Gold & Precious Metals

In the fall, an investor’s fancy returns to the market. Michael Curran of Beacon Securities believes that the end of the summer doldrums could result in gold reaching a high of $1,500/oz this year. In this interview, Curran argues that investors should pay particular attention to speculative plays with modest potential downsides and exciting potential upsides.

Ed Note: Curran received the #1 Ranking for Mining and Metals research coverage in The Wall Street Journal’s Annual Best on the Street Survey in May 2013. Michael’s 5 Junior recommendations and analysis is below, I have also posted the headline and lead to one of his other articles below this note. 

Look beyond gold for compelling risk/reward ratios

Diversify, diversify, diversify — that’s Michael Curran’s advice for metals investors. So if you’ve been obsessively eying gold and silver prices, you might want to focus your attention elsewhere in the mining sector, says the Beacon Securities mining research analyst. Nothing wows the market like discoveries, and exploration success in the copper, zinc and uranium spaces are making some shareholders very happy indeed. In this interview with Curran shares his top speculative picks for a diversified mining portfolio.

…..read all recommendations HERE

Search for Speculative Juniors with the Potential to Soar

The Gold Report: The Federal Reserve decided last week against tapering its quantitative easing. Gold rose $55/ounce ($55/oz)—over 4%—as a result, and silver was up 6.5%. Were you surprised by how robust this one-day rally was?

Michael Curran: Not really. We had already been out with our call in early July for a potential 25% recovery in the gold price in H2/13, which is the average fall recovery seen over the past four years. As such, we saw potential for gold to reclaim $1,450–$1,500/oz over the next few months, so we viewed the Fed tapering news as just another “quiver in the bow” to see our recovery scenario come to fruition.

TGR: Now that tapering is off the table, can we expect an end to the downward pressure on gold and silver?

MC: Our view is that with tapering off the table, short-term prospects for gold and silver are materially improved.

TGR: To what would you attribute gold’s spectacular fall earlier this year?

MC: I think it was a stock market malaise leading investors to liquidate gold to cover other losses.

TGR: We’ve been hearing about liquidation bringing down the price of gold for some time. Is there a point at which investors have done all the liquidating they need to do?

MC: That would be our view. In prior pullbacks in the gold price, we didn’t really see much liquidation in gold exchange-traded funds (ETFs). But this year, for the first time, we saw meaningful selloffs, and these investors redeployed their assets elsewhere. I think we’ve seen the bulk of that. August was the first net positive month for gold ETFs since the spring.

TGR: Small- and micro-cap explorers have suffered terribly in the last 18 months. Can we now expect a resurgence of these stocks?

MC: I think we’ve seen the bottom, but it’s the quality juniors that are going to be the beneficiaries. Not all boats will rise. Investors need to be more selective than in past recoveries.

“With tapering off the table, short-term prospects for gold and silver are materially improved.”

Our recommendation is to focus on early exploration or discovery plays. We’re also looking beyond gold. We like select base metals and uranium, and we have a few favorites there as well. Diversification is our focus for investors right now.

TGR: There are a great many low-price metal stocks today, but how do we find the real bargains?

MC: We concentrate on assets, location, management and balance sheets. We’re looking for assets with potential for high-grade discovery. We’re looking for low political risk in the location of these assets. We’re looking for strong management with backgrounds in exploration and discovery or people who have demonstrated past involvement in success stories. And we’re looking for companies that have enough cash to do exploration in the short term or a combination of assets and management expertise sufficient to raise money, which is not the easiest thing to do in this market.

TGR: Which speculative gold play do you find most attractive?

MC: Cayden Resources Inc. (CYD:TSX.V; CDKNF:NASDAQ) is currently our favorite speculative drill play. It has two main projects in Mexico, Morelos Sur in the Guerrero Gold Belt, which many investors will be familiar with, and the El Barqueño property in Jalisco.

TGR: Cayden is up about 50% in the last month to about $1.50 a share. Your 12-month price target is $3, which would be a 100% increase. On what do you base that projection?

MC: We’ve visited Cayden’s properties earlier this year. Morelos Sur is more of a long-term play. This is a blind, buried deposit several hundred meters below surface. It could take some time to discover a new skarn-hosted gold deposit, but certainly the market interest in the Guerrero Gold Belt is so strong that one good drill hole could generate a lot of interest.

