The investment analysis below is our sixth in our ongoing series of guest write-ups, and is brought to you by friend of the blog Jared Levin of A R Schmeidler & Co. We came across Jared’s outstanding recent write-up about a month ago, and frankly had to rub our eyes a little bit after our first read through (its not very often we come across asymmetrical risk/reward opportunities like Yukon). As Jared said, “after my first meeting with management I must have had a look on my face like I was stealing candy from a baby.” Indeed! After doing our own dd we felt the same way (and have been buying ever since).
Anyhow, for those of you out there scouring the markets for 1) an incredibly attractive “bottom up” bargain, and 2) an ideal macro hedge, then taking a deeper dive into Yukon Nevada will certainly be worthwhile.
Enjoy!
[NOTE “UPDATES” AT BOTTOM OF WRITE-UP]
Yukon-Nevada Gold Corp:
(YNG.TO; NG6 (Frankfurt); YNGFF): $0.25
12-Month Target Price: $1.00 (+300% / 4x)
24-36-Month Target Price: $2.50 (+900 % / ~10x)
Company Web Site: http://www.yukon-nevadagold.com/s/Home.asp
Company Power-Point: http://www.yukon-nevadagold.com/i/pdf/YNG_10_05_17.pdf
Sell-Side Research Coverage: None
Summary:
- Yukon-Nevada (“YNG”) is a deeply under-valued US-based small-cap gold miner with operations in Nevada, USA and British Columbia, Canada
- YNG is in the later phases of a turnaround:
- Company was previously mismanaged, leading to loss of environmental permits and a liquidity crises
- Today, company is newly-recapitalized and under the leadership of a proven turnaround CEO:
- In 2009, a Swiss group along with Eric Sprott put $60 million into YNG and installed new management
- Company is now debt-free
- Most operating permits have been re-instituted and YNG is executing on a court-supervised consent decree that spells out all of the remaining steps that YNG must take to become fully-compliant; YNG currently permitted to run at 75% of capacity, with remaining permits expected soon; note that future environmental liability is capped and constrained by the limits specified in the consent decree
- YNG re-commenced operations in October 2009 and recently achieved 150k oz/year operating rate
- Under low-risk expansion plan (based on the re-starting of existing mines and the milling of stockpiled ore), YNG’s production will grow from 150k oz per year over the next 12 months to ~400k oz in 2012 at a cost of ~$450 per oz
- No new equity issuance will be required to finance growth
- Company is currently finalizing $40mm loan and forward gold sale to finance re-opening of existing mines
- Free Cash Flow is expected to be over $75 million over the next 12 months at current metals prices, rising to $250-300 million-plus by the end of 2012 at current metal prices
- This is against an adjusted market cap of approximately $145mm
- Market does not yet appear to be aware of the progress of YNG’s turnaround:
- Company is currently net-debt-free trading at an adjusted market cap of $145 million—or 2x NTM free cash flow, and <1x expected 2012 FCF
- Mid-cap gold miners typically trade for 10-15x operating cash flow
- YNG is also trading at a market cap per resource oz of gold of approximately $35 per oz compared to a peer average of $150-200 per oz (peer group comprised of Alamos Gold, Aurizon Mines, Centamin Egypt, Kingsgate, Kirkland Lake, Mineral Deposits, Capital Gold and Semafo)
- There are multiple upcoming positive catalysts for YNG (see below) that will unfold over 2H 2010 that should quickly lift YNG closer to fair value
- Near-term price target of $1.00, or 6x NTM FCF should be realized fairly quickly as market becomes aware of the progress of YNG’s turnaround
Note: If YNG were re-valued to simply trade on a market cap/resource oz in-line with its peer group, YNG would currently be valued at $1.25-1.50/share
- Longer-term price target of $2.50 represents <10x 2012E FCF at current metals prices
Upcoming Catalysts:
The following catalysts will all be material positives for YNG and we believe have a very high likelihood of materializing when and as described:
- July 2010—Announcement confirming achievement of operational steady-state production of 150k oz per year at a cost of approximately $450/oz
