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I've always loved CMI's property but the company as a whole is a different beast. It is hard to recommend buying lode here when there are better deals on profitable companies.
As a purely speculative trade it is likely lode will go to a dollar in the next 6-9 months, just based on them plodding along while getting a small % boost from gold's seasonal rally that has recently begun IMO.
Hypothetically if you had a choice of two identical stocks side by side - one makes a huge amount of money and one loses a huge amount of money. Which should you pick? Which is objectively less risky?
I know all the lode guys will say they'd pick the one that losses a huge amount because it might have a chance to earn a decent amount of money some distant day in the future but it is obvious by its very nature (profitable vs unprofitable) that lode is riskier than many of its peers while its upside is tied almost entirely to price of gold as an optionality play.
Personally I would rather the scenario where a company makes lots of money now and IF gold were to rise then they would make even more. Mines should be profitable at prevailing gold prices and then they are in a position to benefit from higher prices if they occur. Everyone just assumes higher gold prices are a given. Gold is likely to go higher from here but it isn't set in stone.
Geo, they have the most obvious high grade deposit in the world. Those surface outcroppings used to contain multi-kilogram gold per mt at surface, one of the most encouraging signs in human history. This is a tier 1 gold property that should have been mined a hundred years ago but wasn't because it was family controlled. There has been no modern mining except for some surface work, small scale UG, and placer over the years. The whole area is known for large, high purity nuggets that have been metal detected and mined for decades. It appears most of the 26 km is mineralized at a grade many times their neighbours, making them an obvious JV/ development target. They have a shaft 50-100 ft deep with 1-6.5 ounces/t and I know from my research that not even 10 years ago the Julio shaft was producing gold at 20/oz per tonne. They also have 500k oz of au of about 1.5 g/t contained in a microscopic spec of their property open in all directions and at depth. It is not a stretch to say they have a couple million oz of high grade, near surface, oxide, open pitable,low strip ratio oz with the potential for easily 10-100x this amount or more. All of this information is publicly available from geological reports, SEC filings, PRs, and a little logical inference and DD on the area and property.
It is quite unfortunate the website is offline. Terrible timing. I did not save the geo reports otherwise I'd upload them but needless to say there is proof beyond the shadow of a doubt they have at least a few years production at grades well above anyone else nearby. And that is with Argo spending zero and just using known information, more drilling and development will lead to more resources being outlined. If they drill they will hit high grade gold and Argo will advance its development timeline. Mexus released some production estimates produced with help by another mining company and the results showed a very easy, very profitable 100k leech project easily scaled towards 2-500koz/year.
"Mexus will begin preparations for begin open pit mining operations with a ... target grade of 1.5 grams per ton average. A report prepared by Cesar Lemos, geologist, indicates that a potential of a reserve of 3.5 million tons with little overburden (basically exposed at the surface). There is also an adjacent shear zone identified by drilling, service sampling and geophysical surveys which now leads Mexus to conclude that we have sufficient data to proceed with further evaluation and production testing of the shear zone." -early 2013. Outlined resource is much larger now.
"CARSON CITY, Nev., July 13, 2015 (GLOBE NEWSWIRE) -- Mexus Gold US (OTCQB:MXSG) (“Mexus” or the “Company”) announced today that after months of negotiating with several mining companies an agreement has been reached. President Paul Thompson is proud to announce that Mexus has signed an option/joint venture agreement with Minera Real del Oro S.A. de C.V., a Mexican corporation, which is wholly owned by Argonaut Gold Inc. (TSE:AR). Argonaut has the knowledge and experience along with the necessary capital to plan, drill, and bring the Julio/Martha Elena project into production. Mexus believes that Argonaut is the best fit for this project. Mr. Thompson added, “For approximately three years, Mexus performed geology, mapping, and exploration work on the property along with limited drilling. Within the property there are extensive vein systems and evidence for several large flat-lying shear zones believed to be related to thrust faulting. Work by Mexus have confirmed that both the veins and shears host multi-gram per tonne gold and silver values. Mexus has drill results which show a high grade, multi vein system throughout the property. Multiple target areas have been identified on the property and Argonaut is currently conducting geologic mapping and sampling in anticipation of an aggressive drill program over the next several months. Adequate work was completed for Mexus to realize that this project was too big for us and needed an experienced mining company such as Argonaut Gold. We are excited about the partnership and look forward to seeing Argonaut drill and ultimately bring this property to production.” - See more at: http://globenewswire.com/news-release/2015/07/13/751556/0/en/Mexus-Gold-US-Signs-Option-Joint-Venture-Agreement.html?parent=710383#sthash.ZwXZ2iA8.dpuf"
The terms of the deal is 5 M in expenditures and a million to Mexus in tiers due in 3 years earns Argo 80% of the property while being responsible for 100% of the costs. Mexus receives 20% gross revenues and they got around 75-100k on signing with more coming. That they had 2 grand months ago is completely and 100% irrelevant ATM, although I give you props for at least looking at that data because 99% of people don't.
As for your other questions since Mexus is getting a million dollars from Argonaut in stages that should enough for the company to survive until production and severely limit dilution and put their geologist to work on their other high grade properties.
"Mexus now plans to precede with the development of the Ocho Hermanos-Guadalupe De Ures concessions. This property lies 80km NE of Hermosillo, Sonora, Mexico and consists of approximately 3500 hectares. Within this property sits 9 mining concessions. The first target for exploration is the El Scorpio. The El Scorpio was initially studied by Elias Felix Badilla, a professor at the University of Sonora State, and his father. Elias Felix’s father was a prospector with a keen ability to find mine prospects. In his hunt for gold he found a remote small outcropping and ultimately spent several days digging it out and uncovering it. Samples were taken and assayed showing 1 to 2 ¼ grams gold per ton. At that time, he was looking for 1 ounce gold per ton. Ultimately, and most importantly, the outcropping was shown to contain high grade copper with 9.3% copper per ton in addition to containing 1.5 grams per ton gold and 41 grams per ton silver. Mexus, using a 330 CAT, uncovered this out cropping and discovered it was much larger than first thought. Mexus did a small amount of tri cone drilling to 60ft with similar assay results previously mentioned. Lying in a bowl shaped area and surrounded by mountains there are some that have called the El Scorpio a porphyry deposit. Adjacent to the North and South of the uncovered copper, Mexus has discovered old workings with gold, silver, and galena. The company has hired Geologist Cesar Lemas to begin a geology and mapping report that can be used to present this property to other mining companies. His results will be released as they become available. - See more at: http://globenewswire.com/news-release/2015/07/20/753361/0/en/Mexus-Gold-US-Announces-Business-Plan.html?parent=710383#sthash.4tm0nzwz.dpuf"
This property has the same general idea as the Julio. So if the majors mine .4% copper would they not be interested in 10% with huge gold and silver credits? Of course, just needs more drilling and discovery work to enlarge the size and make it interesting.
http://www.kitco.com/commentaries/2015-08-06/Canaccord-Genuity-s-Joe-Mazumdar-Tells-Gold-Investors-to-Go-Underground-to-Survive.html
"In the current gold market environment, high-grade underground in Canada represents the best of all possible worlds for me. Investing in a small but profitable producer operating a high-grade underground gold mine on a large land package in Saskatchewan."
I wonder who this could be.
"In the current gold market environment, high-grade underground in Canada represents the best of all possible worlds for me. Investing in a small but profitable producer operating a high-grade underground gold mine on a large land package in Saskatchewan."
So he likes my Saskatchewan darling Claude Resources but doesn't want to call it by name? It always annoys me when analysts refuse to give stock picks or examples, only telling the stories so people unnecessarily purchase their services. "Pay me for my secret knowledge instead of learning for yourself." It is because stock picks are often the only actionable thing learned from research and once you share it and let the cat out of the bag it is not going back in. So an analyst or investor puts in 500 hours and then someone gets a roughly equivalent opportunity for a much smaller effort. It isn't fair but that's life, just in the same way that Mexus will still enrich many of the bashers despite their constant complaining.
If you want to really learn more about gold stocks - learn about 50-100 different opportunities and then rank them on a comparative basis. You'll find that companies like Claude, Mexus, AR, etc rise to the top and that companies you originally thought were awesome in fact suck when compared with the best of their peers.
I bought in 08 when commodity stocks became so insanely cheap it made no sense whatsoever. Things like a hundred billion of economc coal - value zero. Huge profits - value zero. If you want to buy some gold stocks, why not by them now when they have never been cheaper before in human history? This is a historic opportunity (gold stock decimation) combined with another historic opportunity (Mexus AR JV). Huge sums of wealth will be created.
