I haven’t looked at a teaser pitch from Frank Curzio in a long time, and I’ve actually mostly lost interest in his podcast over the past few months, too, though I’ve enjoyed that for years (I think that was probably mostly because the rants kicked up a notch with the election silly season, so I’m sure I’ll give it another try eventually), but we did have some reader questions about his latest gold pitch… and gold is falling this week, so maybe that will make for an interesting opportunity.
The ad is for his Curzio Venture Opportunities letter ($3,000/yr, no refunds), which is the small-cap “upgrade” letter from Curzio Research, and it’s a tease about a junior miner. So let’s get into the clues, shall we?
This is the lead in, including a couple clues:
“I want to talk to you today about a tremendous opportunity we have in the junior mining space.
“I’ve been tracking this company for a while.
“One of the cofounders is actually a good friend of mine.
“And I’ve become friends with all of its key people…
“Including a board member who once served as Secretary of the Interior….
“And is now lobbying on behalf of this company to start production on…
“The most resource-dense piece of land I’ve ever seen in person.”
Oh, man, and that sounds awfully familiar already… but let’s keep going, more hints?
Well, Frank does say that he’s personally invested in the company, and that he sees potential 1,000% gains, but the urgency of the pitch is that he expects some news…
“I expect a critical report to come out very soon that could send this stock soaring.
“No this is not insider stuff… its just common sense based on data that’s already public.
“But most people don’t know about it.”
And then we get some clues about the people involved in the company, like some guy referred to as “LN”…
“I first met LN on a fishing trip with colleagues in 2011.
“He had started a gold company and thought my team and I would like to have a look….
“The day I recommended the stock it was trading at 70 cents a share.
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“The company started reporting a slew of favorable test results on their flagship prospect.
“Less than four months after I recommended the stock, it was up 324%.”
And a second more recent addition to the team…
“Then I learned they recently hired resource legend GB as the new President and CEO.
“You have to understand…
“GB was a mine developer for the premier mining companies in the world…
“Including Rio Tinto, Anglo American, Kinross Gold, and Barrick.
“In fact, he developed and managed the biggest gold project in North America.
“This mine produced over 70 million ounces of gold.”
And then a few hints about the company, with a bunch of other famous initials thrown in…
“This company’s market cap is under $150 million.
“20% of its stock is owned by insiders, which means they have big stake in the game.
“And the insiders are a “who’s who” of the mining world.
“Along with the people I just mentioned, there’s RS, another top guy at the firm.
“He was a member of the board of governors for the U.S. National Mining Hall of Fame…
“And the board of directors of the Canadian Mining Hall of Fame.
“There’s also Executive Chairman EK—who founded several international investment banking firms—with a focus on miners.”
And what’s that news that Curzio sees coming? He drops some hints…
“… this asset will be re-rated from a small, speculative exploration project…
“Into a high-grade gold mine that could start producing over 100k ounces of gold in less than four years….
“Three years ago, Mine Development Associates—top geologic services firm for the mining industry—provided a preliminary report of the potential value of this Wyoming property.
“Based on drill results at the time… and a gold price of around $1,300…
“They estimated the value of this property at just under $180 million.
“That’s more than DOUBLE the current market cap of the company…”
And the company also apparently has a more recent internal summary of their upgraded economic prospects, at higher share prices, and Curzio says that gives the mine a Net Present Value (NPV) at a 5% discount rate of $321.6 million, assuming a $1,600 gold and $2.80 copper… so Curzio makes his own forecast to get us to that 1,000% return number he teased:
“My own calculations put the total value north of $600 million.
“That means the company… based just on this property alone…
“Could easily be worth 10 times its current market cap.”
That new report that Frank is expecting is the pre-feasibility study, which is basically the final economic assessment a mining company makes before it gets to the final feasibility study that they take to the bankers to try to borrow the cash they’ll need to actually build the mine. Those other numbers, the total project value estimates, would have come out of the Preliminary Economic Assessment, which is an earlier step and can be based on measured and inferred resources (the PEA is really just a “does this project have a chance of making economic sense” assessment), while later and more precise pre-feasibility and feasibility studies will have to be based on proven and probable reserves, and will also have to take into effect other economic factors (cost of building a worker’s village, cleanup, variable commodity prices, etc. etc… here the bankers want to have a lot more specifics about how the mine will be profitable and what the risk factors are).
And they reported “incredible” drilling results last month, which Frank says also helped send the share price higher, so perhaps that will help to fuel the possible numbers that might come out of this pre-feasibility report.
What, then, is our stock here? One final clue…
“I haven’t even told you about their huge gold property in Nevada…
“Which alone, could be worth at least the current market cap of the entire company.
“I’m valuing that project at zero…
“Even though its in close proximity to some of the biggest producing gold mines in North America.”
Ah, so there we get to the confirmation… this is our old friend U.S. Gold Corp (USAU), which happens to be a company that I learned about years ago from a different Curzio teaser, and decided to take a gamble on myself because there seemed a decent chance that they might find something big on their Nevada property. I overpaid, sadly, and it ended up being a stock I jettisoned for a loss about six months ago. I has done well since then, naturally enough (I can’t complain too much, I used that money to buy Lemonade (LMND) call options that soared, but I do dislike selling), so what’s going on?
