Why are shares of Tocvan Ventures (TSX-V: TOC) up 45% this month? GOLD.

Tocvan Resources had another strong day of trading on Friday, closing at $0.64 on convincing volume of 114,000 shares, trading 513,275 shares for the week.

This is the highest weekly volume in a few months, with constant buying moving the stock price from $0.44 to $0.64 since the beginning of March. Why the upward price movement? The upward price trend isn’t the result of one specific reason, but more of several key metrics coming together at one time.

You have heard the old saying, “TIMING is EVERYTHING”, well, it is true. I am sure everyone has been caught in a “Paper Promotion”, this is when speculators and day traders jump on a stock for the sole purpose of selling stock, unfortunately, this rarely results in true value to long-term investors as the price spikes and then falls right back down.

Buying a stock for its underlying asset value will generally provide a good return over time. I can hear my dad now, “if gold breaks $2,000 USD, this is going to be a boost for the gold sector, first the big boys play, then these profits will trickle down into the junior gold stocks”. Speculators are first going to diversify and leverage their money into resource companies that are at an advanced stage or near production.

The last stocks to play in this cycle are penny stocks as FOMO “Fear Of Missing Out” pushes the price of penny gold stocks higher in general. Timing these penny plays generally result in disappointment and loss of money. It is always better to play long term, but if you are a gambler, perhaps keeping a small amount of money for higher risk investments, such as those that only have just acquired a property in a highly prospective area (gold or the new gold, Lithium) or when you hear rumours – the “Dreaded Rumours”

One doesn’t have to look that far back to understand how gold has performed, gold was only $280 back in 1970, and first ran to $2,600 by the early 80’s. The next big Junior Resource gold run started in early 2000 when gold retreated to $450 and subsequently surging to over $2,200 in a short 10 years. Since this high in 2011, gold only dropped to around $1,400 in 2015. I believe the next “Gold Bull Cycle” is about to start given the supply and demand curves alone, i.e. more people and banks buying gold as production can’t meet demand. 

I will add that today it is vastly different than the 70’s and even 2000, multimedia has given real-time access to trading at dramatically discounted prices below $10 per trade allowing for a robust day trading sector to evolve. The introduction and volatility of new currencies such as Bitcoin, but more importantly, increased investor interest is pushing up the price of gold as the world struggles through military conflict and disruption to the Global supply chains. 

Supply, demand, and interest rates are key drivers of gold prices. Gold is often used to hedge inflation under the belief that gold will appreciate and offset inflationary pressures. Gold prices have been on a general rise since the beginning of November as market turbulence, rising recession expectations and more gold purchases from central banks. Several analysts are projecting record highs for the precious metal in 2023.

Historical data shows that gold has performed significantly better than other asset classes during periods of stagflation with the rise in demand spurred on by world population growth and Central banks adding gold to their reserves as a protection against growing geopolitical and economic troubles (including inflation).

In times of war, the fear factor often pushes investors to  move their capital out of riskier assets and countries, and buy gold as a long-term safe-haven investment. Generally under these conditions, gold becomes more popular, replacing traditional currencies and paper assets. My simple conclusion: the price of gold is going higher in the coming years. One has to look no further than Tocvan Resources to find a junior gold stock to potentially become the next producer in Sonora, Mexico. Here is a quick recap of what I believe are the key metrics:

  • Management (CEO, Brodie Sutherland,  has a good grasp of the working geology and steps required to make Tocvan a success),
  • Share Structure (Tocvan has never consolidated its shares but has rather taken a prudent approach to developing Pilar by managing Private Placements at good pricing and minimal share dilution, and a strong shareholder base that has exercised their warrants to raise capital, thus keeping the number of shares around 38 M after 3 years since requiring Pilar),
  • Advanced Properties (Pilar has over 23,000 m of drilling with mineralization starting at the surface and extending at depth. El Picacho acquired last year is a robust gold and silver system located in Mexico), and
  • Access to Capital – they say Cash is King. Tocvan just raised $638,000 and has another $638,000 total potential with warrant exercise at $0.62 with little dilution. They also did a Private Placement in June 2022 to an institutional investor to raise an aggregate amount of $5,125,000 in monthly tranches over the next 24 months, so plenty of “Run” capital well into 2024.

Another important aspect adding to the value proposition of Pilar is the inexpensive extraction of surface material to conduct a 1,000 ton heap-leach sample that could potentially lead to fast tracking a production decision. In contrast, other properties where gold is not at the surface, it becomes very expensive to extract bulk samples at depth.

Also the involvement of a local mining company located only 25 km away to conduct the heap-leach sample is a good indication to me that they are interested in Pilar as potentially their next producing property.

I am reading a bit between the lines, but it is well known that as producing properties reach their end of life, companies start looking for the next potential production properties well in advance, and what better way to fully understand the economic viability before buying, is to get involved earlier in the exploration cycle. 

In addition, the company has completed a renewed permit for Pilar. The permit is valid for two years, allowing for nine trench areas and 83 drill pads at Pilar. The permit will provide access for planned infill and step-out drilling along a 1.2-kilometre trend that remains largely untested. 

A quote from Brodie, “With the addition of being able to drill Pilar for another two years, this completely opens the potential for defining more mineralization on a very prospective trend”.

Reading between the lines again, infill drilling will allow for a maiden resource estimate, further drilling along a 1.2-km trend could significantly increase the resource, and more trenching for collection of additional bulk sample material, these combined could increase the economic viability of bringing Pilar to production in the near-term.

Lastly, I am very excited about El Picacho and the first drill program last year. They own this property 100%, and given the extensive deep underground workings and near surface mineralization, and now that they understand the property orientation better, I am sure drills will start turning soon. I wouldn’t be surprised to see some pretty good drill results going forward.

Related Posts