It’s a maxim that when gold stocks run, first the gold producers come to life, then the near-term producers trying to delineate a resource and lastly come the micro-cap juniors hoping the drill bit gods have been listening to their prayers. Those rules are not hard and fast, though, by any means.
Falcon Gold (TSXV: FG) is an early outlier, a tiny (by market capitalization) exploration play that has really come to life. A month ago, this company was trading at about a 2 ½ to 3 cent range on about 300k to 400k of volume a day. In the past week, it has moved dramatically, from 3 ½ cents to 5 ½ cents on close to 12 million shares of volume. The questions one needs to ask are: 1. Why has the stock price moved? 3. What are some of the potential pitfalls to look for? 3. What may come next?
- Why Has the Stock Price Moved? Some theories:
- Some prominent industry names have lined up behind this deal. Having a “Tookie” Angus and an Ian Graham willing to attach their names to the Advisory Board of a company this small gives some comfort to investors.
- The President is putting out strong material news releases that are resonating.
- The President has been able to get himself in front of players who in turn have been able to articulate his vision to the investment world. This is no small feat, as there are many tiny mining exploration plays dying for attention and investors willing to go on the bid.
- The President is doing plenty of open-market buying.
“Mr. Rayani now owns or has control or direction over (7,509,000 common shares representing 12.42%) for a total investment of $326,480. Assuming exercise of all stock options and warrants that total would represent 10,934,000 shares, or approximately 18.09% of Falcon’s issued and outstanding common shares.”
March 19, 2020 News Release: Early Warning Press Release Regarding Investment in Falcon Gold
- The company is currently drilling. And importantly, they have paid for that drilling.
- Falcon Gold is making smart moves to build their suite of properties, acquiring the adjacent Spitfire & Sunny Boy Claims in B.C, this past Thursday.
So, what is probably the best reason to at least have a look at Falcon Gold? Well, personally, I’d say it’s the ongoing drilling at the Central Canada Gold Project, approximately 20 km from Atikokan, ON. Falcon Gold is drilling where there have been great historical results that stretch back over decades of exploration.
Importantly, Falcon Gold is also drilling in a region with a number of strong deposits. Of note, they are 20 kilometers southeast of Agnico Eagle (TSX: AEM)’s Hammond Reef 4.5 million ounce gold deposit. And Agnico has staked all around where Falcon Gold is currently drilling.
- What Are Some of the Potential Pitfalls to Look For?
- When drilling, it is always possible to drill a duster. In the case of Falcon Gold’s current drill program, they are trying to replicate historical holes at a deeper depth. That definitely heightens their chances of strong results.
- As stated, the current drilling program is paid for. Subsequent drilling depends on putting more money in the treasury, either by exercising warrants, or financing at a higher price.
- Management of tiny plays like this are usually hyper-dependent on a driver of activity. If that person takes their eye off the ball, it is almost a certainty that things slow down. In the case of Falcon Gold, the President, Karim Rayani, has a lot of personal money tied up in the company and has been demonstrably extremely active. That is a good indicator that he will remain a strong catalyst.
- Covid-19 has slowed down the world, and the mining world is no exception. In the case of Falcon Gold, they are drilling with a skeleton crew, so should be able to finish their program and beyond.
- What May Come Next?
In terms of next moves, I think we really need to see what the drill core tells us after it is sent to the assay lab. That will tell us how the following goes:
- Every mining company – no matter what they tell you – is perpetually looking at their next capital raise. Assay results will tell us whether future fund-raising for Falcon Gold is a speed bump to run over – or a hurdle that smacks them clean in the midsection. We do know, though, that Rayani is willing to write cheques. And we know he has real industry muscle behind him.
- Do they drill some of their other Ontario properties while they are waiting for assay results from the Central Canada Gold Project?
- The new BC properties look interesting. Are they going to drill those properties, or do they joint venture them to another market player?
Information for this briefing was found via Sedar and Falcon Gold. The author is currently long the equity. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
FULL DISCLOSURE: Falcon Gold is a client of Canacom Group, the parent company of The Deep Dive. The company has been compensated to cover Falcon Gold on The Deep Dive, with The Deep Dive having full editorial control. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.