Out of the Ashes
There has been an active subset of gold bugs working for almost 15 years now that has done a wonderful job of educating investors that the most important market force involves manipulation. This is in spite of the fact that not a single person in world history has ever made a cent off of such a belief because even if it was the most important factor, it generates neither buy signals nor sell signals and as such is more clutter than signal.
Nowhere in the mass of verbiage is ever any such mention of corrections or markets going both up and down. So we have tens of thousands of investors conditioned to believe that markets are supposed to go up every single day and the only reason they ever go down is because they are being manipulated.
A sincere belief in manipulation has cost investors billions of dollars. At tops they are giddy with a belief that the dirty rotten bastards in Wall Street are on the run and silver is about to pass gold in value. They never take profits at tops because no one ever told them it’s perfectly natural that markets go down now and again. At bottoms they quiver in fear because something called a “correction” has taken place and maybe silver isn’t going to $200 next week. Why didn’t someone warn us?
All markets are manipulated. Live with it. If it’s financial, someone is trying to figure out how to take money from your pocket and put it into his. Often times it’s guys running financial sites playing one-string banjos and only one tune. They figure out what you want to hear and then feed it to you. Your fantasies are fulfilled but you never make any money. They are like politicians. We would never elect a politician who bothered telling us the truth. Most financial web sites share the same sort of honesty.
Markets go up and down and at extremes of emotion you can make a lot of money if you learn to ignore the clutter and noise.
We are at a major gold/silver bottom. It’s been going on for months. We had a perfectly normal correction in the metals. It took all resource shares down far more than anyone predicted. Anyone! No one predicted this carnage, even those who correctly predicted a correction in gold and silver. But the carnage is just as bad in the oil sector shares as in the gold sector shares even with $105 oil. So something is taking place that is invisible to most viewers.
The big money hedge funds and mutual funds are rushing into the DOW and the S&P and abandoning resource stocks. That’s what makes major bottoms. That’s a giant opportunity if you will take the time to understand it.
Everything in the resource sector has been wiped out. The good, the bad, and the ugly. If you are smart enough to know the difference, you can do quite well.
The really solid resource shares, Novo Resources, Cayden, Almaden, Pilot Gold, True Gold, Teck, and many others are up a lot in the last month. The great shares will recover first. But as more and more people recognize the bottom has passed, the tiny juniors will rise out of the ashes.
I went to visit one such junior in May. I didn’t write about it at the time because they were in turmoil, changing the board, their name and hopefully their direction. They needed to change their name so they wouldn’t be carrying the baggage left by prior management.
The company was called Sienna Resources. I was an investor a few years back. I lost money. Hell, everyone who invested in it lost money. The company would show signs of life every few years but never went anywhere or did much more than pay excessive paychecks to a bunch of guys not doing much of anything. It’s the same story as that of hundreds of other juniors. They were mining investors, not minerals.
In any case, there was a revolution, the old management was bought off and booted out. Now we see if the new company, Peruvian Precious Metals (PPX-V) can climb out of the ashes.
These turn-around situations can be quite profitable. If you viewed the stock chart of Sienna, it was a disaster. Their main project is named Igor and is located in Peru.
There is a 43-101 released in December of 2012 showing an inferred resource of 730,500 ounces of gold equivalent in 7.2 million tonnes grading 1.9-g/t gold and 71.8 g/t silver. That’s enough to be interesting and a decent grade but not enough to make a mine. By March of 2013, a primary shareholder had enough and he booted the existing management team and inserted a new team.
This in and of itself is pretty meaningless. There are hundreds of companies out there with a resource but not a mine and a management team tightly focused on buttering their own bread. But someone had the guts and the power to force out the existing management and enough good sense to hire a team that has experience in a turn-around situation.
Peruvian Precious Metals is not a buy because they have almost enough gold for a mine. But they are a buy based on a management team that understands how to make lemonade when handed a lemon.
Brian Maher took over what was known as Kodiak Exploration in 2009. He was originally hired as VP of Exploration in 2007. The prior management team had over promoted a Northern Ontario high grade, narrow vein system and ran the shares from $.45 to $5 in four months. When they raised $55 million at $4.80 but couldn’t come up with more than 300,000 ounces of gold, the market had a fit and demanded changes. Brian took over the reins and searched desperately for a real asset.
At PDAC in 2010 Brian met with the CEO of Golden Goose and did an agreement with him in August of 2010 on the past producing Magino Gold Mine. He proposed merging with Golden Goose to get the asset. The deal closed in December on the 1.6 million ounce 6-g/t gold project. Then as now, Brian changed the name from Kodiak to Prodigy Gold to reflect a change in direction. After the merger they produced a new 43-101 reflecting a 2.5 million ounce 1.1 g/t gold resource in two months.
The new management team now consisting of Kimberly Ann in Corporate Development and Tony Wood as CFO took Prodigy Gold from a $25 million market cap to a sale to Argonaut Gold for $340 million only 26 months later.
In the last dozen years I have visited hundreds of mining projects. I’ve come to realize there is no shortage of anything. There is no peak gold, no peak silver, no peak uranium, and no peak peat. There are thousands of projects of everything. If managed right, many could be mines. But there is a giant shortage of people with the management skills who can turn lemons into lemonade.
Peruvian Precious Metals doesn’t have enough gold in place for a mine. It’s decent grade but needs a larger resource to be a mine. What they do have is a management team made up of Brian Maher, Kimberly Ann and Tony Wood who have the experience and skill set to turn the company around.
The deposit is a reasonably high-grade, reasonably wide vein system that can be expanded through drilling. A lot of people made a lot of money off this team at Prodigy Gold and they have bellied up to the bar and financed what would have otherwise been in the scrap heap of dismal gold companies who tried and failed. I expect investors will see a lot of action and hopefully a lot of results. I would be shocked if it was otherwise.
Peruvian Precious Metals is an advertiser and I am biased. I don’t own shares because I’m throwing money at the real penny dreadfuls selling for under a nickel that I hope will go up 20-fold as they did in 2008-2010. Don’t you dare even think of doing the same. There are too many good alternatives that will go up 10-fold. Do your own due diligence.
Peruvian Precious Metals