Frank Curzio has one of those “limited time only” opportunities now for a little gold stock, and he has some pretty outlandish returns to entice us… so let’s sort through his clues and see what he’s talking about.
The pitch is for his Curzio Venture Opportunities newsletter, which is the back-end “upgrade” newsletter for Curzio (those higher-priced letters are where most of the profit margin comes from for most newsletter publishers) — in this case, it’s an offer for one month of “trial” access for $197 that rolls over to the regular $3,500 annual deal (no refunds) if you don’t cancel during that month. This letter is designed to focus mostly on small cap investments and private placements, which is common of the higher-end letters (and is one reason why the more expensive letters don’t always have better returns than the “regular” newsletters — they generally recommend substantially riskier investments).
Here’s Curzio’s enticement at the top of the ad:
“I’ve only seen this set-up a few times in my 20-plus-year career… leading to gains of 2,700% on Nova… 3,800% on Randgold… 8,400% on Seabridge…
“Now my system indicates 3,166% gains starting within the next 30 days… And as a loyal Curzio subscriber, you can get in before the blastoff…”
And the first few paragraphs include quite a few clues:
“For the first time ever, I am letting you in on a unique deal that could literally change your life for the better.
“It involves a tiny mining company…
“A company that has accumulated 24.5 million ounces of gold resources… for less than $5 an ounce…
“And now, the perfect catalyst has emerged.”
OK, so those of you who’ve been planting your butts in the seats here at Gumshoe Lecture Hall for more than a few months might already know who he’s talking about… don’t ruin it for the rest of the class, we’ll get there!
What’s that “perfect catalyst?” Here’s some more from Curzio:
“I expect this company to make a massive announcement.
“It will happen within the next 30 days, I believe.
“And it will involve the ‘surprise’ acquisition of more than 4 MILLION additional ounces of gold resources… for pennies on the dollar. “
And then we get into stuff that sounds really, really familiar…
“Not too long ago, I received an invitation to a closed-door meeting at the Plaza Hotel on 5th Avenue in New York.
“In attendance were some of the richest and most powerful men in the world…
Ambassadors, foreign ministers, a consul-general, senators from both the U.S. and abroad…
“All rubbing elbows with private equity fund presidents, merchant bank chairmen, executives of the world’s largest commercial banks… even a few Ivy League professors.
“We had gathered there for an exclusive, invitation-only summit.
“On tap for discussion was the fate of several gold-mining projects in South America.”
OK, so that sounds like a fantastic line… “invitation to a closed-door meeting at the Plaza Hotel” … fantastic enough that he has to keep re-using it in his marketing, because that line was also the attention-getter for his teaser pitch about this same stock back in June of 2014, when he was still helming Stansberry’s Phase 1 Investor newsletter (also $3,500 a year back then, coincidentally enough). So the meeting was a while ago, and the stock was quite new then — but yes, this is still a pitch about Goldmining (GOLD.V in Canada, GLDLF OTC in the US), the former Brazil Resources, a “prospect aggregator” run by Amir Adnani.
And no, I won’t make you sit through the rest of the ad, but will try to update things about Goldmining briefly for you. You can check out Curzio’s ad here if you want his full spiel.
Goldmining is one of a few companies that try to either “ride the cycle” or “add some financial discipline” in junior mining (depending on who you ask). They buy up small(ish) and undeveloped assets from companies that can’t afford to develop them, spending some minimum amount of cash making the assets more attractive (exploration and marketing), and then try to partner those deposits or mines out to deep-pocketed miners for development at times when the gold price is moving up and miners are desperate to replenish their reserves. First Mining Finance (FF.TO, FFMGF) is a similar type of company, for example, though they call themselves a “mineral bank.” (I’ve invested in both First Mining and Goldmining in the past but took profits on most of those positions, currently I hold a small position in First Mining in my Real Money Portfolio.)
And these companies are looking for huge long-term gains without risking financial catastrophe, so they generally have pretty clean balance sheets, avoid using all their cash, and use stock to make their acquisitions. Which means they have to have some reason for investors to believe that a potential gold mine in their hands is worth more than it was in the hands of the little junior mining company they acquired it from. That’s how this works on a financial level — if investors can be convinced to pay $20 per ounce of “gold resources” in the hands of Goldmining, for example, and they find a company, Junior Miner X, that owns a resource currently valued by the market at $8 per ounce of “resources”, then Goldmining can use their stock, pay a 25% premium, and still end up increasing its share price.
The biggest risk, beyond a collapse in the gold market, is that these kinds of aggregators — and both First Mining Finance and Goldmining do the same thing, more or less — rely on their stock being “overvalued” compared to the junior miners they’re buying or dealing with… which means they rely on having a “name” in the industry (like Keith Neumeyer at First Mining, who is an established mine builder and therefore gets followed closely, or Amir Adnani here with Goldmining, who has incredible newsletter and resource industry contacts and is able to promote his story very effectively).
