“… About to turn into a $10.1 Billion Gold Mine”

This ad caught the attention of a lot of Gumshoe readers over the weekend, which isn’t surprising — it’s filled with promise:

“One of the world’s top geologists makes an $80,000 bet…

“Now It’s About to Turn Into a $10.1 Billion Gold Mine

“And give you the rare opportunity to ‘buy’ gold for 17 cents on the dollar today – and make up to
11 times your money by December…”

Of course, we see promises like that every day here at Stock Gumshoe HQ — but that doesn’t mean we don’t start to imagine buying an island or a yacht when we see teasers like this … or, at least, a few more weeks of daycare for the Junior Gumshoes. So is it real?

Well, the newsletter is one I don’t think I’ve written about before — it’s apparently new, and called Global Resource Alert … edited by Peter Krauth, and published by the good folks at Money Map Press, one of a zillion Agora-affiliated publishers, if that means anything to you.

Let’s dig in a bit deeper … as with so many ads, they use a personal story to draw the picture for you:

“In November of 2004, a 44-year-old French Canadian with a crop of white hair (I’ll call him “T.R.”) purchased an abandoned gold mine from a bankrupt mining company.

“He paid the princely sum of $80,000 for the land and all the mineral rights it contained. “Princely” because his peers in the gold mining industry thought he was crazy to spend even a dime on it…

“The mine hadn’t produced an ounce of gold for over 20 years.

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“And the owners of the property? They were thrilled at the prospect of making any kind of money from their useless land. Someone would have to be a fool, they said, throwing away good money on a dry rock hole.

“But this man was not your ‘average Joe.’

“T.R., it turns out, is now considered one of the top geologists on earth. He and his team have amassed a record of 10 major mining projects – more than almost anyone in the business.”

But the exciting part is the bit about their big gold reserves, which are in Quebec … and that’s where we start to get into some of the specifics. Or as I like to call them, “clues.”

“On November 25, 2008, to little fanfare, this tiny company recorded its scientific findings in an obscure government document.

“What they recorded set a new mark in the North American record books:

“The discovery of an astounding 8.43 million ounces of gold.

“And on June 2nd of this year – just 1,200 yards away from the original site…

“They confirmed the discovery of an additional 2.24 million ounces.

“Total deposits: 10.67 million ounces of gold.

“Total value of the deposits is a record setting $10.1 Billion.

“This renegade geologist and his ‘mom-and-pop’ company are now sitting on the largest undeveloped gold reserves in Canadian history…”

So … what else do we know about this stock?

It’s trading for about $7.

It’s a company based in Montreal.

The technical report on Osisko’s reserves, the NI 43-101 filing, reports, at least in part, 8.43 Moz of gold at .9 g/t out of about 286 million tons.

And of course, the ad lists dozens of other small gold miners that hit it big — without, of course, specifically claiming that our fair newsletter editor picked these miners before they had huge gains. Throw in a few examples of little miners whose share prices rocketed during the last gold peak almost 30 years ago, and an argument about “peak gold” and peak demand being fast upon us, and any investor would be filling his shoes with drool.

So what is the stock that will apparently bring us these riches?

Well, a reader threw a tip my way about this one … and I’m pretty sure he’s right. This looks to be Osisko (OSK in Toronto, OSKFF on the pink sheets).

The shares are just under C$7, (US$5.75) — they peaked about a month ago at a bit over US$6.50. They did buy a mine that others had given up on (the property went through a bankruptcy, I think), but which had been explored by Lac Minerals previously (before they were bought by Barrick) … and they did file their resource estimate on November 25 last year, which certainly helped the share price — you could have bought shares for just over a dollar right before the release, which coincided with the bottom for most of the market, and for gold stocks.

They did really buy the property for $80,000, starting back in 2004 — though they have acquired additional areas surrounding that first purchase, and the mine also carries a royalty to Barrick of 2-3%. Still, it does seem like quite a buy now. Robert Wares was running the show then — I don’t know him, but I don’t know all that much about mining in general … he was on the podium when Osisko won the “Prospector of the Year” award, and he does have a shock of white hair, from what I can tell from the photo, so I’ll consider that a match. I have no idea why they call him “T.R” in the teaser, if he is indeed the person they’re referring to.

