Stock Gumshoe has already moved offices, and that was traumatic enough… but now my family is also moving to a home that isn’t quite done, so this week is going to be another nutty one.
And for that reason, if no other, I’m pleased to be able to get a quick teaser answer out for you in response to a question from a reader.
Here’s the question I got from a reader over the weekend:
“I got a teaser email from Nick Hodge of Angel Reserve who is promoting a book called ‘Goldbug!’ by James Dines, who reportedly has predicted a major gold bull in the past. So here at least one of the stocks he is teasing:
““The Next Gold Mine to Go LIVE”: This new gold mine is expected to produce 87,000 ounces of gold per year for the next eight years… it’s the only one in Canada that’s fully financed, permitted, and under construction… and now you can get in BEFORE it goes into production. The company trades at a “market cap” of just $146 million, providing you with an exquisite entry point. You’ll discover the firm’s name and ticker symbol inside this special report.”
The full ad is focused on the re-introduction of James Dines to the world of heavily hyped newsletters — The Dines Letter has been around since the early 1960s, and James Dines was one of the forefathers of the modern financial newsletter. He is not at all shy or passive, he makes big predictions with some regularity and, back when Mark Hulbert was still tracking newsletter performance, The Dines Letter was very often either in the top or bottom of the performance rankings based on those big calls.
Dines’ early success came from “pounding the table” for gold in the late 1960s and 1970s, which was very controversial at the time but certainly worked out well for folks who sold near the 1980 peak, and he’s often called a “gold bug” — so it’s perhaps no surprise that this latest push from Angel Publishing to sell subscriptions to The Dines Letter is slanted toward gold.
Nick Hodge doesn’t own The Dines Letter, from what I can tell, though maybe Dines is thinking of slowing down (he turned 85 in November) and having someone else push his ideas, so perhaps Hodge is helping to publish it now — I don’t know. Hodge is certainly selling The Dines Letter, and he’s selling it for a similar price to what Dines himself asks on his site. The push from Hodge includes some special reports and a “free” trial of Wall Street Underground, another Outsider Club/Angel Publishing newsletter (that trial defaults to a paid auto-bill subscription after three months, gotcha! — so maybe that’s part of Hodge’s compensation for pitching The Dines Letter).
But what is this mine that’s named in the “Special Report” from Hodge? There’s no mention of this being a Jim Dines idea, though he certainly has often liked gold miners, so presumably the pick itself is from Nick Hodge and his Angel Reserve folks.
And the “secret” stock they’re teasing for this special report is almost certainly Atlantic Gold (AGB.V in Toronto, SPVEF OTC in the US).
Atlantic Gold is indeed expected to produce 87,000 ounces of gold a year for eight years once the mine enters commercial production, and it is indeed financed, permitted and under construction, with a market cap near C$146 million (it’s C$149 million today, which us US$110 million)
Is this an “exquisite entry point?” I don’t know, I’ve never looked at this one in any detail… and it’s always important to be cognizant of the risks and expense of starting up a new gold mine. The company itself is quite optimistic, of course — their presentation indicates they will be commissioning the mine and the processing plant in the third quarter of this year and ramping up to full production at the end of 2017. The eight year mine life actually encompasses two of the four deposits that Atlantic is planning to mine that are all close to each other in Nova Scotia — the first is the Touquoy Deposit, then in five years or so they plan to move on to the Beaver Dam deposit (which should be permitted later this year, they expect), and presumably the plan would move on beyond that to Fifteen Mile Stream and Cochrane Hill, other deposits on their tenements in the province.
Whether you see value here probably depends both on what you think the price of gold will be, and whether you expect them to expand their production more rapidly to incorporate more of those mines earlier (particularly Cochrane Hill). These are not huge mines, but they expect to have low costs so their base case feasibility study has them profitable even with gold at C$1,400 an ounce (that would be about US$1,060 – right now gold is around C$1,560 an ounce), but the small size of the deposit means it doesn’t appear hugely undervalued.
The calculated after-tax Net Present Value (NPV) based no those same assumptions is C$140 million at C$1,400 gold, or C$168 million at C$1,500 gold — which, given the current valuation of the company at C$149 million, would probably make you shrug your shoulders and say “meh” … unless you’re pretty sure that those estimates are really conservative, or certain that gold will rise substantially higher than that (at C$2,000 gold, the NPV of the base project, Touquoy and Beaver Dam, is just over C$300 million… but it’s worth noting that if gold goes up to those levels (that’s a rise of just over 25%) then lots and lots of mining stocks will double.
I just pulled those estimates from the corporate presentation here, so you can check that out and dig into the project and see for yourself whether it appears exciting or worthwhile. My initial impression is that the project is economic enough to have gotten financing, and it seems reasonable that they’re building these mines, but I don’t find my animal spirits surging… perhaps that’s a good reason to consider the stock, since it looks like it has some reasonable fundamentals and it hasn’t been driven up to ludicrous prices on a wave of attention from what I can tell, but it’s hard to feel strongly about it one way or another after 15 minutes of browsing.
So with that, I’ll leave it to you to make your call… please do let us know what you think with a comment below.
Personal Capital is an advertiser with Stock Gumshoe, but Travis also uses it every day for his personal accounts and finds it invaluable. Here's what he said: "They offer a great (and genuinely FREE) 'second opinion' for your financial plan, but what I love most is their automated financial dashboard -- it will look at all your assets and debts, tally up your asset allocation, project where you'll be at retirement, and suggest ways to manage risk or improve returns. It's free, I think their free tools are great, and I think it's worth checking out -- you can do so here.