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GOOD NEWS ON THE WAY!
6-10-2014
I sent the "Welcome everyone" article below on 6-3-14 to new investors who responded to my publicly posted article “CORRUPTION, GOLD, CHINA, THE FED AND A TIMELY OPTION.”
I believe this is a particularly timely update discussing the problems faced by the “typical junior” with an introduction to Lion One Metals (LIO) . It is very important for investors to understand that all juniors are not created equal. Like the wealth of the world I believe some juniors fall into the “1%” category offering spectacular potential returns to the fortunate few who own them while the majority of juniors struggle at the bottom of the ladder to just get by.
This past weekend I had the pleasure of hosting Walter Berukoff, the CEO and Founding Father of Lion One Metals in Lincoln Ne. I must say this was a weekend well spent.
For the past three years Wally has built LIO one step at a time just like anyone who has the knowledge and experience gained from developing and playing a part in the development of seven mines in the past. Wally feels now is the perfect time to bring all the pieces together so the investment world can begin to see the potential that lies within.
All of you received an e-mail update at the beginning of April where I wrote about Lion One Metals LIO. When the two updates are combined with recent news releases from the company the overall picture of LIO begins to take shape.
In the next update I will tie all the pieces of the puzzle together where I think you are going to understand exactly why I have nicknamed the Tuvatu project in Fiji “The Envy of the Pacific Rim!” It may take a couple weeks to finish but I assure you the wait will be well worth the time. If successful in my endeavors I believe investors all over the world will begin to hear The Lion ROAR!
Right now we are witnessing the worst bear market in the history of the precious metals markets. Many times getting out of bed in the morning can be a challenge. I also know that times like these create opportunities for investors armed with the proper knowledge to build positions in companies at prices they will find hard to believe down the road.
I have not been compensated to write this article but we are shareholders where our average cost is three times the current price and I am not the least bit concerned. My only regret is the fact that if I had the opportunity to have that money invested at these levels we would then have three times as many shares as we now own. If my thinking is correct on LIO it is not important as to how many times it multiplies in price. The ultimate determining factor in establishing the wealth created from your investment will be the number of shares owned. At $.35/sh the buying power of a dollar will never be greater.
Enjoy the article and remember this was mailed out a week ago to new additions to my e-mail list. As always these are my own opinions and anyone with any questions can reach me at the number and e-mail address below.
Welcome everyone,
The weakness in the Junior Mining Sector for the last three years has created an opportunity for investors like none we have ever seen before. Who could ever have imagined gold would rise to $1,900/oz from below $300/oz, correct to $1,100/oz with junior mining stocks trading at historical all-time lows without a bid in sight.
I think you will find the information I share with you in this article to be very timely. Few investors have been introduced to the company in question and those who have find themselves in a position where they are burdened with more questions than answers right now. This is all about to change as several years of hard work by management come to fruition putting shareholders in a position to receive the long-awaited answers to their questions.
Before I share this fascinating story with you there are a few points I believe are important which investors must understand about the current state of affairs in the Junior Mining Sector; both good and bad!
I believe many juniors will show returns far beyond the realm of what would seem possible today for investors who have the foresight to ignore the games being played with the paper price of gold. Investors who understand that it is only a question of time before the day arrives where out of control spending and the creation of fiat paper come to an end turning the page to a whole new chapter in the precious metal sector.
Those who are able to hold on and build positions will be handsomely rewarded for the pain and suffering endured during the trying times we have right now. Unfortunately these rewards can only accrue in companies who survive the washout currently underway.
HURDLES IN THE JUNIORS!
The last several years have been very challenging for those who own precious metal stocks to both your health as well as your wealth. Prior to this debacle many juniors were successful in advancing projects of merit while proving up resources the market and investing public fail to recognize as gold safely stored in the ground. This overlooked and very valuable resource will be available for future consumption at the discretion of those fortunate few who then own the resource.
