Steve Sjuggerud’s “Leveraged Bet on Rising Gold Prices”

by Travis Johnson, Stock Gumshoe | October 8, 2019 12:52 pm

What's the Nevada gold junior hinted at by the True Wealth editor?


Apparently, Stansberry True Wealth editor Steve Sjuggerud recommended a gold stock at the Stansberry conference this week, and it was teased in the Stansberry Digest emails that a bunch of readers sent to me this morning… so that’s our quickie topic of the day. Here’s how that stock was teased to non-attendees:

“Longtime Digest readers know that Sjug’s recommendation of small-cap gold stock Seabridge Gold (SA) has sat atop the Stansberry Research Hall of Fame for the past decade. Readers who followed his advice back in July 2005 ended up booking 995% gains a little more than four years later.

“The man behind Seabridge – Albert Friedberg – is a brilliant investor with a long track record of huge returns in gold stocks. And now, Steve believes he has found Friedberg’s next big opportunity… You see, Friedberg owns a big stake in the tiny gold company Steve shared with the audience today.

“In fact, Steve is so excited about the opportunity that he flew out to Nevada early to see the company’s mine for himself. After being blown away with what he saw, Steve was excited to share the details with conference attendees…”

And we’re teased that this is a “leveraged bet on rising gold prices,” which is true of pretty much any mining stock… but that it also “hasn’t participated in the recent rally in precious metals” and trades at less than the price Friedberg paid.

So what is it? This must be Gold Standard Ventures (GSV), which I think Albert Friedberg has been invested in since at least 2011 — so he probably did pay more than the current 70-80 cents per share for some of his position, though I don’t know what his overall cost is.

Need some confirmation? Steve Sjuggerud spoke at the Stansberry Conference at 9:30 in the morning (Las Vegas time) on Monday… and GSV’s share price soared by about 10-15% at exactly that time, 12:30pm for those of us on NY time, on volume that was roughly 10X the average trading volume. The shares have come down a bit, though they’re still not back to the 75-cent range at which they were trading before Sjuggerud recommended the stock.

And it’s true, GSV has not participated in this year’s rally in gold mining stocks — I pulled just a couple random names from my portfolio to compare, so this chart shows the year-to-date price action for gold itself (GLD, green), Sandstorm Gold (SAND, red), Equinox Gold (EQX, orange) and the Junior Miners ETF (GDXJ, purple), compared to Gold Standard Ventures (GSV, blue).

GSV Chart[1]

Going back 10 years might provide a little more perspective — GSV went public with its land package about a decade ago, though consolidating ownership of this “fourth dome” of the Carlin Trend had been talked about for probably at least ten years before that, and Frank Curzio teased the stock as an incredible exploration opportunity[2] when they had identified about 150,000 ounces of gold in January of 2012, when the stock was in the 70-90 cent range… now they’ve identified 1.2 million ounces of proven and probable gold reserves (per their pre-feasibility study, at least according to their latest investor presentation[3]), and they’ve sold a lot of stock to keep financing exploration over the past decade, but the share price is right back to that 70-90 cent range (it was about a $50 million company when Curzio teased it almost eight years ago, it’s now a $220 million company, and after the 2016 gold rally it peaked near $650 million… but exploration and land acquisition cost money, so they also went from about 50 million shares in 2012 to almost 300 million today).

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GSV Chart[4]

Which might represent an opportunity, if you’re as positive as Sjuggerud about the potential of GSV’s Carlin Trend projects… but it should also serve as a reminder that exploration and mine development is slow and expensive, and companies who are not yet producing gold can sometimes be even more levered to the gold price than actual producers… which was good for GSV in 2012 and 2016, at times when gold was surging, but not so good for most of the rest of the past decade.

So will this latest recovery in the gold price be good for Gold Standard Ventures? It hasn’t been yet, but as the calendar moves forward your guess is probably at least as good as mine. They’ve had plenty of good news, and good drilling results, but the stock hasn’t yet done anything… so perhaps people are just waiting for them to take that next step toward a real preliminary economic analysis or a bankable feasibility study so they can actually get moving toward financing and developing a mine, I don’t know.

Investors are not always patient with these kinds of projects, and, frankly, there’s no sign that they’re moving extra-quickly to get a mine built, so maybe they’re also holding out hope that one of the big guys will come in and partner with them for the next (expensive) phase of work. Their latest announcement about their prefeasibility study[5] did provide some justification for building the first portion of the Railroad Project, but it also would, in their plan, require $194 million in capital to fund the project and it’s assessed at a pre-tax net present value (NPV) of only $302 million (after tax it drops to $241 million).

That’s not a bad start, but it might be too small to attract a huge partner at a premium price, and it’s definitely too small to make GSV’s current market cap of $220 million seem like a bargain based just on this first project. To be excited about Gold Standard Ventures here, you really need to read past that prefeasibility study and assume that this is just the beginning of a long period of developing this “district” of possible mines, and expanding that Railroad Project.

