Many Talk, Only a Few Deliver
While so many other mining companies were struggling in the sector over the past 7-year bear market, a man well known and respected for his company Uranium Energy Corp (UEC.NYSE) was quietly consolidating gold resources throughout the Americas. Amir Adnani has assembled a team and 10.5 Moz M&I and 12.4 Moz Inferred of gold resources!
It is the strategy so many tell us to do, but so few do. The discipline, the ability to manage not only expertise but expectations for this strategy may seem, looking back, to be simple, but it is far from easy. Goldmining Inc. (TSXV: GOLD) is the culmination of capital markets, technical expertise and grit. A patient financial decision that is public and poised for the astute investor. If you are new to mining and not quite ready for a junior explorer looking for resources, this is a fantastic ‘bridge’ or company to get your feet wet because it has resources and the ability to prove up a great deal more.
We are siting moving turbulent, times and gold has been in favor for the rich for years. The mainstream news is finally talking about it, which means retail is starting to look to gold and the market is starting to pay attention. You should have your cash position in gold and silver, but your speculative equity position should also consist of resources in the ground when gold is trading at $1,500 and going higher.
The strategy was simple in theory, but like all things that sound simple, they are rarely, if ever, easy: Purchase resource-stage projects in strategic safe/safer jurisdictions within the Americas at low gold prices from companies trading significantly down from their NAV. Simple! Well…good luck pulling it off! This is about timing, patience and the relationships and experience of a solid Director and Management team.
The slide above shows where in the gold price cycle GOLD has made its acquisitions of major qualified gold resources.
I could certainly write a lot about Amir Adnani but for those who know the mining industry, there is no need and for those who are interested, there are a ton of videos and articles written about him. He is the Chairman of the company and has a long list of accolades.The team has a strong balance of capital markets experience and technical ability to pull this accumulation off with specialists in Brazil and Columbia, and even Herb Dhaliwal, the former Canadian Minister of Natural Resources and Minister of National Revenue in the Federal Cabinet of Canada under Prime Minister Jean Chretien.
AcquisitionsThe key to the company’s success has been the ability to understand political risk, capital markets and technical prospects. GOLD has completed nine acquisitions in the Americas avoiding high risk zones like Venezuela. As mentioned, the Board and Management that Amir has assembled have these skills and like all great strategies, they take time. The leverage ability of this company is large — and particularly given the legitimate need for new gold discoveries, the interest in gold, the fact there has not been a major discovery in years and that the reserves of the majors is decreasing. Smart investors understand now that exploration companies serve as a feeder system for larger producers and most geo’s, exploration teams and companies recognize that the obvious deposits have been found. That assumption considers region, climate and economic feasibility of projects and technology. Technological advancements in discovery, efficiency in mining practices and build out of infrastructure bring potential resources life.
Identifying the risks is part of the Model and here is no different with slightly lighter weighting on South America for political and currency risk then North America, but honestly not by much. The political risk is tiered into three groupings for South America, the top tier being Brazil, Columbia, Peru, the second tier being Chile and Argentina, and the third Venezuela, Bolivia and similar countries.
Moving forward, we understand that gold has strength. Having access to copper, silver and other commodities within the projects is a great credit for GoldMining but overall socio-political and economic market risk is a much more likely event then a commodities market decline. The current global markets are volatile. That does not mean that the mining sector will get hit as the FANG companies eventually meltdown. The markets will take a massive tumble with junk debt, with more than $13 trillion of less then 0% sovereign debt circulating. Money still needs to flee to safety and safety lies in real commodities. We have considered the massive stockpiling of gold and other commodities by the likes of China and Russia as they keep signalling that they are coming off the dollar and having access to money in the ground is vital.
Before looking at the capital structure look at the data above, this is the scope and potential that the company harnesses and which we know they picked up for pennies on the dollar.
GOLD is sitting with CAN$8 million in cash and in the money warrants of $3 million due in early January. They are well funded for administration of all properties as well as continued evaluation of new prospects for accretive acquisition at a fraction of the cost of drilling. This is illustrated by the company’s burn rate of only C$263,646 during 2Q19 (-23% YoY) and a total spend of only C$14.5 million since incorporation. This is a stock down from its high of $3.35 and has both short- and long-term optionality and as mentioned, a great entry level into a mining sector that is poised for growth. Commodities will be king, and gold and silver are the first that people go to. Get some multiples by picking up a company sitting on resources with huge potential upside. We do not know if all or any of these will ever come into production but there is ample data and upside potential.
There is another evaluation of the company by H.C. Wainwright & Co which asserts a buy rating and considerable upside stock price target of over $5. Even if we go as far back as 2017, when GOLD had only done 7 acquisitions and gold was trading at USD$1274, Jake Sekelsky from Roth Capital Partners put a price target of $4.50 on the stock. This is your superior entry point into the new market, and you are paying pennies on the dollar for assets that have had considerable historic net asset value. Perhaps this chart below will give you another glimpse at the potential:
Mining has been out of favor, but that is changing and shifting quickly as people narrow down on assets that have actual wealth. The market is awash with giant globalist companies borrowing at almost 0% and buying their own stock and providing the volume for funds to invest, creating the seeming ‘too big too fail’ that most technology companies favor. I must admit if the government and banks offered me free money with little to no tax, I would be a fool to not take advantage, but I prefer to be conservative even in my speculative side. I want commodities and assets that have value regardless of fiat currency. There is risk in this stock and a large part is political, but I do not trade stocks, I buy investments and for just over a dollar, this is an excellent company to introduce you to the mining and gold market.
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Securities Disclosure: I, Andrew O’Donnell, hold no direct investment interest in any company mentioned in this article. Also I was not paid for this article
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