The Multi-Million $ Mining Companies with Room to Grow

By
Henry Mann
·
November 1, 2021

Contrary to what you might think, large cap mining companies can still have the leverage that you may be looking for in your investing returns.

You just need to pick ones with a compelling and meaningful growth story.

Low risk, high reward?

There are three categories of mining companies: juniors, mid-tiers and majors.

Each fulfills different criteria and offers varying levels of risk. 

Investors looking for higher risk, higher return investments often focus on juniors. This is because if the company performs well and is successful, there's a potential for 'tenbagger' returns.

Juniors mining stocks are low capital exploration companies searching for new deposits of natural resources. Junior mining companies are involved with exploration, development, getting the mine permitted with the goal of producing up to 300,000 oz/year. Anything over that would be considered a ‘mid-tier ‘or ‘major’ company.

Investments related to juniors are high risk as they are new in the market and don’t yet have a proven asset base. Juniors may still be in the exploration phase and might not find any resources at all. On the other hand, the potential is there for great reward and huge excitement if the exploration and development is successful.

Typically, a successful mining story will start as a junior and progress through to a major, increasing in value and size along the way. 

Majors tend to be well-capitalised, with many operations worldwide producing a slow and steady cash flow. Because of this, the risk of an investment tends to decrease and so do the potential rewards. 

Many investors think that it isn’t worth it to invest in multi-million dollar mining companies because they’ve reached their peak and there’s little room left to grow. 

However, this isn't always the case. 

A major may start as a billion-dollar company, and then go on to have a 5, 10, 50, 100 billion-dollar market cap. 

Here are a few companies that we believe still have potential for growth.

3 companies we're watching

Rupert Resources

Highlights: 

  • Mkt cap C$807M
  • OTC: RUPRF; TSXV: RUP; FRA: R05
  • Strategic location in Europe, located just 50 km away from Europe’s largest gold mine and with a 60,000 m drilling operation currently ongoing.
  • The company is funded for a further 10,000 m of drilling and has a stellar management team consisting of geologists, gold equity fund managers and mine prospectors. 

Rupert Resources is one of the best funded junior mining companies today. It has a 75% hit rate on all its exploration drilling projects, including 6 recent gold discoveries. Rupert Resources is only 50 km from Kitilla, the largest gold mine in Europe in Northern Finland. 

In fact, the company has had an excellent year and just announced one of the most significant discoveries in the past 15 to 20 years at Ikkari. This shows that the company’s exploration strategy is showing results. 

At the helm of Rupert Resources is James Withall, who has a great track record as a gold equity fund manager and geologist. Rupert Resources has 100% ownership of one gold mill in Finnish Lapland and is targeting multi-million-ounce discoveries in the coming years. According to Withall, the results of the past year is because of the steady, systematic approach the company took to its exploration operations.

For this approach, the company implemented a new technique, used two different methods, and set very clear goals that it wanted to achieve. Also, the Rupert team has been very disciplined on how it implemented its strategy which ultimately led to the discovery of the Ikkari resource mentioned earlier.

Withall believes that this discovery is a significant milestone in the development of the company and that it has put it on a strong trajectory for growth, even though it’s already close to the billion dollar mark. The next step is now to advance the project and shift from being an exploration company to a fully-fledged mining company.

As Withall puts it, 

So, a lot of people ask us this question, what are you now, what do you do, we're both, we're still an exploration company, but we're also going to be de-risking, and so you'll have a Preliminary Economic Assessment in the market for next summer, based on that new resource that gives it one step forward.

Fortunately, the company also has the resources to achieve its goals and is funded to 2023 to cover everything it wants to do to grow the company. As a result, Withall believes Rupert Resources has the momentum to keep going and continue creating value for investors. 

All this combined makes Rupert Resources one of the top junior companies to watch over the next 12 to 18 months. 

