2019 Gold Rush Primer 1

PRIMERStansberry Research presents

Wednesday, August 21, 2019

2 2019 Gold Rush Primer

Why Gold?From the Egyptian pharaohs buried with gold jewelry and coins... to the world’s central banks stockpiling ingots to back their paper money, to today’s most successful hedge fund managers, who all say they own gold... gold has been a spend-ing and saving/investing medium throughout time. The former because it’s accepted worldwide and can be converted into local currency for purchase. The latter because it holds its purchasing power against inflation.

These include $160 billion Bridgewater Associate’s Ray Dalio saying the assets to own in the coming “paradigm shift ... include gold.” Bond King Jeffrey Gundlach, managing over $130 billion, says “I am certainly long gold.” You can see why when you consider what happened when President Nixon set gold’s price free in 1971, at the time one ounce cost just $35. Today, almost 50 years later, it now takes more than$1,500 to buy that same gold ounce. Demand for gold is timeless, but is bullion really the best way to profit from owning gold? At Gold Stock Analyst, we think the answer is to own gold stocks, and we have the track record to prove it. Our 18-year independently audited track record shows a total gain of 530%, triple that of the S&P 500 and double that of gold. Here, we’ll explain some of the basics of evaluating gold stocks.

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It’s simple. The selection of the best gold stocks can deliver market-beating returns over the long term… through bull and bear markets as our 18 years of audited results shows.

GSA Top 10 S&P 500 Gold XAU

530.1% 172.2% 363.3% 37.3%

Even better, when in a gold bull market like the one we’re in today, the returns can be absolutely spec-tacular. As you can see in the chart below, in the last gold bull market, a period of a little more than two years following the crash of 2008, the Gold Stock An-alyst Top 10 was up 1,070%, four times more than any other gold investment and 22 times more than the S&P 500.

These returns are possible because the best gold stocks have leverage to gold price. An increase in gold price translates into a higher stock price via two ways:

1. Operating leverage:Suppose a miner’s output is 100,000 gold ounces a year and these each cost $1,200 in labor, power, and materials to produce. If the gold price is $1,400 per ounce the company’s operating profit is $1,400 minus $1,200 times 100,000, or $20 million. If gold rises to $1,600, the cost to produce doesn’t change, but operating profits double to $400 per ounce or $40 million total. If 50 million shares are outstand-ing, profit per share doubles, from $0.40 to $0.80. The stock price will rise to reflect this.

2. Asset leverage:Miners typically have 10 or more times annual pro- duction in reserves. So for our example, the miner would have a minimum 1 million ounces still in the ground. At $1,400 per ounce, gold has a gross value of $1.4 billion. At $1,600 per ounce gold its value is $1.6 billion, an increase of $200 million. Again, if a compa-ny has 50 million shares outstanding, each would now be worth $4 more based on the value change. This too will show up in an increased stock price.

Why Gold Stocks?

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Choosing the Best Gold StocksChoosing the best gold stocks boils down to selecting stocks that have the best deposits.

Let’s define an “ounce.” Precious metals are measured by troy ounces, aka “metric ounces.” These weigh 31.1 grams as opposed to regular, or common, ounces which weigh 28.35 grams. The use of troy ounces comes from the 1400s and Troyes, France. It was originally used to standardize measurement of precious metals and gunpowder. While an actual gold ounce is standardized, any discussion of the size and number of ounces in a gold deposit is subject to much ambiguity. This often creates confusion among investors. And some unethical mining companies create this confusion on purpose. Gold is present almost everywhere, but in such a low concentration that it can’t be profitably recovered. The oceans contain millions or even billions of gold ounces, but at far too low a grade to even consider trying to recover. What miners seek is a concentrated deposit that has enough gold to make recovery economically practical. This is determined by a feasibility study by

an independent engineering firm. Similar to an accounting firm auditing a company’s financial records, a feasibility study is an independent assess-ment of a deposit, its size and grade, the optimum processing method, the capital cost to build the mine and process facility, and the cash cost to operate and produce gold. All this must be done at a capital cost (capex) that can be funded by the company, or raised from investors AND at an operating cost per ounce (opex) below the current gold price so that a profit can be made.

