Golden Phoenix Minerals (GPXM):
Risen from the Ashes Yet Again
Preface: The US and its entire system is on the brink of collapse regardless of what the “feel good” news of the moment might be–especially during the Holiday Season when we are inundated with Black Friday, Cyper Monday and Shop Till you Drop (or are run over–see www.fedupusa.com) headlines.
The unemployment rate in this country is at least double what the government is posting–closer to 20% than to 10%; in some areas 30-35%. Areas such as Detroit. Most of us are going to have to wake up to reality–especially the Middle Class. I have hopes of creating United We Will Stand, a website devoted to Americans who understand the power of numbers and critical mass.
We all need to make a living and/or invest well if we have any investing capital at all. I want you to do well because Americans are a family without a Patriarch. We need to survive and provide for our families. All signals for me point to a stock market being propped up. I am going to start mentioning a few high risk-high reward junior mining stocks as that was my beat back in the day. Please do your own due diligence and don’t take anyone’s word on anything–including me. God Speed.
November 2010
“The Down and Dirty”
GPXM is a stock I’m purchasing for my own portfolio. I’ve known the principals of the company for five years and believe them to be smart, savvy and a hardworking group. Their stock price is around $.13 US and with gold production beginning in the first quarter of 2011 with JV partner Scorpio Gold, and molybdenum production happening in the same time frame down in Peru, I believe that the company has huge upside potential due to its experience, business model and management. There are 240 million shares outstanding but the company is buying back some of its common stock. They are on the lookout for additional gold properties and have a management team led by a knowledgeable ex-investment banker and a Chairman of the Board who has been at the helm during their recent two year ascent. I believe that the precious metals complex will continue to reward those companies that are led by qualified personnel, have good projects, and are in the early stages of production. GPXM has been repeatedly tested by fire and until they prove they are incompetent or lack integrity, I will continue to support them. That’s the down and dirty of it.
Introduction
When I wrote the title to this Golden Phoenix piece, I wondered if it would be misconstrued. For something to rise up from the ashes, it would intimate that historically it had to crash and burn at some point; which may be construed as a negative. It could also be construed as a positive sign of strength in overcoming some very severe obstacles if it recovered from said crashing and burning. And though Golden Phoenix has been a bit of a roller coaster ride during this period, they’ve done the one thing that many junior mining companies have not—they turned misfortune into an ally. They became better organized and constructed a firm foundation upon which to build a stable vertically integrated company even after having the carpet pulled out from under them when certain commodities took a nose dive in 2008—commodities such as molybdenum in which they were involved.
As such, Golden Phoenix (GPXM) has been an impressive company to observe over the past four or five years because of its management, perseverance, projects, resiliency, and the acquisition of their prospects (projects) for the future. I use the word impressive because there have been several times since I’ve been following it over those years that it has been on the razors edge—a roller coaster ride. It has been impressive to watch how they’ve worked with the cards that the markets have dealt them. At one point, a share was selling for a penny back in 2009 and most investors were kissing the company goodbye—but wait, not so fast! The key people had different ideas and loyal shareholders stood behind them.
And again, something inspirational has once again occurred! They’ve regrouped and created a new foundation for the company which I believe is the strongest one yet. They kicked the obsolete entities to the curb, and aggressively sought out the future. It wasn’t easy because of the people—friends were involved. But they had to reinvent themselves within the context of the commodity markets and they had to do what they had to do if the company was to survive in a state that would be acceptable to shareholders, management and directors. Its one thing to survive, and another to survive with your integrity intact and some control over your destiny moving forward.
They shuffled the pieces of the puzzle around, shook them up and down, and created a working model for a company that would be successful in the impending geopolitical financial environment that we all knew was going to be tough and ugly. This was not going to be an Ali fight when he was in his prime dancing and bobbing and smoking his opponents with those quick left jabs. No, this was going to be a Mike Tyson street brawl, with body blows galore and checking your ears between rounds; as in, are they still there? What were the alternatives? Who wanted to watch ten years and millions of dollars swirl down the drain? Tweren’t gonna happen. Besides, they had experienced similar battles in the past and lived to fight another day. They were rising from the ashes yet again.