“Investors need to be more selective than in past recoveries.” 

Cayden’s neighbors in the area, Goldcorp Inc. (G:TSX; GG:NYSE), Torex Gold Resources Inc. (TXG:TSX) andNewstrike Capital Inc. (NES:TSX.V), have all had very good success on these kinds of targets and found multimillion-ounce deposits.

TGR: Goldcorp has found over 13 million ounces (13 Moz), Torex over 5 Moz and Newstrike over 2 Moz.

MC: That’s right. So Morelos Sur is the big potential discovery. El Barqueño has the lower short-term risk; as recent results have confirmed near-surface mineralization. Drilling will begin shortly and we expect the initial drill program can be successful and delineate resources. We see initial potential of 1–2 Moz at El Barqueño.

TGR: Hasn’t Cayden’s management had success in the past?

MC: A lot of the management team was with Keegan Resources, which was recently renamed Asanko Gold Inc. (AKG:TSX; AKG:NYSE.MKT). Your readers will know about Asanko’s 6 Moz Esaase gold deposit in Ghana.

TGR: What other companies would you like to mention?

MC: One company we like in the gold patch is Premier Gold Mines Ltd. (PG:TSX). The company has a very strong portfolio of assets with high-grade components in both Ontario and Nevada. It has made several additions in the last 18 months from former Agnico-Eagle Mines Ltd. (AEM:TSX; AEM:NYSE) management. This is a junior with the technical expertise of a mid-tier producer.

TGR: Premier Gold Mines shares rose 19% last Wednesday on results from two holes at its Cove Project in Nevada, including 6.74 grams per ton (6.74 g/t) gold over 9.1 meters and 26.3 g/t gold and 39.8 g/t silver over 2.3 meters. How significant are these results, in your opinion?

MC: We believe Premier Gold’s 19% rise was a result of two positive developments that day—the Cove project drill results reported before the open and the announcement by the Fed regarding tapering in the afternoon. We viewed the drill results as positive as the latter higher-grade intercept you mentioned successfully extended the Helen zone gold mineralization to the east of previous drilling. The other intercept you noted opens up the potential for the Helen zone mineralization to extend several hundred meters to the east, to below the previously mined Cove open pit. Of course, follow-up drilling will be required to confirm this.

TGR: Under a joint-venture agreement, Newmont Mining Corp. (NEM:NYSE) can buy 51% of Cove. How likely do you think that is, and do you think Premier is a possible takeover target?

MC: We believe that it is highly likely that Newmont will be involved with any mine development at Cove, either through the exercise of its right of first refusal or as the preferred partner to process Cove ores, thus holding either a direct interest or via a toll-processing agreement.

TGR: Goldrock Mines Corp. (GRM:TSX.V) was another winner last Wednesday, up 11% after announcing a $9.25 million ($9.25M) strategic alliance with Austral Gold Ltd. Goldrock’s stated objective is to develop its Lindero project in Argentina by 2015 so as to “become a mid-tier gold producer with annual gold production of 250,000 oz.” Does it now have the means to accomplish this?

MC: While we view the news of attracting a new strategic partner as positive for Goldrock, the company still has a long way to go to complete full financing for the development of its Lindero gold project in Salta, Argentina. Even with successful fundraising, the Lindero mine would only represent the first step toward achieving the company’s production target of 250,000 oz/year (250 Koz/year), as the open-pit, heap-leach mine is only forecast to be a 125 Koz/year mine. Thus we assume Goldrock’s target of becoming a 250 Koz/yr gold producer would require a second producing asset, likely via acquisition.

TGR: At its Coffee gold project in the Yukon, Kaminak Gold Corp. (KAM:TSX.V) has already drilled more than 35,000 meters this year and has announced a $2.5M bought-deal private placement so it can drill more. Is Kaminak looking to increase the size of its resource or its reliability or both?

MC: One of the main objectives of this summer’s $11M exploration budget was to delineate additional gold resources in proximity of the main mineralized zones at Coffee. We expect the expanded drill program will continue these efforts, as well as provide some infill drilling to increase the reliability (confidence) of gold resources in the main zones, presumably focusing on areas of higher-grade mineralization.

TGR: How many ounces could we see at Coffee?

MC: We believe drill results this summer could increase total resources at Coffee from the previous 3.2 Moz level to 3.7–4 Moz. Longer-term, we maintain our view that gold resources are likely to exceed 5 Moz.

