Phase 1 Investor is the big kahuna newsletter at Stansberry & Associates, the $5,000 newsletter that they typically discount to $3,000 when sending out promo emails …
… and they market this letter so heavily that Gumshoe readers flood our inbox whenever a new Phase 1 teaser ad runs.
So … another of their teasers hit the inbox heavy over the weekend, and it sounds like a doozy.
Here’s how Frank Curzio introduces it:
“I’ve recently discovered a very interesting, and possibly a very profitable, situation with a small gold stock I’ve been watching…but I want to be clear from the start:
“What I’m about to share with you may be the single most controversial opportunity you’ll ever see at S&A…
“As a matter of fact, this situation is so controversial and this stock is so small and volatile that we hesitated to even share this fascinating story.
“But for the right people, the situation is potentially so lucrative that we’ve decided to share the details in this presentation and let you make your own decision. Fair enough?”
OK, well that’s reasonable — that’s pretty much what I have to tell you every time I write about a stock: I can tell you about it, but if you’re dealing with individual stocks, even non-controversial ones, then grown-ups have to make financial decisions for themselves. Most folks who would subscribe to a newsletter this expensive are experienced enough to have internalized that info … but someone who wanders by Stock Gumshoe because they’re curious about this heavily promoted teaser might think it’s a guaranteed winner just because an expensive newsletter is recommending it.
I’m writing as I go and haven’t ID’d the stock just yet — I’m sure we’ll get to that in a few paragraphs, given the well-rested power of the Thinkolator on a Monday morning, but we’ll just throw out that “caution” flag here before we even get started. Expensive newsletters often recommend riskier picks or smaller stocks, given their generally smaller audiences, but they don’t necessarily perform better than inexpensive newsletters every time they pick a stock. Phase 1 has had both good and bad picks over the years, and some of them have been failures based at least partly on political/legal/regulatory risks like they’re talking about with this teaser (Groote Resources, for one). The last really successful mining pick of theirs that I think we covered was about a year ago, the Carlin Trend explorer Gold Standard that shot up dramatically early in 2012 on good drilling results … before coming back to earth in the second half of the year for reasons that I haven’t followed (it’s now back down to close to where Curzio first suggested it, don’t know if it’s just the collapse of all gold juniors or if there’s some company specific issue).
So that’s the fair warning before we begin — what, then, is Curzio teasing this time as “The Most Controversial and Undervalued Gold Stock in the World?” Some hints for you:
“Here’s the Story…
“Recently, a major gold discovery was made in an unusual location. It also happens to be home to a popular tourist destination. As a matter of fact, about 30 MILLION people have visited this place over the past 10 years and none of them realized how close they were to one of the largest gold discoveries of the past decade.
“According to veteran journalist Michael Theodoulou:
“No one had considered prospecting for gold there because the area had been ignored for so long.
“That is, until a veteran geologist with a small mining outfit, based out of Australia, realized the land near this instantly recognizable landmark could contain incredible amounts of gold and other precious minerals. He began exploring the area and learned quickly that his instincts were correct.”
And then we get into a few things that almost approach being details:
“As it stands right now, this could be THE largest gold mine on the planet
“NOT owned by a major mining firm.
“And here’s where it gets really good…
“One of the mining industry’s leading consulting firms, Roche Process Engineering, has independently reviewed and verified the size and recoverability of this massive gold deposit in a Definitive Feasibility Study. International consultants agree this massive deposit is in the league of the world’s largest gold mines. In plain English, that means there’s real gold – A LOT of real gold – in this deposit.
“The mine has already produced over 600,000 ounces of gold and is expected to ramp up to over 400,000 ounces per year by 2014. That’s enough gold to make this one of the top 25 producing gold mines in the world.
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just click here...“The total value of the gold in this enormous deposit (as much as 15 MILLION ounces and growing) is conservatively estimated at nearly $25 BILLION – 25 times the market value of the small company that made the discovery.”
OK … so, huge deposit, company that’s worth roughly a billion dollars, already producing. More? You betcha!
“What makes this situation even more remarkable is that practically no one is paying attention to this situation, except for a handful of the world’s smartest industry professionals.
“That’s due mostly to the fact that this is a risky venture… in a very risky place.
“As of this writing, shares of the small company sitting on this giant golden treasure are trading for practically nothing (under $1 per share) compared to the value of the precious metals it controls…but for reasons I’m about to explain, that could change very soon.”
