What’s Chuck de Castro’s “Mammoth mine” that “will soon begin producing gold at $18 an ounce?”

"A small company owns one of the largest undeveloped gold deposits in the world."

By Travis Johnson, Stock Gumshoe, February 7, 2013

The folks at Penny Mining Speculator manage to get an awful lot of attention from Gumshoe readers, and they do it with email ads like this one — promising that they’ve found a company with a huge, undeveloped deposit that’s worth hundreds of times more than the stock market is giving them credit for.

Sometimes these work out, of course, but it’s far from certain or predictable. These are penny mining stocks, and, as is clear from the name of the newsletter, when you buy a stock like this years before any potential mine might be built you’re absolutely being a speculator. Nothing wrong with that, of course, but we’d all do well to remember the definition of that word “speculation:”

“engagement in business transactions involving considerable risk but offering the chance of large gains….”

I know, I know, there’s no need to get preachy — I just feel compelled to mention that “considerable risk” bit from time to time. Most people who invest early in junior natural resources projects lose most of their money most of the time, and it’s those few spectacular discoveries that make up for the losses in other speculations.

But this ad from Chuck de Castro, interestingly enough, implies that we’ve already got the discovery … and it’s still cheap. So that’s not necessarily likely to get me revved up to buy shares (I expect I would be terrible at picking junior miners, so I use my gold mining allocation to buy royalty companies instead), but I know there are a lot of junior mining lovers out there in the great Gumshoe readership … so we can at least figure out what the stock is and let y’all go figger on it yourselves.

Here’s more from the tease:

“A small company owns one of the largest undeveloped gold deposits in the world. It has proven and probable reserves of almost 20 million ounces of gold.

“The ore is also extremely rich in copper and silver. The mine contains almost 5 BILLION pounds of copper (at $3.60 per pound) and more than 40 million ounces of silver….

“When it begins production, it will be getting more than a billion dollars of gold out of the ground every year. By selling the copper and silver by-product, its production cost will come to only $18 per ounce of gold.”

De Castro compares this to past winners he’s touted like Keegan Resources (KGN) and New Gold (NGD) — and I can’t tell you exactly when he recommended Keegan to his readers, but I can at least verify that he teased it pretty aggressively in April of 2009, and that even after taking quite a hit this year it has still just about doubled since then.

Of course, the S&P 500 has just about doubled since April 2009, too.

The last hint we get for our teaser? The share price …

“$1.76 per share to $11.35 is perfectly reasonable to look for.”

So … we toss that info all into the Mighty, Mighty Thinkolator, and we find that this is almost certainly … Exeter Resource Corp. (XRC in Toronto, XRA in NY)

It’s not at $1.76 any more, but these ads often linger for several months without getting editing updates, and it was near that price last year.

Exeter has a major resource in Chile called Caspiche, and they do claim it as one of the major undeveloped gold mines in the world. The share price has come down considerably over the past year, but there are plenty of bullish profiles and articles about them — including this one from last April that does a pretty good job with the details.

From Exeter’s own website:

“The Caspiche project is well located in Chile’s Maricunga district which has good infrastructure associated with other large scale mining operations and projects in development. Caspiche has proven and probable ore reserves of 1.091 billion tonnes containing 19.3 million ounces gold, 4.62 billion pounds copper, 41.5 million ounces silver”

They would need a lot of water and money to develop that kind of huge mine, and that seems to have been the big concern of late — they’re exploring for water in their concession areas to see if they can find it relatively inexpensively, and if they want to build the full mine to exploit that massive resource it’s presumably going to cost several billion dollars. They say they’re going fairly slowly and trying not to spend a lot more money on the project or do dilutive financing until they can get a better valuation on financing or partnering deals, but they think that “derisking” the water and being patient will give them a chance for a much better valuation and possibly a very good deal to build the mine.

So they are continuing to spend some money on water exploration, which they think could give them a better position because nearby water from their concession areas would save them a lot of money over the high cost of buying water on the massive scale that they’ll need, and they have some optimism about that because they’re in a mining district and other local mines from large producers are getting their water from similar underground sources.

But they have been putting forth a public face of being patient with their big discovery — over the last six months or so they’ve been talking about developing the much smaller oxide heap leach deposit at Capische, which would cost less and demand less water, as the “first stage”, but even on that they seem to be very, very early in the process. Here’s how their Chairman, Yale Simpson, put it in a press release last summer:

“Exeter is in a unique position for a junior explorer. We have a world class gold-copper asset in an excellent jurisdiction and a very substantial treasury.

“In my view the current depressed share price does not reflect the potential future value of the Caspiche deposit, a value that could well be a multiple of our current valuation. The timing will depend on metal prices and world economic conditions.

