I told you yesterday that we’d be looking for the balance of the stocks teased by Sean Brodrick after identifying the “Goldstone Strike” picked that he touted (that was Randgold Resources, you can see yesterday’s article and commentary on that one here if you missed it).
So that’s just what we’re doing — there are five stocks to uncover and discuss, so we’ll make it quick and let you get right to your cogitating:
“Gold Pick #2: The Sole Heir to the Largest Gold Fortune in the United States
“In the coming year, the sole heir to the United States’ largest gold strike will tap an estimated $4 billion worth of gold.
“Best of all, you can get a stake in this gold for an unheard of $39 per ounce….
“It’s already used this methodology to grow its resources from 1 million ounces in May 2010 to over 3.2 million ounces today… making it possible for you to pay just $39 per ounce for your portion of its reserves….
“This similar setup will allow the company to make a fortune.
“And so could its investors – like renowned hedge fund manager Ken Griffin, who bought close to $17 million worth of this company’s stock.
“Recently, I stopped by the company’s headquarters and spoke to the CEO.
“In our talks, he revealed the company is scheduled to receive a mining permit that will ‘double its production’ and ‘cut costs in half.’
“As for the potential upside, he said, ‘We’ve just scratched the surface on this project.’
“… you can still get on board for under $2 a share.”
This one, it appears, is most likely to be the company that has consolidated much of the old landholdings of the original Comstock Lode — Comstock Mining (LODE). This was one of the huge mines in US history, producing millions of ounces of silver and gold and creating a bustling den of sin in Virginia City, Nevada decades before Bugsy Siegel and Meyer Lansky set their eyes on Las Vegas.
And no, I can’t be 100% certain because I don’t think Ken Griffin’s Citadel hedge fund owns shares of Comstock Mining — though it had a roughly $17 million position in Comstock Resources (CRK) last year. That’s a much larger oil and gas company in Texas and Louisiana, as far as I know the firms are not in any way connected … but it’s easy for a copywriter to screw that kind of thing up.
LODE is a junior miner, producing gold and silver now and aiming to double production this year and increase it considerably more in future years, we’re told. I don’t know much about them, but Sean Brodrick did publicly mention his visit to the company and his fondness for their prospects in this article last fall. I think the permit they were talking about was a water permit, which they did get, and they seem to be a decent, small miner from my quick glance. I’ll leave you to the research on that one, and we’ll move on.
“Gold Pick #3: Bag 277% From This Tiny Canadian Miner With Over $4 Billion in Silver
“Major news is starting to buzz around one mining community…
“Located about 46 miles from Durango, on a paved highway, lies this huge mining discovery in Mexico’s modern “Wild West.”
“The site is easily accessible by federal highways or by charter aircraft – which can land at a small paved airstrip on the outskirts of town a few miles away.
“For years, local farmers have plowed this agriculturally rich area of Mexico… completely unaware of the fact that they stood on BILLIONS of dollars of precious metal….
“… this small exploration company hit the precious metals jackpot…
“Having staked exclusive rights to 1,307 acres, it has quietly uncovered what could be the largest untapped silver and gold discovery of the last two centuries…
“It’s a massive deposit with an estimated 198.6 million ounces of silver, currently valued at an impressive $3.9 BILLION.
“That’s almost 20 times this company’s $200 million market cap… shares just over $1 right now….”
That one’s Silvercrest Mines (SVLC, SVL in Toronto) — the deposit referenced is their La Joya project near Durango, Mexico, you can see the details of that one here. This is another producing and cash-flowing junior, though it’s a little bit bigger with a market cap of about $250 million — the only reason I’ve heard of this one is their partnership with Sandstorm Gold for a gold stream on their smaller producing project, Santa Elena. La Joya could be a dramatically larger mine if and when it’s actually built, in part because of its massive copper resource in addition to potentially 198.6 million ounces of silver if the grade cutoff is fairly low, but for now they’re doing well and producing profitably from Santa Elena (Sandstorm Gold just invested another $10 million in expanding the underground mine there).
“Gold Pick #4: The World’s Most Powerful Silver Royalty Company Is Holding a Discount Sale… Here’s How You Can Grab Your Share…
“This fast-growing silver royalty company has an innate ability to spot value… amassing a fortune in the commodity.
“This company receives millions of ounces of silver at a rock-bottom cost of only $4 an ounce – 80% cheaper than what everyone else pays for silver.”
I’ll stop you right there … this is obviously Silver Wheaton (SLW), the large silver streaming company that’s also the biggest precious metals royalty/streaming company on the market. And one of the stocks we’ve probably mentioned more than any other here at Stock Gumshoe, because I like royalty/streaming companies (they finance mines and get a royalty or a chunk of production in return) … and because they get teased quite often.
