Thoughts from Myron—October is Prospect Generator Month

by takeprofits | October 18, 2013 5:06 pm

Ed. note: Here is our latest contribution from Myron Martin, who writes for us primarily about junior miners. He has agreed to our trading restrictions, and, as usual, we have not reviewed, approved or screened his stocks or ideas, and the opinions he expresses are solely his own.  Many of the stocks Myron covers are microcap “penny stocks” that can move dramatically with or without fundamental reasons, so please be cautious. Myron’s past commentaries can be seen here.[1]

Things are really starting to heat up and get interesting in the precious metals markets, and one of the most insightful views is from James Rickards[2], who has just written a new book on how things are likely to play out.

An interesting interview with billionaire Eric Sprott[3] indicates that a financial reckoning day draws ever closer. Sprott is not the only wealthy Canadian who understands the box canyon the U.S. has been driven into by its ruling elite. Ned Goodman also calls a spade a spade[4].

For those of you who are not up to speed on charges of “manipulation” by the bullion banks (led by JP Morgan) this interview on the Max Keiser Report with Andrew Maguire[5], the British “whistle blower” who submitted evidence to the CFTC that played out exactly as predicted, will probably be quite shocking, as former JP Morgan employees have come forward and corroborated the story of financial shenanigans that is hurting us all. If ever there was a “must listen” video, this Andrew Maguire interview is it. Share it with everyone you know. Only public exposure of sufficient magnitude can put an end to this criminality.

Google “is JP Morgan a criminal enterprise” and you will get 10 pages of results. Here[6] is only one of many responses.

More essential facts on the global economy from Britain can be found here[7]. I hope you are archiving these resources!

One source to take care of a physical bullion allocation I feel confident in endorsing is the Hard Asset Alliance[8], which offers a wide range of services and purchase/storage advice, and most intriguingly, offers credit-card size 50 gram gold sheets that can be broken into “bite size pieces” of a current approximate value of $40.00, for use in emergencies should our electrical grid go down, etc. It is certainly worth checking out. This is the cleverest way to conveniently store “purchasing power” that gives you both long term value preservation and convenient spendable emergency currency.

As usual King World News has some “end of week” powerful interviews that underline the fact that unless you dig deeper than the planted stories in the establishment press that depict everything as being rosy, the economy recovering, etc., you will be deceived and robbed of whatever paper assets you have left. Start here[9] to get up to speed, and interviews with Gerald Celente and Jim Grant by KWN are also very provocative and informative.

The real state of affairs in America is a rather sad one we should be aware of[10]. Truth tellers become labelled as potential terrorists and any criticism of Obama and the governments policies leads to IRS harassment.

Unfinished business from my last column: I wrote about my experience with Rare Element Resources Ltd. (REE RES.TO) and Quest Rare Minerals Ltd. (QRM QRM.TO) (refresh your memory here[11]). But there was a third contender in the same time frame of 2009-2010 that I did well with, and was also a market favorite. I speak of Avalon Rare Metals Inc. (AVL AVL.TO) C$0.89 and $0.85. Sure enough, a few days after I sent my column in for final editing and posting it also appeared on my CIBC Alerts for several days as a percentage increase stock. My suggestion is that you buy whichever of the three you can get the best price on with “stink bids” or spread your allocation to rare earths among the four I have profiled.  The fourth one is Texas Rare Earth Resources Corp. (TRER), which I profiled in my last column[12].

Avalon’s claim to fame with their Thor Lake Nechalacho project in the Northwest Territories is their claim to be the most advanced and largest deposit in the world featuring primarily heavy rare earth elements (HREE), most in demand and highest priced.  It also has a year-round airstrip for service to the project. As potentially the first sustainable rare earth producer in North America, they could have a “first to market” advantage. The stock price over 52 weeks ranged from $0.50 to $2.47. They have a $9 million treasury, so they are financially sound and well advanced, with a PEA (Preliminary Economic Assessment) showing a 20-year mine life, producing at a cost of $362.00 per mined ton, and revenue of $885.00 per mined ton for very robust gross margins. Their production plans are very well laid out on their website[13] and I suggest you review it for any other questions you may have. Compare number of shares out and price with other contenders.

The theme this month is prospect generators, for which this Brien Lundin article[14] has an excellent and detailed definition that includes five company examples, all of which I own, though I will only have room to profile three. Brien’s article even has interviews with the CEO’s of all five companies from which you can gain a lot of valuable information, and is the first thing you should read. Then follow up with the companies’ individual website information. The two not profiled by me today, Millrock Resources Inc. (MRO.V MLRKF) $0.09 and Tarsis Resources, Ltd. (TCC.V TARSF) $0.09, both of which I also own, have not yet shown up on my radar screen as being accumulated, so while I am retaining them in my portfolio, I will deal with them in the future if and when they present a compelling investment opportunity. However, you could put them on your own watch list as potential buys.

