Bravada Gold (BVA/BGAVF) was one of our best performers in 2016. The XAU index of mining stocks, despite the second half correction, closed 2016 up 74.1%. This was actually the largest percentage increase on record EVER for the XAU, which has been around since 1983. In comparison, BVA was up 500% from .04 to begin the year to a close of .235. The share price at one point in the summer soared up 1,000% to 40 cents and has now basically been cut in half during this correction. Those that outperformed mightily on the upside in the rally are susceptible to greater percentage pull backs as well.
Did we see the best of Bravada’s share price increase or is there more upside to come? I’m betting on higher prices despite being up substantially on my position, which is very significant for me as I own approximately 4% of the outstanding shares between my firm and personally. I actually am participating in the current 20 cent financing as well (more to come on that later). Bravada only has 35 million shares out so their market cap remains tiny at just $8MM CAD (.235 per share). BVA is one of my top junior gold holdings for several reasons.
First, it is a pure play on Nevada gold exploration as BVA owns 15 properties in the state with 5 being developed by partners. Several have been past producing mines including 2 of their best projects in Wind Mountain and Quito. Very large companies have been attracted to BVA prospects including Kinross, Baker Hughes, Coeur, and Newmont currently as active partners. A number of Bravada’s projects have blue sky potential including several that could become 1MM plus ounce gold resources.
Their 100% owned flagship, Wind Mountain, already has 925,000 ounces of gold in the indicated and inferred categories. This equates to Bravada’s entire market value being approximately $9 per ounce in the ground on Wind Mountain and giving ZERO value to the other 14 projects! I can slice and dice comps and analysis all day in many different ways but the clear simple fact is that the stock is TOO CHEAP. Many juniors have valuations of $20-30-40 per ounce of gold resources even after the recent 40% plus correction in the sector.
I think it is very important for investors to consider the stock now before a fresh round of drilling begins at Wind Mountain before the end of Q1 2017. Quito will see drilling and Kinross is active at Baxter, but I expect serious value generation at WM this spring. There are very precise targets in this phase of drilling that will increase the resource but even more importantly, will technically become more attractive to a new partner. We will see consistent news flow from drilling via Bravada and their partners throughout the year.
The company has a very small burn rate and has cleaned up their balance sheet in 2016. A vast majority of the $1MM current financing will be put to work in the ground, which I like to see. By mid-year/summer 2017, with improved information and results from the next drilling program at WM, we should see a $25-30 an ounce valuation on this project alone. That would put BVA in the share price range of 65-75 cents, giving zero value to the other 14 projects. Clearly Quito and Baxter themselves, which have majors in Coeur and Kinross spending millions, have meaningful value. The Baker Hughes barite mine being built will start to throw off cash to Bravada in 2017 as well.
The other 10 or so Nevada properties are at varying stages of development but half of them are good prospects and have had money spent on drilling in the past. Once gold starts really ripping, all of these projects could garner attention, leading to purchases or JV’s. If we give all 14 projects just half the value of Wind Mountain, we’re looking at a $1 plus stock price. That could happen in 2017 but we’ll need to see another strong run in gold and gold miners for it to happen. However, even in a down/sideways gold market, I think BVA penetrates the 40 cent high from 2016 this year. Going from the current 23-24 cents to $1 may seem like a lot. But keep in mind it is just over 50% of the percentage movement that the share price saw in 2016 (2016 was 500%–we would need to see about 300% from current prices to hit $1).
Juniors move baby! Big swings like this are very normal in bull markets and we know that they can be decimated in bear markets. In fact, BVA was trading at $3.20 in May of 2010 and hit a low of 2 cents in 2015. That means the stock lost more than 99% of its value in just over 5 years!! Some investors are still WAY under water at these prices, still down over 90% ($3 to 30 cents is 9/10th’s of their value!). Fortuitously, we happened to start entering the stock in the fall/winter of 2015 and took a big stake in the company for peanuts. So, it’s all in how you look at it. BVA is a very long way from testing its highs in 2010 which would need a 13 bagger from current prices to do so. However, in the gold mining sector, I believe that BVA and other solid plays like MUX and others will eventually EXCEED their 2010-2011 highs!
I’m laying this out now because it is very important that my readers get in the habit of buying positions when stocks are down. BVA is off about 45% from last summer’s highs of 40 cents but I think it is starting to turn on the weekly chart (see below) and will be back over 30 cents soon, leaving the .20’s behind for good. The only reasons that I would sell any shares is if the position size becomes way out of whack compared to my other junior holdings or if I’m exercising warrants, further increasing my holdings at cheaper prices.
The weekly chart above is bullish and a flagging pattern for months coupled with a triangle pattern forming since November indicate a potentially explosive move soon. A breakout above 26 cents with volume will confirm a significant breakout on the weekly and the next major resistance level won’t be until 40 cents. MACD is turning up after being down for 6 months! The chart is absolutely set up for a multi week-month uptrend to begin. However, if we see the triangle broken to the downside (20 cents) with volume first, then the low end of the flagging pattern at 15-16 cents would be a feasible low point. I am guessing the break out of the triangle will be higher as usually the trend continues in the previous direction, which was higher.
For those of you that are accredited investors ($200k annual income the last 2 years, $300k with your spouse, or $1MM in net worth minus your primary home), you may want to jump on the current private placement offering to take a position. The terms are one unit at 20 cents that includes a 3 year full purchase warrant at 30 cents, which is a nice sweetener on top of the healthy discount to market. This is the optimal way to take positions in juniors if you have access to the deals. Luckily, on BVA, we do. Just register your interest amount (minimum is $20K CAD or about $15k USD—100,000 units) via the Issuer Direct page here.
In summary, investors that want to own exciting gold juniors trading at historically low valuations to assets may want to consider taking a position in BVA/BGAVF. I think the stock can be bought up to 30 cents on BVA and 24 cents on BGAVF for a potential double or more in the next 12-18 months. The current private placement will be closing on or before January 13th so accredited investors that are interested should act swiftly to ensure inclusion.
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Legal Disclaimer: I am offering ideas for your consideration and education. I am not offering financial advice. I am not a financial or investment advisor and am acting in the sole capacity of a newsletter writer. I am a fellow investor and trader sharing his thoughts for educational and informational purposes only. Bravada Gold is a sponsor of the Gold Investment Letter and we are being compensated twenty five hundred dollars monthly. I am also the owner of Issuer Direct and will be receiving compensation in the form of a finder’s fee for investors referred to invest in their private placement. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided on the Website is based on careful research and sources that are believed to be accurate, Mr. Muschinski does not guarantee the accuracy or thoroughness of the data or information reported. The opinions published on the Website belong to Mr. Muschinski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Muschinski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published on the Website have been prepared for your private use and their sole purpose is to educate readers about various investments. By reading Mr. Muschinski’s essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Muschinski, Gold Investment Letter’s employees and affiliates, as well as members of their families, may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.