Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

2 Mining Resource Companies At Good Buying Levels

By The Gold Report Stock MarketsJun 26, 2018 06:44AM ET
2 Mining Resource Companies At Good Buying Levels
By The Gold Report   |  Jun 26, 2018 06:44AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

Money manager Adrian Day discusses two resource companies in his portfolio that he finds are buys at current levels.

Nevsun Resources (NYSE:NSU) continues to make progress on advancing the Timok property in Serbia, as well as turning around Bisha in Eritrea. Earlier in the month, Nevsun started construction of the exploration decline, a necessary development for the development and eventual construction of a mine at the site. This project will take approximately 24 months.

An alternative development plan is being studied, to de-risk the project by reducing the initial capex and production in the early years. If the company adopts this scenario, an updated pre-feasibility study will be released in the fall, with a full feasibility by the middle of next year, on schedule. Concurrently, an initial resource estimate for the Lower Zone, a joint venture with Freeport (NYSE:FCX), is expected in coming months.

The company is looking at various alternatives for project capex, including strategic partners who could provide political, technical, or offtake support in addition to the capital.

In Eritrea, the company is proceeding with an expansion of mining at Bisha, with an incremental capital cost of around $40 million. This reflects confidence that the metallurgical problems that bedevilled recoveries at the end of last year and early this. The expansion is estimated to generate an additional $104 million in cash flow over the next five years, which will go towards development at Timok.

The lawsuit against Nevsun for alleged mistreatment of workers in Eritrea will now move to the Supreme Court of Canada. Nevsun argues that the case should be heard in Eritrea not in Canada, but lost its argument in lower courts.


Separately, Euro Sun said it would pay half its share of the joint proposal with Lundin to buy the company in cash; earlier, the proposal included C$1 in Euro Sun shares. (The cash would come from Nevsun's war chest, if the bid were successful.) This came in response to investor reluctance to take Euro Sun stock. Significantly, this revised offer was made by Euro Sun alone. We surmise this indicates that Lundin may have heard the market message that Euro Sun is not regarded as a serious partner. We could also infer that Lundin may be talking with Nevsun.

Is Another Offer Coming?

We would not be surprised to see an improved offer—perhaps for a joint venture—from Lundin, or from some other company, though any such offers are slow in coming. Nevsun has stated, however, that after the Lundin proposal was made public, it received interest from several other companies. Given the long-term value of the Lower Timok as well as the significant, if largely ignored, regional exploration potential, we think the current offer undervalues Timok and its long-term potential. It is possible that a formula whereby Lundin buys the Upper Timok and shares with Nevsun in the Lower Zone and exploration could be found, increasing the overall value to shareholders without meaningfully increasing what Lundin has to put up.

This is clearly a story to be continued. In the meantime, Nevsun is good value at the current price level, notwithstanding that the stock could fall back in the near term if it became clear that no offer would be forthcoming.

A Quality Company With Lots Of Activity

Midland Exploration (V:MD) continues to advance work on several projects. At the prospective Vortex zone, a new high-grade discovery at a joint venture with Soquem near the Detour Lake mine, a follow-up drill campaign of eight holes has been completed. Once the assays have been received, which should be shortly, the next drill campaign, to target the best zones identified, will be planned and perhaps commenced later this month.

In the James Bay region, there has been work with partner Osisko in the Éléonore area, work on several gold and base metals projects in the joint venture with Altius, and on its wholly owned James Bay Gold project owned property.

In all, Midland has 11 active projects at varying stages, in joint venture, under option, and some 100% owned, with a total of $6.7 million of exploration spending budgeted, of which Midland is responsible for a little over $4 million. Of course, these numbers can change depending on results, but we can expect a continued steady news flow throughout the rest of the year.

With nearly $15 million in cash—including some $1.75 million from the exercise of expiring warrants in May—Midland is well funded to continue its program. Top management, a solid balance sheet, and multiple active projects add up to a company that is well positioned for success. At the current price, Midland is a buy.


1) Adrian Day: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Midland Exploration. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. Funds controlled by Adrian Day Asset Management hold shares of the following companies mentioned in this article: Midland Exploration and Nevsun Resources. I determined which companies would be included in this article based on my research and understanding of the sector.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

2 Mining Resource Companies At Good Buying Levels

Related Articles

2 Mining Resource Companies At Good Buying Levels

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email