So… on a day when gold’s taking a big ol’ “breather,” shall we look at a nice hyped-up gold pitch?
Why not, right? We can feel a little contrarian, at least for a moment.
This is the intro to Bill Shaw’s latest teaser pitch for Commodity Supercycles, which is the entry-level gold and silver newsletter from the Stansberry folks ($49 for the first year, renews at $199):
“With gold reaching $2,000 an ounce, passing all-time highs, you need to know about my latest recommendation.
“It fits all the criteria I look for when I envision the perfect gold stock…
“#1 No one knows about it
“#2 I’ve seen the project with my own eyes… (this has the potential to be one of the top five deposits in the world)
“#3 The metal’s in a bull market
“#4 The company’s preparing a huge announcement
“But most important of all… the stock is backed by some of the most successful names in the precious metals industry.”
So whatever could it be? It is, you’ll be unsurprised to hear, a junior mining exploration company… but where, and what? Why is it special?
More clues from the ad:
“It’s a virtually unknown miner located in ‘the Golden Triangle,’ a corner of northwest Canada that has some of the richest mineral deposits on the planet….
“Located near many other historically successful mines, it could soon be one of the top five largest deposits in the world.
“My back-of-the-napkin math suggests it likely has at least 20-30 million ounces of gold.”
That would certainly be up there on the list of largest mines in the world, if those 20-30 million ounces were “reserves” — though, of course, it’s a long way between drawing on a napkin and actually finding and defining a gold deposit.
Other hints?
“Last month, the stock climbed over 50%….
“This stock trades for less than $3, and the entire company is valued under $500 million. It’s got the most upside of any stock I see in the gold space right now.”
He does later go on to say that this stock was his recommendation in the July issue of his Commodity Supercycles newsletter, and was priced near $3 at the time — we’ll see if the stock has changed in price. Gold is well off the highs of early August, but since mid-July the price of gold has still risen about 3-4%, including today’s drop. The actual ad is dated “August,” though I think this week is the first time I’ve actually seen it circulating.
And on the order form, we learn that he titled his July piece, “Speculate Alongside a Billionaire Mining Expert on This ‘String of Pearls.'”
There’s also a fair amount of chatter about the expectation that gold will continue surging higher…
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“Bank of America recently raised its 18-month gold target to $3,000. That’s 66% higher than today’s prices.
“Billionaire investor, Paul Tudor Jones, shared a similar sentiment when he said:
‘I have never been a gold bug, it is just an asset that, like everything else in life, has its time and place. And that time is now.'”
Paul Tudor Jones did share that sentiment, and it was widely reported — but, to be clear, that was about 11 years ago, in a letter to his investors that went public back in October of in 2009. He does still favor gold as one way to prepare for the impacts of the Fed drowning the world in liquidity, he reiterated a bullish stance for gold last Summer and remains a fan, with a prediction earlier this year that it would rally to $2,400 (or $6,700 ‘if we went back to the 1980 extremes,” whatever that means), but he has also been a bitcoin booster this year, indicating that he sees bitcoin’s role as similar to gold in the 1970s.
But much of the rest of the pitch is about the big backers of this secret $3 stock.
It’s apparently got a connection to Eric Sprott, one of the more widely-followed investors (and asset managers) in the natural resources space…
“And in early 2019, the same gold stock I’ve been telling you about today came on his radar.
“Over the last year he’s poured more and more money into his position.
“Just last month, he invested $6.8 million in the stock.
“And the company’s taken the capital to ramp up drilling…
“An incredibly important signal that operations are heating up…
“Today, Eric Sprott owns 20% of my favorite $3 junior miner.”
OK, so that’s an awfully good clue… but we’re told there’s another shadowy bigwig on board as well…
“There’s another mega billionaire investing in this project with an even bigger stake than Sprott’s.
“Now, for reasons I won’t get in to, I can’t reveal his identity. So going forward, I’ll refer to him as Mr. X….
“He’s a billionaire with over 50 years of international business experience across various industries – like mining, forestry, and energy….
