European Investor Olivier Tielens: In a Sideways Gold Market, Explorers Offer the Most Upside

The Gold Report: After flirting with $1,300 per ounce ($1,300/oz) in January, gold has fallen to around $1,200/oz. What happened? Olivier Tielens: Deflationary forces are still leading the game. There’s a 50% chance that we may go to a new low, very probably the final bottom, and a 50% chance gold will trade throughout 2015 in a tight range. TGR: A few years ago, gold rose tremendously after the U.S. Federal Reserve began quantitative easing (QE). Since then, further rounds of QE from the Fed and, more recently, massive QE from Japan and the European Union have not buoyed the price of gold. Why not? OT: QE is not working. Europe is in a depression. The velocity of money continues to decrease and is now lower than for decades. People are hoarding cash, and that’s deflationary. Zero and even negative interest rates continue, and that could help gold because even though gold doesn’t pay interest, at least bullion owners aren’t losing money by holding it. Inflation will arrive after confidence in the central banks fades. Investors will then want out of the U.S. dollar and into gold. When will that happen? Nobody knows, but it always comes like a thief in the night. Or we could have another black swan event, but this is less likely than in 2008 because the powers that be have learned from that, and there is now so much liquidity in the system. TGR: QE and zero interest rates are not helping gold, but they … Continue reading

Where is the Smart Money Going in Mining? Lawrence Roulston's Answer May Surprise You

The Mining Report: When we last spoke in June 2014, you said that gold at $1,250 per ounce ($1,250/oz) was a reasonable baseline price going forward. Do you still believe that? Lawrence Roulston: Yes. Actually, the fact that gold has remained at this level while the U.S. dollar has become so strong is very significant. My preference is to pay less attention to the gold price per se and more attention to specific gold and silver companies that are good investments in their own right. This means companies with smart management teams that are expanding resources, advancing projects toward production, increasing production or doing other things that add value. As the gold price eventually moves higher, such companies will realize bonuses on top of what should already be an attractive return. “Asanko Gold Inc. is on the list of likely M&As in 2015.“ TMR: In the last two years, two independent phenomena have occurred simultaneously: companies have greatly reduced costs, and, as you mentioned, pretty much all currencies have lost value against the U.S. dollar. Taken together, how much has this improved the condition of miners outside the U.S.? LR: In particular, Canadian and Australian miners have benefitted greatly: a 20% boost on the revenue line, which has led to an even larger boost of operating margins. As a result, many companies that were struggling two years ago are now much healthier. TMR: We hear often that it is difficult to impossible for mining companies to raise financing in the … Continue reading

The Resource Maven Tells Investors How to Take Advantage of a Rising Happiness Index

The Gold Report: You have doubled down on your declaration that “Nov. 5 was the bottom for gold and gold equities.” What makes you so certain? Gwen Preston: The primary reason is fundamental: supply and demand. Demand for gold remains strong despite headlines about exchange-traded funds liquidating their holdings. Physical buyers are buying a lot of gold. These include the central banks of China and Russia, countries pushing for an alternative to the U.S. dollar for international trade, and individual buyers in India and China, people who have long believed in gold as a store of value. The latter buy when it’s cheap, which has resulted in $1,200 per ounce ($1,200/oz) becoming a real bottom for gold. Every time the price falls toward $1,200/oz, the Shanghai premium—the extra amount that buyers in China are willing to pay at that moment to get their hands on an ounce of gold—spikes. “Pilot Gold Inc. has been able to keep its treasury pretty full.“ Meanwhile, gold supply is starting to shrink. Producers let costs climb out of control during gold’s bull market. When the bear market came, they then had to cut costs. New mines and mine expansions were deferred or canceled and output from higher-cost operations was cut back. We have reached peak gold—we will never again produce as much gold as we’re producing now. TGR: What are the other reasons in support of your argument? GP: The second reason is that, even after expenditures were reined in, the all-in sustaining cost … Continue reading