The first stock mentioned in Brien’s profile of prospect generators is Avrupa Minerals (AVU.V AVPMF) with its recent investment by Callinan Royalties Corporation (CAA.V CCNMF) presenting an opportunity to keep subscribers updated on significant news on stocks like Avrupa, which I have previously profiled[15], something I like to do, even though tracking stock news should be primarily the individual investor’s responsibility.

With the prospect generator model proving to be the best in the junior mining sector over many years, I just want to emphasize again what a bargain I think Avrupa Minerals is, and the fact that they are quite cheap in comparison to contemporaries. The investment by Callinan only enhances that perception. When an up-and-coming royalty company like Callinan effectively endorses a company’s management and projects with an investment, it reflects a win-win situation in my books.

Here is a quote from a press release on this investment (see the full release[16] for complete details):

“Callinan is supporting the prospect generation business model as a means to create royalties in prospective areas through agreements with companies such as Avrupa that are established prospect generators and have demonstrated expertise in their chosen jurisdictions.”

Keep in mind the added benefit of lower operating costs in Portugal where jobs are desperately needed. The icing on the cake is that Callinan has an additional $25 million available for royalty investments, with only 49.3 million shares out, giving us a double investment opportunity that will be magnified by Avrupa, attracting more joint venture partners for its many projects, now that they are adequately financed to develop their low-cost projects.

Royalty and prospect generator companies are my two favorite business models and sometimes the two intersect or compliment each other in slightly different ways of application. I felt Brien Lundin did such an excellent job of presenting the many positive features, I felt I had to share his insights, which I agree with wholeheartedly, as to their advantages and the different companies that apply their own innovative practices to its execution. The problem is, there are so many worthy companies to consider, but with the current political stalemate in Washington producing a directionless market, it is difficult to get a confirmed turning point in market direction. I continue to focus on identifying the strongest and best financed and managed companies in the sectors I target! As I see it, the precious metals could go either way depending largely on the ongoing bullion bank shenanigans, our objective being: buy low!

I consider the two companies below some of the strongest companies I have so far profiled and I believe will prove to be excellent choices long term, no matter what the market does near term.

Globex Mining Enterprises Inc. (GMX.TO GLBXF) at $0.40 is in my opinion grossly undervalued. Where else can you find a company with only 27,896,018 shares out (1,310,000 options and warrants) with 15% management and insider holdings? No other company I am aware of has such a broad range of exposure to different in-demand minerals, both in the precious and base metals fields, indeed some critical and specialty metals, one of many reasons it has been in my portfolio for years. The price of $0.40 is deceptive because it appears there must be something wrong with the company, but a little digging shows the company has been able to maintain a profitable but low profile by using joint ventures and royalties to “self fund” and avoid diluting shareholders as shown by the low share count. This indicates good management and a strong survivor in these difficult times. With 100 plus properties and strong joint venture partners, this stock is set to explode once the market turns positive again; and it will, we just can’t know the exact timing, but this is one of the lower-risk stocks to get positioned for that inevitable turn around. It just makes sense that a company with exposure to a dozen or more commodities on over 100 properties and financially strong partners has better odds of striking it rich than a “one trick pony” company that may not have an economically viable project, despite getting lots of attention from press releases announcing drilling results that to the layman appear impressive, but may never result in a profitable mine being built. With 30 former mines on their property holdings, 32 with base metals, rare earths, industrial and specialty minerals, with 35 having historical and/or NI 43-101* defined resources in low-risk major mining camps in North America, what more could an investor ask for? Another thing I like about Globex is that they generate shareholder value by “spinning out projects” that are advanced and can stand on their own merits with Globex shareholders receiving free shares, one already doing well.

Eurasian Minerals Inc. (EMX.V EMXX) C$1.17 and $1.14, likewise embraces the “smaller piece of a bigger pie” concept and holds a large royalty portfolio that makes them largely self-funding, keeping dilution of shareholders at a minimum making it a “junior company with a major’s portfolio” with a track record of world-wide discovery and value creation. With a $4 million 2012 cash flow from royalties, and a strong treasury of $20 million holding 150 properties on five continents, its current stock price can only be described as ridiculous in a totally irrational market. There are 87,604,277 fully diluted shares, which is not bad for such a well developed and positioned company with a stock price just over a dollar. The company has ten major institutional investors, which includes Newmont Mining that has already spent $25 million on six joint venture properties in Haiti. In total, Eurasian has 29 projects and royalty properties located in world class copper and gold districts around the world.