Here's the best article I have read in the past couple weeks on this topic. I felt a strange sense of deja vu as I read it, almost as if I had written part of it myself.
http://www.zealllc.com/2015/absgslev.htm
"Absurd Gold-Stock Levels
Adam Hamilton July 24, 2015 3011 Words
Gold stocks suffered a full-blown panic this past week! This exceedingly-rare magnitude of selloff was triggered by extreme futures shorting intentionally executed to force a flash crash in gold. After gold’s major multi-year support failed in this Machiavellian onslaught, gold stocks plummeted. The levels of fear were so epic that this entire sector was slammed much deeper into fundamentally-absurd price territory.
The gold-mining industry is minuscule compared to the broader markets, a realm only a tiny fraction of investors follow. Although these are mostly hardcore contrarians who fight the crowd, gold stocks’ small constituency still leaves them exceptionally susceptible to herd emotions. Fewer traders make for less liquidity and more volatility, tending to amplify prevailing greed and fear and therefore prices to outsized extremes.
The flagship gold-stock index is the NYSE Arca Gold BUGS Index, which is better known by its symbol HUI. And the leading gold-stock ETF, the Market Vectors Gold Miners ETF trading as GDX, tracks the HUI perfectly. Both bear painful witness to the panic that just unfolded in this already-battered sector. The HUI last peaked in late April, and its subsequent relentless decline was sowing the seeds for this panic.
As of last Thursday July 16th, the HUI had fallen for 8 consecutive trading days for a cumulative loss of 10.5%. Such a long streak of down days is very rare, so it stoked serious worries. And every one of those losses hammered the HUI farther under early November 2014’s brutal 11.3-year secular low. So the psychological pressure on gold-stock investors and speculators to capitulate was utterly crushing.
And then the actual panic started. A panic is a 20%+ drop in a stock index in less than 2 weeks. They usually happen at the end of long bear markets near devastatingly-low prices when sentiment is already overpoweringly bearish. Gold stocks are certainly not the only sector subject to the runaway bearish psychology necessary to fuel panic selling. Back in late 2008, we witnessed a once-in-century stock panic.
The benchmark S&P 500 plummeted 25.9% in exactly 2 weeks leading into early October that year, wiping out a quarter of Americans’ stock-market wealth! And gold stocks have suffered a handful of panic-grade selloffs since early 2000. So while these are exceedingly-rare events, they do happen from time to time. But since so vanishingly few selloffs snowball into full-blown panics, they are impossible to predict.
While I explained this past week’s events leading into this gold-stock panic in great detail in our latest Zeal Speculator, here’s the nutshell version. Last Friday, China’s central bank finally admitted for the first time since April 2009 that its official gold reserves had grown. But the reported number was only 1658 metric tons, far below the 3500ish tonnes analysts had expected. This really disappointed traders.
While most firmly believe China’s reported gold-reserves level remains a total fiction, they still sold gold futures to a 1.0% loss. That wasn’t much in the grand scheme, but it still pushed gold below its deep major early-November-2014 bottom to a new 5.3-year low. That left gold very vulnerable technically, decimating already-terrible gold-stock psychology. The HUI plunged 5.2% to extreme new 12.2-year lows of its own.
The gold price had been blasted to such deep lows not by a glut of physical supply, but by record gold-futures shorting by American speculators. Since futures shorts must soon be covered, lows driven by them are artificial and transitory. Excessive gold-futures shorting always soon reverses into proportional guaranteed near-future buying. So major lows sparked by extreme short selling are actually super-bullish!
But most traders succumb to the popular fear major lows spawn, as they’ve failed to spend enough time studying market history to inoculate themselves from emotional extremes. The short sellers decided to take advantage of this Sunday night and press their luck. So they carefully chose the most-illiquid time in the global gold markets to unleash an astonishing barrage of gold-futures short sales to try and run the stops.
Since the CME closed gold-futures pits earlier this month, there is no more normal US trading day. The electronic gold-futures sessions start at 6:00pm NYT Sunday through Friday and end at 5:15pm the following day. The short sellers chose to strike at 9:30pm Sunday night, when American traders were not watching the markets, Japanese traders were on a public holiday, and just before Chinese markets opened.
In just over one minute, they dumped an astounding $2.7b worth of gold futures in notional terms. At the Friday gold close of $1134, this would work out to nearly 24k gold-futures contracts! This blizzard of selling was so extreme that it forced two 20-second trading halts within just over a minute. The sole purpose of such an epic blitz of shorting was to artificially force gold below stop-loss levels on long contracts.
Happening at such an illiquid time, gold plunged about $48 to $1086 in that super-brief span. This gold flash crash was incredibly artificial and manipulative! When something similar happened in the US stock markets in May 2010, traders rightfully viewed it as a transitory anomaly. But sentiment in gold was so extremely bearish that it was instead wrongly considered to be righteous fundamental selling.
Even though gold recovered nearly half those fake losses within 15 minutes, the psychological damage was done. Gold ended up falling 3.2% on Monday to $1098, a new 5.3-year low. And the gold-stock investors and speculators totally panicked, fleeing the gold stocks so aggressively the HUI plummeted by 12.0% that day! This was its worst down day since December 2008 in the dark heart of that stock panic.
So through 10 consecutive daily losses, the HUI had collapsed a full-on panic-grade 25.3%! Naturally this total capitulation caused tremendous pain for those long gold stocks, leading to mass stoppings. And the HUI had fallen to 113, a mind-boggling 12.7-year low! Such levels were truly fundamentally absurd, wildly unjustified. They were completely the product of super-extreme fear-dominated herd psychology.
This first chart looks at the HUI gold-stock index and gold over the past dozen years or so. Gold stocks have totally disconnected from the metal which drives their profits, and hence ultimately stock prices. This extraordinary capitulation extreme offers once-in-a-lifetime opportunities to greatly multiply wealth for those hardened contrarians tough enough to buy low while everyone else flees in sheer terror.
Everyone hates gold stocks today, convinced they are doomed to spiral lower into oblivion. But that worldview is clouded by irrational emotion. Gold stocks were recently one of if not the best performing sector in all the markets. Between November 2000 and September 2011, the HUI powered 1664% higher in a life-changing secular bull! While gold-stock investors multiplied their wealth by 18x, the S&P 500 lost 14%.
Gold-stock prices have always been a leveraged play on the price of gold, since the profits for mining gold amplify its price movements. If a miner can produce gold for $1000, and it’s trading at $1100, that miner earns $100 per ounce. But if a mere 10% gold rally boosted the metal to $1210, that miners’ costs are still $1000. So its profits more than double to $210! This incredible profits leverage makes gold stocks so alluring.
Throughout the entire stock markets, price levels are ultimately determined by underlying corporate profitability. So as gold prices rise, gold stocks soar. They more than quadrupled as measured by the HUI leading into the late 2000s, and again into the early 2010s. This is perfectly-normal behavior in this sector, earning the brave contrarians who fought the crowd in the early 2000s hundreds of billions of dollars.
Gold stock prices temporarily decoupled from gold to the downside in late 2008’s stock panic, with the HUI falling to 5.3-year lows. Even though gold was trading in the low $700s, the gold stocks were down at prices last seen when gold was in the $350s in the summer of 2003! But as I argued at the time to much ridicule, it made zero sense for gold stocks to trade as if gold was half its prevailing price levels.
And indeed gold stocks soon rallied sharply out of that late-2008 fundamentally-absurd low, with the HUI more than quadrupling over the next several years. And the gains in the smaller gold miners with superior fundamentals dwarfed those of the majors dominating the HUI and GDX. But by August 2011 as I warned then, gold was getting overbought. So it was due for a major correction and consolidation.
Naturally gold stocks were hit hard in this righteous gold selloff, since their high profits leverage works to the downside too. Relatively modest declines in gold prices can lead to sharp drops in earnings. By the time late 2012 rolled around, this sector was recovering nicely with the newest major upleg underway. And then something wildly unprecedented happened, the Fed launched its third quantitative-easing campaign.
Unlike QE1 and QE2, QE3 was totally open-ended with no predetermined size or end date. Fed officials used this ambiguity to their advantage to actively manipulate stock-trader psychology. Whenever the US stock markets started to retreat, Fed officials rushed to jawbone about how they were ready to ramp QE3 to arrest any material stock-market selloff. Traders soon realized the Fed was effectively backstopping stock markets!
So in early 2013 capital fled alternative investments led by gold to migrate into the perceived-riskless US stock markets. Gold plummeted on epically-extreme gold-ETF selling in 2013’s second quarter, leading to gold’s worst quarterly loss in 93 years! This hundred-year storm destroyed gold-stock sentiment, so this entire sector radically decoupled to the downside. It has struggled ever since, faring far worse than gold.
That radical anomaly finally culminated in this week’s capitulation extreme, with the HUI plunging to these 12.7-year lows. That compares to gold at just a 5.3-year low. This chart shows how ridiculous this disconnect has become. The last time the HUI traded at this week’s levels was way back in October 2002. At that time, gold was trading in the $310s! Gold-mining profitability was radically lower back then.