Very few investors understand the vital role these undeveloped resources will play in the future as the Producing Countries of the World reject fiat paper as payment for their goods and services from the Consuming Countries of the World. If any of the points I made in my article “CORRUPTION, GOLD, CHINA, THE FED AND LION ONE METALS” come to pass where the day arrives and the ability of the public to acquire physical gold no longer exists, investors only remaining alternative to participate in, what will then be an all-out panic to own gold will be through investments in mining stocks.
Unfortunately, the collapse in share prices and market caps has taken a very serious toll on the industry as access to capital has become virtually non-existent. This has brought the industry to a standstill as the “typical junior” has been stuck in neutral seeking and acquiring cash whenever and wherever possible with mass dilution to shareholders in an attempt to keep the doors open and just pay the bills. As a result good management teams have been forced to downsize to buy time waiting for overall market conditions to improve in order to access capital. The majority of juniors struggle to just exist as ongoing concerns. As a whole this is the #1 hurdle faced in the junior mining sector today.
Many of those companies who, in the end, do survive will be forced to restructure and reverse splits will be common before management teams are able to get back to work. Those companies, with projects of merit, who survive the current restructuring in the industry offer unique opportunities to investors who find themselves in a position to take advantage upon completion of the restructuring.
The irony of the cycle is the fact that once restructuring is complete the “typical junior” is back to where they started; raise capital, move projects forward, raise more capital in hope of developing an economic resource worthy of being put into production by majors who desperately need to acquire additional resources to replace what they have already depleted.
POTENTIAL IN THE JUNIOR MINING SECTOR:
I am a big believer that now is a perfect time to begin building or adding to positions in companies that do not fall into the “typical junior” category. For the past several years the total precious metal sector has been pummeled and many companies are trading with market caps that in no way reflect the value of the assets contained within.
Many juniors with proven resources and projects of merit share the same often-times overlooked benefits of a penny lying on the sidewalk; the difference is we are talking about ten-dollar bills versus a penny in value. Most will not make the effort to bend over to pick up a penny; practically everyone will welcome a chance to snatch a ten-dollar bill up off the ground. In precious metal stocks the gains come in being the first to recognize the difference.
In my opinion junior mining companies standing on the threshold of becoming producing companies where positive cash flow begins and dilution to shareholders is no longer a threat are companies which should be at the top of every investors buy list. These are the companies which stand to make windfall profits as the correction in gold and mining stocks end and the next leg of the bull begins.
I purposely added a section in my last article on Homestake Mines because I believe the same circumstances exist today that prevailed in the depression for Homestake shareholders. If my thinking is correct then Homestake may serve as a classic example to follow for investors who are seeking protection and profit in the uncertain economic times we have going forward.
One must also understand there is a difference between Homestake which was considered a major producing company and junior mining companies which are explorers with no cash flow. If all goes as planned the junior I will introduce you to will cross the threshold into production by the time the economic uncertainties and conspiracy theories become realities.
For those of you who missed the section on Homestake Mines below is a refresher.
HOMESTAKE MINES: SURVIVING AND THRIVING DURING THE DEPRESSION OF THE THIRTIES!
Homestake Mines was one example of thriving during the hard times of the depression in the 1930’s. This stock went from $85/sh in 1929 to $495/sh at the end of 1935. This in and of itself is a terrific return but the fact remains it also paid cash dividends to its shareholders over this time-frame of $128/sh with $56/sh being paid in 1935 alone.
Anyone with a percentage of their net worth in Homestake Mines understood exactly why investments of this nature are a must in times of deep financial uncertainty. The irony of this statement lies in the fact that the leverage of the 1920’s and 1930’s would qualify as a cash transaction in relation to the gargantuan derivatives markets of today!
Not only were investor returns unbelievable but imagine the buying power these funds had in 1935 after the depression and deflation took its toll on everything else.
The performance of Homestake Mines in the 1930’s proves it does not matter whether we are looking at inflation or deflation going forward. This sector should easily flourish under both scenarios not only giving investors a very viable option to protect their assets but quite possibly a vehicle to change their standard of living if at all possible under the economic conditions we may have going forward.
THE PERFECT HEDGE FOR PORTFOLIO DIVERSIFICATION!
I also believe that stocks like Homestake offer an ideal hedge for investors who may not share my engrained belief in the future of gold but recognize the need to be exposed to the sector in their portfolios.
