Most investors I know have always dreamed of “hitting the big one.” At some level, we all tend to wonder what it would be like to own shares of a company that skyrocketed several hundred or even several thousand percent higher. One of the most common arenas from which this type of story emerges is the gold mining sector. Unfortunately, most people who try to find the next big thing in mining stocks will simply throw their money into worthless businesses with very slick marketing programs designed to separate investors from their hard-earned capital.
Knowledgeable and successful investors in this space are surprisingly open about the prospects most investors face when it comes to the possibility of making money in it. Famed resource investor Rick Rule, of Sprott Global Resource Investments Ltd., told the Australian media in October that investors needed to be aware that, in his view, 60-70% of the junior resource companies on the publicly traded Australian stock exchange were probably worthless. He has been no less critical of those public companies traded on the Canadian exchanges either.
So, for every story you hear of a small mining stock that explodes in price and makes investors rich; there are hundreds of stories you don’t hear about those who gambled and lost. After all, when was the last time you read a story about those who bought lottery tickets they could not afford and did not win the big prize?
If All That Is True, Why Am I Writing This?
As with most things we face in life, there are steps that diligent investors can take that dramatically mitigate the risks involved when investing in the stock market. While these steps are important in any investment, they are critical in the resource sector of the market. Taking these steps will not only decrease the chances of investing in a worthless business with worthless assets; they will vastly increase the prospects of allocating capital to the ones that really will soar. In business in general and resource investing in particular, what you know is important but knowing who knows what you do not is one of the keys to success.
I am not a geologist and I do not have a budget for traveling to remote locations where most exploration projects are located. Nor do I have the time or skills to spend days walking a property and looking at and analyzing core samples from drilling to determine the feasibility of a particular project. But, there are those who do have that time and those resources and I can know who they are and watch what they do. Keeping an eye on this kind of activity by knowledgeable “experts” in the junior mining and exploration business has led me to a company called Gold Standard Ventures (GSV, Financial).
While this business has three actual properties, the one that is actually of interest is called Railroad-Pinion and it is located at the southeast end of the world famous Carlin Trend in north-central Nevada. Just to the north of the Railroad-Pinion project lie the Rain and Emigrant deposits owned Newmont Mining Corporation (NEM). One of the crucial aspects on mining is having deposits in an area where the permits for mining can actually be obtained. That should not be an issue for Gold Standard given the extensive history of mining in this area and the current projects in production. The location of the property can be viewed here.
The close proximity to proven and producing gold deposits should provide investors some level of confidence that the Railroad-Pinion project will contain deposits as well. Some of the very preliminary drilling results seem to confirm that view. The table below displays results from some of the early test drilling.
| Drill Hole | Method | Incl. | TD (m) | Intercept (m) | Thickness (m) | Grade (g Au/t) |
| PIN14-01 | Core | -90 | 96.3 | 1.5 – 71.3 | 69.8 | 0.89 |
| including | 9.8 – 17.1 | 7.3 | 2.31 | |||
| PIN14-02 | RC | -90 | 68.6 | 18.3 – 33.5 | 15.2 | 0.44 |
| PIN14-03 | RC | -90 | 109.8 | 57.9 – 62.5 | 4.6 | 0.38 |
| PIN14-04 | RC | -90 | 99.1 | 39.6 – 57.9 | 18.3 | 0.30 |
| PIN14-05 | RC | -90 | 391.8 | 122.0 – 161.6 | 39.6 | 1.01 |
| Â | 172.3 – 173.8 | 1.5 | 0.56 | |||
| Â | 231.7 – 285.1 | 53.4 | 0.39 | |||
| Â | 301.8 – 304.9 | 3.1 | 0.39 | |||
| Â | 326.2 – 329.3 | 3.1 | 0.24 | |||
So, we now know that the area is friendly to mining projects and the property in question does contain gold.
What Else Do We Need To Know?
I have oft heard it said in resource investing it as much about the “who” as it is about the “what”. Investing in early stage mining and resource exploration projects can be very risky (feel free to read this as suicidal) for the average investor.
To improve prospects for investing in projects that will be successfully explored and turned into a profitable outcome for early investors, it is very helpful to put together a management team that has extensive successful experience in the exploration, promotion and fund-raising aspects of the exploration and junior mining industry.
