The Armchair Trader recently had the opportunity to host a luncheon for one of its favoured gold miners, Fortitude Gold (OTCQB:FTCO), and get an update on the company from its CEO Jason Reid.
Regular readers will know that Roger Breuer recently covered the overall Fortitude Gold mining proposition in some depth.
Fortitude Gold is a gold miner and explorer with a focus on the Isabella Pearl mine and other substantial assets in Nevada. It is an already producing gold miner which has the added advantage of paying out a regular, and very generous dividend. This comes partly from the fact that it is debt free and is generating substantial profits from its operation.
The Isabella Pearl mine
Isabella Pearl is an open pit heap leach mine in Nevada, which is a very friendly jurisdiction for mining companies. It first started producing gold in April 2019. Gold production was ramped up in 2020 and it is now targeting between 40-45,000 ounces of gold for this year.
However this is not just a producing gold mine but has additional exploration potential. Fortitude Gold is targeting additional open pit deposits in the vicinity of Isabella Pearl – really within a 30 mile radius of each other. These have already yielded evidence of some decent deposits close to the surface.
Fortitude is currently involved in the delineation phase at Golden Mile, and is also looking at some punchy exploration data from other possible sites in the vicinity including at East Camp Douglas and Mina Gold. Details on the survey data can be found on the company website.
What is also interesting is the extensive mineralised trend, a line that can be drawn through historic gold producing mines in the area like Slab and Santa Fe, through Isabella Pearl, an on through Fortitude Gold’s existing claims. The company has numerous targets on this claim which can provide further evidence of the rich seam that could exist here. The total claim stretches to around 9000 acres, so there could be a lot more to come here.
The Fortitude Gold management team
Fortitude Gold has a very experienced management team with a strong pedigree in the gold mining industry. This is extremely important if a mining enterprise is going to be successful. CEO Jason Reid was previously CEO of Gold Resource Corp (NYSE:GORO), another gold miner out of which Isabella Pearl was spun. He was 14 years running GRC, which remains a very successful mining operation in Mexico.
Reid was part of the management team that took GRC from an exploration stage company to a development stage company to a gold and silver dividend paying producer. He has seen all stages of the mining cycle. While he was leading GRC it achieved 10 years of consecutive profitability. Over a decade of production, Gold Resource Corp generated over a billion dollars in revenue and $116 million in profit.
It seems significant to us that when Isabella Pearl was hived off a profitable entity like Gold Resource Corp, Reid chose to go with Isabella Pearl.
Let’s talk about those dividends
Reid was recently in London and met with The Armchair Trader. He significantly said that he has many investors in the company who have invested because of the dividend profile – they literally don’t care what the company does, they are on the hunt for dividends.
Reid says he has no plans to issue further shares – existing shareholders in Isabella Pearl won’t be diluted. There are no warrants on the stock and no outstanding debt. Institutional investors represent around 10% of the shareholder base, and there are no gold companies invested. A further 12% is held by the management team.
This month the company was able to raise the monthly dividend it pays by 14%. That’s an additional 4 cents per share. It is the third dividend hike by the company this year and brings the total cumulative dividend increase to 100%. That’s a big dividend for a gold producer.
Why we’re not worried about the gold price
Finally there’s the gold price. While many gold explorers’ shares will correlate to the gold price, Fortitude’s stock has actually increased in price this year. The gold price has been failing to respond the way many traders would like it to, namely rising as inflation picks up. Some blame Bitcoin as the new store of value against inflation, others says that China is manipulating the market to keep the price down.
But Fortitude stock is going to be bought as a yield play if it keeps that dividend where it is. Reid’s track record with gold mining is another factor. The prospect of further gold finds in Nevada starts to look like the icing on the cake for this stock.
