Take physic, pomp

Regarding Porter Stansberry’s latest pump job (from IKN361)

This from IKN361, out on Sunday evening. A little light reading from the edition, far from the most important piece this week

Porter Stansberry brings a bazooka
to a knife fight
He moves in darkness as it seems to
Not of woods only and the shade of
Wall, Robert Frost, 1914
As mentioned in today’s intro, last
week’s biggest market moving event came from the money side of the mining
sector, rather than the mining or operational side. For those unaware as to who
Porter Stansberry is he’s the brains behind Stansberry Research, that bought
out the Agora empire a few years ago (where Stansberry started work as a file
clerk in 1996) and in 2014 bought out Casey Research from its founder Doug
Casey. He’s also the person who was fined $1.5m in 2007 by the U.S Courts for
disseminating false stock tip information, with a court that said during its
ruling that, “Stansberry’s conduct
undoubtedly involved deliberate fraud, making statements that he knew to be
When he tried to take his case to the U.S Supreme Court under a
First Amendment appeal, he wasn’t even let in the door (10). He moves, he
shakes, he sells dreams and investment tips, he tells his largely hard-right-wing
audience what they want to hear (a recurring theme is the Death of the Dollar,
the pitch is to sell gold, sometimes punctuated with warnings how Barack
Hussein Obama is about to hijack the constitution and claim a third term of
office), he’s short on morals, long on spiel. In short Stansberry is a stock
tout and obviously a successful one as these days his touting moves markets in
a way his peers and wannabes only dream about.
Last week Stansberry rolled out a
new promotion and it’s a doozy. You can find it if you like on the internet,
not difficult to come across, in which for the low low price of U$1,500 (one
thousand five hundred United States dollars) down and $49 per month you get
immediate access to his suite of 15 investment recommendations that tie in
closely with the…yes you’ve guessed it,…imminent death of the dollar and a
gold price about to jump to $2000, $5000 and even $10,000 per ounce on
wholesale financial sector meltdown and destruction. Bless him.
After noting the moves in stocks
apparently under the Stansberry pump on the blog last week and after posting
(12) on possibles and probables on the list, I decided to stop being so lazy
and chase up the story a bit more. It turns out that the 15 Stansberry
investment recommendations aren’t all mining stocks, but there are seven
precious metals mining stocks highlighted and recommended and they are the following:
  • Silver Wheaton (SLW)
  • Franco Nevada (FNV)
  • NovaGold (NG)
  • Pretium (PVG)
  • Almaden (AMM.to) (AAU)
  • Midas Gold (MAX.to)
  • Lundin Gold (LUG.to)
That’s an interesting list for
several reasons, so let’s start by splitting them down the three obvious
sub-sets, small medium and large:
1) The
smallest ones LUG.to, AAU/AMM.to, MAX.to
: These are straight plain juniors
all. Here’s a five day chart that shows how they’ve performed compared to gold

Those are big, nay massive two day
percentage price moves. The type of move that catches the eye of regulators and
Lundin Gold was required to comment on the activity on Friday (14).
COLUMBIA–(Marketwired – Apr 8, 2016) – Lundin Gold Inc. (“Lundin
Gold” or the “Company”) (LUG.TO)(LUG.ST), in response to a
request by Market Surveillance (IIROC), today confirmed that it is not aware of
any material, undisclosed information related to the Company or its Fruta del
Norte gold project in Ecuador that would account for the recent increase in the
market price and level of trading activity of its shares.
As is often the case, it’s what
they don’t say which is as important. LUG is under no obligation to state
everything it knows, it needs to disclose its own position and nothing else,
but nobody in their right mind runs a multi-million dollar public listed gold
mining company and doesn’t know within seconds the whys and wherefores of
significant price movements in its shares. Or put more simply, Ron Hochstein
isn’t going to say, “We are not aware of any material, undisclosed information
related to the Company or its Fruta del Norte gold project in Ecuador that
would account for the recent increase in the market price and level of trading
activity of its shares but we do know that Porter Stansberry just pumped the
merry bejeez out of our stock and it’s flying because a whole bunch of people
are scrabbling for the few shares on the ask”. Not LUG’s problem, frankly, but
you could reflect to yourself how “fortunate” this timing is for Lukas Lundin,
what with LUG’s big financing to raise the capex required to build the mine has
been flagged by the company itself for this quarter.
2) The
medium-sized companies, NG, PVG:
These are liquid stocks with decent sized market
caps of around $2Bn and $1Bn respectively and as you’d expect they do much
better average market volumes in both share count and cash terms than the
smaller fry noted above. Here’s how those two traded on on Thursday and Friday compared
to GLD, as well as the GDX and GDXJ benchmarks which also had good days:

