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01/04/2014
Sage Gold

Sage Gold is not a top pick, and there are currently about 125 of those in my database. So why am I releasing a news item about them? There aren't too many stocks that have near-term 10 bagger potential, but they do. They have a FD market cap of $2.7 million, yet they plan to begin producing in Ontario, Canada in Q1 2015. That is only 1 year from now.

This is a high risk / high reward stock. In fact, the reason it is so cheap is the project is not currently economic and might not get built. Moreover, the project is barely economic at $1,300 gold. The PEA was for $1,500 gold and that is really what it needs for significant cash flow.

But if you want to bet that gold is going to reach $1,500 this year and then stay there, this is a good way to play it. Sage Gold will likely jump 10 fold if gold prices stay above $1,500 next year. The capex is only $14 million, so they can have a clean balance sheet very quickly at higher gold prices. Production should begin around 25,000 oz annually.

They only have a 300,000 oz deposit at 4.7 gpt. But it is a 6,000 acre property with significant exploration potential. There is no reason why they can't increase both resources and production.

Of course, if gold prices stay low for all of 2014, this stock will likely languish and could go bankrupt if they borrow the $14 million and never make it into production.

This stock has several interesting facts: low market cap ($2.7 million), low capex ($14 million), good location (Ontario), and potential near-term production (25,000 oz). Of course, the cash cost at $1,000 per oz will likely be a deal killer for most of you. I currently have not decided yet if I'm going to buy the stock.

My guess is they need about $20 million for their pre-development, option, and capex to begin production in 2015. The smart thing would be to wait for them to receive financing.

The cash flow for this project should be around $15 million a year at $2,000 gold. Thus, the future market cap could easily be over $50 million. And this project is easy and quick to build and get into production. Thus, it has explosive upside potential at some point. You don't see too many projects like this, because generally projects are expensive and take a long time to permit and build.

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