The Gold Report: Brien, thanks for joining us today. Can we
start with your take on the current situation in the precious metals market?
Brien Lundin: Yes. As everyone knows by now, gold responded very
well to the big sell-off in stocks. It gained about $5 on the first day of
the big correction, and popped about $30 higher on the second day.
We'll have to see if there's some significant follow-through from these
gains. But longer term, gold has two potential paths upward: 1) continued
market turmoil that leads the Fed to at least flinch as it considers
additional rate hikes; and 2) a short-covering frenzy that turns into a
more-sustained, trend-following run higher as investors increase allocations
to the sector.
Frankly, I think we're going to see a combination of both factors
contributing to a significant rebound in gold and silver. It won't be a
smooth ride, and we'll get a lot of volatility along the way. (Remember the
daily swings of as much as $100 in 2008.)
In the very near term, we can expect a counterattack on gold after one of
the biggest one-day rallies in years.
TGR: Are there a couple of companies that you'd like to talk about
that investors should be taking a look at this point?
BL: Well, one of my top recommendations right now is Great Bear
Resources Ltd. (GBR:TSX.V;GTBDF:OTC). It has essentially quadrupled from
our Buy recommendations at earlier prices, and it's come back a little bit.
So it's a bit strange perhaps for me to still recommend still as a Buy, after
it has run so far and so quickly from much lower levels in our portfolio.
The primary reason why I still recommend it is because there's no other
exploration play out there that offers the kind of upside potential that
Great Bear does. Essentially, the company has as much as 10 kilometers (10
km) of strike in the fabled Red Lake District, where it's consistently
intersecting high-grade gold. Importantly, it's getting these high-grade hits
in the same kinds of rocks as in the typical Red Lake mineralization, and
over an extensive strike length.
So far, the company has drilled off about 2.5 km of strike length where
its drilling has indicated high-grade gold mineralization. There has been
previous sampling for an extent of about 5 km of strike length, and there are
structural indications that the strike length would extend to about 10 km.
Moreover, the key structure is duplicated in parallel, providing the
potential for as much as 20 km of strike.
Interestingly, in the Red Lake District and the Red Lake mining complex,
about 7.3 km of strike length have yielded on the order of 40 million ounces
(40 Moz) of high-grade gold discovered. So the upside potential for Great
Bear—and granted, this is a lot of arm-waving and no one's claiming that it
has anywhere near this yet—is for tens of millions of ounces if it can
continue to prove this kind of ultra-high-grade mineralization over an
extensive strike length. Again, it's nowhere near there now, but there's no
other exploration play out there that offers that degree of upside potential.
The key point is that the company will almost assuredly not find that much
gold. But if it succeeds only fractionally, it could be worth a considerable
multiple of its current value.
TGR: Is Great Bear about to get buried under winter snows or is it
able to continue drilling?
BL: It is going to be able to continue drilling. And it has about
150 more holes to drill after a recent financing. So there's plenty of news
on the way. And that's another aspect of the story that has me very excited.
We're going to find out in fairly quick order what the scope of this
discovery will be.
TGR: Is there another company you want to talk about?
BL: One of my recent recommendations in Gold Newsletter is Revival Gold
Inc. (RVG:TSX.V). It's a widely followed company working in Idaho. What
has me excited about the company is it has a considerable resource of about 2
Moz combined Indicated and Inferred gold and the very real potential of
boosting that discovery to about 3 Moz of good-grade gold in two separate,
nearby projects. The company has a lot of upside on these projects.
But what also has me intrigued about Revival is that management isn't
content with its Beartrack and adjacent Arnett properties, and it's actually
looking into mergers and acquisitions (M&A) and growing through
acquisition. The company's management has experience in this area but with
much larger, major companies. So I think what we have here is the potential
for a new midtier producer down the road. It's an interesting concept for a
junior company. But people who buy this company now have the potential to
ride with it along a steep growth curve over the next few years, in an
environment in which I think the gold price will be rising.
