Free Shares from Almaden
One of my favorite stories is that of Almaden Minerals (AMM-T). They have a giant gold project in Southern Mexico with a 43-101 resource of 3.53 million ounces gold equivalent in Measured and Indicated with an additional 717,000 ounces in the inferred category. It’s a gold/silver project that anticipates a 12-year mine life to produce 1.6 million ounces of gold and about 94 million ounces of silver.
At today’s price, the company has only an $81 million market cap despite holding $1.8 million in physical gold and $8 million in cash and $4.6 million in other investments. That’s absurd. A dozen years ago tiny silver companies with little more than a hope and a prayer were getting $1 and higher for silver in the ground, most of which would never be produced. Buying Almaden is like getting 1.5 ounces of silver per share and the gold is free.
So the father/son team of Duane and Morgan Poliquin are going to make the deal even sweeter for investors. They are going to hand out free shares.
I went to visit the primary project about 18 months ago and I was suitably impressed. But we also talked about the 20+ other projects many of which have similar potential to Ixtaca. Because things are slow and they want to conserve cash, the Poliquins are proceeding full speed ahead with Ixtaca and letting all the other projects simmer on a back burner until market conditions improve.
Since they are getting zero value for their projects other than Ixtaca management determined they should let the market value the other assets via a spin-off. For each whole share of AAU, shareholders will receive .6 of a share in SPINCO.
It’s a hell of a deal. The SPINCO will get (1) a 2% NSR on Ixtaca (2) a 1.5% NSR on Caballo Blanco currently operated by Goldgroup Mining (3) a 2% NSR on the Elk gold project in Canada currently operated by Gold Mountain Mining (4) 21 other early exploration projects all over Mexico (And you will have to take my word for it, there are some excellent projects in that package) and $5 million in cash to move projects forward.
While gold and silver hit new lows in the first week of October, resource shares of even the best managed and well-financed junior companies have been hammered to new lows in sentiment as prices have continued to drift south. One day soon the shares will turn and most investors will miss the boat. This article will make a great read six months from now when the average investor begins to realize that they were out at the airport when their ship came in.
Almaden is an advertiser and I am biased. Please take responsibility for your own due diligence.