The same reason we pay premiums for homeowner, health and life insurance policies would be the motivation and logic for these people to diversify and own shares in the precious metal sector. Nobody enjoys paying insurance premiums but the financial loss associated with having no insurance is a loss that is simply not acceptable. The difference lies in the fact that Homestake turned out to be an investment which returned huge profits that would fund a lifetime of traditional insurance premium expense.
Shareholders of Homestake fared very well through the Depression as their investment exploded in value paying handsome dividends all along the way. These dividends allowed shareholders an excellent income at a time when cash flow and jobs were non-existent.
Great wealth was accumulated by those armed with the knowledge and foresight to be on board as Homestake proved to be a perfect hedge as the Government confiscated gold and devalued the Dollar. Seems to me we have a scenario beginning to take shape that could easily rival the Depression if not take it to a whole new level of ugly.
I believe the next leg in the precious metals equities sector will give similar if not greater returns than those achieved back then. As promised, I am about to introduce you to a company I feel may establish itself as “A” if not “The” “Leader of the Pack” in the next bull leg forward.
TIME TO GET REAL POSITIVE!
What if you happened to be a junior mining company where the inherent risks associated with the “typical junior” was not present?
What if you had $9,000,000 in cash and another asset that could be sold raising additional millions where proceeds can be used to significantly fund the total estimated cap-ex requirements of roughly $30,000,000 on a project currently awaiting production permits?
What if cash flow from this future production could be used to fund the exploration and drilling requirements of a separate project, with elephant potential, which I have optimistically nicknamed “The Envy of the Pacific Rim” with no dilution to shareholders?
And what if this exists in a company currently with 63,000,000 shares outstanding fully diluted at a current price of $.35/sh with a $22,000,000 market cap?
Oh, and by the way we must not overlook the fact that, in the past decade, the man behind this company has developed or played a part in the development of seven mines in seven companies of which two companies were sold returning $1 Billion and $1.5 Billion respectively to shareholders.
Incidentally, the main man just happens to believe that the current company is easily the best he has ever had!
This little blurb is simply scratching the surface of the secrets that lay within this unknown and overlooked Junior Mining Company standing on the threshold of receiving their production permits.
LION ONE METALS (LIO-CAN, LOMLF-US) IS READY TO ROAR!
I have followed LIO since it came public in early 2011 with a $1/sh Private Placement raising in excess of $10,000,000. Currently the main focus of LIO is an epithermal mining project called Tuvatu located on the Island of Viti Levu in Fiji.
Extensive work was performed on this project in the 1990’s by a company called Emperor Gold. Emperor hired Bateman Kinhill which completed a positive feasibility study in 1997 which showed Tuvatu to be economic with gold at $300/oz.
Extensive work was performed on the property where 80,000 meters of drilling was completed. Of the 80,000 meters 60,000 is stored on-site. Of the total drilled less than 5% of the core was ever assayed.
The drilling consisted of;
195 holes reverse circulation drilling (12,207m)
263 holes surface diamond drilling (54,501m)
112 underground diamond drilling (13,408m)
Of the total drilling only two deep holes were drilled, the separate potential “Elephant” project, which multiple zones were encountered in both holes. One zone showed 284 grams gold/ton over 3.72 meters.
I am very excited about the prospects of deep drilling on this site particularly when this drilling is expected to be funded by cash flow from the epithermal production which lies above. I just love the idea of being able to drill this potential Elephant with no dilution to shareholders! This is one of two distinct advantages that LIO shareholders enjoy over practically all other junior mining companies. The second advantage I will discuss below.
In 2011-2012 extensive work was performed on the un-assayed core as well as surface work which included mapping and trenching across the property. Success in both areas, drill core examination and trenching, gave management the confidence to pick up where Emperor left off. Emperor spent $23,000,000, in 2000 Dollars, in an attempt to bring Tuvatu into production. You must remember back in 2000 gold prices struggled to be at $300/oz which created an over-all lack of interest in the project to finance additional funding to bring production online. Very similar to the circumstances we have now in dealing with the challenges of the typical junior today!