As you can see, PVG and NG
out-performed GDX and GDXJ by around 4% on Thursday and Friday, which is a
reasonable return for one’s efforts but nowhere as impressive as the little
guys noted above.
3) The big
cap miners, FNV and SLW:
These are highly liquid Tier 1 names, worth $11Bn and $7Bn
by market cap. Here’s the five day chart of these two against GLD, GDX and

FNV performed right on the GDX/J
average, SLW didn’t have such a great time (perhaps because it’s still in the
overhang period of its recent $550m equity placement) but performed closely
with GLD.

of promotion effects
. The seven stocks performed very much in line with what a
market watcher would expect from them under these circumstances, targets of a
big promo pump by a market tout with a following of people who can easily shell
out $1,500 for a list of names. For sure the whole mining complex had a good
week and that helped things pop nicely too, but the small non-liquid stocks’
massive moves weren’t mirrored by the bigger and more liquidity traded issues.
That makes sense, as even the biggest mining promo pusher can’t bring in the
type of cash that would move up FNV 50% on its own, but it’s perfectly feasible
to have a $5m anomaly entering Almaden and seeing it pop like crazy.
So let’s look a little more closely
at the big movers, with LUG popping over 30% in two days, MAX around 40% and
AMM up 60%. As for the volumes involved, Lundin Gold (LUG.to) isn’t a good
example because it’s a very tight share structure and there’s little width
available even if you pay up. Also, after running the numbers on that one just
a few weeks ago I know it’s now way over-valued (and for my taste, a perfect
example as to why this isn’t some carefully DD’d scientific list…it’s just
another stock pump). However Almaden and Midas are fairer yardsticks so let’s
note volumes in those stocks these last two days:
  • Almaden did around 5.5m
    shares more than its daily average on its US ticker (AAU) and 1.3m more
    than its normal on the Canadian ticker (AMM.to). It’s never easy to be
    exact, some arbitrage may have caused some of that volume, but it’s fair
    to say that AMM saw around $5m dollars flow into it from this promotion
    and that’s more than enough to get a normally thinly traded exploreco to
    jump like a kangaroo.
  • Midas did around 2.5m
    shares more than its daily average in its US OTC ticker (MDRPF) and the
    same in Canada (MAX.to). Let’s go for around $2.5m in extra volume in this
    company’s shares the last two days of last week. We should also note that
    as a Canada listed stock with just an OTC entry point for US investors
    (apparently the lion’s share of Stansberry customers, I’m reliably told),
    it’s a lot easier to move cash into AAU than it is MAX.to.
From those, it’s fair to say that
between $2.5m and probably closer to $5m is the kind of money Porter Stansberry
can conjure up in just two of the 15 investment recommendations he put in front
of clients who paid U$1,500 each for the privilege of reading his words. That’s
not bad at all and as I noted on the blog Saturday (11), “I’ll give Porter Stansberry credit too, he sure knows how to run one of
these and makes the rest (of the junior miner newsletter writer and stock
picker community) look like pikers”.
He gets an extra $5m moving into an
illiquid stock like Almaden and I don’t have to check out my stock radar page,
just my e-mail page is enough as I’ve received at least 20 mails since Thursday
with “AMM” in the title line.
It also makes sense that the entry
of a “fresh” $5m over two days into PVG or NG, stocks that average around U$10m
in trade volume per day, will move their dials a little compared to benchmarks
but not by anything like as much as the little guys in percentage terms.
It also makes sense that $5m “fresh
and extra” moving into Franco Nevada over two days (does U$70m to U$70m per day
average) or Silver Wheaton (does U$80m to U$90m per day average) won’t move
their dials so very much.
It all fits in fairly well and that
type of “Let’s say $5m” per investment idea means Porter’s clients are not
short of cash to play with. Which is fair enough when it comes to the big
names, I’ll even take the medium sized names as fair game for large money at a
pinch, but you can’t tell me that Stansberry Research didn’t know exactly what
was about to happen to LUG.to, AMM.to and MAX.to as soon as he pumpo started.
Which makes me wonder just why those names were chosen.
Focus on
I’m not going into all three of the
smaller names today, but there are reasons to suspect that both LUG and AMM
aren’t just names Stansberry pulled out of a hat or eventually decided upon
after close DD. Today I’m going to try and keep it short (ish) so my efforts are
now concentrated on Midas Gold (MAX.to).
In IKN325 dated August 2nd
2015, we ran a feature on what looked like a set-up for a promo pump in Midas
Gold. There were several points and point six noted details about the May 2015
$8m placement, which sold 19.1m units at 42c apiece (unit = 1 share + ½ warrant
at 60c strike, valid for two years). Here most of that point 6 from IKN325 (go
see the edition for the whole thing, or if you’re new round here and would like
a copy, just drop me a line):
6) The people who bought
the placement.
There were a total of
83 persons (natural or judicial) who took parts of the placement and in among
