Del Real hints, “Seize the opportunity before it’s too late: The top gold mine on America is about to get approved, sparking a 12500% surge… Hurry, your chance to invest is fading fast.”
So, which stock are we talking about, and what’s the background?
Del Real are hinting at a gold shares that promises extraordinary potential, with projections of a 12500% surge as gold prices climb. Sounds too good to pass up, right? The pitch is tempting enough to make some consider signing up for a $199 newsletter that promises “insider” stock tips.
But let’s be real—putting all your trust in secretive stock recommendations might not be the best route to wealth. Instead of rushing to buy into the mystery, let’s take a closer look at the clues Del Real has dropped to see if there’s any substance behind the claim, and you won’t need to spend a penny on the subscription to figure it out.
The big question is: Should you take Del Real’s advice? The story revolves around John Paulson, a highly respected investor who could potentially score yet another huge win in the precious metals sector.
Here’s the core message:
With just weeks remaining in Q3, the urgency surrounding this “imminent” announcement feels a bit overhyped, and the prospect of a 12,500% return seems far-fetched.
Paulson is best known for his colossal success during the financial crisis, when he made a massive bet against the high-risk mortgage sector—an action that earned him the title of “The Ultimate Investment Bet.”
Now, Del Real is convinced that Paulson is poised for yet another big win, but this time in the gold market:
Del Real highlights his successful track record with mining stocks, claiming major profits from companies like Magna Gold, Nevada Sunrise, K2 Gold 2019-2020. Returns ranged from five to over fourteen times the initial investment. Specifically, he points to a 1450% gain from Nevada Sunrise, after buying during the lows of the 2020 market crash and selling at the peak that September. However, it’s worth noting that Nevada Sunrise was also promoted in 2017, and the success largely depends on the exact timing of buys and sells—holding onto the stock for a longer period would likely have led to much smaller gains.
I bring up this stock because Del Real hasn’t openly mentioned recommendations for the others. It’s an important reminder that junior mining firms are often highly volatile, acting more as trading vehicles than investments for long-term wealth. Nevada Sunrise, for example, is primarily focused on nascent lithium projects exploration, though it also deals in gold and copper. This exposure to lithium accounts for some of its unpredictable price movements.
Junior mining stocks tend to react strongly to good, bad news. While they might look like major winners in retrospect, making money instantaneously is a challenge, requiring quick, contrarian thinking. These stocks often appear undervalued during their lows and highly attractive at their highs, making it easy for investors to fall into the trap of “buying high and selling low.” Like Seth Klarman wisely puts it, these are “market-moving sardines,” not “sustenance sardines.”
It’s clear that this isn’t a new stock pick. We’ve been following Del Real, his associate, Nick Hodge, who have been promoting this same mining company dating back to 2018, albeit intermittently. However, let’s dive deeper into the details from the ad to fully assess the situation.
Del Real suggests that Paulson’s significant investment in gold is rooted in his belief that we are on the brink of crisis that is distant worse than what we saw in 2008. He compares it to the 1970s era, when the U.S. lost much of its global influence, and the U.S. Dollar weakened dramatically. This could trigger a gold frenzy, similar to what happened back then.
That being said, while the current economic environment shares some characteristics with the 1970s — such as rising inflation and geopolitical instability — the conditions are fundamentally different. A key event during the 1970s was President Nixon’s choice to decouple the U.S. Dollar from gold, which had been pegged at $35 per ounce since World War Two. This change led to an explosive rise in gold prices, peaking over $800 an ounce by 1980. However, after the U.S. dealt with inflation in the beginning of the 1980s, gold prices generally decreased for the next two decades.
While there are some parallels to the past — particularly inflation and global tensions — today’s situation is not identical. Recent inflationary pressures might evoke memories of the 1970s, but the broader context has shifted. The U.S. has operated for decades under the assumption that running high deficits and growing debt is manageable. This idea was cemented by the country’s role as a global protector, with occasional breaks in fiscal responsibility, such as the period before 9/11.
