Gerardo Del Real’s “This Tiny $21 Million Company Is Sitting on A BILLION DOLLARS OF COPPER” Pitch

What's being hinted at by Junior Mining Monthly?

By Travis Johnson, Stock Gumshoe, October 26, 2017

The promise is familiar to anyone who has had the pleasure of sitting through a promo pitch about a junior mining stock… here’s how Gerardo Del Real’s latest ad for his Junior Mining Monthly opens:

“Score at Least 1,000% on This Metals Superplay — But Only If You Get in by Its Next News Release”

So, naturally, inquiring Gumshoe minds want to know… what are you smoking, and where can I get some?

Kidding!

I mean, we want to know what the stock is.

And we’d rather know without subscribing, because then we’ll be free to be skeptical and cynical and think a bit more rigorously about it… once you pay for something, your brain tends to adopt it as your own and you’ll feel compelled to love it (and it gets worse if you paid for something and the first think you read about it is “it’s going up 1,000%” — then even the most skeptical little neuron that can get itself revved up in your brain has a huge hurdle to jump to even get your attention).

Here’s the sum-up from Junior Mining Monthly’s order form (the subscription comes at a $299 nonrefundable fee, incidentally, then $49/quarter for ongoing issues), to help us cut to the chase…

“This tiny $21 million company is sitting on a billion dollars’ worth of copper, gold, and silver — that fact alone justifies a 1,000% run in share price.

“This copper miner…

  • Has a bottomless expense account
  • Is permit ready
  • Has new drilling results about to be announced
  • Is likely part of a larger porphyry cluster PLUS a second cluster
  • Will benefit even more from a copper bull market
  • Is also sitting on tons of gold and silver, ensuring success
  • And is benefiting from secret drilling results that will doubtless be announced soon.”

So that’s the basic rundown… what other clues can we find in the spiel that I might feed to the Thinkolator? Don’t worry, I’ll try to make it quick…

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“Numerous experts — the most respected geologists in the field — confirm this tiny little $21 million company is sitting on a BILLION dollars of copper.

“Plus 2.6 million ounces of gold. Plus 5.3 million ounces of silver.”

OK, so that’s the size of the deposit. What else?

“All of the copper I’ve told you about so far is located in this company’s first project.

“This copper miner has just begun exploring a second project — and it has yet to announce the findings.”

OK, so we’re dealing with some kind of explorer that’s got at least two different projects… that narrows it down a bit.

Other clues?

He said he viewed the company’s project in the Buckskin Mountains in NW Nevada, and that he got a tour by the CEO, whose name is “Michael.” So if those are true, that narrows it down considerably more.

More hints…

“… the success of this small mining company is underwritten by a giant company with extremely deep pockets…

“It’s benefiting from a rare business arrangement where 100% of the project expenses are covered by a much larger mining firm.

“And by larger, I mean a whopping $14 billion multinational metals giant….

“… it doesn’t mind shelling out a river of cash to maintain its stake.

“This began with $59.3 million in 2014, then $58 million in 2015, and tens of millions since….

“This copper miner doesn’t have to pay for its share of the expenses until the project starts making money — it’ll slowly pay it back with the proceeds.”

And apparently that partner owns shares, too, as does Teck…

“7% of shares are owned by the $14 billion metals giant I mentioned above.

“18% of shares are owned by an even larger company, the $34 billion metals exploration company Teck Resources.”

And, of course, that bit about permits coming soon and providing a catalyst for the stock…

“Everything is on schedule and the permit will be approved just a few weeks from now.

“He showed me the site plan and the location of each body of copper

“Total reserves are at 2.7 billion pounds of copper — that’s enough copper to build an entire city.”

OK, so 2.7 billion pounds would be about $8 billion worth of copper, not “a BILLION DOLLARS” of copper. He includes this about the valuation assumptions:

“And since this project is now permit-ready, this $21 million company should actually be worth at least $225 million.

“Here’s why:

“If we were to conservatively estimate the average market price of copper at $2.50 per pound, that means the market value of this copper is $6.75 billion.

“And this doesn’t include the value of the 2.6 million ounces of gold and 5.3 million ounces of silver that’ll be extracted as well.”

And then we get into some clues that start to actually make sense…

“New drilling results at this copper miner’s second property will add entire new layers of value onto these favorable figures.

“Which brings us back to the Buckskin Mountains of Nevada, and my unquenchable thirst for bottled water and more copper.”

Ah, so this bigger project, the one that’s “permit ready,” is NOT in the Buckskin Mountains… that’s their “second property.”

And this one was apparently acquired by CEO “Michael” because he was friendly with the father-son team that was developing it… and that father-son team was overwhelmed with their more important project in Veracruz, Mexico, which is the only reason, we’re told, that they were willing to give up this valuable “Buckskin Mountains” project.

The other inducements are mostly about how this Nevada property is going to have drilling results soon, which could indicate that they’ve found major porphyry formations or deposits on this property, which is near quite a few other producing or past (or potential) copper mines… and, of course, about how Del Real thinks copper is going to have another bull run that will drive up the valuations even higher.

And, finally, he drops the hint that CEO Michael was “part of the executive team at True Gold.”

