Gold and copper were hitting hew highs early this morning, so it appears we’ve got some interest brewing in metals again… shall we check out a gold teaser?

I thought you’d never ask!

This one’s from Dr. David Eifrig over at Stansberry Research, who’s teasing us with his favorite “2024 Gold Trade” in trying to lure in subscribers for his Retirement Millionaire (first year $59, renews at $199). Here’s the lead-in:

“No matter who wins the election, you need to protect yourself and your money. My No. 1 recommendation: A secret currency trade that uses about $10 to harness 2 ounces of pure gold.

“The last time we showed folks this – it led to gains of 995%.”

He lays it on pretty thick in the first few paragraphs:

“… even though thousands of investing ideas come across my desk every year, I believe the one I’m going to share with you today for free will go down as one of the smartest and most lucrative financial moves of the decade… and quite possibly of the century.

“I’m recommending you make this ‘election trade’ immediately, with at least a portion of your money.”

Much of the first part of the ad is about the election — about how our two political parties are unable to work together, and that might bring more worries about the dollar to a head. Many people have a very gloomy “outlook” on the economy, and he runs through lots of the stuff that is making Americans worried — free speech constraints, AI worries, human rights abuses, war, fights over schools, and, of course, the complete inability of the federal government to get a handle on the budget deficit and the massive debt (and the lack of interest in that topic on both sides of the aisle).

And the thing he really keys on is the “collapse” of the dollar (through long-term inflation), and the “de-dollarization” fueled by China and Russia, who want to free themselves of the increasingly active “sanctions” regimes from Washington.

All of which points him toward gold, which is close to hitting new highs again… and oddly enough, though he doesn’t go into this, gold is rising at the moment even though many of the things that usually cause gold to rise are working against it — the U.S. Dollar is not falling relative to other currencies (it’s quite strong, actually, thanks to higher interest rates), the stock market is not particularly scary and volatile right now, with the VIX near the low end of its range (gold tends to go up after a downturn in the stock market), and the investor/retail interest is not all that high, with coin premiums pretty low and the big gold ETFs actually losing assets under management of late (their AUM is going up slower than the gold price, which means there’s more selling than buying).

Folks seem to mostly be saying that this means the primary driving force for gold’s rise must be the big central banks, since retail investors are not obviously enthused. Maybe because Bitcoin has taken some of that “get out of the dollar” interest away from gold, the traditional “safe haven/currency crisis” trade (bitcoin has of course had MUCH higher gains than gold over almost all time periods over the past decade… though gold has actually gone up more than bitcoin over the past couple months).

But anyway, regardless of the reason, gold has been rising in value. Back to Eifrig, so we can try to ID his favorite gold idea…

“I want to show you the one trade that I consider the single best opportunity in the world today… and something that I believe every American should do right now to secure your financial future.

“It’s a straightforward way to come out on top no matter who wins this November…

“And no matter how bad the next recession and stock market crash turns out to be.

“In fact, that kind of chaos will likely make it even better.

“And so will the election, which is going to deepen our single biggest economic problem no matter who wins.

I’m talking about the bleak future of the U.S. dollar itself.

“This is a way to help protect yourself… and your hard-earned savings….

“… it involves swapping some of your dollars for gold – a currency that can’t be manipulated or printed… that has been recognized as a store of value through turmoil for thousands of years.

“But not in the usual way.

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“I can assure you, I’d never waste my time or yours going through all that effort to get the word out about gold bullion… gold coins… or buying a gold exchange-traded fund (“ETF”) or a simple gold mining stock – approaches that anybody can learn about with a simple web search.”

OK, so something a bit sneakier… consider my ears perked up. Whatever could it be?

More from the ad:

“It may well be the greatest secret in the history of the gold market…

“A way to get out of the U.S. dollar using what I call a ‘gold bank’…

“even a relatively small amount of money can go a long way when every $10 or so leverages the upside in two solid ounces of pure gold….

“I estimate the upside could be near 1,000% in the coming future.

“If you think that’s bluster or exaggeration, you should know:

“It delivered 995% gains across our services to real people like you the last time we shared this exact same idea, publicly and on-the-record.”

OK, well that’s where the fact that your friendly neighborhood Gumshoe has been doing this for a LONG time comes with some benefit — the 995% gain he’s talking about is almost certainly the winning trade Steve Sjuggerud, Eifrig’s colleague at Stansberry Research, recommended a couple decades ago, which was to buy Seabridge Gold (SA, SEA.TO).