That’s what the company believes and is counting on, it appears, though the cynic in me notes that it wouldn’t be surprising if quite a bit more patience is required. They did just raise some money in July (about $13.5 million at 91 cents/share), so depending on the timing of their drilling plans they may not be in urgent need of funding… but they generally have burned through $5-10 million in cash each quarter, so I assume they’ll be selling more shares before we’ve gotten too far into 2020 (that fundraising combined with their existing cash balance should have put them at about $17 million in cash as of July).

Their numbers do indicate significant sensitivity to the gold price, which is no surprise — that after-tax NPV for the first phase of the Railroad Project increases from $241 million at $1,400 gold to $333 million at $1,550 gold… and drops to $147 million at $1,250 gold.

That’s just my spitballing, I haven’t followed the stock in recent years and I don’t really know what their plan is or if there are some skeletons hiding in there somewhere… but the deposit is pretty large and impressive, with pretty massive potential to expand the mine with additional drilling if you’re inclined to any optimism at all, and it clearly makes sense to build the mine with gold at $1,400 an ounce. The current PFS indicates that the company’s market capitalization already pretty fully reflects the anticipated value of this first potential mine, so a bet on GSV here is a bet not only that they’ll build this mine and it will be as profitable as anticipated, but that this first project is just the beginning and the Railroad Project will be expanded in meaningful ways over the next decade (or, of course, a bet that gold will soar far higher).

And, yes, I agree that gold is appealing and provides some important diversification for portfolios these days, with the currency and trade wars again heating up and “uncertainty” seemingly forever on the global march… though that doesn’t mean I know whether gold will go up or down next year.

So with that, dear friends, we’ll hand it over to you — interested in this “blast from the past” explorer that is apparently again being recommended by Steve Sjuggerud? See great potential, or too much risk? Have other favorites in the gold junior space you’d like to share with us instead? Let us know with a comment below.

P.S. As always, we also want to hear what subscribers think of the newsletters they pay for — if you’ve subscribed to Sjuggerud’s True Wealth, please click here to share your experience[6] with your fellow investors. Thank you!

Disclosure: I own physical gold as well as call options and/or shares of both Sandstorm Gold and Equinox Gold. I will not trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.


Endnotes:
  1. [Image]: http://ycharts.com/companies/GSV/chart/#/?annotations=&annualizedReturns=false&calcs=include:true,id:price,,&chartType=interactive&colors=&correlations=&dateSelection=range&displayTicker=false&endDate=&format=indexed&legendOnChart=false&maxPoints=850&note=&partner=basic_850&quoteLegend=true&quotes=true&recessions=false&scaleType=linear&securities=include:true,id:GSV,,include:false,id:EQX.V,,include:true,id:EQX,,include:true,id:SAND,,include:true,id:GLD,,include:true,id:GDXJ,,&securityGroup=&securitylistName=&securitylistSecurityId=&source=false&splitType=single&startDate=&title=&units=false&useEstimates=false&useHttps=false&zoom=ytd
  2. Frank Curzio teased the stock as an incredible exploration opportunity: https://www.stockgumshoe.com/reviews/phase-1-investor/territory-4-how-to-make-a-fortune-in-the-worlds-richest-gold-belt-thinly-traded-gold-firm-for-75-people-only-frank-curzios-phase-1/
  3. their latest investor presentation: https://goldstandardv.com/site/assets/files/2843/gsv_presentation_-_sept_2019.pdf
  4. [Image]: http://ycharts.com/companies/GSV/chart/#/?annotations=&annualizedReturns=false&calcs=id:price,include:true,,&chartType=interactive&colors=&correlations=&dateSelection=range&displayTicker=false&endDate=&format=indexed&legendOnChart=false&maxPoints=850&note=&partner=basic_850&quoteLegend=true&quotes=true&recessions=false&scaleType=linear&securities=id:GSV,include:true,,id:EQX.V,include:false,,id:EQX,include:false,,id:SAND,include:true,,id:GLD,include:true,,id:GDXJ,include:true,,&securityGroup=&securitylistName=&securitylistSecurityId=&source=false&splitType=single&startDate=&title=&units=false&useEstimates=false&useHttps=false&zoom=10
  5. latest announcement about their prefeasibility study: https://goldstandardv.com/news/gold-standard-announces-a-positive-pre-feasibility-1227/
  6. Sjuggerud’s True Wealth, please click here to share your experience: https://www.stockgumshoe.com/reviews/true-wealth/

Source URL: https://www.stockgumshoe.com/reviews/true-wealth/steve-sjuggeruds-leveraged-bet-on-rising-gold-prices/


  1. Avatar
    Dave S.
    Oct 8 2019, 01:43:25 pm

    Thanks, I wondered what had caused GSV to do that big upsurge a couple of days ago. It was strongly recommended by Matt Badiali in his Real Wealth Strategy many months ago but it then proceeded to tank and the position got stopped out with a considerable loss (Matt likes stops at 20-35% and considers such losses “small”). I suspect virtually all mining stocks, including GSV, will be leveraged by a rising gold price, but whether this one will be better than many others will only be determined in the rear-view mirror, imo.

