Brien Lundin expects money printing by the Federal Reserve to
raise gold above its $1,920/oz high, and as editor
and publisher of Gold Newsletter, he considers it his job to show
people how to profit. In this exclusive Gold Report
interview, Lundin explains why he believes it is
time to be aggressive in equity positions and names companies that could
benefit the most from the coming leg up.
The Gold Report: We just
had a third round of bond buying in quantitative easing (QE). Will QE3 help
Brien Lundin: It will
not help the economy, but it will help Wall Street. It will help elevate the
stock market, including precious metals and resource stock prices. Although
that was not the Fed's stated goal, it will be the ultimate result.
As I have written lately, we now have "QE as far as the eye can
see." There is no end to it. The Federal Reserve will use QE until it
works. If it does not work, the Fed will ratchet up the program and print
more money until it does work.
The Fed is using the brute force of money creation to eliminate the
U.S. unemployment problem, but that is not a foundation upon which a
sustainable recovery can be built. At the same time that the Fed is trying to
build a towering economy, it is eroding the very foundation of that economy
by issuing vast pools of liquidity.
TGR: At a recent Casey Research Summit,
some speakers suggested that the stage is being set for inflation. Do you
BL: I see the danger, but I think it is
important for investors to recognize the differences between monetary
inflation and price inflation.
Price inflation is a symptom of the underlying disease, which is
monetary inflation. Every new piece of fiat currency created in the world
that is not backed by gold raises the relative value of tangible assets,
primarily the monetary metals gold and silver, but also other commodities.
For a number of reasons, I do not think we will see soaring price
inflation in the U.S. as we saw in the 1970s anytime soon. There are other
very powerful parallels with the 1970s, but I do not think that retail price
inflation will be one. We are living through monetary inflation right now.
That is why precious metals prices are rising.
TGR: The August edition of Gold
Newsletter predicted what happened in the beginning of September: a gold
price close to $1,800/ounce (oz). Where do you see
BL: That prediction of a mid-to
late-summer price breakout was based on two things. First, typical
seasonality issues came into play. Second was seeing gold trade into a
consolidation pattern of an ever-narrowing price trend.
This kind of consolidation pattern has been evident many times before
in this long bull market for gold. Eventually, the price of any commodity
will break out of such a pattern and typically will return to the trend that
was in force beforehand. For gold, the earlier pattern was an upward trend,
so the odds were that it would break to the upside, and it did.
Breaking to the upside, the price pretty much predicted some action by
the Fed, but QE3 really exceeded anyone's expectations for such action. I
think the near-term goal for gold is to exceed its previous highs of around
$1,920/oz. That will create a foundation for further gains.
TGR: Silver has followed gold higher. What
is your thesis for silver going forward?
BL: Precisely the same as gold. Silver
provides optionality on gold. It is a lever to gold prices. Silver rises more
quickly than gold and it falls more quickly than gold.
Despite its volatility, or rather because of it, silver is a way to
realize greater profits along the long-term uptrend by playing the interim
A lot of people talk about the advantages silver's industrial uses
provide. But the industrial uses really play into the price when silver is
under, say, $10/oz. When the price goes north of $10/oz
to levels that we see today, it is purely due to silver's monetary role.
TGR: You have gone from a largely passive
position in most of the companies you write about to an aggressive position.
BL: This summer, a few of the companies
that I recommended were too good to resist even in a down market. I
recommended that readers peck away at these stocks and accumulate them,
buying a little bit here and there on weakness. I advised not jumping in
headfirst until we saw signs, or even confirmation, that gold was breaking
out of its consolidation pattern. Once we saw that happening, I told readers
it was time to get more aggressive and start building larger positions in
junior mining shares that remained dramatically undervalued.
TGR: Did you see that as a bottom?
BL: Yes. We bottomed in late July or
early August. It was the typical seasonal pattern we predicted, just like
TGR: What are some of the companies you
are being aggressive with?
BL: Lion One
Metals Ltd. (LIO:TSX.V; LOMLF:OTCQX; LY1:FSE) has a
great project in Fiji progressing toward production in about 12 or 18 months.
It has a feasibility study that just needs to be updated and remarkably low
capital expenses to get back into production.
