If the last few years of Stock Gumshoe-ing have taught me anything, it’s that many of my readers love gold, and many more of them love dividends. So when the folks at Lombardi issued this email blast promoting Inya Ivkovic’s Explosive Mine Stocks newsletter, it caught my eye — they tease us that you can receive your special report about this company as soon as you subscribe (“on sale” for $89), and that this stock is not only primed to issue its “first ever special cash dividend,” but also has three other catalysts.
So … the “deadline” is August 16 (that’s apparently the day you have to be a shareholder of record in order to get this “special dividend”), so they even manage to squeeze a little urgency into their newsletter pitch. That gives us five days to figure out what stock this is, so I think we’re OK. I may blather on, but not for quite that long.
Part of the hook for this pitch is that the “Wall Street fatcats” are on vacation and missing the hot story …
“Over the last 30-45 days, it seems a tiny gold stock has quietly been making a series of very important announcements and financial moves.
“But here’s the thing…
“Because many Wall Street traders and fat cats typically take the summer off and because trading volume plummets, these moves have gone practically unnoticed.”
So are we about to be rewarded for sitting patiently at our desks, toiling away while everyone else is in the Hamptons? Sounds pretty enticing, no?
Here’s some more from Michael Lombardi’s letter:
“I’ll admit, it’s not a ‘sure thing’… nothing is… but if you’ve got a little cash set aside for just the right opportunity… then this stock may be the one you’ve been waiting for.
“So very quickly, if you are interested, here’s what’s going on and how you can take advantage before the August 16th deadline.
“There are four recently announced ‘triggers’ that could send this stock price soaring once Wall Street roars back to life later this month.”
Thankfully, the newsletter copywriters know that we’re all so accustomed to disclaimers like “it’s not a sure thing” that we know in our greedy little hearts that what the analyst wanted to say was, “guaranteed winner buy buy buy!” … and it was just the mean lawyers keeping him back.
So … we know that the dividend deadline is August 16, which is probably enough if we’re really willing to put the Thinkolator through its paces … but it’s a steamy, lazy summer day, so let’s see if we can’t make it a bit easier on ourselves by sifting through a few more clues. Starting with those four catalysts that Lombardi mentions …
“Gold Stock Explosion Trigger #1 – Pulling Real Gold Out of the Ground
“On July 1st, this tiny company declared commercial production….
“… they are pulling gold out of the ground at a cost of only $200 an ounce….
“… they are expected to pull out 70,000 ounces in the next 12 months.”
Lovely! How about another trigger/catalyst?
“Gold Stock Explosion Trigger #2 – Approval to Apply for NYSE AMEX Listing
“On July 8th, this tiny company got serious about their business and filed for a listing on the NYSE Amex… a considerable step up from the over-the-counter listing they’ve had up to this point.”
Better and better … more?
“Gold Stock Explosion Trigger #3 – $600-per-Year Research Service Initiates Coverage
“On July 21st, this tiny company was picked up on the radar of a small independent research firm… coverage was initiated.
“This firm charges investors and institutions $600 per year for their ‘coverage.’”
And finally, that “special dividend” …
“Gold Stock Explosion Trigger #4 – First Ever Special Cash Dividend
“On July 29th, the company declared it’s first ever special cash dividend…
“That’s a rarity among gold stocks and should attract quite a bit of attention on Wall Street.
“Think about it… as an early investor, you could actually be a stockholder of record if you act before the markets close on Monday, August 16th, 2010.
“The dividend isn’t much, but the company’s CEO says: ‘Though there are no guarantees as to future dividends, we remain steadfast on our longstanding goal to return approximately one-third cash flow generated from operations back to shareholders.’”
Hmmph. Well, I don’t know if you saw it buried in that text above, but this is the first time we’re told that “the dividend isn’t much.” That’s a harsh return to reality for an ad that got our attention in part because of that “special” dividend (a special dividend just means one that isn’t part of a regular and expected dividend payment schedule, but in investors minds they typically stand out when they’re large — and this one ain’t).
