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Analyzing a Junior Mining Company

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Kal Kotecha PhD

Imagine buying the house next door for half price, would you? Junior mining stocks have been on a fire sale for some time now but why are we nervous about pulling the trigger and buying? Why doesn’t the colloquial statement ring true? “Buy low and sell high.” It makes sense, but then why do most of us buy high and sell low? Fear and panic sets in when we see our stock prices collapse. It seems counterintuitive but buying when people are panic selling generally leads to profitability.

My PhD thesis focused on the affective heuristics of the 2008 stock market crash. Basically that investors are emotional beings that invest emotionally – both in times of highs and lows in the market. Like many, I sustained a lot of personal losses and am starting to become more aware of my ‘emotional investing patterns.’ When do I invest? What makes me motivated to buy a certain stock? Am I panic buying/selling? Have I done my research?

Being a newsletter writer, I have ‘learned’ to do more investigation on the companies I write than I would if I invested purely for myself. But in saying that, it is prudent for the investor to perform in-depth research before buying a stock. In the junior mining field that includes:

  • Having an in-depth knowledge of the history of the management team. This is probably the one most crucial aspect. If the team has a track record of success, chances are they will continue in that course. I urge investors to call the President of the junior mining company, not just the Investor Relations rep. If he/she is too busy to talk to you then they do not deserve your investment. Ask him/her about the project, company goals, finances etc. Get a ‘feel’ of the company from its leader.
  • Know the project/property well. If there are any drill results, analyze them. Talk to an independent geologist and get an opinion on the project and surrounding property.
  • Analyze the balance sheet – is there debt, why? How much cash is on hand? Will there be another financing needed?
  • If the company is going into production, what are the start-up costs? Can they sustain it? How long is the mine life? What will be the projected net revenue?

And importantly, have an exit plan and stick with it whether the company’s stock falls or rises…once that goal has been realized, take your profit or minimize your losses. Do you due diligence so you won’t have to suffer from buyer’s remorse.

Happy investing!

Kal Kotecha PhD

The Big Short–Now the Big Long

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The Big Short–Now the Big Long

Kal Kotecha PhD
We live in an era of fraud in America. Not just in banking, but in government, education, religion, food, even baseball… What bothers me isn’t that fraud is not nice. Or that fraud is mean. For fifteen thousand years, fraud and short sighted thinking have never, ever worked. Not once. Eventually you get caught, things go south. When the hell did we forget all that? I thought we were better than this, I really did.

  • Mark Baum from the Big Short

The Big Short is turning into the Big Long and that is — being long on precious metals. The movie Big Short was based on a true story outlining two separate groups that understood the mortgage crisis and capitalized on it. How did they do this? They investigated who the banks were approving for subprime mortgages. They went to see the properties, interviewed the homeowners and realized that a bubble was forming. Mark Baum asked, “I don’t get it, why are they confessing?” (referring to the mortgage brokers approving just about anyone for a subprime mortgage). His associate replied, “they’re not confessing, they’re bragging.”

In the same light, there may have been some sort of a bubble in gold and gold stocks in 2010 and investors sold. Just like with the 2008 financial and real estate crisis, it overshot to an oversold position. A base in gold has been forming and a breakout looming. The fundamentals for gold look solid and if it can break the $1200 ounce resistance, we could see higher highs. But what are the banks buying now? Do they know something we do not?

In an article by Avery Goodman of Seeking Alpha   http://seekingalpha.com/article/3421396-the-big-long-goldman-sachs-and-hsbc-buy-7_1-tons-of-physical-gold he states: “On August 6, 2015, Goldman Sachs (NYSE:GS) and HSBC (NYSE:HSBC) took delivery of a sum total of 7.1 tons of physical gold. No, I have not made any typographical errors. And no, I am not talking about electronic paper claims. I am talking about shiny yellow metal stuff that you can touch and feel. The gold bars were not purchased for bank clients. They were purchased for the banks themselves. How do I know this? They are designated by the exchange as being for delivery to the bank’s “house” accounts at COMEX, not to client accounts. Goldman Sachs, alone, took 3.2 tons worth of physical gold bars. Yet, even as the firm builds its stockpile, Goldman tells clients not to do it. In spite of the antics in the paper-gold market, we know the physical market is on fire. Demand will exceed known supplies by at least 1,350 tons in 2015. More in 2016. But, that won’t stop someone from setting up the paper market in order to buy from the physical market very cheaply. This is because the mysterious gold “supplier of last resort” will fill COMEX physical delivery demand, for the moment at least, no matter how high it rises, and no matter how low other supplies may be.”

