BRAZIL POTASH GRO-NYSE THE MOST COMPELLING BUSINESS CASE IN GLOBAL RESOURCES

By
Keith Schaefer
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POTENTIALLY DISRUPTIVE LOW COST ECONOMICS IS A WINNER FOR FARMERS & INVESTORS

Brazil Is Fastest Growing Potash Market
But Imports 98% of It!

A few weeks ago, Brazil Potash got a big endorsement from an unusual place – its BIGGEST competitor.

Brazil Potash is an up-and-coming potash producer with a mine under construction in Brazil. Nutrien (NTR-NYSE) is the largest potash producer in the world.

In Q3 investor presentation, Nutrien included the following slide.

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Source: Nutrien Q3 Presentation

Nutrien said the cost of producing potash for the Brazil market—the fastest growing in the world—has gone WAY, WAY up. And it’s going to get worse, as logistics – transportation costs – have become a big burden for foreign potash producers.

Which means that if you can produce potash locally—which by definition means MUCH LOWER transport costs—well, you should make A LOT of money.

That is just what Brazil Potash plans to do. They said in their prospectus that their pending Autuzes mine in Brazil could produce up to 2.4 million tons of potash annually, which could meet up to 20% of Brazil’s potash demand.

It’s such a good idea evidently that Mayo Schmidt, former CEO and Chairman of Nutrien has joined Brazil Potash as Chairman of the Advisory Board!

Potassium (potash) is one of 3 essential nutrients needed for growing plants. It promotes photosynthesis, increases protein formation, makes the plant stronger and gives plants resiliency to fight against stress.

Every year, many millions of tonnes of potassium is pulled from the soil from growing crops and needs to be replenished. There is always going to be the need for more potash.

Today, the biggest potash producers, in fact virtually ALL potash producers, come from the Northern Hemisphere. Production from Latin America represents just a sliver of overall supply.

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Source: Nutrien Investor Presentation

There is just a single potash mine in Brazil – Taquari-Vassouras. That mine is owned by Mosaic, who will give the mine a small increase in production in 2024 from 350,000 tonnes to 400K.

In other words: Latin America has a shortage of local potash supply. But that is about to change when Brazil Potash’s Autazes mine lifts off into production.

LOCATION-LOCATION-LOCATION

The Autazes project is located along the Amazon Potash Basin, in NW Brazil, about 100 miles from the city of Manaus.

The project is located near the Amazon River system, only 5 miles from the Madeira River.

Which is a BIG advantage!

Brazilian government data (SECEX) from January 16, 2024, shows that Brazil exported about $166.6 billion of agricultural products in 2023, and Brazil ranks first in production for many of the world’s highest-demand and potash-intensive crops, like soybean and sugarcane.

Yet today Brazil imports 98% of its potash!

Even closer to home, neighbouring Mato Grosso state, which is just “a short distance” away, consumes 20% of potash in Brazil. It is a market ripe for the mine supply of Autazes.

The goal of Brazil Potash is to become the supplier-of-choice to Mato Gross and all Brazilian farmers.

That starts with their path to market – which is low-cost river barges followed by trucks.

The total transit time from the Autazes Project to Brazilian potash customers is expected to be—2.5 days.

Potash shipments from Canada and Russia average 107 days! So…2.5 vs 107.

That’s 43 times less than it takes other major potash producing suppliers in Canada and Russia to customers in Brazil. CHA CHA CHA!

Think about that – Two and a half days versus 3 and a half months!

Look at the bar-chart below to see the cost of shipping potash across the ocean—it’s a HUGE amount of the overall cost.

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Source: Brazil Potash Prospectus

Foreign producers are transporting potash from 8,000 to 12,000 miles by train and dry bulker. Brazil Potash is using a barge and a truck.

That is a MASSIVE reduction in the cost of transportation. Brazil Potash estimates that the average cost of MOP from Autazes will be less than half of imported potash.

In fact, in their Prospectus, Brazil Potash estimates their “cost to mine, process and deliver potash to Brazilian farmers will be lower than the transportation cost alone for imported potash”!

And the scale is only going tip more in their favor.

Consider that at Nutrien’s analyst day in June, they said that in Brazil, “the short-run marginal producers delivered cost has risen by approximately $50 per ton over the last 5 years.” – in other words, just the rise in transportation costs to Brazil—is over half the cost to produce MOP at Autazes.

It seems almost assured that Brazil Potash is set up to become the LOW-COST producer of potash for the South American farmer. In commodities, the lowest cost producer ALWAYS wins.

A WORLD-CLASS MINE

Brazil Potash expects Autazes to produce roughly 2.4Mt of potash (MOP) once operating at full capacity – enough to satisfy 20% of Brazil’s needs.

In other words, the addressable market in Brazil alone is 5x what Autazes will be able to supply, at least to start.

The resource is muriate of potash (MOP), also known as potassium chloride (KCl). MOP is the most common natural occurring form of potash.

Like most potash resources, the Autazes deposit is deep underground – about half a mile below the surface.

Brazil Potash has drilled 43 exploration holes into the project. So far, what they have found is a deposit that is 2.3 – 13.1 feet thick.

A pre-feasibility study was done on the deposit in October 2022. Based on that study, Brazil Potash expects to mine up to 9.4 Mt of run-of-mine potash ore per year, producing 2.4 Mt of MOP on average. The processing plant, which they plan to build on-site, will have capacity of up to 2.7 Mt MOP.

The mine is expected to have a life of 23 years at this rate based on drilling only a VERY small portion of this potentially massive potash basin.

The proven economically recoverable reserves of the mine is 69 Mt of KCl at a grade of 28.9% MOP. There is another 122 Mt of probable reserves grading 27.5%.

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Source: Brazil Potash Prospectus

Brazil Potash has explored only 5% of the basin!!!

GETTING TO PRODUCTION

Getting to market is the advantage. Getting to production is the challenge.

As with most rural, Latin America mines, there is a local indigenous population, called the Mura, that must be considered. They seem to be on the side of the mine, having previously voted with over 90% in favor of the Autazes Project.

In August, Brazil Potash got ALL the 21 necessary construction licenses from the Brazilian Amazonas Environmental Protection Institute.

What’s left is the operating license. They will need it to produce and sell potash. Following that, they will receive a mining concession from the Brazilian Ministry of Mines and Energy.

The preliminary environmental license was awarded in 2016, but then left in limbo for the following 6 years while objections went through the courts to decide if all aspects of the license had been done in compliance.

Finally, in October 2023, with all the appeals satisfied, the court allowed that the license was valid and reinstated.

But, they admit there could be bumps. From the Prospectus: “we believe that it would not be unusual if certain Brazilian regulatory agencies challenge the regulatory authority of certain other Brazilian environmental agencies over environmental licensing of mining projects”.

A LONG RUNWAY OF GROWTH

Potash demand is only expected to grow.

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Source: Brazil Potash Prospectus

The biggest driver of worldwide potash growth is expected to be Latin America. The biggest driver within Latin America is expected to be Brazil.

CRU Group expects Brazil potash demand to grow at 6.8% from 2023 to 2027.

In Q3, Nutrien said they expect 70-72 million tonnes of potash to be shipped this year. About 24% of that will be consumed in Latin America.

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Source: Nutrien Q3 Investor Presentation

On their Q3 call Mosaic said they expect “near record shipments” of potash in 2024 and record-breaking shipments in 2025.

BUILD IT AND THEY WILL COME

To get the mine this far, Brazil Potash has already raised $240M through equity and debt. The project is now near construction ready.

The $32M+ that Brazil Potash expects to raise from the IPO will go towards initial construction expenses.

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Source: Brazil Potash Investor Presentation

This is not enough to bring the project into production. To bring Autazes into production is going to cost A LOT more – to the tune of $2.5B.

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Source: Brazil Potash Prospectus

That includes the construction of the mine shafts, processing plant and port.

Part of the funding for Autazes will come from a royalty agreement with Franco Nevada. While the exact terms are still undetermined, FNV purchased an option for 4% of gross revenue from Autazes in return for $1M. That is $1M for the option – the purchase price of the royalty will be based on a 12.5% pre-tax IRR at the time the option is exercised.

There is also a 2% royalty that will be paid to the Brazilian government.

VALUE FOR THE INVESTOR

The IPO is scheduled for 2.4M shares. These will be issued at between $15 and $18.

The most recent share issuance (while they were still a private company) was at $16.

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Source: Brazil Potash Prospectus

All this makes Brazil Potash an excellent way for investors to play the next leg of the agricultural revolution. And to get in near the beginning for what could be the next major potash producer.

