Jim Cramer Actually Gets Something RIGHT!

Jim Cramer of Mad Money, someone who is bullish on gold but has bashed the gold miners relentlessy over the years and praises the GLD, gave HIGH praise to my favorite stock today - Sandstorm Gold (SAND)!

And he's finally got something right.

Some Notes from Cramer: 

Likes gold going forward: "Printing money means more upside for gold..."

Likes Sandstorm - "new spec way to play gold rally. Bullion then GLD(no miners) lists all the problems of miners..." then recommends SAND.

" it's sandstorm gold symbol sand. speculative canadian mine financing business. think of sandstorm as beinging a financer for gold miners. we're in an environment where mierns have a lot of trouble getting financing. lenders aren't lending them money. they need more capital. take advantage of this high gold price. that's where sandstorm comes in they will give a gold miner immediate money up front in exchange for the percentage of the future gold produced.

in essence buying themselves a piece of the production stream. they also make a fixed ongoing payment for the gold they receive ooe down the road. that payment is incredibly low, usually around $500 an ounce. gold is worth about $1700 an ounce. why don't you think of sandstorm being a smaller version of a stock that blew my mind when they came on the show, franco nevada..." From CNBC.com. 

"What if there was a company that gave you the benefits of a higher gold price but none of the headaches?"

Yup, he's a little late to the Sandstorm party here as we're hitting new highs, but I do believe there is still much upside to the SAND price. I've been long since 2010 and have no intention of selling.

Welcome aboard, Cramer!

Watch the video here! - http://video.cnbc.com/gallery/?video=3000118980&play=1

Solitario Exploration - An Undervalued, Shareholder-Friendly Company

Finding undervalued junior gold exploration companies is no easy task - it takes countless hours of digging and research.

However, it is becoming easier for myself to spot great deals because Sandstorm Gold has been finding them for me!

Solitario (Quote: XPL) is one such example. I had never heard of them before they completed a $10 financing with Sandstorm Gold (for a 2.4 % NSR - more on that later). Here is the story on Solitario. In bold is the main points I'd like to make:

Current Market Cap - $58 million ($1.75 a share).

The company has a number of exciting projects, but for this discussion, we will focus solely on its Mt. Hamilton Gold Project. (Although the Bongara Zinc project is also very exciting).

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The Mt. Hamilton gold project is located in Nevada, one of the most mining-friendly regions in the world. A new resource estimate gave the project a total of 751,000 Au Eq (Gold Equivalent Ounces, Measured and Indicated) and 154,000 Au Eq inferred, for a total of 905,000 ounces. The resource is growing and has almost doubled since 2010. You can bet that management is focused on expanding the resource even further.

The project carries robust economics, with estimated $575 operating cash costs per ounce, and just $72 million capital cost to bring the gold mine online (really not that much, IMO). The mine is projected to produce 48,000 gold ounces and 330,000 silver ounces per year. However, drilling is ongoing, and the resource is expected to be increased even more. They are aiming for first production in 2015. I am expecting the total resource to be north of 1+ million ounces, and potentially 70K+ average annual Au Eq production.

The estimated pre-tax cash flow of this project, at $1500 gold and $29 silver, is $35.6 million a year and $284 mill. for the life of mine, which makes it interesting because their current market cap is under $60 million. Based on more current prices of $1700 and $33, however, the pre-tax cash flows increases to $48 million a year and $389 million for life of mine. With $1700 gold, the project carries a NPV of $261 million! With gold price of $2,000 and silver of $40+, you can imagine how much more profitable the mine becomes. See the below chart:

Credit: SolitarioXR.com

Again, low initial capital costs of just $71.9 million is required. Sandstorm bought a NSR for $10 million - however, I expect they will convert this to a streaming deal later on. I see them cutting a deal with Solitario for an upfront payment of $30+ million, for the right to purchase 15 or so percent of life of mine gold production, at $450-500 an ounce. From their agreement: ( If (Solitario) enters into a gold stream agreement with Sandstorm that has an upfront deposit of no less than US$30 million, (Solitario) will have the option, for a period of 30 months, to repurchase up to 100% of the NSR for US$12 million.) The rest of the financing will come from either equity or, more likely, a credit facility with RMB. *Financing will not be a problem, in my opinion, and share dilution is unlikely, because...

Solitario management seems to be very shareholder friendly. Maybe it's because management owns nearly 12 percent of the company themselves. The current share count is only 34.5 million. This is unheard of for a junior mining company that has been around for 5+ years. Most companies have to resort to dilution, which can be painful. With $10 million cash on hand, Solitario is in an enviably position.

Insiders have also been buying - On June 28, the CEO of the company bought 180,000 shares.

Insiders are buying. Credit: CanadianInsider.com

The Mt. Hamilton gold project is just one of four projects for Solitario, and I believe this project makes the company worth buying alone!

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To sum it up, here's why I consider Solitario to be an exceptional buying opportunity:

*1) Gold Project in safe region with robust economics - low operating cash costs and minimal capital required to get in production.