Then we get to the hints about the controversy — the reason this stock is trading at this price, we’re told, is that there’s a lawsuit hanging over them. And it doesn’t sound like it’s the typical regulatory problems for a gold miner or explorer — it’s not environmental problems, or land ownership issues, or lying financiers. Here’s more from Curzio:
“Well, right now, this small gold company is at the center of a major legal dispute over the rights to mine the gold. This is an unusual case. It’s not a dispute between the government and the small gold mining outfit. As a matter of fact, even though the small gold mining company is at the center of the dispute, they are not even a party in the case.
“The case was filed by an activist attorney who believes the contract the government signed with the small miner is unfair. He thinks the government should be making more money from the mine. And that’s why he challenged the contract’s validity in court.
“The courts recently ruled the contract to be 100% legal and valid. However, the contract contained a provision that required the company to obtain approval from specific government officials before gold could be mined.
“Based on the information provided to it, the court found insufficient evidence that the proper approvals were obtained. And for that reason, the court ruled the company’s mining lease invalid.
“Both the government and the small gold company disagree. They insist the proper approvals were obtained. But for unknown reasons on which we can only speculate, the documentation was not provided to the court. And therefore the court made its ruling based on insufficient information.”
So we’re told that to a large degree, the future for this company rests on this legal case. Short version: They win, people jump back on board the undervalued stock; They lose, the company owns nothing of value and the stock plummets. Curzio seems pretty confident that it will work out for them:
“The London Telegraph reports the small mining company looks as if it has a good case. And analysts following the situation agree as I’ll show in a minute.
“Another article refers to the lawyer behind the case as ‘a well known trouble maker’ and calls the lawsuit ‘spurious’ and ‘a waste of everyone’s time.’ The author, a professional money manager who has been following the situation closely also says it is ‘highly probable’ that this small gold mining company will win the case.
“But of course, this outcome is not guaranteed. Anything could happen. And if the ruling goes against this promising gold miner, it could lose the mine and shares could tank.”
Curzio even gives a long laundry list of reasons why he believes the company will win, and the mine will continue to grow — I’ll share the headlines here, you can go read his ad if you want all the detail:
- “Reason #1: The local government has a significant financial interest in the project.
- Reason #2: The government has thrown its strong support behind our small gold mining company.
- Reason #3: The mine is critically important to the nation’s developing economy.
- Reason #4: The government desperately wants to attract foreign investment.
- Reason #5: The government has made no attempt to shut down the gold mine.
- Reason #6: Analysts following the story expect this small gold miner to win too.
- Reason #7: Funds and Institutional Shareholders are loading up on shares.
- Reason #8: Insiders are buying—hand over fist.”
And one final set of clues to feed into the gaping maw of the Mighty, Mighty Thinkolator:
“These guys have been operating successfully in one of the most challenging environments in the world for over 15 years. The geopolitical situation in this country scares most investors away. Yet the executives of this small mining company have overcome the instability of this region and built the world-class gold mine I’ve told you about.
“To date, it’s the only producing gold mine in the entire country which gives this growing gold miner a significant first-mover advantage. The company continues to overcome all obstacles and deliver results as promised. They recently confirmed their plans for another record year in 2013. They also reiterated their goal to ramp up production to 450,000 to 500,000 ounces of gold per year.”
Enough? Indeed … so we cogitify, thinkolate, calculize and find that this is almost certainly … Centamin (CEE in Toronto, CEY in London, CELTF on the pink sheets).
And why is it so cheap relative to the potential value of their gold in the ground, and the level of progress they’ve made in developing the mine? Well, part of it’s that lawsuit … and part of it comes from a reminder of what the company’s name used to be: Centamin Egypt.
Yes, this is that same Centamin Egypt that was teased by a few folks several years back — one of them almost six years ago in a pitch called the “Gold of the Pharaohs”, covered here when Stock Gumshoe was still wet behind the ears. I later did take a small position in those shares, but was stopped out of them pretty quickly when the stock was falling in the Summer of 2008 — so I missed out on the huge run Centamin had with gold’s rise and the beginning of actual mining at their site in Egypt in 2009 and 2010. The stock topped out around $3 a little over two years ago and bottomed out below 50 cents in a quick collapse when the legal stuff went against them in December, so there’s plenty of volatility despite the fact that it’s a pretty big junior producer.