TGR: Shares of Dalradian Resources Inc. (DNA:TSX) are up almost 50% over the last month. Its flagship project, Curraghinalt in Northern Ireland, has exceedingly high-grade gold, although most of its measured ounces (2.23 Moz out of 2.79 Moz) are Inferred. How close is Dalradian to derisking Curraghinalt?

“Our recommendation is to focus on early exploration or discovery plays.”

MC: We are awaiting a major milestone for Dalradian later this fall, when the company is expected to receive environmental permits that will allow the next phase of exploration at Curraghinalt to begin. This phase centers on 2 kilometers of underground development that will allow Dalradian to perform detailed infill drilling to confirm and upgrade the Inferred resources, as well as test mining methods and provide a bulk sample for metallurgical testwork, as part of feasibility-level economic studies. We expect this phase to begin early in 2014 and take 15–18 months to complete.

TGR: If the price of gold makes a substantial and sustained move toward $2,000/oz, will we see an end to the doom and the gloom and a return to excitement in the junior sphere?

MC: I think so. For some existing companies, it’s probably too late, but if we approach $1,800/oz, $1,900/oz and $2,000/oz, we’ll have a new wave of names coming up. We’d see new money going into new stories, as opposed to propping up existing exploration stories that haven’t worked.

TGR: Mike, thank you for your insights.

Michael Curran, CFA, is a managing director and a mining research analyst with Beacon Securities Ltd. in Toronto. He was previously a managing director and a mining research analyst with RBC Capital Markets. Curran received the #1 Ranking for Mining and Metals research coverage in The Wall Street Journal’s Annual Best on the Street Survey in May 2013. He holds a Master of Science degree in mineral exploration, a Master of Business Administration and is a CFA charterholder.

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DISCLOSURE: 

1) Kevin Michael Grace conducted this interview for The Gold Report and provides services to The Gold Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Cayden Resources Inc., Goldcorp Inc. and Premier Gold Mines Ltd. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Michael Curran: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. A principal of Beacon Securities is on the Board of Directors for Cayden Resources Inc. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent. 
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

 

 

 

 

Fifty Shades of Gold

Posted by Frank Holmes - US Global Investors

on Wednesday, 25 September 2013 15:33

Goldman Sachs created a stir recently when it forecasted that gold would fall to $1,000 an ounce by the end of 2014, as the firm expected the Federal Reserve to reduce its bond buying program. Goldman also suggested that gold miners might want to hedge their output, locking in 2013 prices.

HSBC analysts have also been bearish on gold, although the firm admits that lower gold prices tend to draw out tremendous demand from emerging markets, especially China. Because of that demand, HSBC believes gold will end 2014 at around $1,435 an ounce, says MarketWatch.

Keep in mind that “Goldman Sachs does things that are good for Goldman, not you,” says Bryon King from Agora Financial. Things can change quickly in the gold market, as investors saw when, only days after Goldman’s assertion, the Federal Reserve surprised everyone by announcing it would continue purchasing $85 billion worth of bonds. Gold investors cheered as the precious metal shot up the most in 15 months.

Unlike many commodities, there are many shades to gold, such as the Love Trade’s buying gold for loved ones and the Fear Trade’s purchasing gold as a store of value. An additional “shade” investors need to be aware of is how the Fed interprets the recovery of the U.S. economy.

I had a few reasons to believe Ben Bernanke was going to pull the rug out from under the market’s feet. Before word came out, I told Canada’s Business News Network that the ending of quantitative easing was not going to be abrupt because it’s not a black and white issue.

Consider the lack of significant job growth in the U.S., as many of the jobs that have been created in recent history were part-time positions. Investor’s Business Daily (IBD) links this lackluster employment situation to President Barack Obama’s Affordable Care Act. According to the publication’s scorecard, “more than 300 employers have cut work hours or jobs, or otherwise shifted away from full-time staff, to limit liability under ObamaCare.” While providing affordable health care to Americans sounds honorable, the loss of full-time jobs seems to be an unintended consequence from the onerous regulations placed upon a business.

Take a look at IBD’s chart, which shows the accommodations industry’s average weekly hours that nonsupervisors put in since 2000. During each recession, in 2001 and again in 2008 to 2009, the hours dropped. But since ObamaCare was signed into law, which mandated that employers would need to provide health care coverage for staff who work more than 30 hours a week, the average plummeted. As of July, the accommodations industry workweek hit 28.8 hours, “at a record low,” according to IBD.