- 3Q 2010—Completion of $40mm debt issuance/forward gold sale to finance expansion of Jerritt Canyon operations with the re-starting of the SSX/Steer underground mine (operations to re-commence in early 2011)
- 2H 2010—Announcement of multi-year contract/JV with Newmont Mining (NEM) and/or Barrick Gold (ABX) and/or other regional producers for purchase and processing of stockpiled medium-grade ore through YNG milling and roasting facilities
- 2H 2010—Announcement of drilling results as YNG executes on its planned $5 million 2010 exploration program on its Jerritt Canyon property
- 2H 2010—Announcement of settlement of 2 lawsuits brought by former employees and outsourced engineering firm, both of which were terminated by current CEO (note that bid/ask for the two settlements currently at a combined total well under $10mm; initial hearings have all been going in YNG’s favor)
- Q4 2010—Announcement of updated 43-101 resource estimate which should substantially increase YNG’s resource base, while converting a large portion of existing resources into reserves
- Last resource update by the Company was based on drill results through 2007 using an assumed gold price of $520/oz
- Updated 43-101 will be run using a 3-year average gold price of $1,000 (making a much larger portion of their mines economic, and thus expanding recoverable resources and reserves) and will also include drilling results from the last 3 years plus results from YNG’s current $5 million drill program
- Note that YNG has historically converted resources into reserves at a 120% rate
- 2H 2010 / 1H 2011—Potential re-initiation of sell-side research coverage. Note that several analysts used to cover YNG prior to the management turnover and permit suspension in 2008/2009. Current management believes that some former analysts would consider picking up coverage again after YNG announces that they have returned to 150k oz production (note that there is significantly less visibility on this specific catalyst and it is beyond management’s control)
Background:
YNG’s Jerritt Canyon property based in Nevada, USA has produced 8 million oz of gold since 1981. Prior senior management was weak and in 2008, production was suspended as a result of environmental violations and a lack of liquidity. As just one example of prior management’s incompetence, the Jerritt Canyon property at the time of shut-down was operating with over 500 employees while current management is running nearly the same throughput was fewer than 150 employees.
In early 2009, a Swiss shareholder group saved YNG from declaring bankruptcy by injecting an emergency overnight financing. Over the next several months, this same Swiss Group along with Eric Sprott of Sprott Asset Management put nearly $60 million into YNG, fired the old management team and engineering firm that was assisting with operations and brought in a new CEO named Robert Baldock who has a 30-year track record of overseeing turnarounds in the mining sector. Since taking over, new management has paid down the Company’s debt, made key maintenance investments to update machinery and equipment and come to a court-overseen consent decree with the Nevada Division of Environmental Protection (NDEP) that allowed the re-start of its facilities in October 2009.
Jerritt Canyon is located just Northeast of the prolific Carlin Trend in Nevada. One of its key assets is its roasting capacity used to process sulfide ore. Currently there are only 3 roasting facilities in Nevada, owned by YNG, Barrick Gold and Newmont. There will likely never be another roasting facility permitted in Nevada due to their lack of popularity with environmentalists. With roasting capacity limited, producers tend to process only their highest-grade ore, while stockpiling their low and medium-grade ore. In NEM and ABX’s case, they have over 100mm tons of ore combined sitting in Nevada that may never get processed that is listed on their balance sheets as assets. Eventually they will be forced to write-down that ore as liabilities if they cannot demonstrate to their auditors that there is any chance of processing it in the foreseeable future (there are also environmental clean up costs associated with it). Although under prior management YNG often processed ore on a tolling-fee basis for Newmont, current management is focused on securing a long-term profit-sharing ore-purchase contract to acquire additional mill feed stock.
