Picking gold and silver equities in a stagnant price environment is a stock picker’s game that requires a particular thesis—and a fair portion of patience, says Joe Reagor, an analyst with ROTH Capital Partners. In this interview with The Gold Report, Reagor outlines types of companies he prefers and pairs those with names that patient investors could parlay into promising profits.
The Gold Report: In a report from RBC Capital Markets in late January, the firm said gold could reach as high as $1,200/ounce ($1,200/oz) in the short term but remains in an overall downward trend. Does ROTH Capital Partners share that view?
Joe Reagor: A lot of people are reacting to a bounce in the gold price here in early February and need to set a number, but they still believe the factors that have held gold down over the last few years remain intact. Our view is a bit different. Gold at $1,100/oz is not a sustainable long-term scenario. The costs of production are still relatively high, and they’re only going to get higher as companies mine higher grades to lower costs. Miners did this in the late 1990s, and that’s why gold moved higher for 12 straight years in the 2000s before we had a healthy pullback. We think we’re heading toward the end of the 1990s time frame again, where the fundamentals will drive the gold price higher.
“Integra Gold Corp. continues to drill more than any other Canadian company on a single project.”
TGR: Please explain those fundamentals.
JR: Gold can’t go much lower without costs having to adjust lower. The strength of the U.S. dollar helps non-U.S. producers somewhat, but in general, the fundamentals suggest that if you want an industry to survive, it needs a 20% profit margin. If all-in sustaining …read more