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StreetSweeper's Short Thesis On Almaden: Stock Is 'Fool's Gold'

Jayson Derrick

Shares of Almaden Minerals Ltd. (NYSE: AAU) were trading higher by more than 9 percent on Tuesday, despite The Street Sweeper stating in a new research report the company's stock is "fool's gold."

Almaden Minerals saw its stock rise on misconceptions surrounding a "highly speculative" gold mine project in Mexico (Ixtaca) to cost more than $1 billion, The Street Sweeper's Sonya Colberg wrote. Meanwhile, the company only has a "measly $2-or-$3 million in the kitty," or a "tiny, tiny sliver" of the amount it would need to finance any mining projects of such a large scale.

Almaden announced back in October a plan to secure financing to acquire a mine in Alaska. The company pitched a $6.5 million option deal to acquire the mine and argued that it will reduce its Ixtaca ramp costs by $70 million - a figure that was an "arguably highly inflated guesstimate."

So how has Almaden's stock risen as of late? According to Colberg, shares went "crazy" following an e-newsletter campaign by Broad Street Alerts, a professional stock promoter. To the company's credit, the company denied having met anyone from Broad Street Alerts, nor has management interacted with the promoter "in any way in respect of any write up they have done."

However, Colberg pointed out it's "amusing" the stock promoter is pushing a "highly speculative mining company" that is "barely hanging onto its New York Stock Exchange listing" rather than recommending a more secure investment in a gold and/or silver index.

Colberg also pointed out that Almaden has "attracted virtually no institutional interest whatsoever." Similarly, until recently, no analysts have covered the stock with The Street Ratings the only firm to do so, with a "Sell" rating nonetheless.

"Institutions, analysts and auditors are telling the company "Bye-bye," even as the company and unnamed individuals push a pretty, arguably unbelievable story of someday hitting gold," Colberg concluded. "We believe all that glitters is really just fool's gold. TheStreetSweeper fully expects shares to soon plunge to a much more reasonable valuation of 30 cents apiece."

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