Operations
YNG’s wholly-owned Jerritt Canyon property is 120 square miles with 3 current / former operating gold mines—the Smith mine, SSX/Steer and Starvation Canyon. The Jerritt mill is engineered to produce 6k tons of ore per day. Currently permits are in place for ~4.3k tons per day of ore throughput. YNG is currently completing stacking tests that should soon allow permitted throughput of 6k oz/day, which is the current engineering-rated capacity. Over the next 12 months, YNG plans to process 3k tons per day (at an average grade of 0.15-0.20 oz/ton, translating to >150k oz/year), with roughly half of the ore coming from YNG’s Smith mine and the other half coming from a stockpile of ore on YNG’s property. Over the next few years, as YNG’s SSX/Steer and Starvation Canyon properties come online, YNG would like to be supplying 50% of production from its own mines, or roughly 3k tons per day, which would still leave capacity of at least another 3k tons per day for entering into JV/purchase transactions to process and roast and sell the low-to-medium grade stockpiles of neighboring mines such as for Newmont and Barrick. Management is confident of being able to sign such an agreement by year-end 2010.
Over the next 12 months, if YNG is successful at producing in excess of 150k oz at their targeted cost of under $450 per ounce, cash from operations would exceed $105mm and FCF would approximate $75mm. Over the next 24-36 months, if YNG successfully re-opens its SSX/Steer and Starvation Canyon mines along with an ore-processing arrangement with one or more of its neighbors, then daily throughput should average 6k tons at average grades of 0.20 oz/ton, which would result in annual production of close to 400k oz (including regularly scheduled maintenance stops). (Note that YNG is considering restarting its wet mill for the processing of oxide ore, which would add additional mill throughput capacity of 5k tons per day—this would be upside to the assumptions described immediately above).
YNG also owns a mine at Ketza River in the Yukon Territory of British Columbia. Ketza River is a former producer with much of its infrastructure in-place that was closed down in 1990 when it became un-economic to mine (at ~$300 gold prices). In May 2010, YNG raised $10mm of flow-through financing for Ketza River and plans to commit another $11mm out of FCF to have a 60k oz/year mine up and running by sometime in 2012 (note that Ketza River was producing 100k oz/year when it was closed down in 1990). The mine would have a cost profile of less than $300 per ton and would be capable of generating approximately $50mm of annual FCF. This would bring 2013 production for YNG to 400-450k oz, assuming no contribution from incremental oxide processing capacity, acquisitions or contributions from further successful drilling and mining on YNG properties.
Conclusion:
Yukon-Nevada is substantially under-valued but no one is yet paying attention. Many investors were burned by prior management and are still stewing. In addition, the market cap is small and with large insider ownership (greater than 60%), there is limited float. There is also no sell-side research coverage. Because of these factors, there is a window of time for opportunistic investors to perform their research and come to a view on YNG. This window is likely to begin to close in July when the company announces it has achieved steady-state production of 150k oz. The reward for moving in early on YNG could be substantial, as a non-demanding multiple of under 10x 2012/2013 FCF would suggest a 10-fold return for the stock over three years.
UPDATES:
July 24, 2010
Some recent news on YNG, all generally supportive of thesis:
July 22: Company announces hiring of new Chief Geologist and outlines 50k foot drilling program for 2010, designed to extend the run-rate of 150k ounces of production (fed by their own mines, as opposed to purchased-ore from neighboring mines) from 4 years to 7-8 years (http://www.yukon-nevadagold.com/s/NewsReleases.asp?ReportID=410285&_Type=&_Title=Yukon-Nevada-Gold-Corp.-Announces-The-Recommencement-Of-Exploration-Drillin… ) (Note: I believe their is still a second press release expected in July confirming they have achieved 150k oz of run-rate production in their mills)
July 20: Boutique firm Byron Capital Markets launches on YNG with a Strong Buy and $0.50 price target
July 13: YNG announces $25mm forward gold sale financing to Eric Sprott’s Sprott Asset Management (http://www.yukon-nevadagold.com/s/NewsReleases.asp?ReportID=408905&_Type=News-Releases&_Title=Yukon-Nevada-Gold-Corp.-Negotiates-US25-Million-Note-Financing )
July 6: Boutique firm Hallgarten & Co initiates coverage of YNG with a $1.50 price target
Variant View:
As described above, the market has not revisited YNG since its difficulties under prior management. It is only due to the fact that we meet so many small-cap gold mining management teams each year that we were fortunate enough to be introduced to YNG’s new management, otherwise we would be in the dark as well as to the progress they are making
Note however, that upside case requires successful execution by management that at times may face set backs and not progress in a straight line.
