How The “Alligator Brain” Can Make or Break Your Career As An Investor

How The “Alligator Brain” Can Make or Break Your Career As An Investor

(B) GoGold and Superior Gold: Chase These Small Miners Now Or Later Toward New Heights.
Content:
Some people call it “the alligator brain”.  They’re referring to a couple of deep seated beliefs that have been passed down to humans over a millennia.
  • We tend to want what we can’t have;
  • We tend to only value what we pay for;
  • And we tend to chase what moves away from us.
Chase being the key word there.  Prices of Gold producers in particular are starting to move away – up, up, and away! (producers generally move ahead of the juniors in a full-blown Gold bull market).  Naturally, people are chasing prices higher.  The underlying psychology, which makes up “the market”, has shifted (as we predicted).
There’s a strong sense of urgency to own precious metals and mining stocks, which didn’t exist before.
 
People want in, and they want in NOW! (preferably yesterday, and months ago).
The chase is on!
Fortunately, and importantly, we’ve had the foresight to position ourselves for this inevitability.
 
We’re in exactly the right place at exactly the right time.
 
The herd is coming to us, but it’s important to stay clearheaded and thoughtful as this bull market runs.  To fully capitalize on this opportunity you can’t allow yourself to get tripped up by the emotions of it all.
In the months ahead, price swings UP and DOWN will become even more dramatic in percentage and dollar terms, as your wealth grows (therein lies the opportunity to make emotion-driven decisions, which are normally bad ones).
Start preparing yourself mentally for those swings now.  Start thinking about whether you’re going to hunker down and hold out until we’re talking $1,800 per ounce (at least), or whether you’re going to ride the waves by surfing in and out of positions along the way.
If you don’t come to some conclusions as to how you’re going to play this cycle, you might find yourself selling into weakness (getting scared) and buying into strength (chasing) – or even worse, being “all-in” at the highs.
We want to play our cards right.
Technical analysis (TA), emotional intelligence, due diligence, site visits, and experience will help us all play our cards right.
But you’ve got to have a few money management rules/principles of your own to WIN BIG, of course.

4 Bigger Picture Points To Keep In Mind

  1. Volatility INCREASES, it doesn’t decrease, as bull markets mature.  Use volatility to your advantage, or volatility will take advantage of you;
  2. Generally speaking, right now just 0.25%, or less, of people’s net worth is allocated into Gold and Silver stocks.  That’s a reliable barometer to watch and right now it’s saying we’re still VERY EARLY in this bull market.  When generalist investors and money managers increase their allocations toward 2% and 4%, or more, we will know the bull market is starting to get old (the Dow to Gold ratio is also timely);
  3. Political and monetary policies are “crazy” now, and it sure seems like they’re going to get even crazier (especially if socialists gain power for any period of time) – Gold and Silver are going to GO NUTS!;
  4. MELT UP in “negative yielding” debt – now $15 trillion, up approximately 75% since December.
Most mining stocks are adjusting to this reality quickly, as you know.
I’m still hunkered down in 2 TSX-listed “small-scale” producers, Superior Gold (SGI, TSX) and GoGold Resources (GGD, TSX), for great Gold and Silver production plus exploration upside, with no intention of selling (taking profits) at this point in time (these 2 are still way undervalued).  Any weakness from current price levels should be short lived, then overwhelmed as new buyers rush in.

Superior Gold (SGI, TSX)

From its ultimate all-time never-to-go-lower again price of 43 cents, SGI has increased 153% to $1.09.
 
Great gain, for sure, but that’s coming off an absurdly low price.  Superior had no business trading down there and I don’t believe it’ll ever get down there again.  Superior is either going to be acquired or become an acquirer.  The Plutonic mine and mill facilities are “big enough”, with capacity of +100,000 ounces annually, to move the needle for just about any growth oriented junior miner.  Plutonic’s also got a significant amount of underutilized plant capacity.
In bull markets speculators and companies place worth on things like “replacement cost” (and having all the permits for mining in-hand)!
SGI needs to increase another 22% to make a new 52-week high and another 45% or so to make a new all-time high.  Getting above $1.60’ish would be of great value because then the stock’s got no upside resistance, which is of great importance from a TA standpoint.
 