These shares are followed far more closely in London and Toronto than they are here, so you can see some of the usual kinds of chatter about them on the Motley Fool’s UK website here. Goldman Sachs reportedly has a 130p price target on the shares that would require the stock to rise 150%, and there have been many other folks calling notice to the undervalued shares. Of course, there are also regulatory and operational risks that probably exceed those of most gold miners — there’s one bearish article from a UK pundit here if you’d like a bit more perspective. There’s also a fairly thoughtful piece from Arab Finance here on the legal challenge that quotes the company as anticipating some response to their legal appeal early this year and hoping for a resolution during 2013 — even though almost all miners are suffering now, and Centamin has other issues beyond just their exploitation permit (like rising fuel costs, and customs “intransigence”), a positive legal decision would almost certainly be a positive catalyst for the stock. As Curzio noted, a negative decision, which seems, according to many analysts, to be unexpected now, would be very, very bad for the stock.
Centamin has been operating in Egypt for a long time, with an exploration project at Sukari for a decade or more before they started to build the mine, and plenty of delays along the way for water, fuel, customs issues and anything else you can imagine. The specific lawsuit that’s impacting the shares now is apparently an activist lawsuit focused on reserving Egypt’s wealth for the Egyptian people — the same lawyer filed similar suits in recent years to overturn land sales or similar deals by the Mubarak regime. I have no idea how this one will end up working out, and it is clearly politically sensitive in a country where the political climate has definitely changed significantly — dealing with a young democracy is not nearly as certain or simple as dealing with an entrenched dictator like Mubarak.
Centamin has a pretty good Q&A on their website here about the lawsuit (which has not stopped production at the mine), and they also have a recently updated investor presentation here about the potential of Sukari and their ramp-up plans — assuming that the government or other outside factors don’t interfere, they appear to be in a pretty solid growth phase for getting up to their anticipated 500,000 ounces a year of production in 2015.
So … feel like taking a flyer on what might be a “double or nothing” bet on the “gold of the pharaohs” (at least over the next few months)? How do you weight the political and legal risks against the large size of the mine? Let us know with a comment below.
P.S. Many of the versions of this teaser ad start with a big emphasis on the fact that the “insiders are loading up” on shares of this stock. There has been a little bit of institutional buying from some major holders over recent months, but all the relatively large insider buying from directors and executives happened over the Summer, at prices significantly higher than Centamin trades for today. Insider buying in clumps like this is generally an indicator of a stock that will rise, but they didn’t know about the lawsuit then and insider buying does not guarantee a rising stock, it just improves the likelihood on average.
Who in their right mind would invest in Egypt? I can just imagine the Muslim Brotherhood taking control of the mine in order to pay for their weapon purchases. No thanks. I will stick to Canada or Nevada.
Agree, Egypt is a mess and will be for some years to come. The Country is flat broke, the people are restless and the Muslim Brotherhood seems unable to govern. Any business that is foreign owned and has assets is a target for confiscation. Look for mines in Alaska or Canada where the government is not so messed up.
No one knows what will happen in Egypt. I certainly don’t. although if there is enough chaos the army may well take control again. However, it is very interesting that my favorite oul producer, Apache, is heavily invested in Egypt and doesn’t seem to be hurt by it in terms of the stock price.
Replace “Egypt” with “United States” in the comments above. One would think
they were posted by Mitt Romney.
Why bring Romney in? What is accomplished?? I like Romney and voted for him . If you do not and did no;t don’t give a d***.
Me too if people were smart enough to realize he was one of the best business people in the country and probably we’d be on our way to prosperity by now. The fools who stayed home gave us OBAMA AGAIN
Romney one of the best businessmen in the US? Only if “getting money” is better than “making money.” He got his millions by doing leveraged buyouts, looting the companies, and then abandoning them with crippling debt while he and Bain walked away with millions. That may be “good business,” but he produced nothing of value. Ron Paul may not be a great businessman but both he and Gary Johnson built their businesses honestly, exchanging value for value.
“To pay for their arms…”
What, like other governments do?
As long a it suits western interests, there will always be unrest.
there are so many safer stocks and that lure of big bucks rarely plays out I took a shot on a small cmpany called CODI which had a big dividend but also some good support. We’ll see how that plays out but my stops are tight as on any of these spec things
I would prefer to invest in companies not under Muslim control and subject to Sharia Law which helps fund terrorism.
This is a classic example of why I no longer use Stansberry,,,,as the gold miners are sinking like the Titanic and commodities are following..he comes up with some tiny little firm which struggles to stay in business.
