Date / Location of update
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Comments |
20th December 2010, Weekly Update
(Stock price: C$2.91)
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On 20th October we wrote:
"Our assessment is that
GQM would be fully valued at around C$3/share, so in the absence of a
takeover bid we will make a complete exit from the stock if it trades
up to C$2.90 within the next few weeks."
GQM closed at C$2.91 on Friday, so we are going to remove it from the
Stocks List. The profit, based on our original entry at C$0.37 way back
in March of 2005, was 686%.
GQM required a huge amount of patience over the years as the company
seemed to take forever to complete the engineering and permit
applications for its Soledad Mountain gold/silver project, but in this
case patience paid off (as it usually does, as long as the company in
question continues to head in the right general direction). GQM is not
over-valued at its current price and remains a likely candidate for a
takeover bid, but the stock selection process is about relative
attractiveness. While we won't be surprised if GQM moves up to C$4 or
even C$5 during the first half of 2011, at current prices we think
there are more attractive alternatives.
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20th October 2010, Stock Selection Update #61
(Stock price: C$2.65)
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...our
Golden Queen Mining (TSX: GQM) was up 17% on Tuesday. There was no news
to explain the price surge and no increase in volume. It was a strange
performance by GQM considering that most gold stocks fell sharply on
the day.
GQM is a likely takeover target, so Tuesday's move could be the result
of takeover discussions/plans leaking out. Another possibility is that
the stock is rising in anticipation of an updated Feasibility Study
(FS) for the Soledad Mountain project. The updated FS was originally
scheduled to be complete by the end of September, so the results should
soon be available.
Our assessment is that GQM would be fully valued at around C$3/share,
so in the absence of a takeover bid we will make a complete exit from
the stock if it trades up to C$2.90 within the next few weeks.
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31st May 2010, Weekly Update
(Stock price: C$1.46)
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GQM
announced two significant developments last week. First, it announced
on Tuesday that the appeals against its Soledad Mountain gold/silver
project had been withdrawn. This wasn't a surprise, but it did
eliminate a small risk and means that the project can now enter the
mine construction phase. The stock moved to a new all-time high in
response to this news. Second, it announced on Friday that Gammon Gold
(GRS) had purchased 5M shares at C$1.60/share via a non-brokered
private placement.
The stock pulled back from C$1.50 to C$1.46 in response to Friday's
news, which was a strange reaction. Gammon is paying more than the
current market price and it is most likely doing so with the aim of
eventually taking over GQM. New Gold (NGD) is another company that may
be interested in acquiring GQM. A normal takeover premium would suggest
a bid of around C$2/share, which is about 10% below our present
valuation.
We wouldn't be buyers or sellers of GQM at the current price, unless
partial selling was warranted from a money management perspective
(someone who had an average-sized position when the stock was trading
at C$0.80 earlier this year might now have an excessively large
position, in which case some profit-taking would make sense). New
buying would be appropriate if the stock pulled back to support at
C$1.10-$1.20. A test of this support range, or even a drop to
longer-term support at C$1.00, could occur if there is no takeover bid
in the near future and the HUI breaks below 420.
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12th April 2010, Weekly Update
(Stock price: C$1.20)
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GQM's
Soledad Mountain project in California has a gold-equivalent (gold +
silver) M&I resource of 2.7M ounces. According to the Feasibility
Study (FS) completed in December of 2007, it could be developed into a
mine with annual gold-equivalent production of about 90K ounces and an
initial capital cost of US$60M.
A press release put out by GQM on Friday morning stated:
"On April 8, 2010, the
Kern County Planning Commission formally considered Golden Queen Mining
Co. Ltd.'s Soledad Mountain project following a review and comment
period for the supplemental environmental impact report (SEIR). At the
meeting, the commission, consisting of a panel of three commissioners,
unanimously approved the project."
The long-awaited approval of the SEIR means that the project can now
proceed to the mine financing and construction phase, and that a
significant risk/uncertainty has been eliminated.
