The newsletter ad I’m looking at today is from Dave Forest for his Casey International Speculator (currently $1,995, no refunds though you can transfer the “credit” to another newsletter in the first 90 days), which seems to mostly be focused on junior gold miners these days… and that is indeed what’s being pitched today, three “penny gold” stocks that they say they’ve identified by using NASA technology.
They lay the “satellite prospecting” stuff on a little thick…
“Before today, no one has revealed this type of demonstration to the public.
“So please keep everything you see confidential.
“You’re about to see a proprietary method for using the Terra satellite to find gold.
“Only two people in the world know how it works…
“Myself and my PhD partner, who cherishes his privacy.”
Who is this partner?
“The gentleman who just appeared to my right is my partner Neil.
“We had to obscure Neil’s identity…
“Because he works in a highly sensitive and competitive segment of the cutthroat gold industry.
“He’s a reclusive scientist who leads a private life in southern Africa.
“Neil has a PhD in computational mathematics…
“He worked for the world’s 3rd largest gold company for over two decades.”
And apparently this fella has some unique way to sift through satellite imagery to identify gold deposits. Prospectors have been all over satellite mapping and images as discovery tools since the first Landsat surveys in the 1970s, so I don’t know what the uniqueness is that “Neil” brings to the table, if anything, but here’s what they say:
“The satellite is armed with cutting-edge “long wave” optics…
“That can detect invisible and harmless electromagnetic waves…
“That have reflected off the earth’s surface.
“These waves can pass through tree canopies, a layer of topsoil and even 200 feet underwater…
“To detect undiscovered gold.
“In other words, this satellite acts like a super long range gold X-ray.
“When you have the proprietary method that Neil and I do.Are you getting our free Daily Update
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“It locates — with extreme precision — gold deposits around the world.”
To be honest, that sounds like hooey to me. I’m no geologist, so maybe there is some special process you can use to narrow down prospecting targets using satellites… and I’m sure all the explorers are using satellite images. I just have a hard time thinking that this gives any investor an edge in identifying which targets are better than others — after all, it’s really about the drilling and the precise results that make a mine viable (or not), and it’s hard to imagine that satellite data is that precise at identifying underground ore bodies. Or, of course, that the secret rests in the hands of a newsletter. More likely this is in large part a marketing ploy to justify interesting stocks that they like for other reasons, but perhaps that’s just the cynic in me.
More from the ad:
“… most people don’t have the geology training needed to identify a promising deposit on the ground…
“The time to fill out a bunch of government forms…
“Or the resources to fly out to the middle of the desert to kick rocks and stake the claim.
“And that’s why we use the NASA satellite to identify penny gold stocks with huge upside potential.
“That way you can take part right from your home computer.
“So let’s take a look at the newest discovery we’ve made with the Terra satellite.
“And please remember… you MUST keep everything you are about to see strictly confidential.”
Yep, it’s top secret! That’s why we put it on the internet and use it to sell stuff!
So with all that foofaraw, what are the actual stocks being teased? Let’s start with number one…
“It’s the single biggest opportunity for you to make a fortune right now.
“We’ve discovered a promising new deposit on land owned by a tiny gold miner.
“Shares go for just 87¢ a pop.
“This penny stock could become the next Treasure Box…
“The next 52-bagger….”
So the story is that they use this satellite, in part, to scan the area around existing mines — since the best place to look for gold is right next to where somebody already found a lot of it — and figure out who owns that property. More from the pitch…
“And boy did we find one!
“In this case, one tiny mining company controls the property.
“And they haven’t publicly acknowledged the value of this deposit…
“… a big, high-potential gold zone…
“It’s a lookalike to the huge Eleonore mine just 30 km away.
“When we find something this big, the next move is to do a field visit and then try to secure the land for ourselves.
“But in this case, a tiny $58 million company beat us to it.
“Right now, shares go for just 87¢ a pop.”
So who is this? Well, there are (of course) tons of junior miners and other explorers who have staked out areas near the big Eleonore Mine, as happens with every successful mine… and attention has only risen as Quebec has worked to open up the still-pretty-remote James Bay area to more industry and exploration, with roads and other infrastructure.
