If newsletter guys know anything, it’s how to sell gold investments — gold has been at the core of the newsletter hype industry since the 1980s, attracting ornery gold bugs every time the gold price rises a bit, so we’re seeing most publishers running quickly to the virtual mailbox with their gold pitches these days… Stansberry is again promoting John Doody’s Gold Stock Analyst, all the junior mining lovers are coming out of the woodwork again now that some optimism is bouncing around Vancouver again, and we’re seeing all the ads for “gold in your 401(k)!” that pop up whenever gold prices are rising… along with the enticement that a lot of the newsletters are using actual gold as a freebie for new subscribers (sign up and we’ll send you a gold coin!).
Today we’ll look at one of those, the pitch from Nick Hodge that starts us out with the FOMO headline, “Here’s Your Last Opportunity Ever to Invest Before the Final Gold Bull Market Begins.”
That’s never true, by the way… there’s never “one last chance,” and if there were predicting such would be impossible — no one knows when gold will top out in price, or which mine will release good news… I’m sure some gold mining analysts are better than others, but the price of the yellow metal itself is the main driver of all of these companies, and that’s about as easy to predict as Donald Trump’s tweet subjects in any given week or month.
The pitch is actually from Gerardo Del Real, who writes his own junior mining newsletter, but this particular ad is for Hodge’s Wall Street’s Underground Profits ($99/year to start, autorenews at unknown price), and he “interviews” Nick Hodge in the ad… here’s how he introduces his publisher:
“I’m about to introduce you to one of the most interesting gold investors and venture capitalists I’ve ever met.
“His name is Nick Hodge.
“And he’s about to make the boldest claim of his career.
“He believes we have quietly entered a short window of time for you to invest before gold turns from bearish to bullish.
“‘It’s the final gold bull market’ he claims….
“Simply buy the right gold stocks today. One gold stock in particular… Nick’s #1 stock opportunity of the decade in gold… could be life changing for your portfolio.”
I guess it could be. “Could” is very powerful word in marketing, since we’re all primed to gloss over that and insert the words “probably will” in our minds.
So what’s the stock? Hints coming…
“That’s why I’m urgently recommending viewers to move capital into my #1 gold stock pick. It has more upside than any other metal stock I own.
“Analysts see a 450% spike already. But it could go a heckuva lot higher.
“#1. It’s trading for very cheap now. The bear market in gold pushed the price down way below what analysts believe it’s worth.
“It trades around $1 right now.
“#2. The company is quietly buying up mines at a rapid pace. It has a unique strategy I’ll share that’s allowing it to acquire mines for up to 90% off. So you can imagine, when gold prices move up to even just $2,000/oz, this stock will absolutely rocket higher.”
We’re also told that the stock has a market cap of around $200 million, and that Nick Hodge himself owns shares. What else?
“It’s acquired many assets recently, if you totaled all its gold reserves together, it’d have one of the largest deposits in the world.
“But it has nine projects, so it’s all split up and thus under the radar.
“You google ‘largest gold deposits’, it won’t pop up because it’s spread out over multiple mines.”
That’s a challenge, I imagine, because small mines are dramatically less valuable than large mines — big companies crave big deposits because they can mine them for decades while dealing with only one permitting process and one construction project, small mines can be almost as hard to build as huge ones but are far less valuable.
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The ad is not exactly new content — it teases us about the possibility of $1,500 gold this year, a 15% rise in the price, but gold has already topped $1,500 in just the past week. It looks like they pulled their data the beginning of the Summer.
They also brought Mario Garnero into their “interview,” which for those who have been paying attention for a few years probably means we’ve already got our answer… but we’ll keep checking the clues just to be sure. Here’s what they say about him:
“Mario’s a Brazilian banker and trailblazer. He’s been called the “Father of the Ethanol Car.” During the 1979 petroleum crisis in Brazil, Mario challenged the top four automotive companies in the country to produce one million cars that run on ethanol. Three years later, 90% of Brazilian cars ran on ethanol thanks to him.
“He’s a personal friend of the Rockefeller and Rothschild families. As well as U.S. presidents including President George W. Bush and President Clinton.
“Currently, he’s the chairman and largest shareholder of Brasilinvest, the largest merchant bank in Brazil.”
He mentions meeting Mario at a Carlyle Hotel meeting four years ago, which further reinforces that their first meeting was during Mario’s series of meetings to promote this little gold stock back in 2014… Frank Curzio also teased this same stock, under its old name, back then, also based on meetings he had with Mario Garnero and the other investors in the company.
But I won’t spoil the surprise just yet, there are also a couple other clues… Hodge says the company is in…
“… full-blown M&A mode at the moment….
“While miners have been going out of business or getting acquired, this incredible gold play has over $9.2 million in cash to spend on mining activities. Zero debt.
