Billionaire Eric Sprott is a “long-time gold bull”, and claims to hold 90% of his assets (except for Sprott Inc shares) in gold and silver. He advised investors to buy gold before the 2008 financial crash, which proved prescient. The gold price went on to double in three years or nearly triple from the absolute bottom in 2008 to the high in 2011.
He invested heavily in Kirkland Lake Gold, holding roughly 10% of outstanding shares in 2019. He also served as the chairman of the board since November 2016 and was the chair of Kirkland Lake Gold Inc since February 2015.
Kirkland Lake’s share price went up roughly 15x from 2015 to 2019, hitting a market cap of around $10 billion. Owning 10% of a $10 billion company must be nice! Suffice it to say that Eric Sprott did very well on his equity position in the company.
But we suspect his greatest gains are still ahead.
Sprott retired from Kirkland Lake and sold a small portion of his investment. He has since been busy redeploying a portion of those massive gains into junior gold and silver miners at deeply discounted prices. As the market trends higher, Mr. Sprott’s investments have the potential to increase by multiples.
We recently made the case for $8,000 gold over the next 5 to 6 years. Assuming a gold/silver ratio of 60, this implies a silver price of at least $130. An 8x move in the silver price is going to translate into 20x or more for many junior silver companies. The upside potential is huge compared to the downside risk, setting up an incredible asymmetric investment opportunity.
Just because Eric is investing in certain junior mining stocks does not necessarily mean they will be winners or that you should follow him. But he does have an impressive track record, so we think it is worth taking a closer look at the companies he has been investing in lately.
In particular, we will focus on silver junior mining stocks that Eric Sprott has purchased during 2019. This list is not exhaustive and Mr. Sprott is probably making other investments that aren’t required to be disclosed until they reach the 10% ownership threshold.
Without further adieu, here are 7 junior silver miners where Eric Sprott decided to invest his own money in 2019…
Americas Gold and Silver (USAS)
On Sept 19th, 2019, Americas Gold and Silver Corporation announced a strategic joint venture agreement with Mr. Eric Sprott to recapitalize the mining operations at the Galena Complex, located in the Silver Valley of Northwest Idaho. Mr. Sprott committed up to US$20 million to fund capital improvements and operations for the first year to earn a 40 percent interest in the Company’s Galena Complex.
The 100%-owned Galena Complex is located in Idaho’s prolific Silver Valley, a district famous for producing silver, lead, zinc, and copper from such well-known operations as the Bunker Hill, Sunshine, and Lucky Friday mines.
The Company’s claim holdings cover nearly 9,000 hectares. The property hosts three active shafts and two process facilities, the Galena mill which currently produces a silver-lead concentrate and the Coeur mill which is on care-and-maintenance.
The Complex was acquired through the business combination with U.S. Silver & Gold Inc. in 2014. Management has been able to reduce the cash cost per silver ounce by more than 50% by focusing on cost control and operating efficiencies.
Kootenay Silver (KTN.V or KOOYY)
On October 7th, Kootenay Silver announced a $2-million investment from Sprott Asset Management through a non-brokered private placement of 7.7 million units at $0.26 per unit. This investment follows an earlier investment from Eric Sprott in August in which Sprott invested $5 million in Kootenay Silver via a non-brokered private placement of 31.2 million units at 16¢ per unit.
Kootenay Silver is a Canadian and Mexican based silver exploration company actively engaged in the development of two major silver projects in Mexico, including the La Cigarra Silver project in Chihuahua, and the Promontorio and La Negra silver discovery in Sonora, Mexico. The Company has a leading growth profile highlighted by one of the largest junior owned silver asset bases in Mexico and a large generative portfolio of precious metals exploration projects located in Canada and Mexico.
Kootenay boasts over 144 Moz Silver Eqv. (M&I) and 37 Moz Silver Eqv. (Inf.) On November 19th, the company announced drill results that included 6.25 meters of 244 gpt silver with 373 gpt silver over 1.5 meters.
Key shareholders include Eric Sprott (11%), Management & Directors (9%),
Pan American Silver (6%), Condire (9%). Drilling is underway at their recently-acquired Columba project.
Metallic Minerals (MMG.V or MMNGF)
On September 30, Eric Sprott invested $2.75 million in Metallic Minerals via a non-brokered private placement financing. It closed on October 17th. He purchased 12.5 million units of the Canadian precious metals explorer for $1.95 million. Sprott now owns and controls about 12.6% of the outstanding common shares on a nondiluted basis, and around 17.8% on a partially diluted basis, assuming the exercise of the warrants.
Metallic Minerals is a growth stage exploration company focused on the acquisition and development of high-grade silver and gold projects in the Yukon within underexplored districts.
