Over the last couple of weeks we have been very bullish on San Lorenzo Gold Corp. (SLG.V), with our first blog post released when the stock price was $0.18. The stock hit $0.40 this past week before a pullback to $0.34 on Friday. We think latecomers to the story still have an opportunity to profit big, but need to act soon. An interview held by SLG's CEO Al Kroontje and released on Friday foretells a sustained increase in the stock price to come:
The key points that we would like to highlight from this interview are:
- Warrants have been exercised, raising $1.5 million.
- In the past, the company raised money through issuance of debt that was convertible at $0.20, when the stock price was 6-7 cents.
- No need for financing at this time.
- $1 million budget for the next phase of drilling.
- Drilling will start in three months.
- There will be 9 drill holes, three each on three targets - Cerro Blanco, Arco de Oro and Tres Amigos.
- Drilling will occur east of the third hole on Cerro Blanco where the most significant IP anomaly exists.
- Last program the company had issues with surface access, but now it won't be an issue.
- The elevation, geography and topography allows for relatively easy year-round access.
- There is ample infrastructure (power, roads) and permitting is timely
The company has also released an updated corporate presentation.
What does all this mean? There are multiple positive catalysts with no negative catalysts (the threat of dilution) and risks are relatively low compared to the typical exploration play. Management has no intent to dilute at this time, at least until after the next drill campaign is complete. Talk is cheap and anyone can say that, however, SLG already has a demonstrated history of treating shareholders well. The CEO participated in debt financing that was convertible at $0.20, well above the stock price at the time. Now that he has debt that is convertible at prices well below market price (along with 12 million shares and 4 million options), he has even more incentive to ensure the stock price is as high as possible before undertaking a financing.
The company will be targeting east of the third drill hole on Cerro Blanco, where the most significant IP anomaly exists. The reason it didn't target there before was due to lack of surface access, which is no longer an issue. This is an important point because assuming that this anomaly increases eastward linearly, this implies that the third hole will have superior results to the first hole already released.
Drill results can be a "sell on news" event. Why? Because a company is out of cash and must raise funds to continue with the next drill program. There is a negative catalyst before more positive catalysts can occur. The market knows this and a selloff occurs, even if there is pretty good results. This will not be the case with SLG. Not only is it not financing, but more drilling is occurring in another three months. This means more results could be out during the summer. If the third drill hole shows superior drill results to the first one, that will be confirmation to the theory that the discovery improves the further east it goes. That will increase speculation and excitement and lead to a sustained run in the stock price over several months in our opinion, until the next batch of results are due.
Investors, traders and speculators who are not yet in should consider throwing down a bet on SLG soon. The remaining drill results for this round should be released any day now and we think the odds are strongly in favor of the gambler instead of the house on this one. With 80 million shares outstanding inclusive of the warrants, announcement of results that are similar to or superior than the ones already released should justify a market cap over $100 million. This would lead to a stock price in the $1.25 range, with the possibility of a sustained run well beyond that depending on the hype around the next round of drilling. We are up to 1,033 followers on our ValueTrades blog despite not giving out a lot of alerts, a fact that we think is indicative of a successful, diligent and prudent stock picking history. If you like our picks you can also follow this blog by clicking the follow button on the top of the left hand panel. We have 122 followers so far on here. You can also follow us on X @StockTradePicks which has over 5,000 followers.
Disclosure: We are long SLG.V