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The following was originally published on July 2 in the Friday File for the paid members of the site. It is republished here with no editing or updating, and the author continues to have no position in the stock.
Well, this seems like a good way to get back to work after a week of moving — and I must say, I’m relieved that it’s not a hugely difficult teaser, since the mighty Thinkolator is not yet up to speed after the move. Hopefully I’ll find the rest of the pieces by next week.
This teaser ad is for another special report and conference call from Stansberry & Associates, a call that they’ll be holding on July 12 (so although the stock is actually moving up already today, a strong indicator that lots of investors figgered this one out on their own, thanks very much, there is a potential catalyst from this call in 10 days that could bump the shares up or down considerably — and on July 8 they’ll release the written report on this one to subscribers, so that could make a difference as well).
The product they’re selling is their most expensive newsletter, Phase 1 Investor, so there are probably lots more folks who figured the stock out on their own or who are reading this note today than will subscribe to the newsletter for this deal (the list price is $5,000, they’re currently selling it for $3,000 … still one of the more expensive letters I ever write about). Phase 1 recently got a new editor, Frank Curzio, who concentrates on low priced stocks (he ran a “stocks under $10″ letter for TheStreet.com before leaving and resurfacing at Stansberry with a new penny stock letter, and now they’ve given him Phase 1 as well.) I don’t know Curzio, though I listen sporadically to his podcast and generally like the kinds of ideas he hunts down.
But you just want to know what this “gold sands” stock is, right? For me that conjures up the Alberta oil sands, but this time we’re actually talking about sand that’s a lot closer to the beach. Here’s how they introduce it in the ad:
“We’re received report of a major gold discovery… in a location you’d never guess in a thousand years…
“If this gold were buried underneath the Washington Monument… or the Sears Tower, it would probably be less surprising…
“But the fact is, after 10 years of investing and writing about finance, I’ve never heard or seen anything like it.
“And I’m not the only one…
“‘Geologically… this is definitely the best prospect I’ve ever seen…’ said Dr. Charles Morgan, a geochemist and former project manager for the U.S. Department of Interior.
“‘The gold content is incredibly high,’ Dr. Steven Scott, professor emeritus of geology at the University of Toronto, said in an interview. ‘It is exceptional.’
“‘These are very, very high contents of valuable metals,’ said CSIRO scientist, Dr. Ray Binns.”
Sounds exciting, right? So why isn’t this in the headlines and getting chatted about on all the investing sites? There has to be a catch, right? More on that in a moment …
“… this discovery is located in one of the most unusual places on Earth. When I tell you where it is, I’m sure you will be surprised—it’s a place no man has ever stepped foot.
“The other interesting thing about this situation is that several of the largest gold and resource companies and investors in the world have quietly been building positions in this tiny firm../ including a powerful billionaire metals-and-technology investor who has invested in Facebook, Gazprom… and whose last stake in a small resources company shot up as much as 910%.
“It’s just a matter of time before these guys tap this gold and mineral treasure trove.
“In fact, we think this could happen very soon.”
So … some of you will have already figured this out, but they’re talking about underwater mining — that narrows the list of companies down to, oh, about one … here’s some more about the location, and the reason for this highly concentrated ore:
“So, where is it? Where is all of this gold buried?
“Here are a few hints:
“There’s no traditional mining infrastructure needed.
“There’s sand everywhere.
“And it’s 1,650 meters below sea level.“That’s right, it’s underwater!
“… About a mile below the Pacific Ocean, in a region called Melanesia…
“There’s an incredible amount of gold and other rare metals such as silver, copper and zinc.
“Billions of dollars worth.
“And one tiny company may soon have the rights to mine and produce it….
“… it’s not far-fetched at all…when you consider the geology of how gold mines work.
“You see, most of the world’s richest gold deposits were underwater at one time… typically thousands of feet beneath the ocean.
“The amazingly rich mines of Ancient Cyprus… Eastern Egypt’s gold and silver mines… Kid Creek in Canada… Rio Tinto, and BHP Billiton’s original cash cow – Broken Hill…
“They all started out in the ocean, along hot cracks in the ocean’s floor called ‘volcanic vents.’”