Its flagship Keno Silver Project is located in the historic Keno Hill Silver District, an area that has produced over 200 million ounces of silver. The Keno Project lies adjacent to Alexco Resource Corp’s United Keno Hill Mine site, which ranks as Canada’s second-largest producer of silver, behind Cobalt, Ontario. After a five-year pause, Alexco is getting ready to put Keno Hill back into production.
In September, Metallic Minerals entered into an option agreement to acquire a 100% interest in the La Plata silver-gold-copper property in southwest Colorado. The La Plata property has been privately held with almost no modern exploration in over 50 years on either the large-scale porphyry system or the surrounding high-grade epithermal zones, both of which will be a focus for Metallic Minerals.
Discovery Metals (DSV.V or DSVMF)
On July 18th, Mr. Sprott agreed to purchase 17,564,000 common shares of a private placement in Discovery Metals, which resulted in him holding 19.9% of Discovery’s issued and outstanding common shares. On October 10th, he agreed to invest another $5 million of a $17 million private placement in order to maintain his 19.9% ownership of the company. The private placement was oversubscribed and closed for $19 million.
Discovery is focused on district-scale silver and silver-zinc-lead projects in northern Mexico. At its 100%-owned Cordero project in Chihuahua State, Discovery is exploring one of the world’s largest silver resources and one of the world’s largest silver-zinc-lead metal endowments.
Dolly Varden Silver (DV.V or DOLLF)
On September 12th, Dolly Varden closed a $3.5m financing that included a strategic investment by Eric Sprott. Mr. Sprott acquired ownership of 5,714,286 common shares, representing approximately 6.8% of the outstanding shares on a non-diluted basis for aggregate consideration of approximately $1,342,857. Mr. Sprott now owns or controls 10,714,286 shares (representing approximately 12.8% of the outstanding shares).
Dolly Varden Silver Corporation is a mineral exploration company focused on the Dolly Varden silver properties located in northwestern British Columbia, Canada, 25km by road from deep tidewater. The 8,800 hectare (88km2) properties host a robust high-grade mineral resource and are considered to be highly prospective for hosting further high-grade deposits, being on the same structural and stratigraphic belts that host numerous other, on-trend, high-grade deposits, such as Eskay Creek and Brucejack.
Dolly Varden’s project includes Indicated Resources of 3.4 Mt grading 300 g/t Ag for 32.9 M ozs Ag, plus Inferred Resources of 1.2 Mt grading 277 g/t Ag for 11.47 M ozs Ag.
Silver One Resources (SVE.V or SLVRF)
On July 11th, Eric Sprott invested $2m in a $5m financing. As a result, Sprott is now the largest shareholder of Silver One and holds 10.9% of the issued and outstanding shares on a non-diluted basis and approximately 15.4% on a partially diluted basis.
Silver One is focused on the exploration and development of quality silver projects. They hold an option to acquire a 100%-interest in the flagship past-producing Candelaria Mine located in Nevada. The Company is currently conducting metallurgical tests to determine the best methods for and potential recoveries of silver from the historic leach pads. Additional opportunities lie in previously identified high-grade silver intercepts down-dip and potentially increasing the substantive silver mineralization along-strike from the two past-producing open pits.
Silver One has staked 636 lode claims and entered into a lease/purchase agreement to acquire five patented claims on its Cherokee project located in Lincoln County, Nevada, host to multiple silver-copper-gold vein systems, traced to date for over 11 km along strike.
In addition, they hold a 100% interest in three significant silver assets located in Mexico – Peñasco Quemado, Sonora; La Frazada, Nayarit; and Pluton, Durango, acquired from First Mining Gold, one of the Company’s largest shareholders.
Aftermath Silver (AAG.V or FLMZF)
On November 14th, Aftermath closed a $3.3M private placement, including $2.98M from Mr. Eric Sprott. He now holds shares and warrants representing 19.5% of the shares on a non-diluted basis and 26.6% on a partially diluted basis.
Aftermath Silver is a Canadian junior exploration company engaged in acquiring, exploring, and developing mineral properties with an emphasis on silver in Chile. Their Cachinal project hosts a current mineral resource of 5.7 million tonnes at 101 g/t Ag in Indicated and an Inferred of 0.8 million tonnes at 115 g/t Ag, with associated Au credits (18.41M oz Ag and 24K oz Au).
The Chairman, Michael Williams, has 25 years of experience in structuring, running and marketing TSX-listed companies. He sold Underworld Resources to Kinross Gold Corp for $138m.
We believe that precious metals have bottomed and are in the early stages of a new multi-year bull market phase. Prices for junior mining stocks are deeply discounted and offering excellent entry points for long-term investors. In fact, they are near the most undervalued, relative to the metals they mine, that they have ever been.
Silver is likely to outperform gold as the gold-to-silver ratio is at 87, well above the 20-year average closer to 60. Silver stocks should do particularly well in this environment and offer excellent leverage. So we like many of Eric Sprott’s picks highlighted above, but a few are clear standouts in our view.
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