The Most Strategic Company I’ve Ever Profiled!
According to research by S&P Global Market Intelligence and National Bank Financial Markets, the average cost to discover an ounce of gold is $170 per ounce in the ground.
While the $170 an ounce includes a spectrum of projects, including producing and advanced mines, it is indicative of the much higher range of cost involved in delineating a resource.
It clearly takes a lot and most mining companies fail exploration…
The $170 per ounce doesn’t sound that bad, but then consider that in order to be considered a serious discovery, you’ll need to discover about a million ounces!
***As you know, gold and mining shares have been in a very long bear market that is over in my opinion. The bull market is nearing a year old and it’s still unloved vs. general equities.
“The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” – Sir John Templeton
What if there were a company and a leader smart enough to buy gold resources for as low as 50 cents per ounce of measured, indicated and inferred resources?
You read that right: I said $0.50!
It was obtained during the depths of the gold bear market when gold was trading for 32% below where it is today, everyone hated the sector, and it was in a multi-year downtrend.
We’ve all heard of the strategy of buying when there is blood in the streets.
It’s being greedy when others are fearful, as Warren Buffett puts it.
That’s exactly what happened with GoldMining (US: GLDLF & TSX: GOLD) and Amir Adnani.
They saw acquisition after acquisition… all during the 2011 to 2019 gold bear market.
It’s BRILLIANT! It’s not original, to tell you the truth: I’ve seen this before, and it worked out spectacularly!
Amir Adnani, the founder of GoldMining Inc. (US: GLDLF & TSX: GOLD), isn’t shy about the fact that he’s not the originator of the business model of the company.
He’s following the trails of success left by others.
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Amir has utilized a PROVEN model that was implemented by billionaire mining entrepreneur Ross Beaty.
That’s greatness, in my book. Even Warren Buffett famously said that the FASTEST and SUREST way to succeed in life is to learn what WORKS in similar cases and to personalize it.
Here’s what Lumina Copper’s strategy was in the early 2000s. This is the company that GoldMining Inc. (TSX: GOLD & US: GLDLF) is basing its strategy upon.
As you can see, in 2003, Ross Beaty began acquiring copper assets at $0.80/lb. The company’s market cap was a mere $10M.
As copper’s price jumped by 20%, the market cap quadrupled.
By mid-2005, the market cap was 16 TIMES what it was just two years prior, as the rising price of copper made the assets more valuable because their ECONOMICS improved.
Beaty then decided to implement an exit strategy of splitting the parent company into four separate entities, unlocking the value of the individual assets by letting standalone management teams focus on each of them as a main goal.
The original company was split into four companies: Regalito Copper Corp., Lumina Resources Corp., Northern Peru Copper Corp., and Global Copper Corp. Over the next few years, those assets were sold for about $1.2 billion, an incredible return on an investment of just $80 million.
That’s how you make 1,500% RETURNS in the mining business: buy distressed assets when the entire sector is hated and starving for capital and then wait for the inevitable rebound… Of course while Lumina’s performance may not be indicative of GoldMinings, as their individual markets are different, we can definitely see that GoldMining has been executing the same strategy successfully so far.
Here’s the timeline of GoldMining Inc.’s (US: GLDLF & TSX: GOLD) acquisitions:
“Buy low, sell high” sounds easy, but few have the courage to do this.
Judging by the shareholders of GoldMining Inc. – people like Rick Rule, Marin Katusa, Doug Casey, and others who were THERE in the days of Ross Beaty’s copper company – I would say the expectations of these types of investor-shareholders are very high.
Consider shares of GoldMining Inc. (US: GLDLF & TSX GOLD).
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The NBF figure of $170/oz discovery cost comes from S&P Global database on mineral projects. They arrived at this number by taking “discovered” ounces per year divided by the yearly global exploration budgets. The “discovered” ounces in their database includes all deposits containing over 1 Moz of gold in reserves and past production, or 2 Moz of gold in reserves, resources and past production. The year of “discovery” corresponds with the year of the initial drill program that identified potential economic mineralization.
This work is based on public filings, current events, interviews, corporate press releases and what we’ve learned as financial journalists. It may contain errors and you shouldn’t make any investment decision based solely on what you read here. It’s your money and your responsibility. The information herein is not intended to be personal legal or investment advice and may not be appropriate or applicable for all readers. If personal advice is needed, the services of a qualified legal, investment or tax professional should be sought.
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