Four Active Mining Companies You Should Be Watching

TM editors’ note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated; do your own careful due diligence.

The mining industry has been very busy over the last few months with the gold price showing signs of stabilizing, financings getting completed, preliminary economic assessments being released, prefeasibility studies being updated and M&A activity increasing. The market has a buzz once again and Thibaut Lepouttre of Caesars Reportprofiles several companies that are reaping the rewards of being very active right now.

Southern Abitibi Project Map

The Gold Report: Falco Resources Ltd. (FPC:TSX.V) (FPRGF) has released its maiden preliminary economic assessment (PEA) on the Horne 5 mine. The market rewarded the company with a share price that almost doubled in the next few days and weeks. What’s the reason behind this?

Thibaut Lepouttre: This PEA had been anticipated for quite a while, and Falco’s shareholders were really looking forward to seeing the economics of the project after an updated resource estimate showed a total of 6.6 million ounces gold equivalent (Au eq), with the majority in the Indicated resource category.

There was a little bit of a headwind from people who weren’t convinced an underground mine with an average grade of less than 3 grams per tonne Au eq would work in the current commodity price environment, so quite a few investors were holding off on making an investment decision until after the PEA.

Falco’s PEA showed an after-tax NPV5% of CA$667 million (CA$667M) and an internal rate of return (IRR) of 16% based on an average production rate of 236,000 ounces (236,000 oz) gold at an all-in sustaining cost (AISC) of less than US$450/oz.

While the output and production costs are definitely meeting or exceeding the market’s expectations, the IRR is indeed a little bit on the lower end of the spectrum, but I do think it’s important here to emphasize that IRR is very resilient. When you see a low IRR, it usually means the project is pretty marginal and even a minor change in the gold price would “kill” the project. That’s absolutely not the case with Falco. Even using a gold price of just $1,000/oz, the IRR would still be a double-digit percentage.