Auryn may gain 190% over the year. Is it a strong-buy?

Stock markets have been in turmoil these last few days, wavering between a risk-on and risk-off mood. While some investors are optimistic due to lockdowns being lifted and businesses being reopened, others fear the escalated U.S.-China tensions will plunge the markets to the bottom once again.

At such times, it’s better to invest in safe-haven assets. They are more dependable and tend to be less volatile. As such, there’s little chance of losing your money due to the sudden collapse of stocks.

Auryn Resources is one such stock. This mining company produces copper and high-grade gold. It operates in the Canadian North and Peru. The stock had some difficulties up to this point, as working in the Peruvian mountains or the Arctic entails high overhead. As a result, Auryn has been operating at a net loss.

However, Auryn managed to turn the tide bit by bit. The losses have been narrowing steadily since 2018. Even with the coronavirus disruptions, analysts forecasted a further reduction in the stock’s net loss per share for the first quarter of 2020.

What caused the company’s success?

Auryn managed to secure C$10.1 million ($7.22 million US) in funding by closing its private placing offering at the end of 2019. It also improved its interest rates on existing loans.

Furthermore, Auryn has released the Preliminary Economic Assessment of their Canadian Homestake Ridge project. This property has the potential to become a high-grade, profitable gold mine. According to the company’s estimation, the new mine will have a production lifetime of 13 years. It will produce up to 88,660 gold equivalent ounces three years after opening, when it reaches peak production.

Roth Capital analyst, Joseph Reagor, stated that the Homestake mine has high potential. However, the analyst thinks that the company can secure maximum value in a roundabout way – by either selling Homestake or merging it with a junior producer. Reagor seems positive that each outcome will result in a premium valuation.

He set his price target at $3.25 per share, with a 190% gaining potential. Presently, the shares are being traded at $1.12 with an upside potential of 88%. However, Wall Street set the average price target of the stock at $2.11.