Amarillo Gold (AGC) is far from a household name in the gold mining space. Nonetheless, the company figures to garner the attention of several of its larger peers in South America.
Opportunity for Amarillo Gold
As a definitively "small-cap" or even "micro" gold stock, Amarillo Gold trades under $1 per share. However, it has recently returned to its high point of 40¢ per share that was initially reached when news of its expansion into Brazil was first announced in May. The company's market cap is only slightly above $25 million at the moment.
The profile of Amarillo Gold was undoubtedly raised by the company press release in early June that reiterated its new deal with Brazilian miner Baribras to move forward in the construction of the Posse mine at the Mara Rosa project site. There are also significant tailings—leftover runoff from older mines—in the area that Amarillo and Baribras plan to reprocess with the potential to recover non-negligible amounts of gold and silver.
Another development that works to Amarillo's distinct advantage is the rising precious metals markets. With higher gold prices and vastly higher silver prices, the environment for the gold mining sector is far more attractive for an emerging small miner like AGC.
Appeal of Gold Mining in Brazil
The president and chief executive officer (CEO) of Amarillo Gold, Buddy Doyle, has great deal of experience searching for big gold deposits in the South American jungle. He is noted for discovering an incredible 45-million-ounce deposit in Papua New Guinea that became the Lihir gold mine. It remains one of the largest gold mines in the world. The pending construction of a gold mine in Brazil is the culmination of decades of fearless work, acquired expertise, and calculated risk-taking by Doyle.
Another pair of factor are helping make the development of the Mara Rosa project a reality. First, the important infrastructure around the site is already built. At this point, it's essentially just a matter of putting the project into its production phase. Moreover, this is only one of four major projects the company is eyeing along the Amazon River.
Secondly, the dramatic drop in the value of the Brazilian real means that Amarillo's all-in sustaining cost (AISC) to produce an ounce of gold is remarkably low. It could perhaps turn out to be even lower than the company's initial estimate of about $525/oz, a figure that is already less than half of what it costs most larger gold mining companies.
Accordingly, Amarillo's promising plans for expansion have been met with speculation that bigger gold miners in the region will quickly buy up Amarillo due to the opportunity for such a low-cost venture. Don't be shocked if shares of AGC see a steep increase if indeed the company is bought out. All of this combines for perfect timing for the company that Mining.com describes as "low-risk."
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.