“Most impressively, he founded a startup mining operation in northern Canada in 2004. Mr. X’s leadership and expertise helped transform this project from a small promising mine into a world-class gold mine…
“Ten years later he sold the mine, valued at $4.5 billion.
“But what I’m most excited about is that, today, Mr. X owns about 35% of my favorite $3 junior miner.
“That means together, Sprott and Mr. X own more than 50% of the company…”
We also hear that there’s a catalyst coming — which is always important, since junior miners, like biotech stocks, are very news-driven:
“I’m expecting a big announcement from the company as early as this winter… and when it breaks, early investors could see gains of 1,000% or more….
“The team also informed me that resource estimates could be coming as early as this winter.
“That means they can finally and officially confirm the amount of gold they have in the ground.
“It also means that’s likely when this story goes mainstream.”
So what’s the story? Well, the mysterious “Mr. X” here is almost certainly Walter Storm, best known in mining circles for building Osisko, and the Thinkolator sez the “secret stock” teased here is the latest mining company he’s been building, including some financing from Eric Sprott: Tudor Gold (TUD on the Venture in Canada, TDRRF OTC in the US).
And the stock has been surging this year, though that mostly happened before July — the company was consolidating its projects and doing some financings this year, then got another $9.3 million from Eric Sprott in early July and reported some drilling results that got folks excited while gold was soaring.
So it’s not a brand new story, Walter Storm has been building up his portfolio of properties in the “golden triangle” in British Columbia for a few years now, but it certainly ramped up this year with the drilling results and the fundraisings that made investors pay attention… at a time when gold was rising dramatically in price.
Since then things have calmed down a little bit — when Shaw recommended the stock it was probably somewhere around C$2.50, then it soared briefly to $4+ and is now down to C$2.80. So if this is to be the next huge winner, I guess you haven’t missed anything (the little image of the headline from his newsletter indicates that it’s dated July 1… and that just so happens to be the date that the stock jumped 25% — so I guess you missed that, but otherwise the stock has been drifting down for three weeks now, since September 1 gold is down about 3% and Tudor Gold is down about 25%, a nice reminder of the accelerated leverage a widely-followed junior gold stock can have, both up and down).
Whether this is the next big mine is a big “if,” of course — we’re still talking about early stage discoveries and initial drilling intercepts, and while the area has gotten more built up and has more infrastructure (power, roads, etc.) than it did a decade ago, it’s still pretty remote. There may be news from the company before too long, as teased, their goal is to release their “maiden resource estimate” later in 2020, and they have done some metallurgical studies that they will use for making initial economic assessments at some point, but it is certainly still early days. Even if that initial resource statement comes out, as expected, it’s not going to “finally and officially confirm” the amount of gold, that’s more like the first draft of what they think they’ve found — it will probably be “resources”, not reserves (“resources” means its probably there, partially measured from initial drilling and partially inferred to assume what exists between the drill samples, “reserves” means we’re more sure it’s there, with more drilling to confirm, and we can produce it economically given reasonable expectations about costs and gold prices).
The narrative is impressive for this story — and as you can see from the share price so far this year, narrative matters a lot in these exploration projects. In addition to Sprott and Storm, they have Ken Konkin on board as their VP of project development (he’s also the geologist shown in photos with Bill Shaw in the ad), and they say he was “instrumental in the discovery of the Valley of the Kings deposit.” That’s Pretium’s (PVG) big mine, and both that mine and the huge and as-yet-undeveloped Seabridge Gold (SA, SEA.TO) deposit are next-door neighbors to Tudor’s Treaty Creek project. Having someone who knows the geology is important, of course, and it’s also a truism of exploration that “the best place to find gold is next to a gold mine.”