The gold price is near an all-time high in US$ terms and could easily face a 10-20% correction beginning at any time. Note that despite having a substantial margin-of-safety, it is not uncommon for small-cap gold mining stocks to sell off, sometimes significantly, on any pull-back in the price of gold.
Above Average Odds Investing 
Thanks for posting this analysis.
What do you see as the downside risks in this investment, aside from a correction in gold prices?
Would you mind sharing how you calculate an adjusted market cap of approximately $145 million?
Am I correct in calculating a total share count of 578.8 mil shares as of March 2010 plus 245 mil of in-the-money warrants?
If so, the market cap would be much closer to $305 million, no?
I’m sure I must be missing something. Any clarification would be greatly appreciated.
Very interesting opportunity, im new to gold companies this is my first one.
how do you account for warrants in calculating intrinsic value?
have you made, besides the earnings power valuation based on 2012/2013 production numbers, some assets value or reproduction costs value?
regards,
other thing i forgot
im new to mining, i see that in last years (and 1q 2010) the cost of gold sold was more than the revenues.
can you explain what makes the future look more bright and what are the items that make cost of gold sold and why that is going to change?
is related with underutilization?
im sorry for the questions, im trying to better understand the business
Morning gents. For those following the name, the company announced they have reached steady state production this morning (up, up and away!).
http://www.yukon-nevadagold.com/s/NewsReleases.asp?ReportID=413519&_Type=&_Title=Yukon-Nevada-Gold-Corp.-Reaches-Steady-State-Production
Also, I don’t have my notes on me at the moment (wanted to post this announcement pronto), so email me if any of the following do not sufficiently answer your questions.
Greg,
As far as downside risks, given the downside protection provided by the company’s assets (let alone its normalized earning power), the only significant risk that really keeps me up at night is the risk of future equity raises (i.e., dilution). Personally I have been burned twice by idiot mining management teams unnecessarily raising equity in the past. That said, with Sprott and the swiss investors on board and production ramping up I doubt this will be an issue going forward.
Vik,
No notes on me, but if memory serves me the Hallgarten RR above has a solid primer on the issue. Email me if you still have questions after giving it a look through.
Emiliano,
Regarding the warrants, I just assume they are excercised (i.e., I include them in my fully diluted share count). As far as asset value…of course :), the replacement value of the company’s operational/strategic assets is roughly 500m (or roughly double our .30 cost basis).
I believe the cost of gold sold is why it is what it was due to both underutilization and various maintenance costs related to getting the assets in good shape for the ramp up in production. I’ll double check and get back to you if I am wrong on this.
Nice news, despite the cone crusher problem (maybe pushing higher costs for the quarter) its clear that the company can achieve the 8500 ounces per month goal.
one thing, i wouldnt like to see problems like this in a regular manner.
Thanks for the in-depth analysis, a couple of thoughts/questions:
1. Considering Byron Capital Markets appears to be issuing/selling a ton of shares for them, doesn’t that somewhat discredit their research?
2. Equity private placements in March February August etc-a HISTORY of dilution pre and post management change. I know you mention that as a concern of yours and it seems to be playing out, why all the optimism on this position when they appear to be diluting further, just as you mention “idiot mining companies” doing this to you in the past?
you know what assets are estimated to be worth 500M? it says strategic assets but doesnt specify wich and how arrived at that number.