So you’ll see several little guys trying to find their fortune roughly 30km southeast of Eleonore, including Eastmain (ER.TO, EANRF) and Azimut (AZM.V) and Osisko Mines (OSK.TO, OBNNF, Osisko is a little remnant of the company that found the other big recent Canadian mine that has gotten a lot of attention, Canadian Malartic), but with those clues the Thinkolator sez our best match today is Midland Exploration (MD.V in Canada, MIDLF OTC in the US).
Why Midland? This isn’t a 100% certain match — It does have several exploration projects near the Eleonore Mine that are plausible matches for this supposed satellite “discovery,” though I can’t say that I’ve identified a prime one that matches the Casey pitch precisely.
And the actual specifics given are a perfect match — price right around 87 cents, market cap right around C$58 million, which is not true of any of the other juniors that I looked at in the area.
So will Midland hit paydirt? I have no idea. The appealing thing about them is that they are a prospect generation company — the acquire and stake exploration projects, do some initial sampling and drilling, and then once they’ve identified something of some value the goal is to partner it up with someone else who will do the heavy (and expensive) lifting. That’s a great model if you’re good and disciplined at staking and acquiring projects, though it certainly still requires a lot of luck and patience — it’s great not because you’re destined to win, but because it’s less expensive than focusing on one property and really proving it up with a lot of pricy drilling and exploration work. Midland has a couple dozen properties in its portfolio, but has only raised about $12 million in the past couple years and spent only $10 million on capex… which is a lot of money, but nowhere near what they’d be spending if they were really trying to develop a mine themselves.
And yes, such companies tend to do pretty well IF there’s a real gold mania, of only because suddenly lots of junior miners will come out of the woodwork raising money, and all of them will be trying to acquire appealing-looking properties to explore, which plays right into the hands of the prospect generators who’ve been waiting for the next mania. That’s no guarantee, and I have no idea how appealing any of Midland’s specific projects might be, but they’ve got quite a few of them — maybe worth a look for the rock hounds out there.
And whaddya know, they even tell us on their “analysts and newsletters coverage” page of the latest Investor Presentation that Casey Research follows them (along with GoldNewsletter, Adrian Day, Thom Calandra and some others who might sound a bit familiar).
What else is teased for us”
“And there’s another penny stock…
“…. chances are this company is on the verge of a big find.
“And that’s on top of the $1.7 billion in gold they’ve already found.”
The “satellite” trick this time is to go to southwest Utah, and find the historical Big Strike mine — which apparently has 1.1 million ounces… and the area of the Big Strike is surrounded by land “controlled by a tiny 58¢ gold stock.”
More from the ad:
“Now, we ask the all-important question:
“‘Is there more gold to be found there?’
“Turns out there almost certainly is, and we spotted it thanks to the Terra satellite.
“With a 94% match, we found this huge potential gold zone in the southwest corner of the claim.
“Without going there to do on-the-ground drill tests, we can’t say exactly how big that new deposit is.
“But considering the existing deposit is 1.1 million ounces…
“That new area could hold as much as 500,000 new ounces of gold.”
This, according to an excellent match with their provided “teaser” map, must actually be the Goldstrike project owned by Liberty Gold (LGD.TO, LGDTF), which has a preliminary economic analysis (PEA) that does include about 1.1 million ounces in resources (not reserves), and which should be a viable project based on the assumptions in that PEA (though it is a bit small, $130 million net present value at $1,300/oz, which can be challenging when you’re trying to raise mine-building capital)… though their priority at the moment seems to be the Black Pine project in Idaho where they’re drilling this year.
I don’t know anything else about these guys, but it’s a solid match on the few clues we got… and it was a 58-cent stock (Canadian) in August (it’s now 85 cents, thanks to some discoveries at Black Pine that coincided with a successful $16 million financing) — the market cap is now about C$200 million. (If you’re counting in US$, by the way, it was a 58-cent stock two weeks ago.)
But we’re not done! One more…
“This mid-sized mining company is one of the most exciting stocks for right now.
“The company has deposits containing 112 million ounces of gold and other precious metals.
“And their mine is the lowest-cost producer in Africa…
“The company can pull gold and other precious metals out of the ground at $351 per ounce.
“As I said a few minutes ago, the global average cost is about $1,200 per ounce.
“That means this little company mines gold at about one quarter the cost of its competitors…
“So, with a gold price above $1,500 per ounce…
“This company’s profits are automatically 283% higher than the average gold producer’s.”
