“Boise Basin’s Gold Fire Sale — $25.17/ounce?”

by Travis Johnson, Stock Gumshoe | January 11, 2010 11:21 am

This ad was a very popular one over the weekend, it started pouring in through the Gumshoe email floodgates just a couple days ago, and it’s clear that we’re all once again excited about little junior gold[1] mining companies … especially with gold getting over $1,150 per ounce once again.

So what’s the deal? The ad is from Luke Burgess[2] for his Hard Money Millionaire[3] newsletter — and he’s telling us that his pick goes up 6.4% for every 1% rise in the price of gold. And it is a ridiculously small stock, even for this fairly expensive newsletter (the newsletter is currently $495/year) — he tells us it has a market cap of just $11 million. Sounds like a rollercoaster ride might be ahead, let’s look at the clues and sniff out this stock, shall we?

The stock that’s being teased is working in the “Boise Basin,” one of the great ore zones during the gold rush days (the basin produced more gold than Alaska during the gold rush), and one of many prime gold mining[4] areas that has been rejuvenated by high gold prices, with junior miners double-checking those old mines and looking to see if they missed anything — or if there’s something sexy and shiny underneath the old tunnels and pits. And yes, for the geographically challenged, it is in Idaho.

The clues are as sparse and thin as my hairline is becoming these days, so while I’m pretty sure I’ve got an answer I should let you know that there’s a (hopefully small) chance that I’m wrong. Here are the main clues I’m working with today, aside from the basics that it’s small and in Idaho …

“With over 600,000 ounces on the property, this $11 million company’s assets now exceed $690 million….”

“a recent battery[5] of core tests – whose results haven’t even been released to the public – have already sent ripples of excitement through the precious metals investment community….”

“With a near-target production of 25,000 ounces per year, we’re looking at a potential earnings per share (EPS) of $0.14….”

“More than 55% of this company is held by insiders, institutions, and professional investors…”

“And all of the warrants[6] out on this stock — that is, contractual agreements to buy at a certain price — are priced between 50 and 75 cents…”

and finally …

“In the closing days of 2009, this company sunk 6 drill holes into this piece of Idaho real estate[7].

“The core samples, which measured mineral content in the bedrock to a depth of up to 985 feet, represented a limited test…

“But in a subsequent press release, management said, “We are extremely pleased with the results…”

“Although the official numbers haven’t been published yet, the old adage ‘you can’t keep good news secret for long’ has proven true.

“In the 2 days that followed, the stock skyrocketed 25%, with the daily volume spiking to over 580% of its average over the previous three months…”

So in time-honored tradition, we carefully grind up those clues and throw them into the gravity-leach Thinkolator, and after a while the answer comes seeping out from the bottom … this looks to be:

Premium Exlploration (PEM in Canada[8], PMMEF on the pink sheets)

And yes, this stock is teeny — the market cap is still well under $50 million, and the shares are already spiking, probably thanks to the aggressive weekend of marketing by Hard Money Millionaire. Looks like the shares are up almost 25% already this morning as I type.

And the stock may well be about to get significantly more attention — they’re presenting at a junior mining conference next week, and at the Money Show in Florida in early February … so I don’t know that they’re primed to get lots of media attention as Burgess teases, but they’re likely to get at least a boost of short-term interest from investors. And with a stock this teensy, it doesn’t take much attention to drive the shares higher … of course, as with all tiny stocks, gravity tends to increase in strength as enthusiastic and impatient newcomers pour in through the gates, so the fact that the stock may well bump up thanks to this attention (including the attention here from yours truly) doesn’t mean the stock is necessarily going to stay higher. Most don’t, but the progress they’re making in analyzing drill results and updating their resources will let investors tell us one way or another how much the stock is really worth.

Why Premium Exploration? The drill program announcement came out on December 29 and matches perfectly — they drilled six holes in a fairly low-budget attempt to start updating their resources, they did indeed drill to a depth of 300 meters under previous holes (that rounds out to the 985 feet in the teaser), and the management quote teased above matches their press release. Here’s a longer quote from that same press release:

“We are extremely pleased with the results of this program and are eager to receive assays, due to the significant impact it could have on the Friday-Petsite gold resource. This phase of drilling included three of the deepest holes drilled on the property and intercepted the mineralized zone 300 meters down-dip from the bottom of historic drill hole PC010.”

The whole PR is here if you’re interested.[9]

They are no longer an $11 million company, but that’s not too much of an exaggeration — and the warrants do have 50 and 75 cent strike amounts, though from a quick look it appears that the 50 cent window may have expired on at least some of those warrants, the warrants were extended a little bit and there are at least some warrants with rights priced at 75 cents until August of this year. They also did a private placement in November that included some warrants at 30 cents, so that doesn’t exactly match the tease … but with the drilling announcement being such a perfect match, and with the 25,000 ounce production target a good match as well (they’re targeting 25-35,000, according to the notes I’ve seen) I still think we’re safe to assume Burgess is teasing Premium Exploration.

In addition to exhibiting at those upcoming investor conferences, they’ve also been pretty actively covered by others in the junior miner investing punditry, including the Midas Letter and the Korelin Report and they link to some of that info from the company website[10] (I know nothing about those sources).

Will it pan out? Well, I haven’t done much additional research on this one since I wanted to get my best answer out to you as quickly as I could — and those who have been around these parts for a while know I’m no expert in evaluating eensy beensy junior miners … but I know a lot of my readers are much more in tune with this sector, so hopefully they’ll chime in and let you know what they think, so feel free to throw out your assessment, opinion, analysis, question or smart remark in the comments box below.

And if you’re one of the early subscribers to Hard Money Millionaires, you could be the first to review[11] it for your fellow investors — just click here to enter your review at Stock Gumshoe Reviews[12], thank you!

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