For my first blog, I thought I’d share a few investment ideas with you. I’ve done okay so far so I hope this isn’t the “Sports Illustrated Cover Jinx” redux!!!
This post was originally on another website where I posted it last night under a pseudonym I use there, "Rush Post." I've taken the liberty of re-editing it here. Heck, I have the copywrite!
Please do your own due diligence; I’m not an investment adviser, just a goldbug with a lot of free time (retired!)
Today I’m going to focus on two stocks, related in land holdings but not price.
Pretium Resources (PXZRF) is a new issue that was carved out of Silver Standard’s (NASDAQ:SSRI) portfolio of properties which went public in December of 2010. Snowfield and Brucejack are the two very exciting properties that SSRI sold to the newly created Pretium Resources.
The funds for the property were raised by the sale of Pretium shares last December at $6.. SSRI received cash from Pretium and still retains 42.3% of the shares in PVG* (*Canada’s stock symbol for PXZRF.)
(Update: Silver Standard today announced they will be selling some of their holdings into the open market via a secondary, non-dilutive offering of shares they already hold.)
It gets interesting; stay with me.
The CEO of Pretium is none other than the former CEO of Silver Standard, Robert Quartermain, who retired about a year ago. Mr. Quartermain took SSRI from a company with $2 million in capitalization to $2 billion!!! (You can look it up!)
More importantly, he changed Silver Standard from strictly an exploration company to a producing company, opening the new Perquitas silver mine in Argentina. The man gets things done!
Snowfield-Brucejack has been explored for years by Silver Standard so, clearly, Robert Quartermain was intimately familiar with the properties when he retired from SSRI last year. It had also been explored by a previous operator many years before when gold prices were too low to warrant further exploration; however, those older technical reports are part of Pretium's records now.
Note that generally what exploration companies do is drill for a season X amount of meters. They then ship the sample cores containing gold, silver, etcetera, to independent labs for assay. The lab report comes back and shows so many grams per ton taken from several holes.
A qualified geologist under Canadian law then reviews the samples, analyzes where the samples were taken from and does some mathematical calculations to come up with three classifications of gold… "Measured, Indicated and Inferred"…each, in descending order, strongest estimate to weakest.
As subsequent drill programs progress over the years, they keep adding to the totals. They are hoping — generally — to be “taken over” by a large mining company, because the costs of mining are huge, compared to exploration alone. But some companies take the plunge and mine their properties themselves.
After years of exploration of Snowfield, SSRI stepped onto the ice (literally) of Brucejack and found even more gold to add to their already rich reserves at Snowfield. How big??? Very.
Try these numbers out…55.7 million ounces of gold in the three categories (definitely go to www.pretivm.com to check this out in more detail. All the numbers are there.) And these numbers are growing because they are far from finishing exploration and each year SSRI/Pretium has added MORE gold, silver and copper to their resources.
Snowfield-Brucejack contains hundreds of millions of ounces of silver; three billion pounds of copper; there’s moly and rhenium too…And, of course, more will be found. So why hasn’t anyone mined this stuff? Read on.
First, until recently, the gold has been low grade; nothing wrong with low grade; it means the gold is there at levels of less than 1 gram per ton. But there are so many billions of tons of gold-bearing rock, the economics -- with skyrocketing gold -- have changed; it's now very much worth mining.
But some miners would rather get the low-hanging fruit of high grade; that is, before gold went parabolic in price…I might add that one of the reasons I believe Silver Standard is selling some of their appreciated shares of Pretium is to do just that; they have a lot of silver properties where the resources should be easily attainable and sooner rather than later; this, of course, is speculation on my part.
The location of this gold is remote, to say the least. It’s in the boonies, in a cold, hostile place at high elevations, in a remote part of British Columbia, with limited access, as opposed to a mine in say, Nevada, off the highway with a Burger King, and a gas station nearby. But things, they are a changin’ and they are a changin’ quickly.
First: The price of gold and silver has risen exponentially, making the expensive buildout of roads and infrastructure worth the billions it will cost. And before you say “Who can afford that?”…think about the recent 39 billion dollar offer for Potash Corporation by Rio Tinto. The 3 or 4 billion or so it might cost to build a highway, mill, year-round camp will be viewed as chump change in the not-too-distant future, in my opinion.
The BC government recently approved a $404 million - 287 kilowatt hydroelectric power line to run through this area…GAME CHANGER!! This will be built over a period of three years. Mining is POWER HUNGRY. And the power line will bring infrastructure and "civilization" to this remote area of the world.
Last year in Brucejack 's Galena Zone, very high-grade gold was found…kilos per ton, not grams. This is where Pretium will focus its attention this summer and much of its 60,000 METER 2011 drill program will focus on those holes with a view toward finding out just how big this puppy is (high grade zone.) This stock can be huge one day. Huge. My three-year target is $30 because I think we compare favorably to next door neighbor Seabridge Gold, which I talk about later, for context only.