The teaser here implies that these shares are about to benefit from the “first ounce bounce,” the jolt a miner’s shares often get when they actually start producing. I’ve also heard plenty of folks claim that they can time the movement of a stock by charting the peaks and valleys of the exploration cycle — a peak when the gold is discovered, then a long slide down while they quietly explore, then another peak after they file their official resource estimates, then another glide down when everyone realizes it will take years to start mining, then another peak when the mining begins and they start making money. It obviously doesn’t always happen according to this pattern, and mining is a risky and unpredictable business, even with those resource estimates being officially approved by third-party experts, so anything can happen while we wait for the ore to be dug up.

Osisko actually looks like they’re pretty close to putting an operating mine in place — they’re relocating buildings and doing community investment to make the local people happy, and the permits seem to be pretty well done according to their presentations (Quebec is, I’m told, a very mining-friendly place, and this mine is near many others). Their most recent corporate presentation, from February (it’s worth a look, you can see it here), notes that pre-stripping of the mine is expected late this year, and commercial production in Spring 2011, with a mine life, according to reserves identified so far, of ten years.

Osisko seems to have plenty of money to keep developing the project, which they call the Canadian Malartic mine — they did a big cash raise this year, timing it nicely for a buoyant gold price, and as long as gold remains near these historically high levels I don’t imagine they’ll have any trouble raising more money if and when they need it. Of course, if gold drops these shares will, too — as you can see from the softness in the share price during the last few weeks of weakening gold prices.

Will this turn you into a millionaire? Well, that’s anyone’s guess — it looks promising as far as I’ve gotten, but I’m far from a mining expert and there are almost always bumps along the way. What do you think of Osisko, or do you have other favorite little gold miners? Let us know with a comment below. Thanks!


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Eric Dumas
Eric Dumas
August 21, 2009 11:46 pm

Travis, you are right. Currently, Quebec is the most mining friendly jurisdiciton in the world.

As a matter of fact, they bend over backward.

They reimburse you with a govt. cheque for 50% of your exploration costs.

Try to get such a cheque in Mexico.
Labor and tortillas are not as cheap as in Mexico though.

However, they also created high-school and college program along with the mining industry.

They have VERY experienced minors there and they figured out a while ago that mining is very cyclical so if they made it friendly, many companies would invest their pesos there. Dudes like Agnico Eagle and other got the picture.

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mr. verdi
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mr. verdi
August 23, 2009 1:47 am

I am very long on ICN.AX . Verify for yourself. Just read their news and see their growth. The Aussie dollar keeps goin up against our fiat currency. This thing will double before Christmas and triple by spring easy. They are sitting on a mountain of CBM. When their new wells do what the last ones did, began emitting gas the first day of dewatering, then touting 5-7 trillion cu’ft of gas recoverable(only worth billions) then this puppy will really fly. Check out the chart, its so damned predictable is a laugher. Also, can’t wait for ‘ think or swim’ to get to Ameritrade

Boneafide
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Boneafide
November 30, 2009 9:00 pm

Timmins Gold TMM(TSX) may be a better bet in the short-medium term than Osisko because permits, equipment, facilities, staff are all in place. Trading around CAD 1.20, its heading for first pour by end of 2009 and commercial production 1Qtr 2010 in Mexico. Its touted to go to CAD 2.25 by Cannacord Capital.

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Sally Kilcullen
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Sally Kilcullen
April 18, 2010 6:13 am

I think there is more upside with Clifton Star Resources and it’s sites very attractive. Osisko provided some financial backing for partial ownership – see the website for Clifton Star Resources; it has been covered by of the Investment Newsletters and institutional investors as well – NOT as many shares outstanding either. Very attractive with very experienced Sr. Geologist\ – CFMSF…check out the articles

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