An attentive reader recently forwarded an email teaser ad to me for a newsletter called The Dollar Vigilante, not one I’d heard of before — but it is edited by Ed Bugos, whose name might ring a bell if you frequent gold and mining websites, and the teaser language rang a little bell deep in the cellar of Gumshoe Headquarters … so I thought I’d spend a few minutes taking a look for you.
The Dollar Vigilante appears to be yet another tapdancer on the (expected) grave of the US dollar, the Federal Reserve, and the global monetary system. From a quick glance at their site (the free blog part, at least), they have some interesting opinions and have highlighted some profitable ideas (no surprise for a new letter — gold and silver are both up quite hugely since they launched in July), but the basic arguments about the decline of fiat currencies and the need to get yourself out of the dollar (or even expatriate and get out of the U.S. entirely) will be familiar to anyone who reads much of anything in financial newsletterland. Porter Stansberry, for example, has a new ad out today that’s similar in tone, all about the need to open foreign bank accounts, store your gold overseas, and own productive farmland so you can protect your assets and feed your family during the coming collapse, and you’ll hear much the same from hundreds of investing pundits.
I have no idea how far dollar debasement will go, of course, though I agree that it seems likely that real asset prices will rise over time as the world gets more crowded and more money gets printed by every central bank — maybe there will be a real and abrupt currency crisis (or full-blown social crisis) as Stansberry and many others predict, or maybe the frog in the pot will come to a boil very slowly, I have no idea, but I wouldn’t personally want to make any long term loans that are repaid in dollars right now. That said, logical arguments don’t always carry the day — and things can certainly stay in what seems like an unsustainable state for a lot longer than you might expect, especially when the world is accustomed to “the way things are.” I’d always guess at gradual change and “muddling through” instead of abrupt crisis, but that’s just the kind of easygoing guy I am.
But anyway, the Dollar Vigilante folks are tossing their ideas and perspective on top of this pile … in exchange for your subscription dollars. And they’re clearly paying attention to the marketplace, because they apparently realize that the way to get subscribers is to offer a tantalizing investment idea but leave the actual specifics just … out … of … reach untilyousubmityourcreditcardnumber.
And that’s where we come in, fellow gumshoes. Let’s find out what stock they’re teasing, and think on it for a spell … shall we?
The promise is familiar, of course … and compelling:
“The Dollar Vigilante has uncovered a company that is about to start a revolution in mining and has serious potential for thousand percent plus returns….
“MANY MINING MAJORS HAVE ALL INVESTED… ALL AT HIGHER PRICES THAN YOU CAN PAY TODAY
“Investing, more often than not, is a case of “following the money” and this is certainly the case with this company. Many mining majors including Anglo American, Barrick Gold and Teck Resources lined up to put in over $300 million into these [sic] junior exploration company.”
The tease tells us that these big major miners rushed in ” before it was even ready to begin testing its theories.” But that they are now “proving the value” of their techniques … and the market hasn’t “woken up to the potential” yet.
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So which “revolutionary” mining stock is this? Well, we get plenty more clues:
“Another financial newsletter that charges $5,000/year to receive their investment recommendations featured this stock in July – also at higher levels than you can buy it at today.”
Ha! Well, now you see why the bell rang over here at Gumshoe HQ — if you’ve been around these parts since the Summer, you may well remember this heavily promoted tease. But if not, let me string you along with a few more clues …
“… they are pioneers in a new way of mining that “can be more than an order of magnitude richer” than regular gold mines,” according to a study published in Nature.
“Preliminary samples from one site where this revolutionary mining company has drilled had an average concentration of 15 grams per ton. Doesn’t sound like much? It does when you consider that the average global gold mine has about 1 to 3 grams of gold per ton of ore. Even South African mines only have about 7 grams per ton. That’s less than half as rich as the resources this company has tapped.”
“… this company has found and has exploration licenses encompassing an area as large as the entire United Kingdom!”
And then we get to the part that really gives away the secret, even if you weren’t reading as closely as your friendly neighborhood Stock Gumshoe:
“Dr. Charles Morgan, a geochemist and former project manager for the U.S. Department of Interior said, “Geologically… this is definitely the best prospect I’ve ever seen.”
“The gold content is incredibly high,” professor emeritus of geology at the University of Toronto, Dr. Steven Scott said. “It is exceptional.”
“These are very, very high contents of valuable metals,” said CSIRO scientist, Dr. Ray Binns….
“… this company is years ahead of any competition in figuring out how to mine resource from underneath the sea floor. In fact, over the decades, the oil & gas industry has developed much of the technology that they plan to utilize today. So in many ways, this company is already ahead of the curve.
“‘This has always been out in the future somewhere,’ said Dr. Sylvia Earle, a prominent marine biologist and deep sea explorer. ‘Now it’s here.’
“‘If you found this deposit on dry land, you’d call these bonanza figures,’ said Dr. Ray Binns, a scientist at the Australian Commonwealth Scientific and Industrial Research Organization.”