Emiliano,
I hear you, but to a certain extent issues like this will reoccur every now and then. Although with most of the equipment freshly modernized and top notch operators at the helm, I don’t expect this to be too much of an issue going forward.
Regarding the assets, I didn’t get very granular here (don’t really have the resources to do so). That said, it makes intuitive sense to me that the newly modernized infrastructure and strategic mill would have tremendous value all things considered. Also, both management and a few mining analysts that I have recently talked with – who notably know far more about the mining industry than myself – confirmed the reasonableness of this estimate. Thoughts?
R. Richards,
Thanks. Feel free to discredit the Byron report if the conflict bothers you (although it doesn’t change the fact that YNG is still trading at a tremendous discount to its intrinsic business value).
Regarding the private placements and our optimism, you bring up an excellent point (I should of clarified in the earlier post). This was actually one of the first things my partner and I talked to management about (given that in our opinion the last capital raise was inexcusable/unecessary and wreaked of self dealing).
Why do I think this won’t be an issue going forward? I would say that having Sprott on the financing side of things and the presence of the Swiss investors provide me with a significant amount of confidence in this regard. Notably, the Swiss own most of the equity and perhaps more importantly, recently indicated to management that they would be furious with any additional equity issuance going forward (we found this out after we questioned management on the shadyness of the latest capital raise).
Again, management indicated that the swiss agreed wholeheartedly with our assessment, that they (mgmt.) completely understand our point of view, and most importantly, that we shouldn’t expect any further equity issuance going forward (at least at anywhere close to today’s price). Also, the latest k is filled with statements alluding to the fact that any capital raises going forward will most likely be funded with debt.
Obviously, if they do it again we will be out of this position like lightning. Yet given the above and the fact that this company should generate huge amounts of cash over the next few years, we don’t think there is a very strong probability that this will be an issue in the future (as always we could be wrong).
Any opinions on the latest capital raise? I can understand it’s necessary after reading their quarterly report, as they were running out of cash, but again, potential for dilution with another 25 million shares (even though it’s already at a slightly higher price, but still grossly undervalued)… I hope they become cashflowpositive very soon so these things can be avoided.
Any opinions would be greatly appreciated…
[…] Investment Analysis: Yukon Nevada Gold (YNGFF.PK) – This was actually a post from a week and a half ago over at Above Average Odds but I just came across it, and it was too interesting to pass up. […]
Good God AAOI, I’ve made 50% return since I read your analysis and dove in!
Too bad it was in a “paper” portofolio!!
Ohh Heart, where are you! But hey, I’m just starting my value investing journey.
Thanks again for the analysis.
Greg
Bart,
Despite the positive earnings report, I have to say I was a little peeved given that just a few short weeks ago the company indicated to me that further equity issuance was a thing of the past (if management didn’t deliver so well on the operational front I probably would have shot first and asked questions later). Fwiw, they reiterated the same today – so here’s to hoping the capital raise will be sufficient for the company to finally turn the corner in this regard. Still, given their relationships, the outstanding economics of the mine, the company’s advanced stage as far as production is concerned, etc. it really surprised me that they couldn’t come up with a less expensive form of funding to get them over the hump so to speak.
Greg,
Haha, my pleasure (although we both should really be thanking Jared). Good things tend to happen when you load up on world class mining assets at a gigantic discount to replacement cost – especially when those assets are run by top notch operators and on the cusp of ramping up to full production :). Anyhow, thanks for the kind words and good luck going forward with your “adventures in value investing.”
AAO,
I agree, I hope this is the last equity raise necessary, as just in the past 2 months they’ve increased their fully diluted sharecount by more than 5 per cent (25m for Sprott + 25m warrants a few days ago).
But as you said, operational updates have been excellent (though they seem to do an awful lot of cashburning things at the same time – hopefully this will improve future results), and if they manage to get the 40m bank loan (still under due diligence, according to their latest report), things should really start rolling for them. I’m already very curious about their 3rd quarter results, that should be a good indication wether or not they can fulfill the expectations, and make this stock a homerun.