And I told you that the list was narrowed down considerably by just the mention of an “underwater miner” … so who is it? This stock is … Nautilus Minerals (NUS in Toronto, NUSMF on the pink sheets)
And yes, I mentioned that the stock is already moving thanks to this teaser campaign — the stock is up 20% today on no other news. Heck, even the completely unrelated Nautilus Inc. is up a few percent today for no reason, perhaps just because of the similar name (that’s a guess — Nautilus Inc., ticker NLS, makes fitness equipment, just FYI).
Nautilus has been exploring in their zone offshore Papua New Guinea for many, many years, and they have identified several prospective areas of underwater volcanic sulfides that include high concentrations of copper, zinc, gold and silver — they were the first explorer to get a commercial exploration license for this kind of underwater project, in the area that they call their “Solwara” prospect, which encompasses a number of named sites (Solwara 1, 2, etc.). They also have other exploration tenements in the South Pacific, including offshore Tonga and New Zealand among a few other spots, but the Solwara project is clearly the basket they’re putting almost all their eggs in right now.
And it has been for a very, very long time — there are a number of quotes in this ad from mining experts and reputable sources, but almost all of them come from a New York Times article about this exploration project. That’s not to say there’s anything wrong with the source, of course, but it’s very much worth noting that the article ran in 1997, when Nautilus got these exploration licenses. This is also an industry — whether on dry land or underwater — that’s fueled by optimists. Here’s a quote from the Nautilus CEO from that article — 13 years ago — about what they saw as the “immediate future” …
“‘I see hundreds of millions of dollars worth of metal in the immediate future,’ said Julian Malnic, the company’s chief executive, who works in Sydney, where Nautilus has an Australian office. ‘And it won’t take us very long to get into the billions.’”
Well, I don’t know what “immediate” means to Nautilus, but for your friendly neighborhood Stock Gumshoe it certainly means “less than 13 years.” Julian Malnic, for what it’s worth, is no longer the CEO.
Nautilus’ first project that they hope to build, Solwara 1, is, at the very least, an interesting testing ground for what they hope will be a new generation of underwater mining equipment — they and their contractors have been modifying deepwater oil drilling equipment and underwater robotic vehicles to develop the capability to mine ore and transport it to the surface for processing. The technological challenge seems absolutely ridiculous — this isn’t something that happens to be under just a couple hundred feet of water but can be fairly easily reached, this project is almost a mile underwater, roughly similar to the depth at which BP is having a devil of a time capping their spewing well after the Deepwater Horizon explosion.
So it’s no surprise that nothing is working as quickly as one might have hoped — just as it’s no surprise that the company suffers from the perpetual optimism of almost all of their peers in the mining world. I wrote about Nautilus a couple years ago when it was being teased by a different newsletter, and at the time they expected to begin production in about two years … which might have them producing ore right now. They did get the environmental permit back in January, but the application for the mineral lease and the approval of their development plans are still apparently pending (they were submitted about 18 months ago).
And when will they actually be producing? Well, they are doing more exploratory drilling this year, aimed at expanding and defining the resource and getting to a deeper depth, but it’s going to be a long, long, long time before they’re selling ingots — just last week they released their preliminary estimate for the offshore production system and the key take-aways I pulled from that release were that capital costs were estimated at about $400 million, and it would take 30 months to commence commercial production. And that’s after they get approval from Papua New Guinea for the mining lease and plans, and after the board approves the plan for the offshore production system … and it doesn’t include plans for how to process and concentrate the ore after they get it off the barges and onto land.
On the positive side, they do have a lot of cash — they have no debt and the company is currently valued at about $280 million, but they have $196 million in cash on hand. So that’s a good start, though of course it’s a fraction of the funding they’ll probably need to reach any kind of sustainable commercial level of production. They were in much the same position two years ago, though at the time it was closer to $300 million in cash, so over two years of continued exploration and permitting they’ve spent about $100 million. Given the groundbreaking nature of this project, even if we assume that the mining lease is issued as expected by the end of this year, one would have to guess that there will be technical problems and challenges that we can’t even imagine at this point.