I want you to understand that you can learn about the mechanics, the press releases, the history of the company from their web site: www.golden-phoenix.com . It’s a good one and although I personally like the old “down home” feel of the past version of the site; this new one does the job. It’s a little slick but it also demonstrates a company on the move and keeping in sync with the much larger entities now becoming interested in the enterprise.
So I want to offer you my perceptions of the company as they exist today; especially considering what they’ve been through. And I’ll begin by saying that they’ve been through a geopolitical epoch in the mining-financial- industry that has been a horror show. They’ve handled themselves with grace, poise, and integrity all the while making some excellent business decisions.I think they’ve probably worked as hard as anyone in the business and there will be rewards for loyalty.
They’ve also attracted some excellent talent which they’ve never had a problem doing.
I want to finish this rather long introduction by taking you back to 2008 when the blood was running in the streets, metaphorically speaking. There are some companies that have gone from $.05 to $1.50 and several years later you hear people saying, “Wow, wish I had picked up a boat load of those shares!” Of course, it took some strong convictions to do that. I personally believe that we’re back at the station and that train is leaving again. At $.13 cents on November 26, 2010, it’s very possible that we may have a second kick at the can. I personally believe that we’re just starting the third inning of this PM Bull market and GPXM just may be a major participant in it.
In response to one of Eric King’s comments, John Embry stated today, November 26, 2010 on King World News: “I would say unquestionably. I have been quoted a few times saying 5 and 10 “baggers” will be commonplace but I honestly think that this thing is big enough that we will see valuations at stupid prices, the likes of which we haven’t seen since the internet craze. It will be of that magnitude I believe before this thing runs its course.” I think you’d do yourself a favor by keeping in touch with www.kingworldnews.com And think of GPXM in terms of that internet craze—only this time, there are strong fundamental reasons to own gold and gold producing assets.
What I am suggesting in the most conservative manner possible is that GPXM might be one of the opportunities that John Embry is talking about. Perform your own due diligence and arrive at your own conclusions.
Gold to Molybdenum to Gold
GPXM is really a gold company and come next month or the first quarter of 2011 they will have achieved an enormous milestone. They will turn the corner and become a gold producer while still continuing to be an explorer for gold. For those who’ve been around this company long enough, you’ll know that GPXM and Winn Eldridge had a deal involving molybdenum (“moly”). It was the best play for the company given the circumstances and the 2006-2008 time frame. Then they ran into a good news bad news scenario, The good news is that they completed a moly mine with corresponding facilities that really looked terrific. Everyone was excited when they produced their first super sack of moly. Then in the blink of an eye, a pound of moly went from about $35.00 a pound to $7.00 a pound. $7.00 was not economical and hence the bad news.
Changes had to be made and so it was decided to work out a deal with their partner Winn Eldridge whereby they bought out GPXM’s interest in the Ashdown molybdenum project. There are press releases on their site which address this transition and I would suggest you peruse them in order to gain a better perspective. Who has been in a partnership that has been flawless and perfect? Not many. I would make mention that GPXM offered excellent terms on the transaction and made them even more favorable. Starting in the spring of 2011, Winn Eldrich will make payments to GPXM along the lines of $90,000 per month until the debt is retired in four years That is money that will help keep the lights on and the staff paid while they pursue other projects. Obviously, it does make sense for GPXM to assist their ex partner make a go of it and last I heard, the price of moly was appreciating.
In the process of building this molybdenum enterprise, GPXM became quite proficient with the molybdenum complex. Rather than simply lose all of the expertise learned “on the job”, they decided to utilize that expertise in Peru at the Polivar Project and at the Champion Project they had acquired in Canada. Meanwhile, they simultaneously went back to their roots which were in gold.
What’s on the Menu?
Golden Phoenix is a 30% joint venture partner with Scorpio Gold on the Mineral Ridge gold and silver property near Silver Peak, Nevada, and owns the Adams Mine and Duff Claim Block near Denio, Nevada.