Anyway, thanks for bringing this steal to my attention 😉
Yep, those are my sentiments exactly.
AAOI,
A few questions I was hoping you might be able to help me with:
Aug 9, 2010: steady-state production of 150k reached. One tertiary crusher needs to be replaced. Sounds like they have reduced production to 12k. When are they scheduled to fix the other crusher?
July 13, 2010: Sprott Assett Management purchases $25mm in senior secured notes. Aug 17, 2010: Raised $25mm in senior secured notes and warrants (due Dec 14, 2010). So is that a total of $50mm or they still need to raise $35mm?
Where are they with contracting to with NEM, ABX, and other regional producers to purchase and process stockpiled medium-grade ore through YNG milling site?
Do they have drilling results on $5million exploration program in Jerritt Canyon?
Settled Aug 26, 1020: YNG will deliver 2 million shares of its issued and outstanding common stock to Golden Eagle on or before October 20, 2010. Is this the reason behind the recent pressure on the price?
What was discussed during conference call on August 26th regarding YS Mining Company Inc.’s proposal to Tagish Lake Gold Corp. (TLG-V) including YNG’s Ketza River amalgamation with YS Mining Company?
Just to be crystal clear regarding your $500K asset value replacement cost estimate: That included 963K fully diluted shares, for a $/share of $0.52?
Nice find. Looking forward to hearing from you.
Wholder
Wholder,
Thanks and I apologize for the belated response given today’s announcement and the ensuing run up in the share price. Regarding the crusher, my understanding is that has already been fixed and that the company is on track to meet their production targets. Curiously, where are you getting the 12k run-rate number?
As far as the recent capital raises, you are correct that they raised 50m between the two deals. Going forward they will need further financing but hopefully Baldock’s recent comments that he has drawn a “no new equity issuance” bright line rule will hold true. The company is currently in talks at the moment to secure less expensive forms of financing, which would allow Yukon to move faster and commit to various projects sooner than would ordinarily be the case.
Concerning the potential ramp up from NEM and ABX, my understanding is that this is subject to additional permitting, which in turn is based on the company’s ability to demonstrate its compliance with the NDEP’s mandated emission levels as they slowly ramp up capacity (that said, given their outstanding recent results it should only be a matter of time before the consent decree is finally lifted). In other words, with their current compliance related restrictions the company is imho wisely focused on operating the mill at this point (i.e., getting operations up and running smoothly), and will only turn to others to increase capacity after that (assuming the consent decree has been lifted by that point, which I think is likely).
No idea regarding last weeks price weakness, your guess is as good as mine.
Regarding the recent CC, the gist of what was discussed was that by going about the project this way the company will receive similar production without the cost of developing/financing the mine themselves (i.e., same revenues less the $25m price tag). Baldock is hoping that the IPO of the newco would also highlight the company’s embedded value. Imho the deal is a pretty savvy move all things considered.
Yes, my rough estimate of YNG’s replacement cost includes the fully diluted share count. Hope all of the above helps and feel free to shoot me any additional questions if you have any
Thanks so much for generously taking the time to answer my questions. Great news about the drilling success at Smith Mine!
Great news about the crusher as well! Hopefully they are, indeed, back up to speed. Per the 12k run-rate figure I cited, I’m getting it from their Aug press release. Maybe I’m reading it wrong. It states, “…Chief Operating Officer Graham Dickson confirmed that subsequent to re-start, the company has produced for the month of July a total of 8,500 ounces of gold with part of the tertiary crusher line down, under less than optimum operating conditions. It is confidently expected that a rate of 12,500 ounces of gold per month is more than sustainable on an ongoing basis…”
The only other question I have concerns the 43-101. How does that differ from the company’s Proven and Probable figures, and why would the stock price respect one document over the other?
