The Leverage of Development Assets: A Case Study
We profiled this company last week, and now we see more people tuning into stories we cover. Please read the comments of Ken Gerbino below:
Ken Gerbino heads up Kenneth J. Gerbino & Company out of Beverly Hills, California and manages the Gerbino Gold Group LLC, a hedge fund investing in precious metal mining stocks. As of April, his funds audited track record since 2001 is up over 800% vs. the Philadelphia Gold Index (XAU) which is up 190%. Ken has been investing in the mining sector since 1973 and is considered one of the best money managers in the world in this sector. He is someone we always like to listen to.
The Leverage of Development Assets: A Case Study
By Kenneth J. Gerbino
Kenneth J. Gerbino & Company
www.kengerbino.com
When I heard that a prominent group of mining entrepreneurs have taken over the old Mt Milligan copper-gold deposit from Placer Dome via Goldcorp, my ears picked up.
Companies with already developed assets have recently enjoyed a lot of investor leverage. Many of these deposits have tens of millions dollars of developmental work already completed, reducing the time to production. This presents a strong valued added situation for a resource investor – as I show in my proprietary mining model below.
DEVELOPMENT ASSETS CAN GIVE STRONG CAPITAL GAINS
In the early to mid 1990s, western geologists and entrepreneurs scattered to every nook and cranny of the earth searching for new mineral deposits. This was the first time that literally thousands of highly trained and technical people – many former upper and middle management with major mining companies – were able to organize funding and create new companies to develop potential new mines, on a large scale.
Many were successful in discovering new deposits, but the low metal prices of the late 1990s and the very poor financial and investment environment at that time meant these very promising deposits didn’t get developed. Starting a few years ago, this situation started to change. As metal prices and the investment community’s interest in metals rebounded, the stocks of many of these companies bounced back – mainly because they already had substantial ounces of gold or pounds of copper or other minerals in the ground.
Eldorado Gold and Nevsun Resources are examples of companies who had discovered substantial deposits in the 1990s, but only found the capital to put them into production in the last 2-3 years. Eldorado went from 40 cents to $6 this cycle. Since 2001, Nevsun went from 33 cents to $9, and now trades at an undervalued $3.50
The point is, it allows for a lower risk profile since the resources is already delineated and managements having this data and information, can sometimes save 2-4 years worth of work. This means the deposit is that much closer to feasibility, financing and production. If a deposit has been permitted before, even if those permits have expired, it’s an encouraging sign that future permitting should not be difficult.
To read the article in its entirety – please click here
Best Wishes,
Ken Gerbino
www.kengerbino.com
|
