Tuesday, February 20, 2007

The Last Undiscovered OTCBB GOLD Stock

With GOLD prices hitting record highs, precious metal mining stocks have recently enjoyed unprecedented success. Mining industry giants Barrick Gold (NYSE: ABX), Rio Tinto (NYSE: RTP), Newmont Mining (NYSE: NEM), and AngloGold Ashanti (NYSE: AU) have been hitting all-time highs while smaller upstarts such as Rangold Resources (NASDAQ: GOLD) Iamgold Corp. (NYSE IAG), and Gold Fields LTC (NYSE: GFI) have been providing incredible returns as well. Not to be outdone by their big board brethren, OTCBB mining stocks have been churning out returns that make actual gold look like chump change. Silver Dragon Resources (OTCBB: SDRG) for example, has risen more than 2600% over the past few years!

During my many years of investing, I have found a very simple yet effective trading strategy to be "mimicry trading". I discuss this trading strategy and nearly a dozen others in my best-selling text The Little Black Book of Microcap Investing. Mimicry trading is not rocket science. Simply put, this strategy requires that you identify a successful sector and look for stocks within this sector that have yet to take off. One of my biggest successes with mimicry trading occurred with voice recognition stocks. There was a time when voice recognition stocks were the talk of the town. I watched from the sidelines as a number of OTCBB voice recognition stocks enjoyed tremendous success. I did an extensive search for voice recognition stocks and to my surprise, I found one that had yet to be discovered. The stock was named Fonix (OTCBB: FONX) and it was trading at lows near $0.25. I bought as many shares of FONX as possible and hoped that the stock would follow the path blazed by other successful voice recognition stocks. Shortly after purchasing FONX, others began to take note of this stock and it soon rose to over $3! I am telling you this story about mimicry trading because I have identified a GOLD STOCK that has yet to be discovered by the masses.

US PRECIOUS METALS (OTCBB: USPR) engages in the acquisition, exploration, and development of mineral properties. The company focuses on gold and base mineral resource properties primarily located in the southern portion of the states of Michoacan and Sonora, Mexico. Specifically, USPR owns exploration concessions to multiple Solidaridad properties located in Michoacan, Mexico. On March 13, 2003, the Company acquired Solidaridad I (175 hectares), also received on March 27, 2003, the exploration concession from the Mexican government for Solidaridad II (2,164 hectares). On July 22, 2003, the Company acquired the exploration concession for Solidaridad III, (294 hectares) and Solidaridad IV, (149 hectares). May 25, 2004, the company received the exploration concession from the Mexican government for Solidaridad V, (La Ceiba 921 hectares), (1 hectare = 2.47 acres).

Please take a moment to look at the map of Precious Metal Mining in Mexico. You will notice that most Mexican gold mining takes place in the mid-central portion of the country. To date, very little mining activity has occurred in the Mexican state of Michoacan. If this is the case, why should we be excited that USPR is focusing their efforts here? First of all, there is a reason why Michoacan has had little mining activity. In 1985, Michoacan was devastated by an extremely powerful earthquake that damaged much of the region's infrastructure. Many of the roads to the Solidaridad mining properties were damaged by this event and subsequent years of neglect made access to these areas nearly impossible. For USPR, this was a blessing in disguise. The damaged roads hindering access to the Solidaridad mining properties have kept the area in pristine condition. While other areas of Mexico have been heavily mined, the minerals of the Michoacan Solidaridad region have been left alone.


(Damage from 1985 Michoacan Earthquake)

When USPR acquired the rights to the Solidaridad mining properties, they realized that in order to mine precious metals, roads and infrastructure to the sites would need to be repaired. In a February 15, 2007 press release, USPR noted "Existing roads on the concession have been repaired by a heavy equipment contractor from Morelia. There were an estimated 10 km of existing roads that needed repair. The rainy seasons in past years had washed out sections of the roads preventing vehicle access. Our intent is to access areas that are considered drilling targets and begin sampling vein structures for continued metallurgical testing." Additionally, in their most recent SEC 10QSB filing from 1/16/2007, USPR indicates that they are planning to spend $505,000 to repair/construct roads to Solidaridad I and improve the site's infrastructure to help facilitate future mining operations.

Based on its pure potential, USPR is an outstanding gold play. When you consider the fact that USPR is just about the last remaining gold stock that has yet to explode, your mouth should begin to water! Do you remember what I said about mimicry trading? Let's take a look at few other OTCBB Gold stocks and see how USPR measures up:

Capital Gold Corp. (OTCBB: CGLD) has $0 reported revenues according to their most recent SEC 10QSB filing and has a market capitalization of $59.9 million

Global Gold Corp. (OTCBB: GBGD) reported $5,600 in revenue according to their most recent SEC 10QSB filing and has a market capitalization of $30.2 million

Gold Resource Corp. (OTCBB: GORO) reported $0 revenue from operations (they did report $841 in interest income) according to their most recent SEC 10QSB filing and has a market capitalization of $61.3 million

Raven Gold Corp. (OTCBB: RVNG) reported $0 in revenue according to their most recent SEC 10QSB filing and has a market capitalization of $58.7 million.

Silver Dragon Resources (OTCBB: SDRG) reported $0 in revenue according to their most recent SEC 10QSB filing and has a market capitalization of $112 million.

The average market capitalization for these OTCBB Gold Mining companies is $64.4 million. If we apply this market capitalization to USPR, the company would have an amazing share price of $2.05! Far fetched you say? Why? None of these other OTCBB gold mining companies have reported any revenue for this year. What makes them different than USPR? The driving force behind each of these companies is potential. While CGLD, GBGD, GORO, RVGC, and SDRG have already risen based on their potential, USPR has yet to be discovered by the masses. When USPR is discovered by the masses, this stock could very easily mimic the rest of the OTCBB Gold Mining stocks.

The fact that USPR has already taken steps to build and/or repair access roads to their mining sites is encouraging. On top of this, on February 6, 2006, USPR appointed a new Chief Operating Geologist. Combine this with the fact that a survey contractor from Morelia has completed the first phase of surveying for the Solidaridad properties and you should be very excited. This portion of the survey provides an accurate base map of an area along the main access road and extends easterly to the edge of the mountains. The second phase of survey is planned to include the "main zone" of mineralization which lies within the mountains directly east of the main road and extends north-south.

According to USPR, a drilling campaign is currently being planned. The drilling consists of shallow drill holes, less than 100 meters, to better define the mineralized zones and provide mine planning data. A second strategy, drill holes less than 700 meters, is intended to explore for deeper targets. All drilling will consist of core.

Can you say potential? I knew that you could! USPR is one gold stock that is truly a diamond in the rough!

This was written with a disclaimer.  However, the disclaimer page has been allowed to expire, no information provided.

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