Seabridge is somewhat unique among the big gold “miners” — it hasn’t seemed like they ever really want to mine, they’re just continuing to explore a massive complex of gold and copper deposits in British Columbia to firm up those reserves, and presumably sit on them until someone who does want to build a mine offers them a ludicrous amount of money. That may not be a fair characterization, but that’s what the situation has looked like to me over the years.

So is Eifrig recommending this same stock again for his Retirement Millionaire newsletter, more than a decade after Steve Sjuggerud took those profits in his True Wealth newsletter? Or is he just recommending the same kind of investment in a gold deposit?

Let’s see what other clues he drops…

“How This ‘Secret’ Investment Produced a 16,000% Gain…

“When gold goes up, this investment typically goes up far more.

“In fact, every $10 or so invested lets you benefit from two full ounces of solid gold, worth about $4,000 today….

“…. my favorite gold investment – what I’m calling the ‘Election Trade of the Century’ ….

“It went so high, so fast, that we have to make a completely new chart.

“Between 2001 and 2008 this investment soared more than 10,000%… and peaked as high as 16,000%.

“In other words, it could have turned every $5,000 investment into more than $800,000.”

And he shows a chart of that stock, so we’ll copy that here — that’s a pretty good clue:

So we can just check… does that match the chart for Seabridge Gold?

We don’t know the exact dates that Eifrig uses in his chart, but even so, it looks like an awfully perfect match:

So this is very likely a recommendation to buy Seabridge… but let’s check out Eifrig’s other clues, just to make sure:

“My colleagues and I have been tracking this gold bank’s rise since 2007, and I can assure you – this company is run by the most passionate and knowledgeable gold experts on earth.

“It’s a leader in the precious metals industry.

“And it owns one of the biggest hoards of gold anywhere on Earth.

“Its gold is safely locked up where nobody can steal it – in the ground.

“It may seem like I’m talking about a gold miner.

“But that’s not quite right – and the distinction is incredibly important.

“Gold miners often raise money by issuing shares of stock… diluting early investors.

“But this company operates differently…

“From 2003 to 2024, it has grown its gold resources by more than 1,000%.

“But its number of shares is up by only 212%…”

And he charts that… with a chart that is a pretty clear copy of one in Seabridge’s Investor Presentation — here’s the original:

(That’s page 7 of the latest Seabridge presentation, if you want to check it out yourself).

And that’s really the key distinction for Seabridge — they say they rank first, by a country mile, when it comes to gold reserves or resources per share, among listed gold companies in North America. So if you included the proven and probable reserves, each share “owns” about 0.58 ounces of gold in the ground… if you expand that to also include the resources (measured & indicated and inferred), then it’s a little over two ounces per share, 2.08 according to their latest report.

So yes, in theory you “own” more than $4,000 worth of gold for about $15, which is the cost of a Seabridge share at the moment (Eifrig’s ad is dated “April 2024,” but SA was last below US$10 back in February, so the pitch was probably put together a bit earlier). Those numbers always sound impressive for a mining stock, since obviously gold that has been discovered but remains underground, trapped in rock and expensive and time-consuming to dig up and refine, is worth a LOT less than a gold bar in a bank fault… but even so, the numbers are pretty extreme.

So yes, Seabridge is unusually levered to reserves, mostly because of that “gold bank” strategy they have, where they don’t actually produce anything. They haven’t spent money actually building a mine, they just keep spending to prove out those resources and reserves, and therefore, at least theoretically, make the property more valuable.

More from Eifrig:

“Its whole mission – essentially from the start – was to buy up as much gold in the ground as possible.

“And like every great commodity company, it did this back when nobody wanted gold.

“For example, when gold was hated by investors – this company purchased numerous gold projects, including what is now the world’s largest undeveloped gold project as measured by reserves and resources…

“Since the company’s inception, its business model has been to buy gold deposits on the cheap, explore for more gold, and, when the time is right, sell its assets for another company to actually construct a mine.”

I haven’t looked at Seabridge in ages, but Eifrig says that it’s on the cusp of “realizing” some of that gold value….

“… the fact that this gold needs to be ‘unlocked’ has never prevented this company’s share price from soaring along with the price of gold (but far higher) in the past – as I’ve shown you.

“But now, it’s narrowing in on a mining partner to handle all the dirty work…

“This gold bank has already invested more than $700 million for the next step.