This points to some type of “gold manipulation”. Wasn’t there manipulation in the 2008 stock market crash as well as the subprime debacle? Weren’t the banks controlling us like little pawns? hmmmm

Avery Goodman continues: COMEX is designated by the US Financial Stability Council as a “Financial Market Utility” (FMU). The Council was set up by the Dodd-Frank Act, and views any failure of this “too-big-to-fail” entity as likely to lead to widespread contagion in multiple markets. Thus, logically, the US Treasury is willing to, and is draining physical gold from the US gold reserve to bail it out.

Still, regardless of what the US government is doing, why would these two banks make such a huge long-term investment in physical gold bullion bars? Perhaps, we are seeing a “Big Long,” similar to the “Big Short” Goldman Sachs is known to have taken in 2006/07. There are many who believe that we are soon going to see the collapse of a worldwide bond bubble, just as we saw a worldwide collapse of real estate values back then.”

So ask yourself, what side of the fence do you want to be on? The long or the short? Goldman Sachs and HSBC seem to know the answer and they are screaming long on gold. It might be a matter of time when someone will be writing about the Big Long that happened in gold.

 

Happy investing!

Kal Kotecha PhD

New Carolin Gold–A Golden Pick

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New Carolin Gold–A Golden Pick

Kal Kotecha PhD

In the fluctuating junior mining sector, there are few corporate characteristics that can help to foreshadow a company’s prolonged success in the market. The variations in the market, both in terms of commodity pricing and confidence investors have for the overall economy, tend to dictate the share prices of junior mining firms.

As I have discussed in previous articles, I believe that one of the most valid signals a company can display to forecast potential success is consistency. A consistent company is one that sets measurable objectives, takes logical steps toward their completion and as a result, reaches their goals in a timely fashion. The Junior Gold Reports looks upon these types of companies with great favour because they are the ones that will improve their share price across the life cycle of the company meaning there will steady and (relatively) predictable returns for investors.

New Carolin Gold Corp. (TSX-V: LAD and OTC: LADFF) (“New Carolin” or “the Company”) is a Canadian junior-stage exploration and brown field development company that has displayed consistency in the development of its 144 square kilometre land claim known as the Ladner Gold Project. The Ladner Gold Project houses 730,000 ounces of inferred gold resources, and is housed in the Coquihalla Gold Belt in southwestern British Columbia, which “is believed to have multimillion-ounce potential” (Taylor, 2015).

We profiled New Carolin Gold Corp. in February of this year (https://www.juniorgoldreport.com/newcarolingold/) , when at the time the Company was taking advantage of soaring gold prices by acquiring 100% of the Ladner Gold Project property from its previous owner. The acquisition showcased New Carolin’s commitment to the property and its potential as a bluesky gold producer. The acquisition of the property was based on a number of conditions the Company had to meet before the transaction could be finalized. As of March 31st, the TSX Venture Exchange provided conditional acceptance of the acquisition by the Company of remaining interest of the properties held by Century Mining Corporation. This acceptance cleared the Company to close the transaction and effect formal property transfers to take 100% interest and control of the Ladner Gold Project.

With this formalization of the transaction, the company is one step closer to attracting a major gold mining company to purchase the property, a benefit to all shareholders on board for the ride.

More importantly, however, is the Company’s recent completion of an Option agreement with Crucible Resources Ltd. whereby the Company acquired mining claims adjoining the Company’s Ladner Gold Project property – an expansion of New Carolin’s assets. The agreement consists of a total of twenty claims covering an area of 30 sq. km situated in the southern portion of the Project below the Coquihalla Highway.

