Snowline Gold Identifies New Targets In Yukon, Stock Price Dips Are Possible

seekingalpha09-28

Snowline Gold Corp. maintains a “Hold” rating due to its promising projects in the Yukon Territory and current stock price performance amidst market volatility.Despite a 3.85% increase since February ...

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With this update, the Hold rating given in the previous analysis for Snowline Gold Corp (OTCQB:SNWGF) stock is confirmed. The company is exploring its flagship Rogue Gold Project, consisting of 4,580 mineral claims covering approximately 94,397 hectares in the Selwyn Basin of the Yukon Territory. Since Last \"Hold\" Rating: How Snowline Gold Corp. Performed Driven by progress in exploration activities that further increase the possibility of a future gold mine, the share price had positive momentum, underpinned by strong bullish sentiment toward gold. This continued until the stock price crashed in early August due to a sudden pessimistic mood in the stock markets. There was nothing wrong with the stock. Previous analysis suggested waiting for the price drop, which actually occurred in early August. Regardless of the trigger, investors who bought the dip in the stock price are now better positioned to take fuller advantage of the positive fallout for shares from rising gold prices coupled with the company’s progress in exploration. Since the “Hold” rating in the last analysis at publication on Feb. 28, 2024, Snowline Gold shares are up 3.85%, underperforming the S&P 500's change of +12.85% at the time of writing. But most likely, the stock price would have done much better had it not crashed during the major sell-off in global markets in early August. To limit losses in other assets during the sell-off, investors have been taking profits in the precious metal, analysts at Commerzbank AG signaled based on past trends. Snowline Gold shares were dragged down by their positive correlation with the Gold Spot Price (CUR), which for a while felt the brunt of the profit taking in gold. Snowline Gold Corp. Recovers Thanks to Gold Rally: Price Target Estimates for the Yellow Metal After plunging in early August, Snowline Gold Corp. shares are recovering in line with the ongoing bullish sentiment in gold prices. The driving forces are highlighted below. These will continue to fuel the rally, according to analysts. Price targets per ounce of gold are as follows: Analysts at UBS Group AG (UBS) have predicted that the gold price will reach the target of $2,700/oz by mid-2025, as well as a rapid increase in demand for gold ETFs in the coming months. But with such hot momentum for gold, the price per troy ounce could end up significantly beyond analysts' forecasts by mid-2025. The sharp rise in gold prices is mainly due to two factors: a) Driven by the Fed's easing of interest rates, which began with a jumbo 50-basis point cut on Sept. 18. b) Investors looking for gold investments to protect themselves against losses in the value of their portfolio in a risky and uncertain global environment. Fed policymakers have planned two more rate cuts of 25 basis points each this year, another one percentage point next year and a 50-basis point cut in 2026. Falling interest rates encourage the demand for gold. Since gold pays no interest while US Treasuries yield interest income, lower rates put downward pressure on the opportunity cost of holding gold instead of US Treasuries. But the value of the US dollar is also cooling off with the easing of interest rates. And since the yellow metal is traded in US dollars, it becomes more convenient for foreign investors to buy gold, pushing up the price per troy ounce. As for safe-haven gold, certain policy measures such as monetary actions to curb inflation and higher Western tariffs on Chinese goods and vice versa are putting global growth at risk. Worrying uncertainties include the conflict between Russia and Ukraine and tensions in the Middle East, fueling the potential for headwinds for investors' assets. Seeking Alpha reported: \"If you combine geopolitical risks with the current deficit that we have, along with the low yielding environment and weaker dollar, the combination of all these is what's leading to gold's rally,\" according to Allegiance Gold's Alex Ebkarian, adding that silver should benefit from a rising gold price environment. Further progress in the Yukon Territory since The Last Analysis The Snowline Gold portfolio explores gold mineralization on an extensive land package of over 360,000 hectares in the Selwyn Basin in Canada's Yukon Territory. There are more than 30 gold targets in eight projects, reflecting the importance of the district in terms of precious metals' presence. Snowline Gold is focused on the Rogue, Einarson and Cynthia projects.   Source: Snowline Gold Corp - Company Presentation From the Einarson project Since the previous analysis, the company has identified another significant target within the Einarson project. The new mineral target is called \"Venus,\" the incorporation of which results from the consolidation of the company's 100% ownership of the Einarson project through the acquisition of a privately held 30% interest in 3,003 mineral claims or approximately 61,000 hectares. Venus is approximately 27 km northwest of Snowline Gold Corp's Jupiter discovery. Venus may be characterized by a rich gold concentration, as hinted by a historic drill result of 9.7 grams of gold per tonne of mineral over 38.7 meters. This needs to be confirmed by further drilling, but the proximity to reputable operators supports Snowline Gold Corp's confidence that the Einarson project area is in a fertile region. Venus extends the Einarson project further northwest of the Jupiter