“Tiny co. strikes gold in abandoned mine” Chuck de Castro

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Is it even possible to slip back in time a year or two, to our delightful bull market past, and remember how differently we looked at things?

At this time of year in 2007 we would have been sifting through teasers about how the latest LCD maker or electronics store was going to benefit from sales of big screen TVs for the Super Bowl … or about how much money Chinese travel companies would make during the Lunar New Year celebrations.

Today, alas, we’re looking at gold. That pretty much says everything you need to know about investor sentiment.

Chuck de Castro edits the Penny Mining Speculator newsletter, which, as you can guess from the name, looks for microcap mining stocks that might have the potential for massive returns. It should probably go without saying, that almost has to mean that the record of his newsletter is going to be based on a lot of duds that didn’t pan out, and a few hugely successful breakout companies. He claims credit for a few big winners, notably Nido Petroleum, which he says got his subscribers 2,844% gains.

I can’t verify that, of course, but I’d urge you to note that in his advertising he doesn’t brag about his overall returns, or his average returns — though the dozen or so closed trades that he claims credit for in the ad do sound impressive (most with 100%+ short term gains, a few with losses of 20% or so, and his “open” portfolio apparently has some good recent performers, perhaps thanks in large part to the big run in gold and silver prices recently).

That’s neither here nor there, of course — the question is, for the gamblers out there, what is the tiny company that he thinks is the most exciting glold play right now, and is it really all that he says it is?

For that, you can turn to your friendly neighborhood Stock Gumshoe — assuming, of course, that you’re not interested in ponying up $3,250 for a subscription … and I think we’ve got some interesting info about this one, but let me preface all of this by saying that I’m no expert in gold miners, nor am I a geologist. I plain don’t understand much of the stuff about “assays” and “veins” and such … but certainly folks love gold these days, so let’s see what we can uncover for you.

Here’s the marketing language from de Castro:

“This gold mine was once one of the richest gold mines in the world, and it looks like it’s going to have a second day in the sun.

“It set many world records, several of which still stand after a hundred years — including the most gold ever extracted from a ton of ore, and the largest single nugget of gold ever found (containing 3,100 ounces of gold).

But as the old miners followed the rich veins of gold deeper into the earth, they ran into a water table. They were sure there was a lot more gold deeper down, but every time they tried to get at it, the mine flooded.

“Since they didn’t have sophisticated pumping systems or diesel generators back then, they had to shut the mine down. And the mine lay dormant for more than 80 years.”

There are a couple clues in there, but we get some more further down in the letter:

“small company bought out all the old mining claims around the old mine and secured 591 square miles of highly promising gold properties…”

“Near-term, I expect them to produce 50,000 ounces of gold a year. In two years, I expect that to grow to 100,000 ounces a year….”

“you’re looking at a company which almost certainly has at least $2 billion of gold in the ground — and probably a lot more.

“The managing director told me he thinks there’s $5 billion in gold, and has gone on the record saying so.”

We learn that the company was originally working with one old mining site, but that they’ve bought up some neighboring companies and mines and continued drilling, including one drill sample that “showed an amazing 355 grams per ton.” (He noted earlier that many mines are very profitable at 5 grams/ton, and this companies drilling had shown an average of 31 grams/ton).

These shares are currently trading for 11 cents, we’re told … and of course, we’re told that the potential is stupendous …

“I see the shares doubling or tripling over the next 12 months. Longer-term, if you’re prepared to sit on your stock while they explore their property and bring one vein after another into production, I think these shares will go to $2 or even $3. If you get in now, this is a company that could multiply your money about 18 times.”

These are always fun little companies to trade or invest in, for those with stomachs of steel or a love of gambling … so what is it?

Thinkolator sez …

Hill End Gold (HEGLF on the pink sheets, HEG in Australia)

For US investors who don’t trade in Australia, note that this one, according to Yahoo Finance, trades only an average of 50,000 shares — that’s only a bit over $5,000, so almost any investor could make those prices sway dramatically. Volume is not particularly large in Australia, either, just FYI. That means, just to spell this out, that it’s quite possible that even the Stock Gumshoe readership could easily move this stock dramatically if just a few folks get excited about the stock, so buyer beware and watch your limit price if you’re thinking of buying this one.

Hill End is an old gold mine, it is indeed the mine where the largest nugget ever mined was found, Holtermann’s Nugget, a whopping 3,100 ounces of gold. And it was an active mine for many years that then lay dormant, like many of the gold mines in nearby areas — the mine(s) are in New South Wales, not all that far from Sydney in southwestern Australia. The water table can be fairly high in this area, and that was indeed one of the impediments to deeper mining.

Another impediment and challenge, apparently, has been the nature of these gold veins — as befits an area where such a large nugget was found, the gold in this mine is very “nuggetized”, which sounds good but actually makes it very tough to do modern resource estimation and, to some degree, hard to mine with industrial processes. That’s because resource estimates look for tiny bits of gold in small drill samples, and extrapolate those samples. When the gold isn’t distributed fairly evenly in a vein and is in much larger nuggets, it is quite easy for a sample to include either no gold or a huge amount of gold, making estimates very difficult.

That’s about the extent of my understanding of this company — there was a nice long article on them in Gold Mining Journal last Fall [PDF file] that explains a lot of this, and provides much more detail … worth a read even if you don’t like buying these kinds of stocks. Since this is an Australian company there won’t be a huge amount of info on many finance websites, but the company itself makes some press coverage and, more importantly, it’s annual reports and filings available on their website here if you’d like to start digging.

The clues are a match beyond that one big Holtermann’s Nugget — de Castro claims that they have 591 square miles of territory to explore, and the company actually claims 1,531 square kilometers, which is an exact match if you do the math. The managing director, Philip Bruce, has said that 50,000 ounces of gold is a good estimate of their initial production capacity, and he has also stated the he thinks they will be able to produce 4-5 million ounces, which, depending on the price of gold, could be $5 billion worth of gold. And in the most recent quarterly report they reported this:

“Total gold produced was 1202 ounces from 1772 tonnes at 24g/t gold with 675 tonnes at a feed grade of 31g/t gold processed in December.”

