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What’s Nick Hodge’s “Proven Golden ‘Loophole'” that “Magnifies Gold & Silver Gains?”

What's the unknown gold "land bank" being hinted at by Hodge's Early Advantage?

Nick Hodge is pitching his Early Advantage newsletter (about $800) with a story about a “golden loophole” that he says provides your best path to profits in the precious metals business — and lots of readers have asked me about that “loophole” this morning, so we’re going to put the Thinkolator to work identifying the truth behind the tease.

The basic idea is that gold mining is a terrible, expensive and difficult business… but that discovering gold and holding onto gold-rich lands and waiting for someone to want to buy your potential mine when prices are soaring again someday is a great business, with low costs and huge potential returns.

Which makes some sense, though it skims over the cost and time commitment, and high failure rate, of the discovery process.

But the ad also isn’t really hinting at finding a grizzled old prospector and staking him to a burro and some beans so he can make discoveries for you, and it’s also not really about buying the early stage “prospect developers” who are out scouting and claiming potential discoveries. It’s really more about buying the counter-cyclical land bank investors who are acquirers, not discoverers. The companies who buy up those discoveries before they’re fully defined and well before the mines are funded or developed, and just sit on those assets until the market turns in their favor to make those assets much more valuable again so some other sucker miner can get involved and actually build a mine.

So that’s the basic theory, at least — interested in finding out the name of the stock? Me, too, let’s get to the clues — this bit is from the order form and sums things up:

“The land banking strategy has routinely delivered percent gains ranging from the thousands… to the hundreds of thousands.

“Luckily, I’ve found a small company — backed by some of the best people in the industry — that sports a large, high-grade gold ‘land bank.’

“And hardly anyone else knows about it. Its value isn’t even close to being fully realized.

“But in the coming gold bull market, it will be.

“Just one of the NINE gold assets it has in its land bank was recently valued by an independent engineering report at $233 million — 17 TIMES more than what they paid for it.

“This firm is trading right now for less than $1 per share. But I don’t expect it to stay there for long.”

That’s probably enough to ID the stock, actually, since I happen to know this one, but let’s check a few more clues so we can be certain… here’s some more of the basic argument, which hinges on the “Peak Gold” assertion that there are many, many fewer big gold discoveries than there used to be, and that the big miners will be desperate to add reserves at some point:

“The risks of investing in ‘land banking’ companies is far, far, far less than your typical mining stock (which spends millions of dollars developing one or two mines that may or may not be winners).

“And now that ‘Peak Gold’ has arrived, big miners will be more desperate than ever for gold-rich land… and willing to pay substantial premiums for it.

“But you don’t need to go out and buy any land. Or buy “stakes” in any claims.

“Thanks to this ‘loophole’, you can safely double, triple, or even quadruple your money… even if you don’t know a gold mine from a rabbit hole.

“All you have to do is simply piggyback off others who have done it before… and have made a ton of money doing it.”

And then some more specific clues:

“The Single Best Gold ‘Land Banking’ Play You Should Buy…

“This CEO is a huge name in the business.

“He has been recognized by Fortune magazine on its “40 Under 40: Ones to Watch” list of North American executives.

“In his first public resource company he produced gains of 3,673% for his shareholders….

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“This is a tiny company that holds valuable resources in one of the greatest gold belts in the world… and it could easily become a 10-bagger down the road.

“It has a ‘land bank’ of NINE gold assets in Brazil, a mining-friendly nation that has attracted over $15 billion worth of investments in this space in recent years.

“In fact, this firm is financially backed by one of the wealthiest families in Brazil… and one of the wealthiest in the world for that matter.”

OK, so I can stop torturing you now — this is Brazil Resources (BRI on the Venture Exchange in Canada, BRIZF OTC in the US).

Which is indeed the baby of Amir Adnani, who also built Uranium Energy (UEC) and serves as CEO for that uranium company. Before that he and his family started Blender Media, which is an investor relations/media company, so it should come as no surprise that both UEC and Brazil Resources have been pretty aggressive at marketing themselves, even using paid promotions that are very similar to the “pump and dump” operations that we all hate (they aren’t really pump and dump campaigns, since they’re paid for by the company and they aren’t designed to let sleazy offshore funds cash out big and take profits, but they do pretty effectively “pump and raise money with secondary offerings or private placements”). That’s probably my biggest qualm with Adnani’s companies — it isn’t necessarily evil that startup companies who depend on raising capital by selling shares want to keep their share price up by promoting themselves to shareholders, but it doesn’t taste so great in my mouth.

Still, I do continue to have some warrants on Brazil Resources because I expect it probably will be a rapid mover if gold prices recover dramatically OR if uranium goes on another crazy bull market run (their most popular asset over the past couple years, while gold was weak, was their Rea Uranium project in the Athabasca Basin).