“This is a project that should average about 1 million ounces of gold per year.

“And if gold prices rise like we expect, this gold bank will be rolling in profits… as should its investors.”

So yes, Seabridge Gold is what’s being teased as Eifrig’s “#1 Gold Recommendation” — and he specifically thinks that the election, and the associated uncertainty (and likely continued devaluing of the dollar) will send gold soaring, and give Seabridge another wild run, not unlike what it had during mid-2000s, and again in the gold runup to the peak in 2013. It hasn’t been as volatile during the moves in gold since then, but the share price did double during the brief 2016 run gold had, and again after COVID in 2020. Here’s what the chart looks like, compared to gold, over the past five years — that’s Seabridge in purple, lagging both the gold price (in orange) and the average big gold miner (the VanEck Gold Miners ETF (GDX)), but it has clearly been reacting to the gold price recently:

And that might be largely because Seabridge did boost its share count pretty substantially during that time, by about 40%, so there has been some dilution in recent years (the biggest chunk in 2020, so they at least did it when the share price was relatively high).

Seabridge’s deposits are pretty rich in copper, too — so with the rising price of copper, that could also increase interest. They offer up some similar per-share metrics in their presentation, which means that they have 84 pounds of copper reserves per share, and 680 pounds of reserves + resources per share. (Mostly inferred resources… but still, that’s a lot — with copper around $4.80/lb, that’s theoretically something like $3,200 worth of copper per share).

The major asset is their Kerr-Sulphurets-Mitchell (KSM) project, which they say is the world’s largest undeveloped gold/copper project (as measured by resources). That’s in northwestern British Columbia, and it’s pretty close to some established producers (particularly the Brucejack and Red Chris mines operated by Newmont), so there’s pretty easy access to expertise, employees and infrastructure, including ports, roads and powerlines. And their 2022 update to the prefeasibility study for the part of the mine that would likely be built first, mostly the Mitchell open pit, indicates it’s a pretty appealing project — at $2,200 gold and $4 copper, they should be able to pay back the capital investment to build the mine within three years, and produce a million ounces of gold per year for at least 33 years (maybe 70+ years).

So what’s going on this year? There is actually a little bit of action….

Seabridge can’t sit on their initial environmental approvals, the rules say that they need to have “substantially started” to build the mine by 2026 in order to keep some of their approvals and permits alive… so they have now been spending some money to move the project forward (some was raised by selling royalties). And they expect to get that “substantially started” designation this year — the company’s goals for 2024 (which form the basis of their incentive compensation) include both getting that designation, which will cement their permits in place, and raising at least another $50 million to build their power station (with BC Hydro, for green power), but the primary 2024 objective is to finally “Enter a joint venture agreement on the KSM project with a suitable partner on terms advantageous to Seabridge shareholders.”

Now, that doesn’t guarantee success… but they’re clearly pushing a little more to get a deal now. Last year that was also an objective, but it wasn’t the most important one… this year it’s the top objective, with a 20.5% weighting (it was 10% last year).

So… they’re trying. It’s a big deal, though, and I don’t know where they stand with talking to potential joint venture partners, or whether the deep-pocketed miners are excited about the project. If they do get a deal done this year, and gold doesn’t fall in price, I would guess that would give the shares a meaningful jolt… but it all depends on the details.

And yes, Seabridge does own other stuff — they have other exploration projects, including some that sound like they could be pretty big, and they’ve slow-walked spending on all of them… but they’re earlier stage and/or smaller, and it’s really all about the KSM project right now.

So… whaddya think? Sounds kind of interesting to me, actually, I like the historical leverage to gold, and the fact that they haven’t spent much money actually building stuff or trying to become an operator. No doubt a lot depends on getting their permits extended, which seems likely, and on finding a well-capitalized joint venture partner… but they have a huge deposit that makes financial sense, so they probably have decent odds of riding a gold rally quite nicely.

Just to be clear, though, that has also often been the case over the past 15 years — and Seabridge CEO Rudi Fronk has been extremely patient, which has frustrated many investors in the past, so the folks who bought during the gold bull run in 2012 or 2016, expecting great things, were disappointed. And yes, the number one objective back in 2015 was also to “Complete a joint venture agreement on the KSM Project with a suitable partner on terms advantageous to Seabridge.” Just putting that at the top of their list clearly doesn’t guarantee that a deal will get done.

