Overstock (OSTK – NASD) has been a big winner for subscribers at sister-site at www.investingwhisperer.com.  I bought the stock in early May at $13–after the stock had already tripled from the bottom.

Overstock briefly broke the $50 barrier on July 12, making it close to a 4-bagger – in only a couple of months – and I think can it can go much higher (to see exactly how much, see my math at the bottom).

Overstock is an online retailer like Amazon (AMZN-NASD) and Wayfair (W-NYSE), and their traffic and sales numbers are rapidly increasing in 2020—hence the big move in the stock.  But they also own a majority position in a crypto-currency trading platform they call tZERO—which has also been VERY successful.

Independent analysis shows  that security tokens listed on tZERO accounted for 95% of all security token trading in May and 75% of the total value traded.  Overstock management added that trading volumes were up 46% from the prior year in May. 

tZERO is officially the powerhouse in the security token arena – but unfortunately the arena remains incredibly small and underdeveloped.

Both online shopping and crypto have been big bull themes during the pandemic, so it makes sense that OSTK-NASD would be a great investment—but even I was surprised that it went from $3 – $50 in two  months!
 

The Most Unique Preferred Share In The World

But there is another way to play Overstock that is both safer (for small positions) and more levered.  How can that be possible you ask?  It’s an investment can give you all the upside of the stock but with a significant discount to the current price.

OSTKO is the symbol of Overstock’s digital preferred dividend.  It is currently trading at around a 40% discount to the stock.

This is a preferred stock.  It has the same rights as the common and pays a small dividend – Overstock paid a 16 cent dividend to OSTKO holders the past 3 years.

All else being equal, you would expect the preferred to trade at a premium to the common.  Of course, things are never equal and in this case what you are seeing is a liquidity discount in the security stemming from a mismatch of buyers and sellers.

OSTKO was originally spun-off to existing shareholders of Overstock.  Each shareholder of OSTK received 1 Series A-1 preferred stock for each 10 shares they owned.   So it truly was 10% dilution.

Overstock had their own reasons for distributing OSTKO shares. One was that then-CEO Patrick Byrne thought it was a way to stop or catch people shorting his stock.  You can’t borrow a digital certificate.

Another was/is that they saw it as a way to onboard investors to their own tZERO trading platform. 

Here’s the catch: OSTKO is only supposed to be traded via Overstock’s tZERO platform.   It is written right into the language of the SEC filings. 

There is an over-the-counter market in the stock, but it is thin and not really supposed to exist.  But it does!  I bought 2000 shares at $12.50 a while ago through my Canadian full-service broker.

Overstock and tZERO have already sent out letters to brokers explaining that the security should only trade through the tZERO platform and no where else.

But trading through tZERO has its own problems.  Right now, there is only one broker-dealer that taps into tZERO – a small, obscure firm named Dinosaur Financial Group—owned by a relative of an executive of tZERO.

The ticker started trading in May of 2020.  But it has not been easy to trade.

If you want to own OSTKO you need to register with Dinosaur Financial.

I went through the process of signing up.  They do as good of a job as anyone to streamline the process, but it is still a pain. You must fill out their paperwork.  Upload your identification.  Figure out a way to transfer cash.

Let me ask you this – who do you think has the most reason to sign up to Dinosaur right now?

You got it – holders of OSTKO.  First, you have funds that can’t hold the security in the first place – it goes against their compliance.  Second, you have investors who do not really know or care what this extra security is that they have been issued so they are content to turn it around for a quick buck.

But potential buyers of OSTKO?  Few and far between.

The result – a 40% discount to the common – and a significant arbitrage (arb) opportunity. 

Again, there is no real difference between the preferred and the common.  Same rights, including voting.   And like I said, the preferred is higher on the capital structure.

I think that very rich arb will close sometime late this summer, after Dinosaur has signed up all the OSTKO shareholders they can.  The owners of Dinosaur–being close to Overstock–also own a lot of OSTK and it’s in their best interest to have that arb disappear and have OSTKO trade at par.  Dinosaur will just open up trading to everybody and stop insisting they use tZERO.  Like I said, the black market is already alive and well in OSTKO.

That’s a $15/share jump coming this summer if I’m right!

And during their Analyst Day, Overstock announced that two new broker-dealers had signed up to tZERO (no names yet), so liquidity could generically increase.