GQM gained 26% on Friday in response to the SEIR approval news, but at
the current price of $1.20 it still looks very under-valued.
Specifically, in the 17th December 2007 Weekly Update we outlined why
Soledad Mountain was probably worth more than $2 per GQM share at a
gold price of around $800/ounce (the gold price at the time). At the
current gold price the valuation would be significantly higher.
It is possible that the stock price will pull back to the low-C$1 area
to 'test' Friday's breakout. If it does, it will be a good opportunity
for new buying.
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18th November 2009, Interim Update
(Stock Price: C$1.14)
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There hasn't yet been a broad-based surge
at the junior end of the gold sector (where most of our interest lies),
but several of our stocks have risen by enough of late to warrant
making a PARTIAL exit. This is particularly the case for speculators
who averaged-in at much lower levels and now have substantial
positions. Examples of TSI gold/silver stocks that have recently moved
sharply higher and may be candidates for partial sales are FVI.V,
GQM.TO, KGN.TO, NGD, and RSG.AX.
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3rd August 2009, Weekly Update
(Stock Price: C$0.58)
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We last mentioned GQM in late May, after it had just run up to the C$0.70s. At that time we wrote:
"...although GQM remains
very under-valued we would not deem it a good candidate for new buying
unless it were to pull back to near former resistance (now support) at
C$0.50.
GQM's stock price will
probably rise to a much higher price level when the company finally
receives the remaining permit for its Soledad Mountain gold project in
California. The permit could be issued as soon as next month, but we'll
believe it when we see it."
The stock subsequently traded as low as C$0.53, providing a reasonable
opportunity to do some buying for those with patience. A lot of
patience is required here because the permit issue continues to drag
on...and on...and on.
It would be OK to accumulate some GQM near the current price (the
mid-to-high C$0.50s). As evidenced by the following chart, the stock is
nearer the bottom than the top of its multi-month range. Also, it is
interesting that the company completed a small non-brokered private
placement of shares at C$0.65 last week. The buyers of these shares
must be confident that something will happen with the permit in the
not-too-distant future.
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27th May 2009, Interim Update
(Stock Price: C$0.65)
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It
is not uncommon for a micro-cap to lie dormant for a lengthy period
even while the stocks around it are rallying, and to then suddenly come
to life for no apparent reason. For example, GQM spent early February
through to mid May oscillating between the mid-C$0.30s and the
mid-C$0.40s, and then jumped up to the mid-C$0.70s last week on no
news. It has since settled back to the mid-0.60s.
The time to accumulate these stocks is when they are dormant, so
although GQM remains very under-valued we would not deem it a good
candidate for new buying unless it were to pull back to near former
resistance (now support) at C$0.50.
GQM's stock price will probably rise to a much higher price level when
the company finally receives the remaining permit for its Soledad
Mountain gold project in California. The permit could be issued as soon
as next month, but we'll believe it when we see it.
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2nd February 2009, Weekly Update
(Stock Price: C$0.26)
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Once
the HUI breaks decisively above resistance in the low-300s we will
probably start paying more attention to the very small gold and silver
stocks in the TSI List. We are talking about stocks such as GGN.TO,
GQM.TO and SBB.V. GGN is short of cash, but in a more positive market
it would be able to raise the money needed to quickly bring its
Nevada-based gold project into production. GQM has experienced
interminably long delays to the permitting of its California-based gold
project, but once the final permits are obtained -- by mid year, in all
likelihood -- this stock should fly.
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11th June 2008, Interim Update
(Stock Price: C$0.91)
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The
following chart of Golden Queen Mining (TSX: GQM) provides another good
example of the agonisingly long consolidations that are prevalent
within the ranks of junior gold stocks. GQM, like NXG, is a very
under-valued stock, although being much smaller and less liquid it
should only be accumulated on weakness.