Porter Stansberry is a fly by night slickster who is doing so well on his investments he bought a yacht………and rents it out to anyone with a wallet. Seems too much like a scam artist me. I’ll stick with Seeking Alpha and Daily Trade Alert and of course our fearless leader travis. LOL
2 of Porter Stansberry’s natural gas infrastructure stocks that I bought in December have exploded and are up 60% since he recommended them just 3 months ago. Those are the only recommendations of his I’ve ever done and they’re huge winners. I have no idea how his actual track record is but find this gold stock enticing. It looks possible the government and the mining company will split the profits and the stock doubles. Much riskier though than the natural gas stocks(LNG and CBI)
what stocks are they? Inquiring minds want to know
Dan Rosenthal in The Natural Resource Hunter reco’d this stock back in 2010 when it was $1.84 and “sold” it 1/11 for $2.59. At 77 cents today, it seems cheap, but I agree with the above comments and would not buy it again.
At this point in time, why not focus on which of the badly beaten companies are certain to survive?
Casey Big Gold comes out with another issue tomorrow and I expect they will be doing just that, and it would be a much more conservative play but maybe about as much upside potential.
Roger
InvestLetters.com
There are two things in that part of the world that interest anybody. Oil and Gold. Assuming predictions are true and the world becomes ever increasingly less dependent on their oil and assuming they have to sell oil at a deeply discounted rate just to move it, it becomes less interesting to the world. Given the growing strength of radical Islamic groups in that region, they will need to control the gold to finance their terrorist acts around the world. I’m as sure that they will find enough customers in nations not friendly with democracy (China and N. Korea are just two that quickly come to mind) to sell that gold to as I am they will take control of it. With or without a victory in litigation. No thank you. This would be the equivalent of investor suicide.
I concur with most of the above comments. If CELTF is a “double or nothing” proposition why not buy NEM or AEM with far more than “nothing ” on the downside, and far more likely to “double” from current prices without all the extra risks?
I have a small amount of Centamin, and having had a good profit for a while i am now down about 15%, hanging on and glad to see those crumbs at Stansberry pumping the stock.
What I find much more interesting and would like to hear anybodies views on,is Petropavlovsk. This used to be called Peter Hambro mining and was tipped by Questor in the Telegraph as being good value at about £10 ( having been “oversold ” from a high of about £15). I bought some, then again I thought buy more when they dropped to £7 ish again I thought be brave when others are fearful and bought again at £3.
Am I a mug? surely this is a good company with solid fundamentals even though it is in Russia.
Do your own research, they say but how do you value such a company? I trusted Questor to have a good take on it, I hope i was right.
Risky, risky… The stock’s future pends from a thread. Nevertheless IMO the chances this stock goes up two, three, or more times in value are more numerous than those that say it will plummet. This opportunity is for aggressive investors only. If you have a diversified porfolio, and would like to risk 5% to 10% of it, with money you would not care if you lose, this might be it (says Curzio.)
I already own Gold Resource Corp (GORO). It’s not going to be a ten-bagger but I get a 5% dividend while I wait for gold to go back up. No Muslim gold for me.
Story sounds like another company I am following. Turquoise Hill Resources TRQ
Have you seen the teases for this “up and coming supertech stock” that Tom Gardner from The Motley Fool is pushing?
It seems to me that in the past year, price spikes after a Phase 1 teaser mailing have been less potent than in the past.
Lol, you made the best case with the shortest sentence. Way to some it up. 🙂
Woops, my reply was meant for copperhead.. but good observation.
All the juniors are down big time. Ther are helluva lot better picks among them than a gamble on ‘double or nothin’!
Centamin Egypt was recommended by Stansberry’s group in the past, probably about 5 years ago. Resource companies that face corrupt governments in poor countries often experience very costly and unjust confiscation (e.g., Crystallex vs. Hugo Chavez, YPF vs. Cristina Kirchner in Argentina) or enormous taxes. Even Petrobras in Brazil was sucked out by the government. Do you want to bet against the government of Egypt in a game whose rules they make? That is not investing.
As far as Apache goes, their stock price has done very badly. Why? For one reason, their operations in Egypt. If Apache trembles (and they do) what will happen to tiny Centamin? A quake.
As far as Stansberry himself, believe it or not within the past few days he wrote to his subscribers that it is not worth investing in companies that produce commodities. He cited Newmont as one example. No surprise, this occurs after some of his worst recommendations were for commodity producers. So on one hand he says “don’t” and on the other hand he says “do” by promoting this high-priced advisory service. So he’s got to be right. Also wrong.
Yep, Porter Stansberry said in his March 1, 2013 “S&A Digest”: “So a good rule of thumb for part-time investors is simply don’t get involved in commodity companies.” But he acknowledges that sometimes such investments can be very lucrative, and adds “Look for commodity sectors that have been in multiyear bear markets… where major cap-ex spending has been declining for years. That’s where you’ll find the best opportunities.”