So now I can tell you who this is, eh? The gold miner they’re teasing is Gold Resource Corporation (trades over the counter at GORO, though they have applied for an AMEX listing — it also trades in Frankfurt at GIH)
And yes, the “special dividend” may be important as an indicator of their future intentions, and as a flag to draw the attention of investors, but it is absolutely teensy — this is a $14 stock, and the special dividend is three cents, (a “yield” of one fifth of one percent). So if you rush to get in before the ex-dividend date, you’re being a little silly.
Of course, there may be other reasons to buy the stock — the CEO did essentially commit to a 1/3 “shareholder return” policy, which would typically mean either share buybacks or dividends. I don’t know that I’ve ever heard of a mining stock buying back shares, so I’d bet on the dividends … but still, we’re talking about a small stock that just began gold production, so the dividend, while nice and a great indicator of shareholder-friendly management policies, is unlikely to be much of an income producer anytime soon.
The other “stock explosion triggers” are all real events, too — they did get “approved to apply” for an AMEX listing in early July, though the listing itself hasn’t been approved and I have no idea of whether or when it may be.
And they did declare that they had begun commercial production in their first mine on July 1, and that their production will be at extraordinarily low cost — here’s how they put it in a recent press release:
“Gold Resource Corporation announced Commercial Production July 1, 2010 from its El Aguila Project’s high-grade open pit deposit. The Company targets 70,000 ounces of gold over the next 12 months at approximately $200 cash cost per ounce from its El Aguila mill’s flotation circuit. The Company’s aggressive growth curve targets production ramp up by year 3 to 200,000 ounces of gold equivalent (gold and silver) at $0 cash cost per ounce using industry standard base metal byproduct credits.”
And if you want the company’s pitch from the horse’s mouth, they have a pretty aggressive corporate presentation on their website, including the goal of producing 200,000 ounces of gold (well, gold equivalent — actually about half gold/half silver). They say that this goal, with their assumptions, could allow them to pay a dividend of about $1.20/year (assuming they continue to pay out a third of their cash flow, which they say they will).
Gold Resource Corp.’s projects are all based in Oaxaca, Mexico, in historical mining districts. Their first project is El Aguila, which includes an open pit mine (mostly mined already, and the source of that first 70,000 ounces) as well as an underground mine (called Arista) that they’ve just started to build. It looks like the underground mine will be the source of most of that 200,000 ounces per year going forward, and they’re forecasting to have a mine life of 8 or 9 years at that production level.
This site has the processing plant that they would also use for other potential mines in the area, though those mines are very much in the early exploratory phase as of yet (they’ve done a few drill samples at one more potentially high grade site, El Rey, but it sounds like there’s still a lot to do … the other three sites they’re currently targeting have yet to see much exploration, and are primarily silver with some “gold credits”).
So … an interesting gold miner, at least, and it looks like they do have some relatively small high-grade mines on tap, along with some very active self-promotion. I do like the focus on cash flow and dividends, which is quite rare for small miners, though it’s always a little off-putting to see miners who aren’t listed in Canada and therefore don’t file those familiar-looking NI 53-101 resource reports with proven and probable reserves — their materials are all about cash flow and annual production expectations, not about reserves. They certainly aren’t unknown, with a fairly prominent mining partner and institutional investor (Hochschild Mining) and a solid market cap of almost $700 million after a dramatic stock increase in the past year from $4 to $14.
There are, you will not be surprised to hear, many Stock Gumshoe readers who know far, far more about mining than I do — if any of you would like to share your opinion on this gold miner, let us know with a comment below. I have barely heard of Inya Ivkovic, though she also edits a biotech newsletter and a microcap newsletter for Lombardi, but if you’ve been a subscriber to her Explosive Mine Stocks letter please share your thoughts with a brief review by clicking here.