So they’re actually producing gold now, and the 31 grams/ton claimed as an average by de Castro has at least some merit for current production. The company also announced that they’ll be selling their own gold bars, so maybe shareholders will get a chance to buy those, too (that’s just a guess).

Hill End also has a project in Laos, which some of the notes I’ve seen indicates might potentially be big someday, but they’re currently only in the permit application process, and of course political risks may well be significant there.

So … does that mean this is a great stock for you to buy? I can’t tell you that, and I know very little about any companies of similar size, or the comparative potential of various microcap gold companies, but I can tell you that this appears almost certainly to be de Castro’s pick. And I did listen to several interviews with Philip Bruce, and read several articles about the company and their projets, and I came out of it intrigued. Of course, the company has been working this area for about a decade and has a lot of losses built up, so one hopes they do end up with a big pile of gold.


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18 Responses to “Tiny co. strikes gold in abandoned mine” Chuck de Castro


  1. If you really believe GOLD will rise, why bother with this CRAP ( HLGF) It would be better to simply buy Pro Funds ETF UGL ! Look at the chart for UGL http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=ugl&sid=0&o_symb=ugl&freq=1&time=7&x=42&y=18

    Now check out HEGLF http://finance.yahoo.com/echarts?s=HEGLF.PK#chart1:symbol=heglf.pk;range=6m;indicator=sma(7,30,200)+volume+macd;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined
    HEGLF appears to be breaking out …..and I will follow it . The only reason I don’t like pink sheet stocks ….is that I cant use a trailing stop …..and this could be a disaster!

    Like(0)

  2. i don’t have a clue about this one.
    i have had great luck the last few weeks buying the explorers that got hammered. nova gold has been nice. i bought at .42 sold a third at 2.94 and a third at 3.20. i guess i’ll just sit on the rest for a while. i’ve got a couple of others that are up about %150. this seems a safer gamble so far.

    Like(0)

  3. Hill End gold-an interesting article. I am an exploration geologist with + 30 years experience. Estimating gold reserves in a vein is very dificult. Sooner or later one must start an exploration tunnel to get a better look at the gold and estimate the grade. It is normally very nuggety in a vein. A drill hole may find gold, but 10 feet away another hole might find nothing.

    Like(0)

  4. Gumster: Someone is touting and teasing a royalty gold co which because it doesn’t have to worry about digging, hiring, permitting, politics, etc is less risky and more stable. I sniffed it out as Royal Gold. Any comments?

    Like(0)

  5. Just stumbled on your site trying
    to identify the Hill End property.
    I had identified the Holtermann
    nugget but wasn’t sure about the
    mine because I thought it was in
    Nevada.
    Been following exploration golds
    for years and I believe you have
    this one nailed. Great Job!!!
    I just subscribed. Paul

    Like(0)

  6. Very exciting. At first I thought this article was about Goldstake Explorations. Here is an excerpt of a posting I put on Stockhouse.ca today:

    Hill End Project

    At Hill End, N.S.W., Australia, Goldstake has a 14% interest in the Golden Gully project, which
    has a mining history of recovery of two ounces of gold per ton at depths down to 250 ft. The
    leaseholder, Silver Orchid Pty. Ltd., is attempting to raise the capital to start production on the
    alluvial resource and also to sink a shaft to 600 ft. to access the lower quartz reefs, which contain
    gold.

    For full details of the Hill End Project, please see the qualifying report by Dr. Derek E. McBride,
    P.Eng. January 27, 2003. Dr. McBride’s summary states that “Golden Gully lies in the historic
    Hill End gold camp that produced the largest gold specimen ever found. The property has seen
    intermittent exploration and exploitation since the 1850′s. Mining efforts were curtailed in 1872
    due to unmanageable water inflows at the 250 foot depth. Underground exploration recovered
    over 400 ounces of gold from 207 tons of ore in 1997. Limited drilling suggests that the
    mineralization continues below the 250 foot level. A two phase program is recommended to
    outline the mineralization with drilling and follow up on these results with a ramp to the 500 foot
    (150m) level at a cost of three million dollars.”

    During the year of 2006, an environmental plan was tendered to the NSW Mines Department and
    has been accepted.

    During the year under review a start was made on the refurbishment of the Cosmopolitan Shaft
    on Golden Gully. This shaft was sunk to 250 feet in 1872 but was abandoned at that depth
    because water was flowing into the mine, with the water table at 150 feet, too fast for dewatering
    equipment to clear the shaft. The Cosmopolitan Mine Manager quoted in his report at the time “ 7. 9. 1872. Sinking on Mrs Beards’s reef on West abandoned in underlay shaft going

    20 ozs per ton (gold)

    on account of water”.

    Modern pumping equipment would keep this shaft dry at all times.
    At this time, 90% of the surface infrastructure has been installed at the shaft head, and over 20
    feet of underground excavation has been completed. An estimation of time to get to the 250 foot
    level is not possible as everything is dependent on the Chairman’s ability to raise the funds to
    complete this objective.

    http://www.stockhouse.com/Bullboards/MessageDetail.aspx?s=GXP&t=LIST&m=26005992&l=0&pd=0&r=0

    I have been following HEG and I am a biased share holder of Goldstake, but I believe that the Hill End portion that Goldstake holds a 14% interest in via Silver Orchid, is the original Hill End discovery and may be fabulously rich, but still needs money spent on it to prove the case.

    HEG should be a great success and is well on the way. I hope the Silver Orchid/Cosmopolitan Shaft will be even more exciting as soon as it also gets moving. All that gold, so close to the surface, protected for all these years only by water!

