ShawshankThanks for the responses. I hope I didn't make you mad with my ?'s from your tone. I'm bullish on Goldrea and I can easily see the scenario you are talking about take place. That's what I think will happen to--roll up a few of them, make them look pretty, and then sell out.
Was surprised by the 47 million and I have been following them for 2 years or more.
Here is something from financial sense website -jim pulpava -- that is part of the reason I'm so bullish on Goldrea.
"Speaking of gold and bull markets. There are something like 17 companies out there which have deposits of 5 million plus. Second tier companies, and there are some out there in the 2 to 3 million rating. However, I would say that’s not very much given where the demand could possibly go in the markets and everything else like that.
JIM: No, and when you consider world gold production is roughly about 2500 tonnes a year, John, and you take a look at the large producers, whether you’re looking at Barrick or you’re looking at Newmont, Gold Fields, Harmony, etc. – and even some of the emerging large producers recently such as Goldcorp – you really have to ask yourself where are they going to find deposits to replace what it is they produce each year?
I keep drawing these parallels in the gold industry, that it’s very similar to what’s going on in the energy industry. Just as Exxon-Mobil is going to have difficulty replacing all the oil and natural gas that it produces each year – especially since 85% of the world’s reserves are either 75% in OPEC countries, or 10% in the Soviet Union – and it’s the same thing with gold deposits. There’s been a lot of money spent on exploration, but you know, John, you’re absolutely right, there’s 17 companies that have 5 million ounces or over; and then when you go into the next level of 2 and 3 million ounce deposits, there’s only roughly about 30 companies that have any quality type deposits that have been developed, that look like they’re going to be proven into a mine. I mean there just isn’t a lot to choose from today when you look at the gold universe. Whether you’re looking at a large mining company – and I keep drawing the parallels to the large mining companies being similar to the IBMs at the beginning of the tech bull, versus the juniors are really your Ciscos, your Dells and your Intels.
But you know there just aren’t a lot of good properties out there that are well managed and have a lot of upside, and so that’s why I still think that the one thing if you look at this gold bull market, what we’ve seen gold prices come back up to over $600 an ounce; you’ve seen the HUI –the Amex Gold Index and the Philadelphia Gold and Silver Index – you’ve seen that go up; you’ve seen the stock of majors rise; you’ve seen the intermediate producers rise – but the juniors are still languishing because they’re still selling at steep discounts.
I mean the thing I love about juniors today is one of my favorite juniors I’m buying for gold in the ground at $20. Another junior I’m looking at is 5 and $6 gold in the ground. So here I have, as of this Friday that you and I are talking, I’m looking at gold over $600 an ounce and I’m taking a look at very few opportunities for the large and intermediate gold companies to expand their production, and then I’m looking at juniors that are selling for you know, you can get gold in the ground for anywhere, from average from $20 to $25, all the way up to a good junior or a takeover candidate which is probably selling closer to $90 an ounce. But you know there’s that wide swath in between there where you can find companies at $25 an ounce, $30 an ounce or $40 an ounce – that to me just seems to make just so much more economic or investment sense than going out and trying to buy a company that’s selling for $400, or $500 gold in the ground, versus let’s say $40 or $50 gold in the ground. [1:09:49]
JOHN: If you think about it, just like alternative energies, when you sort of hang over the edge here like this, a lot of people aren’t thinking in these categories. And typically, if you’re into the classic cocktail party or dinner party talking to someone about this, and you mention you think xyz gold or mining stocks are a real good investment then you get the alien look – you know, that aliens are arriving tomorrow look. Has it ever happened to you?
JIM: You know, it’s funny, we socialize with a lot of people in the boating, recreation area because I love to sail; my wife likes to motorboat around the bay. And a lot of people in the sailing community are very cognizant of energy prices so when I bring up and tell them oil is going to $100, and going up to $200, they listen to me because I told them last year they’d see 75 and $80 oil. And obviously, if you own a motor boat or a yacht that has a 3 thousand gallon tank you’re very cognizant of what the price of energy is. And here in San Diego the Port Commission adds an extra 10% to the cost of fuel, so you even pay more when you go to fill your boat up with diesel. But you know, people are very cognizant of energy because that’s something that they see. When I talk about investing in energy I don’t sound like a whacko, as they thought I was a couple of years ago when I told them the days of $25 oil were over. And so now I have some credibility with these guys because they say, “yeah, your oil predictions have come true.”
But then when you turn the topic and you start talking about the dollar’s fall, you start talking about gold and silver, then all of a sudden they kind of look, “uh, I don’t know.” It’s he’s getting into one of these weird things again. And so that’s a little bit harder for them to grasp. But then I get in to talk about trade deficits, the dollar, I’m explaining inflation to that because they’re seeing that in their real lives and then they tend to be a little bit more receptive. But they also see it as, “isn’t that kind of high risk?” I say there are ways to make it low risk. You can go out and just buy bullion and just hold on to it – it’s a good idea. Then I start talking and relating about historical cycles to them, and then they start to understand; and you know all of a sudden they’re not looking at you like this guy is a Martian that just landed from outer space. So it depends on how you explain it to people. But you’re right, at first glance if you were to bring it up at a cocktail party, and you were going to bring up gold and silver, all of a sudden they look at you like you’re one of those people. [1:12:33]
JOHN: Or talk to somebody at Church who’s a broker and say, “well, I just invested this and I bought another couple of thousand ounces of silver.” And they go, “that’s a risky investment!” Those were the first words off their lips.
