This is a teaser pitch that I covered for the Irregulars a few months ago, but several readers have asked me about it over the past day or two, so perhaps it’s making the rounds again — and I thought I’d share that teaser solution and my thoughts with the rest of the gang today.
And no, it’s not just because I’m otherwise engaged and don’t have a new teaser solution for you today — though that’s also true, I’ll be at the Delivering Alpha conference all day today, hopefully picking up some wisdom from billionaires. Stranger things have happened, right?
Anyway, Curzio’s been pitching this as a “secret IPO” gold stock, and one that brings together two mining industry veterans who turned their last discovery into a huge winner. Curzio started hinting at this pick back in early June, and then rolled out a real ad promo for his Curzio Venture Opportunities newsletter based on this teaser pick a few weeks later.
I’ve mostly copied over the comments below from my older articles, though there’s a bit of updating here and there (and Curzio has thrown in a few updates in the latest version of the ad, as well — though the news from the company so far has been pretty limited).
Here’s a little taste from the recent ad:
“An Invitation that Could Change Your Life…
“A Rare Opportunity to Invest in a Brand-New Gold Stock’s “Secret IPO”
“The last time these men got together, they built a company that’s since grown over 3,200%.
“Now, you have the chance to get in on the ground floor of their latest venture….
“This is your chance to invest alongside a handful of mining experts as a new gold company is built from the ground up…Are you getting our free Daily Update
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“Based on a prospect that, according to comprehensive geologic analysis, could easily be worth billions of dollars. “
He talks up the people who are involved in the company and their past successes, including one that Curzio himself recommended sometime back in late 2011 or early 2012, and he shows a chart of the huge success of that one with a 324% gain from trough to peak over about a four month period… and that perfectly confirms that, yes, that past stock recommendation was Gold Standard Ventures (GSV), as suspected.
And Curzio talks up the geologist who worked both at Gold Standard and for this new company, calling him “King Midas” ….
“The Man They Call “King Midas”
“You see, this man told me he teamed up with one of – if not the – most experienced… most accomplished… most celebrated geologist in the world today.
“As you might imagine, he’s not a promoter.
“He’d much rather be drilling holes than making phone calls….
“He’s actually been described that way in print.
“King Midas is what his peers call him.
“And it’s no wonder…
“For over thirty years, he’s been exploring for gold in Northern Nevada – the epicenter of gold production in America.
“Of the approximately 300 million ounces discovered there, King Midas has personally had a hand in locating more than 50 million of them.”
I don’t know where Dave Mathewson was specifically referred to as “King Midas” in print, but I wouldn’t be surprised if that moniker was applied to him at some point — mining folks, after all, love hyperbole almost as much as newsletter salesmen. Mathewson is the VP of exploration for US Gold, and was the geologist behind the discoveries at Gold Standard Ventures as well as several other large mines in the area for Newmont in decades past. I think we can all stipulate that he’s at least as good at finding large gold deposits in Nevada as anyone else — though that, of course, does not mean he finds something every time he looks.
More from Curzio:
“Right now, you have the chance to invest in what King Midas calls ‘Project R on steroids.’
“I’ve codenamed it DISTRICT X.
“And here’s why, if you get in now, DISTRICT X could make you a fortune…”
So yes, that “Project R” is the Railroad Project that Gold Standard is developing, and the pitch is really that this is the next similar project from Mathewson — they spent years putting together the claims that made up the Railroad Project, dealing with all the different land and claim owners in the area and finally doing their exploration and discovery. Gold Standard has made a half dozen or so discoveries on their properties, and have kept buying up more land, and now they’re more aggressively drilling to further expand their resources… I have no idea how long it will be before they think about actually building a mine, or partnering with a big player who needs reserves, but it has taken them six or seven years of exploration (including some lull years when gold was crashing) to get to this point.
And, for final confirmation (as if that weren’t enough), we get this:
“… the management team was trying hard to keep this under wraps as much as possible.
“For one, instead of a traditional IPO – which would bring major industry scrutiny and a whole lot of press – the company decided to do what I term a ‘Secret IPO.’
“They didn’t go to an underwriter.
“Instead, they merged with a company already listed on a major exchange.
“In fact, for several weeks after it went public, if you searched Yahoo! Finance for the company’s name, you’d never find it.
“It was trading under the symbol of an IT company that essentially turned into a shell corporation.”
So yes, quite clearly still talking up Dataram, which is the shell into which US Gold merged — the company traded at the old DRAM ticker for a while, but now the name change is official and it’s now U.S. Gold (USAU). There is still technically an old Dataram business hiding in there, and a tiny possibility that they might sell or spin it off someday, but I wouldn’t hold my breath — this is now a gold explorer, pure and simple.
So… is there any new big news about U.S. Gold or that Nevada Keystone project? Not really — they have released a bit more information about their “scout” drilling, and plans for their 2017 drilling that is going to start actually trying to find and define whatever the gold resource is in the area, and they’ve staked additional claims but they’re still probably a ways from an actual “discovery” announcement or anything dramatic like that. We’re still talking about a very, very early stage project.
This is what Mathewson said in the most recent press release about their 2017 plans and the staking of their additional claims this year:
“My approach to exploration has always been a process-driven, model-based methodology. This is the same approach we used at Gold Standard Ventures to make the initial discoveries on the Railroad project. Keystone represents a tremendous opportunity, as the gold deposit system indicators, permissive rock formations, geological structural setting, and Nevada location present an ideal setting for a potential discovery and mining exploitation. With these additional claims, I am confident our existing land package now effectively controls every part of the visible system and prospective extensions.”