So how do you figure out how much this is worth? That I can’t say, except that it’s probably worth something, so if it got down to closer to cash value I’d be significantly more interested (that’s about $1.25), but I find it very hard to believe any projections about when the actual mining project might start and when in the future they could possibly become profitable. And to be honest, the cash per share figure is really just a convenient valuation crutch, since they’re likely to spend all that cash and more over the next couple years and there’s not much chance they’d liquidate and send you a check for your share.
So as you might have imagined before we even started this little note today, yes, there is a catch — it’s great to hear about a hugely concentrated resource of gold and copper held by a little company with a plan to extract it, but the list of things Nautilus Minerals has to do that have never been done before in order to extract that ore is pretty daunting, even 13 years after they first started commercial exploration.
I’d guess that those institutional investors like Teck Cominco and Anglo American aren’t counting on this company adding to their bottom line anytime soon, and we’d probably all be best off if we thought similarly — I’m not against a lottery ticket every now and then, and there are catalysts including this Stansberry call next week and a possible mining lease being granted later this year, but they’re not going to be calling this lottery’s winning numbers for at least a few years… absent any big news from the company over the coming weeks, it seems unlikely that the 20% jump in the shares today or the bump we may see when Phase 1 releases its report and holds the conference call would be sustained for very long.
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by manish on August 31, 2010 at 7:09 am
by IrrationalExuberance on August 28, 2010 at 12:05 am
by abrodie on August 23, 2010 at 5:47 pm
by manish on August 21, 2010 at 7:14 am
by manish on August 20, 2010 at 8:10 am
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Back in the late 70's or early 80's there was a pink sheet outfit called Goldcorp that claimed to extract gold from the beach sands of Costa Rica. It was a total scam and some folks went to jail.
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FWD Reply:
July 9th, 2010 at 11:34 pm
Jeez, I didn't know anybody else here was that old
I didn't buy that either.
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The timing from StockGumshoe today was perfect. I do subscribe to some of the Stansberry stuff but not Phase I. Just last night I must have spent 40 minutes listiening to Frank Curizo's teaser on this offering and the July 12th phone report. Based on what SGS tells us, what a waste of money to invest at such distance from an actual production goal. I think a lot of Phase I folks who jumped into this offering will be thoughly disappointed. Many thanks to SGS for allowing us to read his insightful report.
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Thnx for the post…I had absolutely no intention of getting in on Curzio's thing since it was so far from actual production. Nonetheless, what you had to say was very informative & useful from an educational point of view, which is of fundamental value.
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I get some of theStansberry garbage…and lately have been bombarded by thier teaser e-mailsto be sure to listen to the conferece call to let us all in on this great deal. I will not be lsitening. These guys are such promoters…I bet they will personally be shorting the stock into the pop they expect to get from the conference call. They cliam they can't trade thier stock.s…I bet thier relatives and friends do, though.
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Charles Reply:
July 12th, 2010 at 1:15 pm
As an investor listening to the Gold Sands story makes one peak with interesting and never buying into the Stansberry story before, it is good to hear that others have already experience and learned the lesson so the rest of us don't have to reinvent the wheel.
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curcios fatherfrank sr. was one of the first to recognize the athabasca snds bfore any real mining was taking place
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Stock Gumshoe:
Thanks for your expose on this teaser. I watched the video and found it very interesting but I think I will spend my few dollars on something else. I subscribe to some Stansberry offerings and have made money on some and lost more on others. S&A resource report is one of their better ones. True Wealth was good when it started but Steve has been smoking too much "something".
FOX
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Greg P Reply:
July 11th, 2010 at 6:44 am
I disagree with that comment on Steve entirely. Going back over the last 2-3 years True Wealth has been almost doing extremely well in its recommendations. Resource report has been doing well simply because we have been in a commodities bull market for much of that time. Do not confuse success in a bull market with genius.
Although this recommendation is surely a short term hype play, longer term investors will be watching this stock, but not at the > $2 level. For now, I think everyone recognizes this as a a pump.
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Considering how many years ago I first heard about Nautilus Minerals I was surprised that they are still around with that kind of financing. I figured this had to be what they are teasing but like MANY of the promos from Stansberry (and others) while unique and early stage, they are as the Gumshoe has pointed out, FAR from making any money, so it is a pure speculation based on the “greater fool” theory.