Even at this week’s dismal gold lows, this metal was still a whopping 3.5x higher than its late-2002 levels. So it is supremely irrational for the HUI to trade at such fundamentally-absurd levels. “Absurd” is the right word too, defined as “extremely unreasonable, incongruous, or inappropriate”. There is truly absolutely no way, no conceivable scenario, in which today’s gold-stock prices could be considered justified.
Their levels can be viewed from the gold side too. The last time gold traded at this week’s levels back in March 2010, the HUI was over 400. Today collective gold-stock prices are just over a quarter of those levels at that same gold price. This is incredibly illogical, and doesn’t reflect the profitability of mining gold at prevailing prices. After studying gold-stock valuations for many years, I understand them far better than most.
Yes, there are gold-mining companies out there with all-in sustaining costs well over $1100 per ounce. Yes, there are gold miners today that are heavily indebted with little hope to dig out at these low prevailing gold prices. Yes, some of these high-cost debt-financed gold miners have gone bankrupt, with more to come. There is no doubt some gold-mining companies are in serious trouble at today’s gold prices.
But painting all the gold miners with the same brush is silly, as ridiculous as claiming Apple and Netflix are in the same fundamental boat because they are both technology stocks. Apple is trading near 15.7x earnings these days, while Netflix has a terrifying 247.4x trailing P/E ratio! Gold stocks are no more homogenous than any other sector, with wild variations on their outlooks at these shorting-fueled gold lows.
There are plenty of great gold miners out there so amazingly profitable even today that they are trading at dirt-cheap single-digit P/E ratios! There are plenty with all-in sustaining costs far below current gold levels, that could survive if not thrive even if gold plunged by another quarter or more. There are some gold miners now trading at total market capitalizations less than their cash in the bank, which is epically cheap!
But since extreme popular fear leaves the baby to be thrown out with the bath water, gold-stock investors and speculators have irrationally fled the great companies. And as this emotional extreme inevitably fades and mean reverts back to normal psychology, the best gold miners’ stocks will soar far faster than the broader HUI. Contrarians who deploy capital now with blood in the streets stand to really multiply their fortunes.
Since gold-stock profits and hence stock prices are ultimately determined by the gold price, my favorite way to consider prevailing gold-stock levels is by comparing them with gold. This is done through the venerable HUI/Gold Ratio, which divides the daily HUI close by the daily gold close. Charted over time, this construct shows whether gold stocks are cheap or expensive. And today they’ve never been cheaper!
This week, the HGR fell to a staggering all-time record low of 0.103x! Nothing anywhere remotely near these extreme levels of gold-stock undervaluation relative to gold has ever been witnessed before. Not even during 2008’s once-in-a-century stock panic, the greatest fear superstorm we’ll see in our lifetimes. Today’s incredibly-low HGR levels are wildly unprecedented, and absolutely not sustainable for long.
In the 5 years before that incredible general-stock panic, the HUI/Gold Ratio meandered in a tight range between 0.46x support and 0.56x resistance. Its secular average was 0.511x, the HUI index level trading at about half prevailing gold prices. The 2008-stock-panic capitulation broke the resolve of many long-time gold-stock investors, so they panicked and sold low never to return. Thus the post-panic HGR was lower.
2009 to 2012 were the last quasi-normal years in the financial markets before the Fed started grossly distorting everything with its radically-unprecedented QE3 debt monetizations. During that time, the HGR averaged 0.346x. Just to return to those comparatively-modest pre-QE3 gold-stock price levels, the HUI would have to soar nearly 3.4x higher! The upside potential from today’s extreme lows is utterly massive.
The great wealth-killing mistake traders always make during stock panics by succumbing to the extreme fear is assuming those price levels are fundamentally righteous and the new status quo. But nothing could be farther from the truth, as financial markets are forever cyclical. Extreme fear soon burns itself out, and the great sentiment pendulum starts slowly swinging back the other way towards the greed side.
Extreme absolute 12.7-year HUI lows and all-time HUI/Gold Ratio lows aren’t sustainable. Gold stocks can’t and won’t continue decoupling from gold prices forever. This gold-stock panic is as bullish for gold stocks today as the last one was in late 2008. Again after that the HUI more than quadrupled over the next several years, and the smaller gold miners with superior fundamentals greatly amplified those sector gains.
The 9-year-old trend of gold-stock prices losing ground relative to the metal which drives their profitability and hence ultimately stock prices is way overdue to dramatically reverse. Extreme emotion can only drag prices away from fundamentally-righteous levels for so long. Gold stocks will eventually reflect their underlying profitability, with the best of breed skyrocketing as gold-futures short covering gets underway.
Capital is going to return to chase gold stocks at these fundamentally-absurd price levels. Even if the existing gold-stock investors hammered by this panic are too discouraged to return, new investors will take their place. There’s a whole new generation of millennial investors just learning about market cycles, and they are eager to buy low and sell high. Being so young, they have long-term time horizons as well.
Many traders are concerned about not buying until the absolute bottom. But that day won’t become fully apparent until weeks later when gold stocks have already surged by a third or more. Buying low requires deploying capital when everyone thinks it’s crazy, when the act of clicking that buy button leaves you feeling nauseous. Buying extreme lows, and holding if prices slide lower still, is very challenging psychologically.
But this necessary mental sacrifice is well worth it considering the potential rewards, coming gold-stock gains from 4x to well over 10x as this left-for-dead sector mean reverts far higher. Another leg down in gold stocks is exceedingly unlikely since panics mark absolute lows, so potentially forgoing 900% upside because you’re worried about another 20% downside is foolish. Gold stocks have never been cheaper.
And that’s what we’ve long specialized in at Zeal. While our positions suffered mass stoppings too in this latest irrational panic, we’ve been aggressively buying the extreme lows this week. This strategy of fighting popular fear isn’t easy, but it’s netted amazing gains for our subscribers. Since 2001, all 700 stock trades recommended in our newsletters have averaged annualized realized gains of +21.3%! The majority over the years have been gold and silver stocks.
Since gold stocks have never been cheaper relative to gold, there’ve never been better opportunities to multiply your wealth in this hated sector. We’ve long published acclaimed weekly and monthly newsletters for contrarian speculators and investors. They draw on our decades of exceptional market experience, knowledge, and wisdom to explain what’s going on in the markets, why, and how to trade them with specific stocks. Subscribe today, see which gold stocks we’re buying at panic lows, and save 33%!
The bottom line is gold stocks are trading at fundamentally-absurd price levels today. They plummeted into an ultra-rare full-blown panic after futures speculators’ record shorting went nuclear in an attempt to run stops. Gold stocks are trading at levels last seen when gold was in the low $300s, and have never been cheaper relative to the price of the metal that drives their profits. This extreme anomaly isn’t sustainable.
The leading gold-stock index more than quadrupled after the last panic in this sector, with far bigger gains seen in the smaller fundamentally-superior gold miners. Extreme fear always soon burns itself out, and sentiment always subsequently recovers leading to serious gold-stock buying. With markets forever cyclical, there’s no doubt gold stocks will soon mean revert far higher to fundamentally-righteous price levels."
As someone who called the 08 bottom (more luck than skill) I agree with nearly everything Adam has said. We are close to a bottom. Now is the time to aggressively deploy capital if you have the means and the courage to do so.
"Mexus now plans to precede with the development of the Ocho Hermanos-Guadalupe De Ures concessions. This property lies 80km NE of Hermosillo, Sonora, Mexico and consists of approximately 3500 hectares. Within this property sits 9 mining concessions. The first target for exploration is the El Scorpio. The El Scorpio was initially studied by Elias Felix Badilla, a professor at the University of Sonora State, and his father. Elias Felix’s father was a prospector with a keen ability to find mine prospects. In his hunt for gold he found a remote small outcropping and ultimately spent several days digging it out and uncovering it. Samples were taken and assayed showing 1 to 2 ¼ grams gold per ton. At that time, he was looking for 1 ounce gold per ton. Ultimately, and most importantly, the outcropping was shown to contain high grade copper with 9.3% copper per ton in addition to containing 1.5 grams per ton gold and 41 grams per ton silver. Mexus, using a 330 CAT, uncovered this out cropping and discovered it was much larger than first thought. Mexus did a small amount of tri cone drilling to 60ft with similar assay results previously mentioned. Lying in a bowl shaped area and surrounded by mountains there are some that have called the El Scorpio a porphyry deposit. Adjacent to the North and South of the uncovered copper, Mexus has discovered old workings with gold, silver, and galena. The company has hired Geologist Cesar Lemas to begin a geology and mapping report that can be used to present this property to other mining companies. His results will be released as they become available."
