I've been pretty quiet about mining shares lately as I try to get a handle on what the real story is on the Corona Virus. That doesn't mean the companies have been quiet and indeed they have not been. The Corona Virus story looks more and more like a scam on the part of big Pharma with each passing day so I will be doing more writing on it.
Three of our advertisers have done deals lately with majors and are showing the next trend in the junior market. Behind the scenes, the majors and mid-tier mining companies are beginning to realize that they need to be doing deals with the best and brightest of the juniors right now.
The efforts of the US government to bail out a totally insolvent financial system just put gold and silver into what will be the ultimate afterburner. I would be perfectly happy with a correction soon to clean out some of the deadwood that like to buy at tops but down the road, the dollar, the bond market and the stock market are toast.
What else is left to invest in?
The CRB Commodity Index has crashed by 75% from its peak in 2008. It is at the lowest level since 1972. Yes, we are in a depression and prices have plummeted but we still need commodities. Everything is cheap.
The long oil positions crashing this week to minus $37 a barrel show just how dysfunctional our financial system is right now. I don't know when gold and silver will kick into high gear, it isn't here yet.
But could we see gold up $200 in a day and silver up $10? Yes and I think we will. The door to investing into resource shares is a little tiny door. When everyone wants to go through at the same time, it's going to get pretty crowded.
Newcrest backed out of a deal with GFG Resources Inc. (GFG:TSX.V; GFGSF:OTCQB) on the Rattlesnake property in Wyoming recently. Rattlesnake is an alkaline system. Those tend to be both very big and very rich.
I hate them.
They also eat a lot of money. Newcrest put about $5 million into Rattlesnake and drilled a deep hole that hit a lot of rock. Even very big, very well run companies like Newcrest hit dusters on a regular basis. Did I mention that alkaline systems tend to be very big and very rich? And eat a lot of money.
I can't fault Newcrest. I do still think they are one of the finest mining companies in the world. Their geos had a theory. They poured a lot of money into the ground and hit SFA.
At about the same time GFG announced a monster hit at Plan B, the PEN property in Ontario. They had an 8.5-meter intercept of 71.27 grams gold. The Newcrest announcement was on Friday April 3rd and the PEN assays were released on Monday April 6th.
I'll be really charitable and say that I think the really negative press release and the really positive press release came out at about the same time by coincidence because when I start thinking that companies are massaging their stock price in the face of bad news I get really snarky. If it was a coincidence I would like to see it be a solo coincidence.
When I wrote about GFG a long time back, I said that having a Plan B was a great idea. Because if one project doesn't pan out, you have a backup. The Eastern Canada operations have turned out to be brilliant and will more than support the value of the company regardless of what happens to Rattlesnake.
Rattlesnake is still a high potential project. There have been a lot of good hits there and the feeders are there somewhere. Gold going up makes the odds of failure go down so Rattlesnake is still a great project for GFG. Someone will want to do a deal. Geos have more theories than Starbucks has flavors of coffee.
But meanwhile on the strength of the PEN monster hit, Alamos Gold Inc. (AGI:TSX; AGI:NYSE) has stepped up to the plate to inject enough money into a non-brokered PP to bring them up to 9.9%. It will be about $5 million in flow-through shares at $0.291 and non-flow through shares at $0.19. Not only is Alamos putting money into the company at a premium, there are zero warrants.
Darn, I want in the PP as well and I love warrants.
I've written about TriStar Gold Inc. (TSG:TSX.V) before. They have a conglomerate gold system in Brazil. Quinton Hennigh, Erik Wetterling of the Hedgeless Horseman and I snuck in a visit to Brazil in February just before the Iron Curtain came down all over the world.
It was a really great visit. TriStar has a smoothly functioning team with very nice and highly qualified geos. And some are quite attractive.
Erik gives Fernanda panning lessons at TriStar
Quinton gave a 30-minute brief talking about how they have three different styles of gold in three different horizons. I though I understood conglomerate gold systems before but he made it very simple.
He and I made a ten-day scouting trip to New Zealand in 2009 before going to Perth to meet with Mark Creasy on the deal that became Novo Resources. In any case, we actually visited a beach on the west coast of the South Island of New Zealand. Under certain wind and tide conditions, the beach would become covered with a thin layer of gold brought in from the sea floor just off shore. I had seen gold in sand but didn't understand it in context until Quinton spoke in Brazil.
Quinton's lecture
Different layers of conglomerate
Conglomerate
TriStar Gold is yet another junior that has a major betting on their success. In August of last year TriStar announced an $8 million deal with Royal Gold where Royal put in money in different tranches and got some warrants as well. Royal was buying a 1.5% NSR on production. Nobody bets $8 million on production unless they have a high degree of confidence that the company will actually get into production.
Not to be outdone, Precipitate Gold just announced a funding deal with Barrick Gold. Barrick is willing to pay up to $10 million in exploration on Precipitate's Pueblo Grande project and conduct a pre-feasibility study to earn 70% of the property. In addition Barrick will invest $1.39 million CAD into Precipitate shares at $0.11.
I went to see the Pueblo Grande project about ten years ago. It is belly to belly with Barrick's Pueblo Viejo Gold Mine. That was in construction when I was there and now in production at a rate of nearly 600,000 ounces for Barrick with right at 1 million ounces a year total. Pueblo Viejo is owned 60% by Barrick and 40% by Newmont. As a tax source, the mine is the most important industry in the Dominican Republic. It is also the largest gold mine in the Americas.
I like to keep investing simple. Barrick knows what they are producing per year. They know the grade and the cost. They also fully understand the geology. By buying the right to own 70% of Pueblo Grande from Precipitate, they know exactly what they are getting and what the cost is and what the value is.
I love reading the chat boards because the vast majority of posters all believe they know better than the companies as to what they should do. Most posters know in their hearts that they could do a much better job of running the company. That's daft of course and I rarely come across deep or really thoughtful discussion. But if the biggest mining company in the country wants to put money into your project, the project is probably worth having. It's not a bit more complicated than that.
If Barrick funds $10 million in exploration they will find gold. They have the mill right next door so the only cost of production for Precipitate is paying 30% of hauling the gold to the mill. I'm not quite sure how the math works; Barrick would own 70% of Pueblo Grande but only 60% of the mill at Pueblo Viejo. Newmont is a part owner and they will have to be compensated for use of the mill.
Precipitate still has other projects and now will be fully funded to do exploration on them.
I own shares in all three companies both bought in the open market and participation in private placements. All three companies are advertisers so naturally I am biased. Do your own due diligence.
GFG Resources
GFG-V $.22 (Apr 23, 2020)
GFGSF OTCBB 109 million shares
GFG Resources website
TriStar Gold Corp
TSG-V $0.29 (Apr 23, 2020)
TSGZF-OTCBB 182 million shares
TriStar Gold website
Precipitate Gold Corp
PRG-V $.13 (Apr 23, 2020)
PREIF-OTCBB 118 million shares
Precipitate Gold website
Bob Moriarty
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Bob Moriarty founded 321gold.com, with his late wife, Barbara Moriarty, more than 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.
Disclosure:
1) Bob Moriarty: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: GFG Resources, TriStar Gold and Precipitate Gold. My company has a financial relationship with the following companies mentioned in this article: GFG Resources, TriStar Gold and Precipitate Gold are advertisers on 321 Gold. I determined which companies would be included in this article based on my research and understanding of the sector.
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5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of GFG Resources, Royal Gold and Newmont Goldcorp, companies mentioned in this article.