Down here in Victoria we have one the most profitable gold mines in the world.
It’s called Fosterville.
This thing prints money.
Aussie dollar gold is sitting at AU$2,180. That’s not quite gold’s all-time high in Aussie dollars…but it’s pretty close.
There are marginal gold mines that can turn a buck with an Aussie gold price this high.
The Fosterville mine is one of the best in the world.
Its margins are crazy lucrative with gold at $2,180.
Management say that the operating cost to pull gold out of Fosterville was US$120 at last check.
Fosterville just put in a record quarter for production, too.
A company called Kirkland Gold [ASX: KLA] owns Fosterville.
There’s no secret here for the Aussie gold industry. You and I are not going to grab a bargain in Kirkland stock anytime soon.
Fosterville is probably the richest gold mine in Australia.
But you could make some money another way…
There’s a little Aussie explorer called Chalice Gold Mines Ltd [ASX: CHN] with a lot of exploration leases near the Fosterville mine.
And they’re about to start drilling some of this in late September.
You might like to keep an eye on it in the weeks ahead — or dig into the stock a bit deeper.
Chalice is a former recommendation from my Small Cap Alpha service.
I tipped it in December last year. We banked a gain just under 50% in August.
Back in December, Chalice was about as close as you get to a ‘no brainer’ in the stock market.
The stock was trading for 12 cents a share. Yet it had 10 cents in cash and investments on the books.
That meant the market was putting practically no value on its exploration projects!
One of these projects — as I’ve just told you — is near one of the best gold mines in the world.
It didn’t take the market long to catch on to the mismatch around this.
The big rally in Aussie gold brought the entire sector to the forefront of investors.
Chalice’s stock rallied alongside this new enthusiasm.
My Small Cap Alpha readers banked a tidy gain.
I recommended selling Chalice because that gain came with practically no great risk involved.
A punter’s paradise
When you back an exploration company, you’re obviously gambling on them finding what they’re looking for…and in a quantity that puts a genuine development project in play.
If they hit a big seam, your stock goes kaboom!
But if they don’t, you run the risk of holding a stock that has nothing more than a shovel and patch of dirt.
That’s the nature of the exploration game.
Time will tell if my sell call was the ‘right’ decision.
The team behind Chalice Gold Mines are very experienced. I don’t doubt their expertise for a moment.
But they can’t see underground any better than you or I can.
They can study. They can infer. They can sample.
But nobody is sure if there’s gold where they’re looking until they get to the drilling.
We’re going to find out this year if Chalice are a little closer to finding a potential Fosterville-like strike once they get their drilling going.
Here’s something else that’s notable…
There was another reason I recommended my subscribers bank their gain in Chalice.
It was because the stock has a habit of spiking up then retracing back down fairly quickly.
It suggested we might be prudent to take the gain while it was on the table.
Except Chalice hasn’t done that this time — so far at least.
Chalice is holding up around the 19–20-cent mark.
I can’t help but think that the market is watching this stock much closer than it was previously.
It would seem sellers aren’t too keen to cash out of the potential here.
After all — Chalice is drilling near Fosterville.
I’m not recommending you buy Chalice now. That’s for you to do some study on and decide.
I’m just pointing out a potential opportunity.
Remember the basic equation. Perhaps they eventually hit a deposit as awesome as Fosterville.
Or perhaps they hold a lease not much more valuable than the dirt they’ll be standing on.
That’s the exploration game. Is it for you?