IF tZERO gains traction, investors win twice.  First, the liquidity discount of OSTKO will disappear.  Second, Overstock shares are going to do well because Overstock owns ~80% of tZERO.

I have been in and out of Overstock a few times over the last year and it has been a wild ride.  I bought the stock for the blockchain potential and for the turnaround in e-commerce that has been years in the making.

The first time I bought was last summer, shortly after then-CEO Patrick Byrne first announced the idea of a digital dividend.  Byrne’s motive at the time was as much to squeeze the shorts as promote his digital trading platform.

He succeeded, turning the potential for a non-shortable digital dividend into a short squeeze that caused the stock to go to $30.  Of course, then the SEC stepped in and said the deal was a no-go.  Byrne sold his stock, fled the country and is now living on a beach in Bali, Indonesia.   We sold too.

I looked at the new management team with healthy skepticism at first, but I have been pleasantly surprised. 

CEO Jonathan Johnson has put together a rapid turnaround of the e-comm business while tZERO CEO Saum Noursalehi seems to have righted the ship on the crypto side.  They pulled the digital dividend through the SEC hoops, something Byrne was not able to do.

(Compushare does have a deal with the company where they hold custody (“deal with the book”) of the OSTKO, but officially it’s Dinosaur.  They will not lend out any certs for shorts.  You can’t short penny stocks or OTC stocks for the most part, so this is not that different.)

The e-comm business is really the lynchpin for the stock.  This business has seen a huge boost from stay-at-home shoppers.  At the company’s analyst day in mid-June, Johnson said that “April and May sales were up over 120% year-over-year”.  He called the state of the business “phenomenal”, and so far the numbers are bearing that out.

Overstock excels in home furnishings.  It is a big market with a $67 billion TAM—Total Addressable Market. 

Not surprisingly, it is a market where online penetration is quite low – about 42% – and this is up from only 23% a year ago.  The overall market (both online and bricks & mortar) is growing at a 16% annual clip.

Source: Overstock Analyst Day Presentation

Even though e-commerce sales are strong, Overstock is growing even faster. They are taking share.

Probably the most important takeaway for me from Overstock’s Analyst Day is that their e-comm site is finally driving free traffic again.  For the last 3 years Overstock has had a tough time driving free traffic to their site.  Free traffic really means search and search means Google – Overstock saw their Google search ranking plummet beginning in 2017.  At one point in 2018 their keyword rankings had fallen by ¾! 

It is hard to run an online business when your free traffic is in precipitous decline. But that has changed.  In 2019 Overstock finally stabilized their free traffic and in 2020 so far it is up HUGE!

Source: Overstock Analyst Day Presentation

This is SO important.  If you don’t get free traffic then you have to pay for it, which is expensive.  The bump in free traffic has led to significant new customer adds:

Source: Overstock Analyst Day Presentation

New customers mean sales and if those customers are free that means better margins. 

Source: Overstock Analyst Day Presentation

The e-commerce business has gone from questionable viability to a growth story.

tZERO remains the wildcard.  They are sitting on a huge opportunity.  They have first-mover advantage in the trading of a wide range of assets. 

Source: Overstock Analyst Day Presentation
 
tZERO has a pipeline of over 200 issuers.  These aren’t just public companies looking to trade on a different exchange.  What tZERO is attempting to do is disrupt trading markets by adding assets that previously could not be traded.  Stuff like: real estate funds, non-trade REITs and private asset companies.

Overstock also owns equity in a portfolio of blockchain companies.  Their Medici subsidiary companies span the spectrum of banking, identity, capital markets, even voting.

Source: Overstock Analyst Day Presentation

How high do I think Overstock can go?  Well, there is a good chance that OSTK could do $1 billion in revenue this quarter.  Not this year—this quarter.  That would be a $4 billion annualized run rate. 

Could a fast growing, debt free tech stock on NASDAQ trade at 5x sales?  I would say yes.  That is a $20 billion market cap. There are 50 million shares out on Overstock.  $20 Billion / 50 million = $400 per share.

Four hundred dollars.  Now clearly, that is the pie-in-the-sky number.

If Overstock does that, OSTKO will follow.  And eventually that liquidiy gap will close.

Add to all this the optionality of the tZERO platform and the blockchain portfolio of companies and there is a lot to like here. 

Another 10-bagger might be asking a lot, but stranger things have happened.