Now, however, this strategy is under scrutiny. If inflation remains high and interest rates fail to decrease, the growing national debt will become a critical issue. In fact, debt servicing costs on the national debt already account for a significant portion of the budget, overtaking defense spending and rivaling Social Security, which makes it a challenging topic for lawmakers to tackle. The situation becomes even more complicated when considering the large number of retirees who depend on Social Security, making major budget reforms politically unfeasible. Meanwhile, healthcare programs like Medicare and Medicaid continue to drain resources, while other budget categories, including the infrastructure stimulus, take up smaller portions.
Taking all these factors into account, the case for investing in gold is becoming more persuasive. Gold prices have already rebounded from their lows in 2022, inching closer to historic highs this year. Could we be on the verge of a gold “bull market phase”, akin to the 1970s? It’s certainly a possibility. However, one crucial element still seems to be missing: interest from individual, institutional investors. Despite gold’s impressive rise, major gold ETFs have faced significant outflows over the past year. This suggests that investors are not increasing their gold holdings through ETFs like GLD and IAU, as seen in previous periods of heightened market uncertainty, such as in 2020 and early 2022.
Turning to what Del Real refers to as the “most lucrative gold investment ever,” he has some fascinating insights about a particular mining stock, claiming it holds far more significance than is widely recognized:
The site also holds antimony, a strategic mineral essential for military applications and potentially valuable for next-generation batteries:
Environmental factors are also in the spotlight:
So, what could this stock be? The company in question is Perpetua Resources (PPTA), previously known as Midas Gold. Their Stibnite Mine project has moved closer to gaining approval, following the release of the Concluding Environmental Impact Report and a preliminary Decision Record by the United States Forest Service.
While there’s optimism surrounding Perpetua Resources (PPTA), formerly known as Midas Gold, it’s crucial to note that the projected 20,000,000 ounces of gold are still speculative. Mining companies rarely see valuations that align with the total value of their projected output, given the numerous uncertainties surrounding production costs, commodity price volatility, financing, and other risks. Looking at recent gold mining acquisitions can provide some perspective: the amount spent for undeveloped reserves has typically ranged from just 5%-25% in gold’s market value. According to S&P Global, from 2012-2021, acquiring firms paid a mean of $187/ounce for gold reserves, which is far below the paper value of gold reserves.
Despite these advancements, the market should remain cautious, given the history of delays and the speculative nature of the gold reserves’ value. The company’s stock has fluctuated over time, and while there’s increased optimism due to recent developments, the full scale and financial viability of the project remain uncertain.
Since March, Perpetua’s stock has stayed above $4 per share, signaling increased optimism. However, the company has faced several delays over the years in securing permits, which has hindered investors from seeing meaningful returns. Past promises of imminent permit approvals have often been followed by setbacks, adding to the sense of skepticism among long-term investors. Looking at Perpetua’s history on the chart, the stock has struggled compared to the broader gold mining sector (GDX ETF) and the gold price itself.
One of the major catalysts for the stock price surge last spring was the announcement of a potential $1,800 million financing package from the EXIM bank, which could help fund the Stibnite Mine Project. This announcement was followed by the appointment of a mining veteran as the company’s new CEO, fueling expectations that the project could be nearing construction.
Assuming no further delays, what comes next for Perpetua? The company will need to secure financing to move forward with construction, including a transportation route, power lines, and mining equipment. Given the recent rise in gold prices, there could be significant changes in the project’s economics compared to the feasibility study conducted in 2020. The firm still maintains that its current valuation is fewer than 20% its “net current value,” based on gold prices of $2350 or higher.
Looking ahead, if the Final Decision Document is finalized by year-end, Perpetua plans to complete its permitting and financing process by early 2025, with hopes of making a official construction approval and beginning construction towards the end of the year. The goal is to start commercial operations by 2028, though this timeline reflects a two-year delay from initial projections in 2020.
Once the permits are finalized, the company’s valuation could increase, possibly trading at a business valuation of $200 to $500 per unit of reserves. If a formal study is conducted, the reserves estimate may rise, potentially increasing the stock’s valuation. While the discovery of additional gold deposits is a possibility, there are risks involved, including potential restrictions on mine expansion or cleanup obligations if the project extends beyond 15 years.