Three of the new Crucible claims adjoin a prospective new gold zone which has been traced to a length of approximately 1 kilometer, where a sampling program was carried out in the 1980s. From the program, reported soil samples ranged between 20 and 1000 ppm, with one sample of 5900 ppm (close to 6 g/t). Industry standards suggest that gold returns of 20-50 ppm are considered high in soils and this recently optioned zone has wide areas with numerous samples between 100-1000 ppm. The development and production potential of this property is clear and adds significant value to the Company’s position in the market. New Carolin intends to engage Crucible to carry out a new sampling program in 2016 to confirm historic sample locations and assay results, and expand the sampling program on the three new claims with the expectation of extending the gold zone and locating the source.

The Company plans to step up efforts this year and explore lower claim zones where gold on surface is present. These type of holistic study samples will contribute to effective marketing by New Carolin, enabling promotion to investors and directly to majors. As of April 14th, the Company launched a new modernized website, an updated logo and hosts an active Facebook page. This type of progressive marketing from a junior mining brand is relatively unfamiliar to experienced investors in the mining space, and it should absolutely be seen as a proactive response to changing marketing requirements.

In the short-term, the company has the following plans:

  • Updating a 3-D geological model created in the fall of 2014 with detailed geological and structural mapping and surveying of the underground and surface areas. The preliminary 3-D model has provided a more thorough understanding of the Carolin mine gold mineralization and, with the additional work during this program, will provide clear exploration targets for drilling of new areas, as well as within the resource areas.
  • A diamond drill program with specific targets and objectives will follow the first phase of mapping and surveying at the Idaho zone (which includes the Carolin mine and former Aurum mine) and at the McMaster zone, which is 1.2 kilometres northwest of the Carolin mine along the Hozameen fault.
  • The company also plans to undertake exploration work at two of the several additional known mineralized gold zones located on the Ladner gold project.

Looking at New Carolin’s stock performance, there are apparent upward trends that should excite investors interested in both short and long term stakes within the Company.

Over three months, you can see more than a doubling of the stock’s value, moving from $0.04 in late January, to a peak of $0.10 where it currently sits at $0.085. The Company is expanding its property claim and has a planned exploration study to obtain an updated resource estimate. Once this is completed, we expect the stock’s value to improve significantly.

For those cautious investors wondering what kind of growth they can expect from the stock, lets take a look at its historical value over the past year:

In just under one year’s time, this stock has seen 500% growth in value. Expect the stock’s price to grow considerably in coming month’s as the Company works to execute its near term plans and market the results to interested parties.

The Company’s current investors are very confident in the management team’s ability to execute their strategy, as demonstrated by voting results at their recent Annual General Meeting which saw 32 million shares voting in favour of maintaining the team of directors with just 10 thousand voting against. For resource minded investors looking for a clearly undervalued company to make big gains from, we suggest reviewing New Carolin Gold Corp. (TSX-V: LAD) (OTC: LADFF) because we feel it is an excellent candidate due to its bluesky potential property that has already shown expansive inferred resources of 730,000 ounces of gold and has a significant range of land with promising soil samples that indicate solid gold returns.

Disclaimer

© 2010 Junior Gold Report

Junior Gold Report’ Newsletter: Junior Gold Report’s Newsletter is published as a copyright publication of Junior Gold Report (JGR).  No Guarantee as to Content:  Although JGR attempts to research thoroughly and present information based on sources we believe to be reliable, there are no guarantees as to the accuracy or completeness of the information contained herein. Any statements expressed are subject to change without notice. JGR, its associates, authors, and affiliates are not responsible for errors or omissions. Consideration for Services: JGR, it’s editor, affiliates, associates, partners, family members, or contractors may have an interest or position in featured, written-up companies, as well as sponsored companies which compensate JGR. JGR has been paid by the company written up. Thus, multiple conflicts of interests exist. Therefore, information provided herewithin should not be construed as a financial analysis but rather as an advertisement. The author’s views and opinions regarding the companies featured in reports are his own views and are based on information that he has researched independently and has received, which the author assumes to be reliable. No Offer to Sell Securities: JGR is not a registered investment advisor. JGR is intended for informational, educational and research purposes only. It is not to be considered as investment advice. Subscribers are encouraged to conduct their own research and due diligence, and consult with their own independent financial and tax advisors with respect to any investment opportunity. No statement or expression of any opinions contained in this report constitutes an offer to buy or sell the shares of the companies mentioned herein. Links: JGR may contain links to related websites for stock quotes, charts, etc. JGR is not responsible for the content of or the privacy practices of these sites. Release of Liability: By reading JGR, you agree to hold Junior Gold Report its associates, sponsors, affiliates, and partners harmless and to completely release them from any and all liabilities due to any and all losses, damages, or injuries (financial or otherwise) that may be incurred.