discovery and opens the door to significant mineralization prospects given the proximity of Hecla Mining Company (HL)’s Osiris deposit. The Osiris deposit is a Carlin-style gold occurrence along a 25 km trend of the “Nadaleen Project” and it is part of the 1,700 km2 Rackla Gold Property in central Yukon. The Osiris deposit is wholly owned by Hecla Mining Company (HL) following the acquisition of ATAC Resources Ltd by Hecla in July 2023 for a total consideration of US$18.8 million. As of July 2022, the Osiris deposit contained 732,000 ounces of gold or 5.5 million tonnes of gold ore grading 4.12 g/t (grams of gold per ton of mineral) in indicated mineral resources, of which 604,000 ounces of gold or 4.7 million tonnes grading 4.03 g/t were pit-constrained resources. The Osiris deposit also contained 1.04 million ounces of gold or 9.4 million tonnes of ore grading 3.47 g/t in inferred mineral resources, of which 530,000 ounces or 5.4 million tonnes grading 3.07 g/t were pit-constrained resources. Also, at the Einarson project, exploration teams encountered another gold target called \"Galatea,\" located along a structural corridor between 7 km north of the Jupiter target and about 5 km south of Avalanche Creek. Jupiter and Avalanche Creek are Einarson's other two main targets. Jupiter is an orogenic gold target expected to belong to Carlin-like mineralization until several hundred meters below the surface. Avalanche Creek is an orogenic gold deposit along a major fault structure and the known assay averages a rich in-mineral gold concentration of 7.8 g/t Au. Galatea is a structural corridor of over 12 km that appears to have a very high concentration of gold in the minerals, and also provides optimism about the prospect of a much more extensive area of mineralization nearby. Due to the potential presence of many other structures parallel to Galatea, this area may extend further to the south until it meets the boundaries of another promising area in the northernmost part of the nearby Rogue Project. This area, located approximately 10 km north of the Valley discovery of the Rogue Project, appears to be characterized by widespread gold mineralization with the recent discovery of new targets named “Ramsey” and “Livia” which are reduced intrusion-related gold systems (RIRGS). As this analysis will later provide an idea in terms of gold production, RIRGS mines are currently associated with multi million-ounce gold deposits. These new gold targets provide further evidence that the Rogue Project may be part of a highly productive, regionally extensive gold district and that Snowline Gold Corp. therefore may have significant upside that will come to light as exploration activities progress and provide significant upside to the share price. The Einarson property consists of two main claim blocks and several outlying claims, with previous operators having exposed up to 30 kilometres of gold and Carlin Pathfinder Element (As-Sb-Hg-Tl) geochemical anomalies as well as several new gold occurrences over 61,690 hectares, representing a large area of 60 x 52 kilometres. From the Rogue Project 100% Owned by Snowline At Snowline Gold Corp.'s Valley discovery on the Rogue Project, approximately 15 kilometres to the southeast, the company made another gold discovery called \"Charlotte.\" This is “a newly discovered reduced, intrusive gold system” that according to Scott Berdahl, CEO and Director of Snowline Gold, provides a “testament to the scale and the fertility of the district.” Thus, the assumption of an extensive region rich in high-grade gold deposits is not limited to Einarson but extends through the Rogue Project and the surrounding area. The Valley gold target is where exploration has, so far, been the bulk of Snowline Gold's progress in the Selwyn Basin, Yukon Territory. Valley, a reduced intrusive gold system now but only a greenfield project 3 years ago, hosts significant gold resources. Because Valley is a reduced intrusion-related gold system (“RIRGS”), the future mine could be very productive: Valley is expected to host a multi-million-ounce deposit, as are other RIRGS deposits currently in production, such as Fort Knox Mine in Alaska of large Canadian gold mining company Kinross Gold Corporation’s (KGC) (K:CA). Fort Knox produced 123,264 ounces of gold equivalent or 36% of Kinross’ total US or 11.6% of Kinross’ total operations in 1H 2024 at a production cost of sales/equivalent ounce sold of $1,399/oz vs. $1,358/oz for US operations vs. $1,006/oz for total operations. At Valley, exploration activities are underway to extend and upgrade 4.05 million oz of gold in the Indicated Mineral Resource grading 1.66 g/t. Valley also has 3.26 million oz of Inferred Mineral Resources, grading 1.25 g/t. Since the Rogue Project covers a large area of 60 x 30 km and hosts RIRGS similar to those of Valley but occurring in clusters, the district-level potential of Rogue for share price upside with further exploration is astonishing. From the Cynthia Project South of the Rogue project is the Cynthia project. There, Snowline Gold Corp. discovered an additional target called the “Sydney Target,” approximately 24 km south of Rogue's Valley, which could potentially be a high-density, reduced-intrusion gold system. Further exploration activities offer ample scope to confirm the potential, as the Cynthia Project remains largely unexplored. The Stock Price: Due to Cyclicality, a Low Level of Share Price Is Possible As of this writing, shares of Snowline Gold Corp. under the symbol SNWGF on the US OTCQB were trading at $4.25/share for a market cap of $674.76 million and a 52-week range of $2.70 to $4.79. Source: Seeking AlphaThe stock is not trading low as it's above the MA ribbon and much closer to