Note: BRAZIL POTASH has reviewed and sponsored this article. The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter.

Keith Schaefer is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity.

COMPLETE SOLARIA – CSLR-NASD BUYING WHILE THE TIDE IS OUT

By
Keith Schaefer
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The residential solar market has been decimated. There are low prices and low demand. There are literally 100s of solar companies in bankruptcy right now.

As the old Warren Buffett quote goes, the tide is out and we have found out who is swimming naked.

The biggest of these bankruptcies is SunPower (SPWRQ – OTC). This is the 3rd biggest solar installer in the United States. They announced bankruptcy early August.

SunPower is selling off their assets and winding down. Their bankruptcy came with the pre-packaged sale of their crown jewels.

The buyer of these assets is Complete Solaria (CSLR – NASDAQ), a small niche solar player in California.

Just a few months ago Complete Solaria was in default themselves! But in a remarkable twist, they raised capital, paid back their debtors and now are powering ahead by buying SunPower assets that will dramatically expand the company (the sale was approved by the court last week).

The key to that transformation is their brand new rockstar CEO, industry veteran and former Cypress Semiconductor CEO TJ Rodgers.

Rodgers has put his own money behind this. He is literally the reason Complete Solaria isn’t in bankruptcy. In the spring, Rodgers put up $18M to pay off private equity vultures, get them out of default and fund the working capital needed to get the business back in motion.

Next, he bid on SunPower.

I don’t think it is any coincidence that Rodgers decided to take the helm and resurrect Complete Solar just months before SunPower declared bankruptcy. As you will see the history between Rodgers and SunPower runs deep.

I suspect this was all in the plan. As a result, Complete Solar has become a turnaround story in a turnaround industry.

The company just bought the 3rd biggest solar installer in the US for what looks like pennies on the dollar.

It has a CEO with a 20+ history in solar and an even longer history of success.

The residential solar business is bottoming. It has a long recovery to get back to the boom days of 2021-22. Complete Solaria is poised to take share and recover with it.

And while the share price is up a lot, there is plenty of upside left if Complete Solar can resurrect SunPower.

HOW WE GOT HERE

The residential solar market has been a disaster.

The simple explanation to what happened is that high rates shrunk demand. And that’s true. Solar is usually financed, and as interest rates rose both finance and lease rates did to, squeezing out the marginal customer.

But its not the whole story.

The rest of the story took place in California.

In 2023 California changed the rules of how they would pay for solar. There was too much solar while the sun was shining, and the grid was overwhelmed.

In response, the state cut the price of solar during the day almost to nothing.

The new rules (called net electricity metering – NEM 3.0) decimated demand.

Wells Fargo estimates that California installs declined 32% YoY last year. With rates sky-high, the rest of the US could not pick up the slack.
1Source: Zeo Energy Corp Investor Presentation

The market got worse every quarter of 2023. Bankruptcies ensued.
In 2024, the market has been bouncing along the bottom. But there are green shoots.

Wells noted that “permit forecast suggests resi solar installations could increase by 8% q/q in Q3 & another 12% q/q in Q4.” Early indicators like web traffic are turning up.

At the same time, the two big headwinds are beginning to abate. Interest rates are coming down. And battery attachment rates have shot up, mitigating the impact of NEM 3.0 – Enphase Energy (ENPH – NASDAQ) estimated 90% of their installs included batteries in Q2.

Into this recovering picture, Complete Solaria has just bought one of the largest installers in the US for pennies on the dollar.

BANKRUPTCIES CAN PAY OFF

Bankruptcies can be a big opportunity for a company to pick off assets on the cheap.

A couple months ago, I wrote about Amylyx (AMLX – NASDAQ), which also bought cheap assets out of bankruptcy. That stock is up 150% since then.

SunPower is a big fish to reel in. A couple of years ago its capitalization was over $7B.

In 2021 and 2022 SunPower made some poor decisions, selling everything but their residential business. When the bottom fell out, SunPower had nowhere to turn.

Yet SunPower was still the #3 solar installer in the United States last year.

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Source: SunPower Investor Presentation

Complete Solaria was named stalking horse bidder when SunPower filed for bankruptcy in early August (the stalking horse bid is an agreed to bid before the auction, to show there is interest in the assets).

This was in the works before SunPower filed. Which is not surprising.

There is a long history between SunPower and Rodgers. In fact, Rodgers and Cypress used to own SunPower.

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Source: Complete Solar Q2 Presentation

Rodgers rescued SunPower in 2000 with a $750K personal loan he made to the company. Cypress owned a majority stake in the company from 2002 to 2008.

At the peak, SunPower accounted for more than half of Cypress revenue. Under Cypress, SunPower grew 18x over 4 years.

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Source: Complete Solar Q2 Presentation

In 2008 Cypress spun out SunPower. Rodgers stayed on as Board Chairman until 2011.

Rodgers is not doing this acquisition blindly. He knows SunPower as well as anyone.

WHAT THEY BOUGHT

Complete Solaria is poaching three businesses from the SunPower carcass:

1. Blue Raven Solar
2. New Homes
3. Portion of the non-install dealer network

On their Q3 call Rodgers said he expects $80M in Q4 from these businesses (including a small contribution from the legacy Complete Solaria business). In short order he hopes to bring that number to $100M.

For the 3 SunPower businesses Complete Solaria paid $45M and assumed another $7M of liabilities.

To pay for the assets Complete Solaria issued a $40.5M convertible debenture (with a 7% coupon).

The strike on that convert is $2.1375 per share. That seems like a steal, but remember, a few months ago the stock was well below $2.

How about the assets? Let’s put it this way: if this deal was made two years ago, it would look like a steal.

Together, these assets give Complete Solar a network that spans most of the country.

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Source: Complete Solar Q3 Presentation

Blue Raven Solar is a stand-alone residential solar firm. SunPower bought Blue Raven in 2021.

SunPower paid $165M. Blue Raven has over 3,000 employees and operates in 21 states (SunPower bought them to expand outside of California).

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Source: Complete Solaria 2024 S-4

At the time of the acquisition, Blue Raven had $136M of revenue and $13.6M of EBITDA.

At the time SunPower acquired them, Blue Raven had a CAGR of 93% since 2014. Of course it’s a different world now. Blue Raven likely isn’t growing much at all.

But this is still a well-run business. When Rodgers was asked about Blue Raven on the Q2 call he called them “an excellent shop”.

Blue Raven has already announced one expansion deal. Just this week they signed an installation sales agreement with Sunder Energy, one of the largest residential sales companies in the US.

The second acquisition is the New Home business, where SunPower partnered with home builders to add solar to new homes. New Homes had 20 homebuilding partners in all, including most of the biggest builders: Toll Brothers (TOL – NYSE), Meritage Homes, KB Homes (KBH – NYSE), Beazer Homes (BZH – NYSE) and Richmond America to name a few.

SunPower said the business had “more than 50% market share” of new home installs a couple years ago.

In 2023, the New Homes segment was 15-20% of SunPower’s overall business, had $100M+ quarterly bookings and a backlog of 37,000 homes.

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Source: SunPower Q1 Supplemental Slides

That puts New Homes backlog at 18-24 months of installs.

Some of that backlog has slipped with the SunPower bankruptcy. On their Q3 call CFO Dan Foley said that 20-30% of the New Homes backlog had been lost as homebuilders scrambled to move their communities to new installers after the bankruptcy. But Foley said they are working hard to get those builders back and have made progress on that front.

In 2022 SunPower said that aEBITDA per customer was ~$2,200. In mid-2023, after solar slumped, they guided to $1,450-$1,650 per customer. While these numbers were for SunPower as a whole, SunPower said on a number of occasions that New Homes was a higher margin business.

Using those numbers as bookends, the New Homes business was a $40M aEBITDA business in good times and a ~$28M aEBITDA business in bad times.

As for the non-installer dealer network, this one is an unknown. This would be a lower margin sales generation arm of SunPower, where they bought signed contracts from third-party dealers that focused on generating sales.

Non-install dealers were a big network for SunPower. There were over 700 in 2023. But without knowing what fraction Complete Solaria bought its impossible to peg down the value. Though I think its safe to say that they only bought the best partners.

THE COLLAPSE OF THE INSTALLERS

Complete Solar is buying assets cheap in large part because the environment remains tough for solar installers.

Consider the following:

· Titan Solar, the 6th largest US residential solar installer, went out of business June 13th. Titan did 10,000s of installs across 16 states. Titan shut down their business entirely, including their dealer network.

· ADT Solar, a top-8 installer, announced they are exiting the residential business this summer.

· Palmetto Solar, a nationwide provider, announced they were dramatically scaling back their install business.

