In my
latest book I try to make the point that at resource stock market lows,
you can't give shares away. That is all by itself a great indicator of where
we stand in the cycle. We are now easing into the weakest seasonal period of
the year for gold and silver and many companies are selling near their yearly
lows.
Gold and silver seem to have bottomed in late summer of 2018. Platinum
tumbled to a new multi-year low in February of 2019. Shares generally are
higher, some much higher but I think a correction would shake out the
remainder of the bulls so I think we will be weak into mid-summer before gold
and silver start to react to the Great Reset in progress.
When I go through the stocks I own and follow I am astonished at how cheap
they seem. It's not the same as 2001 and 2009 when a hundred companies were
selling for less than the cash they have on hand but there appears to me to
be a giant disconnect between price and value. Harvest season is approaching
and there is a lot of low hanging fruit. It's hard for me to believe prices
to be so cheap for so long. It won't last.
I've written before about an interesting project in Wyoming named the
Rattlesnake project. It's a large alkaline system similar in nature to Cripple Creek (28 million ounces) and Lihir
(40 million ounces). Quinton Hennigh brought the project into Evolving Gold
where they began to explore and drill the project. Evolving Gold later did a
deal with Agnico Eagle that valued the project at about $110 million. During
the decline from 2011 until 2015 when gold dropped, Agnico Eagle requested an
extension of time and was refused by Evolving. Evolving couldn't gain traction
with either the project or the market and eventually GFG Resources
Inc. (GFG:TSX.V; GFGSF:OTCQB) picked up the project as cheap as chips.
There is something I call the curse of large projects. When you have
properties with giant potential such as porphyries or alkaline systems, they
require tens of millions of dollars to prove up that resource. It's hard for
juniors, and many a poor boy has met his end trying to advance a billion ton project
and blown the company sky high trying to raise the money.
GFG management was brilliant. They realized they needed two important
parts. One, they needed a Plan B project that matched both the state of the
market in general and their ability to raise money to advance it. They found several projects in Ontario in late 2017 and put
them together to have an alternative news flow to Rattlesnake. And two, they searched to find a suitable
partner for Rattlesnake with deep pockets who could do a proper job of
advancing an alkaline gold project. They found such a partner in Newcrest.
It's just my opinion but I happen to think Newcrest is one of the top mining
companies in the world.
The deal is a little convoluted but basically Newcrest can increase their
part of the Rattlesnake pie by making staged exploration investments of up to just short of $100 million to earn 75%. Clearly Newcrest
sees the potential for millions of ounces of gold and is prepared to belly up
to the bar to get their hands on it. It doesn't hurt that former Evolving
Gold president Quinton Hennigh used to work for Newcrest and they trust his
judgment.
Investors tend to think of their shares as being lottery tickets. Commonly
they want new lottery numbers to be announced every week. But junior resource
companies have to think in terms of years of work to show real progress. GFG
came up with a plan to advance the company via their investments in both
Rattlesnake and Ontario and the pieces are starting to fall into place.
In Ontario at the Pen project, GFG drilled over 4,700 meters in nineteen
holes in 2018. All of those results have been released and included a number of high-grade intercepts proving their
geological model. The 2019 drill program is budgeted for $2.5 million and
consists of two 4,000-meter programs. The Phase one two drill program started
turning in February and will complete in April. There will be a constant news
flow of results through the end of the year with Phase two starting in H2.
At Rattlesnake Newcrest is funding somewhere between $3 and $3.5 million
for exploration with two drills starting in July. I would expect drilling to
continue until winter arrives in October so the 2nd half of 2019
will have a lot of numbers for the lottery ticket holders.
GFG has one of the best management teams of all the companies I deal with.
They are cashed up and I think there time is coming. With a market cap of
under $20 million and a partner who has implied a value of over $33 million
for GFG's eventual 25% share of Rattlesnake, sooner or later a few resource
investors will wake up.
GFG is an advertiser. I own shares bought in the open market and in the
last PP. I am biased. Do your own due diligence.
GFG Resources
GFG-V $0.23 (Apr 17, 2019)
GFGSF OTCBB 92.8 million shares
GFG Resources website.
Bob and Barb Moriarty brought 321gold.com to the Internet
almost 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.
[NLINSERT]
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