That sounds like an enticing headline, right? It’s getting to the point where, with gold at $1,900 an ounce, I’m going to have to start writing about gold mining stocks again — the teasers are piling up, and the querulous villagers are storming Gumshoe Castle and demanding answers.
And since so many folks have not been invested in gold for the recent incredible performance the shiny metal has shown, the interest is high for gold mining stocks — there’s almost always a disconnect between the metal and the miners, gold has gone up in a flight to safety, with folks seeking a save haven for a cash, and is simply seen by many as a way to protect yourself from declining paper currencies. Gold mining stocks, on the other hand, mean you’re not just getting gold, you’re getting a business — and there have been so many terrible mining businesses, and so many challenges for even the best miners, that investors are usually cautious, which means that the mining stocks react far more slowly than the metal. Gold may be a safe haven, but gold mining stocks aren’t — sure, they should go up in value if gold is going to stay at high prices, but it doesn’t usually happen fast. Over the last six months, gold has been up about 35% and the large cap gold miners, as represented by the GDX ETF, are up about 10%.
So they’re due, right? That’s certainly the speculation of many investors, who reason that if gold stays in this “almost $2,000” range for a while the gold miners, particularly those who are pretty big and producing already, are going to be making ridiculous profits. Hard to argue with that — costs are going up so it’s getting more expensive to find and produce gold (new deposits may be more remote or deeper, and mining is heavily dependent on diesel fuel and/or electricity), but costs are not going up as fast as the price of gold has climbed this year, which means margins ought to be increasing.
That’s reason enough to look to some of the big miners, probably — folks like Goldcorp (GG), which I think is still the large cap name with the most dramatic growth potential in the next few years, and it’s easy to call these stocks “cheap” even if they trade at a premium to the market. But that’s not what Michael Lombardi is pitching today — anyone can tell you to buy Goldcorp, which is a well-known $40 billion company … if you want to shake someone’s credit card loose and get them to sign up to subscribe to your newsletter, you need an idea that sounds a bit sexier.
He’s trying to sell his newish Penny Stock Reporter newsletter, by the way, which will run you $89 (“on sale,” naturally).
And FYI, the last small gold stock that one of Lombardi’s newsletters teased — that I wrote about, at least — was Gold Resource Corp. (GORO), which has done extremely well in the year since I covered the teaser, but which is also under some pressure due to a negative report from the folks at the StreetSweeper website today. For what it’s worth, the stock he’s pitching today is much more of a mainstream gold company than GORO.
So let’s see what he’s teasing now, shall we? Here’s the intro:
“Right Now, One Gold Mining Penny Stock Company Is Giving Away Silver with Every Share of Gold….
“I believe we have found one more way to help you get the financial protection you need with the profit potential you deserve.
“In short, we have uncovered a compelling situation within one gold mining penny stock—a situation that has the potential for BOTH the protection of your financial assets and profits for your future.
“Best of all, thanks to their mining techniques, this company is prepared to give you FREE silver right along with your gold investment.”
And the ad tries to make this sound like an unusual and exciting and unique situation:
“… how would like you like to own a piece of a company that is pulling two million ounces of silver out of the ground… as a by-product?
“In other words, they have two million ounces of silver to sell on the open market and it costs them virtually zero to do so.
“At the current spot price of $38 for silver, that’s a very real value of $76 Million…from a stock that is trading for less than $10.00 per share.”