Mexus PR July 20th 2015
Ocho Hermanos – Guadalupe de Ures Project
"The Guadalupe de Ures Project is accessed from Hermosillo by driving via good paved road for 60 kilometers to the town of Guadalupe de Ures and then for 15 kilometers over dirt roads to the prospects. A base camp has been established near the town of Guadalupe de Ures using mainly trailers for accommodation, workshops and kitchen facilities.
The Ocho Hermanos Project (also called the Guadalupe de Ures Project) consists of the “Ocho Hermanos” and "San Ramon" claims which are covered by the Sales and Production Contract dated the 4 th day of July, 2009 between “Minerales Ruta Dorado de RL de CV” (seller) and “Mexus Gold Mining S.A. de C.V.”, a wholly owned subsidiary of Mexus Gold US (buyer). The Ocho Hermanos Claim consists of 34.9940 hectares (1 acre = 0.4047 hectares) or 86.4690 acres while the San Ramon Claim consists of 80 hectares (197.6773 acres)
The term of the agreement is 5 years. During the term Mexus must pay 40% of the net revenue received for minerals produced to the seller. At the conclusion of the 5 years, the lease can be purchased for USD 50,000.
We did not perform any systematic sampling or any systematic drilling and because of this did not set up a formal QA/QC program. All of the samples were submitted to Certified Laboratories (ALS - Chemex in Hermosillo or American Assay in Reno, Nevada) which insert their own QA/QC samples/duplicates. Also the laboratories run duplicates and blanks from each batch fired. The sequence of events so far are the following:
We located a previously mined area with interesting values – Ocho Hermanos Mexus began to submit characterization samples to the above noted assay laboratories, in order to determine the range of Au - Ag values present Mexus then began an investigation into recovery options by using material taken from the areas with the better values.
The above work was completed before any systematic exploration was done because if no recovery method could be found relatively quickly, the project would move more slowly because of the lead time involved, Mexus began work on an Environmental Impact Statement for the likely operational area (a total of 4 hectares to begin). In order to complete the EIS, figures for estimated tonnages were submitted to cover the hoped for volume. To date, no suitable recovery method was found due primarily to the partial oxidation of the principally sulfide deposit
The Environmental Permits run for 35 years so there is time for further investigation
The main geologic feature of this project area is an apparent “manto” sulfide zone composed primarily of galena with some pyrite, arsenopyrite and possibly phyrrotite. Above this zone there is an oxide zone composed of iron and lead oxides. The sulfides themselves are partially oxidized. Reconnaissance and characterization samples taken indicated sporadically high gold and silver values. The deposit occurs in shallow water sediments (principally quartzites, with some limestone and shales) and can be best characterized as a skarn type deposit due to the presence of intrusive rocks within 1 kilometer.
Given the complex nature of the sulfide deposit and the partial oxidization of the material (indicated by the presence of yellow colored lead oxides), a satisfactory recovery method has not yet been found. Consequently, at this time, no further systematic work beyond the initial reconnaissance and characterization sampling has been completed. The entire project was essentially put on hold until a suitable recovery method is found, which is a continuing effort and at this time is being pursued by member of the faculty at the University of Sonora in Hermosillo. The faculty member teaches metallurgy and assay practices at the University. After a suitable recovery method has been identified, the process will need to be confirmed by a certified metallurgical testing laboratory.
The Environmental Permits detail all of the affected flora and fauna. The land is presently used for cattle grazing and the surface rights are owned by the community of Guadelupe de Ures. An agreement is in place with Mexus Gold Mining S.A. de C.V. for surface access and disturbance. The Environmental Permit concludes that no permanent damage or degradation of the present land use will result from the intended activity on the lands. At present, the Environmental Permits cover a total of 4 hectares - 3 hectares cover the initial site of the mineral as presently understood and 1 hectare is permitted for the erection of a suitable extraction plant.
No known contamination from past mining activities was found or is known to locals. The historic workings consisted of a few shallow adits and pits. In the course of obtaining the Environmental Permission the permit stipulated that properly lined ponds etc. must be used to prevent any potential surface or ground water contamination from any proposed activities.
Only separation is proposed to be conducted on site if found to be possible, while final metal recovery will be conducted at a properly licensed and certified metal refining facility. Current efforts to find suitable recovery methods are being conducted off site in a University laboratory. Up sizing the process, if found, will be completed by a licensed, certified metallurgical laboratory.
370 Area
This zone is composed of a sedimentary sequence (limestone, quartzite, shale) intruded by dacite and diorite as well as rhyolite. The dacite exhibits argillic alterations as well as silicification (quartz veins). The entire area is well oxidized on the surface. This is an area of classic disseminated low grade gold and silver mineralization. Surface grab sample assays show 0.14 grams per ton to as high as 29.490 grams per ton gold. This area is an important area for potentially defining an open pit heap leach project.
El Scorpion Project Area
This area has several shear zones and veins which show copper and gold mineralization. Recent assays of an 84’ drill hole shows 1.750% per ton to .750% per ton of copper and 3.971 grams per ton to 0.072 grams per ton of gold. Another assay of rock sample from the area shows greater than 4.690% per ton copper. This land form distribution appears to be synonymous to the ideal porphyry deposit at Baja La Alumbrera, Argentina.
Los Laureles
Los Laureles is a vein type deposit mainly gold with some silver and copper. Recent assays from grab samples show gold values of 67.730 grams per ton gold, 38.4 grams per ton silver, 2,800 grams per ton copper.
As of the date of this Report, we have opened up old workings at the Los Laureles claim and have discovered a gold carrying vein running north and south into the mountain to the south."
Source: Mexus filings. Hopefully 8 has some more to add. These claims are very interesting and might adhere to a similar speculative thesis as the Julio.
They don't have to leave home to pick up some knowledge, enough mining goes on in our own backyard to learn from observation and osmosis. We Canadians are highly adapted to mining in inhospitable conditions:
Did you Know?
The Canadian mining industry is…
A major employer:
Approximately 380,000 people across Canada work in the mining and mineral processing industries.
Mining is the largest private sector employer of Aboriginal peoples in Canada on a proportional basis, and employment is poised to increase.
Canada has one of the largest mining supply sectors globally with more than 3,400 companies supplying engineering, geotechnical, environmental, financial and other services to mining operations.
Those who work in mining enjoy the highest wages and salaries of all industrial sectors in Canada with an average annual pay exceeding $110,000, which surpassed the average earnings of workers in forestry, manufacturing, finance and construction by a range of $31,000 to $46,000 for those sectors.
An economic engine:
Mining contributed $54 billion to Canada’s Gross Domestic Product (GDP) in 2013.
The industry accounted for 19.6% of the value of Canadian goods exports in 2013.
Canada’s value of mineral production was nearly $43.6 billion in 2013.
The mining industry's payments to Canadian federal and provincial governments total $71 billion in taxes and royalties over the last decade (2003-2012).
A global leader:
Thanks to its rich geology, Canada is one of the largest mining nations in the world producing more than 60 minerals and metals.
Canada ranks in the top five countries in the global production of 11 major minerals and metals:
First in potash
Second in uranium and cobalt
Third in aluminum and tungsten
Fourth in platinum group metals, sulphur and titanium
Fifth in nickel and diamonds
57% of the world’s public mining companies are listed on the TSX and TSX-Venture Exchanges. Together, the two exchanges handled 48% of global mining equity transactions in 2013, and accounted for 46% of global mining equity capital for that year.
Globally, Canada is recognized for its leadership in safety and sustainability. Mining companies in Canada were the first in the world to develop an externally-verified performance system for sustainable mining practices with the creation of MAC’s Towards Sustainable Mining initiative in 2004.
http://mining.ca/resources/mining-facts
Canadians often have good eyes for mineral projects. This Canadian fell in love with Mexus somewhere down Sonora way. She is one of the most beautiful gals I have ever seen. A keeper at any rate.
Juniors are in a bear market. Only recently, over the last six months to a year, have select juniors began to react positively to good news. This is an encouraging sign and is part of a bifurcating process that happens in bear markets where juniors tend to get divided into categories. There are those with a good asset and those who make profits, and then there are hundreds of companies that have no value whatsoever.
In a bull market all news is biased positively by the majority of participants and in a bear it is biased negatively. We appear to be at neither extreme but far closer to the bear side. I've noticed for example, a junior put out great drill results and then sell off on the news while other companies like Claude announce profits and soar. Right now, in a declining gold price environment, the market places huge importance on profitability and less on speculative potential since that element has been flogged to death and proven in recent history to be far less important than margin. So Mexus announced a vague, speculative deal during a resource bear market at a time when gold is cratering, just as the cacophony of doomer predictions reaches a crescendo -- and it still more than doubled, a good sign, even if it did give back its gains. The news of "Here's our profits we have earned vs here's a speculative opportunity that might evolve into something over the next two or three years" could not be more different to an investor.