Well, I always like to include some “cool your jets” info, since I think that helps to offset some of the excitement that a good promo spiel can cause to percolate up into our lizard brains… this is the chart for USAU since Curzio first pitched it, when their Nevada property was the speculative exploration appeal and they were just getting listed through a reverse takeover (that’s USAU in blue, gold itself in red, and the average large mining stock (GDX ETF) in orange):
And that first gold stock from this same guy that Frank Curzio talks up, the one he bought at 70 cents? That was Gold Standard Ventures, and he teased that one at the time too — it did have some big runs along the way when folks were excited about them finding the next huge deposit in Nevada, and they do have a project that they’re in permitting with right now and might reach a decision this year, but, as you can see, ten years later you would have had a couple opportunities for trading profits but no real life-changing gains as an investor. I have not followed the story at Gold Standard in recent years, but one clear takeaway is that developing a mine can be difficult, expensive and slow. Here’s what the shares have done since Curzio pitched it while at Stansberry:
That’s not a dig at Frank specifically, just a reminder that these companies share some history, and exploration-to-development mining stocks are not guaranteed easy wins — there are a lot of bumps along the way, some higher with exciting drill results or releases and some lower with bad news or delays or falling gold prices.
Early stage explorers and prospectors are money vacuums (or bonfires, if you want a less charitable interpretation), so the share count for U.S. Gold has also climbed more than 600% in those almost four years — to pay for the drilling and the exploration work, they have to issue shares, and that has accelerated somewhat with the lower share price, the share count has more than doubled in the last year and now stands at about 6.8 million after another $9.6 million financing on Monday (if you’re wondering why this is priced around $10-12 and isn’t trading for pennies like most junior miners, it’s because they did a 10:1 share consolidation early last year). .
None of that matters in assessing the future, though — from here, we want to know what they’re doing, what it might be worth, and whether we want to place a bet on that possible future. So how are they positioned now?
Well, they did shake up the management of the company — George Bee (GB) came on board last summer as part of their acquisition of Northern Panther (which also brought in some cash), and has led them through beginning to get this pre-feasibility study completed at CK Gold. The Nevada project that was (naively, I confess in retrospect) the primary appeal for me is still there, as is another smaller property, but it hasn’t made much progress (and Dave Mathewson, the headliner “exploration guy” there who was the driving force behind the prospecting in Nevada, seems to have left with some bad blood in mid-2019). The focus now is on CK Gold as their flagship project in Wyoming, which as I recall was originally seen, back when they called it Copper King, as a much smaller potential project that they might be able to advance on the side to get a little cash flowing while they waited to see if they found an elephant in Nevada. Now it’s the headliner, it has grown in scope as they’ve drilled, and that’s the project that has a historic PEA of about $180 million and that Curzio thinks might be worth as much as $600 million, with a pre-feasibility study expected soon.
Here’s what Bee says about it in his shareholder letter from last month:
“2021 is expected to be a busy year for us in Wyoming, and I would advise you to continue watching for more announcements of our drill results and project updates. Although the entire industry is at the mercy of the assay labs, which have suffered delays due to COVID-19 protocols and limited staffing, we will continue to release future results as they are received and analyzed. We believe we are currently on target to have the PFS completed by the end of the first half of 2021. This updated technical report has the potential to re-rate the project and bring more institutional awareness to our company. I am convinced there is still tremendous potential to unlock for our shareholders at the CK Gold Project.”
And yes, all of those details hinted at by Curzio are repeated in the company’s latest investor presentation, including the “internal update of the potential economics” that gets them to a NPV (5% discount) of $321.6 million.
I have no idea idea when they will release their pre-feasibility study, though they still say the priority is getting it done by June, and it seems at least possible that this latest study, with some solid drilling results, could include substantially more reserves than the last update and a better bottom-line number — whether it also includes some bad news (higher costs, operating challenges, longer timeline, etc.), I don’t know, but there’s nothing particularly obvious on that front that I can see. They think they’ll be ready to begin permitting by the Fall, so I guess it’s probably theoretically possible to have this mine operating in four years… though it’s always best to assume that mining CEOs are being pathologically optimistic.
The company in some ways looks better now than it did when I bought it, the market cap is up to about $80 million but they do at least now have some cash for this year’s drilling and perhaps early permitting work, and there also remains a big chunk of warrants on the books from all their financings (I know Frank Curzio has talked about buying into projects that have high-potential long-term warrants as well, so maybe he or his subscribers participated in the January private placement financing which included a warrant, I don’t know — he does say he is invested in the company). I’m coming in with quite a bit of skepticism about the past promises of the management team, though they’ve now shaken that team up a bit and have a new leader, so perhaps you’ll be able to wrap your head around it with a little more excitement than I have.
If they do end up getting the permitting and financing for CK Gold over the next couple years, and if gold and copper stay near their current prices, it sounds pretty likely that the economics will make sense… but it’ll be quite a while before we know any of that for sure, so the price over the next year or two is likely to be driven by whether or not they are able to get investors excited about their prospects again. And, perhaps, by the attention that they get when they release their pre-feasibility study. The price driver in the background, of course, will be gold prices — if gold takes a big haircut, it will be slower and tougher to get the project financed and built… if gold soars to new records, investor excitement will very likely follow.
That’s my take, anyway, and I have a little baggage with this one so you might think quite differently — if you’ve got a take on U.S. Gold, do pop in with a friendly little comment below and share it with us… reason for excitement? Red flags? Thanks for reading!