Dennis da Silva, senior portfolio manager, Middlefield Limited
FOCUS: resource stocks
Top Picks: Iamgold, Spartan Delta, Troilus Gold
MARKET OUTLOOK:
The unpredictable tariff policy of U.S. President Donald Trump’s administration has led to significant swings in commodity prices. Gold has been the beneficiary due to elevated uncertainty regarding global economic growth and continued central banks buying to diversify away from dollar-denominated assets. While gold has retreated from recent all-time highs, it is still up over 20 per cent since the U.S. Presidential Election in November. Gold and silver stocks now represent approximately 11 per cent of the S&P/TSX Composite Index. A recent CIBC report estimates that the street still sits somewhere between three to five per cent weighted to precious metals as of year-end 2024. At over US$3,000/oz, we see re-rating upside of 20-30 per cent.
On the other end of the spectrum, negative sentiment on crude pricing appears pretty consensus now, all the while West Texas Intermediate (WTI) has been defending the US$60 per barrel level. The medium to long-term sentiment for gas continues to grow. LNG remains the most topical long-term theme for natural gas. On the supply side, we would need to see a material increase in activity levels and production to meet LNG demand or pricing will have to reset significantly higher to suppress demand and balance inventories. We feel that as the fundamental picture becomes more clear, natural gas prices are positioned to move materially higher, particularly in 2026. Oil and gas equities provide a balance of dividends and per share growth that should deliver a total return in the low to mid teens.
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TOP PICKS:
Iamgold (IAG TSX)
This intermediate gold producer is approaching the finish line on its key Cote (60 per cent of net asset value) mine ramp up with full production by year-end after a difficult, long, and expensive build. Cote is key to significant free cash flow generation yield of 25 per cent in 2026-27, top tier for peer group. Cote is a top five Canadian gold mine by production and puts them on takeover screen. The Cote capital spending blow up (doubled to $3 billion) and the question of economics are behind them when gold is north of US$3,200. Corporate production grows from 440,000 ounces per year in 2024 to over 800,000 ounces per year in 2026 including Cote with declining operating costs. Only six million ounces out of the 20 million ounces of resource is part of current mine plan. Great high beta exposure to gold.
Spartan Delta (SDE TSX)
A small cap natural gas and liquids producer. Company is a result of predecessor selling Montney assets in 2023 to pay $9.5 special dividend and the spin out of Logan Energy. Relatively under the radar name until they started building a large Duvernay oil play in early 2024 just north of Paramount’s project. Transformational growth plan went from a boring / low growth / low inventory gas story to a low debt, self -funded growth stock with a long runway in one of the hottest plays with lots of inventory and future production that will skew more liquids (oil and condensate). Liquids production growth through 2029 will drive significant cashflow growth. I think the market is under-valuing the potential of these Duvernay assets given what their neighbours Paramount and Baytex are doing. I could argue the 2025 exit rate CF-generation of Duvernay alone supports current stock price with nothing given for gas assets.
Troilus Gold (TLG TSX)
A small cap gold development company with past producing assets in Québec. A large, long-life, and significant Au-Cu-Ag project that is at permitting and financing stage. Despite doubling year to date, it is still cheap to other development peers. The 2024 Feasibility Study shows a $1.1 billion capital expenditure open pit project that will produce 300,000 per annum over its life. Highly leveraged to gold price with 10 per cent gold price change driving over a 30 per cent NAV (net asset value) change. It has great infrastructure, cheap hydro power, and a large prospective land base. Management is targeting financing package by early 2026, permits by mid-2026 and first pour in 2029. Currently have four letters of intent from export development agencies totaling $1.3 billion. Current resource of 11 million ounces and one of the few large resources still in a junior’s hands for mergers and acquisitions.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| IAG TSX | N | N | Y |
| SDE TSX | N | N | Y |
| TLG TSX | N | N | Y |
PAST PICKS: March 4, 2024
Headwater Exploration (HWX TSX)
- Then: $6.95Now: $6.49
- Return: -7%
- Total Return: 0.85%
Tourmaline Oil (TOU TSX)
- Then: $62.80
- Now: $63.59
- Return: 1%
- Total Return: 9%
Capstone Copper (CS TSX)
- Then: $7.21
- Now: $7.74
- Return: 7%
- Total Return: 7%
Total Return Average: 6%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| HWX TSX | N | N | Y |
| TOU TSX | N | N | Y |
| CS TSX | N | N | Y |
