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My simple quantitative approach to spec stocks like Garibaldi

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I came across an interesting video of Eric Sprott recently.  Eric is a legend in the mining sector and I respect his knowledge and work ethic.  Eric has also been one of the supporters of Garibaldi Resources (TSXV:GGI), a company that has received significant scrutiny on this blog, IKN, and the Angry Geologist.  So, you would think that I disagree with Eric Sprott on Garibaldi.  However, that is not the case.

In the video, Eric indicates that he is looking for 10 and 20 baggers.  We all love those, don't we?  Eric has had a lot of them in his lifetime and is much wealthier than most of the rest of us.  Let's be clear, however, that investing in these types of stocks is probably not a core investment strategy.  I'm sure that Eric has also invested in many such stocks and lost money.  He is in the fortunate position that it won't have much of an impact on his overall wealth or quality of life.  My guess is that some investors in stocks like Garibaldi and Novo Resources (…

Would you rather...

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Receive one of the following:

$16,000 US dollars1,000 ounces of silver13 ounces of gold500 pounds of cobalt5,400 pounds of copper or: 1 Bitcoin? Whatever your fancy, the valuations are all currently about the same.
The pullback in Bitcoin I noted a week ago, which looked substantial at that time, now looks like a minor blip on the chart.  Exponential action!

Was Thursday's high on Bitcoin the top?  Probably not.  People don't seem to learn, so history repeats itself again and again with bubbles (lots of bubbles documented here).  Below is a chart for one of the first documented bubbles, tulip mania.  One thing I've learned from bubbles and market crashes is that the decline in price when a bubble pops is typically several times faster than the exponential rise up.  So, when the Bitcoin/cryptocurrency bubble pops, it is likely going to be mind blowing!  If 20% daily gains and losses are normal for Bitcoin, a sharp selloff is going to look like 40 or 50% in a day.  You see, ma…

Garabaldi doesn't add up

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Thanks to the BC Securities Commission, Garabaldi Resources (TSXV:GGI) has disclosed the drill hole coordinate and composite grade intervals that should have been in the drill results release.  Let's do a quick recap.  The company started making a lot of noise about a massive nickel discovery on September 1.  Assays were finally released on November 20 (more than 11 weeks after Sep. 1) in a news release that looked like it was hastily written and incomplete.  It then took another 9 days for the company to issue the full disclosure required by the BCSC.

Why would Garibaldi not want to be forthcoming with this information?  Perhaps, because the facts don't live up to the hype.  The Angry Geologist analyzes the data here and highlights that the massive sulphide intercepts are really quite small and appear to be confined to a small zone.  Stuff like this makes the Angry Geologist angry and you won't like him when he's angry!

I'd also like to point out some simple math.…

Vogogo says no material undisclosed information - seems legit

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I usually keep an eye on streaming news headlines when at my desk.  One of the releases that caught my eye today was from Vogogo (TSXV:VGO) confirming no material undisclosed information.  Does the company really not have an explanation for the 20% move up in the stock today and fourfold increase in the past five weeks?  I call BS and decided to dig a little.

The company website suggests a dormant company with the contact person listed as accounting@vogogo.com (link).  News releases provide the following description of the company: "Vogogo has provided payment processing and related transaction risk services and continues to own certain rights and software with respect to such services."  Looking back, it appears that Vogogo had set up a Canadian bitcoin exchange that failed in mid-2016 (link), roughly a year after raising $12.5M through a brokered financing.

As of Sep. 30, the company still had $6.9M in cash and the MD&A indicates that: "In the latter half of 2016 …

Beginning of the end of the Bitcoin bubble?

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Us mining professionals have been getting sick of cryptocurrencies because they have been sucking investment dollars out of the junior mining space.  We are also sick of watching others make money while junior mining stocks are, at best, lackluster.

But, wait, what is this...is the Bitcoin bubble about to pop?  Bitcoin and its cryptocurrency brethren have been going exponential recently, which is typically the last and most violent move up when something is in a bubble.  Go check out the nice graphic by Visual Capitalist earlier this week on Bitcoin's rise to $10,000 (link).  As per their table below, Bitcoin moved from $9,000 to $10,000 in a mere two days.
Today, Bitcoin's rapid rise came to a screeching halt at around 9am.  It hit $11,300, then fell 20% to $9,000 by 2:30pm before rebounding to $10,000.  Something that can move this much this quickly does not have fundamental underpinnings.  It is a bubble and it will pop.  Why do I care?  Cryptocurrencies are going to make j…