“The Board is determined to see a higher valuation and to that extent Caspiche is ‘not for sale’. We have set aside the funds necessary to maintain the asset for the months or years necessary to bring value to our shareholders. We remind ourselves daily that no one has found another Caspiche-size deposit in Chile for years, simply because there aren’t many left to be found.

“We have a treasury sufficient to consider the acquisition of another project however such an acquisition cannot jeopardise the security of our Caspiche asset. Our view is simply that there are some very interesting opportunities becoming available, potentially for joint venture or ‘on sale’.”

Now, the contrarian in me wants to tilt my head to the side a bit and say, “really? You want to buy some other project when you have one of the world’s largest undeveloped resources already in your pocket and you’ll need buckets of cash and perhaps a big partner to develop it? OK, so what’s wrong with Caspiche, then?”

But I’m probably being a bit grouchy. Haven’t had my lunch yet … and, of course, the financing of these kinds of massive projects is often so counterintuitive and complicated that I delight in staying away from them. Their management continues to hint around about making acquisitions as recently as last month, according to this article form minesite.

Exeter was valued at over $5 a share when they agreed to exercise their option to buy the Capische project from Anglo American back in 2011 after a few years of exploration drilling. The big numbers for gold, copper and silver at the time were similar to what they are now, though they’ve apparently been upgraded to “proven and probable” reserves, and they’ve spent $20 million or so on studies and operations over that time and the share price is down to about $1.30 now … so clearly some of the bloom has come off the rose.

Interestingly, Exeter spun off a company called Extorre about three years ago that ended up being in a somewhat similar position. I don’t know the full story, but Extorre had a big resource with large cap ex needs (though in Argentina, which means much higher political risk) … Extorre mulled around about building a smaller mine for a while to get some cash flow going to fund expansion, but ended up being taken over, at still a cheap cost/ounce price, by Yamana. That seems to often be the way, little $100 million companies just can’t seriously contemplate massive mines in this financial environment, big dilutive partnership deals or takeovers seem to be required to even think about financing these large, expensive mines.

The Cerro Casale project that’s controlled by Barrick Gold is the big comparison that Exeter likes to point to. Cerro Casale has gotten government approvals and is about 10km away from Capische, and fairly similar in size (reserves roughly 20-25% larger) and Barrick’s description says the estimated construction cost is $6 billion. I don’t know if the two are genuinely comparable, but they look similar on paper.

So no, Exeter is not going to be producing gold at $18 an ounce anytime real soon — though that is the potential, according to the project feasibility study on their website… but that is a big ol’ discovery. What do those of you who follow junior miners think? It seems to me like a bit of an open-ended speculation, given what seems to be a “no rush” attitude from management, but there is apparently a lot of gold there, they do have enough cash to keep moving forward cautiously, and perhaps news about the water options or preliminary environmental studies on the heap leaching will move the stock one way or another in the months to come. Beats me.

But I am, at least, quite sure that Exeter is the stock being teased by the Penny Mining Speculator … and hopeful that the rockhounds in he group can give some kind of assessment of Exeter’s prospects by sharing their comments below.


Related Gumshoe Articles

Leave a Reply

35 Comments on "What’s Chuck de Castro’s “Mammoth mine” that “will soon begin producing gold at $18 an ounce?”"

avatar

Gary
Guest
0
Gary
February 7, 2013 1:42 pm

This was teased by Casey years ago.
Still on his list as “Buy if you dare”.
I have owned this since 5.00 a share.
Ouch.
Thinking of adding another 1000 shares in hopes of a boyout bounce to get me close to even.

jerry
Guest
0
jerry
February 8, 2013 1:41 am

You are a dreamer. Lick your wounds, take your loss and go to Vegas with the proceeds.

Roger Bond
Guest
0
February 7, 2013 2:02 pm
I also bought Exeter as a Casey recommendation, fortunately I took a “Casey Free Ride” years ago, got my money back and have half of my shares riding (downward) for free. In the words of Peter Grandich, the last several years have been the worst market for junior resource stocks in our lifetime. Almost any long term money in that sector has been dead and/or dwindling for coming up on 7 years. So personally, I think “buy if you dare” is a fair warning for most anything in that sector. We currently have only highly speculative money allocated for that… Read more »
Timothyi
Guest
0
Timothyi
February 7, 2013 2:25 pm

Casey just touted this one again last week as a Best Buy. I took a third of a position at market ($1.35) and will take another third at $1.10 (a recent low), with the last third at 0.90 (the 2009 low); plus maybe some extra–that’s back-up-the-truck territory. But I’m out if it closes below 0.85, for a 24% loss. Acceptable risk for something with this much upside–but damn this sector is sick.

jerry
Guest
0
jerry
February 7, 2013 4:03 pm

Love your articles–keep them coming.
Do you have any options advice on various stocks???