    Goldstake trades on the TSX as GXP for about 5 cents/share as of Friday.

    disclaimer: the above is my opinion only. Do your own due diligence or contact a qualified adviser prior to investing.

    Logical2

    Like(0)

  7. If you are bullish on gold or silver, I suggest that you buy the metal for delivery. If this is not feasable, buy mning shares, GG, SLW, or buy the metal held by Everbank or GLD or SLV. I prefer Everbank. Theleveraged play is the double ETF. Gold,DGL, silver,DBS. My play is the call options on DGL. Minimum risk, Huge potential, repeat, potential return. Herach.

    Like(0)

  8. Est extrator cooparatiteve repsentative
    We are MEDIA GOLD METAL GROUP Of COMPANIES (L.T.D) and governmental representative on Gold dust/gold bar bas in BENIN West Africa,
    Indeed, we are searching for a good buy or representatives to selle our products: gold dust and bar,-who can help to establish a very long time business relationship-you can get us by mail: mabdulaziz24@yahoo.com ,or by +22998977090
    Best greetings.
    Abdulaziz

    Like(0)

  9. Hello,

    We are a company of IMPORTATION AND EXPORT in Africa area. We sale the following products.

    – GOLD

    -The ALLUMINIUM

    - BRONZE

    -THE RAILS USES HSM1 AND HSM2

    -THE RAILS USED R50- R65

    If you are really interested by one of our products, try to specify us so that we can send the procedure to you on our conditions of sale.

    EMAIL/ idealsarl@ymail.com

    CORDIALLY

    Like(0)

  10. “the mine(s) are in New South Wales, not all that far from Sydney in southwestern Australia.”
    Last time I was there Sydney was still on the east coast?
    HEG has 3 times more sellers than buyers so there maybe a better time to buy coming up.

    Like(0)

  11. I live about 1.5 hours drive from Hill end in Australia [sorry to correct but it is south eastern australia not south western] I have heard news about this company on the radio a bit ,the area where it is located is and was very rich in gold one of the first finds in australia was in this area,ive done a bit of panning in this area,didnt retire on it though, HEG is currently trading right on 20 cents in Aus

    Like(0)

  12. Food for thought.

    Here is a Gold Mining Company in Australia which has interesting future prospects.

    Focus Minerals :FML (ASX)

    210km sq mining tenements in Coolgardie, Western Australia.

    Trading currently around 6 cents per share. Gold Resources 1.9 Moz (just announced a 68% incr in reserves.

    41% increase in Revenue from previous 1/4. Hedge free / DebtFree.
    Produced 70 000 oz in 2009, estimated 80 000 oz in 2010 and over 100 000 oz in 2011. They have just aquired and refurbished their own gold mill which will lower the cost of their operation.

    Also this company has a strong trading volume on the asx virtually every day.

    Have a look at the chart and you will get the picture. Im new to trading, so perhaps you view may be different. Best Regards

    Like(0)

  13. DEAR SIR,

    WE ARE GOLD MINING COMPANY IN GHANA WEST AFRICA AND HAVE GOLD DUST FOR SALE LOOKING FOR RELIABLE BUYER WHO WILL DO LONG TIME BUSINESS RELATIONSHIP WITH US.
    OUR PRODUCT FOR SALE:
    GOLD DUST

    BEST REGARD’S.
    MR. JOE:qjoe71@yahoo.com

    Like(0)

  14. There are a few of these, Royal Gold is one, others are International Royalty, Silver Wheaton, Franco Nevada, and I’m sure there are others I’ve never looked at.

    I’ve written about them a few times, but wouldn’t call myself an expert on this kind of company — many readers here probably know them inside and out much better than I do.

    There are several kinds of royalties, and many times investors erroneously expect to see royalties paid to them when they hold these companies (as with the Canadian Royalty Trusts, for example), but most of them just hold diversified portfolios of royalty interests in a variety of different mines. The key seems to be management — they have to invest in the right mines at the right prices (meaning, they often have to “buy in” before the mine is operating and really proven to get maximum return).

    Here are a few of my earlier articles on these:

    http://www.stockgumshoe.com/2008/02/nevadas-filthy-rich-royalties.html

    http://www.stockgumshoe.com/2008/05/chaffee-royalty-program-mining-profits-without-the-costs.html

    http://www.stockgumshoe.com/2008/09/the-next-franco-nevada-and-nickel-prices.html

    Like(0)

  15. Travis,
    What is your take on this?
    Dear Daily Reckoning Reader,

    Recently, there’s been chatter about a new technology called the “$59 Computer.”

    Some folks – several highly reputable groups, in fact – have claimed this breakthrough will rival the Internet in magnitude.

    Others are talking about how China has gotten a hold of it… and has immediate plans to roll it out to 97 major Chinese cities.

    Interesting in finding out the truth, your publisher tracked down the source of this new research… and has procured the full details for you (see below).

    To Your Wealth,

    Joe Schriefer
    Publisher, Agora Financial

    ———————————————————————

    “The Biggest Revolution since the Internet?”
    ~MIT’s Technology Review
    New “$59 Computer”
    Hitting Chinese Markets

    It’s not a laptop, PC, or any computer you’ve ever seen or used. But
    it’s now being used by more than 100 of the world’s largest corporations, the Canadian Government, and more than 10,000 small businesses. Its next stop could unleash billions of dollars – and
    transform one tiny U.S. company into a juggernaut.

    Dear Reader,

    I’d like to share with you one of the biggest moneymaking ideas we’ve uncovered in more than a decade – since a young Porter Stansberry published the investment report that launched our business.

    While everyone’s been busy worrying about gold, inflation, and the economy…

    They’ve been missing out on a huge story that’s just now breaking.

    It’s an opportunity that – according to our calculations – could generate 6-figure capital gains for early investors.

