At Equity.Guru, we’ve been talking to younger investors, not-yet-investors, and weed investors for some time now about the value that can be found in resource stocks, but we haven’t really hit you between the eyes with anything much gold-related just yet.
The reason? Investors should buy into what they know. If you’re a weed guy, you’re going to pay special attention to weed stocks. If you’re a renewable energy and energy metals guy, you understand cobalt and copper and graphite and manganese are as big a deal in a lithium ion battery as the lithium proper. And it you’re a big tech guy, you know without even really looking that Snap was a short from day one.
But gold? Gold stocks are for old guys. They’re for people who deal in grade and yield and five-year business plans and understand technical reports and who cares?
Well, we’re going to talk to you about a deal today that will change that perception, because this is a stone cold fox. I want you guys out there who don’t do gold to pay some attention, because we’ve got one on the hook that’s fighting hard to bust out.
The company is called Ashanti Gold (AGZ.V), and the CEO is a cat named Tim McCutcheon.
Why do we give a crap about Ashanti?
Because I hear a lot of pitches every day. I hear so many pitches, I should be calling balls and strikes on them. And one thing always sticks out as a reason to take a pitch extra seriously, and that’s the people behind it.
Oh, I’ve got a good line on guys with a good story and that have had six other companies behind them in the last six years, and guys who are all, “trust me, this is going to be the big one!”, and guys who will cross our palms with silver if we just say something – even something negative – about their deal.
But the genuine cats who treat their businesses like organizations they seriously want to grow into billion dollar deals? Those are thinner on the ground. The guys who downplay their deals because they don’t want folks coming in for a quick one-week stock spike? The guys who stay in the game for years, not months, because they know the pay-off will be far bigger if they actually grow a business rather than just talk about growing one?
There’s a handful of those guys about. Tim McCutcheon is one.
Here’s the Tim McCutcheon rap sheet: He’s smart, he’s adventurous, and he’s down with the Russians.
No, not in the Trumpian sense. He’s not bugging hotel suites and tampering with elections. McCutcheon was an analyst and investment banker in North America who spotted some serious potential for mining deals in the Russian sphere of influence, and took a chance that going there may pay off.
Let’s face it, if you could make $500k working out of Texas, or $1m working out of Novokuznetsk, you’d probably take the Texas option. French fries, sunshine, and a low likelihood of ending up in a gulag? Done.
And most people would agree with that call. But McCutcheon saw potential in going where other people thought it would be too hard to go, so he traveled to the red sector and did deals as an investment banker and filled his wallet and didn’t end up stuffed in a gym bag in the back of a Moskvitch 408 on a Siberian highway.
In fact, McCutcheon did some serious deals, including some with a guy named Henk van Alphen.
I know Henk pretty well, in as much as Equity.Guru’s first offices were sublet out of his Cardero group of companies for a year, which gave me some real insight into how he does business. Here’s Henk’s formula:
1: Get a good mining property
2: Bring on wealthy investors
3: Work the mining property
4: Make those wealthy investors wealthier
This seems like an extremely easy process, but it’s not because it takes patience, the ability to know what a good mining property looks like, and the sort of reputation where wealthy investors actually stay in the deal beyond four months, because they know they’re being looked after and that the longer they stay, the more they’ll make.
This is counter-intuitive to just about every Vancouver mining deal, where pretty much everyone in the process is elbowing others aside to get out first, before the stock profits bleed out.
So Henk’s recent deal is Wealth Minerals (WML.V), which you may know from the lithium space. and from his stock chart being less a hockey stick and more that thing on The Price is Right where the mountain climber… well, this:
Here it is, without the game show element:
How did it get there? Well, true to form, Henk snagged a primo property in South America that was literally surrounded by lithium majors just pumping out product for years, and he saw the rise in lithium coming, which allowed him to get in early.
Is there lithium about the property?
Is lithium in big demand?
Can the lithium there be processed and sold?
Bingo bango, you’ve got a $128 million company, consisting of a hot mining project in a hot sector, run by a ‘knows everyone’ networker in van Alphen, and a details guy in McCutcheon.