In response to VentureShadow’s comments. It’s a little bit like real estate sales in the great state of Oregon. Who represented who was a big issue. For many years licensed real estate agents represented the Seller only and the Buyer had no representation, technically speaking. Finally after many years of anguish over the representation issue in this state the Real Estate Division made it clear they were not comfortable with dual agency (representing both buyer and seller – even though both understood this type of representation and signed off on it). Then they encouraged licensees to either be a Sellers Agent or a Buyers Agent. And the Broker who owned the company – the guy/gal at the top? – well they were the only “Dual Agent” acceptable to the mind of the Real Estate Division.
The analogy here is that Stansberry has many newsletter writers on his staff. Some insist this is the time to jump into the market while others say hang onto your cash for awhile. If you have access to all of the Stansberry newsletters this is easy to see. Hence as you point out Stansberry him self is like a Dual agent Principal Broker while everyone he hires to write newsletters are for investing or against investing at any given time (licensees). So you are correct he is right and he is wrong.
You gave Stansberry the benefit of doubt that he has since shown he does not deserve. A couple of weeks after he himself advised investors to avoid companies that produce commodities, citing Newmont specifically, he himself published two more essays. One essay urged buying Newmont, specifically. The other essay was obvious backtracking, where he said that he meant not to buy companies that produce commodities unless you know what you’re doing. That backtracking statement is trivial and obviously meaningless. How about this one: don’t follow Stansberry unless you know what you are doing. Or this one: Don’t do anything unless you know what you are doing.
Obviously, Stansberry’s staff is too afraid of him give feedback about such self-conflicting writings. Stansberry appears to drag around an enormous ego problem chained to his leg. What does this mean to us? On one hand, the quality of his work means a lot to his own feelings of self-worth, it’s not just money or a business. On the other hand, his personality gets in the way of collaborating with his staff, and he is particularly susceptible to influence from people he considers more accomplished than he is.
I prefer KGC and AUY for when Gold comes back..
THE WHOLE ISSUE HERE IS CAN WE TRUST ANYTHING FROM STRANSBERRY. hERE IS AN OUTFIT ASKING FOR $3,000.00 SO THEY CAN TELL YOU TO ROLL THE DICE AND SEE WHAT YOU CAN COME UP WITH. WE KNOW THE ONLY WINNER WILL BE THE PEOPLE AT STRANSBERRY
I don’t understand why there is so much Stansberry-bashing going on. If you don’t like the $3K newsletters, don’t buy them. I believe there is a trial period even for them such that you can get at least 85% of the cost back. I find the $79 newsletter quite interesting and useful. He goes into quite a lot of detail about each recommendation, more than most other newsletters I have seen. Even the free daily newsletters have value. Is he rude? Yes, he revels in it. So what. I have learned a lot and made money, and I was no novice to start.
Ira – He’s beyond rude, he’s a flat-out racist. At http://www.stansberryradio.com/Porter-Stansberry/Latest-Episodes/Episode/123/1/Ep-48-Following-the-Path-to-Mastery he goes on and on about people who “got away with it” in the recent recession because they were black.
At http://www.stansberryradio.com/Porter-Stansberry/Latest-Episodes/Episode/120/Why-Oil-Is-The-Next-Revolution# 11 minutes and 16 seconds into the audio he clearly says”f—king ni–ers.” It is even in the transcript!
I won’t do business with such people on principle.
Porter’s podcast is a must listen for me every week. He can be irreverent at times and I don’t agree with everything he says but he makes you think and he is a refreshing change from the politically correct pablum of mainstream media.
Anyway, there is no way he is a racist and you are misquoting him. When he says those words he is making fun at someone else and immitating them saying those words.
FarmGirl…I agree that Stansberry is both rude and a racist. I dropped a subscription for this reason.
I dropped Stansberry not because of rudeness or racism. Which BTW Paul, I agree with you even though I found it to be very inappropriate and offensive. Anyway, I dropped him because my email was bombarded every day with as much of a sells pitch for another subscription as anything else. I don’t pay for advertisement subscriptions. I pay for information.
I’m with you Wayne.
For anyone who has this problem , you can be taken off of the promotional emailing list. Just email info@stansberrycustomerservice.com requesting to be taken off the promotional emailing list- customer service does this every business day.
I agree with you. Same Centamin Egypt that was teased by a few folks several years back