“The Warren Buffett of Gold” Makes “Quarter-Billion-Dollar Bet on a Little-Known $4 Gold Stock with Crazy Upside”

by Travis Johnson, Stock Gumshoe | September 30, 2024 1:01 am

What's being teased by Jason Williams for Future Giants?

With gold[1] tickling all-time highs recently, it’s time to take another look at a gold stock tease… this time it’s from a higher cost letter, Jason Williams[2]’ Future Giants[3] ($1,999/yr, 90-day refund period). Here’s how he introduces the pitch:

“World’s Greatest Gold Investor Just Made His BIGGEST Bet Ever

“His track record outshines Buffett, Dalio, and Soros[4]…

“With individual gold stocks skyrocketing 10x, 30x, 50x and beyond, he’s a proven master of the gold markets…

“Now, he’s made a quarter-billion-dollar bet on a little-known $4 gold stock with crazy upside…”

So we’ll start with who…

“He built an $11 billion asset management business on the back of stocks that have gone up 10x, 30x, 50x, and beyond.

“What sets him apart from other legends is that he built his billion-dollar fortune by focusing on one overlooked sector:

“The $12 trillion gold market.

“He’s renowned for identifying ’10-bagger’ gold stocks — stocks that climb by 1,000% or more.

“He’s even been called ‘the Warren Buffett[5] of gold.'”

OK, so that’s all about Eric Sprott, who founded Sprott, Inc., the big Canadian natural resources-focused asset management company (the manage a bunch of ETFs, as well as some private investment funds). They actually have more like $25 billion in assets under management these days, and Eric Sprott is certainly widely-followed in the gold markets. That hasn’t helped his asset management company much just yet, incidentally — Dan Ferris[6] over at Stansberry spent years pitching Sprott, Inc. as his favorite play on the gold markets, mostly because the management fees on their physical gold ETFs are kind of like a “royalty,” but they haven’t yet been able to turn that into any great shareholder returns (it hasn’t been bad — SII has done fine since Ferris started pitching it six years ago[7], partly because it got a boost by listing in the US, but over that time it has roughly matched the gains in physical gold or in the S&P 500, with a lot more volatility… coincidentally, when I pulled this chart gold and the S&P 500 had almost identical returns since that Ferris ad, up 117%, while Sprott had a total return of about 100%).

[8]

But I digress — we’re not talking about Sprott, Inc. today, we’re talking about a smaller gold stock that Eric Sprott has invested in… let’s get back to the tease. This is from the order form:

“This little company is tapping one of the largest, richest gold deposits the world has ever seen.

“The world’s greatest gold investor, known for finding ten-bagger stocks in the gold market, has invested $260 million into it.

“This is the single largest investment of his 50-year career. It represents more than 17% of his net worth and showcases his high conviction….

“… he is betting BIG on a new company with a historic gold discovery in Newfoundland.

“With a grade of 150.3 grams per ton, it’s over five times better than Kirkland Lake’s legendary “Swan Zone”.

“Some drill samples yielded more than 757 grams per ton, which is classified as bonanza grade.”

Williams says that they have more exploration to do, too, and that there’s the “potential for 15-40 million ounces of high-grade gold” — which is the kind of thing you’re really not supposed to say until they actually find it, but it is, at least, a clue.

And he thinks, naturally, that new highs in the gold price will set off “a ferocious stock price rally to almost unfathomable heights.”

[9]

So what is this “#1 Gold Play of the Decade?”

Well, it’s the same as it was back in 2021, when Luke Burgess[10] was selling a report with almost the same name, for the same publisher, pitching the same stock: New Found Gold (NFGC, NFG.V in Canada[11]).

To be fair, the ad is not a carbon copy… and I don’t know if the “special report” from Williams is just a rehash of Burgess’ 2021 report or if it’s brand new, and Williams came up with the pitch and analysis on his own. But it is the same stock. And that means we can both note that yes, this is potentially one of the biggest and most dramatic gold discoveries in many years… and also a very early-stage project that has so far failed to excite investors. Here’s what I said to the Irregulars about New Found Gold back in 2021, when it had spiked to a billion-dollar valuation on the strength of their impressive drilling results:

“… what’s being teased is the very high-grade discovery from New Found Gold in Newfoundland, so it’s a pretty sexy combination of high-profile gold people (Eric Sprott and Goldcorp founder Rob McEwen are big shareholders) and super high-grade drilling results (some over 100 g/t gold, which is headline-worthy). That combination of factors has led them to a quick surge to a near-$1 billion valuation, so it’s not a secret idea anymore and it’s still an extremely early stage project, with no resources or reserves reported yet. A little too expensive for speculation for me, but it’s certainly got the potential to be a huge mine in ten years… it’s just that the next several years of drilling and resource reporting, which will give the first idea of the real provable value of the asset, might also sap the patience of investors, particularly if gold prices aren’t moving higher. With those high grades, it certainly has the potential to be the most talked-about project in mining for the next few years.”

