Value Microcaps Free-For-All

[Bobwins]

bmgx.ob Battle Mountain Gold is a new stock for me. I picked it for the PSL3. It's a different twist on gold stocks.

They invest in net smelter royalties. They just closed on a big purchase of royalties on 11 gold properties. 4 of the properties are producing gold. They get a small (less than 1% up to 5%) of the gold sent to the smelter. Last year the cashflow from this collection was 2.3million. With gold higher, the cashflow should be much higher for 2006.

I like the business model. Think about this. Let's say you have a mine producing 39,000 oz a year and they start a capital improvement program to increase to 50,000 oz. Probably cost several million dollars. Bmgx.ob gets full participation in all of the increased production with no additional capex!

Also imagine the overhead required to service this portfolio once it's acquired. Pretty small. No equipment, no big production staff. They probably need a geologist on staff or on call to assess properties and calculate the chances of a successful mine eventually on the property.

Of the 11 properties, 4 are producing now and one is in the process of permitting for mid 2007 production.

Here is the website. http://www.bmegold.com/

They also have an interesting subsidiary that has a method of finding gold deposits thru water chemistry. Sounds interesting and could help them zero in on potential deposits a lot more accurately than current methods requiring lots of expensive drilling.

Today Battle Mountain was up strong .11 to .70 on a down day for gold so I think investors are catching on. There is only one other royalty gold play and that trades for 30 times eps.

Need to see financials with the new royalties to tell for sure but I think this is a nice way to play the gold angle with cashflow instead of hoping for a strike or good drilling or loads of PR like most junior golds.

Bobwins