These aren’t small names. All 3 appear on the top ten list of installers (SunPower does as well).

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Source: Wood Mackenzie

All-in there have been 100+ solar install companies that have gone away!

What has killed these guys is cash flow.

Solar is a cash flow business. You manage cash flow to keep the hamster wheel moving. Buy inventory, install inventory, collect cash and do it again.

Up until 2023, installers were helped by the financing companies. SunPower had its own wing that did this work – they offered 20-year ownership plans or solar leases with power purchase agreements where they paid to use your roof.

One role of the financing company was to provide upfront payments to installers. Installers could expect to receive as much as 50% of their costs at the beginning of construction.

Last year those payments went away. Today an installer can expect 80% after install and the rest once the project turns on.

This led to a capital crunch, then bankruptcies and will eventually lead to consolidation. When residential solar recovers, there will be a few market share leaders.

I suspect this is what is behind the rally in the two largest residential solar companies, SunRun (RUN – NASDAQ) and Sunnova (NOVA – NASDAQ).

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Source: Stockcharts.com
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Source: Stockcharts.com

The market is sniffing out the winners.

FROM SMALL FRY TO BIG FISH

SunRun and Sunnova collect a lot of revenue from customer financing and leasing.

They offer a number of financing options to homeowners. In many cases they just lease a roof from the homeowner, front cost of installation upfront and collect revenue directly from a power purchase agreement (PPA) with the utility. Sunnova isn’t even an installer; they focus purely on financing and power purchase agreements.

Complete Solar, at least for now, is not like that. They decided not to buy SunPower Financial.

Complete Solar is in the nuts and bolts work of putting solar on rooftops.

But I suspect that Complete Solar will look more like SunRun and Sunnova at some point. While the rate shock and NEM 3.0 has shaken the financing business, it will come back.

With Complete Solar having such a large install business across most of the United States, it just makes sense for Rodgers to move into financing.

BUILD IT AND THEY WILL COME

Will solar recover? While solar has certainly had its headwinds, that doesn’t mean that the demand for solar isn’t there – at the right price.

Sunrun calls the residential solar market “massive and underpenetrated”. Of the 88M single family homes in the United States, only about 4.5M have solar.

That is 5% penetration. By 2032 that number is expected to grow to 18%. Which would be a CAGR of 16%.

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Source: SunRun Investor Presentation

This massive correction is really a massive reset on what solar is. We have stepped away from standalone panels. What is installed today is a panel/battery solution that allows electricity to be used when its needed.

Going from A to B was hugely disruptive. It caused much of the industry to fall by the wayside. But with comments like those from Enphase, I’d say the “pig is through the python”. This sets solar up for its next growth phase.

If I’m right about that, then Complete Solaria is beefing up its business at the exact right moment.

Rodgers said on the Q3 call that the business he owns now is a $80M quarterly run rate. He wants to get that to $100M in short order.

Even without a financing arm (something I think is coming) Complete Solaria is a lot less expensive than SunRun and Sunnova.

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Source: Company Financials

Rodgers also seems to understand the importance of managing cash in this business.

On the Q3 call, Rodgers said to expect operating expense to decline from $43.5M in Q3 to just $17M in Q4.

This is far from being all roses.

We know the New Homes business has lost a few customers through the SunPower bankruptcy.

There were also some comments Rodgers made about Blue Raven that made it sound like that group – which has been tight knit and segmented from the rest of SunPower – may not be completely happy with the takeover. I checked LinkedIn and it looks like Blue Raven’s prior CEO is no longer with the division.

Finally, the SunPower offering was not the low-end panel. The good news is that these also weren’t Chinese panels (which will likely get tariffed even more under Trump).

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Source: Complete Solaria Q3 Presentation

The residential panel market is bifurcated between leasing and buy-to-own and leasing is getting traction with high rates making buy-to-own financing difficult. Leasing uses the cheapest, panel + battery combinations, which ends up being TSLA inverters and China made panels.

Buy-to-own is where SunPower and Enphase are used because these homeowners are paying for what’s on their roof and so they care how long it will last.

That means that Complete Solar needs buy-to-own to come back and they need lower rates for that. And they need those cheap Chinese panels to get squeezed by tariffs.

These are all hurdles, and none are insurmountable. This is a turnaround and a roll-up – two tough stories in one.

On the other hand, Rodgers is the right guy for the job, and the price of tag they paid was bargain basement.

Rodgers is following the words of another great investor, Baron Rothschild who said “The time to buy is when there is blood in the streets.”

Lots of blood right now, and a strong experienced leader has put a lot of his own personal capital at risk to make this a success.

BOREALIS MINING BOGO-TSXV ALREADY HAS WHAT EVERYONE ELSE WANTS

By
Keith Schaefer
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0

Borealis Mining (BOGO-TSXv) has what every other gold exploration company wishes they had:

  • Production–they just announced their SECOND gold pour since going public in September.
    They expect to do one pour a month from now until next summer when a more consistent production program will take over. There’s THOUSANDS of historical ounces in a stockpile right now. REVENUE is coming fast!!
  • Permits—a fully permitted mine in the prolific Walker Lane Trend of NEVADA. They bought the US$70 million Borealis Mine for only US$5.1 million.  The stock today has an Enterprise Value of only US$48 million (CAD$60 million)
  • High grade gold in both low-cost oxides at surface and sulphides just underneath that—like 67 meters of 16 grams (half an ounce!) gold, 24 meters of 10 g/t Au.

Just this morning, they announced new drill holes  that have big distances and big grades–like 2.25 g/t Au over 99 m including 4 g/t Au over 21 m–at the edge of the biggest historical pit. Borealis is already permitted to produce from that new mineralized area!

  • A BIG bank account—they raised $16 million ahead of their August 2024 IPO
  • A historical resource (non- 43-101 compliant, but from 2011) of 1.8 million ounces that with many more drill holes (funded by production, not new shares) will potentially grow.

They pretty much have it all.  And I’m about to explain how it’s going to get even better.

But hey, don’t take my word for it.

Just look at what mining legend Rob McEwen did. McEwen is a legend, the founder of Gold Corp; he put Red Lake mining district in NW Ontario on the map.  After hearing the pitch from CEO Kelly Malcolm when Borealis was still a high-risk private company—he bought in, in a BIG way.

The underlying vendor of the Borealis Mine was a top mining private equity firm; one of most savvy and well respected in the world.

Under the go-public scenario, they were to have 16% of the stock.  Within two weeks of learning about Borealis, McEwen said he was in only if he could get their whole block—when Borealis was still a long way from being public!

McEwen now owns 16% of the company.  And he’s not the only major mine builder & former CEO in this stock.

Director Bob Buchan built Kinross (K-NYSE) into a multi-billion dollar gold producer.  Chairman Tony Makuch was at the helm of Kirkland Lake Gold as it went from $4-$64 per share on the strength of Fosterville Mine in Australia (merged with Agnico-Eagle in $11 billion deal).

Management and the blue-blood board and McEwen combined own 30% of the 83 million shares out.

THE NEXT BIG STEP IN VALUE CREATION

Let me back up one step.  The Borealis Mine has twice produced gold—from 1981-1990 there was a total of 500,000 oz Au at 2.02 g/t from eight open pit oxide deposits. Then again in 2011-2013 it produced 125,000 oz of gold.

Picture1

Previous drilling—and there hasn’t been any since 2012—showed the oxide rock can go as deep as 1000 feet. Oxide ore is MUCH CHEAPER to mine than sulphide—it is just crushed and put in a big mound on the ground and the gold is leached out.  So having a BIG oxide deposit is GREAT.

But roughly half of the non-compliant 1.8 million ounce resource from 2011 is in the Graben sulfide deposit.
Graben is open in all directions.  There are many other targets, in both near surface oxides and deeper sulphide rock that, with some time and money and luck, could develop into a much larger resource.  That’s the goal of every single gold company—find more gold!

Every junior gold exploration company wants to get rich by hitting a big juicy drill hole—high grade over long width.  Borealis will be going after that as well, and with holes like 115 meters of 4.5 g/t Au and the above mentioned 67 meters of 16 g/t Au (which were at Graben), investors can have high hopes for that.

A NEVADA OXIDE GOLD ROLL-UP

But Borealis is different; it’s special.  With a fully permitted mine/ADR facility, it can do something that almost nobody else can–consolidate the really small (but very high margin!!) oxide gold deposits that have low valuations. CEO Kelly Malcolm says these deposits can be valued at $10-$15 per ounce in the ground.

By trucking that (still hypothetical) ore to their 50 acres of permitted leach pads, Borealis can create low-cost, highly profitable gold production that keeps the number of shares out very low.