Brazil Resources is often teased and hinted and and reported on by newsletters, particularly all those who talk to each other and poach ideas from each other — Frank Curzio had a big teaser push for this stock for his Phase 1 Investor letter in 2014 when he was still at Stansberry, Brien Lundin has been a big fan in the past, and the Doug Casey/Rick Rule cabal have gotten behind the stock several times and own the shares — Marin Katusa, who used to be at Casey, has even distributed information to his followers to get them in on private placements for Brazil Resources (including the most recent one, back in February).

And, indeed, Nick Hodge himself has teased the stock before, starting about a year ago — though at the time he said he was recommending it because of the Rea Uranium project’s potential (he called it “Obama’s Secret Pipeline”, if that rings a bell, and promised that this “$1 Stock is about to go vertical.”)

It hasn’t quite “gone vertical” yet, though it has doubled from the early January lows — which means it’s back to being a little bit of a win for Hodge, since he first teased the stock last May when it was near C$0.70 and it’s at about C$0.80 now.

Where will it go from here? Well, I stand by my thoughts of two years ago — the company is so promotional, and so tied in with newsletter groups, that I think it’s very likely it will move sharply higher if we’re really in a new bull market for gold (or uranium)… but if those commodity prices don’t rise sharply over the coming year, the stock could easily wither. They do have some work going on, they are doing exploratory drilling to try to increase the attractiveness of their projects for potential acquirers or partners down the road… but they’re not going to actually generate any earnings until things get hot enough for them to find those acquirers or partners. And in the meantime, they’ll probably continue to trade shares for projects, and to raise capital with new share offerings — over the last six years they’ve raised anywhere from $2-6 million a year to keep the company going.

And though there have been lots of big moves over the past five years, largely driven by headline deals or newsletter attention, there is a pretty clear and close relationship between the gold price and the share price of Brazil Resources, here’s the chart (both in US$)

BRIZF_IGPUSD_chart

And as you can see, that relationship with gold has continued through this year, with the stock surging as gold bumped up early in the year.

So over the long term, absent a big surprise deal for one of their properties, I expect it will still be outsized attention from the newsletter jockeys that keeps awareness high, and long-term advances in gold (and maybe uranium) prices that drive the shares higher (if it’s higher that they will go). But over the short term, the next year or so, my best guess is that the shares will mostly track with the gold price. Which might mean, since gold has turned over a bit lately and Brazil’s promotional campaign around their private placement is over, that the stock could turn down a bit after the run of the past few months. That’s just wild guessing, I left my crystal ball in my other trousers.

I did take some losses in my Brazil Resources Warrants late last year to harvest some tax benefit, and repurchased a small position in those same warrants early this year, so I continue to have a small “bet” on the table that Brazil Resources will be above a dollar or so by late 2018 (that’s when my warrants expire), but I wouldn’t call it an investment based on fundamentals — I’d call it a levered speculation on the potential of another blowout gold price surge in the next couple years. That’s fairly similar to my rationale for holding shares of another “gold land bank”, First Mining Finance, which I’ve written about a few times.

I wouldn’t bet the farm on either of those or on any small natural resources firm, but I like having small bets on levered “possibilities” as part of my exposure to mining — partly because it means I can have some appreciable exposure to a potential future bull market without a large capital commitment, even though that works both ways. Levered exposure in microcap companies means the risk of a huge percentage loss is far higher than if you just bought a big, profitable gold miner or royalty company — so instead of a large position on which you might hold a 25% stop loss (for example) to protect your downside, with these kinds of little guys I think it makes more sense to have a small position, give them a lot of room as you wait for your next bull market in gold, and assume that the potential for a 80-100% loss is quite real if you’re wrong or that bull market takes too long to arrive.

Being a “Land bank” kind of stock, without raising huge amounts of capital or taking on lots of debt to build a mine, might mean that there’s some floor to the shares if we assume that gold stays flat or recovers, since they’re not spending a lot of money… but since the companies are so small, acquisitive and dilutive (Brazil Resources has almost tripled their share count over the past five years to fund both operations and acquisitions), I still think it’s wise to assume the worst in sizing your position.

That’s what I think, anyway. How about you? Interested in Brazil Resources or anyone else as a “land bank” gold stock? Let us know with a comment below.

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Thomaskutty
Thomaskutty
April 10, 2016 1:38 pm

Does anybody have any idea about Cctc a clean coal tech company

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hendrixnuzzles
May 8, 2016 4:02 pm
Reply to  Thomaskutty

I am black and blue from coal investments. The deep establishment hatred for coal is putting them all out of business while they are advancing other energy sources.
I’m out of the sector. Did Stocks and bonds…they all went to zero.

