A Junior Gold Miner to Own in Early 2021

I'm coming into 2021 with about 45 positions in the precious metals mining and roaylty sector, in addtion to copper, nickel, vanadium, rare earth and uranium stocks. Many are small flier positions on speculative stocks.

Which are the best prospects in 2021? Depends! CEO.ca has a stock picking contest. My picks for that contest are RYO, platinum PGE and uranium STND (all TSXV). I didn't pick copper CPL.V because it is below 5 cents (anything below starts the contest at 5 cents). Gold explorer TAJ.V didn't make it because RYO covered silver/gold, and I'm not sure when results might hit. Plus, I wanted diversification across different commodities. I own all of these stocks, but I picked them as long-shots that could pop in 2021. If there was repeated play in the contest (compounding returns over time), I would haven chosen different stocks with higher confidence rather than higher potential price gains.

I entered the stock picking contest for the first time last year. For the 2020 contest, I am in the middle, my picks were INOV -1.70% SVE.V 102.70% NCP.TO 38.89% Total return 46.63% through December 27.

For the summer contest, I was in the top quarter with NCAU.V 64.44% SVE.V 61.36% FFOX.V 45.00% Total Return 56.94%. The only one I don't own (yet?) is FFOX, it popped before I put my position on.

A Pick For 2021

There are many flavors of speculative gold mining shares: some are extreme speculations on a possible discovery, some are explorers with a decent discovery but prices came down, some are great bullish setups, some are moving towards production. I own lots of miners for different reasons. In light of this, one early 2021 pick hits a few buy factors: it is moving towards production, it is very undervalued based on expected cash flow and the chart tells me the price could rise about 150 percent before hitting resistance. If I put all my speculative holdings on a spectrum, the least speculative are miners heading for production. This one is more specualtive because of management's track record, a step below Rio2 (RIO) which is advancing towards production in 2022 (One to own later in 2021 if going by news flow, although the chart is close to breaking out. I have a significant position in RIO and am comfortable waiting.) I have a small position in the one below, but will expand it as 2021 gets underway.

Gowest Gold (GWA). They are aiming for near 100,000 oz on their project that has about 1.2 million ounces in the ground, giving them a conservative mine life of 10 years, but they're starting smaller at 40,000 oz per year to keep capital expeditures lower. GoWest closed 2020 with a market cap of $27 million. I think they will eventually earn more money in a single year when production ramps up. Slap a multiple on those earnings and there's quite a bit of upside for stock at higher gold prices. Importantly, once they get into production they should be able to self-finance capex or borrow at reasonable interest rates and avoid dilution.

There's traffic on the chart up to the 80 cent area, beyond that is where the stock could rapidly advance. Even if it doesn't make it beyond, it is 135 percent gain if it can hit 80 cents. The market is holding here because financing for the mine is unknown. Management hasn't been great with protecting shareholders and there's risk of a dilutive deal or one that gives away far too much of the upside. Having said that, the price reflects most of this risk. I think the stock will breakout on any news of a financing deal.

The Company also notes that it is working with interested parties and reviewing both short- and long-term financing opportunities required to raise sufficient funds to complete the bulk sample and advance Bradshaw towards commercial production, targeted for 2021.

The above is from the December 9 news release: Gowest Gold: First Bradshaw Gold Ore Being Processed. I like the risk/reward.

I previously posted GWA in early November. It was a potential breakout at 45 cents, but quickly went back into consolidation. The larger picture remains bullish.