Very few, if any, exploration companies in the USA have that benefit.  I-80 Gold (IAU-TSX) does—in Nevada–and it’s a CAD$500 million market cap.

Here’s a couple pictures of the Borealis mining facility:

Picture2

Picture3

CEO Kelly Malcolm say they are putting in A LOT of time into their M&A strategy, building a detailed database of potential acquisitions.  There’s both private and public targets.

With this much cash, and this backing by some of the biggest legends in the business, I expect Borealis to be very aggressive in adding shareholder value, by both the drill bit and through M&A.

In drilling, the bar for huge success is very low—if they even find a 50,000 oz oxide deposit, it can turn into ore and cash flow VERY quickly.  They have a fully permitted mine that is producing right now. And once  you are in production, you have so many more financing options available to you—gold loans, straight debt, royalties etc…you are not always at the mercy of equity markets.

THIS GAME IS JUST STARTING

Borealis has only been public for a few months.  The Market is just getting introduced to it—its assets, its initial production cadence, and its backers.

With gold at US$2600/oz and the markets convinced that both Kamala and Trump are good for gold…the outlook for the gold price looks…well…pretty darned good.

Borealis is a story that doesn’t have to dilute their shareholders for years, developing assets and waiting for permits while it struggles to find a glory hole.

They bought a US$70 million asset for US$5.1 million. They bought right, and they’re making it pay already—they have done a total of FOUR gold pours since taking over the asset and a FIFTH one is being readied.
They’re in a great spot; they can negotiate from strength up and down the gold market.

They have yet to announce their first transaction, or even their first set of drill results on their current 3500 meter program. Everything…is still out in front of us.

This gold story excites me.  It has everything that all the other gold exploration companies want.  It has everything I want.

BOREALIS MINING COMPANY LIMITED has reviewed and sponsored this article. The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter.

Keith Schaefer is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity.

A TRIPLE-MEME STORY SMALL NUCLEAR // URANIUM // AI ASP ISOTOPES (ASPI – NASDAQ)

By
Keith Schaefer
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0

If it’s a raging bull market, where EVERYTHING is going up—sometimes it doesn’t pay to think too hard about an investment idea.

Case and point is ASP Isotopes (ASPI – NASDAQ).  There are reasons to be wary of this stock (I’ll list off a few shortly).  But while I can quibble on the details, I still bought a small position in the stock based on five big points.

  1. ASPI has a technology that may make small modular nuclear reactors (SMRs) more attainable here in the West (now a big dependence on Russia)
  1. That technology recently took a step in the right direction (this press release)
  1. Nuclear is HOT

a)Uranium is HOT

  1. The stock has a large short interest
  1. This is market where story stocks can win

This would be one of those stocks.  There aren’t a lot of numbers here. And with this stock chart—from $3-$5 in a couple weeks on the biggest volume the stock has ever seen—it can create FOMO.

Picture1

QUICK FACTS

Trading Symbols:                                      ASPI
Share Price Today:                                    $4.50
Shares Outstanding:                                 68.4 million
Market Capitalization:                              $325 million
Net Debt:                                                   $3 million
Enterprise Value:                                      $328 million

QUICK BACKGROUND:
WHAT’S THEIR TECH?

ASPI has a technology for enriching isotopes.  Sounds complicated?  It is.  But if we dumb it down it really comes down to a few simple ideas.

First, what’s an isotope is?  An isotope is a particular state of an atom.  Atoms have several different isotopes depending on the number of neutrons surrounding the atoms protons.

The carbon atom for example, can have 6, 7 or 8 neutrons.  Isotopes are named after the number of protons and neutrons, for example 6-neutron carbon is carbon-12.

Even though isotopes of the same atom are chemically the same, other properties can differ.  The biggest difference being that some isotopes decay (they emit radiation, which is good for nuclear medicine and energy) and some are stable.

ASPI uses a couple processes to change an isotope of atoms into another, more desirable (read: profitable) one. This can be VERY lucrative. While the ASPI tech has worked on light molecules (early in the Periodic Table), it has recently worked on a heavy one—Ytterbium-176.

That has management and investors excited that maybe they can produce Uranium-235 at a very small fraction of traditional process costs.  That’s why the stock is running up.  When I say small fraction, I mean $10 million capex vs. $3.5 billion, as I’ll explain below.

ASPI operates with two technologies: aerodynamic separation process (ASP) and quantum enrichment (QE).

Picture2

Source: ASPI Investor Presentation

I’m not going to spend a lot of time describing how these processes work.  If you are interested after reading this, you can look it up.

I’m going to repeat this; it’s important–what you need to know for investing in ASPI is that:

  1. The process works, especially with lighter atoms
  1. The QE process works on Ytterbium-176 – a much heavier atom then any others tried so far (the 176 is the “weight” of the atom)
  1. That bodes well for the enrichment of uranium – U-235 – which is an even heavier atom

ASPI CAN DO MUCH…BUT…
IT’S REALLY ALL ABOUT URANIUM

Outside of uranium, ASPI does some work that is mostly related to nuclear medicine.

Picture3

Source: ASPI Investor Presentation

ASPI expects to start commercial production of Silicon-28, Carbon-14, Molybdenum-98 and Molybdenum-100 this year.  They have commissioned two isotope enrichment plants in Pretoria, South Africa.

ASPI actually has 5 supply contracts announced for the first four of these isotopes.

Picture4

Source: Canaccord Genuity

And…the Street doesn’t really care about this. The size/scale of these opportunities is unclear.

The stock got moving with their Ytterbium-176 enrichment—it means they could be producing it next year in what would be their third enrichment facility.

Between these deals and the Ytterbium-176 enrichment, Canadian brokerage firm Canaccord estimates that 2025 revenue will be around $32M.

Before you get excited, remember that ASPI is a $300M+ market cap stock today.  10x Price-to-Sales sounds steep!

Which is why ASPI isn’t a story about these plants as much as about what they might build in the future – for uranium for nuclear power to fuel all the electricity needed for AI—Artificial Intelligence.  Three memes, one FOMO stock.

 HOW ASP HOPES TO MAKE SUPER CHEAP URANIUM

The Sprott Uranium Mining ETF (URM – NASDAQ) has been on fire since bottoming in early September.

Picture5

Source: Stockcharts.com

This happened as Microsoft (MSFT – NASDAQ) signed the largest ever power purchase agreement with Constellation Energy (CEG – NYSE) to restore one of the Three Mile Island nuclear units.

Picture6

Source: Constellation Energy

This news tied the fate of nuclear energy to datacenters and more specifically, to the needs of AI.

AI consumes a massive amount of power and that is expected to increase A LOT in the next few years.  Morgan Stanley expects that to reach over 200 TWh in 2027.

Picture7

Source: Forbes.com

By comparison, US power consumption is about 4,000 TWh.   That means AI demand alone will be over 5% of the demand from the entire United States in just a few years.  And it will only grow from there.

As we look further out, AI will demand more power and, unlike homes and businesses, need it 24/7.  That means that intermittent power sources like wind and solar are no Bueno.

The obvious solution is nuclear.  For years nuclear has been on the outside looking in.  AI could be the “trojan horse” that kickstarts new nuclear development.

A number of companies, including one we wrote about called NuScale Power (SMR – NASDAQ) (our writeup is here) are proposing a new smaller scale reactor design (called a small modular reactor or SMR) that can be built more quickly and with less regulation.

But SMR’s require a particular enriched uranium – called high-assay low-enriched uranium (HALEU) – to operate.  Conventional nuclear reactors operate on low-enriched uranium (LEU).

In an effort to be more efficient, have longer refueling cycles and maintain a compact core design, SMR’s are designed to use the more densely enriched HALEU fuel.

Sourcing HALEU is a problem yet to be solved.  In an attempt to create supply, the DOE recently announced contract awards to produce HALEU , which could be worth up to $2.7B if they are successful, to 4 companies.

Each will be looking to produce HALEU through the traditional method that employs a centrifuge and requires a large amount of capital.  We are talking about extremely expensive equipment – Canaccord estimates that building a large centrifuge-based enrichment plant is as much as $3.5B.

As such, the anticipated cost of producing HALEU vs. LEU is estimated at 5x higher.

Where ASPI comes in is if they can produce HALEU with their technology, their costs will be MUCH lower.  ASPI estimates that one of their QE plants will cost just ~$10M – that’s million, versus the billions that a centrifuge requires.

