A quickie for you to start out this week, since gold is on the lips of many investors and I got a question about this Mark Skousen teaser.
The little excerpts of the clues I got indicated that this wasn’t a heavily distributed teaser ad, it was an “upgrade” pitch to get the subscribers of his basic service, Forecasts & Strategies, to sign up for his special FreedomFest events this Summer.
Here are the hints about the “secret stock” he promises to reveal upon ordering…
“I have come across a potential ‘ten bagger’ in the mining business, and it’s selling for under a buck!
“It is literally a penny stock that trades on the over-the-counter market, but with gold in a major upward trend, it could be selling for dollars very quickly.”
So I can see why that got reader questions flowing quickly — that pretty perfectly describes most folks’ thinking about little mining stocks… wouldn’t it be fun to buy something for a few cents that turns into a fortune?
What hints does he drop to entice us?
“It is selling for pennies because the mining company will be producing gold starting in 2021. Fortunately, they already know how much gold there is (6.6 million ounces, which could make it the sixth-largest gold mine in the United States). This is not an exploratory mine, but a mine in the development stage.”
OK, that narrows it down quite a bit — though maybe don’t hold your breath about that “producing gold in 2021” bit, mining company forecasts tend to be almost criminally optimistic on that front. Any other clues to drop into the Thinkolator?
“It owns a world-class, multi-million ounce, low cost, open-pit mine in a historic district that has been held back from development because of environmental issues. That is all about to change. The feasibility studies have been made, the permitting is moving forward and production is expected to start late next year.”
OK, so if they’re still in permitting then maybe construction could start next year… that’s different from starting production. It often takes well over a year to build a mine, often longer than that before it can produce its first gold.
What else? It’s in the western US, Franco-Nevada and Barrick Gold are somewhow involved, and we get one more clue about a backer:
“… recently a billionaire hedge fund investor was invited to check out the property and bought an entire new funding valued at over $30 million.”
So this, sez the Thinkolator, is Midas Gold (MAX.TO in Canada, MDRPF OTC in the US), which we’ve certainly seen teased before… though not by Skousen. I first saw it teased about five years ago by Chuck de Castro, when it was a smaller discovery, and more recently it has been actively touted by Nick Hodge a bunch of times since early 2018.
Here’s part of what I wrote following that first Nick Hodge tease in January of 2018 (the price was about the same then as it is now, though there have been more financings so the market cap has grown)…
“They do have a prefeasibility study (PFS), so that’s the easiest data on which to base your assessments of the value of the project — the 2014 PFS included a NPV at a 5% discount rate of US$832 million, or about $2.60/share… which sounds pretty good compared to the $0.70 share price. So why is the stock trading at such a steep discount to that “net present value?”
“I don’t really know… this is a prospective mine developer, so the possible issues are legion. The regulatory prospects are presented as very optimistic by the company, but perhaps investors are more skeptical on that front…. the net present value figure is calculated on a pretty low discount rate for a relatively risky enterprise (though that’s not unusual)… the estimates were made at a time when silver prices were much higher, so lower silver is likely to drive that down a little bit (though gold is by far the most important driver)… the e