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5th March 2008, Interim Update
(Price: C$0.91)
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A
lot of junior gold stocks are immersed in consolidation patterns. If
these patterns are resolved via upside breakouts in the near future --
a distinct possibility -- then rapid additional gains will likely
ensue.
Here are four examples from the TSI Stocks List, presented in alphabetical order:
3. Golden Queen Mining (TSX: GQM)
In the 17th December Weekly Update we explained why we thought GQM's
fair value was well above C$2/share at metal prices well below those of
today.
The following chart shows that GQM has been in consolidation mode for
almost two years. A close above C$1.10 would constitute a breakout and
suggest that the stock was on its way to our valuation estimate.
We think that GQM will eventually be taken over, with Western
Goldfields and Metallica Resources being likely acquirers. But
hopefully the stock will move much higher before the takeover bid
comes.
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17th December 2007, Weekly Update
(Stock price: C$0.78)
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GQM announced the results of the long-awaited Feasibility Study (FS) for its Soledad gold/silver project on Friday afternoon.
We are a little disappointed that only 50% of the 2.84M-ounce
measured-and-indicated (M&I) resource is being moved to the
proven-and-probable (P&P) reserve category and that the planned
production rate is only 92,000 gold-equivalent (gold + silver) ounces
per year. This is because we were expecting P&P reserves to be at
least 2M ounces and annual production to be around 120K ounces. Having
said that, the FS confirms the exceptional value offered by GQM.
Using "base case" prices for gold and silver of $600 and $12,
respectively, the California-located project has an estimated pre-tax
internal rate of return (IRR) of 23% and a net present value (NPV) of
US$93M assuming a discount rate of 5%. Moreover, the NPV rises to $187M
at current metal prices, or US$2.12 per fully-diluted share; and the
actual economics of the project are likely to be better than indicated
by the FS due to using a pipe conveyor for ore haulage (as opposed to
the haulage via trucks assumed in the FS).
Another way to look at the valuation is to value the company's 1.4M
ounces of P&P reserves at $150/ounce. Doing so yields a total
project value of $210M, or US$2.39 per GQM share. Note that this
methodology is conservative because $150/ounce is well below industry
standards for the P&P reserves of an advanced-stage project in a
politically secure location and because we are assigning no value to
the additional 1.44M ounces of M&I resources or the 0.7M ounces of
inferred resources.
Yet another way to come up with a potential value for GQM is to compare
the Soledad project with the Mesquite project being developed by
Western Goldfields (AMEX: WGW). Mesquite is also located in California
and does not appear to have better economics than Soledad, although it
is larger and more advanced (Mesquite is due to commence production
early next year).
Soledad's M&I resource and planned production rate are 73% and 56%,
respectively, of Mesquite's, so we should be able to get a feel for
GQM's potential market capitalisation by multiplying WGW's market
capitalisation by something in the 56%-73% range. We'll use 60%. WGW
has a market capitalisation of $516M based on Friday's closing price of
US$3.33 and a fully diluted share count of 155M, so GQM's potential
market cap is 60%*$516M = $310M ($3.52 per share). In this comparison
we haven't accounted for the fact that GQM will need to raise $60M to
fund the construction of its mine, but we also haven't allowed for
WGW's $80M of debt and hedging liabilities.
The bottom line is that whichever way we look at it we arrive at the
conclusion that GQM's fair value lies well north of $2 per share. We
therefore consider the stock to be a bargain at Friday's closing price
of C$0.78.
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5th December 2007, Interim Update
(Stock price: C$0.80)
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In
the 21st November Interim Update we mentioned some of the small-cap TSI
stock selections that are likely to have market-moving news over the
coming few months. The most imminent news is probably the Feasibility
Study for the Soledad gold/silver project due to be released by Golden
Queen Mining (TSX: GQM) any day now.