*2) Major backing by Sandstorm Gold - Vote of confidence and third party validation - Sandstorm only cuts deals with companies that have solid management and upside potential. I don't see raising money as a problem -  based on their past actions, I really don't think shareholders should be concerned about dilution.

*3) Undervalued based on the numbers - Mt. Hamilton has a Net Present Value of $261 million based on $1700 gold - current market cap under $60 million.

*4) Shareholder-friendly management - no dilution, large insider ownership and recent insider buying gives me more confidence.


*5) Upside in price of gold - money printing from central banks around the world should lead to a higher gold price, thus increasing the value of Solitario's assets.


Full Disclosure: I am long SSL. I do not own any shares of XPL, but may initiate a position within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

Please do you own due diligence when investing and good luck!

Magellan Minerals Presents Rare Buying Opportunity

Gold stocks have moved up significantly during the latest run-up in the price of gold, as physical gold shot up from $1550 to over $1750 an ounce. The stocks led the way higher, with the HUI Gold Bugs index eclipsing 500 after hitting lows around 350 just months ago.

As gold approaches $2,000 an ounce an ultimately $5,000 an ounce in the coming years, the gold stocks will led the charge, outperforming. As I've stated before, I believe the junior gold stocks and exploration companies will outperform the major mining companies. Juniors are smaller in size, but hold explosive, 1,000 percent gain potential. And, of course, more risk.

Now, many gold and silver mining stocks have made big moves this past month as the Federal Reserve announced monthly, unlimited Quantitative Easing. But not all gold stocks have made big moves and it is a challenge to find one that hasn't.
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*Magellan Minerals is one micro-cap gold stock I've written about before. They own two very promising gold projects in Brazil.

They are a Canadian-based junior gold exploration company "focused on mineral exploration and development in the state of Para in northern Brazil. The Company has interests in a number of properties in the Tapajos region which has a historic gold production estimated at 20-30Moz of gold. The Company has two advanced gold projects, Cuiu Cuiu and Coringa."

Magellan has been a big underperformer as the stock has gone from .35 cents a month ago to just .22 cents today. And in 2011, the stock was over $1.50. The brutal correction in the gold mining stocks was not kind to Magellan.

However, I see the tides changing very soon for this company.

Credit: www.MagellanMinerals.com

**Here are three big reasons why I consider Magellan Minerals an outstanding buying opportunity at current prices: 

1) Financing with Sandstorm Gold  - on May 15 for $7.5 million. This gives them an ample supply of cash (Probably still much of it left over to date). The latest presentation says they have $5 million cash on hand, however, this does not include the $7.5 million financing. So I believe they likely have over $10 million cash on hand currently. *This financing is a third party validation from Sandstorm Gold. Sandstorm does not do deals with companies they don't believe in.

This shows me that: A) Sandstorm believes in Magellan management. As Sandstorm has stated a number of times, this is very important in their process of finding gold streams, and,B) They believe in the upside potential of Magellan's properties.

2) Insiders have been buying - They first started back in May around the time of the financing. More recently, insiders bought over 200K shares on Sept. 21. There are a number of reasons for selling, however, there is one reason for insider buying - they think the share price will rise.

Insider Buys at Magellan. Credit: CanadianInsider.com

3) Positive news flow to come - while they have been quiet of late, I expect news going forward, and very shortly. Coming at the end of this month or early next month will be the updated PEA on the Coringa deposit (1.1 million ounces).

*The previous NPV of  Coringa was just $41 million but was only based on a resource of 370K ounces! The new PEA will be based on 1.1 million ounces!

Plus, the previous PEA was based on $950 gold. At $1,200 gold, the original PEA gave the project a NPV of $80 million. ***With a 1.1 million resource and a price of gold at $1,700, one can expect the new NPV of Coringa to be well above $100 million.

(Have I mentioned that the current market cap of Magellan is around $20 million!)

In conclusion, I strongly feel that the market has not placed a fair value on shares of this company.

Best of luck investing!

FULL DISCLOSURE: I am long V.MNM and SSL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article. Please do you own due diligence when investing!

This is a Good Environment for Gold Royalty Companies

This is a great, great time for companies like Sandstorm Gold.  More deals ahead?

 

"RPT-BAY STREET-Royalty firms could spur junior miner deal bonanza

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* Cash-rich royalty companies poised to strike new deals
* Equity market slump puts junior miners in a tough spot
* Developers, juniors, mid-tier miners all vying for funds
By Euan Rocha
TORONTO, June 3 (Reuters) - Royalty companies that raked in cash from strong precious metal prices in the last three years look poised to drive a wave of deal activity in the Canadian mining sector, especially among junior players hungry for financing.

These companies, which fund projects in return for a portion of future revenues, generated huge amounts of cash flow from existing deals as the price of gold and silver soared since the beginning of 2009.

Now, with the recent pullback in precious metal prices and slumping stock markets, they could be the saviors for small and mid-tier miners wh o are eager to grow but strapped for capital.
Europe's debt crisis and slowing Asian growth have tempered banks' appetite for lending. And miners are not keen to issue equity when their share prices are severely depressed, leaving few alternatives to royalty and stream deals for small miners looking to fund project development.