Thare are some junior partners involved here as well, should you wish to try to get a bit sneakier in search of a value — American Creek Resources (AMK.V, ACKRF) and Teuton Resources (TUO.V, TEUTF) each own 20% of Treaty Creek and are carried through to a production decision (meaning, as I understand the deal, that they don’t have to cough up any exploration money — they’re on the hook only for their share of mine building costs, should it get that far). Both of those stocks soared along with Tudor this year, so it’s not like they’re unknown or secret, but they are a lot smaller — they’re both in the C$100 million range in terms of market capitalization, while Tudor is around C$450 million. I like the idea of being carried to a production decision, since exploration and permitting can take forever and be very expensive, but I don’t know if American Creek or Teuton have full exposure to all of Tudor’s projects, so it could be that they end up missing out if Tudor’s exploration leads them to focus on a separate part of their properties (that’s an honest “I don’t know,” by the way, not a snarky comment — I haven’t researched the deals between those three companies).
Tudor’s Investor Presentation is available here if you’d like a little background. They may think there could be 20-30 million ounces in their project someday, but it is important to keep that in some context — Seabridge Gold, just next door, has not yet built a mine after a decade or more of drilling its KSM project, but they’ve reported proven and probable reserves of 38.8 million ounces of gold (among other stuff — lots of copper and silver, too), and Seabridge is valued at $1.7 billion right now. Reserves are a lot more valuable than resources, if you ignore the non-gold stuff and their other projects (there are a few, but they’re earlier stage), then Seabrige is valued at about $44/ounce of gold reserves. Ascribing that same per-ounce valuation to Tudor would give them a $1.1 billion valuation, but to get there they’d probably have to do a few years of drilling.
I’m not particularly expert at analyzing individual mining projects, I tend to keep most of my mining money in the royalty names that are much more diversified (and Bill Shaw likes those too, to be fair, his previous widely-circulated teaser pitch about the “#1 gold stock to buy” was about Sandstorm Gold (SAND), which has been my biggest gold position for a long time), but it’s a high profile story that is sparking some excitement. Not unlike Midas Gold (MAX.TO MDRPF) recently, or like Pretium (PVG) a decade ago, which was also attached to a high-profile mining name (Bob Quartermain, who had built Silver Standard Resources into a big winner).
So if you want some words of caution, probably the best place to look is Pretium — they discovered the Valley of the Kings zone in the area in 2009, and the stock charts go back to about 2011 for PVG — during that time they continued to build up their resource estimate and find more reserves, published economic assessments and feasibility studies, and finally actually built the mine at a pretty fast pace and poured their first gold at what they call the Brucejack mine in mid-2017. They’ve gone from a discovery to now generating more than $500 million in annual revenue in less than a decade, giving them now a $2.5 billion market cap (up from around $600 million in 2011), which is pretty remarkable and clearly a pretty solid mining success story, but they also had to raise a lot of money to get the project built, going from 800 million shares outstanding to 187 million shares today, so the growth for shareholders was far less substantial… this is what the stock price did during that time:
And here’s how that looks next to the price of gold (in orange), which was soaring at the time of the discovery but has had its ups and downs since…
So you’d have to call that disappointing, particularly if you hold out any notion that mining stocks can “build value” for you over time… but it has, at least, done far better than the average mining stock during the past decade — this is what that same chart looks like if you also toss in the GDX ETF of large gold mining companies, in red:
I was wondering, in fact, whether it might be better to just sit on your discovery and not do anything with it, waiting for the market to recognize the value and reward you with riches. That has apparently been the strategy with Tudor’s other big neighbor, Seabridge Gold, and while that certainly soared for a while in the early 2000s when the discovery was first made, the “sit and drill and wait” strategy hasn’t done anything for the stock price… this is that same chart with the addition of Seabridge Gold in green:
None of that is intended to tell you that gold stocks stink, or that they can’t make money… it’s just a reminder that even above-average companies that discover and develop huge gold mines with some success, like Pretium’s Brucejack, aren’t guaranteed to be big market beaters. Just to rub that in a little bit, here’s what gold and all those gold stocks look like compared to the S&P 500, in purple…
I like gold as a hedge against currency depreciation, and it seems more important now than ever, but remember that taking a flier on a possibly huge gold discovery is not for the weak of heart. Even if it’s backed by big-name folks, seems likely to have good exploration results and maybe an impressive resource statement coming out fairly soon.
