While massive short-term gains are the dream for many micro-cap investors, driven by the proliferation of crypto and the meme stock craze, generational wealth in the stock market is most commonly attained, if I may be permitted the metaphor, by burying shares of high-quality companies in coffee cans in your back yard and forgetting about them for a very long time.
It’s only after compound interest has had a decade or two to work its magic, through operational highs and lows and the changing economic cycle, that investors can reasonably expect to reap life-changing returns. Consequently, it takes a strong stomach and the ability to look past short-term uncertainty to come out ahead.
Investors can minimize this uncertainty by aligning their portfolios with high-quality micro-cap stocks, which we’ll define for our purposes as stocks with value-added assets whose development has yet to be reflected in their share prices.
Here are three compelling candidates to put this thesis into practice, each of which sat down with Stockhouse for an interview over the past week.
Sirona Biochem
Our first high-quality micro-cap stock is Sirona Biochem, market capitalization C$20.71 million, a biotechnology company developing cosmetic and dermatology active ingredients with a specialization in carbohydrate molecules. The company licenses its compounds to leading companies around the world and collects licensing fees, milestone fees and ongoing royalty payments. Its flagship laboratory, the France-based TFChem, has received numerous French national scientific awards and European Union and French government grants.
The company is worth your attention because the stock (TSXV:SBM) has given back more than 80 per cent since 2019 and more than 40 per cent since 2014, despite developing numerous proven products in large-scale markets. These include:
- TFC-1067, a compound for the treatment of dyschromia, or dark spots on the skin, which has been shown to be a safer and more effective option compared with available competitors, including hydroquinone. Sirona signed an exclusive global licensing deal for TFC-1067 with Allergan Aesthetics, an AbbVie (NYSE:ABBV) company, in 2022, through which it receives ongoing royalty payments.
- The TFC-1326 compound, branded as GlycoProteMim, whose unmatched, clinically tested anti-aging properties are expected to hit select markets in 2025 and make inroads into the US$12.5 billion anti-aging market.
With the company being revenue positive and management estimating that “a successful launch [of GlycoProteMim] in just one key region could bring Sirona to profitability as early as 2025,” it’s hard to justify the broader market’s sustained pessimism, and well worth waiting for sentiment to turn optimistic.
Howard Verrico, Sirona Biochem’s chairman and chief executive officer, spoke with Stockhouse’s Lyndsay Malchuk about the company’s rollout of GlycoProteMim. Watch the interview here.
New Pacific Metals
Our next high-quality micro-cap stock to watch is New Pacific Metals, market capitalization C$346.38 million, a Canadian junior miner with three precious metal projects in Bolivia that reveal its stock’s more than 50 per cent loss since 2019 to be a monumental bargain. These include:
- The flagship Silver Sand project, whose world-class size is supported by a 2024 pre-feasibility study detailing a post-tax net present value (5 per cent) of US$740 million at US$24 per ounce of silver, representing a more than 25 per cent discount to the US$32.05 price at the time of writing, and initial capital costs of only US$358 million.
- The 44.5-square-kilometre Silverstrike exploration project, which is notable for multiple zones with extensive high-grade silver, lead, zinc and copper samples dating back to 1995.
- The high-margin silver-lead-zinc Carangas project, whose 2024 preliminary economic assessment details a post-tax net present value of US$501 million at base-case prices of US$24 per ounce of silver, US$1.25 per pound of zinc and US$0.95 per pound of lead, and initial capital costs of only US$324 million.
New Pacific Metals’ multi-pronged development path, marked by multiple mineral resource estimates, a portfolio with demonstrated potential for expansion, and silver’s more than 50 per cent jump in price year-over-year, runs counter to its stock’s (TSX:NUAG) downward trajectory, creating a high-probability path to a significant outcome for those willing to wait on the mining life-cycle’s tortoise-like pace.
Andrew Williams, New Pacific Metals’ CEO, joined Stockhouse’s Coreena Robertson to shed light on the Carangas project’s preliminary economic assessment. Watch the interview here.
Northstar Gold
Our last high-quality micro-cap stock is Northstar Gold, market capitalization C$3.67 million, a junior miner developing and expanding a portfolio highlighted by its 1,100-hectare Miller gold property 18 km southeast of Kirkland Lake, Ontario. Over 11,000 m of drilling since Northstar’s 2019 IPO support the property’s million-ounce prospectivity. For reference, 1 million ounces of gold at US$2,676.90 per ounce (at the time of writing) amounts to more than US$2.67 billion in the ground. The company complements Miller’s upside with:
- The Bryce project, 35 kilometres south of the Miller property, featuring the large-scale stockwork-type gold-copper Sunday Creek porphyry system, stacked lenses of gold-bearing rock at the Pike Lake zone, and multiple untested induced polarization targets and conductors, suggesting the presence of substantial near-surface bulk-tonnage gold resources.
- The Milestone property in Strathcona Township, Ontario, and its Diadem deposit’s historic estimate of 500,000 tons grading 0.5 per cent copper and 0.1 per cent nickel that remains open along strike and at depth, as well as dozens of favourably graded samples to guide further exploration.
Even though management has engaged in robust exploration across these properties over the past five years – with Miller positioned for development through memorandums of understanding (MOU) with Novamera and China-based Hunan Nonferrous – Northstar Gold stock (CSE:NSG) has given back more than 89 per cent over the period, granting you deeply discounted exposure to a value-accretive track record progressing towards an initial mineral resource estimate with each passing year.
Brian Fowler, Northstar Gold’s CEO, spoke with Lyndsay Malchuk about the company’s MOU with Novamera to model, develop and mine a potentially economically viable mineral resource at the Cam copper mine on the Miller property. Watch the interview here.
Join the discussion: Find out what everybody’s saying about these high-quality micro-cap stocks for your coffee-can portfolio on the Sirona Biochem Corp., New Pacific Metals Corp. and Northstar Gold Corp. Bullboards and check out Stockhouse’s stock forums and message boards.
This is sponsored content issued on behalf of Sirona Biochem Corp., New Pacific Metals Corp. and Northstar Gold Corp., please see full disclaimer here.
(Top photo of visible gold from Northstar Gold’s Miller gold property in Ontario: Northstar Gold)