Happy Holidays to all!
If you consider yourself to be a “savvy” investor, you already know that legacy-size fortunes are being made in the smoking red-hot arena for Jr. gold stocks. Investing in junior resource companies, whether it is oil, gold, silver, gas, coal or whatever, is not for the faint of heart.
Sometimes there is stomach turning swings in share price. Other times it seems like an eternity before there is any action at all, not to mention the lack of a liquid buyer base when all hell breaks loose in the markets. However, once you have decided to take the plunge, there are some rules I like to follow:
1. Invest in management: There should be a track record of proven experience on the management team, and at least one leader who has shown real drive in getting things done. An “up and comer,” so to speak.
2. Land: Where are the claims, what do they encompass. How large is the resource base. What is the quality of the bitumen.
3. Location: Are there prosperous, successful companies in adjacent claims. Location! Location! Location!
4. What is the plan: Why will it work! What is the timeline, or is there a potential buyer (takeover target).
5. Limit your investment: How much to invest. I believe no more than 5% of your portfolio should be risked in junior plays.
1,2,3,4,5 – Done Deal!?!
Here are the FACTS that convince me that giant, “Goldcorp” is about to make newly listed Lone Star Gold (OTCBB: LSTG) the NEXT 4,000% plus Winner!
- TICKER: LSTG.OB
- Dec. 16 Close: $0.74
- Avg. Vol. (3m): 881,084
- Market Cap: $86.22M
- EPS (ttm): -0.01
If you got in early on the right small-cap gold stock, it’s been a veritable profit fest!
- Short-Term: $5.75
- 6-Month: $27.50
- After Potential Takeover: $89 (Min) to $125 (Max)
ABOUT LONE STAR: Lone Star Gold, Inc. is a publicly traded (OTC.BB: LSTG) gold exploration and development company based in Albuquerque, New Mexico. The Company’s aggressive acquisition and exploration approach is strategically focused on proven, stable precious metal regions in America and Mexico. Currently, Lone Star has a 70% Working Interest in concessions covering 800 hectares in the La Candelaria project in Chihuahua, Mexico, which the Company is evaluating to determine the potential sites that represent the best potential for silver and gold deposits. Lone Star also has an option to purchase a 70% interest in the Ocampo Project, a 570-hectare gold-silver project in Chihuahua State, Mexico, and an option to purchase an undivided 65% interest in the San Antonio del Potrero mine tailings project in the city of Hidalgo Del Parral in the state of Chihuahua, Mexico.
With some of these smaller gold exploration companies having quickly turned a $5,000 investment in their stock into as much as $90,00, it’s no wonder that so many precious metal analysts are anxious to make a name for themselves predicting the next big winner. I’ve read some of those predictions and I have to laugh over all the speculation swirling around LSTG.
Especially that $179 a share takeover price!
LSTG is trading now at under 0.80 but LSTG is sitting on at least an estimated $18.14B worth of gold and silver. That makes LSTG an obvious takeover target for all of the major gold producers.
According to the rumor mill, Newmont Mining (NYSE: NEM, market cap of 30.77B) may be about to make a move for LSTG. Or maybe it will be Barrick Gold (NYSE: ABX, market cap 44.92B) or Yamana Gold (NYSE: AUY, market cap 10.59B) are creeping in the shadows getting ready to make a play.
Rumors are also stirring that giant Fresnillo (LSE: FRES.L, market cap 10.94B) could be looking at LSTG. This makes more sense because it has a nearby operation in Mexico.
With an estimated $18.14B in new, untouched gold and silver resources, LSTG is an obvious and very likely takeover candidate for the above mentioned and many others of the gold producing majors. However, careful study of the facts can only point to giant, Goldcorp (NYSE: GG, market cap 37.34B) being the ultimate winner.
Where you can differ with the rumor mill is on that $179 price. Experts expect the ultimate take over price could be more like $125 a share for a stock you can pick up now for less than 0.80!
LSTG Just Got $15 Million to Speed Its Development!
LSTG announced that on August 26th, 2011, it signed a $15 million agreement with a Hong Kong based equity investor. According to the terms of the agreement, Lone Star Gold will use the proceeds specifically to speed exploration and development of the Company’s Mexico based La Candelaria gold and silver mining project. The equity financing agreement does not involve any debt. Rather, the terms of the agreement give Lone Star the option to draw down from the $15 million amount as and when needed in the amount of $100,000 or multiples thereof.
“We’re fortunate to have secured a substantial equity financing agreement with a serious investor,” commented Daniel Ferris, Lone Star Gold’s Company President. “We’re also fortunate to have an experienced leadership team in place that will know how to best utilize the agreement’s proceeds to move Lone Star toward its short-term mandate of rapidly becoming a mid-tier producer in Mexico.”
If you are looking to play Gold, LSTG could be a far better way to profit on rising gold prices. The record shows that when one of these junior exploration companies gets bought out or discovered by Wall Street, its stock price literally explodes overnight. As the price of gold has risen, the takeover value of junior gold exploration companies has outpaced gold by ten-fold and more.
Big gold is paying big bucks for the little gold companies doing the hard work of finding new gold reserves.
According to Paul Murphy, Ernst & Young’s mining and metals analyst, the value of completed deals in those industries more than doubled to $96 billion in the first half of this year from the same period in 2010, The full-year total will surpass the $114 billion of 2010 to reach an all-time high as producers such as BHP Billiton Ltd. and Barrick Gold Corp. search for ways to spend cash or expand beyond their main income source, according to Ernst & Young.
According to Murphy, “The bigger players can’t afford to hoard their cash, so some of them are being forced into M&A,” Barrick Gold, the world’s biggest gold company, is buying copper producer Equinox Minerals Ltd. for $7.7 billion. BHP Billiton purchased Chesapeake Energy Corp for $4.75 billion and has agreed to buy Petrohawk Energy Corp. for about $12.1 billion.
The rising value of resource acquisitions indicates that debt is easier to obtain and the large producers are looking for takeovers. Smaller miners that find it tougher to raise funds will increasingly merge to gain scale and access to capital markets.
There are two immediate reasons to load up on LSTG now:
- LSTG is a potential sitting duck takeover target. Its giant neighbor in Mexico’s Urique gold district, Goldcorp, is in desperate need of new resources to maintain its production. LSTG’s La Candelaria project is practically abutting Goldcorp’s worn-out El Sauzal mine. Goldcorp has got to be licking its chops over the $18.14 billion worth of gold estimated to be sitting right next door.
- On its own merits, LSTG has at least an immediate gain of 500% built into it just to catch up to a reasonable valuation.
LSTG is a MUST-ADD to your Stock Watch list immediately.
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