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Corrin
Member
Corrin
September 16, 2021 4:13 pm
Reply to  Thomaskutty

I have a lot of shares and I can’t stop buying. 1) because its so cheap, and 2) because they have a verified and patented process to clean coal before its burned. Coal is the feedstock for many developing nations energy grids, and still provides 30% of the US power. The wind doesn’t blow and the sun doesn’t shine all the time and until (if) they develop fusion power the world will need a fuel source for the base load levels. What’s frustrating is the $1 Million Kiln, funded by the U of Wym has been sitting on the Gillette Wy site for over a year while they wait to get their funding straightened out. But a long history of progress, moving forward, albeit SLOWLY, give me great hope that someday I will be able to tell my wife “Told you so!” And it doesn’t have to go up much to break even, and then I am playing with house money.

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faz
Irregular
faz
April 10, 2016 3:38 pm

For silver exposure, I have some PAAS (a Ross “broken slot machine” Beaty play). Also First Majestic (Keith Neumeyer) and Fortuna Silver.
If this is the start of a multi year precious metals up cycle then.. I hesitate to guess how high these may fly. Hold onto your seats…

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abubu1
Member
abubu1
April 10, 2016 5:10 pm

I have been playing PVG for several years, buying lows, selling highs, but looks like it started do disconnect from gold price movements, same as my another play, SEA.TO, which I bought for 8 and sold when it was 11, missing this $17 ride.
Waiting for both to dip a bit to rinse and repeat, I think their stock will still be going up-down for some time. I am not worried if they drop after I buy, just wait it out, unlike my DUST position where I am -30%, buying on dips and hoping it will skyrocket soon. Working for an engineering consultancy catering exclusively to mining, we are idle now but I see an uptick in proposals for various projects that, so far, have been put on hold by big miners – telling me that my DUST position may bring some cash soon, my avg cost is $3.6 and DUST just dropped to $2.56 this Friday, making me nervous.

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hendrixnuzzles
April 11, 2016 1:55 pm
Reply to  abubu1

DUST is a leveraged bear instrument that is supposed to move contrary to gold.
You are betting for a drop in gold prices with DUST.

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abubu1
Member
abubu1
April 11, 2016 2:31 pm
Reply to  hendrixnuzzles

I know, watched a webinar by Larry Edelson, before I joined this forum. Now, looks like I will have to make it up through NUGT, fingers crossed.

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Wild Bill
Guest
April 11, 2016 7:12 pm
Reply to  abubu1

The bulls are really on gold for the time being, do you think dust is a good idea? I have yet to see dust go up fast. I’m sure you can buy it anytime.

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hendrixnuzzles
April 11, 2016 7:42 pm
Reply to  Wild Bill

Wild Bill, you are scaring me. Do you realize when gold goes up, DUST goes down ? And when gold goes down, DUST goes up ? DUST is a leveraged instrument
designed to do THE REVERSE of what gold does BY A FACTOR OF 3.

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hendrixnuzzles
April 11, 2016 7:56 pm
Reply to  hendrixnuzzles

HOW WILD BILL GOT RICH….I can see it now. After hours of careful research, due diligence, and chart analysis, gold crashes and I lose my shirt. Wild Bill, who is bullish on gold, and buys an INVERSE BEAR FUND WITH 3 TIMES LEVERAGE BY ACCIDENT, and makes big money on a mistake.

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sgemara
Member
sgemara
April 10, 2016 7:46 pm

Mr Adnani is a very smooth talker. But look what happened to UEC that he heavily promoted. It had a sharp decline from 4$ to 70 Cents. And boy, did he promise to make you rich. I don’t touch his companies. this is not about gold mines but minefields.

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hendrixnuzzles
April 11, 2016 1:50 pm
Reply to  sgemara

It’s crazy to slam Adnani while uranium is still at depressed levels. U308 is at $35. If U308 hits $50 a pound and UEC and BRIZF are still doing nothing, then you might have a good reason to criticize Adnani. But not while uranium is still in the dumper.

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faz
Irregular
faz
April 11, 2016 2:59 pm
Reply to  sgemara

On the other hand, sgemara – UEC made Marin Katusa’s readers very happy when it went UP from about $1 (late ’06) to $8+ (early ’07) – and was well clear of $6 till the Fukushima incident. (I’ve seen him talk eg at Cambridge House events and I don’t recall him promising anyone riches, he seems quite sober in fact. I do question the wisdom of paying himself such a large salary tho’.)

PS there are no guarantees U will go back soon to former lofty spot prices, and Russell Fryer opined (recent interview on Palisade Radio) that the U miners in that Texas region are likely to merge into a Cameco-copy if things don’t start moving faster with U spotprices. Depending on who’s buying whom, this could cripple my hopes of selling any UEC at $5+, so I’m now cautious about buying any more for now.