TGR: Revival recently announced that it has commenced drilling on
the Haidee patented claim in the Arnett gold project.
BL: That project has the potential to add considerably to the
resource. And, in fact, it's just one of many ways that Revival can grow its
gold resource. As I said, the M&A aspect offers something else that I
don't think the broader market appreciates right now.
TGR: Do you have one more company you'd like to talk about?
BL: Copper
Mountain Mining Corp. (CMMC:TSX; CPPMF:OTC.MKTS) is a growth copper play.
I think copper has suffered under the trade worries in recent months, but I
believe that's going to be resolved in the near term, and we'll see a nice
rebound in copper. Copper Mountain is a company that's actually growing its
resources through the acquisition of the Eva project in Queensland,
Australia. The company also recently announced larger mineral reserve and
mineral resource estimates for its Copper Mountain mine in British Columbia.
So it's in good stead right now. It's a growth story, and I think there may
be some potential on the M&A front for that story as well.
More generally, I think the M&A story is really going to heat up soon.
Obviously, the Barrick Gold Corp. (ABX:TSX; ABX:NYSE) and Randgold Resources
Ltd. (GOLD:NASDAQ; RRS:LSE) merger is the highlight of this area recently.
But I think that will spark some sense of competition in the majors and
midtier companies to try and grab resources while they still can.
TGR: So do you see midtiers acquiring each other or more of the
traditional M&A, the seniors and midtiers buying juniors for their
resources?
BL: I wouldn't write anything off, but I think one of the keys that
we see here is that there are junior companies with large identified
resources that are near the top of the list of potential
acquisitions—companies like Almaden Minerals Ltd. (AMM:TSX; AAU:NYSE), Sabina Gold
& Silver Corp. (SBB:TSX; RXC:FSE; SGSVF:OTCPK) and Midas Gold
Corp. (MAX:TSX)—which are really high-value targets right now for
midtiers and majors. So I think these companies will fall one by one as we
see gold begin to reestablish a consistent upward trend.
TGR: Would you add Great Bear to the M&A target list?
BL: No, I don't think it really is. Given where Great Bear is, I
think it is going to try and fend off suitors for as long as it can. It
really has the money now to pursue two goals simultaneously. It's going to
pepper the high-grade Hinge zone with a number of holes to try and define
that resource. But it's also going to keep stepping out along the two limbs
of the long zone that goes, as I said, for about 2.5 km right now but has the
potential to extend 10 km. And that's actually in two distinct limbs. So it's
going to want to keep drilling really large stepouts to try and establish the
much broader continuity of the geological model.
TGR: Switching gears, every year you host the New Orleans
Investment Conference. Would you tell us what you have planned for this year?
BL: This year the conference will be Nov. 1 to 4. And as you know,
the New Orleans Investment Conference is the oldest
investment event in the world. This is our 44th consecutive year.
We're known for having big-name speakers that you won't find at any other
investment event, and that's certainly true this year. We have Robert
Kiyosaki, Mark Steyn, Jonah Goldberg, James Grant, Doug Casey, Peter Schiff,
Dennis Gartman, Rick Rule, Guy Adami, and the list goes on and on.
The conference is held over four days in the fun and entertaining city of
New Orleans. People come back year after year, literally decade after decade,
to this event because they know the kind of value we present, and they know
that not only from the stage but also from fellow attendees they can get
really good advice and insights, not only on investing strategies,
predictions for the economy and the markets, but also specific, actionable
recommendations to take in the near term.
One of the things that's been proven by the conference over decades is
that during times of uncertainty, and especially in times where we have
buoyant metals and mining stock prices, the New Orleans conference is the
place to be to maximize your returns and really discover tomorrow's winners
before they take off.
With the conference coming up so quickly, investors should act now to reserve their place.
TGR: Thanks so much, Brien.
With a career spanning four 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.
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