The Secret Broker: Ore body, or a body? Not all that glitters down a hole is gold
The Secret Broker
The Secret Broker
Link copied to
Many moons ago, an Australian hit the UK roadshow circuit, touting a gold prospect.
His one was a bit different than the usual story, as he had a potential ore body in Europe. Sardinia to be precise.
In the true Australian tradition of skirting any hint of flair and selling things exactly as they are, the company was called “Gold Mines of Sardinia“.
Most gold promoters would be coming around, flogging potential gold targets in deepest darkest Africa, so it was a bit refreshing to see a potential European based mine.
You don’t see many of them, as the Romans got their slaves working on depleting the best ones.
Seemed good to us, so we all piled into the IPO, together with the Rothchilds.
All was going well and we got news they had discovered a body. Unfortunately, it was not the actual ore body. It was a real body.
It turned out that, the Mafia had been disposing of bodies plus the odd violin case down one of Gold Mines of Sardinia’s old shafts. It all went downhill from there and later in its life it became an abandoned environmental hazard.
I mention this story because gold has taken off, as both Russia and China have been adding to their reserves. And you need to make sure you have the right exposure, no matter how good a story is.
The thought of eating Italian food, whilst going on a mine visit, was pure seduction to a broker and his client.
So, you want to jump into the current gold rush, look for the ones which have low sovereign risk (like Australia), have not hedged themselves too much (Sons of Gwalia’s forward sales bankrupted them) or have an over-burdening gold loan.
Pre-production mines may have some blue sky but will soon come back harder with any corrections in the gold price.
A good mid-tier Australian producer is one to look for.
If you want to dabble in the real stuff, then have a look at the Perth Mint’s app, which lets you buy and store 100% gold backed certificates through them, from as little as $50.
Of course, Gold Mines of Sardinia was a mere blip compared with Bre-X, a Canadian company whose discovery was deep in the jungle of Indonesia.
Its shares reached C$286 a share, up from C$1.00 and with a C$6bn valuation before it turned out to all be a lie.
So, be careful. Do your research and fingers crossed that your picks discover an ore body… not a dead body.