On today’s TSX Breakouts report, there are 22 stocks on the positive breakouts list (stocks with positive price momentum), and 43 securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a soaring small-cap gold stock that is on the positive breakouts list – Prime Mining Corp. (PRYM-X). This exploration company has seen its share price jump 42 per cent year-to-date and the average one-year target price implies the share price may nearly double over the next year. The share price can be thinly traded and volatile and as such is best suited for consideration by investors with a long-term investment horizon within a diversified portfolio.
A brief outline on Prime is provided below that may serve as a springboard for further fundamental research when conducting your own due diligence.
The company
Headquartered in Vancouver, Prime is an exploration company focused on developing the gold-silver Los Reyes Project located in Mexico. Management is targeting exploration in three deposit areas at Los Reyes: Guadalupe, Z-T, and Central.
To fund its continued exploration activity, Prime completed a bought deal private placement in Dec. raising $21-million through the issuance of 14,030,000 units at a price per unit of $1.50. Each unit was comprised of one common share as well as one common share purchase warrant with an exercise price of $2 until Dec. 22, 2025.
Investment thesis
- Open pit discoveries, which offers lower costs compared to underground mining.
- High-grade deposits. Los Reyes project is located in a prolific region. Other players in the region include McEwen Mining Inc. (MUX-T), Americas Gold and Silver Corp. (USA-T), and First Majestic Silver Corp. (FR-T).
- Low-risk mining jurisdiction with access to infrastructure (e.g. roads, water, power).
- Phase 3 drilling program underway with over 195 drill holes planned and five rigs on site.
- Recently raised money to fully fund its planned 2023 exploration activity.
- According to the company’s April investor presentation, Pierre Lassonde ownership position stands at approximately 17 per cent. Mr. Lassonde is the co-founder of the original Franco-Nevada Corp. (FNV-T). Management and board members ownership stands at roughly 15 per cent, aligning their interests with those of its shareholders.
- Potential near-term catalysts: 1) updated mineral resource estimate (expected to be released in May 2023); and 2) positive drilling results.
- Key risks to consider: 1) volatility in the price of gold; and 2) future financings. The company will need to raise additional money to fund future exploration.
Dividend policy
The company does not pay its shareholders a dividend.
Analysts’ recommendations
This small-cap stock with a market capitalization of $307-million has four “buy” recommendations and one “speculative buy” recommendation (from TD’s Steven Green).
The firms providing research coverage on the company are: Desjardins Securities, PI Financial, Stifel Canada, TD Cowen nd VSA Capital.
Revised recommendations
Year-to-date, one analyst has revised his target price. In February, Stifel’s Stephen Soock increased his target price to $5 from $4.40.
Valuation
The stock is commonly valued on a price-to-net asset value basis.
The average one-year target price is $5.15, implying the share price may appreciate 91 per cent over the next 12 months. Individual target prices vary widely and are: $3 (from PI Financial’s Phil Ker), $3.75, two at $5, and $9 (from VSA Capital’s Oliver O’Donnell).
Insider transaction activity
Year-to-date, there has not been any trading activity in the public market reported by insiders.
Chart watch
Year-to-date, the share price is up 42 per cent.
Looking at key technical resistance and support levels, the stock is faces a ceiling of resistance between roughly $3.50 and $4. There is major overhead resistance around $5. Looking at the downside, there is technical support between $1.80 and $2, near its 200-day moving average at $1.77. Failing that, there is support around $1.20.
This small-cap stock can be thinly traded. The three-month historical daily average trading volume is approximately 295,000 shares.
ESG Risk Rating
Looking at three ESR risk providers, Prime is not rated by Sustainalytics, MSCI, or Bloomberg.
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.
This report should not be considered an investment recommendation.
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Jennifer Dowty