Forward Looking Statements
Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward looking statements are usually identified by our use of certain terminology, including “will”, “believes”, “may”, “expects”, “should”, “seeks”, “anticipates”, “has potential to”, or “intends’ or by discussions of strategy, forward looking numbers or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results or achievements to be materially different from any future results or achievements expressed or implied by such forward-looking statements. Forward-looking statements are statements that are not historical facts, and include but are not limited to, estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to the effectiveness of the Company’s business model; future operations, products and services; the impact of regulatory initiatives on the Company’s operations; the size of and opportunities related to the market for the Company’s products; general industry and macroeconomic growth rates; expectations related to possible joint and/or strategic ventures and statements regarding future performance. Junior Gold Report does not take responsibility for accuracy of forward looking statements and advises the reader to perform own due diligence on forward looking numbers or statements.

What’s Next for the Price of Silver per Ounce?

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• April 28, 2016

The price of silver per ounce has been on a tear in recent weeks, and no doubt, that has many investors wondering just how high silver can go.

Silver prices hit an 11-month high in April, considerably outperforming the gold price. According to Commerzbank, the silver price per ounce has benefited from a weaker US dollar, strong ETF inflows and purchases from speculative investors. While silver bugs are no doubt happy to see the price of silver per ounce on the rise, the firm suggested in its most recent note that “correction potential has built up in the near-term.”

What is the price of silver per ounce right now? At close of day on Wednesday, the white metal was sitting at $17.21 per ounce, up 0.47 percent for the day. Since the start of the year, the silver price has risen 22.23 percent.

Silver wasn’t doing too well at the start of the year, however. As Commerzbank noted in its report, the gold-silver ratio was at its highest since February 2008 in the first two months of this year. That was largely due to silver being priced too low relative to gold. Thus, the firm sees the relative strength of the price of silver per ounce as of late as a “catch-up effect.”

A weaker US dollar has buoyed gold prices so far this year. The US Federal Reserve once again opted to leave interest rates unchanged this week, providing support for both precious metals.

Where is the price of silver per ounce headed?

There’s plenty to consider when looking ahead at the future for the price of silver per ounce:

  • ETF inflows; As mentioned above, the metal has seen strong ETF inflows—240 tons in the first two months of 2016 and 185 tons in February alone, according to Commerzbank. However, inflows slowed to just 60 tons in March.
  • Correction potential; Commerzbank also pointed out that net long positions are currently worth 10,600 tons of silver. That might sound like good news for the price of silver for ounce, but as the firm states, “this has also generated considerable potential for correction if money managers were to take profits and close their long positions.”
  • A boon for miners; To be sure, a higher silver price would be welcome for many long-suffering silver miners. As Commerzbank notes, a low silver price per ounce has made primary silver production “hardly profitable at all.” However, that scenario changes at the current silver price, meaning more supply could come back online.
  • Higher demand; Of course, beyond its investment appeal, silver has a number of industrial applications as well. On this front, demand from the photovoltaic sector is expected to surge by 10 percent, driving industrial silver demand to its highest level in five years.

Overall, while Commerzbank sees a potential correction for the silver price in the near term, the firm does see additional upside for silver in the medium to long term. Commerzbank has upped its forecast for the price of silver per ounce to $18 from $17 previously.

Educational and Fun — How Thinking North Connects Investors

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Educational and Fun — How Thinking North Connects Investors

Kal Kotecha PhD

On Wednesday March 30th, I was honoured to accept an invitation to be the guest speaker at “Thinking North” — a new leader in connecting businesses to the investment community. Every two months the best and brightest of Toronto’s business leaders are invited to present their business or company to an audience of investors and financial professionals.