Wealth is on it’s way, in more ways than one. But McCutcheon didn’t come back to the Great White North to just have one party. He’s had his eye on something that he’s been sitting quietly on for some time. Something shiny. Something others had overlooked. And with the win that has been WML still being heralded, he figured it was finally time to make the next deal happen.
Ashanti Gold is Tim McCutcheon’s legacy project, and the same people Henk brought into WML are now circling AGZ; big players, flush with lithium profits, and with literally millions of reasons to trust the Wealth duo to repeat their success.
SO WHAT ARE THEY BUYING INTO?
African gold. Story time.
So over the last few years, the Canadian markets have seen lots of money made on weed, energy metals, and mining. It’s been a thing.
But not so much in London. In fact, the London AIM market has been sucking wind. Nobody is financing mines on the AIM, and McCutcheon knows this, and so he went a-plundering and found a trio of mining projects so unloved and forgotten that all he really needed to do to get them was pay off some delinquent fees and update some permits. Penniless British pauper companies were unable to do likewise to defend their turf, and little Ashanti suddenly showed up at school with the coolest kicks on the street.
The properties in question are in Ghana and Mali. If you want to read the technical reports, here’s one from Ghana. It’s a little dry, but fill your boots.
[pdf-embedder url=”https://equity.guru/wp-content/uploads/2017/06/Ashanti-gold-technical-report-Anumso-final_161017.pdf” title=”Ashanti gold technical report Anumso final_161017″]
Now, I’m about to let you in on something that’s not so much a secret, as it is a glitch in the matrix.
In North America, because some bad Vancouver men once claimed they had a billion kajillion dollars worth of gold in the ground once, and tossed a guy out of a helicopter (or didn’t, depending on what story you believe), and a whole load of people lost all their money, mining companies now have to put together a document that’s called an NI 43-101 before they can claim they have any ore in the ground.
Maybe they can yank it out of the ground with pickaxes, maybe they’re tripping over the stuff when they go to pee behind the baobab trees, maybe they can see it from a helicopter – but until they’ve compiled that 43-101, they can’t talk about it in any definitive way.
The NI 43-101 is, in a nutshell, a document that a very qualified and experienced third party puts out to say, we’ve measured all the data, and we think there’s X amount of gold here that’s measured, indicated, and/or inferred, and everyone involved agrees on this estimate.
Mining companies can then usually take that to the bank and raise oodles of cash to get an actual mine going, or sell up, or never talk of it again (if the results are fakakta), so it’s what everyone works towards when they’re exploring.
In Australia and its surrounds, mining folks use something similar called a JORC. In South Africa, they go with a SAMREC. On the OTC, they use a magic eight ball, but I digress.
The properties McCutcheon snagged have JORCs attached, but Canada doesn’t play the JORC way, so when McCutcheon talks about his African properties publicly, he can’t mention the fact that the JORCs on his properties outline about $500 million worth of gold ore sitting in the ground.
If he did, the exchange would say, “Tim! Take it back, you little scamp!” and he’d have to say, “Sorry everyone, I was a bit of a dick just there,” and it’d be generally embarrassing for everyone concerned.
Instead, he has to say “there’s no bankable resource estimate” on the properties and resist the urge to wink whenever anyone asks.
From the company website:
In Ghana, the Company has put together a portfolio of licenses to the north and south, along strike, of one of the world’s largest gold mines – Newmont’s Akyem Mine. Past historic data, indicating highly prospective geology, was overlooked due to corporate restructuring and market volatility. In Mali, Ashanti Gold Corp. has established a foothold of very promising ground with a JORC resource due to asset re-focus and earn-in partner.
Ashanti Gold Corp.’s goal is to build a company that unlocks overlooked value for the benefit of all stakeholders, through quick asset advancement due to historical work, an extensive local mining services industry, and the nature of earn-in agreements.
That’s good for you, because now you know there’s JORCs in them thar hills, and McCutcheon is already going drilling so he can fill the gaps in between $10 million of historic drilling work done on the properties.
SO IF THERE’S GOLD THERE, HOW DID ASHANTI GET IT SO CHEAP?
