“The New El Dorado” (Chris Mayer)

By Travis Johnson, Stock Gumshoe, April 14, 2011

Well, it looks like our tech problems are solved for now … fingers crossed — so I’m republishing what I sent out via email while StockGumshoe.com was down (and yes, if you’re not onboard with the Stock Gumshoe Daily Update, which is free, you missed out!)

What follows is all about a little(ish) gold stock, teased by Chris Mayer, free email subscribers got it this morning.

Today we get to take a look at a region that has been a hotbed of investment activity recently: Colombia.

Some folks are saying that Colombia’s resurgence is being ignored by mainstream investors, who still associate the country with coca fields and kidnappings and the sometimes simmering, sometimes boiling civil war that they’ve been living with for 40+ years — apparently it’s at least somewhat safer now (though the oil and mining company money coming in will probably help fuel La Violencia). Colombia has long been known to have very desirable natural resources, and is becoming an important South American oil producer — and the improvement of conditions has led to more and more companies making progress in exploring for natural resources throughout the country.

We’ve seen the “buy Colombia” spiel a few times from most of the big newsletter groups, but this time we’re getting a specific pitch for one company. The tease comes from Chris Mayer for his Mayer’s Special Situations newsletter — and he reckons you could double or triple your money in months.

Mayer is also ready, of course, with a tease-y story for us, and a little $2 company that has apparently found a “Mountain of gold trading for a fraction of its value.”

So what is it?

Well, first we have to sit through the presentation — yep, again Mayer is spinning a long tale by reading an interminable Powerpoint presentation. I really, really wish that these boring “video” presentations weren’t so successful, the fact that they apparently do 10X better than plain ol’ letters means that we’re seeing more and more of them, and they’re taking a helluva lot of your Gumshoe’s time (or perhaps that’s their dastardly plan?) And yes, I know that many of the “presentations” come with a transcript — but unfortunately, not all of them. And this is one of the unfortunate ones.

So much of this will not be direct quotes from the ad, but I’ll do my best to be accurate.

The story starts with Laguna de Guatative, which is apparently the birthplace of the story of El Dorado, 35 miles northeast of Bogota.

The story started with the Chibcha tribes and kings of that area, who traded gold with the lowland tribes and eventually got the attention of the Spanish invaders.

The origin story of El Dorado, apparently, starts with the ritual of “the golden man”, in which the Chibchas sent a golden man (covered with gold dust) into the Laguna to make a golden offering. The Spaniards saw this, and tried to drain the lake and get at the gold beneath, as did later gold seekers (who did finally find some treasure under the lake).

And now, we’re told, Mayer has found the “New El Dorado” — part of a “modern Colombian gold boom that echoes these past desperate efforts.”

Geez, is he ever going to get to the clues? If not, I’ll be pretty grouchy about having listened this far …

We learn that he traveled to Bogota, Colombia to check it out first hand.

And he shares a quote from the New York Times, just to reinforce the “there’s gold here” story:

“The gold rush here is just a part of a broader mining boom in Colombia, with gold production climbing more than 30 percent last year”

You can see that whole NY Times article here, by the way — it doesn’t mention the name of this particular company (or any others), but certainly does provide some background, particularly on the involvement of the rival warlords, the FARC and God knows who else in owning and operating mines and extorting and pressuring miners.

Then we start to hear about some specifics for our little gold miner:

They apparently have a “Promising collection of properties” in the Cauca gold belt.

A Precolumbian society lived here and mined the gold, and the location is, by the rough map, pretty much in central Colombia.

The company apparently has access to 1,198 hectares.

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And 10 million ounces could be “in the hills” according to one of “the world’s leading independent auditors.”

It has a market cap of just $358 million. Just beneath $2 per share.

Why are shares so cheap, asks Mayer?

The company is not producing at it’s big mine yet, so “the market doesn’t care about them.”

He thinks the market will catch on and the shares will rocket when they start mining — if thing go well, we’re told, they’ll be producing gold by 2013.

Which makes it, in his words, an “easy double” because they trade at a low multiple of the value of their gold in the ground ($33 per ounce is the number he cites).


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