What situation are you referring to?
If you mean the general state of SCY there isn't that much to say. They are advancing slow and steady. I expect them to announce another scandium agreement, some project work, and some financing before the end of the year. I've wanted to keep my cards close to my chest regarding this play and the evolving scandium story while I accumulate and wait for other opportunities to mature. But I will say that I am 99% confident that SCY will succeed and I am 100% sure that scandium will became commonplace within 15 years.
In pretty much the same way I was 99.9% positive that Mexus would eventually sign a JV deal. Even with the weird activity on Friday Mex still finished up about 40% for the month after announcing their new historic JV. August will lead to its senior partner, Argonaut Gold, announcing the JV in a more public fashion along with a preliminary drill program in short order. When they do I suspect Aug-Sept to be an entertaining couple of months. When the drill results come out the stock will fly and there should be opportunities to take profits.
A lot of them will go here. Maybe I shouldn't say anything but so few people will read this this message that it doesn't really matter, and I am all for sharing since everything I know I learned from others sharing on the internet and from my own experience. I think you can make 5-10x on Mex, pull out a bit, and then make 5-10x on SCY and hold both long term to dollars per share. I think this is a rare opportunity to turn $10k into a million with a high chance of success. Sounds crazy but I say it with a straight face.
We already had one good move this year with a SCY, a double, and it was probably prudent to take profits into the rally given the general state of the economy. I didn't. Now it's given back all of its recent gains. I am surprised it has gone down this much but that's the double edged sword of a low volume penny stock, moves up and down are hugely exaggerated and SCY is a junior in a market where all juniors are being trashed.
I don't know the exact reason why SCY trades more like a gold junior than anything else but it does.
Good prices are exactly what you want if you believe in the project and are looking to make some life changing wealth.
That's a bit harsh, Eight. I saw this breakdown on Tuesday and it made it seem very likely that we would see lower prices in the short term. It wasn't set in stone, just a simple probability that tends to work out well over 50% of the time. Anything that is more accurate than a coin flip for determining the outcomes of absurdly complex problems is worthy of at least some consideration (IMO).
Implying I am a TA guy or that I put much stock in it is like calling someone who drives by an AA meeting an alcoholic just by inference. To me it is just one more thing in the toolbox, and it doesn't come out much because it, as you point out, is not very useful for penny stocks. Not being useful doesn't mean it is useless.
That said we are still dealing with humans and human nature and just like market cycles there are certain patterns that do repeat themselves and this information is of value because even if you don't believe in it other people do and it represents their behaviour. Those two facts alone are enough to influence trading activity even on small, low volume issues like Mexus.
If you remove 8's last trade the close would have been .02, right on the nose. Call it ridiculous if you want but it was an obvious target. I have held long positions, abstaining from trading while guys like Darby publicly call their trades and double, triple their positions in front of my very eyes using very simple techniques. I have done lots of paper trading with it (for practice - points, not dollars) and there is definitely something to it as this week has proven to me yet again.
The Mexus spec theory I wrote didn't include TA, because it is not a fundamental reason to speculate. I've written hundreds of posts and maybe at most three or four even mention TA. But that doesn't mean that that there is not a compelling reason to use it to help time trades along with entry/exit points. Even in a "sure thing" there are optimal times to come and go and TA can help determine these, or to perhaps provide an explanation for a seemingly nonsensical move that was perhaps not quite so nonsensical after analysis.
By weight I am:
90% speculator
9% investor
1% trader
I am not going to stop using a tool because someone doesn't like the colour of the handle. I am a classic INTJ personality and when I make decisions regarding my hard earned money believe me I will use every possible bit of information at my disposal, even if some of it is deemed more valuable than others.
I would estimate only a couple thousand people at most read the PR and of those only a small percentage both understood how undervalued the company is and had the means to purchase any. We have a small group of tapped out shareholders here and this isn't a capital pool that can support higher prices without new blood.
The share prices of juniors are molded by the prevailing market environment. In 2008 for example I remember companies putting out mind blowing news and their stocks usually went down during this period and since the volumes were so low small buys and sells would swing the share prices enormously, often in nonsensical directions.
A company would say "Our value has materially increased." And the market would say "Your company is now priced less because of it." A contrarian delight, if you have the capital to participate. In bear markets especially PRs are used as liquidity events for people to sell, since market participants become biased to the downside and focus on capital preservation.
Just because someone sold $1200 of stock does not make Mexus worth 20% (a million) less nor does it affect the gold or the property's geology and our chances of ultimate success. Price and value are two separate and distinct entities.
There is also a minor technical reason for the recent decline. After the JV announcement Mexus rose and closed above its 200dma and then moved sideways, consolidating at a higher base within a new, descending range. If anyone remembers the old poster darbyflier he was amazing with calling those flag triangles and I picked up enough from him that these things do happen a statistically significant amount of the time regardless of what opinion you hold of TA.
The point of the flag was at 0.028 and as soon as we moved below that it broke the pattern to the downside, pierced the 200dma, and looked like it was set for a close around the 50dma, 0.02, which it over shot because Mexus is a super volatile penny stock.
Our price moment today has little to do with where we are headed or what we will ultimately be worth with an advanced project in a bull market.
So TL;DR: Today's activity is normal and means nothing unless you want to take advantage of the prevailing price.
It is a results based process so we don't know how fast they will move. We don't know if they are drilling yet but the answer is likely no. This doesn't mean that they are not getting favorable results, just results and data of a slightly different sort. If they walk up to a golden outcropping or kick a nugget out a few feet down they're going to feel good about drilling and press do it ASAP.
They would probably PR it like this:
"April 6, 2011 Argonaut Gold Inc. is pleased to report the Company has commenced an aggressive drill program at the La Colorada property aimed at converting mineralized material from an inferred resource to a Measured & Indicated resource in an effort to create further value at the property. La Colorada was incorporated into Argonaut’s portfolio of projects as part of the Pediment Gold acquisition, which was completed in January of 2011. The La Colorada is a gold-silver project located 50 kilometers southeast of Hermosillo, Mexico."
"June 15, 2011 Argonaut Gold Inc. is pleased to announce exploration results to date at its 100% owned La Colorada project (“La Colorada”) located 50 km southeast of Hermosillo, Mexico. Favorable drill results from our 2011 drill program at La Colorada, have prompted the Company to increase the exploration budget by an additional $3.9 million. This brings the total approved budget for 2011 to $7.7 million and 52,000 meters of drilling. To date, 25,780 meters of drilling have been completed, consisting of approximately 170 holes. The Company is pleased to report that drilling continues to confirm the continuity of the La Colorada gold system..."
What AR has right now is bunch of surface samples, Mexus' data and a map of prospects to drill. I would expect them to update their shareholders about the JV first and then subsequently announce a drill program in late August, so Belgie correctly points out we can't receive results for a program that hasn't even begun yet. Judging by the examples above and taking into account the earlier results would have been slowed by the 2011 demand for geo services it means that current results should be attained even faster.
It depends on your perspective but having confirmation of the deposit's potential and making a production decision within a year or less is pretty fast. It might be a quick process or it might take until 2019 but I think the former is more likely than the latter.
AR could drag it out but they aren't really incentivized to do so, in fact the opposite is true. They will just plod ahead methodically and act based on the results. If they are good, they will build a mine. If they are really good they will do it faster. And if the results are half as good as I expect then AR will rapidly spend a couple million drilling and advance far faster than the contract timeline would indicate. What happens and how fast it does is up to geology more than Argonaut.
Very encouraging results are what will push Argo to spend most of that $5 million in the next year and then use that information to make a resource estimate and mine-plan to sell their shareholders on a modest build-out to make their most profitable or one of their profitable projects.
We'll have a sense within 2-6 months of drilling commencement just how fast the project will advance.
Some hypotheticals.
Say they start on Sept 1st, first results ~Nov
bad/meh results- slow and steady 1-1.5 m exploration in the first year, not great but still better than their other mines AR does slow tiers of drilling, full PFS etc over a couple years before production.
okay results- 2m gradually spent on exploration in a year.
Good results- ramp up to 2.5 m expenditures in 9-12 months.
Great results- accelerate program, commit 3 m to a large drill program, a million for 43-101 and studies.~9 months
Amazing results- commit to spend most funds and generate a PFS and 43-101 to show investors ASAP
Jaw dropping results-full commitment, very aggressive wide program -> more mind-blowing results would probably lead to them spending the entire wad within one year and then doubling size of their investment and commiting to a large mine with the construction phase begining as soon as is feasible, skipping PFS.
Could they just spend the barest minimum and not give a damn about drilling in 2015 or the prospects or potential? Possible but highly unlikely, especially when the sums are so small and the payoff is enormous while they have cash sitting in the bank. It wouldn't surprise me if they had already spent most of that initial commitment.
