Ex-Goldman Sachs Mining Fund Manager Bets Big On Mexican Gold Junior – Source Exploration (CVE:SOP, FRA:4QW1, OTCMKTS:SRXLF)
Current Price: C$0.27
Shares Outstanding: 26.3 million
Market Capitalization: C$7.1 million
52-Week Range: C$0.02-C$0.37
Cash: ~C$1.2 million
Total Liabilities: ~C$0.8 million
At 24 years of age, Matt Geiger is one of the brightest and youngest minds in the resource space.
In 2011 he dropped out of the prestigious Wharton Business School to build a Silicon Valley start-up with a class-mate. To date, the duo has secured $10 million in funding. Concurrently, Matt launched a resource fund, raising several million dollars to pursue investments in the junior mining space. He is now Managing Partner for MGJ Capital, a deep-value, resource-focused investment partnership with 20+ LPs. His background gives him a unique and diverse set of skills pertaining to early stage ventures, and his track record speaks for itself.
MJG Capital returned 95% last year, net of fees, and Matt says that performance has accelerated further in 2017. The aggregate of our team is similarly young, but we look at Matt as a prodigy. When he turns over a stone and finds something, we pay attention. And that is exactly what happened when he brought Source Exploration to our attention.
Fortunately for us, Source has made it through the recession and the courts, and could not be cheaper! The company has recapitalized and brought new leadership aboard. Having just closed a $1.85 million financing, the company is now on course to unleash its maiden resource estimate. We have studied the geology and drill holes; this resource will be BIG.
In the end, we made the decision to invest half a million into the company.
Why A Former Goldman Sachs Superstar Invested & Joined The Board
At its peak, Ali was responsible for $700 million of the principals’ own funds. He eventually left to create his own hedge fund and to manage his own private investments.
Being immersed in metals and mining for the majority of his career, Ali developed his own thesis and has determined now is the ideal time to invest in gold. Debt levels have reached relative post-WW2 levels, with no secular catalysts to pay it off. During the 1950s, the United States was the world’s only superpower, with untouched infrastructure to manufacture and export goods. Baby boomers have created an ideal situation for themselves, with lowered taxes and throttled pensions, leaving the younger generation to fend $500 billion in deficits per year. If you would like to hear more about his thesis, click here to listen to the full interview.
The day of reckoning is approaching, and Ali believes the FX trade of the century will be the tipping point to finally derail the markets and send people rushing to gold. The cost of carrying money is increasing, with many countries already having negative rates on the short-end. With the US debt spiralling out of control, eventually this America will have to succumb to the same fate.
Thus, gold is Ali’s preferred investment; and while gold’s rise may be slow, now is the time to accumulate. Ali looks for four important traits in an gold explorer: scale, grade, management, and jurisdiction. Here is why Source Exploration checks the boxes and then some:
#1 – Scale – The Hunt For Aztec Gold
The Las Minas area has a rich history of exploration and mining, dating all the way back to the Aztec Empire, where artisanal miners paid taxes to the Emperor with gold. The area remained active even after conquered by the Spanish, and all the way to the Mexican Revolution. In fact, between 1870 to 1910, the area was home to thirty small, high-grade mines producing ore ranging from 20-40 g/t gold and 15-30% copper.
After the revolution, the area became dormant. In 1970, the Mexican Government reassessed the area, concluding that the district had potential to contain 80 million tonnes of skarn averaging 1.89 g/t gold equivalent.
In 1996, the concessions were optioned off to International Northair, where the company carried out an extensive sampling and mapping program. The campaign yielded 583 samples from 2-3 meter channels from outcrops and old mine workings, and delineated several large zones, grading 1.0-5.0 g/t gold and 0.5-2.0% copper. The average from all samples was 1.70 g/t gold and 0.39% copper or 2.37 g/t Au Eq.
In 2007, Chesapeake Gold Corp acquired the concessions and continued with exploration. The company was able to identify 25 alteration zones that hosted skarn mineralization with significant gold, with silver and copper.
Las Minas Today – Million Ounces & More?
Presently, the project has over 16,400 meters of drilling, and has delineated high-grade zones at El Dorado/Juan Bran zones and Santa Cruz. Source Exploration has explored six mineralized areas covering 270 hectares.
Previous drilling at El Dorado-Juan Bran has found a mineralized zone measuring 420 meters and extending more than 600 meters down-dip, with thickness varying from 6 to 82 meters.
#3 – Management – Motivated & Ready
Brian Robertson is Source Exploration’s CEO and President, and recently appointed Chairman of the Board. Brian joined Source in September 2009, originally brought on to advance the San Acacio silver project located in Zacatecas. He was hired by Ewan Downie, the CEO and President of Premier Gold Mines (TSE:PG, Mkt Cap: $690.7M), who served as the Chairman of the Board at the time. In October 2010, Brian acquired Las Minas which became Source’s flagship till this day.
Brian brings over 30 years of mining experience, ranging from management, exploration, project management, and aspects of mine construction. He served as the President of Victory Nickel and Nuinsco Resources and is a Director of Romios Gold Resources, Appia Energy, and Minnova Corp.
Its important to note, that while Ewan Downie resigned as Chairman of Source in 2012, it was due to pressure from his Board of Directors at Premier Gold. The decision was made to limit his activities with junior companies. However, during his tenure he was a strong advocate of Las Minas, introducing the asset to many large mining companies. In fact, till this day Source shares an office with Premier Gold in Thunder Bay.
Source Exploration brings a motivated and technically astute team to the table. We know the Directors very well, and believe this team will be able to take Las Minas to the next level.
#4 – Jurisdiction – Premier Mining Country
That being said, Las Minas is a mining town and is just itching to get back to work. The infrastructure is all there, including hydroelectric power and water at site. And Mexico City is located just 270 kilometers west by paved highway. We have no qualms about Mexico and Las Minas.
The Mines, Mexico
There are some very big catalysts on the horizon, beginning with assays from the current drill program that are expected as mid-April.
Source Exploration is also carrying out detailed geological mapping, sampling and target definition at the Pueblo Nuevo concessions. This work is focused on historical mines with high-grade epithermal vein systems, and results from this program will be available in early to mid-May.
But the biggest piece of news most everyone will be waiting for will be the maiden resource estimate, which is slated for Q2.
The company recently closed a private placement, which will become free trading on July 3. This will understandably bring some selling pressure, as the financing was done at 15 cents and shares are now trading at 27 cents. For people looking to average down their positions or for people who missed their first opportunity, this time window may bring a good entry point. However, it is after the resource estimate, the stock may very well be flying by then.
Lastly, Source Exploration will complete its reorganization and rebrand with a name change to Mexican Gold Corp. This is very fitting as the company has new life and ready to attract new investors and capital. Management has made it clear that it will be actively marketing the story, and we believe Las Minas has already attracted the interest of many majors.
The consistency of Las Minas is strong, and even non-technical investors can put together the dots. This has all the makings of a district scale opportunity, and we believe it will be home to multi-million ounce deposits in a mining-friendly jurisdiction.