by Travis Johnson, Stock Gumshoe | April 26, 2011 11:45 am
I hate to pick on Chris Mayer too much, as he seems a nice enough fella and has teased some useful investing ideas in the past — but so many of my readers are asking about this “Golden Staircase” stock that I felt compelled to sniff it out for you …
And, yes, to listen to yet another interminable “presentation” for you — I can at least say “thanks” to Stansberry for giving us the option of reading a transcript instead of listening to the “video” … wish his partners at Agora would do the same.
But anyway, this is the lot your Gumshoe has chosen — no point in complainin’ … the tease is for Mayer’s white-shoe newsletter, Mayer’s Special Situations (like pretty much every newsletter dude of note, he’s got a large circulation newsletter that’s a bit less expensive, and a pricier “upgrade” letter that is, depending on your perspective, either designed to recommend less liquid and smaller cap stocks or other “more exclusive” ideas, or to make sure that subscribers wallets are as thoroughly lightened as possible — this letter is currently about $750/year, his “intro” newsletter, Capital & Crisis, is less than $100 a year, though the prices change more often than I change my socks).
So what is the “Golden Staircase?” That’s the term they used for a resource that was discovered in Northeast Ontario about 100 years ago, though the term has also been used for lots of other things (like the chart of gold, or architectural creations, or actual stairs hewn into the ice in the Yukon gold rush, etc.) — that led to the gold rush at the Timmins Camp, which in turn created some of the historic gold mines of that region.
This is sometimes also called the Timmins-Porcupine camp, with the “Porcupine” coming from the name of the trading trail that went up to Hudson’s Bay (and, presumably later, the Porcupine Fault that runs through the region). There are dozens of explorers in the region, drawn by the history of gold mining and by the huge and prolific mines that are still operating.
Here’s how Mayer pitches it to start:
“And The $1.73 Stock That Grabbed This Massive Gold Find Could Rocket To $27 or More…
Here’s How To Claim Your Stake Of The ‘Golden Staircase’ Before the Mainstream Has a Clue…
“… the ONE penny stock that’s scored a potential multi-billion dollar gold mine mere miles away from the ‘golden staircase.’ And this company is no one-trick pony… it’s bursting with other reserves that could hold billions of ounces of gold… and could hand me gains of 1,472%.”
One of the main reasons that folks still concentrate on the Timmins area, going back over old ground that had been explored before and making new discoveries using new technology or insight or luck, is that gold miners love to explore near known, producing gold mines. It stands to reason that if gold was found in massive quantity a few miles away, your chances are better searching there than they would be a few counties over in completely unexplored territory. And this area has fueled at least two massive mines, the Hollinger Mine, which produced about 20 million ounces and was a huge operation for about 50 years, and the Dome Mine, now owned by GoldCorp and still the longest-lived continuously operated mine in Canada, and still producing (though from expanded properties beyond the original Dome Mine) hundreds of thousands of ounces of gold per year.
So we know roughly where the mine is — somewhere about 40 miles from the Dome mine, and with an 18 sq. km. property “bursting with gold.” Sounds delicious, no?
How about some other clues?
The stock is priced at $1.73, we’re told — and he thinks it could reach $27 or more.
“Few gold mines like this exist anywhere in the world”
“They acquired the property through a quiet merger deal with another gold miner.”
We’re also told that there is an existing producing mine on this site, that it ha been built out and upgraded, and that they also have a mill, which just recently kicked into high gear. So they’re not starting from nothing.
And we get some numbers — “Known reserves of 1.33 million ounces of gold” and they
bought the property for $6.3 million.
Beyond that, there’s another mine on the property with a proven history of production. And as I continued scouring the “presentation” for clues I picked up the following:
There are “four drilling rigs on the property”
The stock is “not a one trick pony — more gold reserves elsewhere in the world.”
Other properties are in:
Saskatchewan — 1.09 million ounces
Southern Mexico — 100% ownership on Ycatan — initial testing for another million ounces.
Northern Mexico, Sierra Madres — 80% ownership.
Three gold exploration projects in the Dominican Republic — Drilling right next to a hot spot owned by Barrick and Goldcorp.