"A lot of the juniors we work with are looking at turning over whatever rock they can in order to get financing. They are exploring it," said Krisztián Tóth, a partner with law firm Fasken Martineau in Toronto.

 Read More: http://www.ibtimes.com/articles/348389/20120604/royalty-firms-spur-junior-miner-deal-bonanza.htm

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!

Are The Miners Starting a Reversal?

It looks like the gold and silver mining stocks (especially the juniors) could be reversing the downward trend they've been in for a while now. While gold has remained under $1600, the stocks have gone up a little bit, with the HUI back up to near 420 and the GDX at 43. 

Perhaps people are starting to realize just how ridiculously undervalued this sector has become. These companies are profitable with $1600, $1500, $1400, even $1200 gold.

http://finance.yahoo.com/blogs/breakout/gold-hits-2012-low-gold-miners-show-signs-132751621.html

Leeb on Gold Juniors - "Greatest Bull Market of All-Time."

Stephen Leeb is Chairman & Chief Investment Officer of Leeb Capital Management:

"The junior gold stocks, the ones with honest to goodness reserves which have not been developed, they will see one of the greatest, if not the greatest bull market of all-time."

Read more at KingWorldNews

Triple Your Money in a Year With This Trade

Here is my first video. I feel strongly that a position in the 2013 Silver Wheaton warrants will pay off considerably, potentially 300 percent gains in a year or less!

Always do your due diligence when investing and good luck. I am long SLW and the '13 warrants.

Sandstorm Gold Releases Great 1Q Results

Another great quarter for this gold streaming company. I've been in since .65 cents and have no intentions of selling anytime soon!
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Sandstorm Gold Recognizes Record Gold Sales and Operating Cash Flow of US$9.3 Million

 Vancouver, British Columbia, May 3, 2012 - Sandstorm Gold Ltd. ("Sandstorm" or the "Company") (TSX-V:SSL) is pleased to announce its unaudited results for the first quarter ended March 31, 2012 (all figures in U.S. dollars).

First Quarter Highlights

• Record operating cash flow of $9.3 million.
• Record gold sales of 7,946 ounces.
• Average cash cost per ounce¹ of $314 resulting in cash operating margins of $1,380 per ounce.
• Sandstorm entered into a revolving credit agreement to borrow up to $50 million, which remains undrawn.

"The first quarter proved to be another record quarter in terms of gold sales and cash flow," said President & CEO Nolan Watson. "As our cash balance continues to grow, we are better positioned to complete additional gold streams..."

Read more - www.sandstormgold.com

 

Gold Stocks News for Thursday

Lots of news flow today for the juniors.

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"Sandstorm Gold Announces Proposed Share Consolidation  Vancouver, British Columbia, April 5, 2012 -- Sandstorm Gold Ltd. ("Sandstorm" or the "Company") (TSX-V:SSL) is proposing a consolidation of its issued and outstanding common shares ("the Common Shares") on the basis of one (1) post-consolidation Common Share for up to every five (5) pre-consolidation Common Shares (the "Consolidation"), with the final consolidation ratio to be set by the Company's Board of Directors within the range approved by the shareholders."

Fine with me. The company wants to open up to the US markets and bigger investors. The warrants will not be affected negatively.

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"Brigus Gold Hits Q1 Production Target
Halifax, Nova Scotia; April 5, 2012 (NYSE Amex: BRD; TSX: BRD) – Brigus Gold Corp. (“Brigus” or the “Company”) is pleased to announce that it produced 16,922 ounces of gold at an average grade of 3.04 grams per tonne (gpt) in the first quarter of 2012 – hitting the top end of its guidance."

*This is also good for Sandstorm! Great job by the team at Brigus to turn this around. Only expect better things on from here.

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And finally....

Vancouver, April 5, 2012 – Luna Gold Corp. (TSXV-LGC) (LMA-LGC) (OTCQX-LGCUF) (“Luna” or the “Company”) is pleased to announce its gold production update at the Aurizona Gold Mine for the quarter ended March 31, 2012. 

Aurizona Gold Mine produced a quarterly record in Q1 of approximately 16,000 ounces.

Sandstorm owns a 17 percent stream. Luna Gold is an interesting story as well.

Primero Mining Posts Solid 4Q

Primero Mining posted a pretty good 4q and full year 2011 results today:

"The Company reported 2011 net earnings of $67.8 million ($0.77 per share) with adjusted net earnings of $28.3 million ($0.32 per share). Operating cash flows(3) were $80.2 million ($0.91 per share)."

For the 4Q: "The Company earned net income of $36.8 million ($0.42 per share) in the fourth quarter of 2011, compared with net income of $6.9 million ($0.08 per share) in the fourth quarter of 2010 due mainly to the impact of the APA filing and the resultant recovery of income taxes retroactive to the date of acquisition of the San Dimas Mine." I do expect this filing to be ruled in favor of Primero at the end of this year. 

A production decision to expand the San Dimas mine will be made in the 3Q. Primero currently trades at only $2.50 with a market cap just over $200 million. They are expecting upwards of $90 million in free cash flow for 2012 - Can you say undervalued?

I am long PPP.