  2. Avatar
    ariz2013
    Oct 8 2019, 01:48:59 pm

    Friedberg is also an insider and made a large purchase back in May of Paramount Gold Nevada (PZG) at a price of approximately $1.25US. PZG has also popped over the last 2 days. Possibility, Travis?

    • 12364 |
      Travis Johnson, Stock Gumshoe
      Travis Johnson, Stock Gumshoe
      Oct 8 2019, 02:13:08 pm

      Sure, but it didn’t pop during his talk on Monday, the pop came this morning on the open — and it is far smaller ($20 million market cap), so I would expect the pop to have been immediate and way more dramatic if Sjuggerud actually recommended it to a room of investors at Noon on Monday, which indicates to me that it’s probably other gumshoes out there grabbing on to the Frieberg connection after seeing the Stansberry emails this morning. But that’s just a guess.

      Paramount is more value-priced relative to the value of its assets, but haven’t looked at them otherwise — they’re focusing more on their Oregon project, Grassy Mountain, but they are thinking about updating their old PEA from their Nevada Sleeper Gold property with a new PFS, and that project did get a $2 million infusion from Franco-Nevada when they sold a 2% royalty earlier this year so that’s at least a small vote of confidence.

  3. Avatar
    Buck
    Oct 8 2019, 02:06:48 pm

    Well, I have to side with Travis here. I can’t see a miner actually making much progress in the US with the EPA in its current form and the political winds up in the air. To me, this is a relative ‘wish’ trade and even more likely being sponsored through the advertiser(s)

    100 years ago, Nevada might have been a good place to mine. Today, it isn’t. It is in the US and has become a relatively liberal state. Liberal states aren’t exactly good chums of any core materials production parties, especially those who are trying to become legitimate, including most of energy.

    I believe that if you want gold, silver, or copper miners, you need to focus on those who can produce at the ‘right’ all-in-cost profiles , have deep reserves which are relatively inexpensive to extract, and are in mining friendly locals (yes, they do exist), already have their capital structures in place, and don’t look like and trade like penny stocks. It turns out that it takes some work to find these, but it can be done. As always, good investing comes through trading a disciplined and defined system , not chasing parked cars. My thanks again to the Gumshoe!

  4. Avatar
    SageNot
    Oct 8 2019, 02:19:01 pm

    Could this be another royalty stock Travis? I was lucky to catch part of Seabridge Gold (SA) ride awhile back, but we both know that these types of stock aren’t gold miners, so we have to rely on MGMT. to gain the profits!

  5. Avatar
    quincy adams
    Oct 8 2019, 02:20:22 pm

    At essentially zero return for 8 years investment in GSV, one has to wonder if Mr. Friedberg is really a brilliant investor in gold mines or is he the liar on top?

  6. Avatar
    Northern Exposure
    Oct 8 2019, 03:16:59 pm

    Travis,

    Everyone is getting all lathered up about gold, but the real play is palladium. It is has been of fire for quite some time. And you want a way to play it? Check out Polymet Mining Corp. (PLM). You really need to go to their web site to follow everything that has been going on for the last 20 + years, but they are currently finalizing the financing to build a copper, nickel, platinum and palladium mine in northern Minnesota. It’s a fascinating story. They bought out a vacant mining complex (along with the rail cars that go with it), and they are sitting on a huge amount of copper and nickel, and lesser amounts of platinum and palladium.

    Northern Exposure

    • 12364 |
      Travis Johnson, Stock Gumshoe
      Travis Johnson, Stock Gumshoe
      Oct 8 2019, 04:14:15 pm

      Palladium is certainly much rarer than gold, with a higher proportion of it used for industrial purposes. Platinum, too, though platinum has lagged dramatically of late.

      • Avatar
        Sargam
        Oct 9 2019, 02:00:09 am

        Stansberry’s Sjuggerud — his childhood buddy and chief adviser — has been pushing platinum recently for that very reason.

        • 12364 |
          Travis Johnson, Stock Gumshoe
          Travis Johnson, Stock Gumshoe
          Oct 14 2019, 02:34:16 pm

          Gold is all about fear and currencies… copper all about economic and industrial growth. So no one’s teasing copper much these days, it’s hard to even make a compelling argument based on continuing electrification, but it will probably come back when the economic growth hopes come back. Here’s the chart of copper vs. gold prices since January of 2018, which pretty much tells the whole story of where interest lies right now:

          Copper Price Chart

    • 141 |
      Avatar
      talktome
      Oct 8 2019, 04:28:53 pm

      Platinum and palladium are fantastic contrarian plays. I am extremely bullish on NGLOY Anglo American Large Cap Stock. I have been invested for quite sometime and continue to add to my position on the dips.

