An Unexpected Bonus
One of the biggest gains of my career came from a very unexpected and unplanned for investment.
In 2015, a company called Silvercrest Mines was acquired by First Majestic. In the process, a smaller company called Silvercrest Metals was spun out, and initially sold for $0.06/share.
I got my readers into this company in 2016 at $0.12/share.
In 2024, Silvercrest Metals announced it was being acquired by Coeur Mining for $10.77/share. The deal was finalized in February of this year - giving my GP10X members an 8,358% gain.
That’s an 88X return… Turning every $1,000 invested into over $88,000.
And it all started with a spinout from those original Silvercrest Mining shares.
Of course, you can’t predict or plan for a spinout to occur. But when it happens, it’s usually great news.
That’s because it shows a preference for creating/maintaining shareholder value over company insider benefit. Why? Instead of simply selling off projects and pocketing the cash, a spinout goes directly back to shareholders.
I mention spinouts today because a company in my current GPIV and GP10X portfolio just announced a spinout of a new company.
The parent company doing the spin out that’s currently in the portfolio is now up 471% since I added it to the portfolio just under two years ago.
Current shareholders will receive one share of the new company for every two shares of the parent company. It makes sense for the older company to offload non-core projects for a few reasons in addition to being shareholder friendly.
For one, they have a significant gold project they’re actively developing. For small management teams, it’s a pretty big undertaking to get one mine off the ground. So when they strike gold in other properties, even if they’re nearby or very compelling, it’s not always in the interest of the company to split their attention.
Carrying extra properties and projects has a cost in both time and money. Spinning them off into a new company lets the existing company’s management team focus on the core project that is most likely going to build value for shareholders.
The spun off company is in a much earlier stage and will require years of work to develop into a mine. The upside at this point is also potentially much larger for the new company.
Remember that Silvercrest Metals was spun out starting at $0.06 and was taken over by Coeur 10 years later for over $10…
The newly spun out company will give shareholders flexibility. They obviously get to keep full ownership of the original company and they get a more pure play on the core project’s upside.
And they can choose to sell the new company and immediately get cash. I almost always recommend holding on to shares… because you never know what these non-core projects will turn into.
Also consider that company insiders are frequently shareholders themselves. In the case of this spinout, the original company has over 30% of outstanding shares owned by insiders.
That means the people who organized this spinout have their interests aligned with public shareholders. They want to see the spunout projects succeed… they just don’t think it’s a wise use of their time while they’re developing the original company’s core asset.
As we see this precious metals bull market continue, I believe we’ll also continue to see these kinds of special investment opportunities. Competent management teams will be laser focused on generating and maintaining shareholder value. It’s the only way to stand out among the crowd.
Best,
Garrett Goggin, CFA, CMT
Chief Analyst & Founder, Golden Portfolio
P.S. If you’re waiting for a signal to put money into gold stocks, you should pay attention to your inbox next Wednesday, October 22nd. That’s when I’m sending out an investment brief all about my #1 favorite stock to own for the rest of this bull market.
It’s a company that’s very close to producing its first ounce of gold, and when that happens I believe the market will revalue the stock 400% over the next few months…
Don’t miss it. Pay close attention next Wednesday.
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