And for retail shareholders who might only buy 1000-5000 shares, OSTKO is not only a safer way to play the rise, but has more leverage.  It is a truly unique preferred.
 

Keith Schaefer

TAAT WELLNESS (TAAT-CSE) IS MY PICK FOR
THE “BEYOND TOBACCO” TRADE
 

 

 

Taat Lifestyle & Wellness Ltd (TAAT-CSE, 2TP2-FRANKFURT) is the BEYOND TOBACCO trade that I think has monster potential for investors.

 

It’s a hemp cigarette that looks, smells and tastes like traditional tobacco cigarettes—but has no nicotine or addictive health issues.

 

Are there not tens of millions of smokers in North America alone—hundreds of millions worldwide—who would like to get off their nicotine addiction?

 

I’m stunned that I don’t see another pure-play on hemp cigarettes in the public markets. This could reduce cancers and deaths by millions annually.

 

Tell me I’m wrong—but doesn’t this sound like one of the most simple and powerful investment stories you’ve ever heard?

 

1. A large global market literally dying to get off cigarettes
2. A new product that looks, smells & tastes like tobacco
3. The product is not addictive; doesn’t have nicotine nor many of the bad products in tobacco cigarettes
4. It will be marketed to the trillion dollar tobacco market, not the billion dollar marijuana market

 

From a public markets point of view, the company has

 

1. First Mover Advantage—again, I see no other pure play in the hemp cigarette market
2. The stock just listed; nobody knows about it—the stock’s First Big Run has not happened yet
3. It could be considered at some point an “ESG” (socially responsible investing) stock as it should reduce deaths and cancers
4. Does not have the same marketing restrictions tobacco products do (that should be HUGE)
5. Management estimates MUCH higher gross margins than tobacco cigarettes—about 25%
6. CEO Joe Deighan who was the original CEO of the current hemp cigarette market leader, Wild Hemp—investors now get to be on the ground floor of his new venture.

 

TAAT is literally the only pure play public company in its niche–and has built a very real competitive moat. CEO Joe Deighan is a self-taught hemp formulation specialist, and his TAAT brand of hemp cigarettes comes from years of trial-and-error and market testing.

 

It’s not just product ingredients—it’s his 20-step process, and moisture and humidity and packaging…nobody will be coming up with a dominant product from their garage laboratory.

 

I think there is A Big Prize for the winner of this industry—whomever comes out as the dominant brand.

 

I think the BEYOND TOBACCO trade has a very good shot at being one of the most lucrative trades of this new decade. And it’s VERY early in this trade.

 

Big Tobacco is a $1 trillion industry selling a product that is begging to be put out to pasture in our new socially responsible world.

 

And there’s no doubt that once the leader in hemp cigarettes—which I think TAAT can be—is known, Big Tobacco will come in and pay A Big Price for that annual revenue stream.

 

THE “BEYOND” TRADES ARE POWERFUL

 

TAAT’s story and its huge edge over its competition is just starting to hit the radar of North American investors. Like all of the “Beyond trades” of the last several years this one has a great opportunity of being explosive. 

 

The established fact is that these “Beyond trades” work extremely well. We have repeatedly seen that the initial moves on these Beyond stocks are moonshoots. The market buys first and asks questions later with these stocks.

 

Investors need to get in front of these stories early—and this stock has not yet been listed for a month yet. What we know for certain is that you do not want to miss the initial run that all of these stocks have….

 

We have learned that time and again over the past decade. The first moves of these stocks are becoming more and more powerful as the market reinforces insatiable demand for “ESG” opportunities.

 

Beyond Meat was just one trade. Both Tesla and more recently Nikola Motors were the “Beyond Carbon” Trade:

 

Beyond Trade Example #2 – Nikola (NKLA) on the promise clean energy heavy duty trucks up 505% just one month out of the gate this year

 

Beyond Trade Example #3 – Tesla (TSLA) the original Beyond trade now up 4,300% and still running without even turning a profit

 

 

I could go on and on. 

 

The Big Investor Trend—and for consumers too–is to immediately embrace these kinds of businesses that promise to improve the world.

 

Tobacco is next on the hit list and TAAT is the most exciting Beyond Tobacco trade that the Market will look at in the next year. 

 

Beyond Tobacco should save millions of lives—and millions in hospital bills. To me, that means that this stock has to run.
 