They also own the Northern Champion molybdenum mine in Ontario, Canada. Golden Phoenix has an option to earn an 80% interest in the Vanderbilt Silver and Gold Project, and the Coyote Fault Gold and Silver Project, both of which are adjacent to the Mineral Ridge gold and silver property near Silver Peak, Nevada.
Golden Phoenix has entered into a Memorandum of Understanding to acquire an 80% interest in five gold and molybdenum properties in Peru; two on the Pataz Gold Trend in the north and three in the Porvenir area in the south.
Golden Phoenix has entered into a Definitive Acquisition Agreement to acquire a 100% interest in four gold and base metal properties in the Shining Tree Mining District in Ontario, Canada.
The menu is refined and quite diversified. Tom Klein and Rob Martin in conjunction with the Board of Directors have made several excellent acquisitions. As a large shareholder, I’m quite comfortable with the direction they’ve taken.
I want your mind to drift back to those soft summer nights in 2008 when our portfolios were hemorrhaging money and people were absolutely freaking out. Investors wouldn’t open their statements due to the fear of what they were going to see. Furthermore, capital was virtually impossible to find—and still is to some extent. The world had changed forever. Against this backdrop GPXM was trying to rebuild.
But when I look what is now on that menu, I believe they have performed Herculean feats.
So it goes without saying that in my opinion, this company is a candidate for immediate purchase and it’s the first recommendation I’ve initiated in over three years. Disclaimer again: I own the stock and I’m completely biased.
I wouldn’t waste my time or reputation recommending anything to you that I didn’t believe had excellent prospects for the future. That is what GPXM is all about—excellent prospects for the future. Point: You are still going to have to execute your own due diligence in order to achieve your own comfort level in this erratic stock market.
Tested Under Fire
Some of the long suffering shareholders had enough of their own money and years of effort already involved into the company and they were not going to allow mundane matrixes of incompetent management teams of the past and crashing commodity markets (molybdenum) take them off stride. It’s a well known fact that if one has “skin in the game”; one is always going to be more sedulous in terms of pursuing excellence and success with any project in question. Current key management of Golden Phoenix Minerals has much skin in the game and as such they’ve been extraordinarily adaptable in order to achieve success. They’ve had to go to where reality has pointed and NOT where it “looked good on paper”.
So, what I’m saying here is that this company, Golden Phoenix, has been tested under fire. After discovering a terrific Molybdenum project in Ashdown Nevada, they and their partner Winn Eldridge constructed a very impressive mine and corresponding processing facilities only to see the price of Moly come crashing down from $35 to $7. They took that “tough to swallow” situation and made it work for everyone. They rose from the ashes—didn’t “toss anyone under the bus”, made the tough decisions, created a solid foundation from which to build a real bona fide mining company and have now moved onwards and upwards. That is the simplest of versions of the story but the web site has press releases that will take you back so you can fill in the blanks. We are now concerned with the future and how well GPXM is prepared for it. Will they be profitably producing gold and “moly” in the first quarter of 2011. I believe the answer to be in the affirmative from all that I am reading via the press releases.
Those familiar with the company will understand that this has indeed been a test by fire and under fire. From an arm’s length, it appears to me that the company has made the right moves and made them under great duress. I’m betting that they will continue to make the right business moves that will reward investors in a very big way, especially as the geopolitical climate continues to evolve into a tangible asset direction. It’s impressive that so much knowledge was acquired during that Ashdown (molybdenum) period. Even now, they are working on other Moly projects even though they are primarily a gold oriented company. They will be processing moly and gold in the first quarter of 2011 and I believe that any company that is efficiently and profitably producing gold in any quantity in the years to come will do well. I’ll leave it at that because I’ve been around far too long to make wild prognostications even though I may believe them myself.
The Web Site
www.golden-phoenix.com
Visit the web site and learn as much as you can about the company, its history and their projects. It’s an amazing story of perseverance, dedication, and the achievement of the American Dream. I did not arbitrarily choose GPXM in order to advance this new reality. I chose it because they’ve been to hell and back and then made another round trip just to make certain they were experienced enough to take on the big boyze in their own back yard.