    You see, a ‘new computer’ is getting ready to take the world by storm…

    Dubbed the ‘$59 Computer’ by some technology insiders, because it’s capable of being manufactured and distributed for as little as fifty nine bucks per factory unit…

    This new contraption has captured the attention of the entire technology community…

    “There’s a new computer available… and it is going to be transformational,” said Ray Ozzie, Microsoft’s Chief software architect.

    “It’s the next big thing,” says MR Rangaswamy, a successful technology investor from India.

    As one BusinessWeek tech writer said, “It’s one of the most significant advances in the computing universe in decades.”

    What’s so special about this ‘computer?’

    Well, you’ve probably seen how technologies – unlike any other consumer product – fall in price from one year to the next.

    For example, in 1995, the average PC cost $2,500. Today, the average PC retails for just $690.

    The reason: New and superior innovations are always coming around, upgrading and oftentimes displacing older models.

    But every once in a while, a new technology comes along that’s not only several generations more advanced, but less expensive and more scaleable too.

    Enter the ‘$59 Computer’…

    “It’s like a combination of two perfect storms,” said Tom Nolle, packet switch specialist and current CEO of CIMI Corporation.

    “It’s a finely tuned system—-with each component meticulously engineered to work seamlessly with every other,” writes Nicholas Carr, a technology author and Harvard Business School writer. “It’s failsafe. It can’t break down.”

    It’s no wonder Fortune 500 giants like Genentech, Novell, Eli Lilly, Motorola, Colgate-Palmolive, Costco, and Time Warner have already purchased orders.

    Coca-Cola has already handed out 40,000 to its employees.

    More than 10,000 small U.S. businesses have tossed out their PCs and bought the ‘$59 Computer’ instead.

    As the Financial Post writes, “[The $59 computer] has the potential to shower billions in revenues on companies that embrace it.”

    It gets better…

    On May 12, 2009, the White House published a last minute supplement to the 2010 budget. They didn’t want to leave out a key technology pilot project.

    Guess what it was for?

    The ‘$59 computer.’

    The Federal Government wants all of its agencies onboard:

    “Expected savings in the out-years… should be many times the original investment in this area,” the document said.

    And they’ve set aside $43 billion over the next 3 years to make sure this happens.

    The Defense Information Systems Agency (DISA) is already installing the ‘$59 computer’ in its data centers.

    NASA’s Ames Research Center has already started.

    “This has never happened before,” says Chris Kemp, NASA Ames’ chief information officer.

    The District of Columbia has committed to making the switch to the ‘$59 computer.’ So has the Canadian Government.

    This technology is very real – and on the brink of mainstream saturation…

    Consumer electronics retail giant Best Buy just announced it would release the ‘$59 computer’ in its stores nationwide – right alongside the flat-panel TVs, digital cameras, and video game consoles that millions of Americans shop for every year.

    The gentleman who uncovered this investment opportunity – an individual whom I’ll introduce you to a bit later – has personally been using the ‘$59 computer’ for the past few months.

    “It’s absolutely amazing,” he said.

    As you might imagine, there’s a staggering amount of money up for grabs…

    Gartner – a highly regarded technology research firm – estimates the market for the “$59 Computer” will reach $150.1 billion by 2013.

    That’s 25% greater than the entire portable PC market in the United States!

    But incredibly, that’s just a small part of the story…

    China wants computers for the entire country. They want them bad.

    And it would appear that they’re targeting the ‘$59 computer.’ Already, they’ve contracted its release in two cities—-Donying and Wuxi.

    Word is… Chinese officials are debating whether to pour some of its $600 billion economic stimulus plan into rolling out the ‘$59 computer’ to more than 100 other Chinese cities.

    What’s exciting is you have the opportunity to invest in a company that owns several key patents on the ‘$59 Computer.’

    This company is TINY – less than $300 million in market capitalization. And it just opened an office in China!

    If you have a small portion of your portfolio that you can put to work on a company that could ultimately pay you 10-times your money… I don’t think there’s a better bet in the market…

    Let me explain the situation in full…

    “Technology companies stand to
    make a lot of money.”
    ~PC World

    I don’t want to spend much time on this here…

    But I would like to briefly show you where this machine came from and what makes it tick… so you can see for yourself what makes it so valuable.

    Then, we’ll get right into the money—and show you why we believe a small stake today could pay you $100,000 or more down the road.

    Here’s the story from the beginning…

    In the fall of 1995, a small group of wealthy men set an idea in motion that would become the foundation of the ‘$59 computer.’

    At the time, Microsoft had just released Windows 95. But already this new idea was spreading like a virus…

    Almost every PC sold in America came with a shrink-wrapped Windows disk. If your computer didn’t have one, you pretty much had to buy a copy.

    Microsoft was well on its way to monopolizing the world’s PC market.

    So Larry Ellison – the CEO of Oracle and 4th richest man in the world – came up with an idea to challenge Microsoft.

    What better way to neutralize the spread of Windows, Ellison reasoned, than to devise a better and cheaper computer that didn’t run on Microsoft software?

    What if this new computer provided everything a user typically needed – memory, applications such as documents, spreadsheets, and images – from the Internet instead?

    Ellison pitched the idea to IBM executive Bob Dies, Netscape cofounder Marc Andreessen, Eric Schmidt of Sun Microsystems (today he’s GOOGLE’S CEO), and a few other Silicon Valley pals.

    In less than a year, they built a new computer around Ellison’s vision. It was much smaller than a PC – even smaller than today’s laptops. And about 80% cheaper too.

    The software it ran came from Oracle – and served only to connect the computer to the Web.

    IBM and Acorn – a now defunct British computer company – manufactured the units.

    When the new computer hit shelves in 1996…

    It flopped. Big time.

    In a rush to get it out, Ellison and his crew had installed a faulty processor. On top of that, the programming wasn’t powerful enough to support the powerful web applications needed to replace Windows.

