Amex Exploration TMI on Gold
I began visiting gold projects in 2002 with a visit to a gold company with projects in China. I knew nothing about how to value a resource company but had correctly called the bottom of the market in my very first piece on investing in resource stocks.
If you are a contrarian, you don’t actually need to know anything about resource companies if you can read the behavior of investors correctly. Of course that is heresy to everyone else in the industry that insist you need to know management and the commodity and country risk and who is invested in that company. That’s all nonsense.
In a bull market everything goes up and in a bear market everything goes down. There is no magic to it; you just have to understand human psychology. When everyone wants to buy, you should sell to them. When everyone wants to sell, you should buy from them. That’s about all you need to know. People are dumber than bricks and the mob is always wrong.
Since that very first site visit I have made trips to hundreds more projects. I’m still as dumb as I was back then; I just have a lot more experience now in looking at companies. I like to keep it simple. When I visit a project, I want to know in the first fifteen minutes if they will succeed or not. Management of course does their best to confuse you. They want you listening to their patter that they have pitched five hundred times in the past. But you shouldn’t listen. You should look around and see what is obvious if you just open your eyes.
Groupthink exists in just about every company. That’s one of the important reasons astute management will run site visits with as varied a group of visitors as possible. Someone new to a project will often see things at once that the company is missing. Let me give you a great example. I said a week ago that I thought resource shares had capitulated the Friday before. With the benefit of having another week of trading it does appear I called it exactly correctly. If you read the piece and disagree, feel free to drop me a line.
Hundreds of companies have had massive corrections since the high point in August. Drops from 35-50% are common. In my investment books I have tried to make the point that if nothing else has changed with a stock except the price, it’s a better deal to buy when it’s cheap. We have had a correction. I think it’s over and a lot of stocks are cheap. One that I like a lot but have been utterly confused about how to tell the tale has dropped 33% in the last ten weeks.
The company is Amex Exploration (AMX-V). They are in the Abitibi greenstone belt in Quebec, near the border with Ontario. Their primary target is the Perron gold property. They have 100% ownership of the project. The company is in the middle of a 300,000-meter drill program. Drilling is cheap for them, about $150 a meter due to the massive amount of infrastructure and road access in the Abitibi gold belt.
The project has fifteen km of strike in between two faults, the Normetal fault and the Perron fault. As of now they have four major gold targets within the 15 km strike. Management believes they have potential for as many as four separate underground gold mines. The massive 300,000 meter drill program that is about half way complete is fully funded as the company has $32 million in cash. 65% of the shares are in the hands of institutions and insiders. Eric Sprott is the largest single shareholder with 15% of the shares.
Since resuming drilling last May the company has released a string of outstanding results. The initial plan was for 100,000 meters of drilling, that went up to 200,000 meters and is now sitting at 300,000 meters. If readers remember how I defined bonanza grade intercepts being over 100 grams/meter. That is to say the intercept length times the grade. Holes have gone as high as 44.22 g/t over 9.10 meters. That’s 402 grams/meter. Which gets me to my biggest issue and the issue I think that faces all potential investors.
My thirty-something niece explained it to me a few years ago. It’s called TMI for Too Much Information. Amex is drilling so many bonanza grade holes in the four different targets that everyone including me is sort of scratching their heads and wondering just how good the property is. We are faced with TMI. Normally I would look deeper and find their latest 43-101 resource but the company has yet to put out a resource.
The drill results are brilliant and constant. They have a high-grade gold mine or two or three. If I was standing in a dark room and had to throw a dart to guess how many ounces they have so far, I’d guess a minimum of three million and potentially five million. That’s not total, that’s just with the drilling so far. I got into touch with management and asked their plans on timing for an initial 43-101 resource. They are saying Q1 of 2022. Once they define a resource, investors will have something they can hang a hook on. Until then we are faced with TMI. It’s good, we just can’t figure out how good.
Because they are fully funded it really doesn’t matter what the price of the stock is. Relative to where it was at the first of the year, it’s had a nice correction and is cheap. It’s just my humble opinion but I think they should be compared with New Found Gold at $575 million and Great Bear at $960 million giving you something to measure with Amex’s $235 million market cap. While I think they are very cheap, I think it’s a mistake on the part of management to not put out a resource based on what they have results for so far. Management is asking investors to guess how valuable the company should be.
The real fireworks for investors will come when the 43-101 resource comes out. Do go to the company presentation. There is a lot of information there, perhaps too much information but for now that’s all you will have.
Amex is an advertiser. I don’t own any shares but you still are responsible for your own due diligence.