While the Euro-Zone's problems continue to make the headlines, investors should NOT lose sight of the emerging opportunity in the precious metals market and junior miners. Against a backdrop of a 1,000 point intra-day loss in the Dow Jones Industrial Average last Thursday, GOLD surged above the $1,200 level as it begins the long-awaited hyperbolic growth phase.
That said, we wish to continue our series on junior precious metals companies with incredible promise to make huge gains in this very exciting phase of the bull market. Today's featured company is U.S. Gold Corporation (UXG), an American-based explorer with significant land holding in Nevada and Mexico. UXG continues to report excellent drilling results and appears poised to take this relatively unknown company to the next level.
Rob McEwen, Chairman and CEO of US Gold, is also the Company's largest shareholder with 21% of the stock and does not draw a salary. Previously, McEwen was the founder and former Chairman and CEO of Goldcorp Inc. (GG), where its Red Lake Mine in northwestern Ontario, Canada is still considered to be the richest gold mine in the world.
During his tenure at Goldcorp, McEwen transformed the company from a collection of small companies into a mining powerhouse, growing its market capitalization from US $50 million to approximately $8 billion. The shares of the Company produced a compounded annual growth rate of 32%.
UXG's Nevada holdings are concentrated in the Cortez Trend - of the Battle Mountain-Eureka Gold Belt that includes American Barrick's (ABX) Cortez (35 million ounces of gold) to the north and the Ruby Hill mine (4 million ounces) to the south. US Gold's combined properties on the Cortez Trend sit 10 miles south of Barrick's recent discovery.
While the Cortez Trend remains under-developed, recent discoveries indicate that it could rival the famous Carlin Trend which is located approximately 30 miles to the northeast where reserves and mineralized material are estimated to be 180 million ounces.
The Company also owns approximately 500,000 acres of mineral rights in Mexico's Sinaloa State. Exploration work was initiated in early 2008 and has produced encouraging results including the exciting El Gallo discovery announced in November 2008.
McEwen believes that GOLD will rise to $2,000 per ounce this year and to an ultimate high of $5,000. Sounds pretty familiar. Could he be a reader of Marko's Take?
The company's investor presentation could be accessed by clicking here http://www.usgold.com/presentation/pdf/24.pdf.
According to UXG's most recent financial statements for the quarter ended March 31, 2010, liquidity was ample with more than $35 million in cash, short-term investments and GOLD bullion. The Company is debt-free.
As an asset play, UXG's value should be viewed based on its resources. All holdings have been independently audited with an "NI 43-101" - a national instrument for the Standards of Disclosure for Mineral Projects. The Instrument is a codified set of rules and guidelines for reporting and displaying information related to mineral properties owned by, or explored by, companies which report these results on stock exchanges.
According to the most recent review, UXG has "measured and indicated" holdings of 3.3 million ounces of Gold, primarily in Nevada and 9.8 million ounces of Silver in Mexico. Based on 122 million shares outstanding and current prices of the metals, this reveals an asset value of approximately $30 per share. UXG closed Friday at $3.27 per share.
Naturally, this valuation doesn't include the costs of development and mining, nor does it include the potential value of FUTURE discoveries. Since 2007, "measured and indicated" Gold resources in Nevada have nearly tripled! Given the prodigious history of the Cortez Trend, further resource discoveries would seem highly likely. The company intends to invest $18 million in the coming year to add to its resource base.
UXG is traded on the Amex and is quite liquid - trading approximately 1 million shares per day. The Company intends to list on the NYSE as soon as it can.
As a disclosure item, I hold some UXG. This stock is not for the feint of heart. The stock traded at nearly $7 per share in late 2007 before declining to about $.50 at the bottom of the financial crisis in late 2008. This stock should only be considered by aggressive holders with a high tolerance for risk.
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