And he says that company currently has about $4.9 billion wroth of gold, but the market cap is just $311 million. Could “soar to $27 or more once Wall Street catches on” … and, of course, “that’s a conservative estimate” and the company could grow its reserves substantially.
To continue to tantalize, Mayer gives a few examples of other huge gainers from miners who shot up once “word got out” on their discoveries, like Copper Lake and Aurelian Resources — he doesn’t, of course, mention the hundreds of explorers whose mines turn out to be less rich than hoped, or too expensive, or otherwise disappointing, but I think we all know that junior mining is a sector that’s not for the faint of heart.
So who is this one that Mayer thinks could let you “retire rich … fast”?
“The golden opportunity of a generation,” per Mayer, as interpreted by the machinations of the Mighty, Mighty Thinkolator must be …. Brigus Gold (BRD in both Toronto and NY)
Brigus is a company I know of only because one of my larger holdings, Sandstorm Gold, helped to finance the expansion of their Black Fox Mine (that’s the one near Timmins) by buying a 12% “gold stream” on the property.
And Brigus, though young, has been a disappointment for investors during this gold bull market — they were created by a merger between Linear Gold and Apollo Gold just last Summer, which I suppose was at least “quiet” enough that I never heard about it (not that I was listening), and they used to have a huge hedge position that meant the upside was somewhat limited for their Black Fox production. The Sandstorm financing deal was done largely to remove that broader hedge position and give them more exposure to rising gold prices. I don’t know why they haven’t gotten some of the “love” that’s granted to other explorers and miners, but it might just be that their properties don’t fall into the “spectacular” class, they’ve been small scale producers, and the projected production from their one existing mine is fairly limited so far (though Sandstorm’s bet is clearly that the mine will be expanded beyond the current plans).
Brigus does have the other properties teased by Mayer as well — they own the Goldfields property in far northern Saskatchewan which includes deposits they call Box and Athona, near Uranium City on the North Shore of Lake Athabasca. They say that a “production decision is pending” on these properties, which are their most advanced non-producing properties and have gone through at least some of the feasibility studies required — assuming they go through with it, they’ve been saying that production could start in Goldfields in 2013.
They also do own properties in both Northern and Southern Mexico, though they’ve sold or tried to sell interests in both — Ixhuatan just recently (that’s the southern one), which they just announced they’d sell 75% of over time in a deal that seems structured to give Brigus some solid upside eventually and a royalty if the mine eventually is built and produces, but not much of a windfall immediately. Their property in the Sierra Madres is called Huizopa, and one of the companies that became Brigus did own 80% of it, but in a dispute settlement with their joint venture partner that was finalized late last year it looks like they now have just a royalty on any eventual production.
And they also do have a joint venture in the Dominican Republic with a company called Everton, where there has been a lot of chatter lately about the potential monster deposits found by others … Brigus’ position in the Dominican is still classified by them as “early exploration,” but it is near some massive discoveries … so we’ll see.
The focus is certainly on the Black Fox Mine near Timmins right now, and will continue to be mostly there as they explore (yes, they do have four drilling rigs working the area now — with another expected shortly if it’s not there yet) and try to expand the underground mine to increase their reserves and mine life, or to build a neighboring mine at the other end of their property.
Will it work, and will Brigus be the turnaround that clearly some investors are hoping for? Beats me — I’ve looked at the Black Fox data before because of my interest in Sandstorm, and I like the potential, but I don’t know if it’s worth more than they’re valued at or not. The company has come down considerably in recent months, it certainly has been in the $1.73 area and toyed with $2 before, as teased, though it’s now down at around $1.50 even though gold is above $1,500 an ounce, so investors still seem a bit skeptical.
And yes, it’s a small company but not an absolutely teensy one — their market cap is a bit under $300 million now if you count just their 190 million outstanding shares, though they’ve had to do a fair amount of capital raising in their short life and they have a large number of warrants outstanding (about 60 million, roughly half “in the money” and half not).
So … is it your kinda stock? Know more about their properties and potential than I do? (I wouldn’t be surprised.) Let us know with a comment below.
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