Predicting a Pullback With Americas Gold and Silver
Earlier this year, one of the most prominent names in precious metals made an investment of $10 million in a microcap mining stock.
It was Eric Sprott, the well-known investor and Canadian billionaire businessman. He is also former chairman of the largest precious metals investment firm in the world, Sprott Resource Holdings. This company lent money to junior mining stocks and profited when those companies hit it big.
Sprott, now retired, continues to make personal investments. His former company, of which he is currently a major shareholder, still bears his name.
The precious metals company Sprott invested in is called Americas Gold and Silver (NYSE: USAS).
In July, at the time of the investment, Americas Gold and Silver was trading around $2.80. Sprott invested $10 million to buy shares for approximately $2.50.
This came on the heels of another deal that Americas Gold and Silver made with up-and-coming junior gold royalty company Sandstorm Gold (NYSE: SAND), which entered a royalty deal worth about $42 million.
Then, in September, Sprott invested another $20 million into a joint venture to develop one of Americas Gold and Silver’s mines, further solidifying the relationship. He is the largest shareholder in the company.
When Americas Gold and Silver was trading in the high $3s, I advised we wait for a pullback in gold prices before taking a position.
Gold pulled back, and I recommended entering a half position at $3.10 while waiting to enter the second half on a further pullback.
With gold, it’s hard to predict pullbacks. There are so many factors affecting the price, including political factors, monetary factors, market volatility, and strategic positioning by central banks and major investors.
Our break came last week when the price of gold corrected again, and the price of Americas Gold and Silver followed.
Members picked up their second half of the position below $2.70…
Some members were able to buy in around $2.56, close to the price Sprott himself paid!
Action Plan: By being patient, taking our time and using a double-down strategy, War Room members were able to enter a speculative position in a company that enjoys the support of the “Warren Buffett” of mining stocks at a price close to what he paid.
Now it’s a waiting game to catch the next bounce in the price of the metal to rake in a tidy profit. For plays like this trading in real time, join me in The War Room today!
About Karim Rahemtulla
With more than 20 years of experience, Karim has mastered the subtle art of options trading. What we admire about him is his ability to score huge gains while minimizing the massive amount of risk that often comes with options. Beyond his expertise in options trading, he is also the author of the best-selling book Where in the World Should I Invest? He publishes weekly about smart speculation in his latest free e-letter, Trade of the Day.