Stock Gumshoe has already moved offices, and that was traumatic enough… but now my family is also moving to a home that isn’t quite done, so this week is going to be another nutty one.
And for that reason, if no other, I’m pleased to be able to get a quick teaser answer out for you in response to a question from a reader.
Here’s the question I got from a reader over the weekend:
“I got a teaser email from Nick Hodge of Angel Reserve who is promoting a book called ‘Goldbug!’ by James Dines, who reportedly has predicted a major gold bull in the past. So here at least one of the stocks he is teasing:
““The Next Gold Mine to Go LIVE”: This new gold mine is expected to produce 87,000 ounces of gold per year for the next eight years… it’s the only one in Canada that’s fully financed, permitted, and under construction… and now you can get in BEFORE it goes into production. The company trades at a “market cap” of just $146 million, providing you with an exquisite entry point. You’ll discover the firm’s name and ticker symbol inside this special report.”
The full ad is focused on the re-introduction of James Dines to the world of heavily hyped newsletters — The Dines Letter has been around since the early 1960s, and James Dines was one of the forefathers of the modern financial newsletter. He is not at all shy or passive, he makes big predictions with some regularity and, back when Mark Hulbert was still tracking newsletter performance, The Dines Letter was very often either in the top or bottom of the performance rankings based on those big calls.
Dines’ early success came from “pounding the table” for gold in the late 1960s and 1970s, which was very controversial at the time but certainly worked out well for folks who sold near the 1980 peak, and he’s often called a “gold bug” — so it’s perhaps no surprise that this latest push from Angel Publishing to sell subscriptions to The Dines Letter is slanted toward gold.
Nick Hodge doesn’t own The Dines Letter, from what I can tell, though maybe Dines is thinking of slowing down (he turned 85 in November) and having someone else push his ideas, so perhaps Hodge is helping to publish it now — I don’t know. Hodge is certainly selling The Dines Letter, and he’s selling it for a similar price to what Dines himself asks on his site. The push from Hodge includes some special reports and a “free” trial of Wall Street Underground, another Outsider Club/Angel Publishing newsletter (that trial defaults to a paid auto-bill subscription after three months, gotcha! — so maybe that’s part of Hodge’s compensation for pitching The Dines Letter).
But what is this mine that’s named in the “Special Report” from Hodge? There’s no mention of this being a Jim Dines idea, though he certainly has often liked gold miners, so presumably the pick itself is from Nick Hodge and his Angel Reserve folks.
And the “secret” stock they’re teasing for this special report is almost certainly Atlantic Gold (AGB.V in Toronto, SPVEF OTC in the US).
Atlantic Gold is indeed expected to produce 87,000 ounces of gold a year for eight years once the mine enters commercial production, and it is indeed financed, permitted and under construction, with a market cap near C$146 million (it’s C$149 million today, which us US$110 million)
Is this an “exquisite entry point?” I don’t know, I’ve never looked at this one in any detail… and it’s always important to be cognizant of the risks and expense of starting up a new gold mine. The company itself is quite optimistic, of course — their presentation indicates they will be commissioning the mine and the processing plant in the third quarter of this year and ramping up to full production at the end of 2017. The eight year mine life actually encompasses two of the four deposits that Atlantic is planning to mine that are all close to each other in Nova Scotia — the first is the Touquoy Deposit, then in five years or so they plan to move on to the Beaver Dam deposit (which should be permitted later this year, they expect), and presumably the plan would move on beyond that to Fifteen Mile Stream and Cochrane Hill, other deposits on their tenements in the province.
Whether you see value here probably depends both on what you think the price of gold will be, and whether you expect them to expand their production more rapidly to incorporate more of those mines earlier (particularly Cochrane Hill). These are not huge mines, but they expect to have low costs so their base case feasibility study has them profitable even with gold at C$1,400 an ounce (that would be about US$1,060 – right now gold is around C$1,560 an ounce), but the small size of the deposit means it doesn’t appear hugely undervalued.
