02/13 2016

12 Million Brazilian Gold Mine Investment

Gold Spot Prices Gold Price Today Spot Change
Gold Price Per Oz $1,237.10 $2.50
Gold Price Per Gram $36.85 $0.08
Gold Price Per Kilo $36,847.94 $80.38

This project was researched extensively by a publicly traded Stock Company in the U.S. called Anglo Gold.  After geologicals,  metallurgicals  and testing, the site was never developed, and Anglo opted for other properties.  There are 27.5 tons of gold on this property, with a current market value of $1.06 Billion at Feb. 2016 Prices.  Should prices rise above 1250 an ounce, then that rises to about 1.12 Billion in valuation.

Analysis Note:   This project is favorable for two reasons.  A.  Exploration and B. Equipment Costs are both eliminated.  Instead of costing 50 to 70 million to start a new mining venture, the exploration and equipment costs have been paid for by principle. This also brings the cost of the gold production DOWN close to a CC basis instead of an AISC basis.   Mining firms have to calculate or depreciate the cost of equipment, and ongoing exploration into their cost per ounce (CC).  This venture is therefore  affordable at $12 Million because as we shall see, these costs are virtually eliminated.

The 12 Million Dollar Investment is for 50% ownership in the mining business to extract the gold.  The existing company has already purchased at auction from the Brazilian Government the entire mining equip from Colossus Corporation.  This equip is invaluable to the project, since it keeps the entry point for the private investor very low.  Instead of much larger start up costs, (as previously mentioned $60-70 million) and having to acquire mining equipment, this project is much closer chronologically to generating revenues than other gold plays.  That is what made it attractive to Kellen, and why we consider this a bargain, and undervalued, with faster returns.

This is a return on investment of 250 times. Estimating a 12 million dollar investment, at 2.5 grams per ton of raw material or 61.4 Kilos per month using a 25 day work month, and weekends off for laborers.   The Entire Business plan is available from Kellen Capital with an NDA and POF (Proof of Funds)  Return is Huge, Cost is low, below fair market value, the equipment will be used as collateral, and is worth the value of the Investment alone.

Gold is a profitable business venture at around 700 an ounce for production costs.  (Companies that have to acquire equipment and pay for exploration average their costs more in line with $950 an ounce. This is not this case with this project which enjoys a lower cost per ounce than average) Put another way below that price, then half the companies cannot afford to mine and produce gold.  At 1200 dollars an ounce, there is 500 dollars of profit remaining after wages, and overhead.  There are 37 ounces in a Kilo. Or about $18,500 per kilo of profit at todays price.  At $1300 you would add about $1500 more profit (since the constant is production, the price fluctuates)  then there or $20,000 per kilo of profit.  Kellen of course prefers the low entry level, and low cost per ounce since they are static.  Those factors make for a measurable result, regardless of gold’s selling price.

Because gold fluctuates, Kellen has used $18,500 per Kilo and a production of 50 Kilos or a profit of $450,000 per Month (Investor’s Portion of Profits)  after labor, production and other costs are factored in.

Analysis: This project will be capable of generating a realistic dependable income of $450,000 per month using conservative figures.  Should the mine produce the projected 61.4 Kilos, then the income would be $540,000.  (fifty percent of profits)

Using Gold/Oil trends has sometimes been used as a measure of inflation.  Kellen sees that entire formula as a red herring.  Pairing the investments of gold and oil is useful to neither industry as a stand alone investment.   They are not mutually inclusive, indeed, they would seem to go in different directions more often than not.  Oil stocks have seen their  lowest prices in 35 years, with some stocks as low as they have seen since the mid 80’s.  This is a strong “buy” signal on all things oil, and an opportunity to average down from 30 a barrel through 20 or lower, acquiring long plays at bargain prices.   Gold on the other hand has been rising in the last 2 months, and has not gone below the cost of production  in 15 years; (using worldwide production averages, then gold has not dropped below production costs in over 11 years)  meaning that gold is still profitable, while Petro States are collapsing.

Gold Graph

Gold was at its most recent low in Dec of 2015 at 1060 an ounce, but did not cross the floor of 1,000.  It is currently trending upward for the last two months.  It’s current price of 1240 by no means is guaranteed.  As investors move into gold, they tend to push up the price.  Trend traders have also spotted a short term bottom, as it bounced off of 1060 and gone back up steadily since then.  Trending upward is always a good entry point, and makes this investment lucrative.   The five year floor of 1040 to 1060 would seem to indicate that mining gold with a low investment thresholid is a very safe and long term play.  A private investor with cash reserves would be in a position to hold onto the finished product, selling gold above 1200.

 

Call Lon Dunn  Or Write:  Lon@KellenCapital.com

Kellen Capital, Inc

703-675-0593

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