Interview with
Marcel Robillard, President & CEO of Puma Exploration
Derek McPherson, Executive Chairman of Olive Resources Capital

Recording date: 27th June 2024

The gold sector is currently navigating a complex landscape, presenting both challenges and potential opportunities for investors. Despite gold prices reaching around $2,400 per ounce, many gold mining stocks, particularly junior exploration companies, have not seen corresponding gains. This disconnect has created a situation where industry experts believe there may be undervalued opportunities in the sector.

Marcel Robillard, CEO of Puma Exploration, describes the current market as one of the most challenging in the past 15 years for junior exploration companies. Many firms are struggling to raise capital and maintain investor interest. However, this challenging environment may be setting the stage for future growth and investment opportunities.

Derek McPherson, Executive Chairman of Olive Resource Capital, suggests that the gold sector could be on the cusp of a significant upturn. He draws parallels to previous bull markets in 2001-2004 and 2010-2012, where major producers saw gains first, followed by mid-tier companies and eventually junior explorers. This historical pattern indicates that when institutional investors begin allocating significant capital to gold stocks, it could trigger a cascade effect throughout the sector.

For investors considering gold exploration companies, several key factors emerge as important:

• Project potential: Look for companies exploring large-scale deposits that could produce at least 150,000 to 200,000 ounces of gold per year.
• Grade and economics: Higher-grade deposits are more likely to attract interest from larger mining companies.
• Jurisdiction: Projects in mining-friendly locations with good infrastructure are more attractive.
• Capital efficiency: Companies that can advance projects efficiently with limited capital have an advantage in the current market.
• Management team: Experience and track record in advancing projects and creating shareholder value are crucial.

Both experts stress the importance of companies continuing to advance their projects, even in challenging market conditions. This ongoing work not only develops the asset but also helps maintain investor relationships and keeps the company on the radar of potential acquirers or partners.

While timing the market is difficult, McPherson suggests that a significant improvement in market conditions for gold stocks could potentially occur in late 2024 or 2025. This timeline is based on the typical lag between when larger gold companies start performing well and when that performance translates into increased interest in junior companies.

It's worth noting that the role of retail investors in the junior mining sector has changed, with many individual investors reducing their participation due to economic pressures. This shift contributes to current liquidity challenges but may also set the stage for a significant re-rating of these stocks when retail interest returns.

For investors considering the gold sector, careful due diligence is essential. While the current market conditions present challenges, they also offer potential opportunities for those willing to take a longer-term view. Look for companies with quality assets, efficient operations, and the ability to advance their projects even in difficult markets. As always, investors should consider their own risk tolerance and investment goals when evaluating opportunities in this sector.

Learn more: https://cruxinvestor.com/categories/commodities/gold

Sign up for Crux Investor: https://cruxinvestor.com