Mineral Ridge and a bit of History.
Golden Phoenix has a very promising mining property called Mineral Ridge. Gold and Silver were discovered on the property years ago. GPXM was originally founded and managed by a certain individual who had the vision, staked the claims, and got the ball rolling but was not wise in the ways of managing a public company. The millions of dollars that shareholders were investing into the company seemed to vaporize. Mining plans that were unrealistic were brought to the table. That always has a propensity to disturb shareholders and so in this case there was finally a “shareholder revolt”. It was actually successful and so began a new chapter in the annals of GPXM.
The new team that emerged has vision and integrity. They brought people into the fold to make the transition, clean up the bills from the past, negotiate with creditors, and create a realistic balance sheet. For two years it appeared that they were going two steps forward and one step backwards which is better than the converse of that proposition.
This is from the landing page on their web site: “Golden Phoenix has emerged from the global credit collapse with a Royalty Mining growth strategy and an initial 24 month acquisition plan to target advanced projects with near-term production throughout North and South America. As our strategy unfolds, we expect our cash flow will be leveraged to the price of gold or underlying strategic metal.”
So you see, they have been in the process of changing the company culture via transitioning and via the implementation of real work flows, projects, and people in different areas of North America. The Scorpio deal (see the web site) is really one of the first they’ve taken from start to finish and are about to see how the business model is going to conclude. I have every confidence of success and it really is quite exciting.
In actuality, they’ve been through this process before with the Ashdown Molybdenum mine. They spent several years and millions of dollars only to see Moly drop from $35 to $7.00 a pound in a matter of weeks. That had even gone so far as to sell those first bags of “moly” concentrate. They learned however, about their resilience and their capabilities so nothing was wasted in the overall scheme of things. And if nothing else, this company has resilience. They’ve achieved their success the old fashioned way—they earned it!
Let’s stay current and on track this 18th day of November, 2010. A news release just came over the wires today and it is the one I’ve been anticipating.
“Golden Phoenix Minerals, Inc. (the “Company”) (OTC Bulletin Board: GPXM) is pleased to announce gold production is scheduled to begin in the first quarter of 2011 on its Mineral Ridge property, which the Company maintains a thirty percent (30%) interest in via its membership interest in Mineral Ridge Gold, LLC, the joint venture entity that owns and operates the Mineral Ridge property with Scorpio Gold (”Scorpio”).”
First, Scorpio announced that they had received the $12,000,000 dollars and now they’ve set a time frame for the production of gold and silver. This is a company that has done everything they said they were going to do and have done it in a relatively competitive time line.
They’ve got excellent management a well respected Board of Directors, and they are “hungry”. My feeling is that this is just the beginning. I will admit that I thought they would have been in production by now but then again, I didn’t expect QE 2 or the audacity of the FED to do what they’ve done and deny the American people the right to inspect their own books. So the fact that my own personal opinion is skewed by the company being off schedule by three months leaves me feeling a bit self indulgent.
The Transition
This is a very important concept to understand. After the economic disasters in 2008 that in my opinion were by design and played out over time, the American Portfolio was for the most part decimated. No, it was not all serendipitous. Nothing happens in a vacuum and because they needed each other, Wall Street got cozy with the US government (and vice versa). Main Street were treated as chumps and for all practical purposes, they still are. The country maintains the illusion of free enterprise, the democratic way, and property rights within the framework of a capitalistic system. Alrighty then, and we still believe in the tooth fairy.
The transition to which I refer has to do with the idea that GPXM went from a company trying to save itself after 2008 to a company now on the cusp of producing real wealth in various parts of North America utilizing a system known as royalty agreements. They make a discovery, perform the exploration and logistics, call in experienced production teams to put the discovery into production. They keep a 70% interest in the property (or whatever is negotiated) and then allow for incentives and buyouts as the development continues. Eventually, the partner can purchase the entire property for a specified price once the quality of said project is determined. It’s a viable model because all parties are rewarded accordingly as the property transverses the various states of development. Capital made from one project is invested in another project and so it goes.