In the short term, most gold mine explorers and developers are leveraged plays on gold and move dramatically based on news… in the long term, most gold mine developers use your money to light their cigars. Bet if you like, I certainly don’t know whether Tudor will release great news this year or not, or if they’ll end up building a mine someday… but be careful if you’re the type who tends to become a true believer.
That’s just my semi-cynical perspective, though — and when it comes to your money, it’s your thinking that matters the most. So I’ll turn it back over to you, dear reader… would you bet on Tudor announcing a great resource and surging higher in a continuing gold market this year? Think Eric Sprott and Walter Storm will soon build one of the world’s next great gold mines? Is this kind of “drilling and press releases” story too risky for your blood? Let us know with a comment below.
What happens to price of gold when Trump moves us back to a gold backed dollar?
If that happens, the unicorns flying out of my butt will distract you from whatever else is happening.
“gold backed dollar”……..I can’t stop laughing…….
Was that too glib?
“Gold standard” means the money supply is inflexible — the Fed can’t print money and the government is restrained from inventing new money to support their spending, and politicians would have to choose restraint and austerity over rewarding voters with tax cuts and spending increases. It’s not just Trump, I don’t think any politician will voluntarily choose a gold standard anywhere in the world, not unless there’s a real crisis on a Zimbabwe scale in a major economy (which is very unlikely, but not impossible).
Kassandra says “It’s [the crisis] coming,” but whoever believes her anyway?
What’s that s’posed to mean?
All I can say Travis is OMG
lmbo
Trump will have nothing to do with decision regarding the future of the Dollar. The Federal Reserve is the lender and buyer of last resort. There will be no gold-backed currency even after the reset. The US will more than likely move to a digital based fiat dollar system. In the interim, an SDR ” basket” of fiat currencies could be set up by the IMF, until it’s decided whether or not the US remains the World Reserve Currency. History tells us that his period will become a very tumultuous and turbulent time. Be prepared. Hold tangible assets.
Gold could be part of that basket currency. Russian and Chinese central banks have been big time buyers of gold in recent years. They won’t let that effort be for nothing, and the Chinese are very up front about launching their own digital currency, and it could be partially pegged to gold. The US dollar isn’t going away any time soon, but diversifying a portion of your investments into gold at this point is recommended by many, such as Warren Buffet now even. Bank of America forecasts $3000 gold, so the balance sheet of gold producers (not explorers like Tudor) are looking mighty fine compared to much of the rest of the stock market, and you don’t need to count on this or that shaped economic recovery.
its gonna go way up
ATCC has been doing phenomenal, Formerly Gryphon resources.
on the gold front….what exactly happened between Sandstorm and Royal Gold ? and its cross impact or thoughts…..seemed negative to Sandstorm and caused it to be pulled from trading.
Apparently they’ve been negotiating with Hindustan Zinc on a big silver streaming deal, and Royal Gold jumped the gun and let the press release fly before the deal was done. I have no idea whether or not the deal will go through, it would be a little challenging for Sandstorm to swallow but the terms sound somewhat appealing as this Seeking Alpha contributor describes them.
I don’t see why the failure of this deal this would be big news or impact the share price, so the big move today was probably an overreaction — but with gold down 3% at one point today it’s not a surprise to see the gold royalty companies (and miners) falling hard. It might actually hurt Sandstorm if the deal does go through as described, at least in the short term, because they’d have to raise money if they’re really going to pony up $450 million for their share of the deal. I don’t know anything other than what I saw reported secondhand in that Seeking Alpha post, however, and I’m still happy with Royal Gold and Sandstorm Gold being my major gold positions.
I’ve been wanting to microdose a little more on both those companies for a while…
So i grabbed a little SAND today!
I have lost large sums of money on ‘hot’ stories…… now I invest in good companies in rising sectors based on chart patterns, in other words I do technical trading. I subscribe to a stock picking newsletter for this & in 10 months I’m up substantially. Right now most of my money is in precious metals.
