RC: A Buy rating with a 12-month target price of $6.80. Right now, it’s trading at $3.19, so we see it doubling. There’s good value there.
TGR: What other company do you like in Mexico?
RC: Avino Silver & Gold Mines Ltd. (ASM:TSX.V; ASM:NYSE.MKT; GV6:FSE). This is a silver company that has gold. It has two mines: San Gonzalo, which began production in 2012, and the past-producing Avino mine, which began production in January and is ramping up.
We expect the San Gonzalo mine to produce ~1.15 Moz silver equivalent (~1.15 Moz Ag eq) annually for several years. We expect Avino to produce 1.5–1.7 Moz Ag eq annually going forward. This company has pretty decent cash costs. We expect long-term AISC for the company to average around $13/oz Ag eq.
TGR: How do you rate Avino?
RC: A Buy with a target price of $3.10. This is an extremely underfollowed name, so it’s usually a surprise when I mention it to people.
TGR: Baron Rothschild supposedly said, “Buy when there is blood in the streets.” Howe Street and Bay Street have seen blood in the streets for years. Is now the time to invest in precious-metals companies?
RC: I do think so. Given how few gold miners can make money at $1,050/oz, I struggle to see how gold prices can make a further significant downward move. On the other hand, I see lots of potential for the gold price to move a lot higher. Looking at the relative downside to upside, we can say that gold could possibly move another $100/oz down, but on the upside, if events move in the right way, gold could move up several hundred dollars.
TGR: Rob, thank you for your time and your insights.
Read Rob Chang’s energy investing ideas here.
Cantor Fitzgerald Canada’s Senior Analyst, Managing Director and Head of Metals and Mining Rob Chang has covered the metals and mining space for over nine years for the sellside and the buyside. Prior to Cantor, Chang served on the equity research teams at Versant Partners, Octagon Capital and BMO Capital Markets. His buyside experience includes managing $3 billion in assets as a director of research/portfolio manager at Middlefield Capital, where his primary resource portfolio outperformed its direct peer and benchmark by over 28% and 18%, respectively. He was also on a five-person multistrategy hedge fund team, where he specialized in equity and derivative investments. He completed his master’s degree in business administration at the University of Toronto’s Rotman School of Management.