“It’s been making acquisitions since 2011. In the past five years, it’s acquired seven gold projects.”
“If you added all its gold up, it currently holds 23 million ounces of gold. That would make it one of the top 10 gold mines in the world if added together.
“When you multiply its reserves by the average price of the past few months…
“You get a value of $29.9 billion.”
That’s silly, of course… in addition to the fact that small deposits tend to be much less valuable than large ones, gold in the ground is never worth anything close to the market price of refined gold. You can argue about whether it’s worth $10 an ounce or $100 or $200 an ounce, depending on sentiment and the specific project and its appeal (what are the mining costs, what’s the regulatory regime like where the mine is, how much exploration has been done? How big is the mine and how quickly could it repay the capital cost of building the infrastructure?), but it’s never worth more than a small fraction of the market price of gold.
“… its reserves are spread out among many mines in the U.S., Canada, Peru, Brazil, and Colombia.
“And the CEO told me privately they are still looking for more assets to acquire.”
We’re also told that insiders own 20% of the shares, and they include Mario Garnero as well as Rick Rule’s Sprott Global… and that there are only two analysts covering the stock, HCW and Roth, both of whom see the price soaring (that’s where they get that “analysts see 450% spike coming” bit).
So who is it? Thinkolator sez this is GoldMining Inc. (GOLD.TO, GLDLF), which graduated to the Toronto Stock Exchange a few months ago but has been a heavily touted stock several times in the past (mostly under its previous name, Brazil Resources).
GoldMining is a project of Amir Adnani, who I think used to be an investor relations/stock promotion guy in Vancouver a decade or more ago and then turned to the ownership side with Brazil Resources and his other company, Uranium Energy Corp (UEC), so he is very investor-savvy and great at promoting his businesses, including relationships with lots of newsletter folks (and getting that “GOLD” ticker in Toronto). That’s not necessarily a criticism, by the way, “promotion” is a dirty word for a lot of investors, and there are a lot of promotional charlatans in the mining world so that makes sense… but promoting your company is also a key part of the CEO’s job for any junior miner, these are companies that sell hopes and dreams about a possible future that’s many years away and is dirty, difficult and complicated, and they need to be storytellers.
Both UEC and GoldMining have been essentially “buy stuff and wait for a bull market” companies, acquiring smallish and inexpensive companies and/or projects and hoping to sell or partner them or start actual mining or production when animal spirits return. It hasn’t worked with UEC, since uranium remains stubbornly in the doldrums, but how is GoldMining doing?
Well, from the income statement it looks like they’ve been sticking with the same strategy they had when I last checked… selling a few shares here and there to keep the lights on, making some more acquisitions in 2017 and 2018, but only doing very early stage project work (permitting, very limited drilling to identify resources, etc.). They have mostly bought beaten-down junior miners who can’t afford to keep operating or whose project/discovery wasn’t advanced enough or attractive enough to get built when gold prices were low — they say that they acquired a bunch of their largest projects for $80 million, but that those companies they acquired had had a peak market cap of $822 million in better days. That doesn’t mean they’ll bounce back, of course, but it does at least mean that they didn’t pay very much… and most of their acquisitions have been done with stock.
Essentially, they’re doing their “discovery” in the stock market instead of with prospectors and drill bits, and are hoping that someone will come along and want to partner on these discoveries, most of which have just sat there waiting for a suitor for the past six years. There’s some appeal to that model, of course, because exploring and drilling and proving up reserves is expensive — if you can just buy cheap projects and put a little shine on them and get someone else to partner with you to pay to actually define reserves and plan and build a mine, you’re a happy investor. But you’re inherently pretty passive, too, depending on someone else to come along and find your projects worthy of a major investment.
And while the promo ad pretty liberally throws around the word “reserves,” that’s not what GoldMining has — what they have are big buckets of resources, which is different. Mining terminology is specific and regulated, “reserves” means you have found the gold and know where it is and you can mine it profitably at something close to the current price… “resources” means you’re pretty sure you have found the gold, with varying degrees of certainty, but haven’t fully proven out the ore body yet and have done no economic calculations about extracting the gold (GoldMining has 10.5 million ounces of “measured and indicated” resources, and 12.4 million ounces of “inferred” resources). Reserves are expensive, because it takes a lot of drilling to prove up reserves… resources are much less expensive.
Rising gold prices tend to always drive attention to these kinds of well-connected stocks (Marin Katusa, Doug Casey and Rick Rule are shareholders too, along with Nick Hodge and probably lots of other smaller well-connected folks in the junior world, so every mining-related newsletter knows this name — so it wouldn’t be surprising if this stock gets recommended or teased by a bunch more newsletters this summer), which means they can be good bets on leverage to rising gold prices as investors flow first to the most heavily-covered juniors… but so far there’s no real indication of them getting any partnership offers despite the fact that gold has held above $1,200 an ounce or so for almost three years. Perhaps this latest surge to $1,500 in the past couple months will drive interest from companies who want to invest to build GoldMining’s Whistler, Yellowknife or Titiribi projects, or perhaps not — I have no idea whether a mid-tier miner would find these projects attractive (Titiribi is by far the largest project they own, in Colombia, with close to 8 million ounces of resources, but it looks like the last drilling was done there in 2013).
