We have heard it so many times: investors need to buy low and sell high. In other words, invest when there is blood in the streets.
The precious metals sector has seen blood in the last 2 years. The question is: have investors been buying into this sector?
One thing is for sure: really smart and wealthy investors, the sorts of Stan Druckenmiller, Marc Faber, George Soros, have been accumulating gold mining stocks as the sector have been going through their worse bear market ever. The returns on their investments over the course of the following years will undoubtedly be significant … because they have done exactly what have made them super rich, i.e. buying when everyone is selling.
The key question is how to choose future tenbaggers in the gold mining space?
Although gold miners carry a very high risk (both in their operations as towards shareholders), there is a way to mitigate that risk. The key success factor is to follow successful people in the mining space, people who have proven to know how to bring a project from its exploration phase to a profitable mine. That could seem simple, but it is an extremely challenging journey. Not many entrepreneurs are able to succeed in that challenge.
One of the people who has proven to be extremely successful in the gold mining area is Keith Neumeyer. He has made First Quantum Minerals and First Majestic Silver successful, and he started those companies at the depths of the previous bear market. His first two gold miners reached billion-dollar market caps.
He now is going for a third succes with First Mining Finance (FF). It’s a mineral bank for hard asset investors, where Keith and his team will accumulate high-quality resources at dirt cheap prices due to the 4-year commodity bear market.
FF plans to do joint venturing projects, spin outs, royalties, and sell some assets to majors for much higher prices.
Below is a timeline of his new company, which began trading on April 6th of this year.
April 28th, 2015
First Mining delivers a hostile takeover bid to acquire Coastal Gold Corp (COD). With Coastal Gold management rejecting FF’s offer, Keith and his team went directly to COD shareholders, and 2 weeks later, officially announced a deal to acquire the company with shareholder support.
FF was set to have their first transaction, buying Coastal Gold Corp., a $47 million market cap company prior to the bear market, for just $11 million. This was an extreme value deal. Installation costs of the power lines alone could easily be $40 million, not to mention the $1billion worth in gold resources.
July 8th, 2015
Coastal Gold transaction closes. With the addition of the Hope Brook gold project, FF adds nearly a million ounces of high-grade gold (844,000 indicated/110,000 inferred ounces) to its mineral bank strategy.
FF paid less than $9 an ounce of gold for this project.
September 1st, 2015
An event that will likely attract major fund managers and reveal just how serious Keith Neumeyer is in building his 3rd billion-dollar company. With 19 projects owned that at the heights of the market would likely have been valued at $300 million, FF with its current market cap of less than $40 million threw out a haymaker of a press release.
FF announced the acquisition of two companies: Gold Canyon Resources (GCU) and PC Gold (PKL). Once closed, the transaction will add another 6.4 million ounces of gold to their portfolio. The Springpole project currently owned by GCU already completed a Preliminary Economic Assessment study, with an estimate of producing 217,000 ounces of gold and 1.2 million ounces of silver annually. This is one of Canada’s largest gold undeveloped gold deposits! FF is paying about $8 per ounce of gold for this project!
The Pickle Crow gold project currently owned by PKL will add a million ounces of high-grade gold. FF is paying about $6 per ounce of gold for this project!
Historically, companies pay about $50 to $100 per ounce of gold in the ground when buying a deposit.
Looking at just the past 3 weeks, Keith has made 8 insider buys. Accumulating another 517,500 shares. First Mining Finance is trading for about 33 cents Canadian (CAD) today, with a CAD$33 million market cap.
Keith has openly stated that the objective for First Mining Finance is to create his 3rd billion dollar company. Which from today’s prices, would be a 2,930% return on investment, or in dollars, it’s like turning $1,000 into $30,000! These large gains take time, but if you look at the people running FF and the projects it holds, you can see that this business is really is being built just as Keith has described it would be.
Bear markets is where Keith Neumeyer thrives
Management is aggressively looking to increase the project portfolio of First Mining Finance while the bear market in resource stocks persists.
They are literally buying while there is blood in the streets and this elite group of resource investors is using FF as their attack vehicle.
In just 6 months, First Mining has become one of the fastest growing gold-developing companies in the world, with its core projects in the safe mining jurisdictions of Canada, the U.S., and Mexico.
In the mid-‘90s and in the early 2000s, investors with Keith were in the same boat. They owned shares of First Quantum Minerals and First Majestic Silver, with market caps of less than $30 million, only to be rewarded with gains of 10-20-30 times their investment.