One of the best-performing stocks in the Casey International Speculator portfolio this year is a gold company that's making record profits even as gold prices have dropped.
How is this possible? Simple: the company itself doesn't mine; it gets paid to process ore for a large number of independent miners. So the "cost of mining" is borne by the miners, and our "Downturn Winner" profits regardless of that price.
Conceptually, this is very straightforward, but operationally, it's quite complicated. Frankly, we didn't believe it would work when management first told us what they proposed, so we didn't recommend the company until it showed it could deliver to the bottom line.
We also conducted a site visit to verify the story. Having seen how this company orchestrates all the moving pieces necessary to deal with different types of mineralization from dozens of different suppliers and still recover 94% or more of the contained gold, we doubt the success of this company could be replicated by others—at least not easily nor with any guarantee of success.
The company has found ways to cut costs and improve margins—as have most others during the last two years of retreating gold prices—but that's not the real driver of its record profits. That comes from the local government getting quite serious about clamping down on illegal mining and processing.
You see, the country where our Downturn Winner operates is one of the more stable and pro-mining countries in Latin America, but it has had a serious problem with so-called "artisan miners" deforesting environmentally sensitive areas, mining without permits (or paying taxes), and spilling mercury and cyanide across the countryside.
Many governments pass laws against this sort of thing, but this one has gotten very serious about the fight. It has shut down hundreds of illegal operations and required thousands more to register and work within the law. That's hard to enforce on the miners, but much easier to enforce on processing facilities.
As a result, our Downturn Winner has one of the only legal gold mills left to process ore from a variety of small producers. It can now pick from among the highest-grade supplies. The more miners go legal, the more and better choice of ore the company gets—and the more money it makes. Average grade of ore processed has gone from approximately 25 grams per tonne (g/t) two years ago to almost 35 g/t as of last quarter… that's over an ounce of gold per tonne.
In fact, the company gets more offers to process high-grade ore than it can handle, so it's decided to build a new plant with twice the capacity of its current operation. This is in the final stages of permitting, and the company has all the cash needed for construction in hand.
In other words, not only does our Downturn Winner deliver to the bottom line at almost any foreseeable gold price, it will soon deliver twice as much or more. When that happens, we expect the stock to soar.
All these developments are already in the cards and form our current basis for speculation. However, the company also has an exploration project that recently surprised the market with thick, high-grade gold intercepts, including 36.5 g/t gold over 4.9 meters—that's bonanza grade over easily mineable thickness. Drilling to follow up on this discovery is under way as we go to press.
What are the odds the company is on to a big, bonanza-grade deposit? Hard to say, as the exploration work is still pretty early stage, but as we get the exploration upside for free when investing in the growth of profitable gold processing, we're not complaining. Whatever the odds, "free" is a great price for a shot at a very rich discovery. And if the company does make it, it already has a plant for processing the ore.
To sum it up: This stock is poised to benefit from high-grade drill results as well as a positive permitting decision in the near term—and it offers long-term growth and minimal risk, due to its "profit at any price" business model.
We recommend that every gold investor own shares in this company, and we're busy looking for more great opportunities like it.
Start profiting today—and get ongoing guidance on this Downturn Winner—with your risk-free trial of Casey International Speculator. Test-drive it for 3 months with full money-back guarantee, and if it's not everything you expected, just cancel for a prompt, courteous refund of every penny you paid. Click here to get started right away.