    Even if the computer hadn’t been defective, not enough people had broadband Internet access for the idea to flourish.

    Not nearly enough to buy a computer that relied on the Internet for most of its operations.

    Why am I telling you about a glitchy computer from the 1990s?

    Because despite being a commercial disaster… the computer was, as it turned out, a brilliant idea…

    It just lacked the necessary infrastructure and hardware.

    In the years that followed, all of that changed…

    Phone and cable companies laid enough optical fiber to circle the planet 11,000 times… making Internet access incredibly fast and cheap.

    Virtualization – the core technology needed to power such a computer – became possible thanks to newer and increasingly powerful computer chips…

    And today – 14 years later – a new computer has risen from the ashes…

    Which brings us to the question you may have been wondering…

    “Who makes the $59 Computer?”

    Not one single company owns sole rights to the ‘$59 computer,’ or the technology that powers it.

    As scientist Peter Meli of the National Institute of Standards and Technology points out, the ‘$59 Computer’ represents “the convergence of many technologies.”

    In other words, it’s all still very much up for grabs.

    As you’ll see, that’s great news for investors. Even better than if one single company owned the rights to it.

    As I write, companies are scrambling to stamp their name on some part of this new computer.

    Dell — the world’s 3rd largest computer manufacturer – recently tried to steal the whole thing for itself! The Texas-based company quietly filed an application with the U.S. Patent and Trademark Office.

    Of course, Dell’s application was denied. Too many technologies have gone into the evolution of this computer for any single entity to claim sole rights.

    But the purse is so large that companies – big and small – are fighting to develop their own versions of the ‘$59 computer.’

    IBM has invested at least $360 million, according to public records… and has assigned 200 researchers to work on its own ‘$59 computer’ project.

    Google – the Palo Alto search engine giant – has invested $600 million.

    And Apple (which saw its MAC sales fall last year) has invested nearly ONE BILLION DOLLARS to study and commercialize its own ‘$59 computer technology.’

    If any one of these large companies owned exclusive rights to the ‘$59 computer,’ we wouldn’t be writing you this letter.

    These stocks are all so big that no discovery or breakthrough – no matter how revolutionary – could move their share price far enough to make you any kind of real money.

    But because this technology is up for grabs…

    And because the company we’ve found is so small (and owns SIXTEEN valuable patents)…

    You can make an absolute fortune.

    Let me show you how…

    Critical Omission on p.20

    Just a few days ago, Barron’s magazine ran a story on the ‘$59 computer.’

    The story’s lead journalist, Mark Veverka, called it “the biggest tech development since the Internet.” On page 20, he listed the companies involved… and he ranked them according to size – from the very largest (Microsoft) to the very smallest (Terremark World).
    Look at how tiny this ‘$59 Computer’ stock is:

    .00096 the size of Microsoft (MSFT)
    0013 the size of Apple (AAPL)
    .0014 the size of Google (GOOG)
    .0015 the size of IBM (IBM)
    .0017 the size of ATAT (T)
    .0018 the size of Cisco (CSCO)
    .0021 the size of Hewlett-Packard (HPQ)
    .0021 the size of Oracle (ORCL)
    .0047 the size of Amazon (AMZN)
    .0091 the size of Dell (DELL)
    .0145 the size of VMWare (VMW)
    .031 the size of Salesforce.com (CRM)
    .032 the size of Citrix Systems (CTXS)
    .157 the size of Riverbed Tech (RVBD)
    .249 the size of NetSuite (N)
    .284 the size of Savvis (SVVS)
    .386 the size of 3PAR (PAR)
    .451 the size of Terremark (TMRK)

    We thought Barron’s did a fine job. They got their facts straight. It wasn’t in-depth research. But it never is when you’re paying five bucks for a newsstand magazine.

    There was, however, one crucial element missing from Barron’s story, specifically, from the list of companies they published.

    It’s something we’re glad they left out. Heck, it’s so small, I don’t know if they ever noticed it in the first place…

    I’m talking about the tiny ‘$59 Computer’ company our analysts have uncovered. Size-wise, it’s just a fraction of Microsoft (1/1116). A small speck of Google (.001). And half the size of the smallest company on Barron’s list.

    You see, mainstream financial news sources like Barron’s and the Wall Street Journal don’t pick up tiny speculations like the one we’ve found. Their job is to report on the biggest companies… whose shares are already owned by many of their readers.

    The point is, although the ‘$59 Computer’ is one of the hottest stories in the media today…

    No one I know of is talking about a legitimate way to make a lot of money from this situation.

    Let me show you how to do that now…

    Watch your account light
    up—$100,000 or more

    Remember the prototype computer I told you about from the 1990s – the one Ellison and his pals rushed out the door?

    Well, we’ve found a tiny company that’s solved one of the biggest problems that plagued that early model…

    They’ve developed proprietary software that makes the ‘$59 computer’ faster.

    What they offer is one of a kind…

    Basically, their new technology allows them to speed up the Internet – and GUARANTEE fast and failsafe delivery of Web-based applications to the ‘$59 computer.’

    Their new technology is so good at doing this they’ve developed a stranglehold on a niche within the ‘$59 computer’ market…

    “After unsuccessful attempts by nearly a dozen other companies, the results from implementing [this company's] solution were both effective and dramatic,” said Stuart Ross, President and CEO of a private ‘$59 computer’ company.

    “It’s like having a license to print money,” said Dave Kochbeck, Director of Technology at Friendster, a privately owned social networking site in Sydney.

    In the technology world, if you have something valuable, you’d better build a moat around it.

    That’s exactly what this tiny little firm has done.

    They’ve received SIXTEEN patents in total—seven in the past year alone:

    November 26, 2009
    October 20, 2009
    September 1, 2009
    July 14, 2009
    June 30, 2009
    February 12, 2009
    February 10, 2009

    Because this technology is so valuable…

    This tiny company’s been lining up contracts with major ‘$59 computer’ players – Hewlett-Packard, Microsoft, Motorola, and Sony, to name a few.

