Lion One Metals Ltd (LOMLF)

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Newest Mike Hoy post


20-20 HINDSIGHT DOES EXIST THROUGH KNOWLEDGE AND HOMEWORK!


Behind the world-wide financial scene there exists growing fundamentals and serious financial issues that simply cannot be overlooked. Trillions upon trillions of debt has been created in currencies of all denominations in hopes that these compounding issues will stay hidden and out of sight while those responsible for the coming debacle continue to steal every last penny they can get their hands on before reality inevitably sets in!

Those who believe the events of today have much in common with the events leading up to the Depression of the 1930’s are correct except for the fact that the events leading up to the crash of 1929 were nothing compared to the financial mess that exists today.

As the debt pyramid of the 1920’s imploded, investors overly leveraged in the stock market, were wiped out as the horrors of being on the wrong side of a market financed with 10% margins became a reality. Unfortunately this was just the beginning of what proved to be years’ worth of pain as deflation raised its ugly head consuming everything in its path where growth could only be found in the “food lines!”

No one knows the exact timing when the current day system explodes leaving unprepared investors and bank depositors in a dazed panic desperate to understand why they no longer have access to their wealth. What we do know is bail-ins, negative interest rates and the out-lawing of cash are perfectly clear red flags warning of the imminent dangers ahead!


PROSPERITY THROUGH THE DEPRESSION OF THE 1930’s!

As the masses scrambled to meet their margin calls in a world full of assets backed by nothing but worthless debt, select issues within the gold sector rose to shine brightly. The fact that gold is “pure wealth” and will never be worthless is a pretty good concept to understand in times where assets backed by nothing but debt or should I say “the full faith and credit” of bankrupt entities are liquidated in a panic as the “ability to pay” comes into question!

As the world’s financial institutions move forward with their plans to separate and deny individuals access to their wealth I believe it is now more important than ever for individuals with savings and wealth to target investments which create pure wealth rather than investments which delegate them to being another name on a very long list of creditors hoping to recover their deposits from those they once trusted!

As the US was forced to consolidate or should I say recover from the excesses of “The
Roaring 20’s” beginning with the market crash of 1929; there was at least one stock which returned terrific profits to its shareholders at a time the rest of the Country suffered from a massive “hangover!”

Imagine if you will, owning a stock from 1929 to 1935, where your investment multiplied by more than six times while paying dividends of 150%! Not only did the owners of this investment survive and prosper through the Depression of the 1930’s but the buying power created from this wealth multiplied their gains several times as their profits were redeployed into assets trading for a fraction of their pre-1929 levels!


HOMESTAKE MINES (HM);

Shareholders in Homestake Mines multiplied their wealth through the Depression of the 1930’s as the share price of HM rose from $80/share in 1929 to greater than $500/share in 1935! As nationwide mass unemployment deprived families of income; shareholders of HM were gifted with dividends of $126/share through the same period of time.

Shareholders in Homestake Mines owned the perfect hedge in the 1930’s to survive and prosper. Investors in today’s world not only find themselves in very similar circumstances but the pounding in the precious metals sector since 2011 has created “Black Friday” sale prices on select individual mining stocks. Many mining stocks today are trading at a fraction of what should be considered their “fair market value” making the potential in the mining sector much greater than what existed in 1929 for shareholders in Homestake Mines!

HISTORY IS ABOUT TO REPEAT ITSELF!

As gold prices topped above $1,900/oz in 2011 the multi-year correction in gold created that “once in a lifetime” opportunity in precious metal equities. The most pressing problem for investors looking to buy and build positions came down to the skills, knowledge and experience one had in being able to pick the survivors in an industry where just being able to keep the doors open was and still is a daily challenge!

Those who believe the recent strength in gold prices may have signaled a bottom in gold from the lows of below $1,050 have started to build gold positions once again. We have recently witnessed a recovery in select precious metals equities as their prices begin to rebound from lows which history will record to have been “bargains of a lifetime!”

I personally believe it is inevitable that gold prices will rise sharply over the next several years as investors and the overall population scramble to regain control of their wealth. Bail-ins and negative interest rates are a scam to blatantly tax and steal the assets of anyone with deposits in institutions owned and controlled by those responsible for the challenging times ahead.

Regardless of whether the games being played in the gold and silver pits will be successful in their goal to drive precious metal prices back to test the lows below $1,050/oz and $13.70/oz is irrelevant as many of the surviving gold and silver equities have bottomed as astute investors are accumulating shares for what I believe is an inevitable explosive up leg in gold’s next move to much higher ground as the illiquid financial institutions of the world implode and those fortunate enough to see the writing on the wall take control of their assets why they still can!

I personally believe junior mining gold companies who are either currently in production with positive cash flow or have projects with high grades and low mining costs which can be put into production are investments which deserve the utmost of investor attentions.