COMM-Average-Weekly-Hours-Nonsupervisors-Record-Low-09202013

It’s not only about job growth. Housing is also not rebounding as strongly as some people think. I told Reuters that many people don’t realize that the real estate market boom has been narrowly focused. According to USA Today, almost half of the homes purchased in July were bought with cold hard cash. In places like Florida, “nearly two-thirds of home sales were completed without a mortgage loan,” says USA Today. In Nevada, about 65 percent of buyers paid with cash, followed by Maine, where nearly 60 percent of house sales were cash. Perhaps regulation in the banking industry has made the process of getting a mortgage too burdensome for families?

Housing is one of the biggest multipliers for jobs, where $1 spent in housing results in about $16 in related economic activity. When interest rates are low, more people apply for mortgages. They build houses, employ moving services and buy new furniture, which in turn employs more people in multiple industries.

But after interest rates rose quickly, the housing market came to a halt. People who once qualified for a mortgage to build a new home no longer qualify at the higher rates, meaning a potential inventory of new housing may quickly build.

At the same time, big banks are announcing layoffs in mortgage lending. Just today, Wells Fargo announced it was going to lay off 1,800 employees as refinancing activity continues to slow. The company had already told 2,300 workers to stop coming to work as rising interest rates curtail demand for new mortgages and refinancing.

So instead of the Fed quickly tapering its bond purchases and raising rates, this process will likely be very gradual. I believe the government will have to keep interest rates low to stimulate the economy.

And that’s positive for equity markets as well as for gold. If interest rates remain low, real rates could remain in negative territory. In my presentation on opportunities in resources and emerging markets, I told the crowd at the Toronto Resource Investment Conference that 2 percent has been the tipping point for gold. Historically, gold and silver performed well in a low or negative real interest rate environment.

COMM-Gold-US-Real-Rates-09202013

Regardless of where analysts think the gold price will be a year from now, we believe gold and gold stocks can be an excellent portfolio diversifier. We’d rather hold quality gold companies that are experiencing a growth in resource base, growth in production and growth in cash flow instead of trying to time the market. Our in-depth analysis helps our team seek the best returns for our shareholders.

 

In-depth analysis is why we’re headed to the Denver Gold Forum. Portfolio managers Ralph Aldis and Brian Hicks as well as one of our analysts, Sam Palaez, will be attending, meeting with some of the new CEOs about the state of the gold mining industry. I look forward to sharing updates from the conference with you.

Read more from Frank Holmes on his site US Global Investors:

Why Its Hard To Ignore Russia

The Game-Changing Trend in Oil Production

 

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link above, you will be directed to a third-party website. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for its content.

Treasures of the Walker Lane

Posted by bob Moriarty -321Gold

on Wednesday, 25 September 2013 13:34

LongstreetMapWalker Lane in Nevada, straddling the California border hosts some of the most prolific gold mines in the United States. The trend is where the North American Plate meets the Pacific Plate. More than 50 million ounces of gold have been produced from mines on the Walker Lane including the world famous Comstock Lode and the Round Mountain gold mine owned by Kinross and Barrick Gold. I visited three projects in the Walker Lane recently and I want to share with you what I learned.

….read about all 3 HERE

 

No question lower gold prices are making production and exploration more difficult for the miners. When you see stories regarding large scale producers cutting costs, it is safe to assume there is widespread struggling throughout the industry.

Click here to read more.

Robert Levy – Border Gold Corp.