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7th November 2007, Interim Update
(Stock price: C$0.79)
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It is with some trepidation that we again shine our spotlight on GQM,
because the stock is doing nothing and the company seems incapable of
completing the Feasibility Study (FS) for its Soledad gold project in
California. However, the FS will be completed one day -- we are told
that it is almost finished, but we were told the same thing many months
ago -- at which point the GQM's extreme under-valuation will become
obvious to the market and to other gold mining companies. Therefore, it
probably makes sense to pick away at the stock while it is trading at
around C$0.80.
Apart from the anticipation of the long-awaited FS, another reason to
shift our focus to GQM at this time is the silver exposure that it
offers. Silver comprises about 25% of the Soledad project's 2.9M-ounce
gold-equivalent resource.
The stock has resistance at C$0.90 and C$1.10, but we suspect that this
resistance will be easily overcome if the FS reveals robust economics.
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19th September 2007, Interim Update
(Stock Price: C$0.76)
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Another
small-cap gold stock worth highlighting at this time is Golden Queen
Mining (TSX: GQM). GQM has frustrated the heck out of us over the past
year due to the company's painfully slow progress towards completing
the Feasibility Study (FS) for its 2.9M-ounce Soledad gold/silver
project in California. However, the long wait for the FS is probably
almost over.
GQM held up quite well during August's sector-wide plunge, perhaps
because most weak-handed shareholders had lost interest and exited long
ago. However, the stock has seen very little new buying interest over
the past month. In other words, there was minimal selling of GQM during
the decline and there has been minimal buying during the ensuing rally.
All in all, there has been a total lack of interest in the stock for
quite a while. This, however, means that it wouldn't take much in the
way of good news to quickly push GQM to a much higher level. So with
the FS due to be released soon and with the stock's price near the
bottom of its 2007 range, GQM looks like a speculative buy.
We think the downside potential from here is limited by the almost
complete absence of speculation up until now and by the company's
in-ground gold being valued by the stock market at only US$23/ounce,
while the likelihood of a positive FS in the not-too-distant future
creates a lot of upside potential.
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11th July 2007, Interim Update
(Stock Price: C$0.76)
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Despite
gaining more than 100% since being added to the TSI Stocks List back in
March of 2005, GQM has also caused us considerable frustration. With
GQM the source of frustration has been the company's painfully slow
progress towards completing the Feasibility Study (FS) for its
2.9M-ounce Soledad gold/silver project in California.
Having persevered this long we will continue to hold because: a) we are
very confident that the FS, when finally complete, will show that the
project is economically robust, and b) at its current stock price GQM's
high-quality resource base is being valued by the market at only
US$23/ounce. In our opinion a fair value would be well over double this
amount assuming that the FS does, in fact, prove to be positive.
GQM would be a good candidate for new buying if it closes above C$1.10
(but below 1.20) or if the HUI closes above 370. It would also be
reasonable to buy some shares at around Wednesday's closing price of
C$0.76, although we doubt that it will be possible to buy many GQM
shares at this level because Wednesday's drop from C$0.87 to C$0.76
appears to have been caused by one or two very small shareholders
losing patience and saying to their brokers "I don't care about the
price, just get me out of this thing".
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2nd May 2007, Interim Update
(Stock price: C$0.94)
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GQM issued a news release
on Tuesday* detailing the current status of the company's Soledad
gold/silver project in California. This news release indicates that the
completion of the Feasibility Study (FS) has been delayed yet again --
to June 2007. This is disappointing, but the release did contain some
clues regarding project economics. For example, a figure of US$62M is
mentioned for the mine's capital cost and a comment is made to the
effect that financing for the project could probably be secured if gold
and silver prices remained at or above $450 per ounce and $7.50 per
ounce, respectively. The implication here is that the project is likely
to be economically viable at much lower metal prices, which is, of
course, a good thing.
The main negative with GQM is that the company is run by engineers with
minimal business acumen, zero promotional ability and no sense of
urgency. On the plus side, however, when the FS is eventually completed
there will be a very high level of confidence in the results. Every 't'
will have been meticulously crossed, every 'i' diligently dotted, and
every minute detail engineered to the nth degree and then
double-checked just to make absolutely sure.