  7. Avatar
    Bill Swigert
    Oct 8 2019, 06:58:57 pm

    One must take into account Sjuggerud’s past history of recommendations. As far as I know, he doesn’t have much on the negative side, and a lot on the positive side.

    • Avatar
      Jameshmwebb
      Oct 9 2019, 03:18:20 am

      Really? He recommended uranium a year or two ago, and he’s raved about KBA many times, but neither has done well.

      • 118 |
        Avatar
        chrizcringle
        Oct 10 2019, 01:02:05 pm

        Yes, but he got out pretty fast when he realised the timing was bad. I’ve subscribed to a ton of analysts for many years, but NO ONE has been more correct than Sjuggerud.

  8. Avatar
    PamelaM
    Oct 9 2019, 02:55:26 pm

    Have you heard of Rise Gold reopening a famous NV mine that was shut down during WWII at peak production. It seems legitimate, like a fairytale you want it to be real even nostalgic. But is it more hype with more gold found now exploring, which isn’t brought out and sold for profit. However, Rise Gold keeps taking on investors. Please Travis a little detective work for you gumshoe. Thank you for your time. P.

  9. Avatar
    Tom Bates
    Oct 9 2019, 06:44:50 pm

    GSV. Gold. Gold miners.
    If gold goes up from $1,500 to $1,650, you can invest in gold and you’ve made 10% (less costs).
    If a gold miner produces gold at %1,350 per ounce and sells it at $1,500 an ounce he makes $150. If gold goes up 10% his profit doubles to $300. So if you believe in gold but want leverage, buy a gold miner–his profit is leveraged to the price of gold. BUT WAIT, THERE’S MORE. You can buy an ETF of the major gold miners, or an ETF of the more speculative, smaller miners without having to bet on a single name/mine/prospect.
    BUT WAIT, THERE’S MORE. You can increase the leverage investing in miners gives you by buying a leveraged ETF, NUGT, which (ignoring commissions and expenses which are high) should triple the performance (up and down) of a simple gold miner ETF which already leverageing the movement of gold.

    JMHO. Thoughts? I’ve got 1/2 my net worth in NUGT and have ridden it up as well as all the way down to 11 and change. I’m hoping for a near term price of $45 which it was just recently…that’s a 3 month goal. And if gold would go up to $1,700-$1800 sm pimvr. NUGT could go to 80. Insh’alla.

    Please g

    • 12364 |
      Travis Johnson, Stock Gumshoe
      Travis Johnson, Stock Gumshoe
      Oct 9 2019, 09:46:42 pm

      Half your net worth? Holy cow, that’s a serious commitment. Best of luck to you, I hope it works out.

      • Avatar
        putlovr
        Oct 11 2019, 02:55:53 pm

        Thank’s Travis…I have (or had) a Series 7, 63, and 66; passed the CFA Level 1 (but I was 60 and didn’t think it was worth the work to get a CFA at 62)…I am or was a CRPC. And what I do with my own net worth would be criminal (I mean this legally, not just figuratively) if I did it with a client’s money. But I only have my own money now. If I lose half, it won’t change my life. If I double my portfolio, it will change my life. So I take stupid, crazy risks. I have never been a “gold bug”. Until five years ago I never came near the metal, other than buying a few collectible coins. I felt about it the same way Warren Buffett did. But after 2008-2009 (March 9 2009, 10 AM) the market soared. I thought it had gone up too fast and had more downside than upside. And I was an Economics major when Milton Friedman and monetarism were radical new ideas that I bought into. What the Fed did with its balance sheet and printing money argued for inflation. But if you were a Keynesian the budget deficits argued for inflation. And the situation with European economies, Greece, Spanish real estate and banks…the uncertainties suggested gold would benefit as a flight to safety. And China was building up gold reserves. Everything suggested gold should go up. I’m always early, but this time several years early. I hope its just too early and not just wrong! I have a huge position in NUGT. shares In addition I have 50 January NUGT 15 calls and 4 @2021 NUGT 12 calls (I put in an order for 50 but only got filled on 4…this was back when NUGT was down there. To make things worse (or better) I have a huge (but smaller) position in NEM and just for the hell of it a large (in shares, but not so large in dollars) position in KNTNF. All of that put together is well over half my net worth.
        I don’t spend as much time on your column and postings as I should/would like to but really like your service.
        Thanks,
        Tom
        I know other’s can see this. I’m not making any recommendations and don’t mind if other’s read this and think “what an idiot!”

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