Maverix Metals

Highlights: 

  • Mkt cap C$684M
  • NYSE: MMX; TSX: MMX
  • Major operations in the Americas, Mexico, and Australia with a portfolio of gold and silver royalty and streams over 120 assets. 
  • Fourteen healthy income generating royalties which include recently acquired royalties from Mayfair Gold, Aris Gold, First Majestic and LaSalle Exploration. 

With a market cap of about US$ 700 million, Maverix Metals is among the best picks in the gold royalty and streaming industry. It is based out of Vancouver, BC, and boasts a portfolio of over 120 royalties across 18 countries. So far, Maverix has generated $50 in revenue at a 90% margin, with most projects in North America and Australia. 

The company offers royalty and streaming agreements with mine operators based on fixed operating costs, commodity price appreciation, and exploration and expansion projections. At the helm of the company is President Ryan McIntyre, who has over 15 years of mining investment experience, and CEO Dan O’Flaherty who has over 10 years of investment banking and Executive Officer experience.

Recent announcements by the company include royalty acquisitions in Mexico, Western Australia, and Ivory Coast.

This has put the company on a strong growth trajectory which O’Flaherty believes is crucial to future growth. According to him, 

That initial critical mass is very important and essentially becomes a self-fulfilling prophecy in terms of building a business as you continue to build and demonstrate that track record of growth that makes it easier to continue to grow from there.

Another important aspect in Maverix’s growth is that it doesn’t focus on growth for growth’s sake. It has a clear and focused strategy to achieve growth, not only for the company, but also for the shareholders. Or, in O’Flaherty’s words, 

When we look at growth, we look at growth on a per-share basis, revenue per-share, cashflow per-share.

Ultimately, it’s worth it to keep an eye on Maverix Metals if you're looking for a longer-term investment opportunity. 

K92 Mining Inc

Highlights: 

  • Mkt cap C$1.6B
  • TSE: KNT; OTCQB: KNTNF
  • High-grade underground gold producer with 700sqkm land package with many potential high-grade vein systems and pathways.
  • Excellent local relations in employment and procurement and a heavy commitment to work training and safety for their operations.
  • Emphasis on sustainable mining. 

While K92 Mining is headquartered in Vancouver, BC, it owns and operates the tier-1 Kainantu Gold Mine in the Eastern Highlands of Papua New Guinea. It’s market cap sits at about C$1.6 billion, and the OTCQX recognized it among the Best 50 companies in 2021.

Leading the company is CEO, John Lewins. He is a qualified mineral engineer with over 40 years of experience in international leadership in the global mining industry. The jurisdiction in which K92 operates is quite unlike any other, whereby royalties go directly to local communities. 

The company has been wildly successful in this context, becoming self-funded since 2018 and reporting over 105% year-on-year increase in their community contributions. 

Additionally, 95% of the 900 K92 contractors and employees are Papua New Guinea nationals. 

The immediate question is, considering what we mentioned earlier, why K92 is still a growth story despite it being a billion-dollar company. According to Lewins, the answer is simple, 

Current production is 40,000t/year, 120,000oz we’re about to embark upon on a small expansion which will increase to 250,000oz. We’re busy with an updated study, which is looking to expand that 3-fold, so increasing our production to about 350,000oz.” 

Also, the resource to support the above expansion plans will be completed this year, and it’s one of the highest-grade resources in the world. Ultimately, this leads into K92 becoming one of the highest grade and lowest cost producers globally. Another benefit of the company is that it’s able to grow and expand with its own cash, which means shareholders interests won’t be diluted in order to raise funds. 

Also, according to Lewins, the COVID-19 pandemic has made the company more resilient which gives it an advantage in the industry. 

Considering that K92 is likely to keep growing exponentially since the region is still largely under-explored and that it’s so resilient, it’s likely one of the companies that you should consider going forward. This is even more so according to Lewins, who says, 

I think gold has great fundamentals going forward. I think the mining industry in general has very good fundamentals going forward.
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