Canada’s Silicon Valley North namely Kitchener-Waterloo, along with the Great Toronto Area hold some of the brightest and finest tech companies in North America. Thinking North assists in connecting these and other sector companies to Toronto’s venture capital.

Thinkingnorth.com is the brainchild of Toronto Venture Capitalist, Steve Singh. After reviewing investor social networks in San Francisco, Toronto and Bogota Colombia, it was readily apparent event originators were more about filling the rink rather than aiming the puck at the top right corner of the net. “For me, it was more about filling the room with the right people and achieving the duality of good/interesting companies at various stages of evolvement pitching to a targeted audience of savvy investors,” says Singh. Together, with Natalie Yavorska, an astute business professional, and Raj Ravindran, entrepreneur, mentor and analyst, Thinkingnorth was born. ThinkingNorth is an arena for sharks, dragons and emerging species.

The night started with introductions followed by my talk. I focused on the importance of tax breaks for corporations and small businesses. Also, where I think the economy is headed and how to capitalize on the technological brain power located between the 401 corridor of Toronto and Kitchener-Waterloo.

Following my talk, presentations were made by Venture Capitalists plus six start-up stage companies. They were given five minutes each to represent their business vis-a-vis product/service, competitive influences and monetization strategy.

Jeff Maser from the Tinley Beverage Company opened the round of presentations. The firm manufactures a drinkable vitality supplement containing hemp stalk extract called Hemplify. The drink satisfies more than thirst, it is also an aesthetically pleasing package. Featuring a beautifully-designed sleek bottle, the product contains non-psychoactive terpenes, essential oils, vitamins, electrolytes, and omegas making it a revitalizing source for athletic, contemplative, and creative activities.

Fertilify took the stage next. This company manufactures a health supplement designed to help women support and maintain reproductive health. They have set themselves the ambitious goal of helping modern and career women who delay giving birth, to maintain the proper level of vitamins in order to ensure they do give birth to healthy children. The company’s intelligent and radiant President Lalli Chapman stated, “I started Fertilify to confront the issues facing women’s fertility today, and help do something about it.”

Another company with the theme of hemp-based products was presented by David Vinokurov from Budhubz.com. Vinokurov showcased a new app akin to Air BnB with a focus on 420-friendly guest facilities and dispensary relationships.

Next to be featured was a luxury all natural water company called Flow Water. This product boasts high natural levels of certain minerals such as calcium taken from a family owned water source in Ontario, and also displaying exotic packaging.

Following this was an exciting new career oriented app called Paddle which helps workers navigate the complexities of today’s career cycle. Paddle has already signed agreements with major universities in the U.S., including Harvard and Stanford. Given the current climate wherein people are expected to have many careers in the course of their working life, they hope to revolutionize the way people approach careers and make it easier to hop between different roles and industries.

The closing speaker was probably the most dazzling. Mark Itwaru from Peeks presented a potentially disruptive technology.  With the foresight to patent his ideas surrounding this technology, he has created an application that gives its users a chance to broadcast themselves and be their own wealth creator, simultaneously in real time. A built-in proprietary payment engine makes it possible to drive revenue through a variety of channels, ie. tips, product sales, advertising, and various others. It was exciting to hear about a brilliant and evolving new technology.

After each of the presentations, a panel of venture capitalists and investors had five minutes to ask questions. After all was said and done, the event closed with another round of networking.  Besides being highly informational from an investor perspective, I must say it was loads of fun from a social perspective.

The team at Thinking North are optimistic about the future – no matter what the state of the market, there are always great people doing exceptional work. There is always capital to be accessed for investing in good ideas and projects. Ultimately, organizations such as Thinking North are here to help Toronto play at the top of the league alongside their neighbours in Silicon Valley and to help Canada maintain its braintrust leadership amongst its peers.

Thank-you Steve, Natalie and Raj for creating a much needed venue that connects investors to great projects.

I now have the honour of being on the investment panel for Thinking North. If you are ever in the Toronto area, feel free to attend the event. The next meeting is expected to have close to 500 investor attendees. The information will be posted on ThinkingNorth.com

Happy Investing!

Kal Kotecha PhD

Clinton or Trump, Who is Better for the Markets and Gold?