Sounds good, right? That’s because I left out their mapping/satellite stuff so you don’t know the location — this one is way over in the Democratic Republic of Congo (DRC)… which isn’t particularly inspiring as a democracy or a republic, but does have some massive mineral deposits to go with its decades-long history of war and conflict.
Which stock, though? We get some clues about the leader of the company:
“He’s a mining industry veteran with a long, steady track record of making investors rich.
“He spent $7 million to discover a gold deposit in Alaska…
“And later sold it to mining giant Kinross for almost $600 million.
“That’s an 85-fold return.
“One of this CEO’s companies made Doug 64,000%…
“And another of his outfits went up a more modest — but still amazing — 225%…
“My research indicates that a gold bull market could push his present company up 500% — or more — over the coming months.”
Apparently there are two big copper deposits that this company is working to mine, and Casey’s satellite connection found a “huge anomaly” to the west of that which might be even bigger and “boost the mine’s total value to $8 billion.”
More from the ad:
“Last July, I wrote that ‘it’s time to back up the truck’ on this little stock…
“And my readers have seen it show strength since then.
“But as the gold bull market goes into overdrive… and the yellow metal hits all-time highs…
“This small $3.50 stock could hit $15 — or more.
“And the copper deposit’s a nice little cherry on top…
“But the key is to get in now, before any news of that new copper deposit gets released…”
It’s hard to imagine that any discovery or “reserves” news will really move this stock dramatically, since it trades at such a dramatic discount to the economic potential of its deposits already… but yes, this is Robert Friedland’s Ivanhoe Mines (IVN.TO, IVPAF), which is roughly a US$4 billion miner concentrated on some huge and incredibly high-grade copper mines in the DRC… but with copper not getting a lot of attention and with the DRC risk remaining high, the attention has recently been on their big Platreef mine in South Africa, which will soon be one of the largest primary platinum group metals producers in the world — and everyone’s excited about that because of the crazy price of palladium right now. Forest has teased Ivanhoe before, and it’s pretty well-known in mining circles thanks to Robert Friedland’s halo.
So sure, rising copper and gold prices might lift Ivanhoe… and rising platinum and palladium prices… but what really keeps the stock down is political risk and fear of both South Africa and the DRC. I don’t know if or when those risk perceptions will change, but if these deposits were in, say, Canada I assume Ivanhoe would be at least a $10 billion company, not a $4 billion one.
Though that doesn’t really mean anything… if my house were in midtown Manhattan, I’d be a billionaire. If China wasn’t closed to western tech companies, Baidu and Tencent wouldn’t exist. Borders, regulations and risk perceptions matter, and betting on them changing is just that, a bet. Robert Friedland has a brilliant history of developing projects, and Ivanhoe has great deposits and will soon probably have a couple of the most profitable mines in the world… whether they ever trade up to some notion of “objective” value or not, I don’t know.
The general case that Dave Forest and the Casey folks make for gold will not be surprising to any of you, I imagine — negative interest rates, combined with record debt levels, and the belief that “gold tends to move in eight year cycles” (that last one takes some retrospective imagination, but sure, there are some historical cycles… though whether that means anything predictive about the future in any given five-year span is another matter entirely). The ad is predicting that gold will hit $5,000 an ounce by 2028 as the next step up in this “cycle,” and they call that an “airtight case” — so you can take that with whatever size grain of salt you like. And yes, if gold rises rapidly, then almost all the junior explorers and miner should surge dramatically higher… just as they’ll collapse if gold falls by 20%.
Casey has pretty much always been excited about gold, regularly predicting the collapse of currencies and a panic into gold (including right as gold was topping in 2011 and 2012), and while broken clocks do tell the right time occasionally we probably shouldn’t rely on them to let us know whether we’re late or early. He was convinced that we were in the trailing edge of the eye of the hurricane seven or eight years ago, with the economic system collapsing within a year or so. He’s an interesting guy to listen to as an intellectual exercise, and perhaps he’ll be right about the future 10-20 years down the line and I assume it’s his big-picture ideas leading the charge at Casey Research (which is now owned by Stansberry), but when it comes to betting on whether or not gold is going to surge in the next six months we should remember that everyone is guessing.
And that’s all we’ve got for you today, boys and girls — a couple penny “junior explorer” stocks and a low-priced company that’s building some big mines… do Midland, Liberty Gold or Ivanhoe have any allure for you? Let us know with a comment below.