RICHMONT MINES (RIC-Can RIC-US)

Richmont Mines (RIC) is a very good example of a Canadian Junior Gold Producing Company which has rebounded sharply from its lows of roughly $1.50/sh C in 2014 after hitting a high of $13/sh C in 2011.

Regardless of whether RIC may have been a little ahead of itself pricewise in 2011 at $13.00/sh, as gold began its multi-year correction, means very little at this point as it most definitely was overly discounted at $1.50/sh in 2014 as items from the 2015 Financials below will show

Since hitting its $1.50 bottom in 2014 the share price has recovered to greater than $7.00/sh C with a closing price on 3-29-16 of $7.24/sh C.


2015 Capital Structure and Financial Results reported on 2-22-16:

Fully Diluted Shares: 62,500,000 shares:
Closing price 3-29-16: $7.24 Can $5.56 US:
Can Market Cap $452M US Market Cap $347M
Cash $61,000,000 Can: Debt $7,300,000 Can:
Overall Resource Increase 187% in 2015:
Resource Grades 6.4g – 8.5g:


2015 Production: 98,000 oz gold:
Average Sales Price: $1,474/oz Can: $1,157/oz US:
Rev $143,000,000 Can: $112,400,000 US:
Cash Flow/Share: $42,400,000 Can or $.74/sh Can: $33,200,000 US or $.58/sh US:
Net Income: $6,800,000 or $.12/sh Can: $5,300,000 or $.09/sh US:

Cost Per Oz: $1,034 Can: $774 US:
All-In Cost: $1,373 Can: $1,074 US:

For those who believe, as I do, that gold’s future has never been brighter and it is inevitable that gold’s price will be higher down the road; shareholders in RIC should have much to cheer about as the next leg in gold’s bull market commences.

Shareholders in RIC will benefit as the rise in gold’s price will not only increase earnings dollar for dollar as we go forward but as investors clamor to own the sector once again the cash flow and earnings per share ratios will expand allowing investors to benefit both ways!

Being a producing junior mining gold company, with cash in the bank, does have distinctive advantages over grass roots junior’s where there is a constant need to raise capital to advance projects of merit forward. For those grass root juniors who are in a position to access financing, the current pathetic market caps dilute existing shareholders big-time as financing is raised with shares trading at or very near their lows.

This dilemma poses opportunity for investors who can differentiate grass root juniors from juniors with a project or multiple projects which are production ready and may be financed through means other than the traditional Private Placement package!


20-20 HINDSIGHT:

Why is it important to write about the explosive profits made and dividends paid in Homestake Mines through the Depression of the 1930’s? Why should one pay attention to the 475+% returns on Richmont Mines since it bottomed in 2014 at roughly $1.50/sh?

The answers to these two questions are very simple. Homestake Mines is a blueprint of history where shareholders in Homestake Mines not only survived the Depression of the 1930’s but received handsome dividends at a time mass unemployment was rampant in the US.

Richmont Mines is a recent success story illustrating the multiple profits to be made from investments in out-of-favor sectors that have been completely oversold. I am certain there existed numerous shareholders who were either building small positions in RIC or had “eyes on the stock” of RIC in 2014 in hopes of building a position at or very near the ultimate low as the precious metals market unmercifully pounded shareholders in the company.

I believe investors who took advantage of the ridiculous cheap share price of RIC are very pleased with the returns they have made on the positions they were able to build. Their knowledge and timing are being very well rewarded. Those with “eyes on the stock” who failed to act missed out and can only lament about the opportunity they failed to capitalize on!

I think it is obvious the one feeling both these parties share, using 20-20 hindsight, is the fact that they should have “backed the truck up” taking full advantage of the opportunity to buy every share of RIC they could get their hands on at prices anywhere near the 2014 lows! It is a rare occurrence when investors are able to build “full positions” at prices near the ultimate lows in a correction because the supply of shares simply does not exist in the limited time period necessary to fill full positions.

Unfortunately, “20-20 hindsight” or a “second chance” are gifts that simply do not exist in the real world we live in today!

OR DO THEY!

It is no accident that I chose Richmont Mines as a classic example in which to show my readers the lucrative profits which can be made from very timely investments in stocks that have been completely and ridiculously oversold. We all desire to own shares in companies which mirror the performance of RIC when their time comes to rebound.

More importantly, we all wish we had the opportunity to invest in “ground-floor juniors” possessing the potential to be successful small producing companies climbing the ladder to become mid-tier producing companies and beyond. Knowledgeable investors who identify bargains which fall into this category many times are rewarded with returns of 10X, 25X or even 50+X their original ground-floor investment!