GQM is a reasonable speculation in the low-to-mid C0.90s.
*The link we've provided shows a time of Wednesday
afternoon, but the news release was first issued on Tuesday.
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18th April 2007, Interim Update
(Stock Price: C$0.95
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GQM
has been a source of considerable frustration for us. It's not that the
stock has done that badly -- we're up by around 150% from our original
entry -- it's that the company's management has progressed the
2.9M-ounce Soledad gold project at an extraordinarily slow pace. An
updated Feasibility Study on the project is now more than two years
behind schedule -- for no reason, as far as we can tell, other than the
management error of committing insufficient resources to the task.
But problems often give birth to opportunities, and the sluggishness of
GQM's management has resulted in the stock remaining very under-valued.
Given the Soledad project's location (California) and the high
probability that the FS will reveal positive economics, the current
value of US$22 per ounce being assigned by the market to the project's
M&I resource is absurdly low. At some point the in-ground resource
will be valued at a more realistic level (at least $50/ounce at the
current gold price); the only question is whether we will lose patience
and make our exit before that happens.
The stock's chart (see below) shows some potential. Specifically, over
the past few years GQM has traced out what some technicians would call
a large "cup and handle" pattern with resistance at C$1.10-1.20. A
break above this resistance would create a technical objective of
around C$2.00, which, we think, would be roughly fair value at the
current gold price. But given the concerns we have about the company's
management, we would take C$1.50 if the market were kind enough to
offer it within the coming month.
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5th February 2007, Weekly Update
(Stock price: C$1.04)
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We had hoped that a good opportunity to exit GQM would have presented
itself by now, but although the stock price has improved steadily over
the past 4 months there hasn't yet been sufficient strength to take us
out.
GQM's management has a long history of being extremely slow to deliver,
but we are hopeful -- a case of hope triumphing over experience,
perhaps -- that the long-awaited Feasibility Study for the company's
Soledad Mountain gold/silver project will be published before the end
of this month. If so then this could prove to be the catalyst that gets
the stock moving and leads to a good exit point.
The sort of price-range we currently have in mind for an exit is C$1.30-C$1.50.
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6th December 2006, Interim Update
(Stock Price: C$0.92)
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In the 13th September Interim Update, with GQM trading at C$0.74, we wrote:
"The 2.9M-ounce
measured-and-indicated gold resource at GQM's Soledad Mountain project
in California is currently being valued by the stock market at only
US$20/ounce. In our opinion there are two main reasons for this
extremely low valuation. First, the company does a terrible job of
promoting itself. Second, the company has been developing Soledad
Mountain at a very slow pace.
Despite GQM's low
valuation relative to most other exploration-stage gold stocks we are
seriously considering replacing it, in the TSI List, with a more
dynamically-managed company. At this stage we'd be sellers of GQM into
strength."
Unfortunately there wasn't any strength to sell into during the weeks
after we wrote the above because GQM's stock price was dragged lower by
the sector-wide downturn in gold stocks during the second half of
September. However, since early October it has rebounded along with the
overall sector and is now at a 4-month high (see chart below).
By the way, Wednesday's close above C$0.90 has created a technical objective of around C$1.20 (the Q1-2004 peak).
According to John Doody at www.goldstockanalyst.com,
GQM's management has said that the Soledad Mountain Feasibility Study
(FS) will be completed in February-2007. In a situation such as this,
with the FS only about 3 months away and the stock trading at such a
low valuation, we would normally decide to hold until the FS results
were known or at least until a positive FS outcome had been factored
into the stock price. But given that the FS was supposed to be
completed in December-2004...then in March-2005...then in
July-2005...then during final quarter of 2005...then during first
quarter of 2006...etc., we aren't exactly bubbling over with confidence
that the latest schedule will be achieved.
In addition to its low valuation, one of the things GQM has going for
it is the fact that Sprott Asset Management purchased a 17% stake in
the company early this year. This was a vote of confidence in the
viability of the Soledad Mountain project from one of the best money
managers in the natural resource sector.