The Only Pure Play Hemp Cigarette Pubco Selling Into The $1 Trillion Market

 

I’m excited about TAAT because it has developed a hemp cigarette that real smokers actually like.

 

Those last words are the most important. Tobacco smokers love this product. TAAT’s formulation makes it taste exactly like a cigarette.

 

Smokers don’t like the fact that they smoke. How could they? Smoking is terrible for your health.

 

But……smokers do really like to smoke. They enjoy it.

 

If it was healthy–smokers wouldn’t even think about quitting.

 

Yes, the hemp based cigarette market is exploding. It is growing at an exponential rate.  BDS Analytics indicates that the volume of hemp cigarette sales have been increasing at an annual rate of 250-300% per year.

 

It is a great industry to be in, but TAAT’s hemp cigarette competition (and surprisingly there isn’t much) is trying to sell to cannabis users.

 

But TAAT is directing their products at the Really Big Market….the tobacco smokers who really enjoy smoking.

 

Outside of TAAT’s product, other hemp cigarettes on the market taste and smell like cannabis. That isn’t what smokers want. Smokers want to smoke something that tastes and smell like a tobacco cigarette.

 

TAAT is the only company that has that product—a healthier version of a legacy tobacco cigarette.

 

That means that instead of just appealing to the small (but fast growing) hemp cigarette niche…….TAAT is also selling directly in to the tobacco smoking market that is nearly $1 trillion in annual sales.

 

The product looks like a tobacco cigarette, tastes like a tobacco cigarette and even smells like a tobacco cigarette–specifically a leading light cigarette brand (ahem–I’m not allowed to use their Big Name).

 

That sounds like a simple enough plan, but actually perfecting a hemp cigarette that provided a tobacco like experience was anything but. TAAT’s product is the result of years of hard work, trial and error and accumulation of knowledge.

 

Beginning in May 2020, test versions of TAAT’s hemp cigarettes were offered for sale at more than 50 retail locations across Nevada and Southern California with the objective of gathering feedback from users.

 

The results of the testing were overwhelmingly positive. Repeat purchases by users was high and 75% of the retailers involved sold out their phase one TAAT test cigarette stock and have reordered.

 

Now it is time to ramp this business up.
 

The Competitive Moat:
Perfecting That (insert: Big Brand Name)
Light Experience
 

Hemp cigarettes are a great product. The problem is that they haven’t been marketed to the everyday smoker. Instead the industry has appealed to cannabis enthusiasts.

 

Like marijuana, hemp is from the cannabis family. Unlike marijuana which is known for its psychoactive effects, hemp will not get you high. Marijuana has high levels of THC, containing anywhere from 5%-35% whereas hemp has less than 0.3% THC.

 

Hemp contains high cannabidiol (CBD) content which is not psychoactive. CBD arguably has many benefits, but it definitely is a proven way to help people quit smoking tobacco cigarettes.

 

A double blind study by Researchers at University College London found a 40% reduction in the number of cigarettes smoked by participants treated with CBD. 

 

A separate survey of more than 5,000 CBD users by the Brightfield Group CBD found that 24% have used it to quit smoking.

 

It makes sense. Smoking the hemp cigarettes helps satisfy the oral fixation that smokers crave–with no nicotine or tobacco.

 

Look, even the Stop Smoking industry will soon be over $20 billion!

 

While competitors are aiming their products at cannabis enthusiasts TAAT is directing all of its resources at tobacco smokers and their $1 trillion of global sales.  There is nothing in TAAT’s marketing that ties it to cannabis.
 

CONCLUSION: All the Trends Favour Hemp Cigarettes
 

This is a very fast growing niche that TAAT is now taking mainstream. As regulations mature—especially in the United States—more and more retailers will accept these and more and more institutional investors will invest in it.

 

I get it. Many people would like to see tobacco & smoking banned. But it’s a free world, and the reality is that smokers want to smoke. 

 

But nobody wants those side effects…….cancer, heart attack and stroke.

 

TAAT’s “beyond tobacco” cigarette will hit the market this fall, and they’re on record as saying they are lining up production capacity of 1 million cigarettes a day.

 

While market launch will be a HUGE catalyst for investors, I think the sector has a melt-up; a speculative premium run that all the other BEYOND trades have had.

 

Never underestimate the power of that First Big Run.

 

This article is already too long. But both the product and the stock have a powerful, simple thesis. The Market is moving in this direction. It’s not only legal, it saves lives and money. It’s ground floor.