So that means we’re now quite overwhelmed with clues here, and the Thinkolator can tell us that this is must be Abacus Minerals (AME.V in Toronto, ABCFF OTC in the US).

Abacus’ most valuable asset is nowhere near the Buckskin Mountains, but it’s also not where they’re putting in their effort these days — those references to specific amounts of copper and gold are silver are exact matches from the reserve statements for the Ajax Copper Project, which is in the permitting process in British Columbia. Abacus has a 20% share of that project, having sold most of it to KGHM Polska Miedz — it looks like KGHM is funding Abacus’ share of development through to production, which is a big deal (the cap ex for building the mine is estimated at $1.3 billion, I don’t know if KGHM has any limits in their arrangement on what they’ll spend, and it reads as though AME does share in the cost of financing development when that comes), so Abacus is pretty much a passive participant at this point.

That doesn’t mean they don’t enjoy their share of the value of the mine, though, despite their passive position in the process right now… and if it does get permitted and built, as seems likely but is never certain, it will be a pretty big copper mine (and gold and silver). But they do just get their 20%, so perhaps that’s where the “BILLION DOLLARS” comes in — their share of the copper in the ground is more than a billion dollars worth at current prices.

Though we don’t use just reserves and current prices to calculate what a mineral deposit is worth, of course — for that you need to estimate the cost of building and financing and operating the mine, which is where feasibility studies and economic assessments come in.

The feasibility study estimated that the Net Present Value (NPV) of the Ajax Project is $543 million at a 5% discount rate, which provides an 11% internal rate of return and a 6.7 year payback… so it sounds like it’s probably worth developing if the operator, KGHM, is positive about the future for copper prices, but it’s not necessarily a slam dunk — that’s a pretty long payback period and a pretty big capital outlay, though KGHM has already committed quite a bit… and Abacus does in fact seem to be on the hook for paying their 20% share of mine development and financing costs once they get the “go” for development and construction, it’s not just a profit share (the skeptics among us will want to note that the NPV drops to $216 million if you derisk it further with an 8% discount rate… so if you derisk it a bit more, or use lower copper prices, that 20% share starts to look a bit less impressive).

If you want to do the math, you’ll note that this after tax valuation of $543 million means that AME’s 20% share should be worth about $108 million. That’s US$. So if you’re positive about that project, you might reasonably conclude that there’s some value in AME at the current market cap of a bit under US$20 million.

And what about that “Buckskin Mountains” property? That’s the Willow Property, which has barely been drilled at all but apparently is promising — they note that they’ll be spending C$788,000 on exploration at Willow this year, which includes up to 2,500m of drilling, so there could certainly be news out of that — whether it will be good or bad, I have no idea.

But what about that father-son team? That’s the Poliquins, of Almadex and Almaden Minerals — Almadex optioned the Willow project to Abacus back in February, and Abacus will earn a 75% stake by spending an agreed-upon amount on exploration and producing a feasibility study within ten years.

And when it comes to that teased Teck Resources relationship, I don’t know what the current status might be — Abacus did issue 18.5 million shares to Teck in exchange for milling and processing facilities that they bought from Teck Cominco in British Columbia, near the Ajax project… though that was back in 2005, and I don’t know if Teck still owns those shares (if so, they don’t talk about ’em much). AME has about 39 million shares outstanding, so that would be way more than 18%, though perhaps they’ve split or diluted them in the interim… they could have sold, too, for all I know.

But it’s getting late, so that’s where I need to leave you — it is an interesting teensy-weensy miner, with a junior share of a potentially substantial (but also fairly expensive) copper mine in British Columbia, and they’ll be spending at least three million dollars of the next few years to explore a copper/gold exploration project in Nevada, so news, good or bad, could come out of either of those ventures in the next few months (drilling results in Nevada, permitting progress in BC).

My first run-through of the numbers indicates that there might be some substantial value in that Ajax Copper Project, assuming the feasibility numbers hold up and permitting proceeds (and copper doesn’t collapse again), but not so much value that I’d expect a 1,000% gain anytime soon even if the permitting news is good… investor sentiment about BC regulatory regime is pretty negative these days, so if there is good news on permitting the stock should go up, just not nearly that much.

So it might be an interesting speculation that has some real catalysts, though it’s tiny and I haven’t done much of a deep dive on the agreement with KHGM to understand what other costs might come in, or if there could be other skeletons in the closet… and, frankly, it’s a stock that’s too small to be recommending in a newsletter of any size, which means that even writing some tepid comments about it here could easily generate more attention than the shares can handle — so be careful. Anytime the attention of our little crowd is enough to move a stock, it’s also likely that the stock will drift right back down once that attention fades.

I don’t own any of these stocks and won’t trade in them anytime soon… but what about you? Any interest in Abacus? Know of any reason to be optimistic or pessimistic about Ajax or Willow? Let us know with a comment below.


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vivian lewis
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a copper mine is a hole in the ground with a liar at the top

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swing trader
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Vivian,
I like your sentiment. I’ll pass.

lyndagrand
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lyndagrand

Thanks for making me laugh Dear Vivian Lewis! ( ‘-‘ )

Marc Pearsall
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Marc Pearsall

They say the same thing about gold mines too!

