I’m updating this quickie teaser solution for you today because we’re getting a LOT of questions about it over the past few days. The ad originally ran in mid-January and we published the first version of this article on January 20, but it is still circulating widely. The ad seems identical to the one we covered in January, but I’ve updated this article for you today.
The pitch is from Stephen Leeb, it’s an ad for his Real World Investing ($1,495/yr, no refunds), and it’s another mining story… this is the intro:
“Discovered: $26 Billion Treasure Trove 48 Miles North of the Arctic Circle
“Move on this tiny $2 company today and you could walk away with $312,400”
And the catalyst for all of these riches, apparently, is that they’re about to build a road to make this huge “treasure trove” accessible:
“As you’ve seen, a road is being planned in Alaska to reach a massive deposit of copper — a substance more important to our modern way of life than gold, silver, platinum, or lithium.
“After five years of prep work, endless meetings, and legal wrangling, the wheels are finally in motion to unlock $26 billion in trapped wealth and bring it to the outside world.
“And one small company is sitting on the motherlode of it all.
“Its stock is now so cheap that it gives you the chance to turn $10,000 into $312,400… and possibly much more.
“And it’s all coming to a head in the coming weeks.”
And the latest versions of the ad really push the “insiders are buying” spiel… here’s what an email I got noted on Wednesday:
“So when the people running this company started betting millions of their own personal money on a project that’s been in the works since the 1980s, it got my attention.
“The man who led the firm for 15 years has bought 2.8 million shares – currently worth $5.6 million. And he bought them all on his own. They weren’t gifted to him as a stock option or bonus.
“The new CEO is being paid entirely in company stock. He must be awfully upbeat about his company’s future.
“The CFO just invested another $279,800, bringing her holdings to $1.74 million.
“The VP has been buying shares, too. He says he feels like selling his house to buy more.”
So what’s the story? You can see the rest of the ad here if you like, but we’ll just jump to our answer.
That $312,400 is not, of course, a likely outcome — that’s what Leeb describes as one “scenario” that could have the stock spiking to almost $50 a share from the current $2ish. I suppose it’s not impossible, but don’t count your chickens.
What’s being teased here is Trilogy Metals (TMQ in both Toronto and NY) and its projects in the Ambler Mining District in Alaska that htey call the Upper Kobuk Mineral Projects.
The name might not sound familiar, but Trilogy used to be called NovaCopper and was spun out of NovaGold about eight years ago. Stephen Leeb, in case you’re curious, has been a big fan of these folks for many years and was teasing Novagold as a favorite in the years after the global financial crisis… so in case you need an extra reason to be cautious, or you haven’t yet seen how challenging the large-scale mining business can be, we’ll note that Novagold, which had two projects they wanted to develop but has now sold one of them in addition to spinning off its founder and its copper project to what is now Trilogy, has spent well over ten years working to develop a major gold mine in Alaska (Donlin Gold is one of the world’s largest potential mines, with a very high average grade), but hasn’t ever actually built anything or generated any revenue in almost 25 years. In fact, Novagold would almost have to double today to get back to the $16 hostile takeover offer they rejected in 2006 from Barrick (ABX), which owns the other half of Donlin Gold.
But that Novagold business is neither here nor there — what’s this Trilogy copper story? Like Novagold’s Donlin, their lead project is a 50/50 joint venture — the copper-focused projects in the Ambler district are owned by a joint venture with South32 (SHTLF), which is a collection of “non-core” projects in the US, Australia and Colombia spun out of BHP Billiton a few years ago but also, importantly, has a lot of revenue and cash to support building more projects (they’re putting up $145 million in cash). They have some strong institutional backing, like Novagold (John Paulson, Electrum, Baupost, etc.).