the higher boundary than the lower boundary of the 52-week range. The 14-day relative strength indicator of 66.68 suggests that shares are close to overbought levels and have plenty of margin underneath to test lower share price levels if a healthy price pullback occurs. These pullbacks cannot be ruled out for the following reason: The underlying trend of the Snowline share price, although positive, is not steady as shares are subject to fluctuations in line with the cyclicality of the gold price. As the current environment is risky and uncertain due to threats to global growth and geopolitical tensions, there's the potential for headwinds that could well exacerbate the bearish phase of Snowline's cyclical share price, setting the stage for a significant share price pullback. A recession in the US could be a trigger that could create a general bearish sentiment in US-listed equities, including Snowline Gold Corp. Analysts at Bank of America Global Research do not rule out that such a recession could have been heralded by the Fed's jumbo 50 basis point interest rate cut on September 18. On Monday, Yahoo Finance reported: As Bank of America Global Research analysts put it in a note on Friday, \"With above-potential growth, a strong consumer, and a record-breaking stock market, such a bold start to an easing cycle is hard to justify if a recession isn't imminent.\"  Risks Since the company is still an explorer and does not produce and sell gold, it does not make a profit. Snowline Gold Corp. therefore funds its Einarson, Rogue and Cynthia projects in the Yukon Territory primarily with capital raised through the issuance of common shares. Now the company can use funds available in its cash reserves of $48.9 million (as of Q2 2024), providing an operating margin through 2026 based on approximately $26 million that the company has set aside for total expenses in the past 12 months through Q2 2024. Although the continuation of the Fed's interest rate reduction policy will make borrowing more affordable and effectively expand financing options for the Einarson, Rogue and Cynthia projects, there's a tolerable risk associated with raising the necessary funds and quickly through the creation of outstanding common stock of Snowline Gold Corp. Driven by the progress of drilling in the Yukon, but especially by the bullish sentiment regarding the gold price, the resulting upward momentum in Snowline Gold Corp.'s share price facilitates the raising of funds through the offering of common shares to the market, thereby reducing the risk associated with having to raise the necessary capital and quickly enough. Snowline Gold shares are positively correlated with the bullish sentiment in gold, and as already outlined in this analysis, the yellow metal is on a solid path to continue moving strongly higher, fueled by Fed rate cuts and investors' sought-after safe haven assets amid risk and uncertain global scenario. Furthermore, increasing the number of outstanding common shares will gradually address a problem inherent in holding shares of Snowline Gold Corp. The problem is that Snowline Gold Corp stock is a low-liquid stock. This is of great importance because stocks with low liquidity, i.e. low volumes of shares changing hands daily, imply the risk that investors who have too fat of their positions may find it very difficult to restructure them as desired if a sudden change in circumstances requires acting accordingly and quickly. Snowline has 158.50 million shares outstanding, up 7.8% from the last analysis, with the float accounting for about 104.21 million shares and 22.76% of the float being held by institutions. The stock is characterized by low liquidity in the US market, measured by an average volume of 80,482 shares traded on the US OTCQB over the past three months. The increase in outstanding common shares leads to the prospect of lower earnings per share in the future and as EPS are significant drivers of US-listed stocks, it also happens to see somewhat gloomy sentiment building around the stock when a company announces its intention to raise funds through equity issuance. When they do occur, these are short-term bearish sentiments that don't seem to affect Snowline Gold Corp.'s stock price anyway. The company's recent announcements to raise money by offering its common stock to the market did not have a significant impact on Snowline Gold Corp.'s share price, which has instead continued to align with the bullish sentiment toward gold. The market is happy to see new funds to advance Einarson, Rogue and Cynthia's Yukon projects, despite what this means for shares outstanding, offsetting the prospect of lower EPS for when Snowline Gold will produce and sell gold. In addition, Snowline Gold Corp.'s Einarson, Rogue and Cynthia projects are located in the Yukon Territory of Canada, which carries minimal investment risk as indicated by the Sprott ESG Mining Risk Heat Map 2024. Conclusion Snowline Gold Corp is a Canadian gold explorer working on three promising projects in the Selwyn Basin of the Yukon Territory of Canada. The projects are located in an extended area and appear to provide various opportunities to install gold production in the future. Since the last analysis, Snowline Gold has listed three main targets: But Valley is the flagship, which has made the most progress from the greenfield stage to potential multi-million-ounce production. Meanwhile, the outlook for gold prices is bullish, providing a further boost to the stock's shareholder value creation. Investors may want to target the dips to strengthen their position in this stock in light of the growth outlook.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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