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Mexus Gold U.S.
 
I invest in very few things.  Although this is frowned upon in the investment world, I believe this is why I've been pretty successful.  Over the last 10 years I've only been invested in about fifteen stocks, and never more than 6 or so at the same time.  This is a write up about a speculative company that could pay off big.
 
 
The company in question is called Mexus Gold U.S., (symbol MXSG on the over-the-counter bulletin board) a metal miner which has the rights to cable salvaging in the Pacific Ocean.  I originally purchased only on the cable but that didn't go as smoothly as planned.  I am including my original work/analysis of the cable pulling at the bottom of this page.  Since this is now on the back burner (but not forgotten) I am going to start with their mineral properties.  Before I go on, let me repeat that this is NOT investment advice and please do your own due diligence before investing.  This is a VERY thinly traded stock and any buying can drive the price up as I can attest to from my own buying.  If even three or four people reading decide to buy, that can have a large impact on the stock price.  The stock has been as low as 2.5 cents and briefly went over 40 cents.  I feel this stock is poised to have a great increase in value due to the currently underway mining.  Being on over the counter stock means there is a lack of analysis and information.  This is either bad or good.  Bad if the company is a scam, which I highly doubt, having spoken to the president, or good as there is very little attention here and the price is lower than it should be so I can purchase shares cheaply.  With those provisos in place, let's dig in.
 
 
 
 
Mining Properties
 
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Cable Salvage
 
With GORO actually producing gold, why would I be interested in another gold miner?  Well, as I mentioned, it's not their gold that interests me, its their salvage rights to an undersea cable.  Mexus has the salvage rights to a cable that runs from Alaska to Southern California.  Here is a cross sectional view:
 
 
As you can see there is a lot of metal inside, the most valuable of which is copper. (there is also lead and steel) Mexus is going to pull this cable up from the sea floor and then sell it.  They already have purchased a tug boat and barge.  The CEO has designed a pulling rig which will go on the tug.  One of the main reasons I initially rejected this company was the fact that it used to be called Action Fashions.  This seemed like a large leap.  About a week ago, the CEO had an audio interview posted on Wall Street Reporter.  Unfortunately, it was taken down after a week, as they don't keep all the archives.  Fortunately, I took notes while listening.  Here are the key points:
 
1.  There are 600,000,000 pounds of cable.
2.  Estimated 400,000,000 pounds of copper.
3.  If all material was recovered (not very likely) the value of the cable would be over $1,000,000,000.
4.  The barge can hold 4,000,000 pounds.
5.  Can pull 10 miles of cable a day, which is 100 tons.
6.  Could fill the barge in 20 days.
 
So lets work this out.  Let' say half of the weight is copper.  That yields 2,000,000 pounds of copper a barge load.  @$3.41 a pound, that is about $6.8 million per 20 days.  Let's assume they can only get half value.  That leaves $3.4 million in gross profit.  In 20 days! 
 
The CEO said that their cut of JUST the Alaska part of the cable is $250 million.  This means they can, assuming 20 days is a month, pull cable for about 6 years.  They are going shut down over the Winter months, so they will stop the process at that point.  Still, 8 months of pulling, will give a profit of about $27 million a year.  That doesn't seem like all that much money until you realize they are only valued at abou $26 million, for the whole company!  And that's after going from 2.5 cents to 18 cents.  This yields a price to earnings of 1!  Obviously, that won't last.  Even a conservative PE of 10, would make this a $1.80 stock.  Plus, they have mining properties.  Sound interesting?
 
The cable pulling is scheduled to start within a month.  They also have a copper mine property that shows high grade copper at 80 foot depths.  This property looks so big that Mexus is already looking for a major miner to joint venture with.  A joint venture, typically gives a majority of the future profits from the mine to the larger company if they agree to pay for everything.  Obviously, this would take a while and there is no guarantee, but if they did acquire a partner, that would add significant value to the company.
 