Cryptocurrencies - creating value out of thin air (and electricity)

In junior mining, we often see companies seeded with cheap capital, followed by a pre-IPO round at a higher valuation and then an IPO at a higher valuation.  That is very similar to something I saw this morning relating to cryptocurrencies.  NetCents (CSE:NC) is creating a new cryptocurrency called NetCents coins. They are pre-selling the first batch of 5 million for $2/coin and plan to release a second batch of 5 million at $4/coin.  The coin exchange will then go live next month and coins will be valued based on demand.  Very similar to junior mining, right?  Well, there is that one difference, which is that a mining company needs to have a real asset.  With cryptocurrencies, there is no underlying asset and money can only be made based on the greater fool theory.  Bubblelicious!
Cryptocurrency talk is going mainstream, so the top probably isn't that far off but things are likely to get even crazier before the bubble implodes, as it always does.  Sadly, electricity consumption …

Follow up on prior posts (WHY, GGI, GQM, LA, IBAT, MXL)

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How time flies.  This blog has now been up and running for almost two months, so I thought I'd take a look back at the posts and see how some of the stocks mentioned have been doing.

West High Yield (TSXV:WHY) - Let's start with everyone's favourite train wreck.  WHY is trading again and the stock continues to highlight how gullible and dumb some retail investors are.  The US$750M takeover deal was clearly a scam, yet there seem to be no repercussions on the perpetrators.  The situation could have been a lot worse if the ASC had not halted trading shortly after the "deal" announcement was made, although it should have never opened for trading in the first place.  My guess is that somebody somewhere, whether inside the company or outside, was getting ready to sell shares to the suckers who believed WHY was worth US$750M.  Interestingly, a number of insider transactions dating back to 2006 have suddenly been filed on SEDI by Frank Marasco and his holding companies. …

After 7 weeks, reality bites and Garibaldi investors sell the news

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First, my apologies for how quiet this blog has been for the past two weeks.  Most things in mining land have seemed very tame lately when compared to the rubber-necking we did on the horrific car crash that was West High Yield (TSXV:WHY).  My travel schedule has also been jam packed lately thanks to the stellar mineral resource estimate issued by Tinka Resources (TSXV:TK) and starting work for AbraPlata Resource (TSXV:ABRA), which has a ridiculously low valuation in the silver-gold sector because few people have ever hear of it (Disclaimer: I work for TK and ABRA plus I am long those stocks, so consider me biased on these companies and do your own due diligence).

Let's turn our attention today to Garibaldi Resources (TSXV:GGI), which finally released some assay results (link) from its E&L project at Nickel Mountain.  This company is likely giving us a real life demonstration of the life cycle of a mining stock, which as I'm sure you all know suggests that mining company s…

OMG, LOL, WHY!

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TGIF!  West High Yield (TSXV:WHY) issued a news release today after the close.  In a nutshell, here is what it said:

The buyer, Gryphon Enertprises, LLC was formed for the purpose of acquiring assets.  They have no assets and it isn't worth suing them if they screw us over.  The buyer has hired an "arranger" to raise the USD $750 million, but there are no firm commitments or arrangements to fund the transaction.Listing Baker Mackenzie as the buyer's law firm was an error.  What kind of clown show is this?  Lawyers play a pretty key role in any real deal, so how does a law firm get listed in error?WHY has not yet received the USD $500,000 deposit.  Don't bother checking the bank account over the weekend Frank, as you've already told us that Gryphon doesn't have any assets.They have no clue how a take or pay commitment would work.  Guys, that should be the least of your concerns.  This deal is similar to me selling my house to a homeless guy for $500 million…

Washington Post picks up the West High Yield story as the deposit deadline looms

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It has almost been a month since West High Yield (TSXV:WHY) announced its ridiculous deal to sell its mining assets for $750 million USD (link).  The first and most obvious thing that didn't add up on this deal was the astronomical valuation, USD$750M for a CAD$21M market cap company by a Maryland corporation with no apparent business or history.  Digging a little deeper, the purchase and sale agreement made no sense and was impossible to execute and the purchaser's law firm, Baker Mackenzie, has no knowledge of the deal.  While the WHY news release refers to the sale of the Record Ridge South and O.K. Mineral Assets, the purchase and sale agreement requires WHY to deliver 100% of the corporation's shares, which is impossible for a publicly traded company.  The purchase and sale agreement also requires take or pay agreements to be put in place before the closing date, although it doesn't specify what or how much.  Minor detail, I guess!

The size of the deal and the dub…