The key to the feasibility study is drilling enough sample holes to determine if the property has enough gold at a reasonable grade to be profitable. Surface deposits are open-pit mined to as deep as 2,000 feet and 200-300 holes (or more) are often drilled to take samples and find the average and highest-grade areas. The number of sample holes is in part determined by the deposit‘s nature. Is the gold widely and fairly uniformly disseminated, so that a geologist would be confident that the undrilled areas between the holes would be similar to the samples? Or is the ore “nuggety” and not uniformly deposited? In that case, a geologist would want to drill more holes, closer together to have confidence in his ounce estimate.

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Surface deposits are usually low grade. The gold has been subject to erosion, and it had to travel far from its deeper source to outcrop at the surface.Low-grade deposits typically average less than a gram per tonne (1.0 g/t) and are best recovered by Heap Leach (HL). This is a low-capital method of piling crushed ore on a thick liner pitched to a drain, then irrigating with a weak cyanide solution to absorb the gold, followed by gold’s recovery from the “pregnant” solution. Underground deposits can be shallow and reached by ramps from the surface, or deep and needing a shaft to reach, typically at a cost of $100 mil-lion-plus. Agnico-Eagle’s LaRonde mine is the America’s deepest at over 10,000 feet.

It’s the grade makes going underground worth-while... usually at least 3 grams/tonne. Bonanza grade zones often reach grades as high as 1.0 ounce/tonne (31.1 g/t), like Kirkland Lake’s Macassa and Fosterville mines. The grades must be higher because underground mining is expensive, typically having higher capital and operating costs. The capex for a processing plant, aka mill, is higher than HL as more crushing is required to pulverize the ore before treatment and gold recovery. There is a payoff, however, as the gold recovery is higher, typically better than 90% for a mill versus 60-70% for heap leaching. The higher grades and the higher recovery pays for the mill’s capex and boosts long term profits.

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Determining a Deposit’s Ounces

Miners use a variety of terms to characterize ounces. The broadest terms, “resource” or “mineralized” ounces, don’t need much more than “gold is present and may, or may not be, worthwhile to mine.” Unfortunately, these ounce totals are too commonly thrown about as they help companies sell more shares to finance more drilling.

As more drilling is done over the next few years, the site may be abandoned as not endowed enough, orit may warrant more drilling to better define a sweet spot that’s typically surrounded by a low-grade gold halo of uneconomic resource. As some point geologists can better define a potentially economic deposit, with the terms “Measured, Indicated and Inferred.” There are no set distances between drill holes to establish confidence levels. It depends on the nature of the deposit (nugget or disseminated) and the engineering firm’s willingness to put its name to the ounce totals. There’s a mining adage that “you never truly know how many ounces a deposit has until you mine it.” This is true as regardless of the hole spacing, the geologists are making “best guesses” on what’s between the holes. The strictest definition of ounces is “Proven and Probable”. These are actually Measured and Indicated ounces that get upgraded with a mining and processing plan. That is showing it would be

“economic” (profitable) to build and operate the mine at a specified gold price. Banks use the trailing three-year average price to evaluate mining loans. The miners themselves choose a price near the current gold price when reporting their ounces at year end. When all these criteria are met, the ounc-es can be called “Proven and Profitable” Reserves. The U.S. SEC requires the ounces also be permitted for production, but as most miners are based in Canada, which does not require reviews to be permitted to count as Proven and Profitable. A quirk in this system is that “economic” is defined as making $1 profit or more over the mine’s life. There is no requirement that the site’s feasibility study shows a positive new present value or a positive internal rate of return over the mine’s life. A related report required of Canadian-listed miners is a “43-101 Report.” It ensures that misleading, erroneous or fraudulent information is not published or promoted to investors... that the claimed ounces are actually there... and it’s signed by a qualified geologist. Once a miner has a 43-101 Report and a positive feasibility study indicating it will produce more than 100,000 gold ounces a year, or it’s already in production above that rate, Gold Stock Analyst will add it to our coverage universe. As of this writing, Gold Stock Analyst covers 44 gold miners and royalty stocks, plus 25 silver miners (under slightly looser criteria). All must be traded on a North American stock exchange so our subscribers can buy them easily.