Here is a Jay Taylor interview[17] with the CEO of Eurasian Minerals.

Other joint venture partners include Antofagasta for a copper project in Sweden, in the Western U.S. a joint venture copper project funded by Vale S.A. (VALE), and another one by Inmet Mining Corp (IMN.TO), and also a copper-gold project joint ventured with Freeport-McMoRan (FCX).

Freeport is also involved with them in a copper-gold project in Russia, and their Serbian projects are jointly operated by Reservoir Minerals (RMC.V RVRLF) and Freeport in projects that have sent Reservoir on a tear this year, probably my best holding in 2013. Eurasian also has a royalty property in Turkey, but most of the strongest royalties are coming from holdings in the prolific Carlin Trend in Nevada with a strong cash flow history. Not enough facts for you? They have an extensive website here[18] where you can get all the details I don’t have room for. After this review of a stock I already made good money on years ago, I am certainly hoping to be able to buy more at these prices. Note: joint venture partners mentioned are not recommendations, they are just major well-known miners with strong cash and portfolio strengths to back these profiled stocks.

Late Breaking News: It seems every time I am on deadline there is some breaking news I should share. I just read a prediction that there will be a “ten-fold increase in aluminum use for automobiles by 2025,” and it so happens that I have an unusual aluminum, near-production company in my portfolio that I can profile the end of the month along with leading companies in the graphite sector, unless something more pressing asserts itself by then.

Here’s an article from King World News that I recommend: Complete Collapse & Economic Meltdown Will Shock The World[19].

Market Alert: After finishing the column I finally got around to checking my CIBC Alerts for the day, and there were 14 precious metals stocks in my portfolio that were up from a high of 11% to a low of 5% (which is still a good daily move), plus another five on my buy list with similar increases. Be alert for a potential breakout next week and review the last two months’ stock profiles to decide what to buy before prices skyrocket.

Stocks in my portfolio mentioned above that I will not trade until the end of next week: Avrupa Minerals, Globex Mining, Eurasian Minerals, Millrock, Reservoir Minerals, and Tarsis; nor will I buy any other stock mentioned for at least three trading days after publication.

*NI 43-101 are Canadian mining standards that must be met by companies before they can make any claims about their projects to investors.

Endnotes:
  1. Myron’s past commentaries can be seen here.: http://stockgumshoe.com/author/takeprofits/
  2. James Rickards: http://bullmarketthinking.com/james-rickards-when-the-international-monetary-system-collapses-its-going-to-be-about-how-much-gold-you-have/
  3. interview with billionaire Eric Sprott: http://goldswitzerland.com/the-west-will-regret-all-its-financial-policies-someday-soon-sprott/
  4. Ned Goodman also calls a spade a spade: http://www.northernminer.com/news/ned-goodman-and-the-botox-economy/1002594276/
  5. interview on the Max Keiser Report with Andrew Maguire: http://www.tfmetalsreport.com/blog/5087/am-mk
  6. Here: http://polizeros.com/2013/08/09/is-jpmorgan-a-bank-or-a-criminal-enterprise/
  7. here: http://www.goldmoney.com/en-gb/news-and-analysis/news-and-analysis-archive/the-80-20-rule.aspx?gmrefcode=gata
  8. Hard Asset Alliance: https://d3k0ihy9emwgeg.cloudfront.net/pdfs/SmartMetalsInvestorKit.pdf
  9. Start here: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/9/27_Breaking__CFTC_Stonewalls_Hathaways_Request_For_Information.html
  10. a rather sad one we should be aware of: http://www.washingtonsblog.com/2012/04/obama-has-prosecuted-more-whistleblowers-than-all-other-presidents-combined.html%20
  11. here: http://stockgumshoe.com/2013/09/microblog-thoughts-from-myron-etfs-rare-earths-and-more/
  12. last column: http://stockgumshoe.com/2013/09/microblog-thoughts-from-myron-etfs-rare-earths-and-more/
  13. website: http://www.avalonraremetals.com/
  14. Brien Lundin article: http://www.jeffersoncompanies.com/marketing/files/ProspectingForProfits.pdf
  15. previously profiled: http://stockgumshoe.com/2013/08/microblog-myron-july/
  16. full release: http://www.callinan.com/s/news.asp?ReportID=606546
  17. interview: http://www.webeatthestreet.com/media/archives/EurasianMinerals20130312.mp3
  18. here: http://www.eurasianminerals.com/s/Home.asp
  19. Complete Collapse & Economic Meltdown Will Shock The World: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/10/17_Complete_Collapse_%26_Economic_Meltdown_Will_Shock_The_World.html

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