A review of the corporate structure of Gold Standard reveals that they have performed exceptionally well, at least in regard to the selection of a President Jonathan Awde and Director, William Threlkeld, respectively. This can be established from their bio’s posted on the companies website:
“Mr. Awde has the spent the last 12 years financing junior resource companies and has focused on institutional accounts. Mr. Awde has raised over $100m for public and private companies in the resource sector. Mr. Awde is co-founder, President/CEO and a Director of Gold Standard Ventures where he oversees all financing, corporate activities and developments for the company. Mr. Awde received his BA in Economics & Finance from Acadia University and is a former Sales & Trading professional at a CDN Broker Dealer.”
“For the past 11 years, Mr. Threlkeld has served as Senior Vice President of Seabridge Gold where he has designed and executed exploration and resource delineation programs which have defined more than 45 million ounces of measured and indicated gold resources. His successes include the discovery and definition of the Mitchell and Iron Cap deposits which have made the KSM project in British Columbia the largest gold reserve in Canada.
While serving as Exploration Manager and Vice President of Placer Dome Inc., from 1991 to 1997, he was responsible for all of Placer Dome’s exploration activity and investment in Latin America. Mr. Threlkeld directed programs that resulted in the discovery and delineation of Las Cristinas, Venezuela, Cerro Crucitas, Costa Rica and Mulatos, Mexico. From 1997 to 2000, he was Vice President, Exploration for Greenstone Resources Ltd. responsible for resource delineation on three Central American gold deposits and development of an organization and strategy to identify new mineral investments. Mr. Threlkeld obtained his MSc in Economic Geology from the University of Western Ontario.” (For readers who are not familiar with Seabridge Gold (SA, Financial), it is the owner of a massive exploration project called KSM, located in British Columbia, Canada.)
A quick review of the names and resumes of their board of advisors should provide any additional assurance anyone needs regarding the kind of industry expertise this business has supporting it.
Obviously, there are people involved with this business who know how to work successfully in this space. People with these kinds of resumes can usually pick and choose their opportunities and they tend to choose them wisely. This is an excellent indicator; but, it should not be enough for the kind of risk investing in these small companies entails.
I Need To Know Gold In The Ground Will Put Cash In My Pocket
One of the most successful and well-known resource hedge fund managers in the world is Albert Friedberg, founder of the Friedberg Mercantile Group in Toronto, Canada. With over $4 billion under management, there are obviously a lot of people who trust Albert Friedberg with their money. I will put a great deal more confidence in those things where he places his own cash.
One of those places just happens to be Gold Standard. Mr. Friedberg directly and through entities over which he exercises personal control owns 15,657,966 shares of GSV. The last addition to this holding were 1,944,444 shares that were purchased as part of a recent private placement deal open only to accredited investors. The shares were acquired for a price of $0.74cdn and each share included one half of a warrant good for the purchase of an additional share at $1cdn any time within the first of 24 months from the date of issue or on the 30th day of any 15-day period in which the stock trades above $1.35cdn/share.
What Is The Catalyst That Will Move The Price Higher?
Gold Standard is scheduled to annouce more drilling results this summer and, if the results meet the expectations for expanding the size and quality of the resource, the stock price could explode. If, like me, you think the price of gold is headed higher, and headed higher soon, then Gold Standard is an excellent way to obtain a position that will be highly leveraged to a rising gold price.
Final Thoughts And Actionable Ideas
There is never anything certain in investing until the money is in the bank. The natural resource industry magnifies that uncertainty even more and the exploration and junior mining segment of that industry applies exponential risk, as a general rule. Potential investors in this sector should always exercise extreme caution.
However, here we have a tiny business with property on the edge of a prolific gold producing area. The property is located in north-central Nevada where there is a long history of industry friendly governance. The business is run by people with long resumes displaying substantial success in this specialized arena. And finally, one of the world’s preeminent resource investors has recently added to what was already a huge stake in the company at the same price we can buy it for today. Albert Friedberg obviously like what he smells cooking in the Gold Standard kitchen and I am willing to follow him in.
While the risk in this suggestion is much higher than I normally accept, the profit potential mitigates that extra risk. Gentlemen of this caliber don’t place money at risk hoping to get double-digit returns; they take very carefully calculated risks hoping to receive hundreds if not thousands of percent returns on their original investments. In the case of Gold Standard Ventures, I think they are right.
