Work Done - Golden Predator

Golden Predator - The Long Valley

In my book, Gold $3000 | Silver $60 I spend some time looking at junior gold and silver companies which rocketed during the last precious metals rally only to fall back to earth when that rally ended.

I use Golden Predator (V.GPY) as an example.

At the end of 2008 Golden Predator traded at a low of $0.88. As the rally took hold it headed skyward and, by October 2010 was trading in excess of $10.00 a share. At which point the shares headed downwards and, by 2014, were trading around $0.10 a share where they stayed stuck until 2016 when they began to show some signs of life.

As I write, GPY is having a good day and has traded as high as $0.435.

Other than as an illustration of the importance of entry points and the volatility of junior mining shares, Golden Predator is also a textbook case of a company severely underrated in the carnage of the junior resource sector.

From 2008 to the present day, GPY has raised and spend millions of dollars exploring its 3 Aces gold project, bulk sampling that project, building a full processing plant to extract the gold from the bulk sample and, near Dawson City, preparing to recommission the past-producing Brewery Creek mine.

In short, Golden Predator is much further advanced now than it was in 2010.

As it has progressed, GPY has attracted the attention of very savvy investors including Eric Sprott, Rob McEwen of McEwen Mining Inc., Pat DiCapo (Power One Capital Markets) and CIBC Private Wealth. These are investors who are knowledgable about the gold mining business and serious about due diligence.

I've interviewed CEO Janet Sheriff a number of times for motherlodetv.net (most recently for an article which appeared August 7, 2019) and a couple of years ago followed Chairman Bill Sheriff over a cliff to look at visible gold at the Three Aces project. They understand the exploration business but, perhaps more importantly, they understand that producing gold is the main priority.

Producing gold is exactly what Golden Predator does with its bulk sampling program and what it will do as it recommissions Brewery Creek.

Back in 2010 Golden Predator was a $10.00 stock with no real prospect of producing gold in the relatively near (say five years) term. Now it is a $0.38 cent stock which is producing gold from its bulk sampling and getting ready to reprocess 10 million tons of rock at an existing facility with a low CAPEX and excellent explorations prospects.

So, what the Hell happened?

There are lots of reasons why stocks crash but really only one reason why they stay crashed: investors bailed on the junior resource market when the precious metals rally ended at the end of 2011 and they have not come back.

The thesis of Gold $3000 | Silver $60 is that the rise in gold and silver prices during a prolonged rally will draw investor attention back to the companies in that sector. First into the larger producers and royalty holders and ETFs, then mid-tier producers and then junior gold and silver explorers and developers. It is not an overnight process and there is every chance that the junior sector, while firming, will remain ignored by investors until there is a "triggering" event. While it is hard to say what that trigger will be, there is every reason to believe that when it happens junior gold and silver companies will do very well indeed.

Right now GPY has a market cap of a bit over 60 million dollars. If we are looking at an extended gold and silver rally, that value is likely to be significantly re-rated over the next 12 to 18 months.

However, where a company like Golden Predator can soar is when it is able to give the market news the market wants to hear when the market wants to hear it. I suspect that the rally will be in full spate just as Golden Predator is able to announce the first gold pour at Brewery Creek. And, as Sheriff pointed out in our most recent interview, the geologists are beginning to understand the structure of the 3 Aces project which will likely mean more successful drill and trench results.

If this rally is at all like the 2008-2011 rally, companies like Golden Predator could easily become 10x or even 15x their current price. However, this time, those prices will reflect actual value.

Exit Strategy - Cartier Resources

I've interviewed Philippe Cloutier CEO of Cartier Resources (V.ECR) nearly a dozen times for motherlodetv.net. Most recently on June 10 (link).

Cartier's flagship project is the old Chimo Mine in Quebec. This was a past-producing mine with a deep shaft and working at many levels. It was closed when the price of gold made it uneconomic. There was plenty of mineralized rock left in the old mine. Quebec is an excellent mining jurisdiction and permitting "brownfield" sites is a straightforward process.

Cartier drill tested the old mine and actually drilled beneath the mine to prove up additional mineralization. But Cartier also drilled step-outs from the old shaft.

The strategy was to discover sufficient new mineralization that the old mine would become attractive to a senior mining company with the capital to de-water the old shaft and the ability to extend the old workings into the new mineralization Cartier was discovering.

Cloutier wanted to increase shareholder value by expanding the areas of mineralization, but he was in no rush to declare a 43-101 compliant resource. Instead, the company drilled and created a significant data set that experienced geos under non-disclosure agreements could evaluate for the companies they represented.

