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Two Extraordinary Stories: West Red Lake Gold and New Found GoldBob Moriarty In my investment books and in articles written in the past, I have mentioned that at every market bottom there are one hundred reasons to sell. It is also true that at every market top there are one hundred reasons to buy. That is what makes market bottoms and tops. The stupidity of the mob who buy at tops and sell at bottoms. The media doesn’t lead the throng, it follows. Last week will probably go down in history as the perfect example. I wrote a piece on February 27 talking about parabolic moves in investments and how they always will mark a top. I used a chart of silver from April 25th of 2011, the day of the top, and Nvidia. The charts may has well have been identical. Friday Nvidia came through with what I believe will be the top. It soared to a new all-time high of 974 before plunging 12.5% on the day to 865 before closing at 874. On occasion stocks will move up or down 12% in a day. It happens. But never before in history has a $2 trillion dollar market cap stock plunged 12.5% in one day. That is a $250 BILLION loss in one day in one stock. $250 billion of what people thought was real money flew off to money heaven. Luckily for us Barron’s and The Economist are telling us where the market will go from here.
Don’t ever let anyone convince you that they don’t ring a bell at the top. DING, DING, DING, DING.
Here is what the media was saying about our sweetheart stock Nvidia. At the very top. However, we have other sources of information today with greater credibility. While the mainstream media was busy touting the stocks that have already gone up 260% in the last year, a few brave contrarians were suggesting what might go up 260% in the next year. The brilliant Jesse Felder of The Felder Report came out with what I believe will be the gold standard as it were for showing contrarian investments. I have plucked a few of the brilliant and timely charts he put in his piece.
I recognized many months ago that we were in a declining market so I haven’t been writing about stocks very often because frankly at bottoms people hate those who write about their stocks, all of which are in the crapper. But all things change. There is so much opportunity now in resource stocks. I am going to write about the two most solid companies an investor can own today. There are hundreds of lottery tickets that will go up more in percentage terms but a lot of them will disappear. These two stories are going to be among the best gold stories in the world. West Red Lake Gold (WRLG-V) is probably the easiest stock to call. The primary asset is an 800 TPD mill that cost $350 million to build in the heart of the Red Lake gold district in Ontario. The project had been owned by Pure Gold who built the mill and attempted to get into production only to run into the snags that always occur in any startup. Pure Gold made a few critical missteps and blew up. But the brand-new mill and gold mine was still an outstanding asset. At one point the market valued Pure Gold at $1.15 billion in market cap. West Red Lake, backed by famed Canadian investor Frank Giustra took over the asset with West Red Lake Gold and closed in mid-2023. The deal was a steal. The Madsen mine came with a 2.1-million-ounce gold resource and an 800 TPD mill with a total investment of over $350 million. WRLG paid $6.5 million in cash and issued 28.46 million shares and a 1% NSR on the Madsen mine. In addition, there is a $10 million USD deferred payment due in the case of a change in control to Sprott Lending. The deal came with a few benefits the market has been pretty much ignoring. There is no doubt the Madsen mine has enough gold to feed their mill. But deposits in the Red Lake District can be tricky. The management of Pure Gold now admit they started production too soon with insufficient drill data and it cost them their company. Current investors today are still pissed at Pure Gold going teats up and haven’t forgiven WRLG for owning the asset. But WRLG also has the Rowan Gold project with a 43-101 resource of almost 0.9 million high-grade gold ounces within driving distance of the Madsen mill. The company is conducting a major resource definition and expansion program at both the Madsen property and at Rowan with exceptional results. The possible plan is to feed Rowan high-grade gold to the Madsen Mill in addition to the Madsen ore as necessary. The biggest issue will be the cost of trucking but that is an issue you can figure out on the calculator on your iPhone. A pretty much hidden advantage is the strength of the management team led by an Irishman named Shane Williams. I’ve talked to him a couple of times and he patiently answers any questions I ask. I’m going to climb way out on a limb here and offer my readers my opinion. This is not a fact. It is just an opinion but I have run into at least a thousand professional geologists in the last 24 years. Shane Williams is the best manager of a gold company I have ever met. Face it. The average Canadian junior has half a dozen people working for it with a tiny market cap and a lot of dreams. Most juniors are led by people who only dream of their next paycheck. If that arrives, they are happy. Shane Williams is building what is going to be recognized as one of the premier gold companies in Canada. He has surrounded himself with some very bright people and they are not hobby miners looking for a weekly paycheck. And something else everyone ignores at their peril. The WRLG purchase of Pure Gold brought with it a $273 million tax write-off. Madsen will go back into production when the time is right. It will make a profit. And the first $273 million will be tax free. Here’s the math. At today’s price of the shares, WRLG is worth about $141 million. The same mine and mill, less Rowan with its 900,000 ounces of gold, used to be worth $1.15 billion. It cost $350 million to put Madsen into production under management that ended up running it into the ground. With current management and $2200 gold I see WRLG being worth 500 to 1,000 percent higher when investors wake up. The second company I am going to write about today is New Found Gold (NFG-V) in Newfoundland. This is the best story I have come across in 25 years. They are doing everything right and it’s a far bigger deposit than anyone understands today. It was a totally grass roots discovery within walking distance of the largest town in Newfoundland with the Trans Canadian highway running right across the property. The incredibly high-grade gold comes right to surface. The project is an analog of the Fosterville Gold Mine in Australia. Kirkland Lake Gold paid about $1 billion for the mine that had been in the hands of two other companies that never understood what they had. The discovery and production of a lot of high-grade gold took KLG from a $3 billion market cap to an $18 billion market cap at the high. NFG has an almost identical deposit. Same gold style, same high grade but starting at the surface. The only reason I haven’t spent a lot more time writing about the company is that their drill results are so good and so many that no one, including me can actually guess what they have in a total resource. I’m going to say that I think WRLG has somewhere around 5 million ounces or so. NFG might have 10-20 million ounces. If KLG could go from $3 billion market cap to $18 billion, how difficult would it be for NFG to go a lot higher than their current $900 million market cap? NFG has a brilliant technical team, a young and aggressive management team and probably the best gold discovery in the last twenty years. Given their constant release of excellent results in time investors will wake up to the potential. The shares are down 65% in three years but the company has everything going for it. Sentiment says Nvidia and Bitcon are reversing. Gold has already reversed and when the money starts flowing out of Nvidia and Bitcon it is going to go right into resource stocks. WRLG and NFG are the safest gold stocks I know and offer hundreds of percent returns. Both companies are advertisers. I have participated in private placements in both companies and bought shares in the open market. I am biased so do your own due diligence. West Red Lake Gold Mines Ltd New Found Gold Corp ### Bob Moriarty 321gold Ltd |
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