The big question here is the “if”.  You will note that most of the atoms that ASPI is targeting are relatively light.  Carbon-14, Silicon-28, even Molybdenum-100.  In their 10-K, ASPI says:

ASP operates very efficiently at molecular masses below 100 atomic mass units, unlike other separation processes which are more efficient higher masses, which ASP can achieve equally well or to a superior degree.

Uranium-235, the naturally occurring uranium isotope, is much heavier than 100.

So the ASP process is not ideal for uranium. Which is where ASPI’s second process, QE or quantum enrichment, comes in.

QE is a process that uses lasers to separate (or enrich) the heavier isotopes from the lighter isotopes.

Picture8

Source: ASPI

The recent news that ASPI was successful in using QE to enrich another heavy molecule, Ytterbium-176, bodes well for uranium.

WHAT ABOUT SILEX AS COMPETITOR?

ASPI is not the only company that is trying to enrich uranium with lasers.  Silex Systems (SLX – ASX) is a pioneer in laser enrichment.  This is another company we have written about in the past (here).

Silex is working closely with Global Laser Enrichment (GLE), a joint venture between Silex and Cameco, a major Canadian uranium producer. GLE aims to commercialize the SILEX technology for uranium enrichment in the United States.

Silex has proven that their enrichment works at demonstration scale, but it’s unproven at the commercial level.

ASPI’s twist on the process is that they use quantum mechanics to tune the laser and identify the isotopes to hit with it.  But how exactly it differs from what Silex is doing is not something I have been able to understand.

What I can say is that the fundamental difference appears to be how APSI deals with a solid material that is vaporized within the process, as opposed to starting with a gaseous form of the atoms, which is required by both Silex and by the centrifuges.

This removal of steps (gasifying the uranium) should work in ASPI’s favor.

I will also point out that Silex says that the SILEX technology is “the only third-generation laser-based uranium enrichment technology known to be in the advanced stages of commercial development today”.  Which seems to be at odds with ASPI.

KNOW WHAT YOU OWN!
I STILL HAVE LOTS OF QUESTIONS

Which brings us to reasons to be wary.  There are several of them:

  1. How ASPI bought the technology so cheaply (according to their filings, in 2022 ASPI paid about $400K to Klydon for the license to the technology, and Klydon had spent 20+ years on it before that!)?
  1. How much weight we should put on the fact that CEO Paul Mann was the former CFO of PolarityTE – a stock that had its share of controversy, including accusations of fraud from Citron and an eventual bankruptcy. Mann did come in after the fraud accusations, so why doesn’t Mann include this experience on his Linkedin profile?
  1. Why an officer and chief scientific advisor appear to have exchanged 3M shares of their common stock in return for direct ownership in the subsidiary that will be making the medical isotopes?

On top of that, it is VERY hard to understand the product.  How their quantum enrichment process works, especially how it differs from Silex (which has been working on quantum enrichment for several decades and now appears to be behind ASPI in their efforts?) is something I tried to figure out, but quite honestly can’t.

Part of that answer could be that if ASPI has discovered a secret sauce, they certainly aren’t going to give us the recipe.  But regardless, as an investor you must be okay investing in a somewhat fuzzy picture.

There is also the fact that SMR’s are just a twinkle in our eye.  Apart from maybe one that has been built in Russia (I think?), they are YEARS away from operating at scale.

None of this means that ASPI can’t eventually be a successful business.  These are all just questions to consider.

What is important is to recognize that for the moment, the stock is moving on the hype.

Which is what this market is about right now.

You gotta know what you own.  In a uranium bull market like this, I think the stock is going higher.  But I own it because of the market we are in, not because of a fundamental reason about the business.

I’m not going to gloss over it – there are unanswered questions here.  I’m just not sure any of them matter for a trade like this.

Keith Schaefer

THE BRILLIANT GOLD STRATEGY IN PLAIN SIGHT–THAT NEXGOLD IS EXECUTING

By
Keith Schaefer
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0

Frank Giustra’s NEXGOLD–with this morning’s news that they are buying Signal Gold (SGNL-TSXv),  has now consolidated TWO of the

a) lowest capital cost,
b) lowest operating cost,
c) environmentally permitted gold deposits in Canada

Environmental permits and low capex are the two keys to market success for junior gold stocks.

Speed is another key to success–and both Signal’s Goldboro deposit in Nova Scotia and Nexgold’s Goliath deposit in Ontario are so advanced, NexGold President Morgan Lekstrom says a realistic goal is to have one of them starting construction in 16 months.

Both deposits have recent feasibility studies showing they will produce 100,000 oz of gold per year for over a decade–with lots of exploration upside to realize through that time.

Nexgold now has 4.7 million ounces in the all important “Measured and Indicated” category, and another 1.3 million in inferred category–all in Canada.

Giustra and his lieutenant Morgan Lekstrom are executing a rapid-fire plan to grow the next mid-tier gold producer by targeting Signal Gold and the former Treasury Metals, which has Goliath.  Both companies have great deposits, with high grade, infrastructure and permits.  NexGold brings the financial power.

See this valuation chart from the article I wrote on Nexgold a few months ago:

Picture1

The opportunity has been sitting in plain sight for a long time, but Giustra and Lekstrom are making it happen.  Again, enviromental permitting is in place and both assets have low capex. Signal Gold’s feasibility was for CAD$271 million capex and Goliath’s feasibility study was $335 million.

“The idea of Nexgold is bite-sized chunks,” says Lekstrom.  “Sub $400 million CapEx bite-sized—financeable—low dilution chunks for our shareholders.  “You have the two most advanced projects, for permitting, in the M&I category in Canada.  Once production financing is in place, it takes us to the 200,000 ounce a year production level—200,000 low cost ounces a year—de-risked.”

Lekstrom has a great relationship with Signal’s debtholder, Nebari, and along with Signal Gold CEO Kevin Bullock, was able to restructure a portion of the $25 million debt that Signal has to make this takeover work.

Assuming the $11 million financing that was announced with the deal gets filled, Nexgold will have $18 million gross cash and $12 million gross debt on the balance sheet.  Nebari also gets a small 0.6% royalty on Goldboro that Nexgold can re-purchase at their option.

After issuing stock for Signal (who will own 29% of Nexgold now) there will be 108 million shares out on NexGold, before the $11 million financing. The “hard” equity is being raised at 70 cents with a half warrant at 95 cents for two years, and this will be free trading immediately upon closing.  The tax-advantaged “flow-through” money and regular, “hard” equity, is being done at 80 cents with a half warrant at $1.05

Giustra is buying a BIG chunk of this financing–millions–and the rest of the NexGold management is also participating.

Bullock will become CEO of NexGold.  Head offices for both the old Treasury Metals and Signal are in Toronto.

This strategy should work for investors. There isn’t years of drilling ahead of us–both these assets could get construction financing and the goal is to get shovels in the ground on one of them in 16 months. Speed. Low capex.

A feasibility study on the Goliath deposit that NexGold has from the Treasury Metals acquisition showed pro-forma production of 109,000 ounces per year with AISC—All-In-Sustaining-Costs—of US$1,072 per ounce, on a grade of 1.3 g/t Au. Capex was estimated at CAD$335 million.

The 2021 feasibility study for Signal’s Goldboro asset showed pro-forma 100,000 oz of annual production with an AISC of US$849/oz, when gold was US$1600/oz, on a grade of 2.26 g/t Au. Capex was estimated at CAD$271 million.

Nova Scotia is one of the most under-appreciated gold camps in the western hemisphere with over 8,000,000 ounces of known gold in 11 deposits in 150 km radius of Goldboro.

Goldboro—drilled down to 500m so far—remains wide open at depth. Its 2.8 million M&I ounces do NOT include any new ounces that could be added from the 1200 metre drill program just completed.

CONCLUSION—in six short months, as the gold price continues to rise, Giustra’s Nexgold has consolidated the two cheapest gold deals in Canada, based on comparables this past spring.

Giustra and Lekstrom see that scale matters—but it has to be smart.  Low capex, top jurisdictions and big exploration upside is what can give investors big capital gains in a good gold market.

They are set up better than most to deliver that now.

NEXGOLD has reviewed and sponsored this article. The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter.

Keith Schaefer is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity.

The Value of This LARGE SCALE Gold Deposit Is Getting Ready to Jump

By
Keith Schaefer
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0

Junior gold investors love three things more than anything:

  1. Size – the bigger the better
  2. Simplicity – one big deposit
  3. A stock under 50 cents

Find me a big open pit with millions of ounces, just under the surface, and I will show you a project that has real potential to be a winner.  Ideally in North America.

The gold market now has enough life in it–$2600/oz and counting!!–that development stocks with these BIG ounces in the ground are moving.