Will it be a winner? I don’t know with any level of certainty — they talk about “visual systems” and geologic trends, and I see the obvious possibilities given the neighborhood they’re exploring, and their obvious confidence in their prospects, but I have no geologic expertise or insight into the odds of success. Everything really depends on what they find, and, to a lesser extent, on what the price of gold is when they find it.
I think it’s an above-average speculation, given Mathewson’s track record of discovery in the area, but there is ample room for a falling share price, particularly if they have to issue new shares to fund exploration but they haven’t had an exciting drill hole with a big gold intercept yet, and there’s also a real possibility that the stock could languish for years if the exploration is slow or uneventful or the gold price falters. That’s just the nature of exploration-stage investing — sometimes it takes a long time, and sometimes (most of the time, if you’re talking averages), it’s unsuccessful.
If U.S. Gold begins to get more promotional, sending out lots of press releases and trying to get the attention of other newsletter pundits, that will probably be a sign that they’re thinking about raising money and want to get the price up so they can raise cash on better terms — but so far they’re still being relatively quiet (for a junior mining stock). That next equity raise or a bad couple of drill results are probably the biggest risks, given that permitting isn’t likely to be an issue in this part of Nevada, but with drilling funded through this year they can wait and do their next equity raise after they have some news if they want to… we’ll see. Curzio actually noted in his ad pitch that he thinks it’s “likely” that he’ll be able to provide a private placement opportunity in this “secret” stock, so that’s perhaps an indication that he has at least talked to the management team about raising money.
I own a few shares of USAU today, which is not doing my portfolio any favors at the moment (my position is down roughly 20%, and this is roughly a 0.5% position in my equity portfolio). That’s about as big a position as I’d want for something that’s completely exploratory like this, but it’s a fun story and could be a nice winner if they are as successful with U.S. Gold as they were with their previous Gold Standard Ventures. The market cap is below $30 million… a little smaller than Gold Standard was when Curzio recommended them five or six years ago. When Gold Standard made their initial discovery it shot up to a $200 million valuation, then fell to $50-60 million for a couple years when gold was in the doldrums and they were in the long slog of defining resources, and after last year’s jump in the gold price the market cap is now above $400 million (and peaked around $600 million). That’s obviously not something we can count on for US Gold Corp., but it’s a reasonable daydream to have if they have a successful drilling program this year and next.
U.S. Gold Corp did in fact release a little bit of news a couple weeks ago… though it certainly wasn’t definitive. This is what I wrote in the Friday File for my latest updated on the stock on September 1:
The only gold stock that actually caught my eye with meaningful news this week was U.S. Gold Corp (USAU) — they released a drilling update that doesn’t particularly change the story, good or bad, but it provided enough confidence to help the stock a little bit.
This is a company driven by VP and Head of Exploration Dave Mathewson, who discovered some of the large Nevada deposits that are now substantial mines in the Carlin Trend and was the primary guy behind finding the large gold deposits for Gold Standard Ventures (GSV), and they’ve gathered a huge prospective area to explore for other “giant” Carlin trend-type deposits.
The key asset is the Keystone area, and they’re still in the very early stages of that exploration — this is a bet on a geologist, which means the chances of failure are very, very high, they have not yet found anything headline-worthy (other than promising geological structures, anomalous gold, and abundant reason to keep drilling). This first announcement about their scout drilling gives some optimism that the area is indeed similar to other large mines nearby, but the Carlin deposits are generally quite low grade and it will take a long time to discover where the highest-grade parts of the Keystone deposit might be… if, indeed, there are any parts that are high-grade enough to make a mine worthwhile.
So far they’ve found several huge areas that are “anomalous” for gold, meaning that there’s more than 10 parts per billion of gold, but that’s not enough to be a “discovery,” really, they’re still trying to understand the geology and figure out where to do their real exploratory drilling. The most promising-sounding result of this initial scout drilling was a 700-foot thick zone of 0.731 ppm gold, which is also not really a “discovery” but is perhaps promising as they plan more drilling (ppm is the same as grams/tonne, at least for our purposes, so we can think of that as 0.731 grams/tonne — if the whole deposit was of that richness, it probably wouldn’t be worth mining unless it’s otherwise exceptional in some way, generally the lowest-grade mines are around 1ppm or 1.0 grams/tonne, and higher is obviously better).
So, no real news other than that they’ve found areas where it’s worth continuing to drill, and they’re continuing to explore the very large land area and map out the geology. This one will require a lot of patience, and, as I noted, could be a complete failure — no one knows for sure whether there’s a large mine waiting to be found in this space, but Dave Mathewson has done it before and likes the odds… so I’ll just keep this one on the back burner and see what happens. They’re doing another drilling program to follow up on this initial data over the next few months, so it’s possible we’ll see some more results before the end of the year.
There was also a piece on them from Gurufocus that might provide some additional perspective.
And that’s about all I’ve got for you today — still an interesting company, still all about whether or not they end up having exploration success, and still not likely to have really definitive news on that front anytime soon… though you usually can’t predict the timing of that key find (or failure) with any real precision.
I’ll keep holding with my money, with a mind to being patient for a couple years as their exploration progresses… but when it comes to your portfolio, it’s your money on the line — so what do you think? Interested in a wager on exploration given what you know about Dave Mathewson and the neighborhood where they’re drilling? Prefer to place your gold chips on a different play? Let us know with a comment below.
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