them are many that are involved in the typical Canadian pump job. There are
more promo and insto names on the list of placement takers (23) than you can
shake a stick at, but by way of a sample…
Investment Management of the UK ($1m of the placement)
Valley Gold Master Fund ($412k of placement)
Phillips of Global Market Development ($126k of the placement), who also earned
$91k in finder’s fees so there are plenty inside his sphere also in this deal
Research via its KCR LLC fund (25) ($420k of the placement), run in cahoots
with Rick Rule and his entourage.
Katusa ($42k of the placement)
Precious Metals of The Netherlands ($84k of the placement)
Funds via Exploration Capital Partners fund ($840,000 of placement)
Gibson ($21,000 of placement)
All those
and more with most of those less interested in the long-term wellbeing of the
Stibnite property and more interested in the near-term lining of their back
pockets. Between them, noise is bound to be made and we also note with interest
that MAX.to was one of the lunch sponsors at last week’s Sprott/Stansberry
conference, where those present got a plate of food while they watched the
company present and pitch.
And that, ladies and gentlemen
readers of The IKN Weekly, is a long list of usual suspects in the mining promo
world, all with the chance to clip a warrant and then hold out for a liquidity
event in which to take profits.
Next let’s consider one of the key
parts of the Stansberry pitch last week. Listen to his spiel (I did, nearly
fell asleep but I did) and you too will hear all about the secret phone call he
took that got him a secret dinner meeting with one of the world’s top hedge
fund people in New York. He then went on to tell us how he heard world
top-table financial people talking about….yup, the death of the dollar and
gold at $10k and all those wonderful things. We get no evidence that the
conversation happened that way, or even that the meeting happened, but the
whole hedge fund plus world famous player gold plus fear thing sure sounds like
John Paulson to me. And oh look who’s long MAX.to!
Let’s consider what happened in February
this year (closed mid-March), when MAX.to ran a much bigger round of
fund-raising then in 2015 and the main taker was none other than famed New York
hedge fund boss John Paulson. Here’s a chunk of the NR:
As a result of the
completion of the Offering, including the issuance of the Advisory Fee Shares
(as defined below), the Company’s issued and outstanding share capital consists
of 175,826,167 Shares. Assuming conversion of all of the Notes, the issued
shares would increase to 317,081,748. Were just the Notes held by Paulson
converted into Shares, Paulson would hold approximately 97,437,165 Shares,
representing 35.7% of the issued and outstanding Shares on a partially diluted
basis and 30.7% on a diluted basis (assuming conversion of all outstanding
For the record, as well as the big
Paulson position Sun Valley took 24.3m of the conversion rights (worth about
$8.6m) and brought its overall holding up to just under 10%. Then other large
takers of the share offering include M&G Investment Management as well as
other names already listed above. At C$0.3541 per share, these guys are sitting
on a real bargain it seems, now that the Porter Stansberry pump has pushed the
stock to 58c. In fact that 42c placement last year is looking good too.
In other
words, Porter Stansberry can time the gold market all he wants, he can pick out
FNV and SLW and even NG too as solid investment vehicles, but the way in which
a MAX.to got equal billing stinks to high heaven because it’s on another level
entirely. This is a pump job designed to benefit his friends, new and old
alike. Paulson’s got a free ride on $35m and Porter’s got a new BFF. It’s the
start of something….beautiful?
Once you see the modus operandi behind these
people, you see them for what they truly are. What you do with this information
is up to you, you may consider playing this pump alongside the ones that know
when it was going to start and (more importantly) when it will stop. If you do
there’s potentially money to be made, but it’s also the classic musical chairs
situation so don’t get left standing when the music stops. It tends to stop
very abruptly.
And a
final word: I’ve also noticed that the Stansberry-owned stock tipping company
Casey Research (Louis James et al) is pumping very hard on the same kind of
theme and there have been out-sized volume moves on no news in some of their
typical pump vehicles, such as Brazil Resources (BRI.v, an awful dog of a thing
with mediocre assets in Brazil). These Casey people have alliances and
connections with other market voices such as Marin Katusa and John Mauldin, the
type of people who don’t think it strange for a person to recommend a stock and
sell their own positions at virtually the same time. Other more trustworthy market
people I’ve talked with this weekend have noted strange buying action in small
explorecos such as Colorado (CXO.v). These and others are the type of size and
shape better suited to a “stage two pump” from the Casey people, rather than
the main Stansberry Research pump engine. We may be on the threshold of a
multi-stage concerted pump effort by these so-called honest money people. Think
about that, too.


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