JIM: Sure, they talk about risky investment, and yet here you have the dollar that’s losing its value as the Fed and credit inflation just runs rampant in this country. And yet you know, it’s funny because you’ll say when you try to explain this inflation and explain it in terms of like, “why do you think real estate prices are so high here?” They tend to think that’s just a bull market; that’s not inflation, that’s a bull market. If stock prices are up like they were in the 90s, that’s a bull market – that’s not inflation. So people really I would say today are not as knowledgeable about monetary matters as they were say 40 or 50 years ago.
So there’s a misunderstanding, although if you take the time and explain to them the core rate of inflation, they kind of chuckle and laugh that nobody believes that. So they know that inflation is running higher, but when you translate it to, “Ok, inflation is running higher, the Fed’s printing money, the dollar is head for a decline, what kind of investments should one be in,” and you mention gold and silver, and then you start talking about juniors and they just go, “oh, my goodness, that’s high risk!.” And then once again, I think it’s just a matter of education.
And when I explain the concept of: where gold prices are, everybody is cognizant of that; this is what it costs to produce it; this is what it costs to find it; and then you tell them now here’s an investment where you can buy gold in the ground at $20 an ounce - gold’s at $630 – you explain it in those terms and all of a sudden they look at you and say, “oh, Ok, that makes sense to me.” So I think it’s a matter of education. And the unfortunate thing is they’re not getting that from the financial media, and they certainly aren’t getting it from Wall Street brokerage firms. [1:14:38]
JOHN: And so you come up and say what you say, that’s why you get the flying-saucer look. That’s because they’re comparing what you say with the word on the Street, and they’re trying to reconcile those and they can’t. and they figure this guy must be the whacko, surely CNBC knows what they’re talking about.
JIM: Sure, because the other thing that you have let’s say that you spent some time, you explain it, and once you explain it to them people pick up on it and they grasp it. But then they walk away and the next day they’re going to be watching CNBC, or picking up a financial publication, and they’re going to be reading something different. So that’s part of the problem of being a contrarian, and looking at this is your views aren’t part of the crowd. So there tends to be this off look, and well you know, “a lot of people aren’t doing that.” But by the same token 6 months ago if you would have said, “real estate – great investment!” everybody would have said yes – they could relate it because everybody had seen their houses rise in value up until recently. So what it’s going to take is a strong movement in prices, but once again if you take a look at where the values are in this market, it’s really going to be in the juniors. And that’s because that’s the only place with gold prices at $600, that you’re able to buy gold in the ground at 20, 30 or 50 dollars an ounce, and so that’s where I think the big play is. [1:16:06]
JOHN: There’s sort of a rollercoaster effect though, that’s in there. The prices fluctuate and that tends to spook a lot of people, especially depending on the amount of money they invest in that. But you really have to base yourself on what you believe to be true, and then just be patient. It’s going to take a while before this thing plays out.
JIM: Sure, because I mean if you take a look at what is a junior – a junior is not a producer. It is a company that has acquired or staked a large tract of land; they’ve got drills out there; they’re poking holes in the ground trying to define the deposit. So they don’t have any income, they don’t have any cash flow, and it takes time to define a deposit.
But you’ve got to think of a junior in terms of what I call forward ounces. Not just the ounces that they have in the ground, and on the balance sheet today, but the ounces that they’re going to develop up over the next 12, 18 months or 24 months through the drill process. And that takes time. And unless they have spectacular drill results most of the business of junior mining is humdrum business: it’s poking holes in the ground; every six weeks or so you release a press release with drill results – but that’s just the business.
And unless you’re whacking out some major gold discovery like Aurelian, pretty much most of the industry is just humdrum: you’re out there, you’ve got your drill crews running, you’re poking holes in the ground and after you get enough holes poked in the ground you come out with a resource estimate which tells you how you’re keeping score: “Oh, they had 2 million ounces, now they’ve added another half a million ounces,” and all of a sudden valuations are instantaneously reevaluated but that’s just the business of juniors. And it’s just why they’re not understood very well, and most people don’t understand valuation of a junior, that’s where I think the great opportunities are in this market. I mean if I was to tell you, John, that gold is selling at $630 an ounce, and you can buy it at in the ground for 20 to $25 an ounce, what would you think? [1:18:12]'
I think they can likely get to 3M oz. too with 250K+ production. This is what they say they are looking for from his other transcriptions.
I know I'm hung up on this seracite, but if they own the ore, why are they only getting 25% of the revenue for it. Seems like a high pricing for processing but what do I know.