This comes down to macro economics. In Canada, mining is on the rise. In the UK, it’s not. So Ashanti is vulturing up a storm.
On one plot, you’ve got a gigantic global player who has a lot of irons in its fire and has this little African project that, really, it’s not got the time to mess about with, so they’re letting Ashanti take it in whole for the price of the work Ashanti will be doing on the project, as long as Ashanti hands back 2% of whatever comes out of the smelter down the road. REAL COST: $0.
On another plot, you’ve got a tiny London-listed player that has a small mine in Kenya and is doing some gold recycling, but taking an exploration property to production would be way outside their ability to raise money and move the project forward fast enough to not lose its claim for failing to do work. So they’ve handed up to 75% to Ashanti if they’ll just keep the thing alive. REAL COST: $0.
The third project is basically a joint venture with another AIM player that can’t raise the money to do things themselves. So Ashanti gets around half to move forward and drop some coin once in a while, while the partner waits for their ability to raise money to return. REAL COST: $0.
Now, a lot of companies will stack options on properties all over hell’s half acre, and they’ll pay for them with stock, which blows out the share structure for you, the common investor, who used to own 1% of the deal but now owns 0.025%. Or the company raises a ton of cash by selling off more stock: same diff. Or the company borrows a fortune at an exorbitant interest rate, putting the future profitability of the joint in doubt.
Ashanti hasn’t done this. They did just raise a bit of cash (we bought into that financing), because it wants to do work on the properties, to get those NI 43-101’s out.
I don’t want to get into the weeds on specifics of all these properties because that ain’t my bag. If it’s yours, here’s the presentation:
[pdf-embedder url=”https://equity.guru/wp-content/uploads/2017/06/Ashanti-Gold-Presentation-May-2017.pdf” title=”Ashanti Gold Presentation May-2017″]
Frankly, the drills will rock on down and what comes up will fill in the rest of that technical story in due course, but what I’m really interested in just now isn’t what’s coming in two years, but what’s coming in the next six months.
Ashanti has pilfered – I’ll say it – pilfered those properties, in an area that is resplendent with global major miners pounding gold out of the ground for years and years, with top of the line infrastructure making it cheap to get at, and cheap to get out of the ground, and cheap to transport and crush and sell.
One of those majors will eventually take Ashanti out, I have very little doubt. It might not happen tomorrow, but it will happen when they have what the majors have wanted for a long time but had no patience to go get: bankable proof of gold ounces.
McCutcheon is no African amateur. He’s doing there EXACTLY what he did in Russia; he’s seen an opportunity, and he knows if he sleeps in a couple of shacks and ensures the locals get their piece and he doesn’t turn the place into a moon landing-like environmental horror show, he’ll get all his permits and he’ll get his data and he’ll put the pieces together to do in Africa as he and Henk did in South America with their lithium deal.
Here’s how much I like this deal: I bought in for more than I’ve ever put in on a single resource stock before. I sat with McCutcheon and listened to his story and realized he’s a Moneyball guy in the extreme, and those guys are the guys I bank on.
Here’s the kicker: You get it today for half price.
In the second half of 2016, it would have cost you $0.50 per share to buy AGZ stock. That slowly dripped down over the last year to $0.25, though the stock has been on a run the last few days and will now cost you $0.30.
Consider that drip the clean-out stage, and what’s happening in the last few days, a sign that the clean up has ended.
If you believe gold will move upwards over the next year, this is a good bet, as the work is happening now, and quickly, to get ready for that lift. If you believe Donald Trump is insane, and will likely lead the world to war, then gold will charge upwards, as it always does in times of panic.
So, for me, this is my bet against Trump. And it’s a bet on good people with a good track record who, when they need to, can bring in big dollars to get things moving.
Not sold? Don’t buy it. But get it on your watchlist, because this is the moment when the gear stick pops into second and the tires smoke. It’s going to be a good ride.
— Chris Parry
FULL DISCLOSURE: Ashanti Gold is an Equity.Guru marketing client, and we have purchased much of its stock because we believe in the promise.
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