I’m still doing a lot of info gathering and putting the pieces of this company together. But wow – other than the dilution issue, they’ve performed as expected or better since the turnaround. I only have a small position now, just to have skin the game while I finish putting my information together. Hopefully the stock will accommodate my lengthy DD and wait to dip below $40 again until I’m finished 🙂
Wholder,
I completely understand…bringing gold miners into ones circle of competence can be a pain as their is a lot to learn and a lot of “pieces of the puzzle” to wrap ones heard around. As far as getting another shot at YNG at lower prices, I sure hope so! I know we would definitely enjoy another opportunity to add to our position at anywhere close to our original cost basis.
Regarding the 43-101: If I understand you question right the difference between the two is that the original estimate was done years ago when gold was at considerably lower prices – its also does not consider any potential upside from their additional underground resources, inferred open pit resources, or any success regarding the companies various fully funded exploratory programs that are currently under way. Hope that helps.
More results from Ketza River:
From the press release, “…None of these recent drill intercepts from the B-Mag Zone and Break Zone were included in the data used for the NI 43-101 resource estimate released on April 14, 2008 and therefore are likely to lead to an increase in the resource at the Ketza River project…”
Another gift!
Per my question regarding the 43-101, I didn’t do a very good job of asking the question. What I’m wondering is why you believe the current price only reflects the value of the 43-101? Why wouldn’t other traders who follow the stock be adjusting their values based on finds, such as the one posted above? And the price of gold is no secret. Why don’t you feel the stock price has already adjusted for the recent gold prices?
AAOI
Thank you very much for the compelling analysis of Yukon. Read it in detail, read the two stock touts you referenced, and pulled the trigger. Thought I might be a bit late as it had already run up into the 30s. Bought 10000 shs in early Aug in low 30s and another 5000 in early Sep at 45 and am up over 65% on my position.
You guys rock…;-)
Will stay on top of it through your boards. Thanks for continuing to answer questions and comment on occurrences at the company. Feeling like I have a nice cushion to ride it forward a ways and see what they can continue to do.
Appreciate it. Best wishes,
DJ
Wholder,
Primarily for all of the same reasons it was so grossly mis-priced in the first place. Given its small size and the fact that their is essentially still no meaningful sell-side research coverage, most investors remain completely unaware that the company even exists. Remember to keep in mind that most of the company’s former investors (both institutional and retail) lost their ass and hence are likely still jaded from the experience (i.e., they probably still suffer from the wildly incorrect view that the company’s assets/operations are unreliable, low quality money pit’s – which all things considered is somewhat understandable given their experience).
Other likely reasons include the fact that Yukon still as of yet doesn’t show up on any stock screens or other “tip offs” that typically alert investors and/or Wall Street to the opportunity as its still in the very early stage’s of ramping up production and updating its resource estimates. Personally I think it will take a few quarters of continued growth in production, revenues and cash flow before institutional investors really begin to catch on here and take notice.
That said, when they do, this stock could still easily double or triple from today’s level assuming management continues to deliver operationally, the company’s production level is able to ramp anywhere close to their 400k estimate, and their resource estimates continue to grow (assuming of course the price of gold stays stable and/or slightly lower).
DJ,
Thanks! I appreciate the comments and I’m glad to hear your on board. Fwiw, I think your patience will likely serve you (and all of us for that matter) very, very well going forward as management executes and production continues to ramp. Even after the parabolic run-up in price over the last month or so this company is still way to cheap imho.
[…] should have posted this write-up about a month ago — or at least posted a link to the excellent guest post on Above Average Odds Investing that inspired me to do my own digging into this […]
AAOI,
Thanks for the reply. This one keeps running away on me. I got lucky with that little dip and bought my first position at $0.42. I tried a limit of $0.37 for my second position, but soon upped my price to $0.50. Today the stock is $0.65. Looks like I will have to up my limit price again. Congrats to everyone that bought in the 20s and 30s!