We think Soledad Mountain is an interesting project that will probably
end up being developed into a very profitable 120K-oz/yr gold mine, but
due mainly to the snail's pace at which the project is being progressed
our view continues to be that it makes sense to scale out of GQM into
strength. Furthermore, we suspect that general strength in
exploration-stage gold stocks over the next two months will provide a
good opportunity to do just that.
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13th September 2006, Interim Update
(Stock Price: C$0.74)
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The 2.9M-ounce measured-and-indicated gold resource at GQM's Soledad
Mountain project in California is currently being valued by the stock
market at only US$20/ounce. In our opinion there are two main reasons
for this extremely low valuation. First, the company does a terrible
job of promoting itself. Second, the company has been developing
Soledad Mountain at a very slow pace.
Despite GQM's low valuation relative to most other exploration-stage
gold stocks we are seriously considering replacing it, in the TSI List,
with a more dynamically-managed company. At this stage we'd be sellers
of GQM into strength.
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27th March 2006, Weekly Update
(Stock price: C$0.73)
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Last
week Golden Queen Mining (TSX: GQM) issued an updated resource
calculation for its Soledad Mountain gold/silver project in California.
The purpose of the update was to bring the resource estimate into line
with NI 43-101 requirements.
The measured-and-indicated (M&I) resource at Soledad Mountain now
stands at 2.9M gold-equivalent ounces (2.16M ounces of gold plus 37.6M
ounces of silver). This means that at Friday's closing price of C$0.73
and with 80M shares outstanding, GQM's M&I resource was being
valued by the market at only US$17 per gold-eq ounce.
Now, why would the market be valuing XRC's resources in Argentina at
almost US$100/oz and valuing GQM's resources in the US at only $17/oz?
There are a number of reasons, one being that XRC's resources are
higher grade and another being that XRC is perceived to have a stronger
growth profile. We think the main reason, though, is management.
Specifically, XRC's management has more credibility and has done a much
better job of promoting the company.
Poorly promoted companies will usually attain a fair valuation
eventually, although a low stock price creates a fundamental issue for
any company that relies on equity financing. In this regard Sprott
Asset Management's recent decision to buy a significant chunk of GQM
was good news because it means that this large and influential investor
now has a vested interest in making sure the GQM story becomes better
known.
In our opinion the huge gap between the valuations of XRC and GQM is
due more to the under-pricing of GQM than the over-pricing of XRC and,
therefore, that the extremely low valuation being assigned to GQM
creates a buying opportunity.
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13th March 2006, Weekly Update
(Stock price: C$0.58)
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Golden
Queen Mining (TSX: GQM) has been a source of great frustration for us
since we added it to the Stocks List at around this time last year. The
frustration stems mainly from the lengthy delays in completing the
Feasibility Study at its Soledad Mountain gold/silver project in
California. The Feasibility Study and an updated reserve calculation
are almost complete, but they've been almost complete for the past 9
months.
The above-mentioned delays and management's failure to promote the
story in any meaningful way have led to GQM becoming one of the most
under-valued situations in the gold sector. The company's
measured-and-indicated gold resource is presently being priced at only
US$15/oz, whereas something north of $50/oz would be more typical for a
US-based project at the feasibility stage. It is this extreme
under-valuation that keeps us interested.
It is worth mentioning that Sprott Asset Management recently purchased
a substantial shareholding in GQM. If Sprott exercises its warrants it
will own about 17% of the fully-diluted share capital.
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12th September 2005, Weekly Update
(Stock price: C$0.33)
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We
haven't said anything about Golden Queen Mining (TSX: GQM) since we
added the stock to the TSI List back in March of this year. The reason
is that there has been absolutely no news from the company over the
past 6 months and the stock price has done very little (it is now about
10% below our entry price).