Jeb Handwerger: A Surge in M&As Proves that Gold Is Back

The Mining Report: You’re fond of the saying, “As January goes, so goes the year.” Given how gold performed last month, up 8%, what does this tell you about the rest of 2015? Jeb Handwerger: Going back over the last 100 years, the statistics are on the side of the sector that outperforms in January. And this January, precious metals and junior miners have taken off, breaking out against all major currencies. Gold bullion outperformed all other currencies, and it’s also beginning to break out against the U.S. dollar. The gold price broke above the 200-day moving average versus the greenback, which many observers see as an indicator of the medium- to long-term trend. Since then it has pulled back to the 50-day moving average, which should act as support as it is begins to slope higher. “Integra Gold Corp.’s Lamaque is one of the highest-quality assets in Quebec controlled by a junior miner.“ We’re seeing a big increase in mergers and acquisitions (M&As). In November, Osisko Gold Royalties Ltd. (OR:TSX) bought Virginia Mines Inc. (VGQ:TSX). In December, Coeur Mining Inc. (CDE:NYSE) bought Paramount Gold and Silver Corp. (PZG:TSX; PZG:NYSE.MKT). In January, Goldcorp Inc. (G:TSX; GG:NYSE) bought Probe Mines Ltd. (PRB:TSX.V) for $440 million ($440M). And in uranium, Uranerz Energy Corp. (URZ:TSX; URZ:NYSE.MKT) and Energy Fuels Inc. (EFR:TSX; UUUU:NYSE.MKT; EFRFF:OTCQX) merged. All this tells me there’s been a sentiment change. Probe and Paramount were mentioned in last year’s interview as takeout candidates. TMR: Gold ended the month over $1,275 per … Continue reading

Global Insecurity Is Good for Gold, Says Mike Niehuser

The Gold Report: Gold and silver have both demonstrated explosive growth in 2015. Why has this happened, and will it continue? Mike Niehuser: Well, I am not sure that I would categorize a higher gold price in the first part of 2015 as “explosive.” Since the beginning of 2015, gold appears to be trading within a band of $1,200 to $1,300 an ounce ($1,200–1,300/oz). While this is not “explosive” from a broader perspective, it is certainly a relief compared to declines in 2013, so let’s just say gold has done well so far in 2015. Despite declines over the last couple of years, gold is still well above its lows prior to Sept. 11, 2001. It has held up in spite of concerns for deflation resulting from a global economic slowdown. This has not been helped by loose monetary policies. “Alexco Resource Corp.’s environmental business continues to grow and cover overhead while the company unlocks the exploration upside at Keno Hill.“ I think the strength is in part due to what Sen. John McCain characterized as being in “an unprecedented period of global turmoil.” Russia has reclaimed the Crimea and is in the process of annexing eastern Ukraine. The same could be said for insurgents in Iraq and eastern Syria. Concerns over the repayment of Greek debt, nuclear issues in Iran and an unsettled path for a maturing China should keep things interesting for gold. Also, it is not clear how the recent collapse in oil prices will impact the … Continue reading

Avoid Dodos and Find Gold and Silver Miners that Can Soar, Says Raymond James' Chris Thompson

The Gold Report: A recent Raymond James research report refers to silver as the “devil’s metal.” What is the story there? Chris Thompson: Silver is much more volatile than gold. Typically when we see a weak day for the gold price, silver has a terrible day. Likewise, if we see a strong day for gold, typically silver delivers exceptional performance. Because it’s so volatile, we term it the devil’s metal. TGR: If the selloff in precious metal equities is over and this is the bottom, how long do you expect the flat-lining to persist? CT: At Raymond James, in the near term we see gold trading rangebound between $1,200 per ounce ($1,200/oz) and $1,300/oz and silver trading rangebound between $16.50/oz and $18.50/oz. We are not seeing fundamentals that would prompt a price outside of those respective ranges. We expect current price strength to continue to the end of Q1/15, followed by some weakness into the summer and then more strength toward the end of the year. TGR: In a recent research report you warned investors about 2015 possibly being the “Year of the Dodo” for certain precious metal producers. Please explain. CT: Over the last three years or so, the silver price has dropped to a level that calls into question the economics of a lot of the primary silver-producing companies that I follow. It’s now about survival. We all know that the dodo could not fly. What I’m looking for—regardless of metal prices—are companies that can continue to deliver … Continue reading

Hedge Against Short-Term Cycles with Lithium: Daniela Desormeaux

The Mining Report: Economic growth rates have diverged this year. They’re increasing in the U.S. and slowing down in China and India. They’re stagnating in Europe, and Russia is going into recession. How is all that affecting the lithium space? Daniela Desormeaux: The lithium industry is growing quickly. It is different from commodities like copper or iron ore in that there is not a direct link between lithium and the economic cycle. Last year, most commodity prices were down, and the most important drop was in iron ore. The lithium industry, on the other hand, grew 5–6% last year. “Galaxy Resources Ltd. has sold its Jiangsu lithium plant for $230M to focus on its Argentina and Australia projects.“ This difference between lithium and other commodities exists because there is still room for new lithium applications. The lithium industry’s growth is higher than the growth rate of the global economy. Of course, if China grows slower than expected, it will affect the consumption of lithium, but this impact should be marginal compared with the impact that China has on the other commodities. There are many lithium applications that are in the early stages of development. So despite this divergent scenario, the lithium industry will grow at a very interesting rate. TMR: The economic difficulties of some countries are not affecting lithium demand that much? DD: I would say that they affect it, but with some lithium applications still in development, demand is going to grow. One of the main applications is … Continue reading

