Byron King

I’ve been busy. Last week, I was in Toronto attending the annual convention of the Prospectors & Developers Association of Canada (PDAC).

It’s the world’s largest mining conference, or so they tell me. I heard that there were about 40,000 attendees and exhibitors (no, I didn’t count heads). There were way over a thousand mining and service companies with booths, which I figured out by walking the aisles. From what I could see, it was just massive.

Suffice to say, I caught up on developments with many companies. I met with management teams and heard plenty of fine investment-grade stories. Where’s the industry headed? Let’s discuss…

In these pages, we usually deal with large resource companies — oil, mining and/or service plays. In general, we follow established companies with extensive assets, operations, production, sales and revenue. It’s the deep pockets and revenue stream that stabilize the shares, and allow dividend payouts in many cases.

For example, look at oil companies like Statoil (STO) or Total (TOT). They have a global presence, with significant oil concessions and operations, as well as a deep technology base and great employees. They’re moneymakers, of course, and pay nice dividends — Statoil pays out at 3.7%, while Total yields a whopping 5.5%. You won’t get that down at your local bank, that’s for sure.

It’s the same with the hard-rock mining guys. Look at some of the companies we’ve covered in Daily Resource Hunter before, like Barrick Gold (ABX) or Freeport McMoRan Copper & Gold (FCX.) Both are mining titans with global reach and both pay a modest dividend.

Freeport and Its “Very High Grade” Discovery

I’ll use Freeport to illustrate the point a bit more. Freeport has global operations, with large cash flows and profits flowing to the bottom line. In 2012, Freeport booked revenues over $18 billion. Its “cost of revenue” — the expense side of the ledger — totaled about $11.5 billion. So its gross profit was around $6.5 billion.

Subtract all manner of other charges, taxes and payouts, and the net revenue for Freeport was over $3 billion. (That’s down from Freeport’s $4.5 billion in 2011.) That’s the kind of income statement that makes for a solid, long-term investment idea.

Assets, income and management place a cushion beneath the down-side of things, even in tough times. But is there still an upside?

Consider this. All that cash flow lets Freeport do some pretty aggressive things. Specifically, Freeport has been bragging, recently, about its success with a “major new project” in Serbia. I’ve mentioned this Serbian play before, but Freeport hasn’t been too public about it until recently.

Now, however, the Freeport news is starting to flow through the industrial conference network. Last week, at PDAC, Freeport offered more detail about the Serbian play. The news is trickling out. Here’s the description of Freeport’s new Serbia play:

Very high-grade Copper-Gold Discovery in a prolific belt. The Timok Project comprises the Jasikovo-Durlan Potok, Brestovac-Metovnica and Leskovo Exploration Permits that are held by a Serbian subsidiary, in which Freeport-McMoran Exploration Corp. (FMEC) has earned a 55% ownership interest.

First, note that somebody is calling this a “very high grade copper gold discovery.” In and of itself, that matters. When a large, closely-watched, public company like Freeport attaches a “very high grade” label, that means something. This is not vaporware.

Plus, Freeport has earned into a 55% ownership share of the Serbian play. Who owns the other 45% share? Well, that would be a small, “Canadian junior” company that I’ve been tracking in my newsletter, Energy & Scarcity Investor. This Canadian junior was among the best performing stocks on the Toronto exchanges in 2012.

It’s certainly nice when a large, established, cash-rich company teams up with a smaller guy who has generated an excellent new prospect. Indeed, it’s a win/win scenario that pays out for investors in both companies.

If only there were more of these, right? On my end, I’ve always got my eye out for this kind of opportunity. Stay tuned.

Best wishes. Thanks for reading.

Byron W. King

Original article posted on Daily Resource Hunter

Byron King

Byron King is the editor of Outstanding Investments, Byron King's Military-Tech Alert, and Real Wealth Trader. He is a Harvard-trained geologist who has traveled to every U.S. state and territory and six of the seven continents. He has conducted site visits to mineral deposits in 26 countries and deep-water oil fields in five oceans. This provides him with a unique perspective on the myriad of investment opportunities in energy and mineral exploration. He has been interviewed by dozens of major print and broadcast media outlets including The Financial Times, The Guardian, The Washington Post, MSN Money, MarketWatch, Fox Business News, and PBS Newshour.

Recent Articles

Why a Strong Dollar is the Mortal Enemy of Gold and Oil

Frank Holmes

Gold and oil are down because the US dollar is up, despite all the inflationary pressures the Fed has put on it. What's going on? Today, Frank Holmes, breaks down the U.S. economy’s current direction with several important charts. Plus, he's got a mining play for you that's prospering despite the current sentiment...


Bill Bonner
Confessions of a Newsletter Man

Bill Bonner

Being a financial newsletter writer certainly has a few advantages. Namely, it affords one the opportunity to comment on the financial markets without having to take them seriously. Today, Bill Bonner looks back on what drew him to this business, and the unique and entertaining cast of characters he's met along the way. Read on...


Extra!
The Most Important Factor of the Swiss Gold Initiative

Grant Williams

The Swiss Gold Initiative has the the Swiss National Bank in a panic. Should the referendum pass, the SNB will be responsible for ensuring that 20% of its total assets are held in gold. That's an awful lot of yellow metal. Today, Grant Williams puts that number into perspective and explains how it could affect the gold market...


How Solar Power Could Heat Up Your Portfolio

Greg Guenthner

Regardless of how you feel about the "green energy movement" there is no denying that solar power is becoming more mainstream. As it closes in on price parity with conventional electricity, more and more people are turning to solar as a viable source of energy. And that's great news for solar stocks. Greg Guenthner explains...


R.I.P. Tapir (5/22/13 – 10/29/14)

Greg Kadajski

The Tapir, beloved pig-like mammal and financial machination, quietly passed away at 2:00 p.m. EST on October 29, 2014. He lived a misunderstood life and was held responsible for many things entirely out of his control. Nevertheless, he will be missed by all who thought they knew him...