Correction ended, True Gold finances
As I predicted in my article about the correction ending and True Gold’s next step being to accomplish final funding for their Burkina Faso Karma Gold project, gold did bottom on June 2 after a necessary correction. On August 12th True Gold announced a $120 million gold streaming deal with Franco-Nevada and Sandstorm Gold.
The twists and turns of markets are nearly impossible to predict. The number of people I know who can do it on a regular basis is indeed small. Once in awhile I get it right using nothing more than bullish consensus. Basically figure out what the mob is doing and do the opposite.
In mid-March of 2000 I read an article on the Internet about how inmates in a jail in Baltimore were holding stock picking contests. That was a bell ringing at the very top that no one else heard because they weren’t listening. Well, on July 13th something similar showed up on Market Watch. It was titled, “Murderer turned stock picker is ‘Oracle of San Quentin.’”
If that isn’t a flipping bell going DING, DING, DING, perhaps another interesting story we posted the next day titled, “Step Inside The Social Network That’s Worth Over $5 Billion But Has No Revenues, Assets, Or Full-Time Employees” would qualify. At the end of July, a piece showed up on an Australian news site called, “Claude Monet water lilies painting Nympheas sells for $57.3 million.” All three of those pieces are what you can expect to see at a general market top. Ding, Ding, Ding but you have to be listening. If you think you are smarter than Mr. Market, write me in six months and tell me how that worked out.
The market in general is way overpriced, margin debt is at a record high, the VIX has been hitting record lows and the majority of stock touts are crying for the market to go higher. The only thing I haven’t heard is “This time it’s different.” If you ever hear that phrase, head for the hills.
We’ve had a correction in gold. The bottom was probably in early June and we are moving into the strongest period of the year from mid-August through December. This June was nothing more than a retest of last years decline in June and another retest in December. I see the metals going much higher much faster than most people see. We have had a three-year correction. Corrections breed bull markets. Bull markets breed corrections and I think the general market will ease slightly higher into September and then crash. I could be wrong but the contrarians I know make money while everyone else is whining about manipulation and squiggles on charts.
There is actually one easier way to make money investing in resources. That is to buy anything run by Mark O’Dea. I make exactly the same mistake most resource writers make. I write about companies and projects and where the metals are going. It’s really a lot simpler than that. Put your money where Mark O’Dea puts his.
The Vancouver Sun did an excellent piece on Mark in late June. He manages three companies at present, Pilot Gold, True Gold and Pure Gold. Everything he touches seems to turn to gold. He is most famous for coming in 2nd in the 2000 Goldcorp Challenge. The prize for 2nd place was only $75,000 and he was supposed to split it with me for my entry but as the top individual entry in the contest, he gained a lot of credibility that allowed him to finance his first venture, Fronteer Gold.
O’Dea later sold Fronteer Gold with it’s Long Canyon project to Newmont for $2.3 billion. He took the remaining pieces of Fronteer and spun them into Pilot Gold now exploring in both Turkey and in Nevada.
True Gold is his African gold company with two major projects in Burkina Faso. The deal just announced completes a $185 million dollar financing necessary to finish the mine. The company had $65 million in cash. The gold steaming deal between Franco-Nevada, Sandstorm and True Gold calls for Franco and Sandstorm to put up $100 million in exchange for 100,000 ounces of gold delivered over a five-year period at an 80% discount from the market price. This period will start about 18 months from now when True Gold anticipates the first gold pour in late 2015.
For an additional $20 million US if necessary, the funding partners will be delivered another 30,000 ounces of gold to be delivered over a four year period and the financing group will get 6.5% of the gold produced at Karma over the life of the project.
Mark O’Dea does two things better than anyone else in the industry. First he manages to find and hire people smarter than he is. Most people want to hire people dumber than they are and frankly in the junior mining business often that is very hard to do. The guys running most of the juniors are so stupid and self serving that finding people dumber than they are is a real stretch. Mark hires brilliant people, he compensates them fairly and most important, he gets out of their way. He lets them do what they know best.
Second, Mark can monetize projects better than anyone. There are a ton of people who can line their pockets at the expense of investors who do dozens of million dollar deals a year who may make more money than Mark O’Dea but Mark makes money for shareholders and that’s as rare as a gold chain made out of hen’s teeth. You may not have a 100 bagger on an O’Dea company but you are going to have a 3-10 bagger on a consistent basis.
I actually hate saying this but as investors, you actually have to both time your buying and your selling. I thought investors knew that but the carnage of the last three years has proven that a lot of people want to buy at tops and sell at bottoms. You don’t want to do that. You want to buy any stock, not just a Mark O’Dea stock, when it is cheap and you want to sell it when it gets expensive. If you don’t learn how to take a profit, the only other alternative is to take a loss.
Buying any Mark O’Dea company is like money in the bank. He has developed a pattern of success and that’s what you want to be buying. I have been to Burkina Faso twice to see the True Gold projects. The technical team under Dwayne Melrose is brilliant. I am not even going to go into it from a technical point of view but I think True Gold has two company making projects in BF, not just one. Obviously the Karma project with 120,000 ounces projected gold production yearly is top priority right now.
Dwayne Melrose has consistently added ounces to the resource and production planned. This project is going to be bigger than anyone expects in both total ounces and yearly production. One day it will be sold and there will be a lot of zeros on the checks.
True Gold is an advertiser and I am biased. As always, you have to do your own due diligence.
True Gold Mining