 

The Farm Bill means that gas stations, Walmart, Costco, Mom and Pop stores and everyone else can sell hemp cigarettes openly.

 

That is a lot of retail power and those retailers aren’t selling to cannabis enthusiasts, they are selling to tobacco smokers. That is why TAAT’s product tastes like a light cigarette.

 

Vaping became nearly a $20 billion market in just over a year. That incredible growth says how big and how fast the hemp cigarette market can become. 

 

A relevant data point on vaping growth that I will never forget is the $38 billion valuation that Philip Morris put on e-cigarette manufacturer JUUL when it acquired a third of the business in 2018. 

 

That’s why I’m long TAAT. I think everything is set up for both investors and consumers to win here.

 

Taat Lifestyle & Wellness Ltd 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.

Exactly a year ago I introduced Roscan Gold (ROS-TSXv) to my audience. It was a new junior gold play in the very prolific high grade Mali gold belt in West Africa.

But after that, the stock languished—and did I ever catch hell for that! Months of angry emails! But now the company is set to become one of the most successful African plays of the year. So I was just early!

The stock languished for a couple reasons. One was the Market couldn’t look at the drill results at the time and put together the potential for a resource estimate. 

Secondly, the CEO at the time, Greg Isenor, and team were recognized more as an early stage exploration group who could sniff out great ground–not so much with capital markets.

Enter former Clarus Capital mining analyst Nana Bompeh Sangmuah–who had become a very successful & respected mining analyst in Toronto. He joined the Company late last year

He saw so much potential, he left his comfortable perch to take over the reins as President and CEO of Roscan. And to prove he knows how to make money, he came in at the bottom. He brought in some (very) Smart Money in the form of Michael Gentile.

Now, less than a year later, Sangmuah has

-raised $15 million

-brought in value-add shareholders,

-increase Roscan’s land position in the area to the point where now, -investors can see the potential for a major multi-million ounce gold deposit, at surface and…

-quite possibly over 4 g/t—very high grade considering some Nevada deposits are in production at under half a gram.

More importantly, investors now have confidence that Sangmuah, Isenor and the team can move into production.

I had a conversation with Sangmuah earlier this week:

Keith:           What did you saw in the company, that made you decide to leave your analyst position and come over to Roscan?

Nana:          I saw value creation in Roscan. I’ve always been very much leaning towards the very early stage situations, because that’s where you have the maximum upside once the execution goes right. Most my coverage history as an analyst, I was almost first on everything. The value proposition was too compelling and was a great team with superb track record.

Because I would take the calculated risk, and take the pain to understand the project in details. And it’s exciting, and often times you discover some jewels. And if you draw people in at that stage you can create significant returns for them. And that was all based on the track record of the founder, who had been very successful discovering these deposits, and traded them up into the laps of major producers.

Keith:           And in total, you’ve raised about, pretty close to 15 million bucks in the last nine months?

Nana:           Yes – myself and team, and the other thing that I would highlight as well, is there was always a misconception to a lot of people that were interested in this story, but always were scared about our warrants position. And they thought that was going to create a significant ceiling on us, and prevent us from re-rating, which hasn’t happened. 

The warrant position we started out, has been cut by a third. Most of these warrants have been exercised and held by the respective large holders, and all the warrants are in the money as we speak. And by next December, when all of them are exercised, that brings another approximately 25 million bucks, almost 35 million bucks into treasury.

Keith:            You did a recent acquisition. Tell me about that.

Nana:           It was a very strategic acquisition because it actually expands this eight kilometer corridor that I spoke about at Mankouke, into a 30 kilometer corridor stretching further north. We are very excited and looking forward to updating the market.

Keith:           Tell me about this year’s exploration campaign.

Nana:            At the initial technical session in December 2019 everybody agreed to start on Mankouke, being the place to go, and start this year’s campaign. And the reason was quite obvious, because we had an approximately 80 meter mineralized section, which was picked up from the end of our 2019 drill campaign. And the average grade in that section was about four grams per ton.

Basically it was wide intercepts from that campaign, and we not only managed to extend the mineralization to a depth of 155m, we also established a strike of 600 meters for the mineralization.

We’re drilling deeper. We’re drilling to the North and West, trying to understand this better. But the northerly plunge aligns with some of the bigger deposits in the region.

