Shares in U.S. Gold Corp (NASDAQ: USAU) are in rally mode, trading at $5.37 on Wednesday at the time of this writing, which is over 46% higher than when they started Q2. The potentially better news for investors is that the rally is news-supported and, more importantly, sets the foundation for the steepening share price trajectory to continue.
Those following U.S. Gold Corp already know why, including recognizing value potential in project interests at its flagship CK Gold in Wyoming; Keystone, located 11 miles south of Nevada Gold Mines' Cortez Complex; and its Challis Project, which provides opportunities to unearth gold in the historic Challis volcanic field district southwest of Salmon, Idaho. Those properties have provided plenty of encouraging pre-production data. Couple that with a bullish gold bullion market, USAU may be better positioned than ever to exploit a perfect storm of opportunity—not just at one location but at several in some of the world's most mining-friendly jurisdictions.
Best of all, from an investor's perspective, production could start within the next few months. Here's why:
U.S. Gold Corp Subsidiary Earns A Milestone Permit
On May 8th, U.S. Gold Corp. announced that its wholly owned subsidiary, Gold King Corp., was issued its Surface Gold Mine Permit on April 29th, 2024, from the Director of the Wyoming Department of Environmental Quality, subject to certain conditions. It's a big deal that followed previously being granted its Industrial Siting Permit in 2023. Combined, these two facilitate USAU clearing the major regulatory hurdles towards project development. There is still more work to do, though.
On that front, USAU noted the work to meet final authorization for development is well underway, including its mission to satisfy the remaining conditions to get the approval for a reclamation bond, which has already been submitted, satisfy the Wyoming Pollutant Discharge Elimination System permitting process, which is in the final stages of approval, and receiving the WDEQ Air Quality Division permits, where technical work is under review. While it may appear as an exhaustive list and process, that's not the case. USAU said it's on track to receive the necessary permits around mid-year, per prior guidance. In other words, by the end of this quarter or early next.
Therefore, positioning ahead of those milestones may be wise. Remember, permits aren't a sell-the-news event in the mining sector. Primarily because they are accretive to near-term growth. Luke Norman, Executive Chairman of U.S. Gold Corp., expects that to be the case. About his most recent permit, he said,
"This is an outstanding accomplishment. Since shifting the Company's focus in August 2020 from exploration to the development of the CK Gold Project, through the receipt of the Mine Operating Permit, is a remarkable achievement. We would like to recognize our management team, consultants, and the State of Wyoming regulatory authorities for everyone's hard work and dedication advancing the CK Gold Project. The CK Gold Project sits on State and private ground in Wyoming, which is an extraordinary jurisdiction for resource development, with a clear regulatory framework, and authorities that are knowledgeable, experienced, and motivated to safely and responsibly manage the State's mineral wealth."
He has reasons to appreciate the milestone reached. While all his company's projects have tremendous potential, the CK Gold Project is undoubtedly the current star in its portfolio. It's an advanced exploration and development property within Southeast Wyoming's Silver Crown Mining District. This location is more than stunning from a landscape perspective; its grounds may also protect a treasure trove of potential, with the most recent Technical Report and Pre-Feasibility Study estimating 1.01 million proven and probable ounces of gold intertwined with 248 million pounds of copper.
A Value Proposition In-Play
These numbers aren't just figures on a report; properly exploited, they're the promise of a pre-tax net present value of $323 million at report-time prices of $1,625, which, when extrapolated, presents USAU a forecast annual internal rate of return (IRR) of 39.4%. But know this, too: the current price of gold is $2,389, likely making the upside and IRR at the CK Gold Project significantly higher than that report presented, noting they used prices to estimate when gold was below the $1,700 level. Now reflecting as overtly conservative in relation to the rally in gold and copper, the USAU bulls have plenty to be excited about. Adding to that is that the CK Gold Project, with the newest permit in hand, is racing towards near-term production and, if all goes as planned, enormous value creation.
In other words, USAU setting its new 52-week high share price of $5.37 so far on Wednesday is unsurprising. On the contrary, it's justified knowing that USAU's operations are unlikely to face environmental roadblocks in its mission to transform from an exploration to a development stage company. That's not a lucky coincidence. It's an assumption based on the CK Gold Project being designed to run cleaner than most, not using hazardous chemicals, and having no refinery or air-polluting smokestack.