The Companies Bob Moriarty Loves for the Long Term

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The Gold Report: The Swiss National Bank surprised the world by unpegging the franc from the euro. You wrote that you suspect this will be identified as the beginning of the end and that when the derivatives market blows up, it will take down billions of dollars in hedge funds. Is this the beginning of the end of derivatives and hedge funds or the beginning of the end of something bigger? Bob Moriarty: The beginning of the end of something bigger. With the Swiss franc tied to the euro, as the dollar went up, the euro went down. This required Switzerland to buy more euros to protect its currency. Switzerland ended up owning nearly as many euros as the country’s annual GDP. The Swiss National Bank got out before the European Central Bank (ECB) could increase its quantitative easing (QE). The real key is the size of the movement. The best record that I’ve seen indicates a 38% move in the Swiss franc against the euro in 12 minutes. A move that big has never happened before in history. TGR: Was the size of the movement driven by a kneejerk reaction to the surprise announcement? Later on, it settled out to something lower. BM: The Bank for International Settlements showed $3.954 trillion ($3.954T) in Swiss derivatives. Somebody was long $4T and somebody was short $4T. As soon as the announcement was made, computer trading kicked in and blew out all of the positions that were short the Swiss franc. Essentially, … Continue reading

What the Aden Sisters Are Watching Before Jumping Back into Natural Resources

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The Gold Report: We are only a month into 2015 and already the economic news has been dramatic. Switzerland decoupled the franc from the euro. The European Central Bank (ECB) has announced quantitative easing (QE). The Russian ruble is crashing along with oil prices, but the U.S. stock market seems to be soaring. What indicators are you watching and what are you expecting in the global economy in 2015? Pamela Aden: Never a dull moment. The biggest beneficiary of all this turmoil has been the dollar. The dollar index is at 10-year highs. Meanwhile the euro and the Canadian dollar have gotten caught up in a deflationary cycle along with oil and commodities. Mary Anne Aden: We are watching the exchange rate and the cross rate. The strength of the dollar is the key because it has become the world’s favorite safe haven in these times of uncertainty. Everyone is quite concerned about what’s coming next. With the renewed liquidity from the ECB and the Bank of Japan, the decoupling of the Swiss franc and the collapse of the oil price, fundamental factors like gross domestic product and debt levels have almost been tossed by the wayside. The wild events in currency markets are impacting the stock markets in a big way. PA: It is also having an effect on the bond market. A year ago the bond market bottom was rising. It became one of the biggest surprise investments for 2014. Even the end of QE in the U.S. … Continue reading

Stefan Ioannou: Bottom-Fishing Opportunities in Base Metals, Especially Zinc

The Mining Report: Copper has fallen about 12% in 2015 and other base metals are seeing significantly weaker support after the World Bank said it expects the global economy to slow by as much as 1% this year. Is the bull market for commodities over or is this a pause in an otherwise bullish cycle? Stefan Ioannou: Looking at this market as bullish over the past couple of years may be a bit aggressive. There has been a cautious tone since 2012. Metal prices relative to historic prices are definitely higher, but so are operating costs. The margins haven’t changed much. Depending on the metal you’re talking about, there are also concerns about large surpluses and global economies possibly slowing down. TMR: Would it be fair to say that while base metal prices may be under pressure in a broad sense, specific equities may have catalysts or other news that could offset commodity price weakness? “Balmoral Resources Ltd.’s project portfolio includes the high-grade Grasset deposit in Quebec, where massive sulphide mineralization remains open in multiple directions.“ SI: Well-run companies tend to do well, assuming they have a project that can demonstrate reasonable economics in a given pricing environment. However, in mid-January we witnessed a massive correction in the copper price—a lot of value has been taken off the table. When there are rapid drops like that it almost doesn’t matter how great a project is. In the short term those companies will face general market sentiment, which tends to hit … Continue reading

The Warrant Report | Primero | New Gold and The U.S. Dollar

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  The October issue of The Warrant Report showcases two warrants as great examples of potential leverage as well as how to reduce your dollar cost in the investment with warrants versus buying the common shares. Primero Mining and New Gold are the two companies showcased. We also present numerous charts of gold, usd, gold in Euros and gold in Russian Rubles. Click Here for the complete report.   … Continue reading