Thane
Guest
0
Thane
February 7, 2013 4:16 pm
I’m not much into miners, but I do like a speculative play once in a while. My day job is selling 401k plans in AZ, and a few years ago, I had a meeting with a business owner who’s company was doing soil research for a miner from Canada, AZC. He told me he just dumped 20K into it. So I figured what the heck. Invested $1,000 and rode it up for a double. Been in and out a few times in the past 2 years since it seems to roll. But for you miners out there, that’s another one… Read more »
todd welch
Guest
0
todd welch
August 5, 2013 3:29 pm

I lived in Tucson and get regular updates from Rosemont Copper (AZC). I bought a few shares and they have gone down, but I had the intention of holding for a while anyway. Production is supposed to start in 2015, and they have recently cleared some political obstacles (environmental), so we will see.

voiper
Guest
0
voiper
February 7, 2013 4:43 pm

Travis, I love that you pick out what’s being teased and how you present the market around each particular stock.

Do you have a summary of your sector allocations, current stock picks, and why? I’m curious what you’ve ended up with.

Ventureshadow
Guest
0
Ventureshadow
February 7, 2013 4:46 pm
The Stansberry Group recommended Exeter a few years ago. Soon after it crashed down through their stop limits and they said to sell for a loss. These are the usual events with their mining recommendations. The alternative is to hold for a greater loss. The only way not to lose with such wild speculations is to avoid them. The problem here is that when you spend money to subscribe you feel as if you’re wasting your subscription fees if you don’t invest as they say. So it is CRUCIAL NOT TO SUBSCRIBE to newsletters that recommend speculations that crap out,… Read more »
SC
Guest
0
SC
February 7, 2013 5:36 pm
This is indeed a very sizeable deposit, but would require a multi-billion $ CapEx. A few things that immediately struck me in my cursory examination of the project is that this is a low grade deposit, of which the vast majority of the “ore”, 93% to be exact, is hosted in sulfide mineralization. Approximately 62% of the deposits gross metal value is in gold. Sulphides invariably result in difficult metallurgy for the extraction of the gold (OK for the copper though) . This typically requires a lot of grinding and roasting of the ore, which of course demands a lot… Read more »
Mr. T
Guest
0
Mr. T
February 7, 2013 5:56 pm
Overall the Jr mining sector is really depressed. It seems every Jr I am sitting on has lost 50% or more in the past 18 months. I think banks have really pulled back on lending to Jr mining companies in general which is why they have had to dilute their shares so badly. It is a boom/bust sector and it has been on the bust for awhile now. Not to mention the sector as a whole is tiny and is easy to put downward pressure on with massive short sales. What caught my eye on this company is the call… Read more »
Myron Martin
Guest
0
February 7, 2013 6:10 pm
I certainly share peoples frustration with the junior mining market which has been in a funk for at least 18 months, on the other hand, after the 2008 market meltdown I turned $55,000 into $210,000 in 3 years primarily with junior mining shares, nearly 200 became free trading, i.e. returned my money with about 1/3rd of the shares left. In hindsight, having picked good entry and exit points I would have been better off selling ALL of my shares at the high at which they became free trading. Juniors are not a “buy and hold” proposition, they require careful monitoring… Read more »
Richard Stevenson
Guest
0
Richard Stevenson
February 8, 2013 9:11 am

Itried to access KING WORLD NEWS, and was advised it was corrupted by viruses

Myron Martin
Guest
0
February 8, 2013 5:19 pm

Have been accessing their site for years and today got the same virus corruption message. Somebody must be upset with the news they are putting out, so best to give it a few days for their expert team to clean things up.

Mr. T
Guest
0
Mr. T
February 9, 2013 1:55 am

You hit the nail on the head Myron. Other than a few Jr’s I am sitting on at a major loss, I have had much better results with Yamana, Royal Gold, Sandstorm, silver wheaton and even just the straight bullion holdings. Platinum has been a good one for me also.

lesbaker
Irregular
25
lesbaker
February 11, 2013 5:23 am

Check out Dynacor Gold, DNG on TSX and DNGDF on pinks. At least they are making money….

carlb60
Irregular
24
February 7, 2013 6:26 pm

After reading Yale Simpson’s statement: There’s a lot of jargon here. To mangle an old proverb, “Those that can, do. Those that can’t write long winded, incomprehensible BS.”

Dwight Fisher
Guest
0
Dwight Fisher
February 7, 2013 7:46 pm

These Jr. miners remind me of the boitech penny stocks. Long on promise while they burn through uddles of dough, while investors wait for something to happen. 20 million for research? Wonder who got that money?

Dave
Guest
0
Dave
February 7, 2013 10:42 pm

Who got the $20M: Suppliers of very expensive lab equipment and supplies needed to do the research, and the senior scientists & tech support staff. Research in biotech costs a fortune.