So pay attention to the 1.54M ounce Au Indicated and 5.20M ounce Au Inferred Moss deposit in Ontario, a 30 minute drive off the Trans Canada Highway—owned 100% by GoldShore Resources – GSHR-TSXv / GSHRF-OTC.

This big, blue-blood gold asset was almost completely forgotten by the market—leaving lots of leverage.

This large, forgotten deposit recently attracted resource entrepreneur Brian Paes-Braga, giving this company and this stock a revitalized energy that is just starting to play out.

Goldshore has spent over $65 million on the deposit with 235,000 total meters of drilling completed by all owners to make this a BIG gold asset. I LOVE the fact that the heavy lifting has been done here.  As I’ll outline below, a little bit of extra drilling can mean a lot of value.

Brian and his new technical team only have to drill enough meters to bring that 5.2 million ounce inferred resource—in Ontario into the much more highly valued M&I category—Measured and Indicated.

In my experience, Inferred ounces are worth $10-$20 per ounce in the ground. Measured and Indicated are worth $50 per ounce or more. And this deposit is in Ontario–think Red Lake in northern Ontario. And then Equinox just paid almost $1 billion for just 40% of the 5 million ounce Greenstone mine in Ontario.

At Goldshore, a lot of the heavy lifting has been done—235,000 meters of drilling and initial metallurgical work!!!  Now this blue-blood asset has the SPONSORSHIP to make it a success.

I think it’s one of the best set-ups I see in the global gold market—and it’s happening NOW, under our noses, as Brian’s technical team comes out with more news TODAY–a new drill program that would test five targets in and around Moss’s conceptual BIG PIT–that could quickly add a lot of near-surface ounces.

With gold at this price, that’s a lot of value.  And the Market has not even prescribed GoldShore much value for the 5.2M ounces of inferred and 1.54M ounces of indicated already delineated–it trades at one of the lowest values of its peer group…..

FOUR BIG CATALYSTS COMING

There are FOUR big catalysts I really like here that will add a lot of value quickly (I mean, aside from the rising price of gold…).

  1. Sponsorship—Brian Paes Braga (BPB)
  2. Potential resource expansion near surface within the top 200 meters
  3. Moss is only 3.6 kilometers of the 35+ kilometer mineralized trend–NEW DISCOVERY POTENTIAL
  4. G Mining who did Greenstone/Equinox Feasibility study is on the PEA

From a new resource study done only a few months ago, Goldshore’s Moss deposit has a whopping 5.20 M oz of gold in the “inferred” category. Inferred ounces don’t get valued as highly as the other 1.54 M “Indicated” ounces.  This is all backed up by 235,000 metres of drilling.

To me, the essence of the investor story for Goldshore is–the value gap between Inferred and M&I ounces is BIG–and easy for Goldshore after that amount of drilling. 5 M oz of inferred gives this stock HUGE leverage IMHO (In My Humble Opinion).

GSHR’s Moss deposit is 100 km west of a big resource hub—Thunder Bay, Ontario.  It’s close to very cheap power ($0.08/KwH) and a 30 min drive off Hwy 11; the Trans-Canada Highway.

With 94% of the resource known to be in mineralized bands, the exploration risk to take this Inferred 5.2 M oz into the much more highly valued Indicated category is low. That makes closing the valuation gap with peers easier—just more infill drilling through well known geology. Low-risk/high-reward.

  1. SPONSORSHIP

The MOST-under appreciated factor in junior resource stocks by retail investors is SPONSORSHIP. Who has enough stock to work hard and smart enough to get the Market to care about this investment.

I didn’t buy GSHR when it was first pitched to me three years ago, despite a fabulous board of directors.

Everybody at the board level owned stock—good stuff—but in equal amounts. Nobody was the OBVIOUS driver.

SAF Group, led by Brian Paes Braga, is now driving this bus.  In my opinion Paes-Braga is one of the top new resource entrepreneurs in the world right now.  After striking it big in the last cycle, he has been patient and prudent, buying large positions in several big assets trading at cycle-low valuations—and Goldshore stands out.

In November 2023, Paes-Braga and other principals at SAF Group led a CA$3.75 million financing in Goldshore.

Then they bought a big chunk of a 19 million share block in a private transaction.

Then they recently exercised a large number of their warrants super early, — 37.5 million in total were exercised, which added CA$4.9 million to the company’s kitty.

Leadership/Sponsorship matters—a lot. The Street KNOWS Brian will never quit, and has the personal wealth and network to make it happen. He refreshed the technical team, attracting CEO Michael Henrichson, who was part of several gold discoveries while he was in senior management at Newmont for many years.

All together, the board, management and strategic investors have a 41% stake.

  1. MORE GOLD–Near-term potential for resource expansion in and around their conceptual open pit.

Just at the edges of the Moss Deposit are FOUR well defined targets that could add A LOT of near surface resource expansion to the deposit.

Picture1

There are multiple High Priority targets adjacent to the open pit that have the potential to extend the Moss deposit.

So there is a lot of low-hanging fruit at Moss—and it now has the technical team and finance team to move it forward FAST.

3

Source: Goldshore Investor Presentation

But this deposit has the potential to get expanded EVERYWHERE—it is open at depth, and along strike….see this map:

4

3. BLUE SKY POTENTIAL FOR A BRAND NEW DISCOVERY

The current resource that Moss has is only 3.6 km of a much larger 35 km mineralized trend across the entire property.  GSHR has only drilled 4km of the immediate 8km Moss corridor—so LOTS of exploration potential left.

4. BIG GOLD BUYOUTS ARE HAPPENING NOW

Equinox (EQX-NYSE/TSX) recently paid C$995 million to buy out Orion’s 40% interest in the Greenstone Gold Mine, giving the project an in situ value of just under C$3.5 billion.

The Greenstone Gold Mine started being built in Q4 2021. By Q2 2024, the company poured its first gold.

Greenstone will be one of Canada’s largest open-pit mines, producing almost 400,000 ounces of gold every year for the first five years of its nearly 15-year mine life.

Another gold buyout—worth BBBBBILLIONS in cold hard CASH– Gold Fields made headlines with its August 2024 announcement of a C$2.16 billion acquisition of Osisko Mining, which sold for a 55% premium.

Osisko’s Windfall Project, a large, high-grade deposit, was a prime target for Gold Fields, shows there is BIG appetite for large, high-quality gold projects in Tier 1 jurisdictions like Canada.

Goldshore has hired G Mining Services, the consultant that completed the 2021 feasibility study for Greenstone, to complete the PEA–Preliminary Economic Assessment–on the Moss Gold Project.

This will be a VERY detailed PEA, with an optimized and staged mine plan and processing strategy, and infrastructure layout.

(The staged mine plan is SUPER important, because that’s what will keep the initial cost of building the mine LOW compared to other multi-million ounce deposits.)

Look, what Goldshore has found so far is an incredible Large Scale deposit.  Moss holds together with mineralized widths of up to 60 – 200 meters, mineralized continuity down to 500 meters vertical depth—and is still open at depth!

CONCLUSION–FILLING THE VALUE GAP STARTS TODAY

Over many years, first Wesdome and now Goldshore has already found over 5.2M ounces inferred and 1.54M ounces indicated of gold–in Canada–by drilling 235,000 metres.  The hard work is done.  The Big Value Gap between Inferred and M&I will be bridged by just–simply–more drilling.  They know the deposit and the geology. Today’s news of  more drilling will go a long way to crossing this bridge.

That value gap is why Brian Paes Braga is here as a large shareholder, driving the bus. He knows the leverage here in a good gold market–which is getting better every week right now!!!

Brian knows what he’s doing. He bought into a big asset with a low valuation at just the right time.

Current comp tables show that if they can convert their 5 MILLION OUNCES OF INFERRED GOLD to M&I—the value of those ounces could increase A LOT.

Finding more ounces will, of course, drive even more value – potentially much more.

There are a lot of targets adjacent to The One Big Pit. There are a lot of targets along the rest of the cumulative 23 km trend.  There are a lot of targets at depth.

Generally speaking, the more ounces you have, the higher the value per ounce.  So every new ounce of gold has the potential for greater impact to valuation.

This is where I like to get involved in a story. Heavy lifting done. Big deposit found. Incremental drilling/spending has the potential to drive big value increase. Highly visible sponsorship.

With today’s news, Goldshore will start bridging a BIG value gap. I’m crossing with them.  I’m long–so consider me biased.  But I think I laid it all out here quite easy for you to understand.  With gold at $2600 and rising, this timing is perfect.

Goldshore has reviewed and sponsored this article.   Peter Flindell, PGeo, MAusIMM, MAIG, Vice-President, Exploration, of the Company, and a qualified person under National Instrument 43-101 – Standards of Disclosure for Mineral Projects, has approved the scientific and technical information contained in this news release.

