Precious Metals

Louis James on the "Golden Runway"

Precious Metals

At PDAC James shared a new strategy he’s found to make money on gold stocks.

This year’s Prospectors & Developers Association of Canada (PDAC) conference featured hundreds of companies and speakers, and the Investing News Network had the chance to take in quite a few talks.
On Sunday, one highlight was a presentation by Louis James, editor of the International Speculator. James began his 30-minute slot by saying he is bullish on uranium and gold this year, but his main focus was the concept of the “golden runway.”
He explained that his latest research shows that between the time a company reaches the decision to build a mine and the time that the mine begins production there is usually a large share price rise for the company. He believes savvy investors can harness that information to make money.

James began by explaining that it’s not hard to figure out which companies are planning to build a mine. Once the decision is made, the company will put out a press release, and will continue to release updates until production begins.
What he found impressive when doing his research was that most companies that announce plans to build a mine actually do build that mine. “From 100 examples that we researched, 92 built a mine — a 92-percent success rate,” he said. In contrast, only one in 300 discoveries ever becomes a mine.

Even more exciting is the fact that the 92 percent of companies that managed to build their mine saw an average gain of 91 percent. What’s more, said James, the five most successful mine builders saw an average gain of 699.97 percent.

James acknowledged that those numbers might sound surprising, and that skeptical investors might say that such gains could only happen during bull market periods. However, James said that 30 of the companies he researched built mines during a bear market. “Their average gain was 27 percent, and yes, it is less, but it is still a strategy that works in a bear market,” he noted.

In closing, James laid out how investors can use the information he was presenting to make money. While it’s obviously best to try to invest before a company makes the decision to build a mine, he said that even if investors miss that milestone they still have time to get in.
“During the last months before the first pour, there is an acceleration, so there are still gains to be made,” he said.
James also noted that the companies that tend to make the biggest gains as they ramp up to production are the ones that do the most work getting their stories out — in other words, the ones that release regular updates on how work is going and the ones that receive analyst coverage.
Two companies that he thinks will do well based on his research are Atlantic Gold (TSXV:AGB,ASX:ATV), which currently holds four development projects in Nova Scotia, and Continental Gold (TSX:CNL), which is focused on a high-grade gold project in Colombia.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.


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