This was sent to your humble scribe yesterday by someone who read yesterday's post on Carpathian (CPN.to) and wanted to comment on Casey's extended pumping of that stock. Whereas me, I love the whole thing so much (not just the CPN.to call) I'm just going to show you the entire letter, keep comments to a minimum and leave it to you to work out the rest. It's dated March 1st 2013, just before PDAC.
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CIA #505: The 10-Bagger List
Dear Speculators,
We've written a lot lately about what to do if the correction in our market continues or deepens. This was necessary, given market sentiment, but we run the risk of seeming more negative than we are. Therefore, I thought I would offer you a heads-up regarding the companies on my radar that have the greatest potential for extraordinary gains.
I'm on my way to Toronto this weekend, for the PDAC convention, where I will meet with many of these and other companies, so I'll have more to say soon. The list below is simply the subset of companies among those we follow that are selling cheap enough relative to the assets they are advancing to offer 10-bagger potential or better.
They won't all make it, of course, but they all have the potential, and the odds are good that several will deliver – one or two will hit it right out of the ballpark. It's impossible to say which; the best-run companies with the best projects can run into unexpected roadblocks, and neglected underdogs can make spectacular discoveries while no one is paying attention.
This is why a basket approach is essential. As we have long said, you have to cast a wide net and be willing to take losses along the way to the record-breaking wins, if you're serious about nailing 10-baggers.
I know that many investors feel paralyzed by a falling market, but I also know that there are disciplined speculators out there, wanting to know where to focus their buying when others are selling. If we see the kind of market capitulation we've been writing about recently, which bargains could become the biggest winners? The 10-bagger list below is my current answer to that question.
I am not suggesting that anyone go out and buy the whole list – nor any of them today, necessarily, especially if long already. Rather, consider building or adding to positions in these companies if we get a real market meltdown in the weeks and months ahead.
Without further ado, then, here's the list:
ATAC Resources (V.ATC, C$1.71, 103.6M SO, 113.7M FD, C$177.2M MCap,www.atacresources.com) — ATAC has already been at nearly 10 times current levels, simply based on a different level of risk appetite in the market. The company's discoveries in the Yukon are significant and have serious size potential. In a more bullish market environment, this company could be a 10-bagger without changing. However, we expect more excellent results this year.
Banks Island Gold (V.BOZ, C$0.64, 34.4M SO, 42.4M FD, C$22M MCap,http://www.banksislandgold.com) — BOZ has the assets and the game plan for developing them that could easily deliver a 10-bagger. There's technical risk in doing what must be done, and the company only has half the money it needs to build its first mine at Yellow Giant, but it has options for the latter, and we believe it has the right people to address the former. This is not a penny stock, but its market cap is like that of a penny stock and has similarly explosive potential.
Brixton Metals (V.BBB, C$0.175, 52.5M SO, 81.1M FD, C$9.2M MCap, www.brixtonmetals.com) — Brixton does not yet have a 43-101-compliant resource in hand, and is quite a ways from delivering one. That makes this a higher-risk spec. But it is cheap, and it has delivered spectacular drill results, more of which could easily make this a 10-bagger.
Carpathian Gold (T.CPN, C$0.29, 555M SO, 590.5M FD, C$161M MCap, www.carpathiangold.com)— We've written quite a bit about this company. The bottom line is simple: the company is trading at a discount to the value of the gold mine, is on track to deliver on time and on budget in Brazil, and on top of this, it has a huge gold-copper resource in Romania for which the market is giving it no value. The stock will almost certainly rise based on the former and could eventually become a 10-bagger based on that alone, given the low starting point. It's hard to put odds on the Romanian blue sky, but whatever they are, free is a great price, and the consequences of success with that project would be huge.
Global Minerals (V.CTG, C$0.175, 110.8M SO, 144.9M FD, C$19.4M MCap,www.globalminerals.com) — Global's decision to focus on advancing their known deposit this year, rather than on making new discoveries, would normally make for less explosive upside in the play. However, the stock has gotten a lot cheaper recently without any bad news from the company (due in part to a newsletter publishing a sell recommendation on the stock). It's not hard to see the stock rising to 10 times its current share price if the company delivers a profitable new silver mine to the market.
Gold Port Resources (V.GPO, C$0.07, 110.6M SO, 177.5M FD, C$7.7M MCap,www.goldportresources.com) — Gold Port recently delivered a substantial new gold resource to the market that is being subjected to an inappropriate level of country discount, on top of general market sector weakness. There is technical risk in this play, but the stock is so cheap, a 10-bagger or better is easily doable if the company delivers on its objectives.
GoldQuest Mining (V.GQC, C$0.425, 144M SO, 155.8M FD, C$61.2M MCap,www.goldquestcorp.com) — GoldQuest has become a value play with enormous upside. It's a spec, but if the company starts delivering more Romero-style drill results, these shares should soar. But even if that doesn't happen, it appears likely that the company will be able to deliver a significant gold discovery with robust economics to the market. So, while the explosive upside is highly speculative, the base of value looks solid. The company is cashed up and hard at work; stay tuned.