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StLouis1
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StLouis1

My rule of thumb is that an outstanding project will have a capex that will be lower than the 8% after tax NPV. This project has a $1.5 billion capex and an AT NPV of less than about $300 million. I am going to pass.

goldstockbull
Member
👍116

Not very economic at 11% IRR, high CAPEX and realtively low after-tax NPV. I like copper, but this is a pass in my view. Constantine Metal Resources is an interesting small-cap copper play, with thier Palmer project in Alaska. Lots of insider buying recently. Trilogy Metals (formerly NovaCopper) is another small cap ($100M) copper play worth a look. As always, perform your own due diligence.

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rjbarnett
Guest

for those who recognize value of a project that competes directly with the US dollar and serves to divert resources into alternate wealth pools, a major Bitcoin /Forex company is quietly expanding its base of millionaires (and billionaire investors). An ICO is forth-coming. (They hash about 2% of the Ethereum currently being generated.) For smaller investors, they offer the best prospect I’ve seen for positioning/leveraging into significant mining shares.

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johannes
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johannes

Am not impressed with Gerardo’s recs. and discontinued his sheet. My only jr. miner copper holding is Triology metals formerly Nova Copper.

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carlb60
Irregular
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What is a porphyry cluster? I looked up the definition from Wikipedia and this is what I got: Porphyry copper deposits are copper orebodies that are formed from hydrothermal fluids that originate from a voluminous magma chamber several kilometers below the deposit itself. Predating or associated with those fluids are vertical dikes of porphyritic intrusive rocks from which this deposit type derives its name. In later stages, circulating meteoric fluids may interact with the magmatic fluids. Successive envelopes of hydrothermal alteration typically enclose a core of disseminated ore minerals in often stockwork-forming hairline fractures and veins. Because of their large… Read more »

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clauschris
Member
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clauschris

Thanks for your excellent analysis, Travis. I do think that owning shares in Abacus is worthwhile, both for the Ajax part AND for the Willow part. In my view, it is no more of a gamble, than many other, junior mining stocks, so we just need to make an investment according to the risk, always to be considered when investing in junior mines. I am buying this stock with that in mind.

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rjbarnett
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the symbol is not listed at Pink Sheets — otcmarkets.com

Marc Pearsall
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Marc Pearsall

My best copper miner is Taseko Mines Limited (TSX: TKO; NYSE American: TGB), which is on sale this morning (down 10%) after reporting some pretty good results. Go figure. Still up 10% for the month and over 120% YTD. I also picked up a few thousand shares of Abacus yesterday, after sleuthing it out (took me a few hours of looking, longer than most teases!). The 30% pop this morning will pay for a nice dinner out this weekend. Will probably add more on a pullback. What always puzzles me is why a company (KGHM, in this instance) would fund… Read more »

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pmb2pmb
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pmb2pmb

To quote the Joint Federal/Province Assessment on the Apex Copper Project summary: ” With respect to Indigenous groups, the report noted that the Ajax Project is likely to cause significant adverse effects to heritage and to the current use of lands and resources for traditional Aboriginal purposes. ” Given the current Federal government’s political problems it is unlikely in my opinion that they will risk further uproar by giving approval despite no significant adverse environmental issues being found.

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BeeBee
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BeeBee

Agree. Project approval does not seem to be a slam dunk especially given that the current provincial government is BC is a coalition with the green party. I was quite interested until I started to see these types of websites / Facebook groups: http://www.stopajaxmine.ca/home

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Steve
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Steve

What is the “gold skimmer” company that Jim Richards is hyping?

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Ray
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Ray

I don’t know, Jim Rickards may be a smart man, but his predictions “STINK”…

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totos
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How about an update onRAMPF

convenient_myths
Irregular
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convenient_myths

Another Grand Projection (Hope), well into the future.

clauschris
Member
👍9
clauschris

Down 67% today (Dec. 15) to a historic low. Could be a buy?

SoGiAm
Member
👍11361

$ABCFF – Abacus Announces BC Environmental Assessment Review Decision for Ajax Copper-Gold Project 9:53 am ET December 15, 2017 (Globe Newswire) Print Abacus Mining & Exploration Corporation (“Abacus” or the “Company”) (TSX-V:AME) announces that the British Columbia Minister of Environment and Climate Change Strategy and Minister of Energy, Mines and Petroleum Resources have declined the issuance of an Environmental Assessment Certificate (EA Certificate) for the Ajax copper-gold project near Kamloops, B.C. Ajax is an advanced stage copper-gold project owned by KGHM Ajax Mining Inc. (KGHM Ajax), a joint venture company owned by Abacus (20%) and KGHM Polska Miedz S.A. (80%).… Read more »

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clauschris
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clauschris

Yes, I know, thanks. The Buckskin project could still generate great value. Well, it’s certainly risky business.

Lester
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Lester

Gerardo Del Real has to be the worst stock picker I have ever seen. Subscribed to his epic fail resource digest and EVERY pick is down big time. Avoid his advice at all costs. Total huckster

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