www.bordergold.com 

rlevy@bordergold.com

888.312.2288

  1. Is sizable QE tapering really going to happen? Perhaps, but the Fed has based the implementation of tapering on a consistent drop in the employment rate, and a steady increase in the housing market.
  2. Horrifically, one of the two drivers of the “taper caper” may be close to incinerating. “The Mortgage Bankers Association projects a decline in mortgage refinancing volume from $1.247 trillion in 2012 to $973 billion this year, and to plunge to $388 billion in 2014. The MBA expects total mortgage loan origination to decline from $1.750 trillion in 2012 to $1.592 trillion in 2013 and $1.091 trillion in 2014.” – CNBC News, September 24, 2013.
  3. The numbers being projected by the Mortgage Bankers Association are ghastly. If the mortgage origination and “REFI” markets suffer a collapse going into 2014, any tapering that occurs during that collapse could arguably be called the work of a madman.
  4. Fed presidents Dennis Lockhart and Bill Dudley made public statements on Monday. They expressed serious concerns about the health of the US economy. I doubt that Ben Bernanke wants to go down in history as the madman who caused a new global markets crash.
  5. Having said that, the gold price continues to decline, albeit modestly. Many gold investors are rightfully frustrated, after watching gold stocks give up all their “no taper” rally gains.
  6. I think the key issue causing this situation is comex gold options. Please click here now. The next key expiry day is September 25.
  7. Gold often tends to decline as options expiry approaches, and I think that is the main short term price driver of gold right now.
  8. In the big picture, Chinese & Indian demand is probably the most powerful driver of higher gold prices. It’s important not to make decisions that affect your long term core positions, using events like “options expiry day”.
  9. On that note, the just-announced clarification of the 80-20 gold import rule, by the central bank of India, is a critical victory for the bulls, in my professional opinion.    
  10. Please click here now. You are viewing the daily gold chart. From a technical standpoint, I don’t see anything to be concerned about. From the lows in the $1180 area, gold surged about $250.
  11. As it arrived in the $1410 – $1430 area, sentiment became overly-bullish. I labelled $1425 as key sell-side HSR (horizontal support & resistance).
  12. It’s true that the black uptrend line “broke”, but by the time that happened, gold had already declined to about $1360. That trend line probably isn’t as important as the bears think it is.
  13. Tactically, gold enthusiasts should now be light sellers at $1350 and $1425, and decent buyers at $1266 and $1200.
  14. Note the position of my gold stokeillator at the bottom of that chart. It is heavily oversold, and flashing a crossover buy signal. Once options expiry day is over, I think a nice gold rally is very likely.
  15. Please click here now. That’s the daily silver chart. After completing a small head & shoulders top, silver declined slightly.
  16.  It’s now approaching key buy-side HSR in the $20.75 area. Note the action of my stokeillator, at the bottom of the chart. Silver enthusiasts should have buy orders in that general $20.75 area.
  17. If gold surges out of an “options expiry day hole”, silver could perform even better.
  18. What about gold and silver stocks? Please click here now. You are looking at the six month chart for GDX, and the gold bears are afraid there’s a head and shoulders top formation.
  19. I think it’s just a shape, rather than a real chart pattern. The gold stock bears may be overly-focused on the price action that is likely due to options expiry.
  20. The bears are also probably under-focused on the rising demand coming out of India, as the Diwali festival approaches. Barring government restrictions imposed on buyers, gold demand in China and India is relativelyinelastic.
  21. Can consistent and growing “Chindian” gold demand be met with ETF and euro government sales?
  22. I think the answer is: No. It can only be met with gold that is mined out of the ground, and that means the long term outlook for gold stocks is superb. Should gold stock investors carry some short positions, to manage their emotional state, even if the long term fundamentals are excellent? I believe the answer is: Yes. They should not be added now, because of fear of lower prices. They should be added professionally into price strength, in the GDX $28 – $32 area.
  23. Please click here now. This six month chart for GDXJ is a little concerning, because of the broadening action of the trend lines. Also, it’s unknown whether there is a buy signal in play on the stokeillator, or a “flat line” event (oscillator signal failure). Keep in mind that junior gold stocks can fluctuate wildly around events like options expiry day.
  24. More importantly, when the price of gold enters the “COP” (cost of production) zone, the risk/reward ratio of gold stocks to gold bullion can soar dramatically. If gold declines to $1266 or $1200, I’d like to see the gold community step up to the junior gold stock “buy plate”, via GDXJ and their favourite individual issues, rather than drawing arrows on charts to lower prices. I’m not so sure that’s going to happen. After the options expiry traders have their short term day in the limelight, I’m laying odds at 60%, that junior gold stocks begin a sizable rally!  

 

Special Offer For WebsiteReaders:   Please send me an Email to freereports4@gracelandupdates.com and I’ll send you my free “Glow In The Dark” report. Which uranium stocks are poised to “glow”, in 2014, while others may fail to recover at all? I’ll show you the ones I’m focused on, and why!

Thanks!  

Cheers

         St

Stewart Thomson

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