All Aboard! The S.S. Royal Standard
I suspect that most of us buy metals stocks in the belief (or faint hope) of a general increase in the price of gold and silver. When gold moves up, the gold stocks move up at a higher rate. But the other side of the coin is that when gold moves down or even stays even, the gold stocks tend to drift down or go down even faster than gold.
There is a time when there is a disconnect between gold and the price of a stock, when the stock climbs at a high rate even when gold is going down or staying even. That's when a company is just going into production. Two stocks recently show the incredible profit possible by timing your investment so you get in just before they begin production.
Silverado Gold Mines - OTCBB symbol SLGLF was bouncing along in the $.12-$.15 range in May of this year. They announced they were beginning production this fall and by early July, and the stock was pushing $.60 a share, up 400-500% in only 8 weeks. chart
Golden Eagle International, Inc. OTCBB: MYNG was $.05 a share for the longest time and only climbing above $.06 a share as late as February of this year. As recently as August 1st, the stock hovered around $.10 to $.12 a share. They announced going into production and six weeks later the stock was $.30 a share, up 100-200% in six weeks and 400% for the year. chart
Royal Standard Minerals, OTCBB RYSMF, CDNX:RSM has had one run up from Canadian $.06 to $.47 already this year in anticipation of nearby production and has corrected back to Canadian $.24 to $.28 where I believe it has an excellent chance of launching another zoom upward as production nears, regardless of the day-to-day moves of gold.
Gold mining companies have been forced to think cheap by the low price of gold for the last four years. While many are just now coming out of hibernation, Royal Standard Minerals is leading the pack in many ways. With their Gold Wedge deposit within the Manhattan mining district in Nevada they are saving money in some pretty creative ways.
Since they have both patented and unpatented claims on the property, they have located the portal to the decline on a piece of patented property. Because they own it 100%, rather than coming under control of the BLM, they can bypass complicated and expensive Environmental Impact Studies and get on with mining.
Indeed, Royal Standard will
begin permitting this quarter and intends to begin construction
of the decline in the 1st or 2nd quarter of next year. As part
of the work being done to create the decline, they intend to
do a bulk sample of 8,000 to 10,000 tons of .4 OPT grade gold
by drifting a cross cut into a high grade deposit. The cross
cut will test the gold distribution along strike as well as drift
into a multiple thousand ounce zone cut during the surface drill
program. This bulk sample program allows them to mostly offset
the cost of construction of the decline. And since the decline
will be running at about a 20% angle, they will be able to use
vehicles on rubber to bring the high grade deposit to the surface
Royal Standard quotes 200,000 ounces of proven and probable resources and believes the Gold Wedge deposit contains another 500,000 ounces going down to a depth of 1000 feet in the central zone. The drill and test program next year will provide a far more accurate estimate. One of their primary goals is to develop a resource of 1,000,000 ounces via the 2003 program.
According to their current estimates, Royal Standard can mine gold at Gold Wedge for a cash cost of $125 providing an operating margin of almost $200 per ounce. They completed a private placement earlier this summer and are in excellent financial condition to begin their work this quarter.
In addition of Gold Wedge, Royal Standard has a strong land position on the Carlin Trend with major properties at Ruby Ridge and another at Pinon-Railroad with a resource potential of 1,000,000 ounces but at present the market place seems to be ignoring the value of these projects.
As of this time, Royal Standard has approximately 27,000,000 shares outstanding and is selling for about US $.16 per share giving a market cap of about $4.3 million. With production of 50,000 ounces by the end of 2003, we expect the market to value the company far higher based on the one project. If gold does continue to go up and the other projects become more advanced, we expect the market to begin to reflect their value as well. Royal Standard remains undervalued by almost any standard.
The number of mining companies is small and we are investors for our own benefit. At any one time we may own 25-30 different mining stocks. It follows that often we will own stocks which we have written about.
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