Do you mind sharing which stock picking newsletter you subscribe to, how their track record has been for you, and why you like their style of investing?
I tried that 11 years ago. Extremely risky. Ewer heard of ” by way shootings”?
I am somewhat in the same boat. I stopped using reddit and started reading about stocks with all the time I got back. I joined the motley fool about a year ago and my portfolio has done tremendously well this last year.
I dad been dabbleing in stocks for years and basically breaking even. I really appreciate the MF advice.
I do think you need to be cautious though. This market is nuts and I really appreciate Travis’s words of caution. It seems just about everything is going up and it is easy to feel like you know everything and are an investing guru and start doubling down.
It’s nice to hear a positive comment about Motley Fool. I joined MF in 2016, and all the stocks which I’ve bought as a result of their recommendation have done very well, i.e. Shopify, Alphabet, Facebook, Twilio, etc…. and this year, Zoom.
I ignored their zoom recommendation… I couldn’t see how it was much different than many other such services.
MF has had some good stock recommendations…
I am thinking about getting the Motley Fool subscription, but they have several subscription options, which one did you get?, thank you.
@john. Could you share more details on the newsletter you subscribe to?
Sounds good…
GLDLF is a new gold Royalty stock and moving quickly…Love the royalty.$2.35 share.
That’s been a highly-promotional story stock for years now, so it might soar… but do be careful — they haven’t built any mines yet in ten years, and none of their royalties are likely to be producing cash flow within at least the next few years (and I’d take the “over” on that, though perhaps just because I’m a little cynical after seeing their work up close from 2012-2017 or so).
You wouldn’t call GoldMining Inc a Royalty company exactly? It’s described as a Junior Late Stage Developer. A Canada-based mineral exploration company. It is focused on the acquisition, exploration and development of projects in Colombia, the United States, Brazil, Canada and other regions of the Americas. However it does have a Royalty subsidiary company Gold Royalty Corp, which I’m not sure trades on it’s own? But things change. Good investment though headed by the clever Amir Adnani.
Travis, this is indeed Tudor Gold, which they recommend up to $2.50 Canadian per share. Right as usual
Travis, on another note I posted a follow up question about Charlotte’s web here: https://www.stockgumshoe.com/reviews/motley-fool-ipo-trailblazers/whats-tom-gardners-first-ever-marijuana-stock-recommendation/
I would be curious to know how you feel about this stock today?
Have not looked at it since I stopped out during the FDA conflicts last year. Will try to take another look soon.
I belong to the national institute of cannabis investors and they just recently told us to sell all of your Charlottes Webb at market. I sold all of mine and then I repurchased a smaller amount then I sold at $3.
Thanks for the insight!
I got out of Marijuana stocks awhile back…too slow for me. Have done much better with fastly, nvda, crm….just one dog recently not mentioned.
Great Sleuthing
As i read along, my thoughts were of USAS which is trading in the same range as TDRRF. USAS has gone as high as $3.85 and then fallen recently to $2.12 and now back to to $3.00. I do own USAS to be clear, just wanted to know if the thinkolater might had come up with that stock also as a possible?
BUY USA/USAS
Travis, your is a balanced view IMO. I’ve seen a lot of exploration and development mineral companies go Bk over the years. Its one thing to tout a narrative. Its quite another to actually mine ore, refine it, and sell thaat for a profit. The industry is very competitive with spot prices that are routinely croaked and pimped by financial intermediaries. It is not a place for the faint of heart.
i’ve lost $ in the past on these types of junior mining plays so no more for me. it is purely speculative imo. what i didn’t realize however, Travis, is what your analysis so clearly points out…even if all goes very well and they start producing gold, the results do not live up to the hype. (pretium). with so many good alternatives to invest in, I am staying away from this one!
Following Eric Sprott is not without risk. Many of his investments
are not buy and hold investments. He can exit or substantially reduce his
stake ( for a neat little profit ) if he finds a better opportunity elsewhere.
If someone like Ross Beatty was the billionaire investor betting on Tudor
Gold, it would be a different matter.