That makes the stocks very levered to gold prices, because when investor enthusiasm heats up these are natural targets of that enthusiasm — large resource bases, known leaders, lots of existing promotional material out there in the world to reinforce the excitement that investors feel when gold rises 10%, etc. That’s what happened in the first half of 2016, when gold rose 25% in fairly quick order and gold stocks went nuts — Goldmining was one of the nuttiest, jumping from about 45 cents to well over $3 (it’s back around C$1.50 now), so gold at the peak in 2016 was up about 25% on the year, and Goldmining stock was up about 600%.
The risk in these names is that, as you might imagine, the flip side is true as well — if you go from the peak for gold in early July, gold prices are down about 7% and GOLD.V shares are down 50%. You need to have a stomach for volatility to hold these kinds of stocks through both up and down cycles.
Over the past couple years, though, it does seem that the leverage has grown more dramatic for Brazil Resources/Goldmining — perhaps that’s because of the marketing prowess, perhaps it’s just because the company has grown in size through several more acquisitions so now has a substantially higher “ounces” total when they talk up their resources. The market cap has exploded higher as more shares have been added to the tally through their acquisitions, so back in early 2014 when they were talking up the company’s prospects following their acquisition of Brazil Gold, they had roughly 4 million ounces of indicated and inferred resources and about 68 million shares outstanding.
Today, after the recently announced acquisition of the Crucero Project in Peru for 3.5 million shares, they have about 21 million ounces of gold in the indicated and inferred categories (plus a few properties that don’t have any resources booked yet), and they have roughly 132 million shares outstanding.
So on a per-share basis, there’s more gold now than there was in the beginning, and that resource base should expand as they add resource estimates or do additional drilling or analysis on their existing projects, and as they make more acquisitions. But this is not just a pile of gold, or a gigantic mine somewhere that will be either a go or no go decision, this is a dozen different projects, mostly fairly small, spread around North and South America, and none of them have reserves yet or prefeasibility studies, or anything like that which would make you, as an outside, convinced that they would make economically sensible investments for folks who want to build gold mines.
Which means there’s certainly a leap of faith required — in order for Goldmining to make sense as an investment, you need either a resurgence of “animal spirits” to increase the value of gold stocks, or you need majors to become interested in developing these projects and to start optioning them or buying them from Goldmining to keep that arbitrage going (buy it for $8 per ounce in resources, use it to lift value of stock at a $20/ounce valuation, then sell it to a developer for $50/ounce after spending a little bit to improve the project).
I don’t know whether it will work out, the biggest determinant is, of course, gold prices — but whenever I get too excited about what might happen with this big resource base I take a second look at one of Goldmining’s larger recent acquisitions, the Whistler project in Alaska. That’s one of the biggest contributors to their “resources” number, with about 6.5 million ounces of indicated and inferred gold resources (more if you use “gold equivalent” numbers, because there’s quite a bit of copper and silver). That project was acquired from Kiska Metals when gold prices were substantially lower, a little over two years ago, for 3.5 million shares of Goldmining (at the time, GOLD.V was trading around 50 cents, so that was less than C$2 million for the project).
There are two ways to think about that: Either Goldmining is an incredibly brilliant company that makes fantastic acquisitions, and Kiska Metals didn’t know what they had on their hands in the Whistler project… or there are good reasons that other folks didn’t want Whistler and were willing to let that deal pass at $2 million for a possible district-size project with millions of ounces in likely gold resources. Mining companies often make mistakes, and resources get wildly mispriced during times when financing is hard to come by, or when commodity prices are falling (gold was looking weak at the time, down around $1,100 or so and a few months from dipping briefly below $1,000 at the end of 2015, so things were definitely not red-hot… though that set things up for the wild rally in early 2016), but remember that there was a seller on that deal, too, and probably other buyers who looked at it and turned it down.
So that’s my bucket of cool water for you — I expect Goldmining will rise sharply if gold goes up, and it’s possible that they could jump if they make another acquisition soon as Curzio teases (maybe he’s talking about the latest announcement, for a deal that hasn’t closed yet, or maybe he’s predicting something more… I don’t know), and it’s also possible that Goldmining will qualify for a listing on the big board in Toronto pretty soon (which would make some investors more confident, the Venture exchange feels a bit scarier sometimes), so that could help as well… but if you want to imagine huge returns it’s really about gold prices going up fairly sharply.
Whaddya think? Interested in Amir Adnani’s Goldmining as a bet on the next surge in gold prices? Have other favored prospect aggregators you’d like to share? Think gold prices will rise or fall in the year to come? Let us know with a comment below.