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The two companies I saw a week ago not only have real business models, each is selling for less than the cash they have in the bank. At this point, they are worth more dead than alive. That's no risk at all.
Miranda Gold
My first visit was to Miranda Gold (MAD-V) in Nevada. They aren't just in elephant country; they are in mega elephant country. The Carlin Trend has produced over 65 million ounces of gold with 120 million ounces still in the ground. On the Cortez Trend, 10 million ounces of gold have been produced since discovery by accident of the Pipeline Deposit in 1991 when Placer Dome drilled under an inactive leach pad to determine depth of the water table.
Placer Dome always did a lot better by accident or serendipity than through geological theory. The 20 million ounce Cortez Hills was the result of some condemnation drilling that they screwed up and found a giant elephant size gold deposit.
Miranda Gold President and CEO Ken Cunningham took us on a tour of Cortez and Cortez Hills on the first day of the tour. You really have to understand the 'hood [neighbourhood] to understand Miranda's Joint Venture business model.
Miranda Gold has 13 projects within the Cortez Trend that is a sub trend of the greater Battle Mountain-Eureka Gold Belt. Miranda has attracted a number of major, mid-tier and junior mining companies into JV agreements on their various properties. Presently eight of the projects are in JVs. These JV partners will drill over 50,000 feet at a cost of $2.2 million to the partners for 2008 alone.
But the business model goes way beyond just doing JVs in elephant country. Ken got the company well cashed up and with a market cap of only $8 million; the company has $11.6 million in cash and a tiny burn rate of only $1.9 million. As of Friday's price, the lowest price in 5 years, you can buy $1 bills from Miranda for $.69. It doesn't get any better than that.
I talked to Ken at some length over the two days we were together. My training was in economics and one of the most basic principles is that no matter what you are invested in, there is risk and there is an alternative cost of investing. You may be invested in nothing but Canadian TBills but there are currency fluctuations and the cost of not investing in other great companies.
Any junior that is well cashed up right now and selling for less than their cash should invest first of all in their own stocks and secondly, in the stocks of other similar companies. It will be clear once we get past this rough weather that this is the opportunity of a lifetime. Sitting on TBills is not prudent investing. They have five years cash on hand and need to use it wisely. Sitting on it in the hopes of it hatching isn't wise.
The basic business plan is sound and Ken's excellent team is doing a good job of implementing it and moving the company forward. A major discovery could make them a $10 stock. The odds are high but in the Cortez trend, the payoff is a lot higher.
Selling for $.69 on the dollar makes them a no brainer. There is no risk; the company will go higher. If gold dropped to zero tomorrow and looked like it would stay there, they could wind down the company and you could make 45% on your investment.
Evolving Gold
My second visit on this trip was to another excellent company, Evolving Gold. (EVG-V) Evolving Gold is another absurd situation where a good company, well cashed up and well run with excellent prospects, is selling for less than the cash they have on hand.
It was worse. In a perfect example of deleveraging, a large shareholder with a 500,000-share position had to unload those shares last week. The shares plunged to $.14 on Friday before closing the day up $.06 at $.22. You could have been picking up $1 bills for $.50 on Friday.
Evolving Gold has ten projects total. Eight are located in Nevada around the Carlin trend. One is in New Mexico and one is in Wyoming. The company is extremely well cashed up with $19.3 million in the bank.
Along with a lot of other shareholders, I have a bit of a bone to pick with management and I spared Evolving Gold President Quinton Hennigh no mercy on our four-hour drive from Longmont Colorado to the star of the show, the Rattlesnake Hills deposit in Wyoming.
Evolving Gold was sold to the investing public as a company with a great theory that would connect the Getchell Trend and the Carlin Trend and find zillions of ounces of gold with a single hole. Maybe two.
They drilled a few holes, claimed to have proven the theory and nothing more was heard about Carlin Trend and some giant connection. So my question to him was, "What happened to the Carlin Trend theory?"
To give Quinton full marks for candor, he didn't duck the question. Drilling is going on at Carlin but they are very deep holes and they have had a lot of technical problems. The first two holes had to be abandoned well short of their targets.
Quinton wasn't running the show a year ago and there have been major management changes. He did agree the whole Carlin theory had been oversold and it hurt the stock. I could add that there was a bit of silver lining, they oversold the area play but they did cash up the company and that is real valuable right now.
Quinton wanted to emphasize the lack of value given to what he thinks is going to be a homerun for the company. He recently released great results from the Rattlesnake Hills Project in Wyoming that we were on our way to see. Hole 3 of 12 holes planned in a 7,000-meter drill program came up with 2.48 grams over a 146-meter intercept.
Rattlesnake Hills is an alkaline gold system hopefully similar to Cripple Creek in Colorado. Quinton had studied the project while he worked for Newmont and it was #1 on his target list. Newmont passed on it so when he moved to Evolving Gold, he snapped it up. EVG has 100% of the project.
We arrived at the projects just as the first snow of the season fell. The drillers were in the process of moving the drills out and were almost snowed in. We didn't get to see all of the project but what I saw, I liked.
The labs in Nevada are still backed up and it will take another two months to get all the results. EVG is expecting 8 more holes to be released starting in a couple of weeks and coming through December. At the same time there will be holes from Carlin released. Rattlesnake Hills has the potential for more world-class holes and if they do, the confidence in the project is going though the roof. The Carlin holes have higher odds of success but even higher payout should they hit.
Evolving Gold has excellent hands-on management who is one of the top alkaline gold systems experts in the world who is drilling his dream project. The results so far have been excellent. The project has the potential for being a company maker in the next 8 weeks. Meanwhile, something may actually come though in the Carlin Trend.
But in real simple terms you can buy dollar bills for $.83 and have a free lottery ticket on two potentially giant gold systems. Evolving Gold is an excellent company with nearly no risk. With a market cap of less than $16 million, Evolving Gold has $19.3 million cash.
Miranda Gold and Evolving Gold are advertisers and we are biased. We participated in a private placement in EVG at much higher prices and have bought more shares while they are on the sale rack. We don't share in your profits or losses so please be responsible for your own due diligence.
Miranda
Gold Corporation
MAD-V $.18 (Oct 20,
2008)
MRDDF-PK 44.9 million shares
Miranda website
Evolving
Gold Corporation
EVG-V $.20 (Oct 20,
2008)
EVOGF-PK 79.9 million shares
Evolving Gold website
Oct 20, 2008
Bob Moriarty
President: 321gold
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