Any opinions on that pls ?

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hendrixnuzzles
April 11, 2016 4:02 pm
Reply to  faz

No way to predict when U308 prices will go up, especially with other energy sources so cheap now. Staying in UEC and CCJ with reduced positions but got rid of everything else in uranium til the U-commodity shows signs of life.

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hendrixnuzzles
April 14, 2016 8:36 pm
Reply to  faz

$UEC…frahman…IF you believe that uranium will go up someday soon,
and IF you like the UEC story, then the time to buy UEC is right now when no one is looking.
You liked it at $5.00…why don’t you like it at 70 cents ? You can watch small moves with indifference and be patient when you are in at 70 cents. Forget about the buy at $5.00…it was a mistake.

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faz
Irregular
faz
April 20, 2016 11:49 am
Reply to  hendrixnuzzles

Hi Hendrix – I can’t recall saying I bought UEC at $5; I do agree that for those who have no UEC exposure, it’s never been cheaper to pick some up. But I’m not buying any more currently for position sizing reasons and diversification – don’t want to put all my U-exposure in mr Adnani’s care. Best regards.

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Gui_
Gui_
April 11, 2016 8:28 am

$GDX chart

Every time Yellen opens her mouth, the miners soar, unreal.

http://finviz.com/chart.ashx?t=GDX&ty=c&ta=1&p=d&s=l

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Wild Bill
Guest
April 11, 2016 6:59 pm

I do not and don’t intend to tie up precious capital on ” penny stocks “, especially from Brazil. Does anybody realize the risk involved once you go ” South of the Border “? Like they say Easy Come Easy Go ! Not in my neighborhood, too darn hard to get back, nontheless nerve racking !

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hendrixnuzzles
April 11, 2016 7:14 pm
Reply to  Wild Bill

Hey Wild Bill, I agree in principle. But the BRIZF holding of interest to me is their CANADIAN URANIUM claim in the Athabasca basin. Still a speculation, for sure.

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Myron Martin
Irregular
May 8, 2016 2:23 pm
Reply to  Wild Bill

Question whether Wild Bill has taken all factors into consideration. For examply, the Brazilian REAL is very cheap right now and the country is in a political mess, the bright spot being that their production costs locally would be very LOW while selling on the world commodities market priced in U.S. dollars. Gold may not be up as much as we might like, but in terms of Canadian or Australian dollars (and some other currencies) gold and silver have beat the market so far in 2016 and it is only a matter of time before the U.S. dollar given its obscene debt load falls to its true value and gold rises in U.S. dollar terms to compensate.

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Wild Bill
Guest
April 11, 2016 7:52 pm

I guess it shows,i’ve lost a pile of money. That’s why i’m here. Trying to keep my sanity. Pretty much.

hendrixnuzzles
April 11, 2016 8:01 pm
Reply to  Wild Bill

Wild Bill, most of the people on this site want to help each other.
And everyone makes mistakes, I sure make my share. Best wishes to you.

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Gui_
Gui_
April 11, 2016 8:27 pm

$GDX (Market Vectors Gold Miners ETF) v. $DUST (Direxion Daily Gold Miners Bear 3X ETF) v. $DJIA (Dow Jones Industrial Average)

As you can see, $DUST has huge volitility. The only caveat with DUST is they are flirting with a r/s which does not have the same effect on an ETF as it does a stock, plus you get 20 days notice.

5 yr. chart
http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&symb=gdx&uf=0&type=4&size=4&sid=2325226&style=350&freq=3&entitlementtoken=0c33378313484ba9b46b8e24ded87dd6&time=12&rand=1779777317&compidx=DJIA&comp=dust&ma=0&maval=9&lf=1&lf2=0&lf3=0&height=635&width=1045&mocktick=1

$DUST is an inverse (Bear) Miner ETF and only somewhat follow Gold, but more precisely the Miners, bif difference.

$DUST v. $GLD (SPDR Gold Trust ETF)

5 yr. chart
http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&symb=gld&uf=0&type=4&size=4&sid=3219852&style=350&freq=3&entitlementtoken=0c33378313484ba9b46b8e24ded87dd6&time=12&rand=904881152&compidx=aaaaa%3a0&comp=dust&ma=0&maval=9&lf=1&lf2=0&lf3=0&height=635&width=1045&mocktick=1

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hendrixnuzzles
April 19, 2016 10:13 pm

Hi, since the Hodges tease had been solved (answer BRIZF), I am going to other threads for commentary on gold and precious metals. Don’t intend to post further on this thread. Good luck everyone…unless you are in gold bear funds…

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niizajim
May 16, 2016 9:29 am

Any opinions on BLK.AX, a soon to be producing company in Australia?

I like near term producers.

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