So they’ve got a great deposit, and things seem to be moving forward more this year than they have in the past… but betting on KSM being developed on any particular timeframe has disappointed many folks in the past. And if gold or copper drop dramatically in price, it might well be even harder to find a great deal with a joint venture partner.

Anything could happen. But it looks to be an interesting year.

I’ve already got some meaningful exposure to gold, both through the metal itself and through substantial positions in a couple gold royalty companies, which are generally my preferred way to get long-term equity exposure to gold. But this story does set up well for some potential catalysts, which means I’m tempted enough to nibble on some options. The December $20 calls are pretty liquid, those would require about a 50% jump in the shares to generate a real profit… and would bring windfall returns if the stock price doubles or better going into the election and the end of the year. That seems like a worthy speculation on a stock that has ridden the gold market wildly at times in the past, though the risk of using options, of course, is always that you might be right about the general potential… but wrong about the timing. If news of a Seabridge partner doesn’t come until next year, or gold drops below $2,000, then the call options will very likely expire worthless.

So while my preference is to stick with the stodgier names in precious metals, like the royalty companies, I’ll take a flyer on some options here. In order for this to work out well, we probably need both a continuing rise in the gold price, and some meaningful news out of Seabridge — the likely extension of their permits from getting a “substantially started” designation for the early work they’ve done this year might be enough, but to see SA shares really fly again, like they did 15 years ago, we would probably really need at least some rumors about a possible joint venture deal to develop the mine, if not actually announcements or visible progress. And we’d need all of that within the next six months or so, which is a meaningful risk — that’s always the case with options, but here we’re essentially betting that a company which has proven it is patient to a fault, will actually make some meaningful progress before the end of the year (or get lucky, with a huge surge in the gold price).

I have no idea which big miner might be most tempted to partner on KSM at the moment — I guess Newmont (NEM) would be the obvious one, given that they operate two other major mines nearby (Red Chris and Brucejack), though they also just absorbed Newcrest and are looking to sell some smaller mines, so maybe they’re too busy to take on another project… Teck Resources (TECK) is also very active in the province (mostly with coal mines, but at least one big copper mine)… but really, it’s an attractive enough asset that pretty much any large miner with some bandwidth to develop a big copper and gold project should be at least somewhat interested. Whether they’re actually “narrowing in” on finding a partner, or whether they are offering terms that a big miner would be willing to accept, I don’t know.

And whaddya know, but one of those royalty companies I like and own, Royal Gold (RGLD), also has a pretty meaningful royalty on the KSM project — they have an option to buy a 1.25% NSR royalty for C$100 million, or a 2% NSR royalty for C$160 million. They don’t have to choose whether or how to exercise that option until after the mine meets some more conditions for eventual production (like committed funding, and all the permits), but it’s a nice asset to have in their back pocket. They got those options by buying about C$50 million worth of Seabridge shares in private placements back in 2011 and 2012, and I don’t know if Royal Gold still holds any of those shares, but if they sold them in the past decade they probably lost a little more money on that. Still, if the mine eventually gets built, and really produces for even 20-30 years, let alone the 70+ years it would take to dig up all the known reserves and resources, it should easily be worth the cost. The preliminary feasibility study would indicate that at current prices for gold and silver, that royalty should generate about $65 million a year to Royal Gold — which is a lot, even for a large and diversified royalty company — the total gross profit at RGLD was about $340 million last year, so KSM alone could boost that by more than 20%. It’s not in my calculations about Royal Gold, of course, even in a perfect world where a joint venture partner pours money into the project, it would almost certainly be at least five years before the mine produces anything… but still, it’s a nice potential asset. And a reminder that royalty companies often have to be VERY patient.

So… tempted by the “gold bank” idea, now that they’re actually having to spend a little money and show a little progress at the mine? Think gold will soar going into the election, or have any other favorite gold ideas, whether they follow the “gold bank” strategy or not? Let us know with a comment below.

P.S. Eifrig’s Retirement Millionaire is not specifically gold-focused, and it sounds like he even covers some non-investing topics, but we haven’t heard much from his subscribers lately — so if you’ve subscribed to this entry-level letter, please visit our Reviews page for Retirement Millionare to share your opinion… your fellow investors want to know what it’s like for real subscribers. Thanks!

Disclosure: Of the companies mentioned above, I own shares of Royal Gold and December 2024 call options on Seabridge Gold. I also own some physical gold and silver. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.