Mexus Gold US (MXSG)

[TMLonggun]

I probably have more shares and bigger paper losses than nearly everyone here. Am I worried? No! Oh come on, you've got to be a bit concerned? Nope. Would I prefer to be averaged at the exact bottom and sell at the exact top? Of course, but that is not realistic at all.

Now my lack of terror will seem strange to some but I will outline my reasons below. These reasons also help demonstrate how many people on other stock boards can be very disingenuous when speaking about Mexus, its future, and junior mining stocks in general.

There seems to be a huge disconnect between expectations and the reality of this industry. Here's some facts about mines and Mexus in general:

Reality: A mine now takes more than 10 years on average to develop through to production.

Reality: ~90% of discoveries are uneconomic, ie 90% of geologic anomalies are not viable.

Perception: Mexus failed to enter full commercial production within 2 years of a production decision, so the company is crappy and will soon be dust.

Now think about that for a moment, side by side with the truth, is that really a legitimate complaint?

Shareholders are angry and "disappointed." Why? The share-price. They had unrealistic short term expectations and are mad that they didn't get rich quick!

Almost all Mexus shareholders believed they would get rich quick. In my own experience the GRQ strategy leads to losses every time. The get rich quick folks are the least disciplined investors; they are a proxy for the common masses. These are also the people that tend to blame others for their own actions and proffer the most unrealistic complaints, eg that a small company with limited resources should do what not even large companies can, inform them of every minute detail of everything that goes on, etc.

So if we were trying to be reasonable here... if you knew something not only would take 10 years or more AND that it had a 9/10 chance of failing would you really bet the entire farm on it and complain after only 2 years?

The get rich quick strategy has been the death of many fortunes.

I know of a guy that can make a million dollars in a day. GRQ right? Wrong! It took him almost forty years of training, hard work, capital accumulation, and obsession to get that good. If/when Mexus trades above a dollar it won't be getting rich quick for us, it will have been earned and have taken many years of development, research, and the fortitude to survive it...like every other mining project in the world.

Reality: The mining industry is one of the most, if not the most cyclical sectors on earth. We currently reside in the bottom of one of these cycles and share-prices of nearly the entire sector are very low.

Perception: Mexus' share-price is low, this means the company is bad. Therefore the company is doomed and the fault lies completely with the CEO. Only companies with high share-prices are good investments.

Reality: The price of gold hugely affects Mexus. Detractors are quick to point out Mexus and other juniors do not appear to be closely correlated to the price of gold, and this is true, to a point. It makes sense too, why would junior companies who have no proven gold track the price of something they do not have? But, the price of gold does influence the availability of financing to the entire sector and affects the likelihood of making a deal or JV on good terms. Financing leads to value creation, drills turning, discoveries made, and metals mined. These, combined with the natural reduction of spending in a cyclical decline, are the very things that ultimately seed and turn a bear market into a bull market.

The last points (gold price, cyclicality) are things that are more likely to be a tailwind than a headwind going forward. In better market conditions Mexus will be rewarded for the progress it has made and higher gold prices will ensure that the already impressive margins talked about are expanded further as words and dreams are finally turned into gold.

So even though I have paper losses, I do not believe it has affected the long term potential of the company, nor where it could potentially trade with much higher gold prices and a return to bull market. I still believe with near certainty that Mexus will one day trade at least 50% above its all time high.


I am also going to re-post part of this old post, more relevant today than ever:


I would like to offer some perspective to the disheartened shareholders here.

We all knowingly put our money in a volatile penny stock in the highest risk sector in the world and it should not be the least bit surprising that it is capable of large percentage swings both up and down. When you consider the sentiments towards metals and markets in general and how many times junior markets have had 90% corrections in recent history then there is nothing alarming about our current circumstances. Due to the calibre of the Mexus projects and their realistic potential for huge production we are in far better shape than most juniors. Remember that many things are cyclical or driven by events far from our control or view.

Consider one of my favourite Mark Twain quotes:

“I was seldom able to see an opportunity until it had ceased to be one.”

Hindsight makes the winners obvious, but if opportunities were easy to see they would cease to be.

You can look at the share price and become emotional or you can evaluate things calmly from the perspective of a disciplined speculator.

Last year, with higher metals prices and a generally more optimistic market, Mexus ran up over 300% (11.5-46.5) in a month and a half on essentially nothing. All that happened was that Mexus finished their mill and it looked like underground mining was commencing imminently and a relatively small number of shareholders chased the stock to a high $0.62. As the rally accelerated this is where numerous JV rumours, pictures, trips, the Plomo deal and ultimately Trinidad and the all speculation and back of napkining(™) that went along with it.

To get to .62 it took about 7-8 million dollars of total buying and selling over 14 weeks. I estimate it took approximately $250k per week of sustained buying pressure.

Fourteen weeks is not a long time, the number of shares and dollar value is modest, this stuff can and will change just that quickly.

At 62 cents Mexus was valued at 130 million dollars and was just not worth it without cash flow. If you go back and the read the messages during this time period everyone was ridiculously bullish and had blinders on. This is a telltale sell signal. At this point they had the mill, a hole in the ground, and a JV going concern with huge potential but that definitely needed a few bucks and some TLC. The JV employed about 125 workers and was quite bloated and inefficient and we had little information about grade and operations. Gold is a dream somewhere in the future. Most of us, myself included, ignored many of the permits necessary to run the Mexus 100% projects and I think that in general an average investor hugely underestimates the difficulties and amount of time permitting and construction actually take in this business.

Fast forward to today. Mexus trades at 7.5 cents and is worth about 18 million dollars fully diluted. They still have no real earnings. While that remains the same though, the projects on the other hand have all advanced significantly. The mill sits as before and the placer, marginally expanded, is idle. There has been a lot of equipment added to the Julio site, a headframe and bucket system has been installed and the underground mine resembles an underground mine instead of a rattle snake cave. The environmental and permitting is ongoing but I would say it is more a matter of money than time at this point. The geo reports indicate (to me) that there is ludicrous exploration potential at the Julio and the surrounding areas. Something about multi-kilogram surface outcrops that makes a man wonder what is a little bit deeper.

Gold is still a dream somewhere in the future but this time metal is flowing and is so close I can taste it. (It tastes like a four leaf-clover, or perhaps that’s the cyanide?)

Overall the value of the company has increased significantly while the price has decreased considerably. What’s that sound? Opportunity knocking.


It is up to you whether or not you answer the door.

Thanks for reading!
-TM

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