Stakeholder Gold : SRC – Brookville Capital Intelligence Report on Stakeholder Gold Corp.

Dear Subscriber,

We are told that fossil fuels are on the way out. Coal and Oil have "had their day".

But what is the new coal and oil? Would be nice to know eh?

Obviously, this is pure guesswork. But it would make sense for the US to have plenty of it. If you look at the history books, it would appear that many of the recent wars (such as Iraq, Libya and Afghanistan) have been fought in countries with a lot of natural resources. Appreciate that's a cynical view. But there might be an element of truth in it.

So a useful starting point is what commodities does the US have good access to? I've had a look on Wikipedia and the answer appears to be lithium.

Take a look at this link:

https://www.statista.com/statistics/268790/countries-with-the-largest-lithium-reserves-worldwide/

As you know, we already have Sigma Lithium and Arizona Lithium in our portfolio. If the price dips…and many lithium companies have really taken off this year….then I think it might be worth adding another one to the portfolio.

Just to be clear here. I'm not saying lithium is the new oil. But given the potential growth from EV's and the importance of batteries…I think it could be an important commodity in the future. So I'd like a bit more exposure to it.

I asked the same question on LinkedIn and there seemed to be a belief that both hydrogen and LNG could also do well, so I'm hoping to have a few companies with exposure to these in the portfolio.

This week I've got another update for you. But thought I'd mention this.

Stakeholder Gold

If you cast your mind back, you'll remember that Stakeholder Gold are a very unusual mining company. Because they've already got one very profitable quarry that is generating cash.

There are really two pieces of news you need to take on board. Firstly, on 29th November 2021 they announced their 3rd quarter earnings.

The upshot being that for the nine months ended 30th September they reported revenue of CAD$2.3m and a gross profit of CAD$1.8m. Given the gross profit for the last quarter was CAD$0.7m. They may be able to achieve a gross profit for the year of CAD$2.5m. This annual gross profit forecast is very much guesswork and should not be relied upon.

What I particularly liked about this announcement (see the link below) was this quote:

"We have secured3 additional quarry sitesin Minas Gerais for exotic stone extraction and anticipate being able to report increasing production and profitability throughout 2022", stated Christopher Berlet, President and CEO of Stakeholder.

Here is the link:

https://stakeholdergold.com/stakeholder-gold-announces-q3-earnings/

So I'm hoping they will be able to generate even more profit (and cash in 2022). Which brings me on to the next topic.

If these new quarries perform similar to the first quarry, then Stakeholder could be trading (at 80 cents) at less than 1X forward earnings in the next couple of years. We'll see, but this alone makes it attractive at today's price. Perhaps this is why there has been such consistent buying of company shares by insiders as evidenced by filings on SEDI (System for Electronic Disclosure by Insiders). Management certainly seems interested in buying their own company shares at these levels.

Take a look at this link:

https://ceo.ca/src

The second bit of news is more about "no news"….bear with me.

They also own 100% of the Ballarat Gold Project in the White Gold District of the Yukon (see the initial write up on this). And there's been no news on this. I'd expect them to either do some exploration or sell it….but they've done neither.

I think that next year they'll probably do one or the other. Fortunately, as they're generating cash from the quartzite business they are in no hurry to sell the asset. Similarly, they may decide to use some of this cash to carry out some exploration (without needing to dilute shareholders - which is quite unusual for a Junior Mining company). This exploration can really go one of two ways.

If the results are good, then the asset is likely to attract more interest…and command a higher price. But if the results are bad, there's unlikely to be any interest. It's high-risk stuff. But given the results of some of their neighbours, it may be a risk they're happy to take.

To recap:

Ballarat covers some 7,000+ hectares located in the Heart of the White Gold District of the Yukon Territory. The property to the south of Ballarat (Coffee now held by Newmont) sold for C$500m+ in 2016, while the properties contiguous to the east, and north of Ballarat are held by White Gold Corp. (TSX-V: WGO) which today trading at around C$103m market cap.

White Gold has had some very interesting successes in proving up gold assets on their claims this year and has both Kinross and Agnico Eagle as cornerstone shareholders. In fact, Agnico Eagle recently exercised investment rights to keep their undiluted interest in White Gold at 20% which is a telltale sign of more interest. Let's see what happens.

Stakeholder's Ballarat property sits in between these two companies and represents some of the only remaining ground in the White Gold District held by "another company". Furthermore, an 11km road is being developed through the Ballarat property (Northern Gateway Road) which should add real value to its strategic importance in the area. I've chased up to see if there's any further information on this road and have been told that the surveys have been done, but it's unclear when it will be completed.

There is also some of evidence of gold on the Ballarat property as determined by previous exploration campaigns. But should they undertake a campaign next year - they will want to prove that it's still prospective.

However, Stakeholder has not conducted exploration on Ballarat since 2016. The last few years have been focusing on generating cash flow from the quartzite business. If exploration begins again on this forgotten property, 100% owned by Stakeholder Gold and the results are encouraging….as I eluded to earlier….the company market cap could improve significantly.

In Summary, either rapidly developing profitability and cash flow from the quartzite operations or developments with the gold assets is likely to drive interest in their shares. Although it's not clear what they are planning to do on the exploration front in 2022, if the cashflow improves as much as it could do from bringing these new quarries into production, that will hopefully benefit the shares.

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