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One of the major things to consider is any underwater project developments or companies that focus on the seabed at any depth due to fears of another underwater accident like what has happened to BP. Add the bad media coverage and that can spell doom for a company just starting to emerge. The sharks would be there so fast and the blood would be thick. To follow on this will be to watch the outcome of BP.
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I ran across this outfit several years ago—-hyped by several penny stock investment letters at the time. Passed, because of long, if any, schedule to production and capex required (as highlighted by Gumshoe above). On a whim, called my broker today to see if I could "short" the stock. He said….."no way Jose." His firm has banned any trading in this stock, citing that they feel it is "pump and dump" scheme initiated by several investment advisory services.
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Greg P Reply:
July 11th, 2010 at 6:46 am
Get a new Broker. You should absolutely be able to short pump and dump stocks !!!
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I got this teaser and in 10 minutes I found out the answer as Nautilus Minerals. Interesting discovery, and there were some substantial gold mines worked on land in the 50's in this region. I agree that the challenges to get it off the sea floor pose an unknown risk. For now, it's on my watch list.
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Stanberry, seems to always be talking about free money, like getting more
money from Social Security and loop holes in all kinds of Goverment programs.
Most of if just don't feel right if you know what I mean. Bob.
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Short Interest = 88,300.000
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Bill Reply:
July 10th, 2010 at 10:48 pm
Thanks Aarin————-Wow!!!!!
Either this will explode up in price on "short squeeze" or it will deflate faster than popping baloons on New Year's Eve.
Per Nautilus home page:
Issued Capital: Nautilus Minerals has on issue as at March 31, 2010;
Common Shares 155,558,884
Options 13,683,500
Fully Diluted 169,242,384
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Another case of, "if it seems to be too good to be true, it probably is." Thank you for clear cold water splash of reality.
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How does one subscribe to your paid issues? Thanks. alex_8217@msn.com
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I think the stock is Neptune Minerals.
"When will Neptune's resources be defined?
Neptune submitted its first mining licence application (MLA) in July 2008 for an area withing the company's Kermadec licence PL39-195. Discussions with the New Zealand regulator Crown Minerals and other stakeholders are ongoing and will ensure a satisfactory conclusion to the application process.
Once the mining licence has been granted, activities can commence to define the SMS resource and conduct the baseline environmental impact assessment.
When will mining commence?
Neptune is working to engage operational partners to develop the Kermadec asset and other New Zealand SMS deposits. Neptune's goal is to achieve trial mining by 2011.
Does Neptune have the financial backing to see the company through the initial exploration phase? In June 2007, Newmont Mining Corporation invested £2.5 million in Neptune with plans to place staff and provide technical expertise to assist Neptune’s exploration activities.
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Larry Reply:
July 10th, 2010 at 10:19 pm
I looked for Neptune Minerals but did not find a trading symbol. Can you givr that to us?
Thanks, Larry
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Bill Reply:
July 10th, 2010 at 10:41 pm
Gumshoe gives it above in his writeup—–
Nautilus Minerals (NUS in Toronto, NUSMF on the pink sheets)
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Adrian Reply:
July 11th, 2010 at 10:03 am
Mmmm… no. NEPTUNE minerals is a UK company (Nautilus is Canadian). Neptune Minerals WAS traded on the London Stock Exchange but delisted last year. It currently has no official market listing although it does still exist as a company.
Remember Hudson Resources? They were going to hold the rights to all the minerals in that tract of land in Greenland. They were hyped and the stock went up. Since then, their stock is in a rut and getting the ore will take decades.
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Let's do some arithmetic. S&A says the estimated gold content is 15grams of gold/ton of ore. Using a conversion of .000001102 short tons/gm, this ore concentration is .0000165tons-of-gold/ton-of-ore, or inverting, 60,606 tons-of-ore per ton-of-gold. Now, bringing up 60,000 tons of ore in a South African gold mine for processing at the surface is one thing, bringing up that much ore from an underground mine that is thousands of feet underwater and then barging it to a distant processing facility is quite another. And that's for one ton of gold (worth some $38 million).
