“This rare private deal could score you up to 3,000% returns over time — or more!”
That’s the attention-getting intro to the latest ad from Jim Rickards, who now has yet another paid newsletter service with Agora Financial — this one that he’s selling today is called Jim Rickards’ Private Dealflow, and it seems to be focused on the private placements that so many mining folks are obsessed with.
Private placements, in case you’re unaware, are deals that companies make for financing — they sell shares directly to investors instead of going through an investment bank (as they likely would for an IPO or secondary offering, for example), and those investors often get a bonus in exchange for offering up this capital… often the private placement is done at a discount to the market price, or includes some sort of warrants as “sweetener” for the deal, and sometimes there are also negatives, like required holding periods or shares or warrants that aren’t listed on an exchange, which means they’re hard to sell.
Marin Katusa and Frank Curzio have talked up quite a few private placements in the past year, and sometimes they turn out to be appealing opportunities… particularly if they come with long-term warrants. Sometimes, of course, they also turn out to be hugely disappointing, at least in the short term — like any other investment in a mining project, they can lose value if the price of the commodity (gold, in this case) falls, or if the actual project is a disappointment (poor drilling results, poorly capitalized or managed, accidents or permitting problems, etc.) As should probably go without saying, a company that has to include sweeteners like warrants to raise needed capital is not a company that has a 100% guarantee of success.
So what is the deal that Jim Rickards is pitching now? Here are some clues from his ad about this “Valley of Gold” project:
“… if you get in on a well-run mining operation in this area…
“With a high-quality deposit and a favorable cost structure…
“You could get extremely rich.
“And the operation I’m about to show you is the best one of its scale I’ve ever seen, on all these counts, and more.”
And, to prep you for the fact that this is a $5,000/year newsletter service (that’s about as expensive as retail-oriented newsletters ever get):
“This is a very exclusive, private deal — and it’s not cheap
“The general public can’t get in on the special opportunity I’m about to show you.
“It’s intended for private individuals who meet certain very specific ‘accredited investor’ income and asset criteria (more on these shortly).
“And I’ll tell you right up front — even if you do meet these criteria…
“If you’re not comfortable with the thought of investing at least $25,000 in a gold mining venture…
“Or if you’re uncomfortable with the risks of private investing…
“This deal is not for you.”
That’s when most of us should walk away, be honest with ourselves, and say “this deal is not for me” … but, of course, we still want to know what the company is. Me no like secrets.
What else do we learn about this project?
Well, it’s in the Abitibi-Greendstone Belt in Quebec, which is one of the major gold-producing areas in North America over the past century…
“According to my colleague and partner in vetting this deal — geologist and all-around genius Byron King…
“Val-d’Or sits on top of an underground rock mass called the Abitibi Greenstone Belt.”
Here are the clues I gleaned from the ad:
“This project is currently in the ‘pre-production’ phase….
“… well over 1,200 holes of varying depths have been drilled on site…
“And over 122,000 meters of core samples have been collected from those holes….
“Intersected ore grades of….
“18.7 grams of gold per ton.
“32.6 grams of gold per ton.
“57.0 grams of gold per ton!”
That’s very high grade, as Rickards notes (he says it’s “up to 16 times as much gold as the average grade of ore rock that Canadian mines are currently extracting”).
What else? Rickards cites one super-high grade sample:
“This incredible intersection of over 236 grams per ton…
“With chunks of pure gold plainly visible in it!
“Like Byron said in his video a moment ago, there are just over 28 grams in an ounce…
“So that’s over 8.3 ounces of gold per ton of ore rock from this particular vein!
“That’s more than half a pound of gold — around $10,500 worth, at today’s prices.”
There are actually about 31 grams in a troy ounce, which is what most of us deal with when talking about gold, but we’ll give them the benefit of the doubt on that. If you’re doing the math, that’s 7.6 troy ounces per ton for that sample, which is still very impressive and would be worth $9,500 if it were above ground and refined (that’s at today’s $1,250/oz gold price).
What else are we told about this mine? It’s expected to begin full scale production in about 18 months, in January of 2019, and Rickards says he expects gold to be at $1,450 an ounce by then (he extrapolates that from the 20% move gold has made in the past 18 months, assuming that it will continue on that trend — which is certainly possible, though I have no idea whether gold will be at $800 or $3,000 in a year and a half).
Rickards also lays out some scenarios for future profits that he says were calculated by Dan Amoss, who is apparently the “financial analyst” on this service (Amoss has been at Agora Financial for a while, he has had a few letters of his own in the past that didn’t pan out and now writes for several of David Stockman and Jim Rickards’ letters… Rickards now has 7 different newsletters through Agora Financial, in case you’re keeping track).
Those scenarios include up to 1,253% ROI for the company by 2023 (assuming a $4,800 gold price by that year), or 374% assuming that gold rises 5% a year and reaches about $1,800 an ounce by 2023 (there are no scenarios mentioned for “gold stays flat or falls in price”).
Rickards’ pitch about 3,000% returns is based on the company producing more gold than is included in the Prefeasibility Study that Amoss’ data comes from. He notes that the current study uses the conservative estimates of gold in the ground, high estimates of the mining cost, and a short five year mine life, but that the company probably has more gold than that.
This is common, as mining investors know — the incentive for a company that wants to develop a mine is to define enough of a reserve that they can get financing to build and operate the mine… there’s no reason for them to wait a couple more years, drill more holes, and “book reserves” that go far beyond what is needed to make the project financially feasible… they can wait to spend that exploration money after they have regular cash flow coming in from the initial production, and expand on those reserves in the years to come when they need to identify the ways in which they can expand the mine.