T. Walker
Guest
0
T. Walker
February 7, 2013 7:51 pm

I am so glad for this site as it gives me much to think about. why not consider commodity funds? you don’t have to worry about the costs of the miners, just the material itself.

BonnieEmber
Guest
0
February 7, 2013 8:11 pm
Hello Gold Rush Investor’s. Have you seen the Ruby & Sutter Mines in the California Gold Rush areas? Sutter is currently producing gold, & Ruby is set to start this summer. Ruby has know deposits of approx $750,000,000. The largest nugget pulled from the Mine was 201 ounces. Ruby trades under the symbol: NBRI Sutter is SGMNF. I get these pump & dump emails too & have to laugh. Yes, in America, it can cost a billion to open a mine. Why fund other people’s dreams, when you can buy a genuine California Gold Rush Mine Stock, already producing. These… Read more »
Marco polo
Guest
0
Marco polo
February 7, 2013 9:09 pm

Great book…..jeckyl island…….opened my eyes totally……they say 10-20% is the safe allocation for precious metals?……..to me, it seems like 1 of the only true stores of value…..the real stuff!

SageNot
Guest
0
SageNot
February 7, 2013 9:41 pm

Why would billionaire Doug Casey be recommending junk while being in the book writing business? His recent “Totally Incorrect” never mentions these speculative losses like XRA or their Caspiche project, which I read & hear is a find.

If Intl car sales are in a boom mode, buy platinum & palladium stocks, catalytic converters must have this metal (diesels require palladium). If I’m not mistaken a new ETF has been, or w/b, launched with stocks primarily in these two metals.

Cheers!

SageNot
Guest
0
SageNot
February 7, 2013 10:53 pm

Good evening Travis. PLTM is a seasoned metal trust that tracks platinum & palladium mostly. Look where it was before the markets broke down, & yes, platinum is missing it’s premium to gold presently. Maybe not a 10 bagger, but easily a double+ if auto/truck sales continue to rally. China’s air is the worst, so they must clean up their air supply, which is right up the platinum/palladium’s alley. This seems like a no-brainer to me regardless of the Euro problem.

http://www.wikinvest.com/fund/First_Trust_ISE_Global_Platinum_Index_Fund_(PLTM)/WikiChart

If I find that ETF for these metals I’ll post it for you guys.

Jim
Guest
0
Jim
February 8, 2013 12:45 am

Take a look at SPPP. Holds physical metal in Canada in a closed ended fund. The premium/discount to NAV is available on their Web Site. Suggest consulting before purchase.

Michael Hullevad
Guest
0
Michael Hullevad
February 8, 2013 5:33 am

I stay away from juniors that does not have funds and permits in order. (getting permits in the US is VERY hard to get). Explorers can be put on the radar, but it is a fact that it takes 8-10 years to get a new mine up and running.
Far too risky! The gold grade looks very low. One have to consider return on energy invested,

blackjack
Guest
0
blackjack
February 8, 2013 6:13 am

have a look at Medusa in the Phillipines – run by an Aussie co ASX:MML
produce at less than 300 bucks per ounce
well priced SP
lots of potential

shredder
Guest
0
shredder
February 10, 2013 10:48 am

Can get some valuable info from Brent Cook’s site and the Phase 1, Phase 2 and Phase 3 parts of the Jr reource sector
Or as Rick Rule tells us…in this sector either you are a Contrarian or a victim

Bill
Guest
0
Bill
February 14, 2013 9:33 am

Yes I do. Barkerville is a scam and any money you put into it will go up in smoke. If there are 10 million ounces there, I will sell you some swampland in Florida that’s worth a lot more, ok?

Bill
Guest
0
Bill
February 14, 2013 9:34 am

Sorry that was meant to be a reply to the post below, hit the wrong button.

Elliot O'Neill
Guest
0
Elliot O'Neill
February 12, 2013 4:18 am

You guys got any opinions on Barkerville Gold?
Currently has a CTO @ $1.22. However trading on OTC market under BGMZF @ .64 cents. Expecting the report to come out within a month, with an expected resources of 10m oz and decent grades.
Ian Gordon has been touting them for a while, any views on him also?
Cheers

Myron Martin
Guest
0
February 12, 2013 12:09 pm
Their upcoming report should be quite revealing. Thank you Elliott for advising that the stock is still trading on the OTC market even though trading was halted on the home Venture exchange @ $1.22. This would indicate to me that there could be an initial drop of 50% when the trade restriction is lifted, UNLESS the report is so positive that the OTC purchasers get an instant 50% RISE to match the price at which trading was halted. If indeed a 10m oz. deposit is confirmed, (depending on configuration between Indicated and inferred) there could even be a substantial price… Read more »
wpDiscuz