Musings on Investing

Leverage is Mining Investors’ Mirage

Atacama Pacific Gold (ATM) and ValGold Resources (VAL)

The gold price has gone up by more than 100% in the last ten years. It has gone up by 280% in the last twenty years. Ironically, many gold bugs have come to see gold and most commodities as non-performing assets. This has happened because they made a fallacious assumption that an increase in demand for commodities would directly translate into an exponential increase in stock prices of mining companies. Alas, this did not happen.

The biggest culprits behind the destruction of wealth are the rules of thumb that investors apply to “value” companies. Using isolated rules of thumb, what looks cheap is often uneconomical and wealth destroying. I explore these issues in my latest article for the Mining Journal.

On investments…

Atacama Pacific Gold (ATM; C$0.71) is being acquired. There is a 25% arbitrage upside in owning ATM. There are a couple of big sellers in ATM and the deal will take about two months to close. So there is no reason to chase it.

Also, ValGold Resources (VAL; C$0.12) is being acquired. There is a 10% arbitrage upside in owning VAL. I usually wait for a 20% arbitrage upside to emerge before buying.

Warm regards,

Jayant Bhandari


Disclaimer: All information found here, including any ideas, opinions, views, predictions, forecasts, commentaries, suggestions, or stock picks, expressed or implied herein, are for informational, entertainment or educational purposes only and should not be construed as personal investment advice. While the information provided is believed to be accurate, it may include errors or inaccuracies. The sole purpose of these musings is to show my thinking process when analyzing a stock, not to provide any recommendation. I will not and cannot be held liable for any actions you take as a result of anything you read here. Conduct your own due diligence, or consult a licensed financial advisor or broker before making any and all investment decisions. Any investments, trades, speculations, or decisions made on the basis of any information found on this site, expressed or implied herein, are committed at your own risk, financial or otherwise.