Buy These Gold Stocks Before Everyone Else Figures it Out
By Dr. Steve Sjuggerud
June 4, 2007

David Cole got a lot richer after our True Wealth Gold Conference last week...

You see, David is the CEO of Eurasian Minerals, one of a handful of companies that I invited to speak at our conference. Shares of Eurasian rose by 18% in the two days after David spoke.

Readers have made money out of this conference... Two years ago at our gold conference, I only invited one gold company CEO to speak – and that was Seabridge Gold. Shares of Seabridge are up more than 500% since I originally recommended them in my newsletter about two years ago.

I think the next big story in this space will be businesses like David Cole's. I wanted to share the core idea with you now, and why it has such a tailwind now...

The Best Opportunity in Mining is With This Group

This year, with the help of Matt Badiali, I expanded the list of speakers at my gold conference dramatically. You see, Matt writes the S&A Gold Report, and he's a geologist. A few months ago, we traveled to Canada and visited a ridiculous number of mining companies, looking for opportunity. Matt and I invited the best of the companies to our conference.

For the most part, the companies we liked followed a similar model... they are called "prospect generators."

These guys are the young blood in Vancouver... old enough to have experience, young enough to be hungry and work hard looking for metals, and smart enough to make it all work.

The basic model is this: The big mining companies don't make discoveries any more. And the tiny mining companies are often just good promoters masquerading as miners. The real discovery work is done by these prospect generators – guys who go out and find mining prospects.

In short, prospect generators do the fieldwork o find a site with excellent potential, then partner with a mining company. The mining company develops that project so it can sell it a major gold producer. The prospect generators move along after passing the project to a partner – but crucially – they keep a percentage interest (shares) as a "finder's fee" for the opportunity they discovered. Over time, these prospect generators end up with shares of many companies.

David Cole's Eurasian Minerals is one example...

David stepped out on his own, after a career with Newmont Mining. But he picked up right where he left off... He was sizing up Turkey and Eastern Europe before he left Newmont and has since developed these projects while out on his own. He already has one success story in Serbia. He picked up more than a million shares of the company that took over the asset and got a royalty of 2% on any gold that comes out there.

This is one example of how it works. Incidentally, when Matt and I met with David Cole in Vancouver early in 2007, I had mixed feelings... I was incredibly impressed with how smart he was and how committed he was to what he did. But we wondered if he was a little crazy, going into the wild nooks and crannies of the world...

David moved on from Serbia after he struck a deal, and took his local expertise into Romania. Romania has gold? Why, yes, actually. David actually prefers to be in wild locations. It keeps the level of competition low. For example, he has been working in Haiti recently... and has found that even the low-hanging fruit could turn out to be quality gold deposits.

His penchant for digging where nobody else will is paying off for investors... shares are up 40% since we visited him earlier this year.

Matt Badiali recently explained the business model better than I can:

I believe this business model is the best way for investors to make huge gains in the mining sector. Here's why:

The mining industry is voracious for metal deposits, and the most talented exploration geologists own and work for prospect generators. I see the emergence of an entirely new class of mining company, and this is your opportunity to get in on the ground floor.

There are only about 20 prospect generators (PGs) in the world, as opposed to the thousands of conventional mining companies. The PG's niche is exploration at the expense of the majors.

A typical junior mining company needs to raise money (and dilute your shares) to fund a new drilling project. On the other hand, prospect generators use other people's money and protect your value.

The seductive lure of these companies is the possibility that they will make a huge discovery. At our recent True Wealth Gold & Collectibles Conference, names like Altius Minerals, Aurelian Resources, and Arequipa Resources got reverential treatment. Like Virginia Gold Mines, these companies made discoveries that took them from penny stocks to tens of dollars within months.

Perhaps my favorite discovery story in the group is Aurelian Resources. Aurelian's Fruta del Norte discovery in Ecuador took its share price from 30 cents to $30 in nine months... a spectacular gain of nearly 10,000%.

The key to the PG business model is making discoveries and sticking with the smartest geologists. The key to investing in PGs is to buy a handful now to spread your risk.

Right now these companies are small (between $20 million to $40 million market cap), but they won't stay that way for long.

No doubt, you will be hearing a good deal about these companies in the future, as this is the right business model for the mining industry. The word is getting out. I suggest you don't wait to you acquaint yourself with these companies. I recommend start learning as much as you can about prospect generators, like David Cole's Eurasian Minerals.

Good investing, Steve Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments. Sign up today to read more investment ideas from Steve Sjuggerud.