The fruits of Emperor’s labor awaits the shareholders of LIO as there exists 1,600 meters of underground workings in place in which LIO will not have to shoulder the burden of time and expense to build. Hi-grade surface outcroppings, which were discovered in several areas as a result of the mapping and trenching programs, also offer huge benefits as this can be easily mined offering a multitude of options to management including low cost production and quick cash flow.
The failure of Emperor Gold to bring about production at Tuvatu is a classic example of the point I am trying to make when one considers the huge obstacles faced by the “typical junior” today. A lack of funding and overall market conditions will simply not allow many of these juniors to exist going forward. Those who eventually wind up with the projects and properties of merit with the financing to finish the work started by those who failed before them are opportunities I believe offer investors potential far beyond any alternative investment today.
THE SECOND ADVANTAGE!
The second advantage shareholders of LIO enjoy is the experience, success and wealth of the main man behind the company.
Walter Berukoff is the CEO and Founding Father of LIO. His successes with Miramar which was sold to Newmont Mining in 2008 for $1.53 Billion, Northern Orion which was sold for $1.09 Billion in 2007 pretty much speaks for itself.
Currently there are 63,000,000 sh outstanding fully diluted trading for $.35/sh. Wally personally owns in excess of 33% of outstanding shares fully diluted and he was very happy to add to his position recently when the stock traded on its low of $.25/sh. with no other bids in sight.
With an estimated $30,000,000 cap ex to achieve production there will be a need to raise some additional funds. I do not yet know what the financing package will look like when complete as Wally has many options available to him. I do know there are many wolves at the door right now all looking for a piece of the pie as they hope to receive the opportunity to finance Tuvatu as they are fully aware of its value and potential.
Unfortunately many of these potential investors fail to recognize the past financial success enjoyed by Wally has enabled him the luxury of being able to personally fund any difference in cap-ex requirements if he were to so choose.
With cash on hand of $9,000,000 plus other options to raise additional millions Wally and LIO are not plagued with the curse of the typical junior mining company. This is the second distinct advantage that shareholders of LIO have over the typical junior mining company.
I have left out information and management estimates on specifics such as annual gold production and all-in costs per ounce for my next article as I will write this up after what I consider to be a very important meeting with Wally in Lincoln Ne on June 7-8. I am honored that Wally is choosing to take time out of his busy schedule and come to Lincoln.
I know I have barely scratched the surface of the potential for LIO giving no mention at all to any of the other projects in the company which are considerable. After my visit with Wally I plan on writing a comprehensive report on LIO bringing everyone completely up to date. Needless to say, I believe shareholders will have a lot to cheer about as they find out in detail the accomplishments of the last three years and the direction going forward.
No doubt one of the subjects to be discussed in detail when Wally comes to town will be what he would like to see for a financing package. The opportunity may exist for some of you to participate in the financing. Anyone who would like an opportunity to do so should contact me.
As many of you can surmise from my article; I am very excited about what I see and I am anxiously looking forward to writing a comprehensive update sharing the knowledge I gain with all of you.
Needless to say there is a lot more to this story than I have revealed here in this article, anyone with any questions can always reach me through e-mail or and I prefer a phone call at the number listed below.
I view LIO as an opportunity about to leave the station. There is plenty I would like to say about my opinion of the dirt cheap $.35/sh price; but won’t. What I will say is “don’t get used to the stock trading at these levels because I believe that will soon change!” If for some unknown reason the price were to hang around these levels or even show weakness from here I would have a big smile on my face as I know this will give everyone a chance to build a position at prices they will love to brag about down the road.
As always, everything in this article is my own personal opinion and in the end it is up to each of you to do your own homework as your opinion may vary from mine. I have not been compensated for writing this article but I believe that could change going forward as I would like nothing better than telling the world why all investors need to own a piece of LIO in their portfolios.
402-483-4484 8:00 AM - 8:00 PM CST
mhoy@neb.rr.com
Mike,
check out BONZ gold stock
Anyone here? Novagold has signed a very important financing agreement with George Soros, yes George Soros the legendary investor! NG is setting new highs and is still trading at one tenth its mineral value.
