With only 1 in 10,000 mineral projects becoming mines following up to 15 years of preparatory work, including exploration, consultation, data analysis and financing, microcap mining stock investors need all the help they can get to make an informed allocation decision.
Green flags to look out for aren’t rocket science, but bear repeating, because due diligence is the only thing separating a well-intentioned but unknowing retail investor from a flyer gone wrong:
First and foremost, a miner must be guided by a management team with ample experience with the company’s minerals of choice, including ramping up related projects into production.
Secondly, a miner must substantiate the potential for economical mineral extraction with high-grade sampling and drilling results, building on the wherewithal to pursue minerals propelled by long-term demand. The more a resource expands in width and depth, the more a stock should reflect this as the company progresses towards an initial resource estimate.
Beyond these two pillars of due diligence, potential investors have little else to rely on, unless a given project reaches the feasibility study stage, which offers a more accurate picture of profits to be reaped – usually within a 10-15 per cent margin of error – but still carries considerable risk, given the years of design and construction ahead before mineral extraction can occur.
To minimize uncertainty about microcap mining stocks in early-stage development, readers can look out for established names that have already run them through in-house due diligence and acquired shares, validating current operations and future plans with skin in the game. We present three such stocks below, each of them offering exposure to tailor-made management teams developing properties with spots reserved, although not yet guaranteed, on the global stage.
Western Copper and Gold
Western Copper and Gold’s (TSX:WRN) flagship Casino project in the Yukon is one of the largest copper-gold projects in Canada, coming in at 7.6 billion pounds of copper measured and indicated and 3.1 billion pounds inferred, and 14.8 million ounces of gold measured and indicated and 6.3 million ounces inferred, as per the property’s 2022 feasibility study.
Casino is expected to produce more than C$10 billion in after-tax cash flow over a 27-year life, guided by a leadership team with well over a century of experience and long tenures with the company.
The project has been vetted by major players Rio Tinto (US$178 billion market cap) and Mitsubishi Materials (JPN¥341 billion market cap), which took 9.7 per cent and 5 per cent ownership stakes, respectively.
President and Chief Executive Officer Paul West-Sells spoke with Stockhouse’s Brieanna McCutcheon about Rio Tinto’s most recent share purchase, as well as the Yukon Government’s C$21.4 million investment in dock infrastructure to support ore exports for the Yukon mining industry.
The news is in addition to a new high-grade, near-surface extension of gold mineralization on the Betty property, which is contiguous to Casino. Results are highlighted by 5.04 g/t gold over 20.85 m.
The microcap mining stock (TSX:WRN) is down by 42.80 per cent year-over-year, but has gained 57.14 per cent since 2019.
Click here to read Western Copper and Gold’s latest investor presentation.
Grounded Lithium
Grounded Lithium (TSXV:GRD) is focused on its Kindersley lithium project in Saskatchewan, which boasts an NI 43-101 resource of 4.2 million tonnes of lithium carbonate equivalent, including 1 million tonnes measured and indicated.
A preliminary economic assessment (PEA) for Kindersley filed in August 2023 delineates the project’s ability to generate C$200 million in after-tax cash flow from 2027 to 2032 from producing 11,000 tonnes of lithium hydroxide monohydrate per year. Production is envisioned to quadruple to 44,000 tonnes per year by the 2030s with existing land holdings.
Grounded’s management team brings considerable resource exploration, production, financing and M&A experience to the table, mostly in oil and gas, though they have already proven out their expertise with the PEA’s robust economics.
Kindersley’s prospectivity is such that Denison Mines (TSX:DML) (C$2.42 billion market cap) optioned the property for up to C$15.1 million. Denison is ramping up one of the largest undeveloped uranium projects in Canada in Saskatchewan’s Athabasca Basin.
Greg Phaneuf, Grounded Lithium’s chief financial officer and senior vice president of corporate development, sat down with Stockhouse’s Ryan Dhillon to discuss what Denison’s involvement means to the company’s future success.
Grounded Lithium stock (TSXV:GRD) is down by 71.67 per cent year-over-year.
Click here to read Grounded Lithium’s latest investor presentation.
FPX Nickel
FPX Nickel (TSXV:FPX), our final microcap mining stock pick this week, holds the potentially transformational Baptiste nickel project in British Columbia, where a high-margin, long-life, large-scale and low-carbon mine is inching closer to becoming a reality.
The mine would produce either a high-grade concentrate (60 per cent nickel) for the stainless steel industry, or battery-grade nickel sulphate, cobalt precipitate and copper concentrate products for battery materials clients, at what is projected to be one of the top 10 highest production outputs in the world at an average of 59,100 tonnes of nickel per year – at only US$3.70/pound in operating costs and 88.7 per cent nickel recovery – over a 29-year operating life, affording it a net present value a little more than US$2 billion.
Baptiste’s appeal as nickel demand continues to rise (slide 4) is a direct result of management that is as decorated as they come, including a chairman in the Canadian Mining Hall of Fame, and multiple decades across the team covering careers in plant metallurgy, mine development, geology, permitting and environmental assessment. Their alignment with shareholders doesn’t hurt either, standing at 14 per cent insider ownership to date.
The company has also shown itself skilled at attracting strategic partners, like Toyota and Panasonic, as well as Sumitomo Metal Mining (JPN¥1.18 trillion market cap), one of the world’s largest nickel producers, which took a C$14 million, 9.9 per cent stake in FPX that will allow it to initiate feasibility study work.
President and Chief Executive Officer Martin Turenne spoke with Stockhouse’s Brieanna McCutcheon about how Sumitomo’s skin in the game and battery materials expertise bring technical validation to the Baptiste project.
FPX Nickel stock (TSXV:FPX) has given back 31.71 per cent year-over-year, but has gained 86.67 per cent since 2019.
Click here to read FPX Nickel’s latest investor presentation.
Join the discussion: Find out what everybody’s saying about these microcap mining stocks on the Western Copper and Gold, Grounded Lithium and FPX Nickel Bullboards, and check out Stockhouse’s stock forums and message boards.
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