TGR: Lion One Metals is around
$0.66/share. What are the catalysts between now and production?
BL: The numbers in its updated
feasibility study should show the market that this is a viable project. That
would be a catalyst.
Remarkably, it should take only $20–$30 million to get the
project into production. Raising that kind of capital should be relatively
easy, so the company does not have to get the economics buttoned down too
tightly before actually going out and building a mine.
SilverCrest Mines Inc. (SVL:TSX.V;
SVLC:NYSE.MKT) has been one of our big winners. Not
only is it growing production in a rising silver market, it has plans to
double production. This is a production play, but also boasts an exploration
upside in another project that it is drilling off. It offers a one-stop shop
for investors who like producers, but also like the upside of a development
and exploration story.
is in Mexico. How do you like Mexico as a jurisdiction?
BL: Mexico is a great place to invest.
There has been a lot of news about the danger of the drug gangs, but the
companies in production or working there are doing fine and handling any
SilverCrest is a
well-managed company with two very good projects in production. That is
critical: invest in a company that will be there for the long term, is making
money and is neither draining shareholder equity nor diluting its share
structure to get into production. SilverCrest is
ahead of the game, and has a very steep growth curve ahead of it.
BL: I also
like Seafield Resources Ltd. (SFF:TSX.V). It just
put out a new, very impressive resource estimate on its Colombian project.
The next step is to prove the project's economic viability. I do not think
the market appreciates how advanced it is.
TGR: Seafield is
at around $0.13/share. Where do you think it should be?
BL: I hate to give specific price
targets, but Seafield, with its large established
resource, has a lot of upside ahead of it. As the gold market continues to
advance and the general market strengthens, companies with established resources
will be the big winners.
I followed Rye Patch
Gold Corp. (RPM:TSX.V; RPMGF:OTCQX) long
before its legal controversy with Coeur d'Alene Mines Corp (CDM:TSX;
CDE:NYSE) in Nevada, and I still like it. The staking controversy over Coeur
d'Alene's expired claims gives Rye Patch immediate upside that it previously
lacked. I think the two parties will have to reach some
accommodation—an accommodation that has a very good chance of being
worth more to Rye Patch than its current market cap.
TGR: I was just near that property in
Nevada. There is a lot going on in the area.
BL: A lot of jockeying here and there, a
lot of people trying to get in on each other's grounds, court injunctions,
lawsuits and a lot of staking. The lawsuit also has a lot of implications
beyond that immediate area and beyond the specific issue involved. It could
throw into the air the whole system of staking claims and mine ownership in
TGR: That is something we all will have to
watch together. Do you have other names?
BL: I like Almaden
Minerals Ltd. (AMM:TSX; AAU:NYSE), which is
expanding the discovery on its Tuligtic project in
Mexico. The share price has come back a bit, and it is a great value right
now. A recent step-out on its northeast extension produced a great hit. There
are parallel zones for development, giving Almaden
a lot of growth potential. Its first resource estimate could be a very big
TGR: When is that due out?
BL: Likely by the end of this year.
Meanwhile, the company is busily drilling away and expanding the resource.
Once it has enough to impress the market, a resource estimate would be the
TGR: In out last interview, you talked
about Prophecy Platinum Corp. (NKL:TSX.V; PNIKD:OTCPK; P94P:FSE). What is
happening with that?
BL: Its big mover is the Wellgreen project in the Yukon. It's a polymetallic project: platinum, palladium, gold, nickel
and some of the rare and valuable platinum metals. It does not yet have good
assays on the higher-end platinum metals, but they are there.
Prophecy acquired this large project thanks to the vision of its CEO
John Lee. He saw that there were two significant deposits as yet unconnected
by drilling. He realized that extending them to depth and connecting them
would result in a world-class resource. He systematically drilled it off and
proved the theory.
Its next stage is a prefeasibility study. That would be the next
trigger point in showing the market greater value.
TGR: Do you have another name in the
BL: I recently recommended Precipitate Gold Corp. (PRG:TSX.V), which
was founded as a Yukon story. Some friends of mine, including the Coffin
brothers, helped launch it.
Precipitate Gold's management team includes Adrian Fleming, who was
the president of Underworld Resources. That company helped launch the new
Yukon gold rush and was a big winner for my readers a few years ago.