The feasibility analysis conducted in 2020 outlined a starting investment requirement of $1,300 million. With inflation factored in, the potential $1,800 million loan from EXIM might cover the costs. According to the study, the mine could generate $584 million annually in after-tax net cash flow after expenses during the initial 4 years of output at a gold price of $1,850. If these assumptions hold true, the investment could be lucrative, with the loan potentially being repaid during the initial production phase. Although production is expected to drop significantly after the initial 4 years, the project could still generate over $3,500 million in net cash flow after expenses over the next two decades, assuming gold prices remain stable at around $1,600.
However, it’s important to remain cautious with mining companies, as they often spend cash flow in new projects right at the peak of commodity prices. Based on their projected financials, the investment does seem sound.
Estimating the market value of such a firm in about six years, when it ought to be in full-scale production, is difficult. For example, SSR Mining generated slightly less net cash flow after expenses in 2022 from its economically efficient mines and future projects, with a valuation of around 10 times net cash flow after expenses, amounting to about $4 billion. This is not an ideal comparison, as SSR Mining’s stock fell by 75% after a tragic incident at its Turkiye mine. However, for an operator managing a one-mine operation with substantial reserves, a 10 times cash flow valuation is a reasonable initial reference point, assuming stable commodity prices.
If construction, permitting move forward without issues, and the Export-Import loan is secured without additional equity sales, coupled with gold prices hitting $2,500 per ounce by 2030, the feasibility analysis suggests that potential avaiable cash flow could total about $700 million per annual figure during the initial four years, with an mean of roughly $400 million annually over the next 15 years. $4 billion worth to Perpetua Resources could be justified even at this lower average.
This would significantly increase the company’s worth, moving from $550,000,000 to $4,000,000,000 by 2030 Investors might see a mean yearly return of 40% if no further dilution occurs. Mining investments are seldom straightforward, it’s possible to experience fluctuations, including years of 500% gains followed by losses of 60%. Uncertainties remain regarding loan terms and necessary updates to the feasibility report from 2020, but this provides a framework for considering potential outcomes. Should an acquisition occur, a reasonable offer might be around $400 per unit of reserves, translating to roughly $1,900 million—indicating a potential 300% increase from current values. However, there’s no clear indication that an acquisition is imminent, especially considering that Barrick Gold, a prior significant investor, divested its shares in 2022.
The situation surrounding Perpetua Resources (PPTA) reflects the inherent risks and potential rewards of investing in junior mining companies. With significant backing from financial institutions, notably John Paulson’s company, there’s a sense of stability and confidence in the project. However, the project’s success largely hinges on factors like gold prices, interest rates, and the crucial $1.8 billion financing deal from EXIM.
If gold prices were to drop significantly, particularly to $1500 per ounce or lower, coupled with rising interest rates, the project might face severe challenges. In such a scenario, development could be delayed, or profitability could be at risk. For an investor, this uncertainty means that while the long-term potential could be great, the short-term future is highly unpredictable. Even if the project is operational, the profitability might remain under pressure, potentially causing a long wait for positive returns.
The mining shares lifecycle, as outlined by U.S. Global Investors, is crucial to understanding the risks involved. For Perpetua, we’re likely at the stage just before construction, which is often the point where significant challenges arise. The mining lifecycle includes many hurdles, from securing financing to dealing with fluctuating gold prices and construction costs. Therefore, while some see this period as a potential opportunity, others might want to wait for more concrete developments before committing.
The speculative nature of the battery aspect of the project adds another layer of uncertainty. While the partnership with Ambri and the potential demand for antimony is interesting, it’s still a long way off, and there are plenty of unknowns about how this will play out.
In terms of whether this is a turning point for Perpetua, it could well be—assuming they successfully navigate the permitting, financing, and construction hurdles. If they manage to get past those, the project could be highly profitable, with strong free cash flow expected in the long term. However, given the lengthy timeline to profitability (with commercial operations not expected until 2028), investors must decide whether they’re willing to hold on for the long haul or if they prefer trading around news and developments leading up to that point.
The improved outlook for permitting and financing this year compared to the past decade is a positive sign. However, as with any speculative mining investment, it’s crucial to weigh the potential rewards against the risks—especially with a project that has a history of delays and setbacks. Whether this is the right time to invest depends on your risk tolerance, your investment strategy, and how much you believe in the long-term potential of the Stibnite Mine.