The calculated after-tax Net Present Value (NPV) based no those same assumptions is C$140 million at C$1,400 gold, or C$168 million at C$1,500 gold — which, given the current valuation of the company at C$149 million, would probably make you shrug your shoulders and say “meh” … unless you’re pretty sure that those estimates are really conservative, or certain that gold will rise substantially higher than that (at C$2,000 gold, the NPV of the base project, Touquoy and Beaver Dam, is just over C$300 million… but it’s worth noting that if gold goes up to those levels (that’s a rise of just over 25%) then lots and lots of mining stocks will double.
I just pulled those estimates from the corporate presentation here, so you can check that out and dig into the project and see for yourself whether it appears exciting or worthwhile. My initial impression is that the project is economic enough to have gotten financing, and it seems reasonable that they’re building these mines, but I don’t find my animal spirits surging… perhaps that’s a good reason to consider the stock, since it looks like it has some reasonable fundamentals and it hasn’t been driven up to ludicrous prices on a wave of attention from what I can tell, but it’s hard to feel strongly about it one way or another after 15 minutes of browsing.
So with that, I’ll leave it to you to make your call… please do let us know what you think with a comment below.
would you please show us the casey Alaskan ‘super gold mine’ he charges 75 to get, and compare its potential over nick hodge’s atlantic gold choice–thanks
The Casey Alaskan “super gold mine” is Northern Dynasty Minerals, Ltd symbol (NAK)
Thanks for the valuation. The whole point of junior golds is the possibility of big returns if gold soars…. this stock doesn’t exactly fit that profile while the risk is still there that the permitting may get snagged…
If the price of gold is going to “explode” as some predict, and lots of small mining 1ç stocks will double, if you believe that––wouldn’t a safer way to invest in this concept be to just but GLDX.
Yep — it won’t go up as fast as the smallest and riskiest miners, but the miners index would be a safer way to play mining in general. I prefer the royalty stocks for most of my gold allocation, but they’re not cheap at the moment.
There are other choices. The most interesting, IMO, is JNUG, which is a 3x play on juniors. When they are up, it is way up. When they are down, it is way down.
So, timing is everything for this ETF.
Found an article that says they made a debt deal to finance the mines but…
“To get such a good rate, Atlantic also agreed to a forward sale contract for 215,000 oz. gold at CAD$1,500 per oz. (about US$1,000 per oz. using current rates). That brings up the second point: accessing cash requires picking your poison. This forward sales contract limits Atlantic’s upside if gold rises – but it gives the company the cash it needs today.”
Another reason this isn’t the best small miner to invest in.
http://smallcappower.com/expert-articles/atlantic-gold-gets-01-03-2016/
Travis Are you moving off Gumshoe Mountain?
Or maybe higher up the mountain. (?!)
I have said this before, but I will repeat it again: Whenever I see ‘Nick Hodge’, I run not walk to the nearest exit!
At some point in this discussion, it would seem appropriate to compare the various miners as to their cost of getting gold out of the ground. The last comparison I could find was about ten years old.
Most miners are good about sharing their all in sustaining costs (AISC) these days, which does give some idea of the feasibility of the project based on your expectations for gold pricing — both these folks and Northern Dynasty have much lower than average AISC for the life of mine, though these are estimates and could easily change (My shorthand explanation is that Northern Dynasty’s AISC per ounce is likely to be low because the project is so massive that the production is expected to eventually dwarf the huge startup costs, assuming they ever get a permit, which is still far from guaranteed… Atlantic’s costs are low because the project is fairly small and simple and high-grade).
Marijuana
How would you value a stock like this
I try to avoid investing in little individual miners partly because it’s hard to value them and, to a frightening degree, both costs and revenue are outside their control.