For those who would like a second chance to “roll the clock back” taking full advantage of missed opportunities; I am pleased to say I believe “The Lion is Ready to Roar!” In my opinion, the advances and development of the last five years in my favorite gold stock are about to handsomely reward investors for their time and patience. For investors in search of that undiscovered gem I believe Lion One Metals has earned the right to be considered as a prime investment in your portfolios!


LION ONE METALS (LIO CAN LOMLF US):

I have closely followed Lion One Metals and their Tuvatu Project in Fiji since they came public in January 2011 at $1/share.

Tuvatu is a hi-grade low cost epithermal system which the vast majority of junior mining companies can only dream of possessing as an asset. LIO has successfully advanced its Tuvatu project from an exploration play with tons of potential to a fully permitted mining project including a PEA which boasts a projected internal rate of return (IRR) of 67%.

Since LIO is a production situation I would like to concentrate on the estimated cash flow which will be generated from Tuvatu. I pulled the production and expense numbers directly from the publicly released PEA on 6-1-15.

I know this information is based on a PEA with a + or - 30% accuracy but I have a hunch the actual number will be on the positive side for shareholders as many costs to enter production have fallen over the last couple of years. The cost to acquire a mill is one specific cost that has fallen sharply from just a few years ago as lower paper gold prices has brought many borderline projects to a standstill while demand to purchase gold in the physical market continues to annihilate every law of economics.

Those who believe as I do will find these numbers particularly attractive since I am of the opinion that gold prices will be substantially higher than current prices two years down the road when LIO reaches these production levels.

Much work needs to be performed and carried out by a competent management team to successfully bring production to the table. The past successes enjoyed by CEO Walter Berukoff and Stephen Mann have proven that they have the background and experience necessary to bring Tuvatu into production.

Before I get into the numbers I must also qualify what is written below as I do not know exactly where or how management stands in the production financing as there are several options or a combination of options in which to choose. Actual financial results will depend on the capital structure after the financing has been closed.

Anyone who may be interested in participating in this financing should give me a call as this financing creates several different options for investors which may be the answers they seek in regaining control of their wealth from institutions which may have other plans for their deposits! I can be reached at the phone number listed at the bottom of this article!

I am only going to forecast the first three years production as the stated production listed in the PEA begins to decline in year 4 without addressing any of management’s thinking and plans to bring additional production to the table.

Underground epithermal systems like those present at Tuvatu tend to replace resources as production moves forward; as in the case of Richmont Mines where overall resources were increased by 187% as a result of continuous and ongoing successful work programs performed in 2015.

I believe management at LIO has a very strong opinion that production will increase beyond year three for many years to come versus a decline to zero in year seven as stated in the PEA. Management has always said that grades appear to increase at depth while continuous work programs have identified several additional targets which could add many years’ worth of production to the known resources at Tuvatu! None of this potential is included in any resource estimates! You might say that what is known about LIO today represents only the “Tip of the Iceberg” as only a very small fraction of the property in Fiji has been explored!



CASH FLOW ESTIMATES;

Below is a simple cash flow chart where total revenues are subtracted from total expenses. If the financing is to be raised where shares are issued instead of, or in combination with debt then these forecasted cash flow estimates would be divided by the total number of shares outstanding after the issue to arrive at earnings per share figures.

Since LIO has proposed a debt issue where physical gold is a redemption option versus cash to retire the debt; one would have to deduct the quantities of physical gold from net production while keeping the total all in cost associated with that production as an expense. This would initially be dilutive to earnings until the debt is retired but would result in substantially less shares outstanding which will sharply increase earnings per share after the debt is retired.


ASSUMPTIONS AS STATED IN THE PEA PUBLIC NEWS RELEASE ON 6-1-15;

Year 1; Total Gold Production 68,200 oz Total Cost; $622+$211= all-in cost $833/oz
Year 2; Total Gold Production 78,600 oz Total Cost; $518+$211= all-in cost $729/oz
Year 3; Total Gold Production 79,300 oz Total Cost; $499+$211= all-in cost $710/oz

Total $ revenue/oz – Total $ all-in cost = Cash Flow with the price of gold at specific levels;

NUMBERS LISTED IN US MILLIONS;

GOLD PRICE; $1,100 $1,200 $1,500 $1,750 $2,000 $2,500 $3,000

Year 1;
68,200 oz;
Revenue; $75 $82 $102 $120 $136 $171 $205
Expense; $57 $57 $ 57 $ 57 $ 57 $ 57 $ 57
Cash Flow; $18 $25 $ 45 $ 63 $ 79 $114 $148

Year 2;
78,600 oz;
Revenue; $86 $94 $118 $137 $157 $196 $236
Expense; $57 $57 $ 57 $ 57 $ 57 $ 57 $ 57
Cash Flow; $29 $37 $ 61 $ 80 $100 $139 $179

Year 3;
79,300 oz;
Revenue; $87 $95 $119 $139 $159 $198 $238
Expense; $56 $56 $ 56 $ 56 $ 56 $ 56 $ 56
Cash Flow; $31 $39 $ 63 $ 83 $103 $142 $182


With a lead time of roughly 2 years to achieve production, I personally believe gold prices will be in excess of $1,500/oz in Year 1 making the cash flow of $45,000,000 US almost 2X the current Canadian market cap of $23,500,000 and 2.5X the current US market cap of $18,000,000.

