Buy Me, Buy Me
A lot of life consists of events that transpire that are pretty much accidental. I stumbled across an interesting deposit and company pretty much by accident and I want to bring it to your attention.
I wrote a piece a couple of weeks ago about Goldgroup (GGA-T) in Mexico. While I was on the trip I met an interesting young man named Trace Adams of the Adams clan. He is part of a third generation mining family with deep roots in mining. I mentioned that I was going to Guyana in February to see some other projects. Trace said that he would meet me and we could visit the Toroparu Gold project of Sandspring Resources (SSP-V) while I was in Guyana.
Life happens and Trace was unable to meet with me but John Adams, Chairman of Sandspring, was in Barbados and was good enough to fly over to Georgetown to meet me. We jumped on a chartered Cessna and were at the project an hour later.
The history of mining goes back three generations in the Adams family to uranium mining and milling in Utah and Colorado going back to the 40s. Robert Adams founded the mining tradition and began Energy Fuels Nuclear Inc. John, his son, later ran it and eventually sold it in 1993. In 1998 he and a partner decided they needed to get into the placer mining business in Guyana. It was a fateful decision.
Mining but a few hundred ounces of gold a month, the venture was as much adventure as business prospect. The current generation, Wes Adams and now Trace Adams also have played a part in the company.
At some point someone made an interesting observation by looking at the gold with a loupe. In Western mining culture, we are familiar with two types of placer or free gold. One, the most commonly understood, would be alluvial gold where gold has come out of some sort of eroded material and been concentrated by the action of water. The other is elluvial gold and few hard rock geologists understand it.
It’s free gold that has not been transported. The material that contained it has been eroded. It hasn’t moved at all from the source. The outline of the placer gold and the hard rock gold is identical. At times it may be chemically or biologically concentrated. I’ve seen mining areas in Brazil that had very coarse gold at the surface, then smaller gold as you went down and finally no-see-em gold once you hit the sulfide level.
Alluvial gold has been moved. Under a loupe you can see that the movement down a riverbed or creek has rounded the edges. Elluvial gold on the other hand has rough edges. It hasn’t been moved at all.
Five years ago I was on a site visit to Tanzania for Canaco (CAN-V). We had four geologists on the trip. We visited the Handeni property that has lately been the source of drill results that pushed CAN from a $5 million dollar company to a $900 million dollar company.
I examined gold we purchased from the artisan miners through a loupe. It had rough edges. I said that the gold hadn’t been transported. Everyone disagreed with me. It was placer gold therefore it had been transported. I wasn’t a geologist so I didn’t know anything. I didn’t have the piece of paper.
Years later they drilled under where the artisan miners were working. The shares went from about a nickel to $6.45. That’s the kind of gain you would like to have once in your life. I had been right all along and Canaco didn’t realize they literally were sitting on a gold mine until they finally drilled.
John and Wes Adams set up a camp at Toroparu near the Venezuelan border in western Guyana about ten years ago and started mining. When it came to them that they probably had something a lot more significant than a few hundred ounces of placer gold a month, they got a drill rig in and started drilling under their pit. The first 27 holes outlined an incredible 3.3 million ounces of gold equivalent.
That’s $171 million dollars of gold and copper in the ground per hole. That’s nothing short of incredible.
Naturally, Thom Calandra of Stockhouse Ticker Trax found this company first. He’s an unbelievably hard working guy and he keeps scooping the entire industry. For all practical purposes, he put Colombia on the map. I wouldn’t have even gone to Colombia to visit projects until I read him and he said that the danger was not nearly as bad as the popular press would have you believe. He’s done the same thing again for Guyana.
He was writing about Sandspring when the shares were $.65. Now they are $2.70 and luckily for you, I know something I will share with you that you can buy some shares and make money.
Finding 3.3 million equivalent ounces of gold and copper made John realize he needed to change the entire direction of the company. After talking to his partners the decision was made in 2008 to take the company public. They went public in November of 2009.
Once upon a time, South American and Africa were joined. If you look at a globe, you can see where South America fits right into the shoulder of Africa. The gold mineralization that occurs in West Africa continues through the Guiana Shield into Venezuela. The highly mineralized KM 88 in Venezuela contains two deposits of over 30 million ounces and is only 60 air miles from the Toroparu Deposit.
It’s pretty much taken John Adams and his staff 18 months to make the transition from a small private placer company to a large public hard rock company. He’s been busy hiring experienced staff to do this project right. On my visit to Toroparu I met with Werner Claessens, the new VP of Exploration. He comes with 30 years of experience with identical rocks in West Africa and hand full of major gold discoveries under his belt.
John commented to me on our visit that if he had understood the advantages of having a public company, he would have taken his company public a long time before. To be sure, he did some incredibly productive work as a private company and as such he controls a lot more of the public company than most investors.
In the ten years he and Wes Adams worked the placer company, John put in about $15 million of his own money. Now he either owns or controls about 40% of the stock. Much of the rest is in institutional hands who are pretty reluctant to be disposing of shares.
It’s a pretty typical green stone belt shear zone hosted gold-copper mesothermal system. With four drill rigs turning, the company has outlined just over 6 million ounces of gold and 480 million pounds of copper. At today’s values, the gold in the ground is worth about $8.4 billion and the copper is worth just over $2 billion dollars. John gets a silly smile every time he mentions the copper because the copper credit once they put the rock through a flotation system will pay a large part of the costs of mining and milling.
Even with four rigs, they aren’t pulling $170 million dollar holes every time they collar a hole but John guesses it costs him about $5 to find an ounce of gold. With $50 million dollars cash in the treasury it would be nice to think they might find another 10 million ounces of gold.
I found out a long time ago that you could visit any project and pretty much figure out what was going on by the attitude of the people working there. You do not need a degree or any technical expertise. The people working on a project know just how well things are progressing. From the attitude of the people working at Toroparu, they know they are onto something red-hot. Everyone had a great attitude. There are some really qualified people working on this project and they really like it.
I hinted that I knew a way investors could buy into a stock that seems to me to be screaming, “Buy me. Buy me.” Sandspring has dropped from $3.75 at the first of January to $2.70 now. I think most of the drop was related to shares from the last private placement coming free trading on February 15th. For any number of reasons, people who bought into the PP at $2.60 are selling just because they can. I think the $2.60 will pretty much form a floor for the stock.
There will be a lot of fresh news out on a regular basis. A PEA is due any day now and an updated 43-101 is due shortly. I expect the 7.2 million ounce gold equivalent ounces to go higher and in time go much higher. The company has 108 million shares outstanding and right now a market cap of about $291 million. That’s about $40 an ounce for gold. Similar companies are selling for twice to four times as high. There is still a whole lot of upside to the shares.
They have a long way to go in the transition but John Adams is a hard working guy who tolerates no nonsense. As a one-time owner of the Denver Broncos, he understands the necessity of teamwork. He has pretty much put a Super Bowl of a mining team together and things are starting to happen. I’d like to see the website burned down and reconstructed but that’s in the works as well.
I bought shares just as soon as I got back to Georgetown. I think there is a short window of opportunity before the retail community figures out the story. They are short of retail investors now but that’s not going to last long. The shares are in pretty strong hands so the float isn’t going to be anything like what the total number of shares would make it look.
As a shareholder I have a vested interest. I highly encourage all potential investors to contact the company with any question and as always, you are responsible for your investments, not me. Do your own due diligence.