    Okay, so how much money could a small stake in this company return?

    Well, considering that…

    1. This stock is absurdly small.
    2. They’ve cornered a niche of a $150 billion industry that practically no one has heard about yet.
    3. And their competitive advantage – their patented technology – is protected by the U.S. legal system.

    I wouldn’t be surprised to see this company’s stock rise by many multiples.

    How much?

    It’s impossible to say for sure, of course…

    But whenever a tiny technology company develops and patents superior software… the returns for early shareholders can be staggering:

    * When VASCO Data Security International (VDSI) acquired a smart card reader technology in 2005, shares spiked big time… rising as much as 10,149%.

    * Shares of McAfee (MFE) shot up 5,688% from 1993-98, with the spread of its Anti-viral software.

    * When Smith Micro Software (SMSI) broke into the WiFi market with its new wireless software… shares went on a tear, climbing as high as 522%.

    * iMergent Inc (IIG), thanks to its SEO-integrated e-commerce software, jumped 823.8% in roughly one year.

    * Not long after bursting onto the wireless scene with its VoIP software, shares of Synchronoss Technologies (SNCR) climbed 624%.

    * On March 17, 2003, Ebix (EBIX), a software company specializing in insurance solutions, released a revolutionary new billing software/system. Since then, shares have risen as much as 6,815%.

    These were all brilliant technological advances, no doubt. But truthfully, none comes close to matching the potential of the tiny company we’ve found.

    You see, a technology is only as valuable as the folks who are willing to pay for it. And in the case of our little ‘$59 computer’ firm, it’s got the full weight of an entirely new $150 billion market behind it, multiple governments, and dozens of the largest and wealthiest corporations in the world.

    On top of all of that…

    There’s something that could make this small stock climb even higher…

    Why We’ve Spent More than 1 Million
    Dollars to Obtain this Information…

    First, before I go any further…I should be very upfront about something…

    While I know a fair amount about investing…

    And quite a bit about trading…

    I know very little about technology.

    And what I’ve found is very few people in this sector have any real clue about the companies they cover.

    That’s why, over the past 7 years, S&A Research has spent a considerable amount of money tracking down this type of information.

    In fact, between air miles logged (over 100 high-tech company visits and 3 dozen trips to academic institutions such as MIT and Harvard Medical School), technology and medical conferences, high-priced consultants and highly educated on-staff technology experts…

    We’ve spent well over 1 million dollars tracking down the best technology ideas.

    Why?

    Because new technology possesses a power unlike any other – it has the capability to dramatically transform the quality of our world.

    Likewise, investments in new and revolutionary technologies can dramatically transform your personal fortune.

    It changed ours…

    In the late 1990s, a young Porter Stansberry realized a fundamental truth about capitalism – that the best investments cause massive reductions in consumer prices.

    At the time, small companies were laying millions of miles of fiber optic cable underneath old railroad tracks all across the United States.

    Porter called this technology the “new railroad” and predicted it would render existing telecom (AT&T) obsolete…

    He published a report, recommending several small “railroad stocks” to the few people who would pay to listen to him.

    Today, the term has become a cliché, but only because Porter’s prediction came true…

    Not only did the explosion of the Internet reshape telecommunications, but it also gave individuals and businesses everywhere a significantly cheaper way of communicating.

    The start-up companies Porter wrote about ended up generating huge returns for a small group of flagship subscribers – JDS Uniphase Corp (592%), Sun Microsystems (96%), Cree Inc (271%), Broadcom Corp (199%), ImClone Systems (107%).

    As a result, a new business was born. And the same technology that Porter recommended investing in – fiber optic networks – helped turn his fledgling newsletter company into one of the most successful independent publishing companies in the world.
    Today, S&A Research is living proof that investments in technology can create unforeseeable wealth and success.

    If the Internet is a new highway, with 10 freshly paved lanes going in either direction…

    Then what we’ve found in the ‘$59 Computer’ is a new car built specifically for that highway…

    It’s faster. Cheaper. And vastly more fuel-efficient than any other vehicle on the road today.

    An early stake in the ‘$59 computer’ company we’ve uncovered could make you an obscene amount of money.

    But we didn’t find it on our own.

    Meet “HOPKINS”

    We’ve dedicated a large portion of our $1 million tech budget to a private contractor whom we’ll call, in these pages, “HOPKINS.”

    He’s the gentleman who brought us the idea of the ‘$59 Computer’ – along with the tiny company I’ve been telling you about.

    In fact, “HOPKINS” has been the secret hand behind S&A’s best technology recommendations over the past 7 years…

    * Like Crucell (CRXL), for example, a Dutch technology company that shot up as much as 339% since we first told readers about it.

    * Or Sirna (RNAI)… which was bought out by Merck after “Hopkins” found it and doubled overnight, a 201% gain.

    * And Sangamo, which jumped 161% after we recommended it to subscribers.

    * And Esperion, which “Hopkins” discovered while working at Cedars Sinai Research Center in Los Angeles. We recommended the company to our readers, and three weeks later, they had a chance to make 53% gains overnight when the company was sold to a Fortune 500 company.

    Here’s what we really respect about this fellow…

    “HOPKINS”
    (Our Secret ‘$59 Computer’ Contact)

    MBA, MPH from TOP 3 rated Science University

    Helped start technology company in Hyberadad, India.

    Conducted genetic studies through NIH.

    Cedars Sinai Research Center in Los Angeles

    Secret weapon behind many of our top tech recommendations
    We’ve asked HOPKINS to vet several dozen companies over the years. Every time there wasn’t enough evidence to know whether a new technology will work, it hasn’t.

    A while back, we asked “Hopkins” to look at Renovis (RNVS) – a tiny biotech company called that had just developed a new drug for stroke victims.

