BC Business
Equinox Gold celebrates the start of mining operations at the Santa Luz Gold Mine in Brazil
The stock: Gold producers generally have been trending downward for months, given the ambivalence around the price of gold. Equinox Gold Corp. (TSX, NYSE American:EQX), chaired by Vancouver mining and renewable energy tycoon Ross Beaty, has done worse than most—down 39 percent year-to-date, to $8.65 on Tuesday—largely thanks to the recent disruption at its Los Filos mine in Mexico. A group of unionized miners and members of the Indigenous Xochipala community blockaded the site in late June, demanding payments in excess of their existing contracts.
The drivers: If you only scratched the surface, you wouldn’t find any nuggets of optimism in this story. But this isn’t the first such blockade at Los Filos. The one last year ended after four months, and some observers think that experience will see this disruption resolved even faster.
Also, Equinox, with a market cap over $2 billion, has other assets in its stable. The company just starting mining operations at the Santa Luz Gold Mine in Brazil (first pour is expected in Q1 2022) and has operating mines in the U.S., Mexico and Brazil and an exploration property in Ontario. In April, it completed the acquisition of Premier Gold Mines, adding a producing mine and a construction-ready project to its portfolio.
So as bad as things look, the potential for surprises lies mostly on the upside if, say, Santa Luz ramps up on schedule or there’s a quick settlement at Los Filos. Management projects 76-percent growth in overall output between now and 2024. Plus, there’s the macro case for increasing one’s gold exposure as a hedge against either of two risks that have been tormenting investors of late: an inflationary spiral or a stock market crash.
Word on the street: “It looks like the market has removed any value for the asset [Los Filos] for the remainder of the year,” Haywood Capital Markets analyst Kerry Smith, who’s maintaining his $19.50 target, wrote in a June 29 note to clients. “We continue to recommend the shares as one of the leading growth companies in the gold space.”
Coming and going: We’re keeping an eye on Vancouver-based CloudMD Software & Services (TSXV:DOC), which just closed two acquisitions for a combined $128 million in cash and stock (plus performance-based earn-outs) and appointed Karen Adams president. The previous president, Amit Mathur, will now focus on CloudMD’s U.S. expansion.