A Gold Stock With 10-Bagger Potential!

I recently learned of a new micro-cap gold stock that got me pretty excited. There are only a few times before when investing have I felt this sense of conviction - buying shares of Sandstorm Gold in 2010 and Endeavor Silver were two other times. I also really like the 2013 Silver Wheaton warrants as I stated in a recent video.

I frequently post at the message board of the Motley Fool website. Here's what I had to say about my new favorite gold junior, Magellan Minerals: 

Source: MagellanMinerals.com

"I'm sure you heard of the last Sandstorm deal - they cut a NSR with Magellan Minerals, on two of their projects in Brazil. Well, wouldn't you know, I did some DD on Magellan, and I am very, very intrigued!
Facts: The financing with Sandstorm Gold was for $7.5 million cash, $.5 mill in common shares (at .50 cents - the stock is currently only .20 cents).

At .20 cents, they have a market cap of about $20 million. Not considering what other cash they have in the bank (not sure to be exact but I will check), we know they have at least $7.5 million cash. Close to 40 percent of their current market cap!

*Management owns 11 percent. Both Kinross and Newmont are shareholders.

You can bet that they are going to use this cash to start getting the drills going.

Their two properties have total resource of 2.4 million ounces of gold. Brazil is a great mining jurisdiction. 

I bought yesterday at .20 cents. (I bought 10,000 shares).

The last point I'd like to make is Sandstorm's management and how they choose their deals. They only go for safe political locations, solid management teams, project upside, etc. That only gives me more confidence. 

Courtesy: Yahoo!Finance

(As you see here, shares have been beaten down pretty badly recently. However, I feel that we've either reached a bottom or are getting close. With $7.5 million in the bank and a 20 million market cap, I see little downside).

They are aiming for first production in 2015 and second mine in 2016. I of course like the potential of both of their projects. Check out the presentations on the site - http://magellanminerals.com/."

*This stock could return 1,000 percent of your money. I'm not kidding. If they can use that cash and get the drills going and update the resource at both of their projects, they could have over 4 million ounces of gold (measured, indicated and inferred). Then an updated Preliminary Economic Assessment should be in store.

*The PEA indicates a robust Internal Rate of Return ("IRR") of 34% and a Net Present Value ("NPV") of US$41M (assuming a 5% discount rate and a gold price of US$950/troy oz (oz). The project payback period is 3.7 years.*** (With gold at a more current price of $1,600, the NPV should be WAY higher - It's worth much more than the measly $41 million!).

The Coringa Deposit is a high grade deposit with roughly 560K measured and indicated and 534K inferred. If they can get constructed without too much dilution, we could see Magellan trading over $2 a share easily.

The hope is that the share price will be higher when they have to go to the market again. Since they have $7.5 mill in the bank, that won't be for a while. When they decide on constructing the mine they will most likely have to issue shares to raise capital, however, I expect the share price to be MUCH HIGHER at that point with the updated resource and drill results, and a better market (hopefully). 

My long-term (2-5 year) price target is $1-2 a share and I think we can easily get there. 

DISCLOSURE: I own shares of V.MNM. This is not investing recommendation, nor am I an investment advisor. Please do your own due diligence when investing!