Cartier did not want to develop the mine itself - although that always remains an option - rather it wanted a senior miner to buy the mine outright or create a joint venture.

Up until the beginning of the current gold and silver rally the market was unsympathetic to Cloutier's vision. (Fortunately, he had backing from several major backers including Agnico Eagle with a 17% stake in the company and JP Morgan UK with 8.3% - see corporate presentation.)

Recently, since June, V.ECR has gone from $0.11 to today's price of $0.20.

Knowing Cloutier he is, no doubt, delighted by the move but he is aiming much higher.

In my book Gold $3000 | Silver $60 I look at what happened to companies like Cartier in the 2008-2011 rally. As that rally peaked it was not uncommon for advanced juniors to see 500 to 2000% price jumps.

Cloutier has an exit strategy and plenty of interest from senior and mid-tier miners who would like to get a working gold mine for a CAPEX of 30 to 50 million dollars rather than 300 to 500 million.

We are in the very early stages of the rally and smart junior investors are going to be looking for companies which are undervalued, have near 43-101 reported resources and have a solid exit strategy to provide a return to shareholders. There are not that many of those sorts of juniors out there.

In Gold $3000, part of my investment thesis is that many juniors have been so undervalued by the market that they have virtually no downside. Even after nearly doubling in three months, Cartier Resources is firmly in that category. And, in my view will stay in that category right up to $0.75.

Worth a look (Yahoo Finance ECR) Company Website

Gold $15.42 | Silver $18.18 FOMO

Silver in USD - $17 we hardly knew you

Gold flew through $1500 and silver has breached $18.

Which means gold is halfway to the $3000 I think it will reach in a sustained rally and silver is coming up on the 1/3 level to $60.

It is very easy for investors to conclude that now that the metals are running they may have missed out on the opportunity to jump into the stocks which will ultimately benefit from that rally.

I point out in my book Gold $3000 | Silver $60 that the gold and silver explorers and developers tend to lag the moves in the metal market.

Here are some of the gold and silver juniors I follow as at 10:45 Pacific

$BHS      $0.105        +0.005
$GPLY    $0.215        -0.005
$GPY      $0.345        -0.005
$WGO    $1.07          -0.02
$TIG       $0.43          -0.06
$ATC      $0.245        +0.005
$ABN     $0.15          -0.005

The fact is that it takes a while for the market to revalue junior explorers and developers even at the beginning of a gold and silver rally. Indeed, most of the really life changing profits in such a rally occur towards the end of the rally rather than the beginning.

At the moment, the excitement generated by rising gold and silver prices is confined to the long suffering junior company investors who have been holding some of these shares for years.

What makes the juniors rise is a more general perception that gold and silver are going to go up and keep going up. That, in turn, draws peoples attention first to the metals themselves, then to the gold and silver ETFs, then to the senior producers, eventually to the mid-tier producers and then, finally, to the gold and silver juniors.

However, as I point out in Gold $3000 | Silver $60  where the metals may double or triple in value, the junior shares, carefully selected, can experience 5x to 50x share price increases as the rally takes hold.

Right now junior explorers and developers are still trading near their lows.

Smart investors will take advantage of this slow start to build positions which have very low cost entry points.

Missing the very low entry points will be an error but a recoverable one if the rally takes hold as the junior explorers will likely continue to be grossly undervalued well past gold $2000 and silver $30.

Playing the Precious Metals Rally

It looks very much as if the gold and silver markets are in the starting phases of a major rally.

I have written a short - 10,000 words or so - book on how best to make serious money in such a rally.

You can get the book for Kindle or any other ebook reader or pretty much any device at https://amzn.to/2ZdF6jB

The essential premise of the book is that in a rally junior exploration and development companies will appreciate far more than mid-tier producers or senior miners. And shares in those companies will also outperform the metals themselves by a wide margin.

Historically, the sequence in a major rally is that the metals rise, then the ETFs, then senior producers, mid-tier producers and, finally, when the rally is well established, the juniors begin to shine.

Right now, most of the juniors are doing pretty much nothing. Which is completely typical at the beginning of a rally.

For the juniors to gain traction they need to gain attention. That attention arrives when there is real excitement in the gold and silver markets.

It is always tough to spot the exact moment investor attention turns to a particular sector and part of the argument in Gold $3000 | Silver $60  is that getting that exactly right may not matter much. The gold and silver juniors have been so badly beaten up that most are bargains at current prices.

I'll be posting about real bargains and how  to find them over the next few months as we wait to see if the rally I am expecting emerges.