Precipitate assembled a great land package from the Strategic Metals
group, for many years one of the top exploration outfits in the Yukon.
Precipitate went public through an initial public offering (IPO) with this
big Yukon play.
Then came the big GoldQuest Mining Corp. (GQC:TSX.V) discovery in the
Dominican Republic. As an example of how a good management team can benefit
shareholders, Precipitate went in and quickly seized an enviable land
position in the Dominican Republic on trend with the GoldQuest
discovery. Now Precipitate has two tremendous land positions in two of the
hottest gold exploration trends in the world. It's a great company. It hasn't
really taken off yet, but I think as it begins its exploration efforts, we're
going to see the market start to pay attention to it.
TGR: Since its IPO in May, Precipitate's
stock seems to be rising.
BL: Yes. I see Precipitate as a
longer-term winner that has tons of potential ahead of it and is a very good
buy for investors.
TGR: The New Orleans
Investment Conference is approaching. What can
attendees expect to take away from this year's event?
BL: The conference always seems to come
at a crucial turning point in the markets, but with the advent of QE3 and the
November election, I cannot think of a more important time for investors to
be prepared than right now.
We will have a blockbuster roster of geopolitical and economic analysts
to talk about the election and its impact on the economy and investors.
Charles Krauthammer, probably the most influential political commentator in
America, will be there, along with Rick Santelli,
the godfather of the Tea Party. Peter Schiff, Sarah Palin, Dinesh D'Souza and
Marc Faber are coming. Doug Casey and many of today's top precious metals and
resource stock analysts will speak.
We have some fun events planned as well. This year's political debate
will pit the conservative Charles Krauthammer against the liberal James
Carville, with Doug Casey defending the libertarian position. That is always
a big hit.
TGR: Before we let you go, do you have an
BL: Looking at the political landscape
right now, I think the odds favor President Barack Obama's re-election. I
would put the odds at 60/40 right now. Obama's re-election would be an
extremely bullish development for investors in gold, silver and resource stocks.
TGR: Why is that?
BL: It would signal a continuation of
government spending and money printing. Mitt Romney has spoken out against QE
and has said he probably would not reappoint Ben Bernanke as Fed chairman. In
contrast, the Obama administration would apparently continue the policies
that have led to these high metals prices.
thanks for your time and insights.
With a career spanning three decades in the investment markets, Brien Lundin serves as
president and CEO of Jefferson Financial, a highly regarded publisher of
market analyses and producer of investment-oriented events. Under the
Jefferson Financial umbrella, Lundin publishes and
edits Gold Newsletter, a cornerstone of
precious metals advisories since 1971. He also hosts the New Orleans
Investment Conference, the
oldest and most respected investment event of its kind, Oct. 24–27.
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1) JT Long of The Gold Report conducted this interview. She personally
and/or her family own shares of the following companies mentioned in this
2) Brian Sylvester of The Gold Report conducted this interview. He
personally and/or his family own shares of the following companies mentioned
in this interview: None.
3) The following companies mentioned in the interview are sponsors of The
Gold Report: Lion One Metals Ltd., SilverCrest
Mines Inc., Seafield Resources Ltd., Rye Patch Gold
Corp., Almaden Minerals Ltd., Prophecy Platinum
Corp. and Precipitate Gold Corp. Streetwise Reports does
not accept stock in exchange for services. Interviews are edited for clarity.
4) Brien Lundin: I personally and/or my family own
shares of the following companies mentioned in this interview: Lion One
Metals Ltd., Seafield Resources Ltd., Rye Patch
Gold Corp., Prophecy Platinum Corp. and Precipitate Gold Corp. I personally
and/or my family am paid by the following companies
mentioned in this interview: None. I was not paid by Streetwise Reports for
participating in this interview.
Companies Mentioned :Almaden Minerals Ltd. : GoldQuest Mining Corp. : Lion One Metals Ltd. : Precipitate Gold Corp. : Prophecy Platinum Corp. : Rye Patch Gold Corp. : Seafield Resources Ltd. : SilverCrest Mines Inc.
Freegold Resources Ltd.
: Urastar Gold