Golden Phoenix (GPXM) has been a company in transition. I will reinforce this fact repeatedly. They have learned how to adapt to current market climates and that is no small feat. I think that the first stage of that transition is just about complete and they are moving from that phase to a wealth producing phase. Don’t let the minimal price fool you. Sometimes there are bargains out in the marketplace. I’m certain the price of all quality juniors will remain volatile. Eventually, GPXM will regain its momentum and move higher as the company moves forward. Please review the quality of their projects, the number of them (15), the location, the management, and then we’ll talk again.
The management and advisory teams have been working on getting the company solvent, paying down debt, locating viable mining projects in north America and connecting with suitable JV partners with a similar mindset. They are setting the stage for a brighter future within the parameters of the real economic climate—not the fairy tale, the “make-believe” financial climate of Wall Street. Their financial ledgers are accurate and that in itself is reason to take a closer look at the company. Remember too, that GPXM is really a gold company with an intense level of expertise in molybdenum due to the extenuating historical factors.
That being said, the company must take the best that all the major exchanges have to offer and transition into a company into which people can have confidence.
I’ve been at an advantage because I’ve known some of the guys for a long; way before 2008, and I knew that if anyone could pull this off, it would be them. I was buying the company’s shares when they were literally being given away. The advantage I had stemmed from the fact that I knew how diligent these people were and how hard they worked and how much skin they had in the game.
If anyone was going to figure it out and make it happen; it was going to be them. I knew that Rob, Tom, Lari, et al, would find a way. I didn’t know Tom but I do know Rob and so I figured Rob would connect with someone of quality who would be a good fit. He did and that was Tom Klein, an ex- (full time) investment banker, who hit it off well with the philosophy of the company and with the other officers involved.
Let’s be clear. After 2008, many companies, and especially the juniors, took a huge hit. Many went under; others regrouped and refused to fail as in “failure is not an option”. GPXM was one of the latter.
Moving on
The “saving company mode” was brutal. It was all about deals, debt, and deliberations. Then it was about getting the right people on the right job and allowing the ones who were not going to fit into the new paradigm to move on to where they could be more productive. No one said business was an easy gig and sometimes friends have to be displaced for the good of the company. It is unpleasant but it has to be that way because a growing company demands different skill sets on all levels
.
One must measure all of this “saving of a company” against a backdrop of a gold and silver market that was appalling because of the manipulation. Never forget that gold is a political metal and it competes head to head with the US dollar and all fiat currencies. It’s like playing 3-D Chess with Captain Kirk in the Enterprise—or was that Spock? In the old days, you didn’t have to deal with the absolutely clueless press corp. that didn’t know the truth if it slapped them across the face with a Bible. But deals needed to be made, financing had to be created, and old debts needed to be addressed. GPXM didn’t claim BK—they paid their debts and reworked the personnel and the payroll to make it work. On top of it all they ended up with several world class projects and a corresponding group of partners who were reputable.
Again, I’d suggest you mosey down to the web site (www.golden-phoenix.com) and check out the projects in Quebec, Nevada, and Peru. There are 15 in all (5 in each district) and two are close to creating cash flow. One is with gold and the one in Peru deals with Molybdenum. I think you’ll find the PR put out today to be exceptionally informative and well written.
Management
When Tom Klein joined the team as an ex investment banker, he brought years of financial experience to the table. Rob Martin kept on doing what he does which is basically emitting the glue which keeps things together. Every company needs a leader, a focal point and Rob serves well in that capacity; he is now Chairman of the Board. Sounds Impressive doesn’t it!? But he is the same down to earth guy he has always been and he is one of those guys who the troops follow to hell and back because they believe in him. Win, lose, or draw he’ll do what is honest and what is best for the company. Men want to be like him, women want to be with him, and animals want to eat him. I’m not sure about that last part.