    So he paid a visit to the head of Stroke Research at one of America’s top research hospitals. Right away, Hopkins’ contact said “No way. You’re flipping a coin on this.”

    We scrapped the idea. 3 months later, Renovis tanked 75% when the Phase II trial failed. We avoided this bomb thanks to HOPKINS and his good hard due diligence. Bottom-line, when Hopkins comes to us with an idea, you’d better believe he’s vetted it from every conceivable angle.

    In the case of the ‘$59 Computer,’ it may be his most thorough work yet…

    I’ve already told you part of the story behind this tiny company….

    But I still haven’t told you about two “X-factors” that could send this stock hurdling into the ionosphere…

    Let me explain…

    Two ‘X’ Factors that Could Send this
    Tiny Computer Company Soaring
    Even Higher

    As I mentioned at the beginning of the letter, China wants new computers – they want them bad.

    But here’s the thing…

    China doesn’t want to rely on the rest of the world for its computing needs. And they don’t want to pay Western prices, either.

    That’s why, they’ve set aside a small portion of their massive $600 billion economic stimulus package to study and test the ‘$59 computer.’

    They want to see if they can replicate the same cost-and-time saving success Western businesses and municipalities have enjoyed.

    So, they’ve selected two cities – Donying and Wuxi – to serve as testing grounds.

    If everything goes well, the Chinese could distribute the ‘$59 computer’ throughout the country…

    The ‘$59 computer’ rollout is “expected to be duplicated in other cities,” writes Information Week journalist Charles Babcock.

    As Forbes writer Andy Greenberg says, it represents “a chance to tap billions in government economic stimulus funds.”

    Now, I realize that this all might sound a tad speculative. Who’s to say our tiny recommendation will benefit from this disbursement?

    The fact is, even if these guys never get one red cent from the deal…

    You still could easily quadruple your money, simply based on the facts I’ve relayed to you thus far.

    That said, we know for a fact that this tiny company recently opened a new facility in a business friendly region of China…

    And we believe they did this for a very good reason:

    They want to be up and running by the time China decides to rollout the ‘$59 computer’ to 100 cities.

    It gets better…

    This company has already demonstrated its software works just as well in China, as it does in the States…

    You see, we’ve recently learned that a large specialty materials corporation in China has outfitted its entire operation with the ‘$59 computer’ – and paid our tiny company to use its software.

    As a result:

    According to the data coming out of China, these guys have been able to increase the speed of their new system by as much as 2,000%!

    So, what happens to a tiny, already fast moving U.S. critical technology stock that breaks into a lucrative, Government-fueled Chinese market…?

    Again, no one can say with certainty, but here’s an example:

    In 2002, Akamai Technologies (AKAM) was a no-name penny stock trading for about 70 cents a share. Thanks to a series of patents and partnerships with big name U.S. companies like AOL and Yahoo, its e-business content software started to take off: Akamai’s stock jumped more than 400%. By November 2003, Akamai had broken into China, signing a lucrative deal with China Telecom. This sent shares soaring as much as 7,809%.

    Remember, we’re in the bonus zone if our tiny company sinks its teeth into China ‘$59 Computer’ rollout. The way we see it, you could be getting paid either way.

    Here’s another thing – the second ‘X’ factor I mentioned:

    China isn’t the only probable new frontier for this tiny ‘$59 computer’ company. They’ve got another deal in the works – a much more concrete deal – that’s potentially just as valuable.

    I can’t tell you much more about it here… except it’s with a Mumbai-based tech giant…

    And it’s potentially worth as much as $270 million – a sum bigger than the tiny company itself!

    Bottom line, we’ve got a tiger by the tail here.

    Personally, I think if you have money to speculate, you’d be crazy not to consider taking a stake in this tiny company.

    I can’t tell you much more about it here. You can get the full details, including the identity of this explosive little stock, in a just-posted white paper e-briefing called The ‘$59 Computer’ Revolution.

    Now, we don’t sell this report anywhere – not for any price. It’s reserved exclusively for members of our Phase 1 Research advisory.

    Allow me to explain…

    PhD Investor Shows You
    Venture Capital Ideas
    (Without the Minimum $1,000,000 Stake)

    Of the 16 investment and trading research advisories we publish at S&A Research, Phase 1 Investor is, hands down, the most sophisticated.

    Run by Dr. George Huang, who received a PhD from the #2 medical school in the country (as ranked by U.S. News and World Report) …

    Phase 1 is a special service designed for seasoned investors.

    Its primary objective:

    To find technological breakthroughs you can monetize for huge returns. We’re not looking for big companies with popular technologies. We’re looking for small, early-stage companies with technological breakthroughs that can change the face of business, and have the potential to grow 500%-1,000%, or more.

    To do this – to find ideas that no one is really talking about yet – you have to do some serious digging and subsequent due diligence.

    That’s why we hired Dr. George Huang to be our lead researcher and point-person. He is the most capable and talented researcher I have ever met.

    Before joining Stansberry & Associates, Dr. Huang received a PhD in Cellular & Molecular Medicine (CMM), under the tutelage of a Nobel Laureate in Chemistry.

    In the past, George has worked to secure seed capital for a Vancouver-based firm called Helios Bioinformatics.

    He’s fluent in 3 languages…

    My point is, George is wicked smart. He’s hardworking. And knows the right people.

    You have to be all three to really make money with new technologies…

    You have to get to know the engineers, scientists, researchers, geologists, doctors, programmers and executives who know (long before Wall Street) where the next ‘big thing’ is coming from.

    * That’s how George got to know “HOPKINS,” who introduced us to the ‘$59 computer’ and the tiny company we’ve been telling you about. He met him through a technology transfer initiative at a major academic research center.

    * That’s how George got to know our recent Phase 1 gold expert, who tipped us off to a tiny British Columbian gold explorer, which jumped 114.86% just 6 weeks after we recommended it.