Matamec Explorations (V.MAT, C$0.185, 120.3M SO, 138.7M FD, C$22.3M MCap,www.matamec.com) — Matamec is another company we've written about recently. Again, if the market were giving the company a normal discount for a pre-feasibility project, there might not be quite as explosive potential in the play, but since the market does not yet seem to believe in the Kipawa project, despite Toyota putting millions into it, a shift in perception is all it would take to make a big winner out of this pick. And that's not even counting the company's non-Kipawa assets and blue sky.
Renaissance Gold (T.REN, C$0.455, 30.7M SO, 32.4M FD, C$14M MCap, www.rengold.com) — This is a pure people play. The company does not yet have a flagship project upon which we can project any value added. It does, however, have one of the most successful mineral exploration teams in the world, bar none. And it's cheap. It's hard to say where, when, and how the stars will align for this one, but when they do, the results should be extremely gratifying.
As a bonus, here's a list of companies that have similar excellent potential but are not quite as cheap. These companies seem likely to deliver, but maybe not as much as ten times current share prices. Call it the potential 5-Bagger list:
Adventure Gold (V.AGE, C$0.255, 65.5M SO, 70.8M FD, C$16.7M MCap, www.adventure-gold.com)— Adventure has a relatively high-grade, open-pit gold resource in mine-friendly Québec. The deposit is not huge, but it's big enough to matter, and if the company is successful in making it bigger, it could yield very robust economics. The company also has Other People's Money going into the ground on other projects. There are certainly risks in this play, but if the company delivers on its plans, that success could easily justify five times the current market cap, or more, in a bull market environment.
Almaden Minerals (AAU, $2.22, T.AMM, C$2.18, 60M SO, 65M FD, C$130.8M MCap,www.almadenminerals.com) — Almaden has delivered a world-class gold resource in mine-friendly Mexico, with several characteristics that are very bullish for project economics. We should see preliminary numbers on that by the end of the year. We will also see drilling all year long, which has the potential to greatly expand the deposit. The company has plenty of cash and best-in-the-business management. If they deliver on their intentions, it would be easy to see a 5-bagger in the stock.
Exeter Resources (XRA, $1.17, T.XRC, C$1.21, 88.4M SO, 98.9M FD, C$107M MCap,www.exeterresource.com) — Exeter's monster-sized Caspiche gold deposit in Chile is getting almost no valuation in the market. There certainly are technical challenges, but the size of the prize is certainly commensurate with the risk. Big bulk mining projects are currently out of favor, but Caspiche has a smaller, but still large, higher-grade core that we hope to see the company put some economic numbers on. The committee also has lots of cash and is looking for value unlocking ways to deploy it. That aside, simply as a gold bank with ounces in the ground, this stock is highly leveraged to rising gold prices.
International Tower Hill (THM, US$1.62, T.ITH, C$1.71, 98.1M SO, 106.2M FD, US$158.9M MCap,www.ithmines.com) — ITH is almost the same story as Exeter, but it has less cash. On the other hand, it also faces far fewer technical challenges and offers excellent leverage to rising gold prices.
Rye Patch Gold (V.RPM, C$0.355, 146.1M SO, 155.6M FD, C$51.9M MCap, www.ryepatchgold.com)— Rye Patch will probably not quintuple if successful in its legal battle with Coeur d'Alene Mines over the Rochester silver mine in Nevada. However, it could easily double or more on that basis, and that could prompt the market to revalue the company's substantial portfolio of other assets in the area. Add to this any success in the company's ongoing drill campaign, and we could see the shares trading much higher when the gold market turns bullish again.
Sandspring Resources (V.SSP, C$0.37, 132.4M SO, 142.3M FD, C$49M MCap,www.sandspringresources.com) — Sandspring's Toroparu gold project in Guyana should soon deliver to the market updated economic numbers that we think will be more robust than most investors are expecting. If the company's neighbors, Guyana Goldfields, are able to raise the rest of the money they need to build their mine, that should greatly reduce the country discount being applied to all Guyana plays. There's exploration upside as well. Taken altogether, it's easier to see much higher share prices, even without a major new discovery, in a more bullish gold environment.
Others I see excellent potential in, but maybe not quite at the 5- or 10-bagger level, include Strategic Metals,Sunward Resources, NioGold, and Columbus Gold. I do see potential for a double or better in the rest of the companies in our portfolio, or they wouldn't be there. However, the purpose of this alert is not to reassure you how good all of our picks are; the idea is to help those of you who have the guts to hunt for big game when we have the field almost to ourselves to focus on the picks that offer maximum potential yield. If the market falls apart for a time, these are the picks that are likely to offer the maximum bang for the buck. Just remember the higher yield entail higher risk.
I know it takes courage to be a contrarian, but I have confidence in the wisdom and discipline of the speculators receiving this alert. Fortune favors the bold, and I believe it will favor us all greatly in the months and years ahead.
Sincerely,
Louis James
Chief Metals & Mining Investment Strategist
Casey Research