A Short Update

Gold sector is in correction mode. As I discuss here, in this frothy and still expensive market, I like to focus on companies with solid moats. The following meet that standard:

→ Gold Mountain (GUM; $0.265) is being acquired. They have a nice little project in Canada. The arbitrage upside is as much as 20%. Moreover the merged entity will have a very tight share-structure. This is my low-risk, high-reward investment, making it my favorite at the current share price.

→ Jubilee Gold Exploration (JUB; $0.61): JUB has gone up quite a bit since I wrote about it here and here. JUB has a very nice inherent value. The problem is that insiders own ~90% of the stock, making JUB extremely illiquid. Moreover, minority shareholders have virtually no—if at all any—control over the company, given very high insider ownership. JUB does not even have a website. Were these ownership risks not there, JUB could easily still be my top pick.

→ Novo Resources (NVO; $1.10): I recently wrote about NVO. Also, here is a very good explanation of NVO written by Bob Moriarty. NVO has gone up quite a bit in the last couple of days. I would look for weakness to buy.

Additionally, here are a couple of companies that offer high-risk, high-reward situation:

→ Rusoro Mining (RML; $0.30): Using simple math, one could see that it was not going to be easy—if at all possible—for RML to ever make money. They had to sell gold to the Venezuelan government at a fraction of the international price. The project was “fortunately” expropriated. They have recently won an arbitration case against the government. Based on my quick calculation there could be as much as 400% upside. But the big problem is that in my view it will be very tough to get money out of the bankrupt Venezuelan government. Hence, I see RML as a GAMBLE, a high-risk, high-reward play for a small amount of my investment. Moreover, I never see such companies as buy-and-hold investments. I TRADE.

→ Thunderstruck Resources (AWE; $0.075): They are in the process of acquiring full ownership of their large project in Fiji. The company has a very good investor base and hence strong financial backing. It is hard to put a value on AWE, but it has a rather small market capitalization, and tight share-structure. I see AWE as a high-risk, high-reward investment.

Warm regards,

Jayant Bhandari

www.jayantbhandari.com

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