On today’s Breakouts report, there are 59 stocks on the positive breakouts list (stocks with positive price momentum), and 17 stocks are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a stock that is on the positive breakouts list - Battle North Gold Corp. (BNAU-T). However, this positive breakout may be short-lived - at least temporarily.
Battle North’s share price is likely to retreat in the near term. Last week, the share price rallied 24 per cent, taking the stock into overbought territory. In addition, the price of gold is starting this week off under pressure after Pfizer (PFE-N) and BioNTech SE (BNTX-Q) announced positive data from their Phase 3 COVID-19 vaccine trial.
A pullback in Battle North’s share price may present a potential buying opportunity for investors. The stock has a unanimous buy recommendation from eight analysts and an expected one-year potential return of 69 per cent.
A brief outline is provided below that may serve as a springboard for further fundamental research when conducting your own due diligence.
Toronto-based Battle North is a gold exploration and development company. Its flagship asset is its 100 per cent owned Bateman Gold Project located in the Red Lake gold district in Ontario.
On Oct. 21, the company released a Feasibility Study on the Bateman Gold project with total reserves, proven and probable, of over 3.5-million tonnes. The Bateman Gold Project has a mine life of eight years with estimated commercial production of just under 80,000 ounces of gold per year. During commercial production, all-in sustaining costs (AISC) are anticipated to be US$865 per ounce.
The Bateman Gold Project has a relatively short timeline to bring the underground mine into production.
Once approved by the board of directors, initial production is anticipated to start seven months after construction begins. The ramp-up period to commercial production is expected to take an additional 14 months (21 months in total after construction starts). The mill capacity is around 1,800 tons per day. Management will be applying to amend its permit to allow for production of 1,800 tons per day up from its current permitted capacity of 1,250 tons per day.
Investors may recognize the company under its former name, Rubicon Minerals Corp. In July, the company changed its name to Battle North from Rubicon.
Chief Executive Officer George Ogilvie said, “This is the dawn of a new era for Battle North Gold, its shareholders and stakeholders. We believe the new name provides a fresh look at the company’s potential to create value. Fueled by our perseverance and determination, we have significantly de-risked and advanced our shovel-ready Bateman Gold Project in Red Lake.”
Investment thesis highlights
- Management team with a proven track record. The president and chief executive officer George Ogilvie is the former chief executive officer of Kirkland Lake Gold.
- Attractive land package. With a 28,000-hectare land package in Red Lake, a prolific gold mining region, this provides Battle North plenty of exploration upside potential that may extend the mine life beyond eight years.
- Limited geopolitical risk. Its flagship project is in the Red Lake district of Ontario, a mining friendly jurisdiction.
- Emerging junior gold producer. With major infrastructure and permitting in place, initial production can potentially begin in mid-2021.
- Revaluation. Potential for multiple expansion once the company transitions from a gold exploration and development company into a junior gold producer.
- Significant tax loss pools available. The company has $703.5-million in tax loss pools (tax-deductible pools, tax losses, and tax credits), improving free cash flow.
- Rising commodity price. The price of gold has been in an uptrend since mid-2019.
- Potential near-term catalysts. 1) Securing funding for the project. The company needs to raise approximately $40-million to have a fully-funded project. 2) A construction decision is expected to be made by the company’s board of directors in the weeks/months ahead.
The company does not pay its shareholders a dividend.
This gold stock with a market capitalization of $292-million is covered by eight analysts, of which four analysts have buy recommendations and four analysts have ‘speculative buy’ recommendations.
The firms providing analyst coverage on the company are: BMO Nesbitt Burns, Canaccord Genuity, Cormark Securities, Industrial Alliance Securities, Laurentian Bank Securities, Mackie Research Capital, Stifel Canada and TD Securities.
Since the beginning of October, five analysts have revised their expectations.
- Mackie’s Stuart McDougall reduced his target price to $5.10 from $5.50.
- BMO’s Andrew Mikitchook raised his target to $4 from $3.30.
- Cormark’s Brock Colterjohn raised his higher by 10 cents to $4.
- Laurentian Bank Securities' Ryan Hanley cut his target to $4 from $4.75.
- TD’s Arun Lamba increased his target to $3 from $2.75.
The Street is forecasting revenue to rise in the years ahead as gold production ramps up. The consensus revenue estimates are $6-million in 2021, $110-million in 2022, and $155-million in 2023.
The stock is commonly valued on a price-to-net asset value basis.
The average one-year target price is $3.81, implying the share price has 69 per cent upside potential over the next 12 months. Expectations vary widely from a potential price return of 28 per cent to a potential gain of 126 per cent. Individual target prices are as follows in numerical order: $2.90 (from George Topping at Industrial Alliance Securities), $3, $3.50, $3.70, three at $4, and 5.10 (from Stuart McDougall at Mackie Research Capital).
Insider transaction activities
Year-to-date, only one insider has reported trading activity in the public market.
On July 24, the Canada Pension Plan Investment Board sold 10-million shares at a price per share of $1.85.
Year-to-date, the share price has more than doubled in value, rising 110 per cent.
Last week, the share price rallied 24 per cent taking the stock into overbought territory. The relative strength index is at 72. Generally, an RSI reading at or above 70 reflects an overbought condition. Consequently, the share price may re-test the $2 level before continuing its climb higher.
In terms of key resistance and support levels, the share price is approaching an initial ceiling of resistance around $2.30. After that, there is major resistance $3. Looking at the downside, there is initial technical support around $2. Failing that, there is support around $1.80, near its 50-day moving average (at $1.83) and strong support around $1.50, close to its 200-day moving average (at $1.48).
The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company’s dividend policy, analysts’ recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.
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