How fast this all advances will be determined by how good our property is. Our claims are world class IMO so just a little bit of patience required at this time. The hard, risky part is over.
Huge news! Winfield removes boot from CMI's throat!
Corrado De Gasperis, President & CEO, commented, "This is a watershed moment in the Company's evolution that reflects our investors' confidence in our progress and forward plans and our boards ability to take steps necessary to maximize value to all of our shareholders. It immediately strengthens our balance sheet by significantly reducing liabilities on some of our richest properties, improves our liquidity and dramatically lowers our future capital and mining costs."
http://news.sys-con.com/node/3388780
This is the first time in years I have been pleased with something CMI has done. Winfield is going to stop bleeding us dry or at least leach a lot less! This is huge, removing one of the biggest reasons to hate CMI (its terrible structure favouring insiders over common holders).
Yeah there are lots of bargains out there that are profitable and pay dividends. Even lode .40 to .60 is now a respectable 50% and pretty decent gamble in the short term if metal prices stabilize or trend upward.
It should have been in the title of the initial PR as well. The last two updates aren't even on the Mexus website.
Even in the 21st century where information is rapidly disseminated it still takes a long time for information to spread when it starts from a very low base.
Awareness will come with time and some of Argo's shareholder base and analyst coverage will eventually rub off on us. Upcoming bonanza drill results will signal to the market that Argo will certainly exercise the option and produce. A small operation would generate more than our current market cap in earnings.
Paul did a radio interview before and now that Mexus will survive he could probably invest a bit of time and money in promotion. I don't mean hiring promoters, more like flying some Mexus guys to a mining convention or something like that.
It looks like Mexus is attempting a "prospect generator" model, which is a lower risk alternative to the standard junior model. I think lots of people will would be impressed with the deal PT cut - if they knew about it.
El Scorpio at 10% copper plus gold is another ridiculously awesome target and the kind of thing that major mining companies processing .3% might find it a bit compelling as a future JV prospect. We might have another Ranch just sitting there.
Keep buying - this stock is going to have strong performance over the next 18-24 months regardless of what gold prices do.
Mexus Gold US Announces Business Plan
CARSON CITY, Nev., July 20, 2015 (GLOBE NEWSWIRE) -- Mexus Gold US (OTCQB:MXSG) (“Mexus” or the “Company”) is pleased to provide an update to its business plan. The company now has 10 different properties it is dealing with. First and foremost is the most recent announcement concerning the Santa Elena/Julio property. As noted in prior press releases, the company announced a deal with a major mining company. Added CEO Paul Thompson, “We are thrilled with our new partner and excited to see their results as they announce them. Our new partner is the right company to take this property to full production.”
The placer operation continues at the Santa Elena with mixed results. The company is reviewing whether continuance of the placer is economically feasible and practical considering our exposure to the joint venture mentioned above. A decision will be made shortly and an announcement made once decided.
The company continues to review with legal counsel its options concerning the San Felix Joint Venture agreement. Shareholders can expect a press release in the near term that will outline what our legal recourse is and what steps will be taken to protect our investment.
Mexus now plans to precede with the development of the Ocho Hermanos-Guadalupe De Ures concessions. This property lies 80km NE of Hermosillo, Sonora, Mexico and consists of approximately 3500 hectares. Within this property sits 9 mining concessions. The first target for exploration is the El Scorpio. The El Scorpio was initially studied by Elias Felix Badilla, a professor at the University of Sonora State, and his father. Elias Felix’s father was a prospector with a keen ability to find mine prospects. In his hunt for gold he found a remote small outcropping and ultimately spent several days digging it out and uncovering it. Samples were taken and assayed showing 1 to 2 ¼ grams gold per ton. At that time, he was looking for 1 ounce gold per ton. Ultimately, and most importantly, the outcropping was shown to contain high grade copper with 9.3% copper per ton in addition to containing 1.5 grams per ton gold and 41 grams per ton silver. Mexus, using a 330 CAT, uncovered this out cropping and discovered it was much larger than first thought. Mexus did a small amount of tri cone drilling to 60ft with similar assay results previously mentioned. Lying in a bowl shaped area and surrounded by mountains there are some that have called the El Scorpio a porphyry deposit. Adjacent to the North and South of the uncovered copper, Mexus has discovered old workings with gold, silver, and galena. The company has hired Geologist Cesar Lemas to begin a geology and mapping report that can be used to present this property to other mining companies. His results will be released as they become available.
- See more at: http://globenewswire.com/news-release/2015/07/20/753361/0/en/Mexus-Gold-US-Announces-Business-Plan.html#sthash.08SX86U8.dpuf
Even a baby 10,000tpd operation at 1gpt does 100k in less than a year.
At Castillo they do more than 80 thousand tonnes per day at .31 g/t. Last year they did 91 thousand tonnes per day at .31 g/t. Colorado does 15k/d through their crusher circuit alone.
Back at the ranch imagine if in five years or less they do 50k tpd at 2 gpt - wait I think I hear sirens outside.
18,250,000 t at 2g is 36.5m g/31.1 = 1,173,633.4 oz
Okay no more imaginary math for me.
You should both take half an hour and read a bit about it. It looks like they just signed one of the most impressive deals in mining history - at a bear market low. That deserves at least a peek.
Mexus is a strong buy along with my strongest possible endorsement. Mexus is my number one pick with the most compelling risk/reward that I know of in the mining sector. Claude will probably go to a couple bucks a share but MXSG now has a very real chance of doing at least 1000% in the next year and going on to make hundreds of millions of nearly risk free cash. Not bad for a 5 million dollar company in the midst of a mining depression.
In one month of production MXSG will make more than lode has the past several years of mining combined. LODE took around a decade to get to to where they are, Mex is way ahead of that timetable.
Although both have high grade ore lode is mining low grades (sub 1 gram) with very high costs, expensive social license, etc. Even if their deposits were identical the same deposit is way more profitable in Sonora than in VC Nevada.
Mexus will be a high grade, low cost operation. Let's just say if Mex spent what lode has Mex would have 20% gross of one of the largest and most profitable mines on earth. Compare this with the literal flatbed truck of money lode has spent for the privilege of losing money on every ounce and I can't even compare the projects with a straight face although there is definitely a lot to be learned from the lode saga.
Lode is a fairly risky shot to make 2-3x your money. Mexus is a very high chance to make many times your money at current gold prices. Lode is worth 100 M for a meh mine and Mexus is worth 5 million for a WOW mine that almost guarantees they exceed their current market cap in earnings in the first year of commercial production. I think lode is approximately fairly valued in the current environment and Mex is super undervalued.
Both Mex and Comstock are speculations but the risk/reward calculations couldn't be further apart. Lode has massive operating risk, and Mex now has none just as an example.
All IMO of course. The lode fanboys are probably going to send me anthrax now.
They can leach the UG ore since it is only 100 feet that would all just be included in an open pit. They might have to add milling/grinding and perhaps agglomeration to get the highest recovery but maybe just throwing it all on the heap with no or minimal crushing is the highest margin way forward. They are the experts, they will figure it out.
Now that I think about it the UG doesn't make sense for them at all. Too much hassle and it is unnecessary because even if it was 300 feet deep it would still ultimately become part of the pit.
Also did you see China just revealed some of its gold reserves. It looks like they will reveal small amounts as a cunning policy tool. They could say lower interest rates and print money but simultaneously reveal gold to mitigate the negative aspects of their policies.
http://www.pbc.gov.cn/publish/html/2015s09.htm
http://www.zerohedge.com/news/2015-07-17/china-increases-gold-holdings-57-one-month-first-official-update-2009
You can see all the currency wars stuff going on in the background. Instead of having just one all or nothing "nuclear" strike they now have smaller shots that can be fired in succession for a variety of uses.
Even 20% of 100k/year will get us up into some of the fun cocktail napkin projections.
We know quite a bit from the info released and can probably infer/guess a fairly decent timetable.
They have 3 1/2 years to exercise their option. They aren't going to be sitting on their hands. Apparently AR has been swarming the property for at least a couple months.
They would redo a quick prospecting stage and confirm Mexus' samples and use their maps to get a sense of the property and lay of the land and geology. This is maybe a three or four month process that I would guess is already complete or nearly complete. After they familiarize themselves with all of Mexus' data they would then start targeting the most prospective areas to start or continue drilling.
I assume they have been there since about May which would put them drilling in July or August.
Now here's where things get interesting. The production decisions and how fast everything advances are 100% based on these results.
They have to spend $300,000 by December 31, 2015 which I would speculate is mostly geologic work, mapping, sampling, and setting up a drill program.
A minimum of US$600,000 in expenditures relating to drilling by July 2016. So this is essentially a 1 million dollar exploration program - which goes a long way down in Mexico.