However, we would be stepping up campaign on our regional targets, which included Kandiole targets, the west and north targets at Kandiole. And the goal is to just make sure that we find more discoveries, because that would be very well appreciated, and well rewarded, if there should be a transaction that should happen down the line.

Keith:           Right, okay. When you look at where the geology is leading you, where do you get the most exited?

Nana:           Well, the most excitement I think comes from our current drill program at Mankouke South. Also the corridor is relatively unknown, and what excites me about the corridor so far, my understanding and based on the work we’ve done, there’s a lot of cross-cutting features in this corridor, and that’s usually quite exiting in geology. We’ll be doing more geophysical studies to highlight some of the trends, because we want to make sure that if it’s there, we’re definitely finding it. And we spend our resources wisely towards that.

Keith:           In a best case scenario now, when would you see a maiden resource?

Nana:           The key really is not to put the cart before the horse. We can show results, yeah. But our focus is currently to unlock value from the entire property.

And once we start generating resources, it will probably not be resource from just one single zone, it would be resources from a few others as well. And that’s where you can get into the discussions how we advance to the next level as will open numerous doors.

I always get this question, and a lot of people do the comparison ask you, “The next Fekola?” If you ask me it would be great if we get the next Fekola, but whatever we’re doing, we’re drilling and we’ll find out. But, my confidence is the ability to string a lot of ounces together on a lot of multiple targets, and discovery in the property and the package, which would make it quite significant as well.

Keith:           So, what do you do to keep market interest here, when at some point in time the street’s going to really want this?

Nana:            We’ve got to keep showing good results and value creation.

Keith:           Your stock has had quite a run here, is there any part of the company here that you think is still unappreciated?

Nana:          I think basically the run is definitely based on hits that have been made from the southern Mankouke target. Without a doubt – the team comes with some the finest experience and skillset, Keith you will be surprised if you were on an exploration call – simply amazing to listen to our team – I am privileged to have this team.

The Komet acquisition is relatively unknown to the street, and we also have to show to the street the reason why we think that it’s strategic. We’ve gotten already three advanced targets there, one that already has a historical estimate. And with some little work, that should be adding some more value.

Keith:           Okay, thanks so much for your time again.

Nana:            Keith, thanks for the interest. As you can imagine it’s been crazy, and we’ve been pulled in several different directions at once, but we’re always a phone call away, and happy to answer any questions.

___________________________________________

Roscan now has the geology and management that has attracted a huge audience, chewed through all the warrants and has strong institutional support.

For those who invested a year ago it has been a longer wait than anticipated, but the stock is a double! Patient investors win again!

Chris Taylor has another great bear–but this one is a kodiak.

His last deal–Great Bear Resources (GBR:TSXV, GTBDF:OTC) — went from 15 cents to over $9 in 20 months as they discovered a huge gold deposit in Red Lake, Ontario. Then it soared further to $14!

That quick move to $9 was a 60-Bagger in the blink of an eye. If you were lucky, you turn $10,000 into $600,000. It’s a win that allows you to relax. It’s a win that lets you do anything you want for a year…or three.

Taylor is back doing the same kind of geological detective work he did with Great Bear—with Kodiak Copper. Kodiak is now trading at 43 cents. It’s in the same spot Great Bear was at 15 cents, right when they started and before their first discovery.

Kodiak is similar to Great Bear in many ways:

1. Its main property is in Canada—in this case southern British Columbia
2. And it’s located just off a highway. Lots of nearby services and infrastructure means low cost exploration
3. It’s in a prolific porphyry district—There are SEVEN past and present mines in the district
4. Taylor acquired a large land package which could hold multiple deposits
5. There is lots of historical data
6. Like Great Bear, Taylor has a geologic approach that is different and is already bearing fruit
7. It has a tight share structure—just over 36 million shares outstanding
8. In this hot junior market, just ONE drill hole can add BIG value to shareholders —just like Taylor did with Great Bear.

The two plays are SO similar! Exploration legend John Robins is an advisor here as he is at Great Bear. Not only is he one of Canada’s premier land stakers, he has monetized numerous plays—most notably selling Kaminak to Goldcorp for over half a billion dollars in 2016.

But Kodiak has one advantage over Great Bear for the early stage investors–Kodiak already has a discovery hole because of Taylor’s outside-the-box-thinking. I’m going to tell you about that as I explain their property and how it could be on the cusp of a major discovery.