Moreover, USAU has noted in the press that the hole in the ground made from the dig could be used for water storage for the city of Cheyenne. In addition, USAU believes it can serve another market by selling waste rock, which would deliver more than extra income; the end result closes an open gap related to environmental impact.
The Gold Bugs Attracted To USAU
That's an important consideration. And by USAU checking the right boxes before getting to the drilling-stage start line, primarily those environmentally related, gold investors are paying attention to this junior miner. Deservedly so, noting that value is likely to accrue without unexpected interference. Again, no coincidence. It should result from USAU ensuring its processes, procedures, and interests align with its development partners, the communities where they work, and with the people who work at its company sites.
Indeed, USAU's leadership team has taken the proper steps, sometimes at a painstakingly slow pace, to get its company correctly licensed, fundamentally and operationally positioned, and able to extract what they expect to be a transformative financial haul. Keep in mind that this is all getting done at the right time.
Despite the clashing of talking heads on financial news shows, the most recent May economic indicators point toward a continuation of the bull market for gold and copper into the end of this year. Investors could incite an appreciable uptick in interest in companies like U.S. Gold as a safe haven ahead of what's expected to be a historic and potentially volatile election season leading up to November.
But here's what neither side of the inflation and interest rate debate can hide from: Despite the political spin flavor of the day, report after report shows that while inflation is slowing, it's still hot. And that should generally bode well for gold and, by proxy, U.S. Gold Corp.
After all, historically, gold remains one of the safest plays against inflation. And while higher gold prices can send the share prices of most miners higher, it's also true that some do better than others. USAU proved that's the case in April with its 5% jump. In comparison*, during the same period, Barrick Gold (NYSE: GOLD) moved lower about 1.35% higher, Paramount Gold Nevada (NYSE: PZG) lower by 2.3%, Vista Gold (NYSE: VGZ) closed lower by nearly 9%, and Caledonia Mining (NASDAQ: CMCL) lost over 10% of its value. Incidentally, several of those noted were listed on the 2022 "10 Best Junior Mining Gold Stocks To Buy" published by Insider Monkey. Usually, investors can say the list got stale. However, in the mining sector, two years should yield growth, not declines. (*Prices for comparisons calculated using 04/01/24 opening prices thru 04/30/24 intraday, Yahoo! Finance, 2:31PM EST. Some quotes may be delayed by quotation providers)
Different Is Good In The Mining Sector
Those performances show that not all junior miners should be treated the same. Some, like USAU, deserve the praise they're getting. In addition to investor interest, the company also announced a successful capital raise in April that injected approximately $4.9 million into its coffers. This achievement, comprising a direct offering and private placement, reflects investor confidence and underscores U.S. Gold Corp's institutional and accredited investor relationship resilience at a time when access to capital markets has tightened.
Notably, that investment does come at a time when the Federal Reserve in the United States may have pinned itself into a corner and is finding it increasingly challenging to appease markets, consumers, and companies simultaneously. While there certainly wasn't a sense of urgency to raise interest rates, as of Friday, that talk is again potentially on the table after hotter-than-expected inflation reads changed the narrative at some news desks.
While the "gold bug" news and narrative can favor USAU in the near term, COPPER is another single-word value kicker that can't be ignored. And like its forecast gold reserves, USAU may have plenty of it.
USAU Is A Copper Play As Well
According to estimates, USAU's CK Gold Project alone could hold enough copper to contribute to building at least a million electric vehicles. And remember, they would be selling into an E.V. sector that NEEDS copper to power its vehicles. More importantly, they may serve that demand with potentially record-high prices. While it is a significant opportunity today, it's expected to get better. Bloomberg put out a note expecting copper to hit $15,000 a ton in 2025, about 53% higher than its $9,790 on April 26th. The bottom line is that it's another bullish motivator for investment consideration in USAU.
Moreover, the report shows that while investing in USAU for its gold interests may be appealing, buying for its copper interests could be the transformative catalyst heading into next year. Thus, don't be misled by the company name. USAU is much more than a gold play; it could also deliver a materially significant copper score and fulfill the narrative that copper may emerge as a generational trade as the E.V. sector grows into its expected $50 trillion market size by 2050.
Thus, while noting the valuation gap related to its gold interests is reason enough to capitalize on USAU's exposed value proposition, factoring in the revenue-generating potentials from its copper interests, despite its 46% Q2 run, may make this proposition too good to ignore.
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