All our stocks are doing amazing, NG Setting new highs, and AMOK really doing good as well. Anyone out there?
Almost allof the good businesses are saturated with government officials ownership over there.Oh say,we started our jr miners board Muaythai's Miners yesterday.We were talking about it before I saw your board.Feel free to come visit and see what we got goingon.I'll be recomending posters to your board for gold specificstocks.We talk about allof them , gold silver platinum REM's base and industrials , coal...
Well that should be a good sign :)
No ,I haven't.Oh and the company is %52 owned by a Thai partner.The thai partner is owned by govt.ministers.
Here is one that I like, that trades at a deep discount to discovered resources: http://www.witsgold.com/
Wits Gold holds title to NI 43-101 compliant total inferred resources of 151.7 Moz of gold and 267.8 Mlbs of U3O8. This includes 19.9 Moz of indicated resources and 5.4 Moz of P&P reserves at Bloemhoek
These guys are crazy, they may have one of the largest deposits in the world and they only traded at a market value of $216M their indicated resources are 20,000,000 ounces of gold While their inferred is as high as 151,000,000. Kind of makes you cringe!!
So basically for 216m$ you are getting between 20b$-151b$ in gold wealth at TODAYS gold price. I like WGR:CN a lot...
Whats also interesting is that it appears the market is discounting them similarly to how they did Seabridge so the stock is actually down this year!
Muaythai, I am going to look into Kingsgate consolidated and let you know what I find. Sounds like an interesting one, although as I said before I don't love the situations where there isn't a history of government friendliness, even though I have been to Thailand myself, the government there has gone through some hicups lately, did you hear about the Shinawatra case being settled yesterday?
Yes ,my friend orca showed me that.It makes sence tome ,asChina is agressivly increasing their reserves ,and have a truck load of potentially toxic US treasuries to unload.
Nice info to know.Do you have any thoughts on kingsgate consolidated? They are an aussie.They have 1 of 2 operational mines in the leoi/petchaban massive sulphide belt in thailand.The only compitition they have is Tongkah Harbour.Tongkah harbour is in the extreem north of the belt , and have thousands of square miles of ocean dredging rights for tin in the Addaman sea as well.Thailand ,because of their more than %50 thai ownership laws is virtually unexplored ,yet they have a huge gold belt going right through the middle of the country down into Cambodia or Kampuche if you like.Kingsgate has their mine right smack dab in the middle of the belt ,and is constantly expanding everytime you turn around.Not a bad operation if you like aussies.
global gold is in armenia.their neighbor.
Great Article today about China increasing its Gold Purchases:
http://seekingalpha.com/article/190803-why-chinas-rumored-imf-gold-purchase-if-true-would-be-highly-significant?source=feed
Apex Silver, actually was founded by Tom Kaplan who is regarded as one of the greatest mining investors. He used to work for George Soros then started Apex, and coincidentally he owns large stakes in both NovaGold (NG) and Gabriel Resources (GBU)
Here is another great list of OTCBB Golds with their Market Caps.
