Back in 2017, I stood on a mountainside in northern Nevada, watching a drill rig on the Keystone Project. It was a classic Nevada gold story…lots of the right rocks, lots of the right minerals and the right address.
Keystone sits on the Cortez Trend. I drove past Barrick's giant Cortez Hills complex to get to the project from Elko.
Unfortunately, the early drilling results didn't hit gold. It was a huge disappointment. Turns out that the geology was complicated…also a classic Nevada gold story. Using the information gained from the first set of results, the team dialed in the next round of drilling. And they found gold…but it came too late.
The gold price collapsed 14% in a few months. By August 2018, it fell to $1,174 per ounce and investors bailed out of the sector. The little company that owned the project eventually ran low on money. Over the next year or so, some investors and staff left.
Not even the news that they found gold at Keystone could keep them together.
Eventually, only the CEO and COO remained. They had solid projects but needed great staff and new investors. They knew they had a winner in Nevada. But they also realized that they had a (literal) gold mine in Wyoming.
They spent the next year consolidating the stock to maintain their Nasdaq listing, courting new investors and looking for a new technical team. As they worked, the gold price began a steady climb from its low. By September 2019, it was up 32% to over $1,550 per ounce.
By August 2020, they found their new leader.
George Bee is one of the great names in the mining industry. You may remember Aurelian Resources, which made the Fruta del Norte discovery. Mr. Bee was the chief operating officer who helped develop that project, which eventually sold to Kinross for $1.8 billion. He was the director of technical projects for Barrick Gold for 16 years, so he knows a winning project when he sees one. George brought Barrick's giant Goldstrike Mine into production.
When the team showed him Keystone, he was interested. But it was the other project, in Wyoming, that won him over.
Called the CK Gold Project, it wasn't as exciting as the huge potential at Keystone. The Geological Society of Nevada published a paper on Keystone. The CK Gold Project was just a run of the mill gold/copper deposit…
The company quietly advanced this modest gold and copper deposit. In December 2017, Mine Development Associates put out a Preliminary Economic Assessment. The study showed that at a $1,250 per ounce gold price and $2.25 per pound copper price, the project made money.
An internal update, put out in March 2020, showed at $1,600 per ounce gold price and $2.80 per pound copper price, the project would generate roughly $510 million in cash flow and had a net-present value (NPV) of $321 million.
George reviewed that study and declared this a great potential mine, in a natural resource friendly state.
The company immediately began drilling at CK Gold to push it towards a Prefeasibility Study.
At current market prices of $1,900 per ounce gold price and a $3.00 copper price, the project generates a 70% internal rate of return and has an NPV of $475 million.
At the current share price, that's like buying $131 of asset value for $8.50 each.
I must admit to a conflict of interest in this company. Not only do I own shares, I consult for them. As I said, I visited Keystone and watched the process unfold. When they hired George Bee, I decided to get involved.
I want to be there when George takes this company from a microcap to a giant mining company. When it all works out, I'll probably write a book about the experience.
The fact is, I really like the value proposition. You see, today the market value of this little company is just $30 million. It has cash in the bank and no debt. The CK Gold Project, at current metal prices, is worth more than fifteen times that much.
And that doesn't consider the value of Keystone, or its other exploration projects at all…
This is all about timing. The company spent most of 2020 restructuring. It is a forgotten story in the gold space.
And it is not a Canadian stock. It trades on the Nasdaq in the U.S.—that's not exactly a hotbed of junior gold stocks.
The company's name is U.S. Gold Corp. (USAU:NASDAQ). It's one of the only junior gold stocks that you can buy on the U.S. stock market. You should drop by its website and check them out: www.usgoldcorp.gold. You can thank me later.
--Matt Badiali
Matt Badiali is a geologist and independent financial analyst. He spent fifteen years researching and writing about great investments inside the natural resources sectors. He can be reached at www.mattbadiali.net.
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1) Matt Badiali: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: U.S. Gold Corp. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: I am a consultant to U.S. Gold Corp. My company has a financial relationship with the following companies mentioned in this article: None. I determined which companies would be included in this article based on my research and understanding of the sector.
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