Mexus' properties are awesome so Argonaut will shit their pants as soon as the first drill comes up with visible gold. After a bit of confirmation and step out drilling Argo will fully commit and spend everything well before 3.5 years elapse.
If the results are even 10% of what I expect they will spend at least a million on exploration in the first 9 months which will give them a blueprint and mineplan for their heap and UG.
If they drill the Julio they will hit multi oz per tonne and have to change their pants yet again. I can't imagine Argonaut discovering such high grades in a 100 foot shaft and not immediately prioritizing its production. It could be placed into production in maybe 2 or 3 months (or less) but 6 months to a year is more reasonable.
Same logic applies to the heap. If they drill 5 years production at 1.5 or 2g/t they will be encouraged to drill more and place it into production ASAP. MC can be modular and more pads added over time so they could be in limited heap production after say three months of construction that follows a 3-9 month drill program.
We need to wait for more info from Argonaut and for drill results. If the results are good I would expect some decent production within a year to a year and a half but it could be sooner or later dependent on the results.
It comes down to what you personally think the property holds and the likelihood AR will find large amounts of high grade ore. Personally I think they have a 99.9% of success just based on what Mexus has already discovered to date.
I'd personally call it a GSR although an NSR and GSR can, apparently, be the same thing. An NSR is usually a % of (rev - production costs) but an NSR could be defined as:Net Smelter Return Royalties: a % of the gross value of production. What matters are the specifics, and Paul already said it is a gross deal so we already know the answer to your question regardless of what terminology we use.
According to a Mexican royalty company:
NSR:Generate revenues by being paid a small percentage (typically 1-4%) of the gross value of the products.
The favorable attributes to an NSR:
Insulation from increases in operational costs.
No construction, environmental or closure costs.
Limited management-time administering asset.
The negative aspects to a NSR:
High acquisition costs.
Difficulty in acquiring a royalty that significantly enhances earnings per share.
No influence on production decisions.
Note how the traditional negatives do not apply to Mexus' deal.
Even if it is a traditional NSR (rev - production costs) since:
All mining operations will be funded by Argonaut at no cost to Mexus.
The equation would be 20%(revenue - zero) or 20% of revenue.
Call it an NSR or a GSR or an NSR with no production cost, whatever makes you happy. Paul Thompson said it is a gross deal so this means that is a gross deal.
I know it is kind of ingrained in everyone to be negative and it is prudent to have questions but sometimes awesome news is just awesome news. This is one of the reasons that bear markets exist - we get tunnel vision and are influenced by our immediate pasts. We get the best news ever and just look at how angry, disappointed, and depressed a lot of people were. It will be opposite in the bull, we will get bad news and nearly everyone will be foolishly optimistic. Market psychology is comical as long as you aren't a member of the mob. Everyone on this board is well ahead of the curve but we are still human.
This is a historic mining agreement. This is the kind of venture that can turn a bear market into a bull. People should be raising a toast and celebrating instead of obsessing over questions we already know the answer to. I know that tonight I'll be raising a glass for Mexus, for Paul Thompson, and for everyone else, shareholders included, that put blood, sweat, and probably a few tears into the project and got it to where it is today.
There is still a few unanswered questions but work is progressing and those answers will come eventually and when they do I think we will like 'em.
The facts are:
All mining operations will be funded by Argonaut at no cost to Mexus.
Let me know if I need to use coloured font.
If it is on net profits then the 8k is wrong and Argonaut is not paying for mining operations. I personally believe the documents submitted to the SEC to be correct.
AR tsx / ARNGF otc
http://www.marketwatch.com/story/argonaut-gold-announces-second-quarter-2015-production-of-36529-gold-equivalent-ounces-2015-07-15-191733119
http://investorshub.advfn.com/Argonaut-Gold-Inc-AR-19037/
http://www.octafinance.com/scotia-capital-analyst-reaffirmed-4-75-price-target-on-argonaut-gold-inc-tsear-stock-while-reiterating-outperform-rating/
http://www.argonautgold.com/
The math seems to make sense with it being 20% off the top. Seems like a win win. But if it is in fact a net profit deal it's probably time to buy some AR shares :)
100k oz produced $1200/oz ppg 120m earnings, 20% to Mexus off the top, 24m profit, 96m to AR - 60M (600/oz)Cost 100% to AR - 36M profit for AR.
200k oz 1500 3ooM 60M MEx, 240 to AR, economies of scale, efficiencies down to 500/oz cost is 100M for 140 M profit to AR.
300k oz 1500 450M 90M mex, 360m to AR, 550 cost 165m, 195 M profit to AR.
300k oz 2000 600m 120m mex, 480m to AR, 700 cost 210M, 270M profit to AR.
This makes perfect sense to me and seems like a good deal where all parties are more than satisfied.
As the project advances AR is then incentivized to lower production costs as much as possible because this increases their share.
Compare this with a 50-50 partnership and you can see why Argo would in fact give Mexus a 20% stream rather than give up half the gold. The idea isn't crazy, especially if it ensured a deal and locked up the property for them.
Why would you assume such high costs for Mexus? Argo is at $883 AIS across all their super low grade mines. I am completely mystified why you think Mexus would be way worse off than Argo's average - it should be the opposite. Mexus should be in the the lowest quartile, not the highest. Even if the deal was as pessimistic as you imply it would still be more like:
100k $650 oz/profit x.20 is 13 M/308m shares = .04/share or $.40
But that isn't what the deal says. Reread the terms. Argo is paying the cost of operations, which is the vast majority of the cost to mine an ounce. To visualize this there is a shell company that will be created and in this shell will be the mining claims and assets and all of the profits go into this shell to be divided 80-20. This shell is separate from Mexus and Argonaut. Argo will pay the costs for newco, Mexus gets 20% of Newco profits. Simple. Since only 600k is earmarked for 1st year drilling the other 4 m is for mine development, which will get Mexus into production. This means Mexus will make more than 20% of the net profits of the operation since they aren't responsible for the operational costs to produce those profits. Mexus is not mining an ounce for $1100 and getting 20% of the profits. If they did that it means that they paid for their own ounces to be produced. Or stated another way if they make $200 an oz the other grand is spent on operations to mine that ounce. This isn't what is happening here, this isn't like the other JV. The profit per oz will probably be ~$1100 not its AIS!
This is my opinion until I see something to suggest otherwise.
If Argonaut pays for the mining operations like it says it looks like this:
20% of 100k is 20k 0z or 24 M even taking 10% for admin costs is 21.6 M or .07/ $.70share even, taking off a third for taxes still leaves net income of 14.4 M, .046/ or $.46 share at the same multiple.
Instead of cursing a dirty gold nugget maybe wash it off in the river before you despair.
Over 400k traded in the first 10 minutes. It will be volatile but it looks like we will start to get some decent volume. At least now there is a compelling reason for people to purchase shares.
FWIW Mexus is number 4 on ihub's breakout boards. http://investorshub.advfn.com/boards/breakoutboards.aspx I am not sure when this ranking resets.
There seems to be gradually growing levels of interest on the web as well. Some high visibility PRs would be sure be nice about now to really get us going.
Once the option is exercised, Argonaut will hold an 80% interest of Newco and Mexus will hold a 20% interest in Newco. All mining operations will be funded by Argonaut at no cost to Mexus. Newco will be managed by three board members, one of which will be Mexus.
So Mexus receives no cost production? My read of this is that Mexus has structured itself almost like a royalty company/streamer. 20% zero cost gold is more than 40% pay your own share.
Argonaut will have a big heap operation going there in no time. Absolute minimum would be 100k oz from a small leach operation combined with a minimum of 20k oz from the UG which would give Mexus 24k ounces which is about 30 million before tax or about 10 cents per share or $1/share at x10.
So I think we may have just got everything we wanted.
Since the grades are so high and Argo has control a 250k heap with a 50-100k UG is probably the medium term goal.
Congrats everyone. A 20% stream on a soon to be giant mine is way better than a kick in the ass and no pie at all.
Yes, it is mainly current shareholders that are buying. There is surprisingly little interest because the sector is depressed and the PRs have low visibility. The headline "Mexus Gold US Signs Option/Joint Venture Agreement" sucks compared to "Mexus Gold US and Argonaut Gold sign JV agreement" or "Argonaut and Mexus Gold partner to place high grade Julio zone into production." etc.
We need a joint PR by both Mex and AR explaining the terms of the deal and the game plan going forward.
Anyone seen a 10Q lost in the desert? More colour there would be nice too.
We need multiple PRs in a row that build on the previous releases. Get us some drills turning and ground broken and we will be rolling in no time. The price will probably increase as more information becomes available and more widely disseminated.
Also paradoxically as Mexus increases in price more people will, for some reason, like it a lot more and buy in even as it becomes less of a bargain. These people will take less risk as this speculation transforms into an investment. They will probably get lower returns for their choice.