So … I don’t know if the Dollar Vigilante folks were “inspired” by the hypetastic “gold sands” pitch from Stansberry’s Phase 1 over the summer, or if they went back and pulled those expert quotes from the 1997 and 2003 New York Times articles, too (both those articles were by the same journalist, by the way, William Broad). Whatever the reason, the quotes are mostly the same even though the ad is far, far briefer — and this is, still, our favorite little undersea mining experiment: Nautilus Minerals (NUS in Toronto, NUSMF on the pink sheets).
Don’t worry, I expect the Dollar Vigilante has but a tiny portion of the marketing budget and mailing list access of Stansberry, so there’s no particular reason why the stock should spike much on this recommendation or their marketing push, which seems to have been quite minor. The ad is from this past weekend, when the Dollar Vigilante folks said they were releasing this to their subscribers on Monday, and from a look at the chart their subscribers clearly didn’t move the stock much if at all … though if you squint your eyes a bit you can conclude that the trading volume did pick up slightly this week. A far cry from the turbo-blast that hit the shares in July, when that gold sands teaser campaign brought in a couple days of huge trading volume and a spike of about 50% (there are typically about 50-100,000 shares traded in this stock, for those few days in early July it traded well over a million shares a day).
If you want the full story on Nautilus Minerals they’ll be happy to tell it to you — they have all the reports and presentations you’d expect on their website, and the shorthand “fact sheet” [pdf file]to explain themselves in five minutes. They are, essentially, the most advanced deepwater mining company in the world. They might also be the only deepwater mining company in the world.
What Nautilus is doing is trying to develop a new industry — using deepwater oil exploration and production technology to do underwater hard rock mining (or maybe “hard rock” isn’t the best term, since they aim to turn the stuff to slurry then pump it to the surface). Folks have always known that there are rich metal resources underwater, particularly in volcanic zones … after all, the same ancient geologic forces that created great concentrated copper, gold, etc. resources on land are present all over the globe, without regard to whether or not water covers that part of the earth. It’s just that, well, they’re under water … and it has proven to be even more challenging than first dreamed to extract those resources.
Nautilus does have a huge area for exploration in the South Pacific, but their exploration projects really have value only if they can prove that they can profitably extract minerals from deep below the surface — so really, you can still think of the company as a gamble on the success of their Solwara 1 project — that’s the first “mine” they’re trying to develop offshore Papua New Guinea.
And yes, one of the frequent points made about Nautilus is that they have a lot of cash on hand relative to their market cap — as of the last quarter they say they have $185 million in cash, and their market capitalization is just a bit over $300 million. You could interpret that to mean that the company’s assets are valued at only $115 million … but that’s probably a mistake, since the reality is that the $185 million they do have on hand is probably but a teensy fraction of the capital they will need to advance to the production stage (assuming that they eventually get there). Their own commissioned engineering study notes that they will require $383 million in capital, and then another “$70 per tonne” in operating costs. Each of those tonnes, per their fact sheet, has about .15 ounces of gold and .75 ounces of silver buried within, so if you can pull it up for that cost it’s perhaps worthwhile, and the Solwara area is also very rich in copper (though of course, that’s just the cost of getting those tonnes of dirt/rock/sand/ore slurry off the seafloor and to port – before you pay to move the stuff to a refinery and actually get the copper, gold and silver out).
Nautilus is one of those companies that amazes me — the possibilities keep folks intrigued for years, or in this case far more than a decade (remember, the promise and potential sounded just about the same in 1997, at least to a layperson like me, as they do now), and they still haven’t actually produced anything except some nice drill results and scads of engineering experiments as they try to build, with subcontractors, the first generation of the equipment that would be needed to move this adventure along.
I can’t blame the big mining companies for being invested in Nautilus — they can certainly afford it, and I see that as a gamble that IF this works, they’d want to be in on the deal and the technology, and for that reason Nautilus may well succeed in bringing in the deep-pocketed partner that they need to move development forward, too, they’ve certainly been able to raise plenty of money over the years. But I can’t see any particularly compelling reason for me to invest — there are still plenty of money-making discoveries on land, and new mining techniques to be applied to century-old gold mining camps, that make me think there’s something comforting about dry feet, and about mining technologies that have had a few hundred years to evolve.
I could be wrong, of course, or simply too much of a worrier … but I think enthusiastic investors in Nautilus Minerals may well be continuing to underestimate the difficulty of starting up this kind of brand new project a mile under the ocean’s surface, 13 years after Nautilus’ founders staked their mining claim and themselves promised rapid riches and, arguably, made a similar underestimation (though to be fair, if you don’t have optimism seeping out of your pores you’ll never fit in as a mining executive).
Still, folks who go out to sea in search of buried treasure find investors every day who are as interested in adventure and novelty as they are in annualized returns — and every once in a while, they find a Spanish galleon.
That’s about all I can come up with to say about Nautilus Minerals for you today, though I’ve covered it a few times over the years and I always hear from readers who’ve been involved in the stock — so if you’ve an opinion to share, please do so with a comment below.
And if you’re familiar with the Dollar Vigilante folks and have tried their newsletter during it’s young life so far, please click here to review it for your fellow investors over at Stock Gumshoe Reviews. Thanks!