TGM is fully capitalized and incentivized to move quickly, with its major shareholders in alignment with company initiatives, which the company has been executing flawlessly. We fully expect this to continue and note that even with the new investors, on a fully diluted basis, the company trades with only about 40 million shares, which will add booster power to the share price in the face of any new demand.
Simply put, multiple expansion refers to the expansion of a stock’s price/earnings ratio based on investor willingness to place more value on the company’s earnings. This willingness, it needs be noted, can drive the stock price up all on its own. Consider the hypothetical J.R. Ewing Gold Company, which trades at $10 per share on a valuation of 10 times its $1 of earnings. Let’s say investor interest starts driving the share price up, and, even lacking any noteworthy news or developments, the stock rises to $25 and pushes the price/earnings ratio up to 25/1. If you’d been invested in the company at $10 per share, multiple expansion helped you more than double your money.
Not only will the addition of this new talent add exceptional levels of mining expertise to help drive successful exploration, but also strongly suggests that Newman Todd and Trillium are worth putting their reputations on the line. After all, such seasoned mining experts would not likely be attracted to or accept key roles in a fool’s gold exploration project.
Naturally, if the price of gold is on the rise, whatever the company finds is going to be that much more valuable. So, when a microcap or small cap mining and exploration company hits a new productive strike or ups proven reserve numbers, it’s like adding gold to the stock price—gold that in and of itself is rising in price during fraught times, further boosting the share price.
Countries, being ultimate agents of action, can declare governmental ownership of entities that operate within their borders. Once outside companies endure the risk of identifying profitable gold mines, governments can declare the mine to be governmental property, thereby hijacking the intellectual and mechanical energy deployed by the outside company and abruptly declaring full ownership of the mine.
As I covered in a recent post on Inflection Investing, tech and software businesses can scale very quickly. And when they do much of the newly generated revenue passes straight through to the bottom line. Fans is at that Impending Inflection Point juncture now. Their investment thesis is definitely worth a closer look.
