Musings on Investing

Commodities, Gold, India and China

Amarillo Gold (AGC)

Recently, I attended Mines & Money in Hong Kong, and a separate day that they put on to discuss One Belt One Road project. Before this event, Cory Fleck and I discussed about China, and the fact that a lot of people do not want to recognize the progress China is making because it is not a democratic country. In my view “democracy” is the worst religion, and puts a society on a downward spiral. Linked here is our discussion.

Given China’s continual economic growth, which is underpinned by a cultural renaissance happening there, I find myself expecting a better future for both commodities and gold demand. However, optimism about commodity prices and gold will not necessarily translate into improving the lot of the mining sector, which has a history of destroying wealth. Here is an interview I did with Andrew Thake to expand on these issues.

On investments…

Amarillo Gold (AGC; C$0.27) is trading for less than its recently closed over-subscribed financing. AGC has been suffering financially, has a long-term debt, and has a terrible share-structure. They also haven’t been able to do much work at their projects in Brazil. Its share price has been in a vicious cycle as a result of these problems. This has also made AGC a rather inexpensive stock in comparison to the peer companies.

AGC’s Mara Rosa Project has a million ounces in reserves, with decent economics even at today’s gold price. With the newly raised cash, AGC wants to drill more, and update the resources, and the pre-feasibility study.

Based on what AGC already has, I see a very nice upside (higher than the usual 100% that I look for), and very limited downside risks. Given a large number of shares outstanding, any upward movement in AGC price will be slow. I have extra reason to be patient when acquiring more.

I will soon be in beautiful San Diego to attend Libertopia.

Warm regards,

Jayant Bhandari


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