Big picture, Hodge cites five catalysts for gold to rise — first being a lack of new supply, thanks to the oft-cited fact that explorers aren’t finding any huge new mines these days.
And if supply is one, then demand must be the flip side — right? He says that demand is rising as “the richest people in the world are also pushing their money into gold.” He gives a few examples, including John Paulson, George Soros, Ray Dalio and Carlos Slim. I don’t know if that means anything in the short term other than “really rich people are scared of losing their money,” the uber-wealthy are not necessarily any better at timing the global economy than anyone else.
The second catalyst he cites is the “technicals” for gold — lots of long-term charts showing shapes that are supposed to mean something, but really it’s mostly an argument that since gold didn’t fall a lot further during the bull market, it has therefore found a new “floor” from which to jump higher. And as an addition to that, he does note that gold has momentum — which it did and does. From the charts he cites, it looks like the data for this ad was pulled in late May, just before gold started jumping — so either he had some pretty good short-term timing, or he waited until the trend moved in his favor to start really pushing the ad.
Other catalysts? He says that gold is at an all-time high price… in every major currency except the dollar. Which is just another way of saying that the dollar has held up much better than every other currency, something we’re all quite aware of… and something that has been driven largely by the differential in interest rates. So perhaps if the dollar weakens again as interest rates drop, as President Trump would like, that will drive gold up again in dollar terms (which is what most of us care about).
That’s arguably already happening, with gold’s latest surge coming in the past couple months, after the market (and perhaps pressure from President Trump) forced the Federal Reserve to cut interest rates and the Trade War got ugly again, increasing the probability of a recession and another series of interest rate cuts.
Other catalysts? More volatility will send investors into gold. A recession would be good for the gold price (or at least, that gold will rise after a recession — what you can really see in charts is gold may not rise when the market is falling, but after it falls people get scared into gold). And the final catalyst he cites is consolidation — the likelihood of the industry narrowing as companies buy each other, which is already happening at the top with the Newmont–Barrick–GoldCorp dance earlier this year and a wave of mid-tier mergers, and is always happening to some degree with junior explorers getting bought out by reserves-hungry operators.
So will those gold catalysts keep firing and drive the price higher? If so, GoldMining will probably do quite well and will probably be quite levered to that move, just as predecessor Brazil Resources was in the brief gold bull market we had in the first half of 2016. To get an idea of how levered this company has been, whether because of promotion or real “size of resources” leverage to gold, here’s what the share price has looked like since they went public in 2011, GoldMining/Brazil Resources is in blue, compared to the big miners (GDX ETF, in red) and to my favorite royalty company (Sandstorm Gold, green), as well as to the price of gold itself (GLD ETF, orange):
And, of course, the time frame you choose for a chart can change the story completely — if you had bought three years ago in the summer of 2016, right after the last time gold surged and everyone was really excited about it again, the results for everything except gold itself would have been quite disappointing:
And, of course, if we go back to that 2011-present timeframe, we get a good reminder that gold companies have a very hard time growing value over time unless there’s a steady and unrelenting rise in the price of gold — this is that first chart again, only I threw in the S&P 500 to show you what you were missing if you focused only on gold during that time.
You can see how the company wants you to understand its prospects by checking out their latest Investor Presentation here, which outlines their larger assets and quotes some of those analyst reports, in addition to including a lot of the language that Hodge uses in the ad. It’s hard for me to get excited about this company operationally, since they aren’t really doing anything, but they have been patient about acquiring cheap projects and holding them in their pocket in hopes of a wealthy suitor coming along in the next gold bull market… the last surge in the gold price in 2016 did not lead to any deals, and the shares fell pretty quickly back down after their huge promotion-fueled surge, but maybe the next one will — if we’re in that bull market now, I guess we’ll soon find out whether anyone with money to burn wants to build mines on GoldMining’s projects.
I speculated on these shares during that surge three or four years ago, but haven’t owned them since… and I can’t claim to have any real confidence that Adnani’s strategy of “buy low” will work because he hasn’t yet done any “sell high” deals to validate the worth of all these properties they’ve acquired over the years… but that might just be because I’m a little tired of hearing the promotional talk about this company after following them off and on for the past eight years. You can make your own call on GoldMining… it is, after all, your money… and I hope you’ll share your thoughts on either the company or the future of this nascent gold bull market with a comment below. Thanks for reading!