They also have another very high grade silver property (also in Mexico) to begin mining within 120 days.  They have portable mining equipment, ready to go on site.  This will mine 25-30 tons of rock a day.  The property has very high silver content, at least 100 ounces a ton.  This would mean, assuming a $200 an ounce production cost, over a million dollars a month in profit.  That ore will probably not last long, but a profit that high, even for a year, would provide millions of dollars in profit, and the share price would rise accordingly. 
 
 
 
 
The CEO is experienced in small mining operations and has significant management experience, having built a trailer park and housing subdivision in Nevada.  He currently runs a trucking company which is funding activities.  He sounded very committed to keeping costs low, and that they were under budget on the cable salvage project.  He also seemed a little less than marketing savvy.  This could be why they aren't very well known
  
So what could be "wrong".  Here is my list:
 
1.  Could be total scam as the bulletin board stocks are often just that.  Risk of this:  low.  The demeanor of the CEO on the radio program just wasn't that of hypester.
 
2.  Might not be able to extract cable as easily as planned.  Risk of this: medium.  Their tug boat captain is familiar with the cable and they are hiring a diver.  This should alleviate most major problems.  They will shut down in Winter months so that will slow things no matter what.  The cable isn't going anywhere so this would just mean waiting longer for results.
 
3.  Large share count could keep growing:  Risk of this:  medium.  If they can get the revenue flowing from the cable salvage, this should be unnecessary.  Salvage to start soon.
 
4.  They only have a million dollar line of credit so they could run out of funds.  Risk of this:  low.  Again, revenue from the cable should start flowing.
 
5.  Management is older.  CEO is 69 and his demise would probably put a large damper on activity.  This would affect the share price downward, perhaps permanently.  Risk of this:  medium.
 
Overall, not that bad.  This actually looks like a potential 10 bagger.  Another plus in their favor is that 70% of the stock is insider owned.  That's a lot.  This means the float, or shares available is only about 40 million shares.  At $.18 that's only $7.2 million bucks.  That's a tight float.  Anyone looking to get in with a large purchase, will drive the price higher.
 
So if you decide to invest in this, here are some things to keep in mind:
 
1.  Only risk money that you wouldn't mind losing.
2.  Go to the company website and check it out.
3.  Only order this stock with a limit order. (if you don't know what a limit order is, this stock is probably not a good idea for you, but email me for help)
4.  Realize if you buy anything more than a few thousand shares, YOU will be driving the price higher.  I can tell you that my purchases last week, drove the price up 3 cents.  If too many people reading this buy, it might go up faster.  I would consider this stock to have a large margin of safety up to about 25-30 cents.  This may be a long term investment to pan out, so the share price will sink if time goes by with no activity 
5.  Don't buy this without first researching it yourself.  www.ragingbull.com has fairly active message board.
6.  The information available on this stock is very sparse.
7.  This is highly SPECULATIVE.  This isn't GORO.  They have a long way to go to prove their value.  GORO is paying dividends right now.  The difference between these two at this point is wide.  Don't put any more than 2% of your portfolio into it.  (that's what I have done)  As they execute their plan, I will think about increasing that.
 
I believe if this stock is for real, and can carry out their business plan, that they are vastly undervalued.  This is a stock that would easily trade at a couple bucks with the projected cash flow.  That is a ten bagger.  Those don't come around very often. 
 
 
Mexus  Part 2
 
I've been doing some more computations on Mexus Gold.  Specifically, the submarine cable recovery.  Although it seems like they have some pretty good metal properties, the thing that REALLY interests me is the cable.  Here's a new photo of the automatic cable puller which is being affixed to the barge and hopefully nearing completion:
 
 
 
 
I wanted to get a better idea of what this company could be worth.  I took a picture of the cable and adjusted the size so that it was about life size.  I then measured the various portions of the cable.  The interior copper core is 1 1/2" in diameter.  The lead layer is 1/2" thick with an outside diameter is 2 1/4".  The outside is probably (this is uncertain at this point, but there have been sources saying that the other portions of the cable are more valuable than the copper which my analysis seems to confirm) an alloy of nickel and copper which is used for it's strength and non-corrosive properties.  These alloys usually have at least 60% nickel.  There were thirty one 1/4" diameter wires in the cable.  
 
