RJK Climbs out of the Ashes
As a result of the four-year crash in gold shares, many resource juniors pretty much died. Gold didn’t actually correct that much, going from $1923 in September of 2011 to a lot of $1045 in December of 2015 before resuming the bull market. That’s not a big decline in a bull market. Silver went from just under $50 in April of 2011 to a low of under $14 in late 2015. Now that’s a serious decline.
But the lousy sentiment in the metals wiped out all thoughts of investing in penny dreadfuls for both institutional investors and ordinary punters. Exploration and development stage juniors are dependent on a constant stream of capital. Mining is a capital-intensive business but the flow of funds simply stopped. So many of the penny lottery tickets crashed 95% and more.
One was RJK Explorations (RJX.A-V) that actually has a nice project bounded by the Blackwater-Davidson 10 million ounce gold project owned by New Gold in northern BC. A couple of years ago New Gold was snapping up everything in the area for good money but lately their attention has been focused on their Rainey River Mine.
RJK’s Blackwater project is a call on the value of New Gold’s Blackwater-Davidson project. When New Gold goes into production, they are going to want RJK’s land to both prevent someone else from coming into the camp and to expand their own potential. But until New Gold comes sniffing, RJK are holding a property that isn’t worth putting money into even if they had it.
The company-making project for RJK is the Maude Lake gold project in Ontario that the company picked up from Globex Mining in early 2016. The company needs to pay an inflation-adjusted payment of $250,000 yearly and a royalty of 4%. Gold was discovered on the Maude Lake property as early as 1915. It sits on the Pipestone splay off the Destor-Porcupine fault in Ontario where over 122 million ounces of gold have been mined. Maude Lake is in elephant country. The project has a historic resource of about 183,000 ounces of gold at quarter of an ounce gold per ton.
The project has had over $11 million spent on it over the years with 37,000 meters of surface drilling and 9,000 meters of underground drilling. The mine has had a pre-strip done for an open pit and the near surface resource of about 20,000 ounces that could be shipped to a variety of nearby mills looking for feedstock.
The RJK technical staff has been computerizing many boxes of paper data since they picked up the project. The data has been accumulated over the years. They are starting a small 5 hole, 1000-meter drill program shortly with results coming out in 4-6 weeks.
Investing for a profit is hardly magic as I explain in my recent best seller Nobody Knows Anything. It’s as simple as buying things when they are cheap and selling them when they are dear. We are in a gold bull market. In a bull market, shares go up.
RJK Explorations has already crashed and burned, the company did the expected 10-1 rollback in July of 2016. At today’s price, you can buy the whole kit and caboodle for $2.1 million. That means potential shareholders can pick up gold in the ground in one of the best addresses in the world for about $10 an ounce. That’s cheap.
Nothing says it might not get cheaper. But management and their technical people have a gun pointed at their heads. It’s either find some gold or fade away. I like it when you have the attention of management by pointing a gun to their heads; it tends to focus their attention on what they are doing. All junior mining companies are lottery tickets. You spend a little money on them in the hopes of making a lot more.
A month or so from now we will have a small idea of the potential of this project under this management team. If they hit something nice, the stock goes up a bunch. They raise money at a higher price and keep drilling. If not, pull the trigger.
I financed my way through flight training as an eighteen and nineteen year old cadet over fifty years ago shooting craps. I won because I understood the odds. On this drill program we have the attention of management and a great potential project. I hope they succeed. The odds are so-so but the payoff could be big.
RJK is an advertiser and I have bought shares in the open market. As such naturally I am biased. Please do your own due diligence. I share in neither your profit nor your losses.