Name Market Cap Price
GOLD STANDARD MINING CORP $749,172,480.00 5.25
GOLD RESOURCE CORP $487,690,304.00 10.58
SANTA FE GOLD CORP $93,140,896.00 1.01
SARA CREEK GOLD CORP $82,694,992.00 1.85
XTRA-GOLD RESOURCES CORP $33,501,240.00 1.03
AMERICAN SIERRA GOLD CORP $30,900,000.00 0.375
GOLDEN RIVER RESOURCES CORP $28,364,930.00 0.16
STAR GOLD CORP $27,607,500.00 0.45
GOLDSPRING INC $26,772,030.00 0.0074
STANDARD GOLD INC $22,028,760.00 1.01
GOLD BAG INC $20,892,000.00 0.3
GOLDEN CENTURY RESOURCES LTD $18,522,500.00 1.25
GOLDRICH MINING CO $14,150,310.00 0.32
GOLDEN PHOENIX MINERALS INC $10,437,770.00 0.047
PATRIOT GOLD CORP $10,358,640.00 0.395
SILVERADO GOLD MINES LTD $8,849,378.00 0.0059
GOLD HOLDINGS CORP $7,595,000.00 1.55
GLOBAL GOLD CORP $5,761,400.00 0.14
MEXUS GOLD US $5,626,640.00 0.08
FISCHER-WATT GOLD CO INC $5,123,077.00 0.07
NEVADA GOLD HOLDINGS INC $4,569,117.00 0.06
MIDEX GOLD CORP $4,550,000.00 0.0251
AMERICAN GOLDFIELDS INC $4,258,575.00 0.2
LINUX GOLD CORP $4,056,056.00 0.069
GOLDEN ARIA GROUP $3,663,185.00 0.25
AMAZON GOLDSANDS LTD $3,275,896.00 0.25
THUNDER MOUNTAIN GOLD INC $2,778,024.00 0.18
GOLD CANYON BANK $2,200,000.00 2
GOLD CREST MINES INC $2,119,425.00 0.025
GOLDEN EAGLE INTL INC $1,975,051.00 0.001
COLORADO GOLDFIELDS INC-A $1,852,912.00 0.0017
GOLDEN ELEPHANT GLASS TECHNO $1,431,200.00 0.05
AULTRA GOLD INC $1,172,989.00 0.012187
CALIFORNIA GOLD CORP $1,166,260.00 0.02
APOLO GOLD & ENERGY INC $1,074,191.00 0.011
RAVEN GOLD CORP $281,920.00 0.008
TINTIC GOLD MINING CO/NV $105,482.10 0.05
SOURCE GOLD CORP 0.98
SHIMMER GOLD INC 1.03
RANGER GOLD CORP 0.15
OREGON GOLD INC 0.1
NORTH AMERICAN GOLD & MINERA
MINATURA GOLD 7.4
IRONWOOD GOLD CORP 0.45
Here ya go. They were APEX silver.
http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=80000&sn=Detail
Let me get a link for you to the mine loss.
GBU - Gabriel Resources has one of the largest resource banks in Europe in Romania with about 15 million ounces. Trading at only 3$ or 1.1b$
There you go... thats why I like to stick with properties in: Canada, US, Australia, Europe, even Brazil is good at respecting mineral rights. Africa/Latin America (ex Brazil) are a little tougher.
Here is a list of OTCBB Gold Stocks:
http://www.equitygroups.com/otcbb/otcbbmining/otcbbgoldstocks/index.html
If I remember rightthey were the remainder of that mining company that lost their world class mine in Peru to Sumitomo.
looks like GDMN was formerly AUM on the TSX they just dual listed on the OTCBB. It appears they are heavily focused on Latin America. One thing you should always keep in mind as a gold investor, is the Gold Reserve (GRZ) debacle. Most of us can still feel the pain on that one. And it teaches a good lesson to not have too much faith in latin american governments when it comes to gold mining.
I like the stock action, I see they recently went public, any information on their properties or a website?
3 American Gold Stocks:
Minera Andes Incorporated
Nasdaq OTCBB: MNEAF; TSX-V: MAI
Minera Andes is a mineral exploration company whose most advanced property, the Huevos Verdes high-grade gold/silver vein system target, is presently undergoing construction to define a mineable ore reserve base. This is the final major step prior to considering a mine production decision. As an exploration company, Minera Andes also has a portfolio of highly prospective gold, silver and copper properties in Argentina.
Pacific Rim Mining Corporation
AMEX: PMU; TSX: PMU
Pacific Rim Mining Corp. is a well-managed, revenue-generating gold exploration company with operational and exploration assets in North, Central and South America. The Company utilizes cash flow from its 49% interest in the Denton-Rawhide gold mine in Nevada to explore, define and advance its El Dorado and La Calera gold projects in El Salvador.
Golden Phoenix Minerals, Incorporated
OTCBB: GPXM
Golden Phoenix Minerals, Inc. is a mineral-property development company headquartered in Reno, Nevada. It specializes in acquiring and consolidating large, advanced-stage properties with near-term production and good exploration potential. Acquisition and development emphasis is on deposits containing gold, silver, copper, and other strategic minerals that are located in Nevada and the western United States.