I'll spare you all the calculations but the cable has the following amount of metal per foot of cable: (starting with the area of each metal from the cross section)
 
lead  -  1.57 sq in. x 12 = 18.84 cu. in per foot x .409 pounds in a cu in= 7.72 lbs of lead per linear foot.  Lead is about $1 a pound or $7.72 a foot.
 
nickel  -   .9114 sq in. x 12 = 10.94 cu. in per foot x .321 pounds per cu. in = 3.51 lbs per linear foot.  Nickel is about $10.75 a pound or $37.73 a foot.
 
copper  -  2.378 squ in x 12 = 28.536 cu in per foot x .323 pounds per cu. in = 9.22 lbs per linear foot.  Copper is about $3.60 or $33.19 a foot.
 
Latest prices of metals:
 
MetalPrices.com
   
LB KG MT
 USD/LB Cash 3m 15m
Aluminum 1.0528 1.0657 1.0918
Alum Alloy 1.0024 .9866 .9662
NA Alloy 1.0188 1.0297 1.0342
Copper 3.6761 3.6809 3.6242

LME Officials 08 Oct 2010
 USD/LB Cash 3m 15m
Nickel 10.7524 10.7751 10.5007
Lead .9975 1.0092 1.0129
Tin 11.8048 11.8388 11.5099
Zinc 1.0124 1.0256 1.0469
 
 
Total value per foot is $78.64
Total value per mile is $415,219
 
What's very interesting here is that the nickel is more valuable than the copper.  Interesting, because the company doesn't really mention this in any of their publications or press releases. 
 
Let's say the refiner is going to pay 60% overhead and scrap sales discounts yields $207,609 a mile.  Scrap typically pays 60% of spot price 
 
Puller can yield 10 miles of cable a day but let's assume they can only pull 50% of that.  This means they will be making over $1,000,000 a day!  Working for 250 days a year and we're talking $250,000,000 a year.  They also have to pay the original owner of the cable about 25% of the gross revenue.  This lowers the amount to $188,000,000.  Now let me ask you this:  if they can produce that much profit in the first year, would the current valuation of $35 million for the whole company be realistic?  Of course not.  This is why I've taken a position in this stock.  It could be a grand slam. 
 
The one fly in the ointment is that we don't know how much cable there is.  We do have the company's estimate of 400,000,000 pounds of copper.  Working from that, we have 3.6 pounds of copper per foot, or 19,000 pounds per mile.  Dividing this yields 21,000 miles of cable.  It is highly doubtful there is that much cable but we do know that the deep sea cable is much bigger and would have more copper.  In any case, it looks like they could pull cable for years. 
 
 
Bottom line, it looks like there is a LOT of money to be made here.  If they can get this thing cranking this week, and have a positive press release of even pulling 1 mile a day, that is $27,500,000 in profit a year. (after subtracting the 25% royalty)  For a company this small, it will mean fireworks.  The price to earnings ratio of even the lowest ranked stocks is typically at least 10:1.  This would mean a market cap of $375,000,000.  Taking the 150 million shares outstanding gives a share price of $2.50!  This is without the gold and silver properties.  I don't see them having any problems that could result in only a 10% cable pulling capacity per day, so that price should be on the low side.   
 
Now factor in the possibility of securing rights to another cable and the mind boggles.  If they can get this working, why wouldn't you look for other cables?  They'll have plenty of money to buy those rights too.
 
Here's a couple videos from the pulling tests:
 
 
 
Then add in the potential for gold and silver income and you have the makings of huge gainer.  Please do your own due diligence and make your own decision and please don't put any money in this that you can't afford to lose. 
 
If you have any questions about Mexus, give me a call at 703-791-6066 or email me at currymagic@gmail.com