service providers.”
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Shankar says AMCC’s stock has pulled back as a result of a decline in the legacy PowerPC business and softness and an inventory correction for their 10Gig Ethernet/OTN connectivity chips.
FBR Capital Markets Analyst Christopher Rolland says he and his team are still waiting to see whether the second derivative in the semiconductor cycle is starting to slow, or whether the sector is simply experiencing choppiness at the moment. But, he says so-called supercyclicals have been more impacted than companies like ON Semiconductor Corp (ONNN).
“So ON hasn’t been hit as hard as other supercyclicals, but still has been hit here probably around 6%, something similar to what the SOX has been down during that same period since earnings have begun,” Rolland says.
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Meanwhile, he says some stocks in the same areas, like power management, have been down as much as 10%, and some even more.
“So I would say that ON has held up fairly well here, but again, all eyes are on the semiconductor cycle and whether it rolls over or not,” Rolland says. “If there is just a little bit of turbulence, I think ON goes higher, but if it is indeed the end of the semi cycle, it will be tough for them to work through that.”