And the stock price? Here’s how it has done since I posted those words — that’s New Found Gold in purple, the average miner (GDX ETF) in blue, and the price of physical gold in orange:

[12]

So what’s the story now? New Found Gold is still drilling away at the Queensway Project in Newfoundland, which they still describe as the “center of the Newfoundland gold rush,” near Gander. They’re still reporting very impressive drilling results from these fault zones, with some new 100+ gram/tonne drill cores to reinforce the very high grades they were reporting back in 2021. Eric Sprott still owns 19% of the company, and has invested a total of about $260 million now (the whole company is only worth US$540 million at the moment, so his investment is currently in the red, like most peoples’), they’re still saying lots of optimistic things and buying back some small royalty rights on parts of the property, which is at least evidence of some fiscal discipline and belief that they’re eventually going to build this mine, and they’ve extended the size of their potential gold area both by drilling new zones and by acquiring the Kingsway Project from Labrador Gold (LAB.V, NKOSF), which is right next door (Burgess also teased that one, about a year ago[13], and that acquisition, for shares, hasn’t done Labrador Gold any favors yet — Burgess has since disappeared from the Angel Publishing[14] website, so presumably he has moved on to other pursuits).

It’s still an extremely impressive discovery, with the potential to be much larger when they get more deep drilling results, but it’s also still very early days — they have not yet done any economic evaluation of the project, and they have not yet reported any resources, let alone reserves. So they’re still spending lots of money on drilling without any real assessment of the size of the resource base, or the viability of building a mine on this site. Eric Sprott is a good fellow shareholder to have, but presumably he’s also very patient… and I would imagine that New Found Gold shareholders will have to be patient, too. There could be big announcements at any time, it’s possible they will report their first resources within the next year, after this current drilling campaign, but if their big investors are patient and willing to keep funding them, it could also take longer than that. The “discovery to production” timeline averages close to 20 years, and it’s been a half-dozen years since they started to drill in Newfoundland.

Sometime in the next few years they will get to the point where they release a preliminary economic analysis (PEA), which uses a basic estimate of the size of the resource and some real-world estimates about production costs to judge whether it’s viable enough to move forward… and assuming that’s fairly positive, as it presumably would be given the very high grade seams they’ve found, they could move forward to more drilling that turns the resources into reserves (essentially just drilling holes that are closer together, to further “de-risk” the estimate of how much gold is in those spaces underground), and after a few years of that drilling they could be at the point where they’re ready for a feasibility study, which is the much more definitive analysis of the project and what the economics would look like, including the up-front capital cost to build the mine, and they use that to go to the banks for funding… or to sell a share of the project to a large miner who could take on the work. Once they are at that feasibility study, the average timeline is 4-5 years for construction planning, infrastructure development, and actual building of the mine… and then, perhaps, they can start producing gold.

Gold stocks tend to go through a cycle of early excitement about discovery, followed by a long period of investor disillusionment while the drilling is done to prove up reserves, and the expensive and boring work of turning a discovery into something that could be worthy of a huge investment to build a mine, including permitting work, provides minor good or bad news along the way, and then sometimes they surge higher again once a mine actually gets built and the finances of the operation look appealing. New Found Gold is unusually big and high grade, probably, so it won’t necessarily follow exactly that pattern — my guess would be that they’re really still primed for another “exploration” boost someday, when they actually post their maiden resource estimate and their preliminary economic analysis, which I would hope will come over the next year or two… and there could also be a big deal with a partner at some point after that, which could cause a spike in the shares… but that there will also be lots of “despair” periods when investors give up on waiting for the mine to actually be built in (maybe) the 2030s. In the meantime, of course, there could be catastrophic permitting news, or a big move (either up or down) in the price of gold, throwing off anyone’s prior estimates.

So I still think this one is impressive, I like having Eric Sprott on board and I like the high-grade drilling results, and it could be a big winner over the next 5-10 years… but that was as true when it was a $10 stock three years ago as it is today at $2.50. Mindful of that cycle of enthusiasm and despair with these early-stage mining projects, I’m still not very likely to bet on explorers or mine developers — there’s just too much uncertainty, and the timeline is too long. Sometimes I can’t resist the temptation, so never say never, but I’d at least never make a big investment in a project that’s at least 5-10 years from being commercially viable. It can work, and I know a lot of folks love to follow and invest in mining projects, but it’s not what I need in my portfolio.

If you’d like to get ginned up with some excitement, Eric Sprott did some YouTube promos for New Found Gold, visiting the site and looking at their core samples, about a year ago here:

Any mining fans out there have a take on New Found Gold? Ready to be patient while the potential for a mega mine emerges? Have other gold speculations you like more? Think gold is just dumb and not worthy of your money? Let us know with a comment below… thanks for reading!

Disclosure: I own gold, and shares of Warren Buffett’s Berkshire Hathaway, but am not invested in any of the companies mentioned above. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.

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