If my thinking is correct and there exists 10-15+ years’ worth of epithermal production at Tuvatu just imagine, if you will, the share price of LIO in the event the supply of gold suddenly disappears and gold prices explode from current levels.

What if, down the road, the public is denied the opportunity to purchase physical gold and silver at a time their emotions trigger an insatiable desire to own true wealth while their funds are being held hostage by the coming bail-in programs and subsequently stolen by negative interest rates? The time will come when investors panic to unload interest rate sensitive bonds and inflated stocks in a desperate act to protect what wealth they have left!

I think there is a very strong possibility in the next few years that the price of gold could be higher than any of the numbers listed in the table above!

Under these circumstances gold stocks will be one of the few remaining options available for investors to gain precious metals exposure!


As you can gather from everything written above, many questions remain unanswered as to the financing, capital structure and the development of additional resources. These are important questions and, in my opinion, the lack of publicly available answers is the main reason LIO has failed to acquire the increased market cap and public following they deserve and have earned!

For those who are not yet shareholders, this is really good news. For existing shareholders this has been a point of frustration as they have very little to show for their time, patience and investment.

Investors who have taken the time to closely follow the development of Tuvatu through homework and research have gained knowledge that they sometimes find hard to believe as the lack of any interest in the volume and share price does not reflect what is going on behind the scenes. These investors also fully understand that it is only a matter of time before the investing public becomes aware of the same knowledge they possess where those new to the LIO story will be buying shares at multiples from current prices!

All these questions and uncertainties can disappear overnight with a fresh approach to PR where corporate communications bring shareholders and potential shareholders up to date on the events occurring in LIO. This is currently in the works!

Most investors dream of making investments where they are “in” at the “ground floor level!” In my opinion; investors currently taking advantage of LIO are not “in” on the “ground-floor” as they are at “sub-surface” in a company, I believe, will make room for them in the “penthouse” when all is said and done; just like shareholders in Homestake Mines enjoyed through the murderous years of the Depression of the 1930’s!



POTENTIAL GAMECHANGER!

As if this story is not enough; let us not forget the potential existence of an “Elephant body of ore,” which may be present at depth below the epithermal system at Tuvatu just waiting to be discovered.

Many investors in the junior mining sector own shares in companies with excellent projects that deserve to be fully explored. Unfortunately, the current market caps of these companies make it virtually impossible to raise funds in which to move their projects forward without massive dilution to the existing shareholder base.

Imagine owning shares in a company possessing the potential of a major discovery beneath a high grade low cost epithermal system in the bountiful Pacific Rim where exploration of this project will be funded with cash flow from the epithermal production above with very little dilution to shareholders? A discovery of this nature would turn this underpriced junior into a whole new ballgame!

This is an LIO Bonus which will have to wait for another article.

PARTING THOUGHT!

CEO Walter Berukoff has enjoyed many prior successes in his career; among those is Miramar which was acquired by Newmont in 2008 for $1.5Billion and Northern Orion which was acquired by Yamana Gold in 2007 for $1.1Billion; Wally believes that LIO may be the best project he has ever had.

LIO CAPITAL STRUCTURE:
63,500,000 shares fully diluted;
3-29-16 closing price $.37 Can $.285 US
Market Cap; $23,500,000 Can $18,100,000 US


As it is plain to read; I like what I see in Lion One Metals! Obviously, there is much more to The LIO Story than what is written here which is why I invite my readers to phone for the rest of the story!


Homestake was a game-changer for its shareholders through the Depression of the 1930’s.

Richmont Mines is in the process of rewarding its shareholders.

Lion One Metals; could be the best yet!


As always folks, the strong opinions expressed in this article are my own personal opinions generated from 5+ years’ worth of ongoing research. It is important for each of you to do your own homework as in the end your opinions may differ from mine.

I invite anyone with any questions or an interest in the debt financing to e-mail me or call me at the number below.


I am biased as we own shares in LIO and I do have stock options in the company.


402-483-4484 8:00 AM-8:00 PM CST;

Mike,
Read more at http://www.stockhouse.com/companies/bullboard/bullboard/t.ric/richmont-mines-inc#jcKaYtouppAY4PuD.99