Ya, I was following Midas, until I heard of this,
But I’m glad to see your work! Playfulhair
I made 150% on Tudor. Like pure gold Ely royalty. Looking for $1830 on gold
Old Mark Twain definition of a gold mine: “A hole in the ground with a lisr sitting on top.”.
He wasn’t as fortune in his investments as he was in his writing career.
He was also partial to inventors who were trying to invent perpetual motion machines.
The thing with any junior mining investment is that you have to know so much more about the company than most people are willing to spend the time and effort to find out. I go to mining conferences and meet the people. I chart out when private placement shares will be free to trade so I know where the dips will be (you can sell a week before and re-buy a week after for a quick profit). I track outstanding warrants, likely dates for drill/sample results to be announced and a lot of other information which will impact the share price. I subscribe to the news email for every company that I own. It’s a lot of effort and until this year my typical return has been 18% (this year 250%). When a mining stock doubles, I sell half. When I think it’s “run up” has ended, I sell at least half again. The Treaty Creek project has been one of my best returns for the year (owning all 3 companies, favoring American Creek and Teuton for less risk but recognizing that Tudor has a great team). There is likely more than one big deposit on this land and it is close to the road. Seabridge has similar geology but has to build an expensive tunnel under a glacier (and go through the Treaty Creek property) to get to the road (and services). Pretium has uneven grade . Over the life of the mine it should do well but the production will vary .
Travis, if you go further back in the history between American Creek and Teuton (starting around 2012-03-01), you will find some ugliness and a court case which American Creek eventually won their buy in to the property for their work on the property. It is alleged that Teuton exhibited unethical behavior on the internet. Eventually American Creek prevailed (see American Creek Wins Decisively At BC Court of Appeal – Title to Treaty Creek Confirmed (2015-04-27). Personally, I read their press releases with skepticism.
Good to know, thanks.
As of late, we’ve been hearing a lot about Gold. For me it’s been strictly a speculation. Buying into it while it’s up over $2,000 an once, is insanity. While these so-called experts were touting it, I began selling it. Having bought it cheap months before. Sometimes years before. My favorite speculation is Vista Gold(VGZ). But only when it sells for less than .50 cents. Sold it recently for over $1.20. Another is the MIDSX fund, but only when it’s down well under a dollar. In silver, my watch is AG. But only should it ever get below $5. That was big, but only once. Over TIME, with discipline, going in and out of these speculations in a timely manner, can be insanely profitable. A far as SAND goes and for that matter other actual Gold mining operations, picking any one can be a crap shoot. I never really found as much leverage to be had. Which is why I prefer the Midas Fund. They seem to know what they’re doing and cover a lot more bases.
I own just two gold stocks- SAND. and SII. I Purchased 78,000 Shares of SAND and 8700 shares of SII. on reading about the companies on Stock gumshoe. I liked the musings of the boss man Nolan having worked the rafters at Franco Nevada. I paid $2.02 per share in January 1914.. As regards SII I purchased the 8700 shares at $15.77 . I sold half of SAND 39000 @ 9..17 and half of SII @ $42.35 and to be brutally honest I could not care what the price of gold goes to. I purchased these two stocks because I have little faith in the value of “ dishonest” money.I suffered mightily holding SAND for over 6 years with no dividend and it constituted a major part of my portfolio. Very foolish but there are the dumb things that can either go terribly wrong or result in good fortune. This is just one. As my daddy used to say – read, research and sometimes you make your own luck. . Mark Twain I read as a young man( now 79) I guess I missed his quote on investing in goldmines.
Thank you Mr. Gumshoe.
World base price of gold may be raised to off-set debt of countries, including the USA???!!!
Why would that help? The dollar is not backed by gold, neither literally nor even symbolically at this point. If there’s a new Bretton Woods agreement that fixes currencies to gold, which seems laughably unlikely for political reasons, I’m sure they would start with something near what reality is today (like they did in Bretton Woods 1)— not set it artificially to provide a theoretical windfall for gold holders.