The past couple of months have been volatile for junior gold miners and the precious metals sector, as a whole. The turbulent US Presidential election, looming second wave of COVID-19 infections and depleting gold supply have contributed to the bullish rally of gold stocks and silver stocks.
At the same time, several names have fallen 30% or more from their highs with the recent correction in gold price (GLD). Sabina Gold & Silver (OTCQX:SGSVF) is one of the gold miners whose gold stocks held up quite well during the sector-wide carnage, up 35% in Q3. The stock's outperformance is likely tied to continued drilling success at Back River and the realization that development could be a reality if gold prices maintain their current levels. The record gold price, and the potential for a staged approach to Back River, put Sabina Gold & Silver among the more attractive gold juniors out there in the sector and on the radar for investors looking to buy gold stocks.
Other mining stocks that have been favored recently strikingly show one thing in common beside the high gold prices and that is a remote location. While major and well-known basins are becoming depleted from their reserves, smaller productions have been releasing phenomenal results over the past few months. At the same time, higher gold price has started to make costly projects in more remote jurisdictions more feasible.
In the case of one of the most interesting junior miners - the recent drill results are certainly encouraging. Sabina Gold & Silver has been releasing solid exploration results for years now since its 2015 Feasibility Study, moving the share price of the $500-million market cap junior. Its Back River Project in northern Canada is remote, making it cheaper to develop.
By comparison, other mining stocks of gold miners such as Marathon Gold's (OTCQX:MGDPF), Skeena Resources' (OTCQX:SKREF) and Gold Standard's (NYSEMKT:GSV) have intimidating upfront capex for their current projects estimated in the hundreds of millions.
This is all about timing. Junior and mid-tier miners spent most of 2020 restructuring – a forgotten story in the gold space. Many junior miners have properties that make them potentially good targets for mergers and acquisitions. The trend of consolidation in the sector means that we are just about to witness the bulk of the run up in mining stocks and gold stocks.