Superior has lots of room to improve its Australian-based mining operations.  Efficiency, tonnage, and grade improvements will drive costs down and boost production.  Those are your catalysts to blast past $1.60.  Not to mention, Gold is already selling for over $2,000 per ounce in Australia (prices like those can cover up several sins).
Many big geological systems tend to improve with age, too, like a fine wine, so I like the odds of Superior making a new economic discovery (they’re normally always drilling both above and below ground).
Past production is +5.5 million ounces.
Superior’s already hit 57 g/t Au over 7 m at Plutonic West!
 
Come on, now, that’s a respectable intersection!
I’m no geologist but it helps lead me to believe Superior ain’t going to be mining at 2 g/t or 3 g/t  forever.
Plutonic definitely has some higher grade potential.
Compared to its peers, many of whom are located in riskier places, SGI is still darn cheap with a market cap of $105 million.
 
Their enterprise value is only $88 million ($17 million cash, no debt), so Superior is still valued lower than many in its peer group.  
 
Q2 results are scheduled to be released before the bell next Wednesday (August 14).  
 
If SGI sells off on the news for some reason, I’d be jumping all over it!

GoGold Resources (GGD, TSX)

CEO/Founder Brad Langille has a history of creating wealth for himself and his shareholders.
 
He owns approximately 30% of GoGold and plans to hit another home run with GGD.
 
Go back and look at those numbers.  Very impressive!  $11 million to $92 million with Santa Gertrudis in 3 years!
 
GGD offers an excellent combination of production and exploration at a very reasonable price (market cap $85 million).
 GoGold is one of very few “pure play” Silver producers and they have a very strong balance sheet, approximately $20 million worth of cash and marketable securities (no debt).
There aren’t very many companies with strong Silver exposure like GGD, so it’s best to get positioned in this deals NOW and ride the wave.  There’s no question Silver prices are headed much higher (another reason we like Canada Cobalt – CCW, TSX-V – so much at current levels.  They are going to ride the Silver (and Gold) wave, just like GGD).
GoGold already announced Q2 was a record in terms of production – 451,011 Silver equivalent ounces.  Costs have started trending down, so “record production” should translate into better economics (year over year).
Given their existing resource base it’s probably safe to assume +1.7 million ounces of Silver production annually for another 10 years.
Getting back to Langille’s history of value creation, he’s really-really excited about what GoGold has in Los Ricos!
 
“We think it’s a multi-million ounce deposit.  Grade will put Los Ricos in the top 5% to 10% worldwide.  Internally, we already have a number.  And it’s a very good number.  Grade is King,” Langille boasted very recently.
I don’t think he’d be talking like this, publicly, unless he was highly confident Los Ricos is going to be a multi-million ounce deposit with grades placing Los Ricos in the top 5% to 10% of undeveloped deposits globally (Langille knows he and his stock are only as good as what he delivers on).  This is valuable insight and information, freely available to anyone who’s willing to listen.  As GoGold’s internal/historical data is released more broadly, we’ll begin to better understand it’s true worth – I’m estimating 1 x to 2 x their current market cap.
The Los Ricos story, as a high-grade Golden opportunity (or Silver, if you prefer AgEq) starts really getting told in September.
GoGold’s got 2 drill rigs turning now at Los Ricos.  Langille’s drilling underground for resource delineation and the other rig is doing truer exploration drilling (greenfields) at Cerro Colorado, located approximately 750 m from the underground workings.  Given what they know, based off historical data, good drilling results are to be expected (Cerro Colorado is the wild card!).
At 52 cents per share GGD is about 150% off its lows and would need to lift another 250% or so to reach its old high of $1.75.
Chase GGD now or chase it later!
daniel
(561) 596-5067

Asset Management & Equity Research