Got ya.What do you think of GDMN? They are a silver play.
Anyone have lits of gold stocks with reputable resource banks or are in pre-production mode?
Great list of Canadian Gold Stocks , maybe the next Seabridge lies in this list: http://www.latestgold.com/
Sounds like another grassroots exploration play... not really what we are looking for here. We are looking for the next Seabridge!!
All the DD is at the SFMI board.Justgo there follow the links and read.I will say this though.The property is under explored from what I understand.
Muaythai, can you tell us more about this one, does it have a defined resource estimate or are you just using closeology here?
Severstal OAO, the Russian steel and mining company, will make a bid for the shares in Crew Gold Corp that it does not already own, valuing the company at about US$400 million.
This is yet another example of a Gold Stock, CRU CN which is in a similar position to Pre Production companies. This stock was just .10 cents in January now at .30 cents ! A total return of 200% in 30 days.
Oh ,and it's just starting to come onto the radar.
SFMI up %13 yesterday , and up %38 today. Uplisting reportedly next week, and completeing their mill very very soon.Americasn property (War Eagle Mountain) with possibly between 5-8mil oz gold reserves!Silver to gold ratio 14/1! Parent company Goldcorp Holdings.Webcam to view progress at the mill.Checkout the board.Muaythai
Surprisingly there aren't any boards online or on investorshub dedicated to Gold Stocks.
For those of you who are avid gold stock investors, you know that this sector represents some of the best opportunities out there given that conventional analysis and fundamental metrics attributed to regular stocks don't apply.
Over the past few years with the increased value of spot Gold some of these stocks have seen colossal gains. But the truth is that all throughout time gold stocks tend to be either extremely undervalued or extremely overvalued. As a gold stock investor its our job to find these hidden gems when the market is truly missing them.
In general, the most reputable gold stocks are found on the Canadian exchange, however increasingly more and more US and Australian companies are finding their way to solid properties with substantial resources.
Before we display some examples of some amazing returns on Gold stocks over the past 5 years its important that everyone understand some basic industry definitions and jargon.
1) Exploration - Most junior gold companies are simply exploration companies. That means that they go out and either option or lease a piece of land due to the belief that this land may contain an ore body with an economical gold resource. These companies are not what we are looking for. Too many times companies in this space rely on "Closeology" and not "Geology", they will claim to be within close proximity to a major gold mine and 9 times out of 10 that ends up being a huge waste of time. In the case of a reputable grass roots exploration program, as an investor that is more like gambling than investing, because even though a company may be using quality geologists and established methodologies, there is just too much risk and time to wait for drilling results that either may or may not develop into an ore body. While there have been some great exploration plays out there, I don't believe, given the huge amount of exploration companies out there that an investor can make efficient decisions with their capital to single out a candidate. Finally, even when these exploration companies are able to tap into and define an ore body it is then a long way towards constructing and building an economical mine that will provide a decent return on capital to investors.
2) Producing - The other group of gold companies are producing companies. These companies have already gone through the route of identifying a resource and bringing it up to production. What has become clear over the years, is that these companies tend to trade more like utilities and at multiples that are very similar. As an investor looking for the next great gold stock, these are good to have in a portfolio as safe capital investments, but are not going to bring you amazing returns.
What we do Like:
There are two situations that gold companies can find themselves in where history has shown tremendous returns can be achieved as an investor finding these scenarios.
3)Pre-Production - These are companies that have gone through exploration, resource definition, and have raised most of the money needed for constructing a mine. The great part about these situations is that in most cases, the market will value these stocks at a valuation that is in between junior exploration - and junior producer. The market tends to treat these companies as though they are just not going to make it on the production side. And when the numbers start rolling in the market usually agressively corrects its valuation and as a result these stocks soar. These are great situations to be in and we should attempt to find most of the stocks that are in this stage of their lifecycle. There have been many 1,000-3,000% gainers for gold stocks that were in this scenario, from a buy point of buying after most of the capital was raised, but production has yet to commence, until production commences and numbers are reported to the market.