The numbers that Rickards uses will give us some clues to add to the Thinkolator:
“That’s the number of recoverable ounces listed in the PFS as ‘proven and probable’ gold reserves (or ‘2P’ in mining lingo).
“All the ROI projections you saw earlier are based on this 114,916-ounce figure.
“The thing is, this ‘2P’ gold-in-place figure is now practically obsolete…
“Because of the second number: 236,000.
“This is how many ounces newer on-site studies from 2015 classified as ‘measured and indicated’ gold resources for this project.
“In the mining world, ‘measured and indicated’ estimates are just as valid for economic projections as 2P reserve figures are….”
I don’t know if that’s a fair statement — “reserves” and “resources” are different things, though certainly some folks will consider both.
Reserves, whether Proven or Probable, are well-defined by drill holes with pretty tight spacing (clearer evidence for Proven than for Probable, as you would guess) AND are deemed to be economically viable to produce based on some measure of current or recent commodity prices.
Resources don’t include an economic assessment, but Measured resources are deemed to be real and defined ore, Indicated are resources that are likely to exist but perhaps not as well defined (with drill holes further apart, for example), and inferred resources are those that are expected to be there but haven’t actually been seen or measured… like when you assume that an ore body that’s present in one area continues into another, with some evidence but not necessarily a level of certainty. The definitions are all a little bit squishy, but it’s important to be aware of the relative meaning of those terms when you’re looking at mining company reports (the official standards, from the Canadian Institute of Mining, Petroleum and Metallurgy, are here if you’d like the straight dope).
But anyway, that does let us in on the “secret” of which company this is… Rickards is almost certainly teasing Monarques Gold (MQR on the Canadian Venture exchange, MRQRF OTC in the US)
If you’d like the bullish case for Monarques Gold, you can check out their paid promotional piece run by the National Investor in Canada a few months ago. The details match up exactly with the teaser pitch when it comes to resources, reserves, and economic feasibility of the project, which you can confirm for yourself if you like using their most recent investor relations presentation or the press release about their 2014 Prefeasibility Study.
The project is the Croinor Gold Project, which includes those reserves and resources mentioned in a previously mined area, plus the mill they acquired when they bought the Beacon property last Fall (the mill is about 40 miles from the proposed Croinor Gold Mine, and is already permitted). They seem to be in pretty good shape as far as their development plans, and they are drilling this year, presumably to beef up the reserves (they did, as noted in the pitch, upgrade their measured and indicated resource to 236,000 ounces last Fall). And yes, their best intercept so far has been one meter of ore that measures 236 grams/ton in one of their core samples.
As for any private placement that Rickards might be promoting, I haven’t seen any word of that yet. They did just do a $5.1 million private placement in March, so they have a little less than $10 million in cash and will need roughly $42 million to get the mine up and running if the Prefeasibility Study they did back in 2014 still holds. That study assumes “total cost per ounce” of $1,038, which means it is in no way a “low cost” mine, but it is a high-grade mine and it’s fairly small, so the capital requirements are not terribly daunting and the profitability of the project is pretty decent.
The yellow flag in the Prefeasibility Study is that the Pre-tax NPV of the Croinor Gold deposit was calculated to be $25 million ($15 million after tax), so that’s not all that encouraging for a company that is already valued at about C$50 million… the value of the deposit could, of course, be much higher if they add more to the reserves, extend the mine life, or the price of gold goes much higher (their Prefeasibility Study was done in the Fall of 2014 when gold was at roughly $1,200 an ounce, pretty close to the current price, and assumes that gold reaches $1,459 by year five, so they’re pretty close to Rickards on that estimation).
So… there you have it. I don’t know what the terms might be of any private placement that Monarques might roll out over the coming months to Rickards’ subscribers, but they’ll need to ramp up the size of the project pretty considerably beyond that initial Prefeasibility assessment to make it worthwhile. That’s eminently possible, but I don’t know much else about the project or what the odds might be — and whether or not any private placement Agora might provide access to makes sense for investors will, of course, depend on the terms for that private placement… but if you like Monarques at a C$50 million valuation, well, you don’t have to pony up $5,000 for access to some unknown private placement, you can just research it and buy or reject the shares on the open market… if Rickards is right about the 3,000% return potential, then the currently trading shares will probably have similar potential, depending on private discount or warrant terms, to any private placement.
If you are interested in pursuing these kinds of private placements, you can also always contact a company directly — sometimes they promise things to middlemen like newsletter writers, or keep access under wraps in some other way, but the newsletter can’t actually be the one that sells you the shares, that has to be done by the company or its agent.
And the other thing that’s frequently a caveat for these kinds of “private access” services is that they do not offer refunds at all (Private Dealflow has no refunds), and they cannot guarantee access to any private placement — so if they’re oversubscribed, or you don’t qualify to make one of the investments, or you decide against an investment once you’ve seen the specific terms, you’re out of luck and Agora still gets to keep your $5,000.
In case you’re curious about that “accredited” requirement: For these kinds of private placements that require you to be an accredited investor, the general definition of that (from the SEC) is that you have to have a million dollars in net assets outside of your primary residence, or have income of $200,000 or more for several years in a row, $300,000 for a couple.
So that’s all I’ve got for you… Rickards and Byron King and Dan Amoss are pitching some kind of investment in microcap mine developer Monarques Gold in Quebec, whether it’s a private placement or some other opportunity, and it’s a publicly traded company that has plenty of available information if you’d like to evaluate it on your own. Not my cup of tea given the small size and the cost, but it could certainly work out… if you’ve got a take on Monarques or Rickards or on private placements in general, I’m sure we’d all like to read your comment below. Thanks for reading!
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