Should be a good week. Already at 3, ask is 0.035. EOM.
Now we have one of the best junior/mid tier producers in the world as our partner. They have about $50 million in cash with more coming in daily. If they spent $5, $10, or $20 million on the project, factoring in the bear market savings the Mexus JV will probably become Argonaut's crown jewel and one of the most profitable mines in Mexico.
I am sure I am not alone in wanting to read the full agreement and see how the option %s work. Hopefully the contract doesn't favour our partner too much. There is a good chance IMO Argonaut will gobble up Mexus as soon as the value is apparent. Historically buyouts happen, even without substantial drilling, when the deposit has good grades and continuity that allows them to estimate a large deposit with little cost and risk, like with the buyout of Gold Eagle for $1.5 billion. I think AR will drill out a million high grade ounces so quickly their heads will spin, then their geologists will look at 26 square km of the stuff and have brain aneurisms of delight. I don't think Argonaut will want Mexus to control ~50% of what will probably become their best, or one of their best, assets in the long term and that is a good thing since assets aren't worth much if nobody wants them. The Argonaut JV is a strong endorsement of Mexus' potential.
For those not familiar with the Argonaut team they are drawn from Meridian Gold which was bought for $3.5 billion in 2007. This team is a proven, brilliant, value generating force. Their current share-price is a bargain like many in the sector.
http://www.marketwatch.com/story/yamana-meridian-forge-35-billion-gold-merger
Argonaut will soon be a 500k/oz annual producer over the next few years and they were established in the same year as Mexus (2009, with a cashed up power team). Argonaut will probably pay a dividend once they are finished their build outs and if metals go up even a little bit it seems like an easy slam dunk to $25/share+. I bet they attempt to acquire Mexus simply because they will be too attractive to resist. Hopefully we don't get bought out until the next cycle upswing, where we can cash out for a premium. Ideally we sit back for the next bull cycle and collect our due rewards but at the very least Mexus now has a much better chance that one day there will be an optimal exit opportunity and liquidity event.
So now that Argonaut has our back reread this and let your imagination run wild. It is time to get excited and with good reason!
"Mexus Gold Speculation Theory By TMLonggun 07/04/15 $.016/share
When you speculate you are making an informed bet. I personally ask myself a series of questions essentially forming a mental equation in my mind. Everyone should do their own dd and make their own appraisals.
I ask myself why should I buy shares or hold the ones I have? Are there compelling reasons to speculate? Why am I here?
Because of Paul Thompson. I personally trust him. Overall one has to decide, has he missed his mark, or, is he an honest entrepreneur who will do his best to do right by his backers? He has been given a lot of flak over the deals that have never materialized, some deserved. But should he have accepted an unfair deal that jilted shareholders for short term gain? Of course not. Ask yourselves could you have done any better in this market? I think PT's performance is well above the sector average but the bar is pretty low at the moment, the majority of companies are just trying to survive. But when the bar is so low it is easy to raise it, just like the expectations for the mining sector - people expect nothing at this point. Giving them something will cause the pom poms to come out.
Because of Don Phillips. Make of him what you will but one does not pick what essentially amounts to successive lottery tickets by luck. His endorsement is a strong positive. How many of us would have even heard of Mexus without him? How many opportunities have there been to make vast sums of money off not only his previous picks but also even Mexus itself? There have been numerous chances to make vast sums but not many of us have managed it but Don has.
Because of the quality of Mexus gold properties. Simple question, do you believe there is a large amount of economic gold on the property? Do you think there is a decent or high likelihood that Mexus could drill a large, high-grade discovery with relative ease?
Because of the macro environment. We live in a world where high grade gold deposits are becoming increasing rare and the global average is about half a gram per tonne for undeveloped deposits. The majors care little for acquisitions at the moment but in a couple of years they will have eaten their lunch and have hungry bellies and go hunting to replace what they have consumed. In the future it is highly likely the properties alone will be worth a fortune even without any production factored in whatsoever.
Because of there is a small chance of a buyout and high chance of other JV opportunities over the years. The property is large and the gold mineralization appears to be extensive. The expansion opportunities and chances to explore other areas and claims are numerous. Mexus has other exciting properties and there is a decent chance there is something valuable on those too.
Because of the potential of additional huge upside if gold appreciates.
Because of the potential for huge cash-flow. It is quite reasonable to see expansion to six figure gold production over time, with long LOM, and obvious world class mine potential. A simple heap leech operation supplemented by the underground and whatever exploration leads us to discover it is pretty easy to imagine some pleasant BOE math.
Because of the potential for eventual dividend yields that are absurd. They have to make money first of course, but initial GORO investors no doubt fantasized about dividends to come, and they got $104 million! So it is possible.
Because of where we sit in the mine cycle, at cyclical lows that have persisted for about the length of previous declines; with profitable companies now being rewarded for news and progress it demonstrates a dramatic change.
Because of the example set by numerous profitable mines in the same trend as Mexus, all are profitable yet have demonstrably inferior projects when compared to Mexus. Does this not make them more likely to succeed?
Because a financed Mexus with only the shaft producing is worth multiples of our current market cap.
Because you do yourself an immense disservice by not averaging down or purchasing precisely when an optimal opportunity presents itself. It sucks if you bought high and sold low in the past but how does ignoring a good chance to do the opposite enhance your psyche or well being?
Because the stock is cheap. It can still get much cheaper and potentially go lower, but on a simple relative value basis Mexus at under 2 cents is cheap and undervalued and meanwhile everyone is sad :( while Mexus at 62 cents was overvalued and expensive (everyone was happy). How much more likely is Mexus to run from .016 to 8 cents than from 62 cents to a dollar?
Because of the entertainment value. At five a dime, more than worth the price of admission IMO.
Because of the crazy ass shareholder base. Subtracting the weak hands who will quickly sell out there are still a lot of, uh, I will politely call them, nuts, who hold the majority of the float and do so with a long term outlook. I think at least 150 M shares "know" it is undervalued. The float could be much smaller than expected and if ~200 million shares are held close very little demand will drive the price higher (if there is a fundamental reason). Just as easily we fell to .02 we can rise to .20. Even with all the extra dilution of life support, necessary in a bear market for most juniors regardless of a CEO's acumen we still are in decent shape. It sucks they print shares but we will live to fight another day and to do so allows a very good chance of reclaiming our old highs. Even 50 cents is ~31x our current share price. If you had a 31 bagger you would be hailed as a genius stock picker and many would frame the certs on their wall. There's a pretty fair chance that happens in my mind so all this depression is a bit comical. Stocks go up and down and it is partially because of how emotional we are.
What percentage chance of success does this all amount to? That is something you should decide for yourself. I would make the argument that even if you placed a 5% probability of Mexus succeeding that would more than warrant a purchase at these prices, since the upside is frankly astronomical. We have recently experienced lots of downside and so our perspectives are coloured by our immediate pasts. Rationally I do not think our chances of success have dipped much since the whole SF saga punched our negotiating clout in the groin. The chance of winning here is still far greater than 1/20 in my opinion.
So have a laugh everyone and relax, this time is like a blip on the decade long timeline of getting a mine into commercial production. We're still ahead of a normal timetable and most of the facts speak to an impressive property that will be worth far more in good times than in bad. The gold has been there millions of years and it isn't going anywhere until Mexus mines it.
Here's some wisdom from Rick Rule:
Argonaut Gold Inc signs deal with Mexus Gold:
CARSON CITY, Nev., July 13, 2015 (GLOBE NEWSWIRE) -- Mexus Gold US (MXSG) (“Mexus” or the “Company”) announced today that after months of negotiating with several mining companies an agreement has been reached. President Paul Thompson is proud to announce that Mexus has signed an option/joint venture agreement with Minera Real del Oro S.A. de C.V., a Mexican corporation, which is wholly owned by Argonaut Gold Inc. (AR.TO). Argonaut has the knowledge and experience along with the necessary capital to plan, drill, and bring the Julio/Martha Elena project into production. Mexus believes that Argonaut is the best fit for this project. Mr. Thompson added, “For approximately three years, Mexus performed geology, mapping, and exploration work on the property along with limited drilling. Within the property there are extensive vein systems and evidence for several large flat-lying shear zones believed to be related to thrust faulting. Work by Mexus have confirmed that both the veins and shears host multi-gram per tonne gold and silver values. Mexus has drill results which show a high grade, multi vein system throughout the property. Multiple target areas have been identified on the property and Argonaut is currently conducting geologic mapping and sampling in anticipation of an aggressive drill program over the next several months. Adequate work was completed for Mexus to realize that this project was too big for us and needed an experienced mining company such as Argonaut Gold. We are excited about the partnership and look forward to seeing Argonaut drill and ultimately bring this property to production.”
http://finance.yahoo.com/news/mexus-gold-us-signs-option-133000108.html