4) Resource Banks - These situations have historically been the best performers for a gold stock investor. These are companies that have successfully defined a resource according to 43-101 standards and either just sit on the resource or continue to prove up and increase the "ounces in the ground". In general the market likes to value these companies at a valuation per ounce of gold in the ground. This valuation is always a large discount to the value of the gold mined for obvious reasons. Many times these companies simply do not have the balance sheet to produce, and in some circumstances the board of directors may even decide that they don't want to produce. The fact of the matter is, quality resource banks either get bought out or tend to rise aggressively when there is a major increase in the price of gold. Given that these companies often trade at a fraction to their ounces in the ground, when the price of gold appreciates the valuation of these companies tends to outperform given the increased wealth which had been generated. Robert McEwen, one of the greatest gold investors in the world, has done a great job of building several of these companies and has even created an index to track them.
Here are some examples of Pre-Production, and Resource Bank scenarios where investors generated amazing returns:
Pre-Production
Allied Nevada Gold (ANV) - In 2007 ANV was trading at 1.90$ per share even though they had secured all the capital required to start production on their 2.1 million ounce Hycroft Mine in Nevada. The market then valued ANV at only $150m even though they were on the verge of initial production on roughly $2.1 Billion of mineral wealth. What happened since was clear, once production had started and ANV reported their first quarterly revenue the stock soared to about $14 a share and a valuation of $1.0 Billion which is where it is today. The total return here was over 700% in less than two and a half years.
Gold Resource Corp. (GORO) - This company went public at only 1$ per share in 2006. They had defined a resource in Mexico with over 1 million ounces and had raised sufficient capital to construct a mine. By December 2008 they were on the verge of production and the stock was trading at only $2 per share. Once the company began reporting gold sales and that production was on target the stock soared to $10.50 which is where its at today. The total return here was over 500% in less than 12 months.
There are many more examples which I am sure you can all find. But lets move to the real movers. The Resource Banks.
Seabridge Gold - (SA:US, SEA:CN) - Probably one of the greatest examples of intelligent gold investing. In 2002, Seabridge acquired a property from a major gold company for about $2,000,000 cash and some shares. This property had about 1.2 million ounces of gold at the time. Gold was trading at a fraction of the price but nevertheless there was substantial proven mineral wealth there. The stock was trading at about .30 -.50 cents per share. The market had treated Seabridge as though gold was was either never going to rise, and furthermore that the company's properties were uneconomical. Well two things happened, the price of gold began to rise, which allowed the company to raise more money. Once they had raised enough money they started drilling into their existing property and ended up increasing their defined resource from about 1.2 million ounces to over 10 million ounces of gold. The stock ran from .50 cents a share in 2002 to as high as $30 this year. Thats about a 6,000% return. Now its important to realize that unlike other situations in the stock market, a lot of seasoned gold investors recognized Seabridge early on and bet large on its success. Those investors are sitting pretty today.
NovaGold - (NG) - Another fantastic example of a resource bank situation. Novagold had defined a resource of about 30 million ounces with a major partner. Their ownership of 50% makes them one of the largest owners of gold in the ground on earth! In 2008 the stock had dropped hard due to the global financial panic. Investors stopped caring about the fact that NovaGold had over $15 Billion in mineral wealth ready to be tapped and they drove the total valuation of the company to only $80 million dollars. Yes $80 million dollar total valuation for a company with $15-16 Billion in potential mineral wealth. The ensuing result was obvious to any seasoned gold investor. The stock rose from .40 cents to $5.69 which is where it is today. A total return of about 1,100% in less than 13 months. Some feel that NG is still undervalued given its dramatic resource bank.
There are many other similar situations and if you really understand gold investing you will realize that this may be one of the last industries in the world where conventional stock analysis doesn't cut it. Analysts look for earnings, book value per share, profitability, and competitive advantages. These metrics don't apply to gold investing. For gold investors whats important is proven resources trading at a severe discount. We are all operating under the assumption that the price of gold will continue to rise, so if that is the case these unique situations can produce wonderful results.
I hope we can all work together to find gold stocks that are trading in these scenarios and share our thoughts.
Happy Gold Investing!
Cheers
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