SLW is quite diversified across mines, partly thanks to the fact that they were able to build up a large portfolio of silver streams at a time when silver interest was low (silver is often a byproduct of copper, zinc, nickel, lead or gold mines — miners sold the silver in advance to SLW because silver wasn’t their primary product or focus), but it’s a bit tougher for them to grow meaningfully with new deals now because of their massive size — so they’re getting more levered to recent, large deals, which might be a problem if silver collapses again. But still, this is a very large royalty/streaming company with a focus on silver, and it’s by far the cheapest royalty/streaming company based on pretty much any metric I can think of — that’s partly because people don’t trust silver quite as much as they trust gold, given silver’s much higher volatility in recent years. I’d buy Silver Wheaton before I bought a stand-alone silver miner, and it should have meaningful leverage to the price of silver, but I don’t own either at the moment (I do own some physical silver, and try to buy small chunks of it on a semi-regular basis).
More? Tired yet? Don’t worry, we’re almost done …
“Gold Pick #5: This Company Pinpoints Gold Deposits With Laser-Like Accuracy… And It’s Poised to Quadruple Its Production…
“Okay, I’ve talked about some bargains so far. But this high-grade gold producer trades below book value – a trait nearly unheard of in this industry.
“And no, the mine isn’t underwater or on the slopes of an active volcano.
“It’s just undiscovered… though probably not for long.
“Recently, this firm’s high-tech surveillance and scouting equipment pinpointed a strip of land in Mexico that contains gold in about the purest form you can find.
“It’s poised to yield up to 2.3 million gold-equivalent ounces. And make no mistake, this gold windfall would be a profit-making bonanza for this small company.
“Last year alone it increased its reserves by 171%!”
This one, it appears, is Primero Mining (PPP in NY, P in Toronto), a larger but still small gold miner (market cap about $800 million) that has been acquiring smallish high-grade mines or projects. The latest acquisition to close is their purchase of Brigus Gold, which finalized today and gave them the Black Fox and Grey Fox projects in Timmins, Ontario, but the one being pitched here is the Cerro del Gallo project in Mexico that they agreed to buy a little over a year ago — that project does indeed have 2.3 million ounces of gold equivalent resources plus reserves (“gold equivalent” just means that it’s not all gold — they’re including the substantial silver or other mineral reserves and translating them into how much gold they would be worth). They also have a producing mine, San Dimas, that’s producing now, and they’re expected to be profitable next year.
This is one of the few small or mid-size miners that’s actually at or near its 52-week high, it appears that investors really like their strategy of rolling up relatively small, high-grade mines that have further exploration potential, and they now have a decent pipeline of projects to keep reserves and production growing … as long, of course, as gold prices cooperate.
Oh, and yes, they do have experienced management — CEO Joseph Conway helped build IAMGold into a $6 billion company, and has been at the helm of Primero for about four years now.
“Gold Pick #6: The Tiny Firm Making a Killing on Gold… Without Mining an Ounce
“One small firm has discovered a low risk ‘backdoor’ entrance to the gold market that entails huge profit potential…
“Even though its mining interests are primarily in gold… It gets no revenue from mining operations.
“In fact, this tiny firm is making a killing on gold… without mining an ounce.
“It buys property… finds a partner to explore and develop the projects… and collects an interest in whatever it finds.”
That sounds like it’s one of the gold royalty companies, which is a pretty small fraternity to begin with — but which one?
“And it increased its dividend a total of 153% over the last five years.
“And here’s the best part…
“As the stock price of this firm’s partner appreciates in the coming months – which we expect will happen as gold prices rise – this firm’s stock price could easily double in the next few weeks.”
That makes it a bit more odd, because Franco-Nevada doesn’t really have just one “partner” … though they do have royalties on mines from most of the biggies, like their former corporate parent Newmont Mining and giants Goldcorp and Barrick Gold. But since they are that specific about the dividend that narrows it down from two dividend-paying gold royalty companies with long histories to, well, one: Franco-Nevada (FNV in both NY and Toronto).
This is a solid pick among the royalty companies, but really, if you like gold they’re probably all solid picks at this point (Royal Gold, RGLD, and Sandstorm Gold, SAND, are the two other publicly traded gold royalty/streaming companies of any size, and SAND is far smaller than the two big guys. I own SAND personally). Franco-Nevada, like Royal Gold and Silver Wheaton, has done bigger deals as it has gotten larger, so it is somewhat levered up to higher prices because of its major commitment to huge projects like the Cobre Panama mine that now has been delayed and won’t be online for almost four years, but it’s also quite diversified … and I do like their smallish chunk of platinum group metals royalties thrown in for a bonus, and their small energy position too, which provides a bit more diversification.
And that’s all I’ve got in me today — what do you think? Any favorites you’d like to trumpet in this group of five “explosive” stocks teased by Sean Brodrick? Several of these are pretty well covered in the investment newsletter world, where the pundits tend to follow each other around a lot, so I’m sure many of you know at least a few of these stocks well … and probably own some of them… so let us know what you’re thinking with a comment below.
P.S. If you’re interested in what our mining columnist thinks, he’s been busy at PDAC this week and we’re finishing up his column for publication soon, but in the past Myron mentioned LODE as a “buy on dips” idea last Summer, and he’s also had nice things to say about both Brigus and its new owner, Primero.