Amir Adnani, founder of GoldMining Inc. (TSX: GOLD & US: GLDLF), isn’t shy about the fact that he’s not the originator of the business model of the company. He’s following the trails of success left by others. Just like Buffett mimicked, tweaked and then surpassed his own mentor, Benjamin Graham, becoming the best investor in history, so Amir has utilized a PROVEN model, implemented by billionaire mining entrepreneur, Ross Beaty.
That’s greatness, in my book. Even Warren Buffett famously said that the FASTEST and SUREST way to succeed in life is to learn what WORKS in similar cases and to personalize it.
Here’s what Lumina Copper’s strategy was in the early 2000s. This is the company that GoldMining Inc. (TSX: GOLD & US: GLDLF) is basing its strategy upon, and has the potential to experience similar success.
As you can see, in 2003, Ross Beaty began acquiring copper assets at $0.80/lb. The company’s market cap was a mere $10M. As copper’s price jumped by 20%, the market cap quadrupled. By Mid-2005, the market cap was 16-TIMES what it was just two years prior, as the rising price of copper made the assets more valuable, because their ECONOMICS improved.
Beaty then decided to implement an exit strategy of splitting the parent company into four separate entities, unlocking the value of the individual assets, by letting standalone management teams focus on each of them as a main goal.
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The original company was split into four companies. Over the next few years, those assets were sold for about $1.2-billion, an incredible return on an investment of just $80-million.
That’s how you make 1,500% RETURNS in the mining business: (1) buy distressed assets, which have a higher degree of potential, (2) patiently wait for the cycle to turn, while keeping low overhead costs, (3) implementing a WISE exit strategy, which could be (A) splitting the various assets into individual projects, (B) selling them, (C) developing them on your own or with a JV partner, and (4) creating royalty deals.
Here’s the timeline of GoldMining Inc.’s (TSX: GOLD & US: GLDLF) acquisitions:
The price of gold bottomed at $1,053/ounce in December 2015. At that time, the company’s share price was CAD$0.48. By August 2016, the price of gold had risen by 30%, while the company’s share price SOARED by hundreds of percent, finally touching CAD$3.14.
Instead of implementing an exit strategy as Beaty did, management, in this case, decided that the cycle wasn’t topping off and that the price of gold would allow it to extract even more equity and value in the future.
Gold, indeed, has continued to rise, now up 50% since bottoming. But, COMPARED with copper’s move above in gaining about 450%, gold’s cycle is still in its early days.
Beaty’s companies were sold after the spot price of copper had doubled, compared with the cycle’s bottom. For gold, this would mean at least $2,000. In other words, there’s upside potential right now, if this company is following in the footsteps of previous successes.
Judging by the shareholders of GoldMining Inc. (TSX: GOLD & US: GLDLF) – people like Rick Rule, Marin Katusa, Doug Casey and others, who were THERE in the days of the copper rally and backed Ross Beaty as well – this is the real deal.
Consider shares of GoldMining Inc. (TSX: GOLD & US: GLDLF)!
Best Regards,
Tom Beck
Research Partner, PortfolioWealthGlobal.com
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