    * That’s how George got hooked up with our oil contact, a gentleman who showed us a super small Canadian energy play, which rocketed 167% two months after we recommended it to our Phase 1 Investor subscribers (gains reflect closing date Jan. 18, 2010).

    Insiders in every industry always know more than outsiders—but in technology, where innovations make or break a company, this on-the-ground perspective is critical. And that’s exactly what you’ll get by joining Phase 1 Investor.

    As subscriber Danny Pinkerton writes from Chicago, “Phase 1 opens areas into which I do not normally have access.”

    George Sinclair, a subscriber from LA writes, “Your service is without a doubt the best I have used. In fact, I have eliminated all the others. Keep up the good work!”

    And Rick Smith from Tulsa writes, “Phase 1 Investor gives a ‘behind-the-scenes’ look. I would never have known about any of these companies without it. Keep up the good work.”

    To my knowledge, there’s nothing else like this service available anywhere. These are the kinds of investments that can literally change your life – where an investment of $10,000 can easily turn into enough to buy a new beach house, or finance a college education… or literally allow you to quit work, forever. It happens all the time – you just have to know about the right company at the right time. That’s the whole purpose of Phase 1 Investor.

    “I’m already up…”

    “I am already up 82.3%… 42.3%… and 40.8% on your recommendations. Your team is doing a great job. I am learning about opportunities that I would otherwise never hear about. I am very happy with Phase 1 Investor.”

    ~ Steven Stockton, Bloomingdale, IN
    But there’s one small thing you should keep in mind. Investing in this type of small, emerging company is inherently risky.

    So if you are uncomfortable with high-risk investments, Phase 1 Investor is not for you.

    However, if you are the kind of investor who enjoys speculating with a small part of your portfolio, I can comfortably say that we do the kind of due diligence you will simply never receive from your broker or any financial advisor.

    So, how much does one year of Phase 1 Investor cost?

    Limited Enrollment

    One year of Phase 1 Investor research is not cheap.

    We charge a lot of money for this service for two reasons:

    1) It’s time-and-labor intensive work. As I mentioned earlier, since inception we’ve spent more than $1 million on producing this research. Roughly $250,000 this year alone.

    2) A high price tag helps to keep this group small. I know this probably seems contrary to our business interests, but we don’t want a lot of people piling into Phase 1.

    Why?

    Because we’re dealing with the smallest and most illiquid securities in the market. If too many people try to get in on these deals, the share price goes through the roof, and the opportunity is lost. If you’ve ever seen small stocks spike the day a recommendation comes out, then you probably know what I mean by this.

    That said, I believe Phase 1 Investor is an incredible bargain, considering the amount of time and money that goes into each recommendation… and considering the returns these recommendations often generate.

    “In 2½ months…”

    “I am already up 82.3%… 42.3%… and 40.8% on your recommendations. Your team “In 2½ months, I have already made a 125.3% gain. Phase 1 is easily the best-performing newsletter among the many that I’m subscribed to.”

    ~ Sam Quincey, Henderson, NV
    I’ve seen boutique Wall Street firms like Ned Davis charge as much as $25,000 for a single report. Heck, even competitors of ours are currently offering lesser services for as much as $34,000.

    One full year of Phase 1 Investor research typically costs $5,000.

    If that seems like a small fortune to you, then you probably have no business signing up for this research.

    Seasoned investors know that quality investment research does not come cheap.

    Would you spend $5,000 if you knew it would pay $100,000 in return?

    Phase 1 Investor is designed for a very small group of aggressive but prudent investors who want to make serious money, but can stomach the bumpy ride that often leads to major returns.

    If that’s you, then let me show you what to do to get started… and what you get as a new member…

    **Additional Perk Worth $2,400:
    (See below for details)

    If you’re interested in trying Phase 1 Investor, then here’s what I recommend you do:

    1) Sign up for trial Phase 1 Investor ASAP. Within 30 minutes of activating your membership, you’ll receive a password giving you access to our subscribers-only Phase 1 website, where you’ll find a copy of The ‘$59 Computer’ Revolution.

    This is our proprietary research on the biggest technological breakthrough since the World Wide Web – the $59 Computer. Inside this exclusive e-briefing, you’ll find the full details on the tiny company we’re recommending you buy to get in early and make a fortune on this trend.

    2) Your trial subscription gives you access to all of our past Phase 1 Investor research reports. We encourage you to read these over. Many of the recommendations are still SCREAMING buys. (Make sure you check out the current portfolio for more details.)

    “In 30 years…”

    “In 30 years of subscribing to research advisories, Phase 1 Investor is by far the best in my judgment.”

    ~ Jack Milligan, San Diego, CA
    3) When you give Phase 1 Investor a try, you’ll have three months to decide if this service is right for you. It’s certainly not right for everyone. That should give you plenty of time to see how our recommendations perform.

    If you decide Phase 1 is not for you, let us know within the next 3 months. We’ll give you a full refund, minus a 10% fee. We’ve instituted this policy to deter folks from signing up just to get the research reports, then immediately canceling. Believe it or not, people do this.

    If you cancel after your 3-month trial period ends, we’ll give you a prorated refund based on the time left in your subscription.

    **4) If you get back to us today, you can claim a one-time only discount to Phase 1 Investor. See order form for more details.

    If you have risk capital set aside, and are interested in making some serious money in 2010, then sign up for Phase 1 Investor today.

    You’ll get the full details on the ‘$59 Computer’ company and have the opportunity to invest BEFORE this technology rolls out in China.

    To get started, Subscribe Now

    Good investing,

    Brian Hunt
    Editor in Chief, Stansberry & Associates Investment Research
    February 2010

    PS. Remember, for details on how to claim our Phase 1 Investor research at a discounted price, see the order form. This offer won’t last long.

    Subscribe Now
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