Everything we said in our initial write-up at
http://www.speculative-investor.com/new/GQM.html still applies, but
obviously it has taken GQM a LOT longer than expected to update the
feasibility study at its Soledad gold/silver project in southern
California (the original study was completed in 2000). Work has been
proceeding behind the scenes; it's just happened at a much slower rate
than expected.
We don't know what the results of the updated feasibility study will be
because substantial changes are being made to the mine plan and costs
will now be considerably higher, but given that the original study was
based on a gold price of $300 we will be surprised if the economics
don't look as good now as they did then.
For those inclined to speculate in this area of the market, the
lowest-risk time to accumulate micro-cap resource shares is when there
is absolutely no interest in the shares. Right now there is absolutely
no interest in GQM, so with, dare we say it, important news likely to
come from this company within the next few weeks it is probably a good
time to do a small amount of buying.
By the way, we are not aware of any company that has gold reserves of
at least 1M ounces and that sells at a lower market-cap per
reserve-ounce than GQM.
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7th March 2005, Stock Selection Update #33
(Stock price: C$0.37)
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GQM is a thinly traded exploration-stage micro-cap gold/silver stock
and therefore not suitable for everyone. Here is a summary of the
Golden Queen story taken from the company's web site:
"The Company is focused on developing an open pit, gold-silver heap
leach operation on its Soledad Mountain property (the Project), which
is located 8 km from the town of Mojave in Kern County in southern
California.
The ore that will be mined as per the current mine design is
57.3million t with grades of 0.83 g/t gold (0.024 oz/ton) and 13.5 g/t
silver (0.39 oz/ton). This minable reserve is estimated to contain
1,529,000 oz gold and 24,870,000 oz silver.
Ore will be mined and leached at the nominal rate of 5.728million t per
year with recoveries for gold and silver of 80 % and 65 % respectively
over a leach cycle of 120 days. It is expected that production will
average 119,000 oz of gold and 1,668,000 oz of silver per year once the
mine is in full production. The initial life of mine will be 12 years.
Only 47 % of the mineral inventory of 122,750,000 t is included in the
current mine design. The potential exists therefore for an extended
life of mine beyond the initial 12 years and this will depend upon gold
and silver prices and the Project economics.
The estimated capital cost to the start of production is U.S.$50million
and this includes the reclamation bonds. A further U.S.$8million will
be required for working capital.
The pre-tax IRR and payback targets are > 40 % and < 3 years respectively.
The Project is fully permitted and can proceed to production once project financing has been secured.
Work is proceeding rapidly on the remaining elements of the revised
feasibility study and it is expected that this work will be competed by
December 31, 2004.
It is expected that the Company will seek production financing in late
2004 or early 2005. Construction could begin in the first quarter 2005
with the start of production 9 months later."
The web site obviously hasn't been updated in a while because the
Feasibility Study is not yet complete. It is, however, likely to be
completed within the coming month.
There are three main reasons we think GQM is a good speculation
anywhere near Friday's closing price of C$0.37. First, the stock is
trading at only US$10 per RESERVE ounce. Second, the economics of the
project appear to be excellent. Third, it could have a 150K
gold-equivalent-ounce/year mine just 9 months after a construction
decision is made.
The risk, and probably the main reason why the stock is trading at such
a low price, is that the company will have to raise US$50M before
construction can commence. This is obviously a huge sum for a company
with a market cap of only US$20M.
For risk-tolerant investors we think it would be worth buying GQM up to C$0.45/share.
On a side note, to consistently make money with these illiquid
micro-cap stocks you have to make the lack of liquidity work for you.
The best way to do this is to place bids well under the market during
the down-swings in order to pick-up the stock that periodically gets
dumped by shareholders who lose interest; and to subsequently --
perhaps 6-12 months later -- place sell orders well above the market to
take advantage of the traders who chase these stocks during periods of
strength. This can entail waiting months for an order to be filled and
might mean that your order never gets filled, but it's a profitable
strategy if implemented consistently. |
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