Assuming that they are able to get financing and permitting without major risk factors, I’d be most attentive to potential positive cash flow based on expected mining operations, expected length of cash flow based on the size of the mineable deposit and some guess on whether they will expand those reserves in the future, and the market capitalization relative to that cash flow — i.e., would the cash profits from the mine pay for operations within three years if all goes as expected? five years? ten years? You have to have assumptions about gold prices and you have to assume that operations will go as expected in the mining plan or the economic analysis from the mining company, but then that also gets some sort of “risk” probability given to it — what are the odds that gold might fall? What are the odds that they’ll have delays or need more financing?
This is why you don’t put a large allocation in one junior mining company, or one mine. The great ones are millionaire-makers, the terrible ones are wealth destroyers… and there are lots of terrible ones and it’s not always really obvious which are which up front. But you can improve your odds by making analysis of mining stocks a hobby and watching what the big investors do in this space, and diversifying among a basket of appealing projects that don’t all have the same risk factors (or, if you’re a chicken like me, you can invest in diversified royalty companies and prospect generators and accept the fact that you probably won’t have any short-term 500% returns.)
While I really like Atlantic, I think that Falco Resources (FRPGF), Midas Gold (MDRPF), Blackham (BKHRF), Lexam VG (LEXVF), Treasury Metals (TSMRF), Integra (ICGQF), Silver Bear (SVBRF), Aurvista (ARVSF), and Gowest Gold (GWSAF) are others that should be considered as they are very cheap and hold HUGE LT upside. I also really like Victoria Gold (VITFF), Pure Gold (LRTNF), Golden Predator (NTGSF), White Gold (GFRGF), Colorado Resources (CLASF)+my favorite OTHER Golden Triangle pick (aside from Pretium) is Teuton (TEUTF-although they are up ~50% in the last 2 days, so DEF wait for pullback on that one) Gran Columbia (TPRFF), Hummingbird Resources (HUMRF), Golden Reign (GRGNF), Arizona Mining (WLDVF), Saracen (SCEXF), Regis Resources (RGRNF), Silver Lakes (SVLKF), Minco Silver (MISVF), Bear Creek (BCEKF), Golden Arrow (GARWF), Golden Minerals (AUMN), Brixton Metals, (BXTMF), Nevsun (NSU) and Exeter (XRA) all are great LT value BUYS… Best of luck to Jr Miner traders… I’m all up in that sector myself as u may see, and with the SGE now fully in charge of price, I hope we are done with the BS SMASHDOWNS in PMs and I fully expect a return to sound money with the EURO and DOLLAR dragging their feet as long as possible but this paradigm shift from unbacked worthless paper MONEY to commodity backed Money is imminent!!!
Small miners, Nah, however here is some gold for those looking for a global income stream, Sticktothefundamentals global 360 – quarterly update, if they don’t pay they don’t make the list…. http://www.eqibeat.com
After losing my gluteus minimus with the last gold stocks surge these days I just buy the metal itself and store it and call it good! After all , real gold can look good in an aquarium!
It’s no longer a teaser, he gives all the details here
http://www.outsiderclub.com/interview-with-atlantic-gold-tsx-v-agb-ceo-steven-dean/2196
Think this mine AGB.V will be a good deal in the intermediate term. Plus if they ever wish to expand there are some private properties in New Brunswick that could be purchased as reserves. Just a hop and a skip away…
Has anyone read about the ‘Red Rock’ deposit being touted by Louis James of the International Speculator? Located in the Yukon near the Alaska border.
A report was published today on it.
This the second time I have seen Atlantic Gold promoted. However the earlier report was very similar to this one. Though It did not have the symbol available in that report. For really good work up go to free seeking alpha . com search symbol “SPVEF” YOU WANT TO READ THESE GUYS!
Hey all,
Bought some AGB at 1.01 (CAD) some more at 1.15 or so, and more at 1.29
Average cost 1.223
It hit 1.42 today.
Thanks for showing us this answer Travis,
It got me going on this one.
I needed a win after last year.