Cautionary Note Regarding Forward-Looking Statements
This news release contains statements that constitute “forward-looking statements.” Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements, or developments to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements. Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words “expects,” “plans,” “anticipates,” “believes,” “intends,” “estimates,” “projects,” “potential” and similar expressions, or that events or conditions “will,” “would,” “may,” “could” or “should” occur.  Forward-looking statements in this news release include, among others, statements relating to expectations regarding the exploration and development of the Moss Gold Project; the timing and release of assay results; timing and release of a PEA; the expectation that the development of Goldshore will be successful; and other statements that are not historical facts.
Forward-looking statements are based on certain material assumptions and analysis made by the Company and the opinions and estimates of management as of the date of this press release, including that the exploration and development of the Moss Gold Project will be as expected by the Company’s management; the timing and release of assay results will be as expected by management; timing and release of a PEA will be as expected by management; the development of the Company will be successful.
These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements or forward-looking information. Important risks that may cause actual results to vary, include, without limitation, the risk that the exploration and development of the Moss Gold Project not be expected by the Company’s management or will be completed at all; the timing and release of assay results not be as expected by the Company’s management or will not be completed at all; timing and release of a PEA will not be as expected by the Company’s management or will not be completed at all; the development of the Company will not be successful.
Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements and forward-looking information. Readers are cautioned that reliance on such information may not be appropriate for other purposes. The Company does not undertake to update any forward-looking statement, forward-looking information or financial outlook that are incorporated by reference herein, except in accordance with applicable securities laws.

PAID ADVERTISEMENT.  This communication is a paid advertisement for Goldshore Resources Inc. (TSXV:GSHR) (OTCQB:GSHRF) (the “Company”) to enhance public awareness of the Company, its products, its industry and as a potential investment opportunity.  Investing Whisperer, and their owners, managers, employees, and assigns were paid by the Company to create, produce and distribute this advertisement.  This compensation should be viewed as a major conflict with Investing Whisperer’s ability to be unbiased.
This communication is not intended as, and should not be construed to be, an offer to sell or a solicitation of an offer to buy any security. Neither this communication nor the Company purport to provide a complete analysis of the Company or its financial position. The Company is not, and does not purport to be, a broker-dealer or registered investment adviser. This communication is not, and should not be construed to be, personalized investment advice directed to or appropriate for any particular investor. Any investment should be made only after consulting a professional investment advisor and only after reviewing the financial statements and other pertinent corporate information about the Company. Further, readers are advised to read and carefully consider the Risk Factors identified and discussed in the profiled Company’s SEDAR+ and/or other government filings. Investing in securities is speculative and carries a high degree of risk.

No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter.

Keith Schaefer is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity.

THESE 6 STOCKS KILLED IT IN Q2

By
Keith Schaefer
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There is a growing niche in small cap stocks—ones with GOOD FINANCIAL NUMBERS are finally being rewarded with higher stock prices.

Q2 reporting just ended, and the winners in my portfolio had big improvements. I outline the numbers below.  And the stocks responded!

For the last half of 2021, all of 2022 and 10/12ths of 2023 (end of October)—small cap land was a desert for investors.

But then last November—which coincided with the peak in interest rates—micro-cap / small cap stocks have been perking up.  They haven’t all been winners, but here is the Q2 update on my best 6 stocks, all of which saw financials improve A LOT.

  1. California Nano (CNO-TSXv)  $0.15 – high of $1.15 (666%) since September
  2. MYOMO (MYO-NASD) $0.80 – high of $5.60 (600%) since November
  3. Delcath (DCTH-NASD) $2.25 – $11.75 (422%) since November
  4. Bewhere (BEW-TSXv) $0.18 – high of $0.77 (327%) since November
  5. Simply Solventless (HASH-TSXv) from its 15 cent IPO in Jan – high of $0.60 (300%)
  6. Itafos (IFOS-TSXv/MCNB-NASD) $1.30 – $1.60 (23%) since November

Every stock except Itafos had a big revenue jump—Itafos just cleaned up its balance sheet to basically have no debt—it has paid off almost $200 M in debt since I bought it 3 years ago.

I see ALL these stocks continuing to head higher in the next 12 months. I’m putting the original full report on the free section of my website—www.investingwhisperer.com (Example – you can find Simply Solventless report HERE.)

Let’s dive in:

MYOMO – LET THE RAMP BEGIN!

I’ve written before in the blog about Myomo (MYO – NASDAQ) –they make a unique myoelectric arm brace that basically reads your mind to help you get better fine motor function in arms wrist and hands.

MYO preannounced Q2 in early July.  At that time, they estimated revenue of between $7.2M to $7.4M for the quarter, which was a 90% jump over Q1.  A month later they reported earnings and the number was even higher – $7.5M!    All these number were WAY, WAY above estimates of $6.5M.

The stock popped on the pre-release in July but came back down to earth and consolidated at $4.

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Source: Stockcharts.com

But that chart is turning up again, which may be the Street anticipating another bump up in revenue in Q3.

Estimates for next quarter are $9.3M, another big step up.

Now I don’t know how much credit the Street will give Myomo before it has a few quarters of trend under its belt.   The stock is moving up like there are believers, but we will see.  We may need a few more datapoints before the stock really takes off.

In Q2, even though Myomo saw a big increase in revenue, their EBITDA improvement was only $100K.  Operating cash flow was actually worse YoY as they build out their expansion (150 new workers).

Patient pipelines adds were also only up a bit over Q1.  And investors were a bit surprised that some Medicare Advantage insurers were still balking at insuring the MyoPro device.

None of this is cause for concern.  Myomo is ramping product, deploying more salespeople, doing all the thing that they need to grow.  The sales process of bringing on Medicare patients is going to take time.

So this move we saw the last couple days is GREAT – but don’t be surprised if the market needs more time.   It doesn’t mean the stock is stuck.  It just means that we need some patience.

The real juice here is in the O&P market—Orthotics and Prosthetics.  There are over 10,000 clinics in the US, and their patient base has just recently had an injury or health issue that has reduced their arm mobility—those people want to get back to full mobility FAST.  As they announce the successful rollout of O&P clinics adopting the MyoPro brace, the stock should gain more life.

BEWHERE BEW-TSXv / BEWFF-PINK
– HOW MUCH CAN WE PRICE IN?

BeWhere (BEW – TSXv) tracks low cost items via low-power and 5G—making them unique.  This is a new pick and I like it A LOT…lots of potential that management is now realizing.  Orders are getting bigger.  Their distribution channels are working.

They put together exactly the quarter I was looking for.  Revenue growth.  Bottomline growth.  Another big jump in recurring fees.

The stock popped and kept going, reaching as high as 77c.

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Source: Stockcharts.com

Over the past few sessions BeWhere has backed off to 67c.  This is still above where it was pre-earnings and I look at this as a normal consolidation.

At this point, what is going to determine the stock price is what the market is willing to price in.  At 70c, BeWhere has a market cap of $61M.  Trailing twelve-month revenue is $14M.  That puts the stock at 4x P/S – which is not cheap.

A large part of BeWhere’s revenue is still low-margin product sales.  That high margin recurring fee revenue was up to $1.66M in Q3 and was $5.8M over the last 4 Q’s, or about 38% of sales.

Overall, the business is a mid-30%’s gross margin business.  Those margins will grow as recurring fees grow, but it still caps how much the Street will pay in the short run.

Free-cash flow over the past 12 months has been $2M.  30x FCF – again not cheap, not expensive – probably fair given where the business is going.

In other words, BeWhere isn’t crazy expensive, but it also isn’t dirt cheap.  The stock is going to grow into its valuation and the price will grow as each quarter results prove out the business.  That will take time.

ITAFOS – DID SOMEONE ACTUALLY CARE ABOUT THIS INCREDIBLE CASH COW?

Itafos (IFOS – TSX/MBCF-NASD) is the opposite story of Bewhere.  This is not about growth and pricing in the future.  Its about value and pricing in what is right in front of us.

Itafos delivers free cash flow quarter after quarter.   The Q2 results were no different.  Instead, the surprise was that the market actually bid the stock up a bit on the results!

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Source: Stockcharts.com

Itafos had been mired below $1.50 for so long I was beginning to wonder if there was an iceberg order on the ask that would never allow it to break out!

Turns out that the stock can move after all.  All it took was adjusted EBITDA of US$32M, EPS of C$0.12 per share and free cash flow of over US$42M (helped by a big influx of working capital)!

