Wednesday, May 23, 2012

GRZ An Interesting Buy

Gold Reserve (GRZ) is a small US based gold miner. They used to be the epitome of high risk having only one big project located in Venezuela. They were a speculation spending $300 million on developing the property, but not quite ready to build and start bringing out the gold. Then a twist of  fate made them into maybe the epitome of low risk. This ironically happened as a result of Hugo Chavez seizing their project back in 2008. Oh, that's bad. No, that's good, because they filed a case with the World Bank demanding payment of damages caused by the Chavez government. Oh, that's good. No, that could be bad, because now they're at the mercy of what a pact of lawyers do. Oh, that's bad. No, that's good, because lawyers do what other lawyers did in similar past cases. And by that reckoning, GRZ will be granted a good portion if not all of the $2.1 billion demanded in damages. And that would be around $13 a share if only half of it were awarded - that's very good return on the $3 the stock now trades at.

I published an article on all this over at Seeking Alpha a couple days ago here. The comment by "The Vet" lays out the likely course of action the World Bank will take and its effect on the share price. All I know is this stock has some of the strongest hands holding on to it I've ever seen, as I illustrate in the chart in the article. Since then, the stock has actually dipped a little to some very strong support: