In 2020, gold continued its secular bull run that started in December 2015.
It advanced 25%, which was its largest yearly gain since 2010.
Can gold advance further in 2021?
Probably, because the two primary drivers of gold in this bull market, namely quantitative easing (QE) and near-zero interest rates (negative real interest rates), are still in play.
In December 2020, the Fed signalled it would continue its QE programs until the U.S. economy fully recovered from its current woes.
Economists predict this recovery won’t happen until at least 2022.
Meanwhile, interest rates are expected to remain at near-zero for even longer, with many financial experts predicting rates won’t budge until 2024.
Now, given that mining stocks are leveraged plays on the gold price, gold miners will continue to be on investors’ radars throughout this bull market.
However, not all gold miners are created equal, because junior gold miners are often bigger leveraged plays on the gold price than the majors.
Even better is a junior miner that is not only active in a hot mining district, but is also on the cusp of gold production.
Canadian junior miner Sonoro Gold Corp. (TSXV: SGO; OTCQB: SMOFF) fits this profile. It recently changed its name from Sonoro Metals to better reflect its focus on gold.
Sonoro has adopted an ambitious strategy to develop its highly mineralized properties in Northern Mexico: it will finance exploration of higher-grade deep deposits using cash flow from fast-track development of lower-grade shallow deposits.
SONORO GOLD CORP. : ON DECK FOR A TRANSFORMATIVE 2021
After exiting British Columbia in 2015 and Alaska in 2018, the company is now solely focused on Mexico.
Its flagship property, which it acquired in January 2018, is the advanced exploration stage 1400-hectare Cerro Caliche concession in the historic gold mining district of Cucurpe, Sonora State, Mexico.
Mexico is a top 10 world gold producer and Sonora State was Mexico’s biggest producer of gold in 2018.
Therefore, Sonoro is active in a prime gold mining location and 2021 could be the most transformative year for the company if everything goes according to plan.
Part of the plan is to be very transparent to investors.
A steady bout of news from the company has kept investors in the loop about its operations.
This high transparency, which is unusual for a junior miner, has probably helped Sonoro to raise money to adequately fund its exploration programs through Q1 2021.
For instance, its biggest fundraise to date – via private placement in July 2020 – was 60 percent oversubscribed. This strong investor interest catapulted its stock to new levels – see stock chart above, as at December 31, 2020.
The key factors that make Sonoro a compelling investment are: a unique business development strategy, high growth prospects, and a solid management team.
UNIQUE BUSINESS STRATEGY
Typically, the strategy of most junior miners is to find abandoned properties in highly-productive mining districts, unlock new value in these properties, and then either sell these assets or outsource their development to mid-tier producers in exchange for royalties.
In other words, juniors often do not have the financial muscle and/or commitment to take properties to production.
Conversely, Sonoro seems committed to making a transition from exploration to full scale commercial production.
To do so, the company has embarked on a dual track strategy of “higher risk but potentially high reward exploration drilling of the Cerro Caliche deeper high-grade gold targets, while we concurrently advance our proposed Heap Leach Mining Operation as an initial step in assessing the property’s shallow bulk gold mining potential.”, according to President and CEO, Kenneth MacLeod, in an August 2020 press release.
In December 2020, during a webinar to update investors on the company’s activities, John Darch, Chairman of Sonoro, sought to reassure investors by saying, “to those who have doubts and are sitting on the sidelines, asking the question: are we actually going into production? The next 3 to 4 months will answer that question.”
When you look at the recent upsurge in price and volume on the stock, it seems as though a lot of investors are willing to take that bet.
HIGH GROWTH PROSPECTS
Sonoro’s immediate growth heavily depends on the outcomes of its drilling programs at Cerro Caliche.
A July 2020 technical report on Cerro Caliche’s resource potential inferred 201,000 ounces of gold equivalent grading at 0.5 grams per tonne of gold equivalent.
However, as at December 2020, less than 20% of the property’s mineralized zones had been explored.
Therefore, the company has intensified drilling within Cerro Caliche and will issue a critical, updated technical report by April 2021.
Management believes that the new technical report will considerably add to Cerro Caliche’s resource potential.
Furthermore, the report will determine the viability of a planned open pit, heap leach mining operation (HLMO) to fast-track development of low grade shallow deposits.
If new funding is secured for the HLMO by the end of April 2021, the company will start mine construction in May 2021 and likely pour first gold in December 2021.
Now, while Cerro Caliche is Sonoro’s flagship project, it is not the company’s only highly prospective property in Sonora State.
Its other property, which is the 1,000-hectare San Marcial concession located 30 km southeast of Cerro Caliche, is also surrounded by producing gold mines and Sonoro has not even started drilling there.
All told, there’s considerable upside for Sonoro’s growth in the next few years.
SOLID MANAGEMENT TEAM
The company’s management team are highly experienced and seemingly capable of executing Sonoro’s transformation from an explorer into a gold producer.
According to the company, the team collectively have discovered, explored, and developed more than a dozen copper and gold deposits or mines around the world.
Gold continued its bull run in 2020 and has already started 2021 on a bullish tone. Consequently, gold stocks are poised to advance this year in lockstep with rising gold prices.
Sonoro Gold Corporation is a Canadian junior miner active in a hot mining district in Sonora State, Northern Mexico.
The company is currently undertaking massive drilling programs at its highly prospective Cerro Caliche property with a view to starting commercial gold production in December 2021.
Given that most junior miners are explorers, the company’s unusual commitment to gold production makes it an attractive investment proposition.
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