Another Exploration Success for Midland
Contributed Opinion

Midland Exploration Inc. (MD:TSX.V) announced that it had discovered high-grade copper-gold showings on its joint venture project with SOQUEM in the Labrador Trough region. The two companies have agreed on a $1 million budget for 2024, split evenly, with the program focusing on improving the understanding of the geology and structure of the property.

This is very early days, of course, but another example of the exploration work Midland is doing with partners sharing the costs. Separately, Midland closed another placement of both regular and flow-through shares, just over 4 million shares in total, bringing its shares outstanding to almost 87 million shares, up from 64 million five years ago. Gladstone Investment Corp. (GAIN: NASDAQ)

Flow-through shares are sold to Canadians, usually at a premium, with the recipient obtaining a tax deduction; proceeds must be spent on exploration in Canada. This adds to an already healthy treasury (CA$8 million as of September 30). Their dilution is by no means egregious, but one has to think it is something of a drag on the share price.

Buy.

Gladstone Pays a Special Dividend

Gladstone Investment Corp. (GAIN: NASDAQ) paid a special dividend of 88 cents to shareholders of record on December 5, payable next week. This is why the stock fell sharply earlier in the week.

Hold.

Franco: It's Now Formal

Franco-Nevada Corp. (FNV:TSX; FNV:NYSE) received the not-unexpected news Friday that the Panama government has formally ordered First Quantum to shut all operations at Cobre Panama, on which Franco has its largest stream.

The order covers not only mining but also refining, export, and sales activities.

First Quantum has laid off over 4,000 employees. With the mine accounting for 5% of the country's gross domestic product, and, after the canal, its largest source of tax revenue, this is what is known as "an own goal." 

Franco is a very Strong Buy.

TOP BUYS this week in addition to the above include Metalla Royalty & Streaming Ltd. (MTA:TSX.V; MTA:NYSE American), Altius Minerals Corp. (ALS:TSX.V), Lara Exploration Ltd. (LRA:TSX.V), and Hutchison Port Holdings Trust (HPHT:Singapore).

Questions From Readers

Which of the largest gold mining companies do you prefer?

On our list of current holdings, we have two of the three largest gold miners, Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) and Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE). We have held Newmont Corp. (NEM:NYSE) in the past, first when it acquired Franco-Nevada (subsequently spun out again) and next when it bought Goldcorp Inc. (which we got in turn from its acquisition of Virginia's Eleonore Mine).

Newmont is at a $45 billion market cap. After its acquisition of Australia's Newcrest, is the largest, with Barrick, at $30 billion, in second place, ahead of Agnico ($25 billion).

Of the big three, Agnico has the lowest political risk, operating in Canada, Australia, Finland, and Mexico. It has solid management, a solid balance sheet, and a deep pipeline. Newmont and Barrick both have broad property portfolios, both include copper, and both have strong reserves and deep pipelines.

Barrick beats Newmont on most metrics and is less expensive.

Though Barrick's political risk profile is more aggressive than Newmont's, I favor Barrick: it has a stronger balance sheet, more world-class projects, a more sustainable dividend policy, more visionary management, and a better pipeline.

It has a better long-term upside with major projects, including the huge Reko Diq copper deposit in Pakistan. It is also less expensive on every metric. On a price-to-net asset value of 0.67x, it is trading at pretty much its lowest multiple ever (other than the last quarter of 2015). Though Newmont, being the world's largest gold miner, will do just fine in a strong gold market, I favor Barrick and Agnico.

If it's a favorite, why isn't it a Buy?

Over recent years, many readers have asked why we continually write that FrancoNevada is our favorite gold holding but have rarely rated it as a buy. Simple: price is important.

Franco illustrates perfectly one of the things the late Charlie Munger used to say: "It's all in the waiting."

His business partner Warren Buffett, using a baseball analogy, likes to say, "you can wait for your pitch." Although we had many "Buy" recommendations on Franco in the 2010s, recently, we rated it mostly a "Hold."

We waited years for a good opportunity to buy Franco again, and we have had it in spades, in the last few weeks. If you are underweight with this resource blue chip, this is your opportunity to load up.

Do you have a favorite lithium company? With specialist resources, such as lithium, I prefer to get exposure through other companies that I like anyway. Of the companies on our recommended list, both Altius and Midland, for example, have exposure to lithium, Altius through shares and a royalty on some properties in Lithium Royalty Corp (LTUM:OTCQB), and Midland through joint ventures focused on lithium (including one with Rio Tinto).

In both cases, success would be meaningful to the company, but failure would not destroy them. A new pure lithium company has caught my eye, though, because of its management, technical expertise, location, strong cash balance, and favorable conditions.

This is Canter Resources Corp. (CRC:CSE;CNRCF:OTCMKTS), which started trading in October. It has optioned a property in the Columbus Basin in Northern Nevada, an area that holds several high-quality lithium brine deposits.

Crucially, the project has secured water rights for the property. Lithium exploration can be quickly compared with gold or base metals, and the outcome can be binary. Though we are not formally adding it to our list, we will update developments from time to time.

For those looking for a pure lithium speculation, look at Canter.

Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of [Midland Exploration Inc., Franco-Nevada Corp., Metalla Royalty & Streaming Ltd., Altius Minerals Corp., Agnico Eagle Mines Ltd., Lara Exploration Ltd., and Canter Resources Corp., ].
2. [Adrian Day]: I, or members of my immediate household or family, own securities of: [All]. My company has a financial relationship with [All]. I determined which companies would be included in this article based on my research and understanding of the sector.
3. Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
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Adrian Day’s Global Analyst is distributed for $990 per year by Investment Consultants International, Ltd., P.O. Box 6644, Annapolis, MD 21401. (410) 224-8885. www.AdrianDayGlobalAnalyst.com. Publisher: Adrian Day. Owner: Investment Consultants International, Ltd. Staff may have positions in securities discussed herein. Adrian Day is also President of Global Strategic Management (GSM), a registered investment advisor, and a separate company from this service. In his capacity as GSM president, Adrian Day may be buying or selling for clients securities recommended herein concurrently, before or after recommendations herein, and may be acting for clients in a manner contrary to recommendations herein. This is not a solicitation for GSM. Views herein are the editor’s opinion and not fact. All information is believed to be correct, but its accuracy cannot be guaranteed. The owner and editor are not responsible for errors and omissions. © 2023. Adrian Day’s Global Analyst. Information and advice herein are intended purely for the subscriber’s own account. Under no circumstances may any part of a Global Analyst e-mail be copied or distributed without prior written permission of the editor. Given the nature of this service, we will pursue any violations aggressively.