As promised, below is my gold mining friend's expert analysis of LSTG. A bit technical and brutally honest. He finds the "tailings project" interesting, but considers the prospect of LSTG becoming a fully operation gold mining company a long shot. He does point out a couple of gold mining companies in the "exploratory" stage that he does find interesting. They say knowledge is power and I hope this helps everyone have a better understanding of their investment in LSTG. Obviously, pretty risky, but with big risks come big rewards.
Hi Mike P
I promised to review and comment. The market has many opportunities to invest into gold and/or silver companies where I usually consider the domicile as a critical issue. Mexico is viewed by the market as being rather high on the curve as compared with Bolivia, DRC, and others. Personally I have some issues with Mexico since the progress from acquiring a geological target through exploration; development, and production generate individual sets of unique challenges. In simple language, I do not like surprises and Mexico has many. For example, selection of a labor union and the rights of that labor union are somewhat foreign to US conditions; ownership of land and mining rights are also unique in some regions; and, future value sharing with the government and local squatters is now in flux. The country has many positive attitudes toward mineral development but their legal and political systems which appear straight forward, are not.
With regards to the specific investment, the current market is harsh with respect to junior mining companies. One can classify from the less defined to those with the highest clarity: a. Over the counter stocks where the properties do not have a CN 43-101 or JORC filing for the resource and project; b. Junior listed on the TSXV which also do not have a CN 43-101 or JORC filing; c. Junior listed on TSXV with a CN 43-101 or JORC filing; and, d. Junior or mid-size firms listed on the TSX with a CN 43-101 or JORC filing. This is somewhat boring but the investment risk declines from (a) to (d); then, you have the major listed groups on the TSX and NYSE, etc as well. One can invest and perform well in many of the sectors but the skill (like all markets) is knowing when to get in/out.
I can identify couple of dozen interesting investments (no guarantees) where one has the potential for multiples on the investment. I am not very excited about Lone Star since they are more in the (a) grouping and the investments are not 100 % ownership. I also examine the management and this has an influence on my view.
I was a director for some time with Euromax Ltd. listed on the TSXV where this firm is beginning to achieve some traction with their properties in Bulgaria.. I do like High Desert Gold listed on the TSXV with properties in Nevada in an established gold zone where the management is excellent. Another junior in Canada is Gowest which is interesting.
Let's consider the gold and silver markets (PMs): We appear to have a serious restructuring of the PM market with investors believing that stocks and other investments are attractive in the current environment and the major issue "Fear" has declined with respect to Europe, US, and Japan. I am not on the same path as this thinking but one should not swim against the tide. Gold could test $1200 per ounce should this trend continue. Base metals however have stabilized and could move higher which is a deviation away from the fundamental thinking. I do expect gold to rise over the next 18 months since the Europeans have not resolved their problems and physical demand for gold is very high. Political stability is questionable in Asia, Middle East, and Africa.
If you are a gold bug, a vehicle for investment may be the ETFs where you can enter and exit at ease and trend with the actual gold price where gold mining company stocks have not been able to maintain pace with the actual gold price over the past few years (Newmont, Barrick, etc.).
As for Lone Star, I do not believe that you will realize value soon for the tailings project (positive cash flow) and the La Candaleria property is not well defined. From a personal view again, converting an exploration play into a producing facility is not a simple task. The tailing potential is interesting but the firm has much to overcome before achieving a positive cash flow for the total project.
Hope this helps.
Best Regards,
Mike M.
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