Great Bear is high grade gold in northern Ontario, but Taylor’s expertise is actually in large, lower grade copper-gold deposits called “porphyries”.

There is one very important thing to know about porphyry deposits–they are consistently mineralized over a VERY large area. They are one of, if not THE largest mined deposits in the world.

What that means is—when your drill hole hits porphyry-style mineralization, especially in a world class mining district—you may be onto something big. That’s why early drilling success can add A LOT of shareholder value.

And for the first time in a long time–I love copper right now. Copper prices have bounced back hard and fast since the COVID crisis, and China’s copper refineries “are sucking in concentrate at higher rates than the record setting 2019 total of 22 m tonnes” says mining.com.

Did I mention the stock is only 43 cents?

Porphyries are found up and down the west coast of the Americas–from northern BC right to Tierra del Fuego in southern Chile.

The porphyry asset that Taylor has locked down for Kodiak Copper is called MPD and it covers a sizeable footprint. At MPD, copper and gold have already been found over an area of 10 square kilometers. Major mining companies love these deposits because they produce incredible cash flow for decades. They’re that BIG.

Taylor bought Great Bear’s Dixie asset for $200,000 and turned it into a project that is now worth more than half a billion dollars today. The Dixie project area was large, had over 100 historic drill holes, was right beside the highway, good infrastructure and not well understood.

The MPD project is also large, is also located right beside a highway in southern BC, and also has over 100 historic holes. Similarly, Taylor bought 100% of the MPD property for only $200,000 and $100,000 in shares. 

Those holes confirmed the property had huge potential—but after going over the historic work, Taylor realized that the past drilling rarely tested below 200 meters depth.

Right away, he knew what to do. Last November Taylor’s Kodiak Copper team drilled hole MPD-19-003—which went deeper than the 100+ historic holes ever had on the property. 

Deeper was better–MUCH better.

That drill hole hit almost double the copper and gold grades over 200+ meters depth —just below where previous drilling had stopped – and discovered what Kodiak now calls the “Gate Zone”. 

Not only did this new discovery increase the value of MPD—but drilling suggested they were close…really close…to the core (read: higher grade) of a system with one or more porphyry centres. 

The new Gate Zone discovery even beat the expectations of Taylor and his team. The deeper drilling at Gate returned:

1)   higher grades over longer intervals  than all earlier holes,

2)   the length of mineralization was also the longest reported to date (mineralization now goes down 800 metres vertical depth!)

The grades at the new Gate Zone now compare very favorably to those from nearby producing mines – and this is elephant country for copper-gold mines.

The Copper Mountain mine is located only 35 kilometres (20 miles) to the south and the prolific Highland Valley Copper mine is situated just 80 kilometres (50 miles) to the northwest.

That means that this is a very, very small company could be sitting on something very valuable. Just as Taylor thought at the beginning of Great Bear’s Dixie project.

Based on what Taylor and his team are seeing from reworking the historic data, they interpret there could be at least three or four porphyry centres clustered underneath the MPD property. To be clear —— the more the better!

The single discovery hole at the Gate Zone last fall did not hit the porphyry center, but rather they think they just clipped the side of it. That means that the best drilling results are likely yet to come.

Past exploration has found copper and gold all over the surface at MPD and covering more than 10 square kilometers–a major sign that this is likely a big system. 

Taylor and his team also believe this system is probably upright and intact, making it simpler to explore

Kodiak is drilling early this summer. I want to repeat—we are now in a rare junior market where exploration can be richly rewarded.

In a perfect world, this summer Taylor’s team will:

1) Build on the best drill holes ever found on the property, and find even higher grades over a larger area at the Gate Zone

2) Test the TWO other priority zones at other porphyry centres with deeper drilling, below copper/gold zones from earlier shallow drilling.

CONCLUSION

Great Bear’s Dixie property and Kodiak’s MPD property have freakishly similar set-ups.

Like investors saw with Great Bear’s success, any drill results this summer– that continue to show economic grades and widths–will likely have a HUGE impact on the stock—and we have seen what Taylor’s stocks can do.

Kodiak has a tight share structure, hot management team, big project, great initial results and a low-cost development path. There are no guarantees in the resource sector but getting in early on potential big discoveries like this is why investors like us love this sector.

You get one chance to get in on the ground floor on Chris Taylor’s next deal. That chance is right now.

Kodiak Copper 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.