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Kal Kotecha PhD

Politics in the United States is dramatic and watches like a soap opera. But which candidate if elected will help the stock market and specifically the price of gold? Let’s breakdown the views of the frontrunners.

Republican Presidential front runner Donald Trump holds very controversial beliefs on immigration, tariffs and border security. On the flip side, Democratic front runner Hilary Clinton wants to “break down walls” and has no plans on placing huge tariffs on imports.

Trump wants to place a 45% tariff on imports from China. Why does he want to do this? Simply, he does not like China ‘dumping’ cheap products into the U.S. But perhaps he is thinking long term. Even though he did not specify outright, he may be thinking that multinational corporations operating in China and other Eastern nations may come back to the good Ol’ USA avoiding the import tariffs and building plants there resulting in the hiring of more Americans. Even some Eastern based corporations may relocate in the U.S. Will this work? I am not a big fan of most of Trump’s ideas – I do like this one. Even though it is not deemed to be a “Republican” view which takes more of a stance on company profits and free trade, Trump if elected, may be successful in bringing back jobs to the U.S.

I remember lecturing at the University a few years ago when a student asked me, “How can we bring more jobs back to Canada?” I pondered and stated: one way would be to place import tariffs on products that were not made in Canada. Even though in ‘theory’ this may seem to work, in practice it probably wouldn’t for Canada. The main reason being that in essence, no company really cares about the Canadian market versus the vast US market. Another reason why this may not work for Canada is because Canada does not have many multinational corporations. The likes of Blackberry and Bombardier are not the stellar darlings they were many years ago and may require government bailouts.

Corporations do not want to lose customers in the lucrative U.S. market. American companies like Microsoft, Nike and Apple, even though they might not have a big workforce in China, may bring back their plants/offices to the US. – especially if their competitors do so. Trump may even lean towards providing tax breaks to corporations willing to relocate back to the U.S.

Trump may be on to something for the U.S. market. If he gets elected, it may be projected that he is not “good for American Company profits”. Let’s be honest here, corporations exploit cheap human labour overseas and they will not be making the profits they are now if they had to move their operation back to the U.S. and pay 5-15 times the wages they are paying now to produce the same product.

On the flipside, Clinton is not expected to try to ‘encourage’ U.S. companies to bring jobs back to the homeland, nor place a huge tariff on Eastern imports. I believe the markets will laud a Clinton win.

In terms of gold, there is evidence that Trump holds gold. As reported by Business Insider  http://www.businessinsider.com/donald-trump-owns-gold-2015-7

Trump owned between $100,001 to $250,000 of gold on July 2015. They appear to be holdings in physical gold, not in specific company shares.

Westernjournalism.com reports:  Is gold better than cash? Donald Trump accepted three bars of it as a security deposit when a new tenant moved into his 40 Wall Street property in New York’s financial district. Michael Haynes, chief executive of APMEX, the tenant, convinced the real estate mogul that accepting gold offered the greatest security for him. “I figured, Trump is a smart guy, and he’ll realize that taking gold is a better idea than taking cash.”

Haynes gave Trump three 32 ounce gold bars for APMEX’s deposit, valued at over $100,000. At the time, Trump expressed concern about the nation’s currency. “It’s a sad day when a large property owner starts accepting gold instead of the dollar,” Mr. Trump told the Wall Street Journal. “The economy is bad, and Obama’s not protecting the dollar at all….If I do this, other people are going to start doing it, and maybe we’ll see some changes.”

Peter Reagan, financial market strategist at precious metals dealer Birch Gold Group, said, “Trump recognizes the vulnerability of the value of the dollar over time and the inflationary pressures on our economy due to Obama administration policies,” http://www.westernjournalism.com/for-trump-gold-is-better-than-cash/

Is this the start of Trump’s new gold standard? Seemingly he understands that to stabilize and secure the US dollar, gold must play a role.

I can find no evidence that Hillary Clinton supports gold or owns gold other than for jewelry purposes.

Therefore my prediction is that a Trump victory will not be favourable for the stock market initially but should be for the longer term as jobs are created and positive for gold.

No matter what happens, the drama and the bashing in American politics is a political version of The Young and the Restless. Enjoy the drama while it lasts.
Happy investing!

Kal Kotecha PhD

 

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