But shareholders do respect the staff and that is clear to me because of the large shareholder base they enjoy, even after these last several years of a volatile market. There is no BS coming from the press releases and the staff of GPXM and Scorpio have a propensity to under promise and over deliver. That is refreshing. That has kind of been the golden rule around the company and it’s served them well. When a PR (press release) is served up, you can pretty much take it to heart.
There will be more changes in this company as they move forward looking to break out from the penny stock status and into a fully fledged cash making machine. It is a path that will be chosen carefully and personnel will be placed where they serve greatest benefit. Some guys, especially geologists, are better out in the field kicking rocks discovering new properties as opposed to sitting in board rooms discussing financing and quarterly projections.
The one thing I can tell you is that this is a company that is carefully planning its chess game and the corresponding moves, ten in advance. That’s how you win at chess and that is how you win in business.
GPXM is primarily a gold play
I bring this up only because this can be confusing due to the fact that a great deal of energy had been expended in developing a molybdenum mine in Ashdown, Nevada. To that end, the company has become quite proficient in the area of molybdenum production and has developed an excellent reputation in that arena. But as I mentioned before, the market changed and the company adapted as best they could. Their partner on the Ashdown deal, Winn Eldridge, bought them out and will begin making payments in the beginning in April of 2011. That was a win-win for all. It goes without saying that GPXM fully supports the success of their ex-partner and stand by to assist in any way possible. Besides the (molybdenum) Champion project in Ontario, there are the projects in Peru. They have a full plate and are trying to keep it all in balance.
I want you to be very clear about junior mining companies. There are many moving parts and they all have to work together seamlessly. They are the same parts I’ve been talking about for years. The major categories are people, projects, the ability to fund, the willingness to promote, and Integrity. Of course, there are subcategories underneath each of those main topics.
These companies are high risk and high reward so be prepared for volatility that will make your hair stand on end after you’ve stuck your finger into a 120 V electric outlet. For instance, GPXM went on a tear a few weeks ago and made it up to about $.14. Then it slipped back to about $.09 which is a 40% drop give or take. For me, it’s a good way to average in because I believe in the company, their people, and what they are doing.
But what I do like is their business model, and the way they are diversifying their resources from Peru to Ontario and points in between. Hence, the tag line: “royalty mining in the Americas”. The idea is to pick up a property, analyze it with some excellent geologists (Wayne Colwell and David Cauldwell ) and then decide whether to become involved with that project or go on to the next one.
A major point for you to realize is that this company is on the move and connected with the power players on the inside of the mining industry and on the outside with the financial community.
In retrospect, at the bottom of that financial valley in 2008, one could have picked up some of these junior mining companies for pennies on the dollar. The ones with good projects, management, and a little money in the till became 10-30 baggers for those smart enough and sufficiently brave to buy at that time. Golden Phoenix found themselves on the precipice and how they scraped and worked their way back into the game is going to be a story they’ll be telling their grandchildren.
Conclusion
I think that Golden Phoenix has done an amazing job at circumventing a myriad of obstacles thrown into their path over the past five years. They have done several things which separate them from the pack.
They have located excellent properties, excellent partners, and are moving forward to transition from saving a company to creating a wealth producing entity.
They have traveled the full gamut of mining from discovering a property to permitting to building a mine to producing product to selling the product.
They were thrown curve balls as they navigated this complex industry and managed to turn the negatives into positives becoming much more skilled and adept in the process.
They are not a one trick pony having experience in several different metals; gold and molybdenum being foremost among them.
They’ve paid down almost all debt—certainly all major debt.
They’ve attracted some of the highest quality talent in the field and in their boardroom.
Operations begin in Nevada and Peru in the first quarter of 2011 which should make them cash flow positive. There is institutional presence and it could expand; especially if the Mineral Ridge area becomes a “district play” which very possibly could happen.
They have worked with their ex-partner Winn Eldridge to create a payment schedule of close to $90,000 per month after they sold their interest in the Ashdown property to them.
Until Next Time,
D. Stewart Armstrong
consulting@seacoastpub.com
Posted by D.Stewart Armstrong in Articles