Of course, if you only looked at the numbers, not the name, you’d be hard pressed to say this move has stretched valuation.  Itafos trades at a market cap of just over C$300M.  With trailing twelve-month EBITDA of US$120M+, it pegs at 2x EV/EBITDA and about 2x P/E.

The debt overhang is GONE.  Itafos has used their cash to diligently pay down debt each quarter.  With $59M of cash and $66M of debt at the end of Q2, they will almost certainly be “net debt free” by this time next quarter.

The big issue with the stock is “what now?”.  Itafos remains tightly held by private equity firm Castlelake, who completed a strategic alternatives program and came to the conclusion that they were best leaving things as is.  Now we wait and see what the direction is.

SIMPLY SOLVENTLESS HASH-TSXv–
EXECUTION WILL BE THE KEY

Simply Solventless (HASH – TSXv) has THE BEST operating margins that I have seen in the Cannabis business.  In Q2, HASH did $4.2M of revenue and $950k of EBITDA.  That works out to 23% EBITDA margin.

These margins are before we see contribution from the recently acquired CannMart and their two brands: Roilty and Zest Cannabis.

With HASH forecasting $40M of revenue and $6.2M of net income for 2024, the stock is priced at under 9x earnings.

Picture4

Source: Simply Solventless Investor Presentation

That is a reasonable valuation is likely why the stock quickly digested its earnings day gap up and now looks ready to take on new highs.

Picture5

Source: Stockcharts.com

What we want to see next is execution.  Integrate Lamplighter, Roilty, and Zest.  Ramp up inventory, reinvigorate the brands and (hopefully) lower cost at the same time.

My only worry with the story is how Canadian pricing plays out.  The biggest players in the Canadian market (Organigram (OGI – TSX), Cronos (CRO – TSX) and Tilray (TLRY – TSX) have the lowest margins.

This is topsy-turvy to just about every other business.  It signifies one thing to me – price wars.

If you look at the balance sheets of the big players, they are STACKED WITH CASH.  If I was running Cronos for example (which has $800M of cash in the bank), I would look at all the struggling competitors and think about squeezing them out of business but cutting prices and taking short-term losses for long-term gains.

HASH is not struggling (there are plenty of other small cannabis names trading at penny stock levels), but if a nasty price war does ensue, they wouldn’t be immune.

But we’ll see.  HASH could also be the beneficiary, buying up cheap brands out of bankruptcy.  How management integrates these acquisitions and takes advantage of opportunity is going to determine a lot.

DELCATH – ON ITS WAY TO $15+

The second quarter results coming out of Delcath were EXACTLY what I wanted to see.  And while it took a few weeks for the market to figure it out, it was clearly what the market wanted as well.

Picture6

Source: Stockcharts.com

The company did $7M+ of revenue in Q2.  They will be operating in 12 centers by Q3 and 20 centers by Q4.   If they get to 20 that should be an east $25M per quarter run rate sometime in 2025.

If you run through the math Delcath should pull out an earnings run rate north of 80c per share on a fully diluted share base by 2025 (I’m assuming all the warrants and stock options are converted into shares – those $6 warrants are way in the money here).  Which should translate into a stock price of $15+.

Of course, things are just getting started.  Delcath’s pipeline of opportunities is significant, and we will see that begin to play out in 2025 as well.

We have ALREADY seen quite the move in Delcath the last few sessions and the stock is probably due for a breather.  We may see a period of consolidation to get those cheap warrants cleaned out.

But after that happens, I think there is more to go to the upside with this one.

Editors Note: My top pick is releasing its next quarterly within days–and I’m sure it’s going to be great. To get THAT update–and all the ones from these 6 stocks–CLICK HERE (66% dicount)

Keith Schaefer

The Sweet Spot for Gold Investors

By
Keith Schaefer
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Gold hit US$2500/oz last week—a new all-time high. The cheapest part of the gold market is junior developers, which are trading at 0.45x price to net asset value. The average historical ratio is twice that. It’s been a long bear market for gold stocks, which means the upside potential in junior – the more leveraged of the lot – in a real gold bull market is BIG.

Gold is clearly in a bull market. The yellow metal is up 90% in 5 years, including 23% already in 2024, and there are lots of reasons to think it will jump again this fall. Here’s a 25-year gold chart from VIII Capital that shows when gold moves, it moves BIG:

Picture1

And while the price of gold is now rising, cost inflation is finally coming down—so profit margins across the board are stabilizing and/or increasing.

So if a rising tide will finally start to lift all boats now, where is the Sweet Spot for gold investors?

My colleague Lobo Tigre of the Independent Speculator www.independentspeculator.com, @duediligenceguy) did some original research that shows there is a Pre-Production Sweet Spot (PPSS) for investors, backed up by some real numbers.

Picture2

What he dubbed the Pre Production Sweet Spot is the last, upward slope of the famous “Lassonde Curve” right before production.

And the numbers back him up: after assessing 124 first-mine-building companies stretching back to the 1980s, Lobo Tigre found that 95% of Construction Decisions successfully reached First Gold.

His study found that the average gain from construction decision to first gold was 111%.

That’s a risk-return setup I can get behind! And those cases occurred across a range of gold markets. The average PPSS gain during gold bull markets was 132%.

That’s one big reason why I like West Red Lake Gold (WRLG-TSX / WRLGF-OTC) right now.  They’re going into production within a year. They have raised over $100 million in the last 18 months to ready their 60,000-oz-per-year Madsen Mine in Ontario, in a time when few juniors could raise money. (That’s my estimate at annual production; as I’ll explain, WRLG is about to issue an official mine plan with that number.)

This is a past producer—that ran 9 g/t gold!  That was 30 years ago.  Then this past cycle, a company called Pure Gold tried to get it back in production, spending over $350 million on a new mill and a lot of infrastructure.

But a combination of COVID, being constantly under-capitalized, and a couple management decisions forced it back into care & maintenance in late 2022.  As a result, CEO Shane Williams and financier Frank Giustra were able to buy Madsen & surrounding deposits for only $6.5 M cash upfront, a 1% NSR, and some stock.

(Shane was COO of Skeena Minerals (SKE-TSX) as it went from $3 – $10 and before that VP Operations for Eldorado Gold (ELD-TSX) leading the build of 3 major gold mines.)

Madsen is an asset that has now had $500 M spent on it, with almost all infrastructure still brand new and production permits in place.  All Williams and his team have had to do is put the finishing touches on what others spent big capital on.

The main reason Pure Gold fell down was that the rock they mined didn’t have the gold grade they expected—from a lack of infill drilling to really know where the gold was.

Williams and VP Exploration Will Robinson have made infill drilling Job 1, to get everyone’s confidence up in the mine plan at Madsen. In the last year they have hammered the parts of the deposit they plan to mine first with tightly spaced drilling.

6O6A6686

Huge amounts of infill drilling core from Madsen Mine

The mine engineering team have taken all that data and planned out over a year’s worth of mining areas – stope defined mineable inventory, in shop talk.

Investors have not yet recognized WRLG as a Pre Production Sweet Spot opportunity. I think a lot of people still think of Pure Gold here, and WRLG has pushed Madsen towards production so quickly that investors haven’t kept up.

Another reason for this: the company hasn’t yet issued an official mine plan. It takes a long time for external consultants to produce those detailed studies. Lacking that study, the market hasn’t understood how quick this mine will turn on again.

But I understand. And I think the market will catch on soon, because a pre-feasibility study is imminent. It should be a strong plan, with very modest capex left to spend (because the company has been funding restart work for a year already) that should lead to a high rate of return.

I think this study will highlight West Red Lake Gold Mines as a rare Pre Production Sweet Spot story just as investors are scrambling for exposure to gold.

So there will be a steady stream of catalysts for investors to get excited about here.

I follow this story really close (yes I’m long), and they were a client of mine a couple years ago. I haven’t touched on the high grade drill results previously pulled from the 8-Zone at depth at Madsen, which could put a new look on both profitability and Life-Of-Mine (LOM) here—or the crazy high grade results (296.8 g/t gold over 1 metre, 42.4 g/t gold over 3 metre, 118.3 g/t gold over 1 metre, and 56 g/t gold over 1 metre are some of the best) at the Rowan deposit several miles away.

LAST POINT—always remember, the most precious commodity is PEOPLE. Williams heading the ops team and Giustra on the finance team have great success behind them.  The stock is very liquid, but still close to the same price it was when they took over WRLG.  It has yet to have its First Big Run. I think the new PFS—Pre-Feasibility Study—will be the catalyst that starts its move.

jill ug

Jill Christmann, chief mine site geologist of West Red Lake Gold

Keith Schaefer

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