If there’s one asset class that attracts individual investors like lemmings every time it hits a new high, it’s gold.
And if there’s one thing that newsletter publishers know, it’s to sell the people what they want … whether they know they want it or not.
So today we’ve got a new high in the gold price (a nominal high, at least, in US dollar terms) … which means I have to write about a gold teaser today, or risk a horde of angry villagers with pitchforks and torches descending on Castle Gumshoe.
And what do you know, I just happen to have about a zillion copies of a Luke Burgess gold teaser filling my inbox right now, it’s for a new service he’s launching called Underground Profits — oddly enough, Burgess is better known to Gumshoe readers as the guy behind Hard Money Millionaire, which carries a retail price tag of $995, and unlike most newsletter editors who try to make their name and their mailing list with a low-cost newsletter and then sell folks up to the more profitable and exlusive letter, he’s going in reverse, Underground Profits is a $49 letter. There’s been a bit of this going around lately, with established editors starting new low-cost letters, perhaps there’s a new marketing strategy in place with the publishing cabal, or maybe they’re responding to economic weakness and having a hard time buying subscribers to the premium letters.
But the tease remains the same whether it’s a $5,000 or a $50 letter — they provide the hints and get the drool flowing, you sign up for your subscription and learn about the stock that has their editor in a lather.
Or, being a smarty pants, you come on over to Stock Gumshoe and find out about the stock for yourself. So let’s do that, shall we?
The latest teaser here is built on the contention that gold will keep going up, of course, and that small mining stocks — if you pick the right one — will provide dramatically leveraged returns that make the expected 100-400% increase in the gold price (over the next 2-1/2 years) look paltry.
The basic gold boom argument is familiar, and you probably either buy in or you don’t — it’s that gold has already had the fundamental price rise thanks to inflation and dollar devaluation over the last decade or so, and that the next stage is a mania of investment demand driven by new investors and, importantly, by Chinese government and individual saver demand. I hold some bullion and some gold mining stocks as well, though I’ve been trying to focus on gold mining stocks that carry less mining risk for my own portfolio (royalty and prospect generator-type firms, by and large) and I certainly wouldn’t bet the house on $5,000 gold by 2013.
I’m no mining expert, to be clear, but I can at least find out which stock he’s jazzed about.
So, this is a microcap Nevada gold company that Burgess says is following in the footsteps of Rochester Resources, a company that apparently skipped the expensive and time-consuming step of exploratory drilling and went straight into developing a mine … here’s how he describes it:
“You see back in 2005, a tiny gold company by the name of Rochester Resources Ltd. adopted a mining doctrine that’s unusual, to say the least…
“… in the 21 months after Rochester initiated the program, the company’s stock went from $.03 to $2.75.
“It skipped the Exploration Stage and moved from the directly into Development.
“This move was dubbed reckless by competing firms, as this hit-or-miss practice had been virtually unheard of since the initiation of modern exploration.
“But Rochester had a methodology that was anything but hit-or-miss…
“And based on painstaking geological and earth-penetrating radar analysis, the company was confident that it could skip the costly and time-consuming exploration drilling.”
I don’t know anything about Rochester Resources, but the chart backs that up — though it also says that Rochester had been well above $30 a share back around 2000 or so, collapsed to a few cents in 2005, then bounced back up to roughly $2.75 in 2006, and again fell back in 2008 to where it is now, roughly ten cents a share. That may involve a big change in the company, since they say on their website that “inception” was in 2006, and they do say that they followed an aggressive strategy of rapid mine development initially, though they are now doing what they say is their first exploratory drilling. So the story makes sense, at least, though I have no idea whether or not it’s really a unique tale or is applicable to the teased stock.
So let’s see what clues we get about this specific stock Burgess is teasing, and you can make up your own mind. Hints, please!
“Right now, a new mining-exploration company is getting ready to trump Rochester’s history-making 2006 run.
“This mining outfit is located in Nevada, dead center within a cluster of some of the most active gold mining sites on the planet.
“But with at least $345 million in assets, this tiny $9.3 million company is on the very brink of becoming one of the big players in the gold game.”
We also learn that the stock is currently priced (as of September 10, at least) at about 22 cents. I’d assume that’s Canadian, since the lion’s share of junior miners are listed North of the border, though it doesn’t make a big difference at this point.