Another similar company priced about the same is Nova Gold, but they have far more shares outstanding. I'm not knocking them; they have other things going for them, but I think Pretium has the "right pedigree" to be a huge winner.
There are less than 90 million shares outstanding, fully diluted; and:
42.4% of the shares are in the hands of Silver Standard*
40.9% of the shares are in the hands of institutions (sneaky devils, huh?)
Only 12.7% of the shares are in the hands of RETAIL customers* (*Schnooks like you and me.)
I know that leaves a few percent; I think the pie chart on the Pretivm website showed they were held by Asian investors. You can look it up.
Note: If you don’t use the link, the “u” in Pretium is a “v” on the website…they are trying to be clever. Again,www.pretivm.com
Full disclosure, I have a position in PXZRF.
And for you "two-dollar bettors," the second stock is the one I have a large position in. I’m embarassed to tell you the price; it’s about 67 cents as of this writing. But if things go well, the price can be much higher.
The stock is Teuton Resources; American Symbol TEUTF. I’ll use the Canadian symbol of TUO because it’s shorter! Their website is www.teuton.com and they will be updating and revamping it in the next thirty days or so as some of their info is a bit stale.
When you go to the site, be sure to click on “High Property Presentation.” Narrated by their President, Dino Cremonese, it talks about — you guessed it — the High Property!!!! And why am I so excited about this so called “High Property”?? BECAUSE IT’S RIGHT NEXT DOOR TO BRUCEJACK…TOUCHING IT, IN FACT. Sorry for shouting…I thought you weren’t paying attention.
Back to that in a minute.
Teuton Resources is a property accumulator. They have been acquiring property in the Golden Triangle since the early 80s. Their business model is to option out a property to another company; the other company spends the agreed upon amount of money to drill and explore. For their efforts, they get half or 60 percent or whatever the deal is. Teuton rarely drills on its own. (They have scores of properties, by the way.)
To put this geographic puzzle together, Pretium’s other neighbor is the giant Seabridge Gold (NYSEMKT:SA), which has even more gold, copper and silver than Pretium and is part of this happy family of interconnected grounds (Teuton having the most land but not a bunch of cash and, as of yet, no mindblowing numbers –YET.) I must mention Seabridge because Teuton’s Treaty Creek property is 800 meters away from Seabridge’s Iron Cap Zone which has 8.5 million oz. of au and lots of copper. Bottom line: Teuton is in the heart of "elephant country" and is loaded for bear (sorry about the mixed metaphors.)
Our Treaty Creek property was drilled by our optionee partner, American Creek Resources, and they found .8 gpt gold over 241 meters, the same grade as neighboring Seabridge.
Unfortunately, that company did not follow up with further drilling programs, having run out of cash. For reasons best known to them, they failed to raise sufficient capital to pay for further exploration of the Treaty Creek property.
Teuton, no matter what, will always own 50%, but TUO is suing American Creek, claiming they did not spend the required $5,000,000 on the property; Teuton's president is an attorney and I believe his case may succeed.
If Teuton can prove American Creek didn’t spend the required sums of money, American Creek will lose their share or perhaps more likely settle for a smaller percentage of Treaty Creek while relinquishing control back to Teuton… it’s speculation on my part; it’s up the the parties or the Canadian courts; but a suit (and countersuit) have been filed and discovery is underway.
Teuton has 300,000 acres of property in the Golden Triangle, making them the largest landholder there. I started buying the stock in 2007 when it was 61 cents or so…and during the crash, bought a lot more all the way down to a nickle!!!
I look at it almost like a real estate play. Gold all around, up the ying yang and even up the old wazoo!!!
Teuton has plans to drill their High property this year. The drilling season is short, due to the cold arse weather and mega feet of snow they get there. I won’t lie to you; it’s ugly weather.
Teuton has many other exciting properties I won’t rattle off here. Like I say, I have a position in the company. You need to do your due diligence.
The hope is that by drilling the gossan (area of mineralized multi-colored oxidized rock) this year, Teuton may discover its own “Galena.” We are right on top of Pretium's Bridge Zone, which also has millions of ounces of gold.
When you look at the Teuton presentation re the High property, you can see just how close “we” are. If we find big ounces this year, in the words of Jackie Gleason, it’s “To the moon, Alice.” Bear in mind, Teuton only has 40,000,000 shares outstanding.
Listed Canadian stocks trade in the US on the OTC bulletin board. Even prime Toronto Stock Exchange companies trade that way. Limit orders are best because stocks like Pretium and Teuton are thinly traded and can have big gaps between the bid and the offer.
I got interested in gold and silver years ago when I saw that the supply of paper money was outstripping the relatively stagnant gold and silver supplies. Obama and his friends have found a way to SUPERCHARGE the printing presses… I needn’t drone on about money printing, “stimulus,” etcetera; politics aside, we are injecting a lot of cash into circulation.
Please don’t take my word for any of this stuff. It’s all accurate to the best of my ability but I’m capable of making a mistake. Don’t close out your 401Ks and bet the farm but, if you're so inclined, check these two stocks out. I think they both merit your attention.