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SDLurker Reply:
July 13th, 2010 at 3:55 am
William makes a good point. Perhaps the technology involves a large vessel mounted processing plant that enables extraction at the site and re-bedding the tails at sea. Just a thought.
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Thanks William, I was going to point out your observations raising ore to the surface is a dead lift undertaking requiring considerable energy unlike oil which is lighter than water and is driven by formation pressure. the only drive evident in this case is hype.
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John Martinson Reply:
July 12th, 2010 at 11:06 pm
It's more than a dead lift. Pressures at a depth of 1650 meters are enormous. There will have to be new "mining" technology to make this economic.
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Bob Reply:
July 21st, 2010 at 9:23 pm
That pressure is on all sides, so doesn't make anything heavier to lift. It shouldn't take any more energy to lift ore up one mile of ocean than to lift it one mile up from a deep South African mine.
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I am happy to find this information. I am dumping the S&A letter. More old regurgitated info than I can take. I am a new investor and even I canlook for the obvious!
Thank you for your artcle.
bluemax
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I have found an article from the "Berliner Zeitung" from April 11th 2006 stating that a canadien company called Placer Dome invested 7 million USD in the drilling programm of Nautilus Minerals with the following deal : If the program becomes profitable, Placer Dome will get the gold. Nautilus Minerals will make money on the other minerals !
So if this statement of the Berliner Zeitung is true, the gold story is for someone else !
Here's the text in the original german language :
"Die kanadische Firma Placer Dome, eine der größten Goldminen-Gesellschaften der
Welt, investierte daraufhin sieben Millionen US-Dollar in das Bohrprogramm von
Nautilus Minerals. Sollte sich der kommerzielle Abbau der Meereslagerstätten als
rentabel erweisen, bekommt Placer Dome das geborgene Gold; Nautilus will am
Verkauf der anderen Metalle verdienen."
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Thanks to a world-changing Cold War blunder, you have one brief window to bank 180 times your money on their 64¢ shares
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placer dome was bought out by barrick. they did make a 7mil investment in nautilus years ago but nothing has been mentioned about it since they were bought out. teck also made an investment in the drilling program but pulled out recently. they still own shares in the company.
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A few years ago I invested in a London-listed company called Subsea Resources whose plan was to salvage metals from sunken ships' cargoes. It was a good plan until the company's salvage vessel sank, leaving me equally underwater. Just thought you'd like to know…
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Got into Nautilus back ~1.00….got out on this pump. As the gummer says….we ain't close to being close yet. I'll jump back in below 1.25…or more likely close to 1.00 if it reaches that…just to hold a lottery ticket or to wait for the next pump. If it never gets down there again…I won't lose any sleep. Not to disrespect their efforts, but this is still a high school science project…a very expensive one. jmo…jt
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[...] accordance with the patterns and rules outlined in my 10 instructional DVDs executing a perfect P, as exposed by Stock Gumshoe, by use of phrases such as ““We’re received report of a major gold discovery… in a [...]
What a great story Londonian. "Subsea Resources" salvaging sunken derelicts – sinks their own ship and subsides, into a "sub-sea resource". LOL. =:-) Reality is odder than fiction.
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Does anyone know what price level the Stansberry report is recommending for their subscribers to buy?
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If you look at most modern surface gold mines they crush the rock and use cyanide to leach the gold out of the crushed rock and end up with huge ponds of cyanide contaminated tailings & water. If you did it on a ship, you could probably pump the cyanide tailings & water over the side. But i think people would notice when fish started dying in the area. Technical challenges are extreme. I would give them 1% chance of success. Considerably better odds than the lottery!
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Hm. This article makes it sound like the Gumshoes are being used as patsies in the process of pushing this kind of stock.
http://www.jcamberger.com/2010/08/golden-opportun...
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StockGumshoe Reply:
August 7th, 2010 at 5:01 pm
I expect that's at least sometimes true, at least to a limited degree. That's a great article, from an author whose promos I'm sure I've also written about before, he has an interesting insider perspective. And he does some estimating on the profits that can flow from a recommendation like this for a publisher, even though they were almost certainly not doing a "pump and dump" of the shares… the subscription profits flowing to these larger publishers are remarkably higher than most readers would imagine, I think.
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