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Meet the PanelJohn DoodyThe gold expert whose unique gold strategy has delivered audited returns of 530% since 2000 — beating the return of gold, the returns of major gold funds, as well as more than tripling the S&P 500. John’s research has been featured in The Wall Street Journal... Fortune magazine... Barron’s... MarketWatch... Forbes... Business Insider... TheStreet.com... and on CNBC. Today, he is the founder and editor-in-chief of Gold Stock Analyst — the most widely-followed gold stock research service on the planet for insiders and pros... read by gold-mining executives, as well as more than 40 professional money managers... including hedge funds, mutual funds, private asset managers, and brokers all around the globe.

Dr. Steve SjuggerudDr. Sjuggerud has an MBA and a Ph.D. in finance... has been quoted by The Wall Street Journal, Barron’s, and The Washington Post... and appeared on Bloomberg and Fox Busi-ness News. Today, this former hedge fund manager is the senior research partner at Stansberry Research, America’s leading independent financial research firm since 1999, where he holds the record for the No. 1 highest-performing stock in the company’s history, Seabridge Gold, which soared 995% after his recommendation.

Daniela CamboneDaniela has worked as an anchor and journalist in the gold industry for more than 10 years. She’s a regular contributor for TheStreet.com and Forbes. Today, she’s the face of the No. 1 destination for gold news online... where she interviews money managers... gold mining CEOs... economists... and analysts every single day.

Garrett Goggin, CFA®Garrett began his career on the floor of the NYSE and worked in derivatives arbitrage in the U.K. and Ireland. He ran his own asset management firm and then co-man-aged the equity portfolio for a portion of Babson College’s $400 million endowment fund. He’s a Certified Market Technician (CMT), and a Chartered Financial Analyst® (CFA). Garrett has been John’s right-hand man for nearly 10 years now.

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What Others are Saying...“I’ve been reading Gold Stock Analyst since it first began and have con-sistently found John’s advice to be invaluable. His analysis is based on good, old-fashioned number crunching and years of experience eval-uating management teams and mines. His ability to identify winning stock picks is superb. Regardless whether you are new to the mining sector or a skilled veteran, you will benefit from Gold Stock Analyst.”

– James Turk, Founder and Chairman of GoldMoney

“I have been a futures day trader for 20 years… this is the best funda-mental analysis I have ever found.”

– Bill M.

“John’s work is of the highest caliber. His impartial, independent ad-vice has been consistently on target and has greatly benefited me and my family.”

– Nick B., former CEO and Chairman of a research and trading firm in Chicago

“I have been a Gold Stock Analyst subscriber for several years… you are my hero, the only really good gold stock analyst that I have followed.”

– Kevin S., a Morningstar 5-star rate portfolio manager with 20 years of money management experience

“The only gold newsletter I subscribe to is Doody’s. The man has con-sistently outperformed all the gold indexes during the last decade. I’ve made millions on his recommendations.”

– Hedge fund manager Harris Kupperman

“I have had many newsletters in the past. Yours is the best. The hardest part of investing is when to sell. You take the worry out of this.”

– Georgia M. “I made more than $7.5 million with your recommendation of Yamana Gold. Thanks!”

– Alexander G.

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Don’t Miss the 2019 Gold Rush!On the night of Wednesday, August 21st...

You’ll learn about a way to potentially make as much as 20 times your money in the coming weeks and months...

You’ll find out why John believes there’s a “per-fect storm” for gold right now...

And John will give you the name of a gold investment he believes could jump 500% or more—just for tuning in.

And remember...

We’re giving away more than $25,000 worth of free gold coins, which you have a shot at winning.

But you MUST tune in to the event on August 21st to be eligible to win. If you wait for the replay, you will miss out... AND you will miss out on the name of the free recommendation that could go up 500%.

So mark your calendar for August 21st, at 8 PM Eastern Time.

We HIGHLY recommend signing up to receive a text message reminder from us, so you don’t acciden-tally forget.

If you’d like to receive a text, simply visit:

2019GoldRush.comSee you on August 21st!

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NO PURCHASE NECESSARY. Open to legal residents of the United States and the District of Columbia, age 21 or older. Void where prohibited, including Florida and New York. Odds of winning depend on number of entries received. Sweepstakes starts at 8:00 p.m. ET on August 21, 2019 and ends at 10:00 p.m. ET on August 21, 2019. For full official rules, prize

disclosures, and to enter, visit our official rules page. Sponsored by Stansberry & Associates Investment Research, LLC, 1125 N. Charles Street, Baltimore, Maryland 21201.