TGR: So you recommend investors get real gold. Do you like ETFs at this point?
BM: Actually, I’m anti-ETF, whether gold or silver. The financial situation is so dangerous that it’s no longer an issue of market risk, nor of whether they have the physical metal. It’s an issue of counterparty risk; that’s the danger today. Is the institution issuing the ETF going to exist if gold goes up $100 a day? Physical gold in hand, not in the safety deposit box, not where governments can get their hands on it, is an insurance policy. It’s still working today even though gold is cheap. Resource stocks and physical holdings are what you want as we head into hyper-inflation.
TGR: Would you avoid even the Central Fund of Canada (CEF:AMEX)?
BM: No, the CEF is brilliant. I do like that and that is not an ETF. There’s no counterparty risk there that doesn’t exist with any stock. I would even recommend investors have shares in multiple brokerage companies because it’s entirely possible for one of them (like Lehman Brothers) to go bankrupt. You might still have the assets; you just can’t touch them for six months or a year.
TGR: When do you see gold climbing? You say it’s at the bottom now, so it could go any day.
BM: I believe so. It’s going to surprise everybody because it’s been hammered so much, but it’s totally artificial. The price of gold has nothing to do with supply and demand. It’s been hammered by the hedge funds closing their positions and buying dollars to pay off their loans. As soon as the hedge funds let up in their buying, the dollar will tank and gold will go up. A lot of money sitting on the sidelines is looking for a safe place to go. When people start understanding you can buy $100 million worth of mining company for $50 million, they will start doing that.
TGR: So that’s the specific catalyst. It’s not that the hedge funds will stop buying, but will stop selling.
BM: Correct. I think they will do that. The last couple of trading days in October tend to be very positive, so it looks as if we sneaked through the worst of it. If we’re not at the bottom yet, we’re very close to it.
TGR: Some are speculating that the downtrend will continue through the fourth quarter as people readjust for 2008 results.
BM: The reason there are horse races is everybody has opinions. I’m not giving you fact. I didn’t walk down a mountain with it. It isn’t carved on tablets. It’s my opinion and I could be wrong and I’ve been wrong in the past. Just not very wrong. And not very often.
TGR: Would you care to comment on a few of our sponsors? How about Animas Resources (TSX.V:ANI)?
BM: Animas has an entire mining district in Mexico, a very important mining district, and will be releasing assay results any day now. The stock is a third of what it was a month ago and the company’s twice as good as it was a month ago. They will recover. I was encouraging them a year ago was to accelerate plans for getting into production and given today’s environment, I’m sure they’re thinking about that.
TGR: How about Miranda Gold Corp. (TSX.V:MAD)?
BM: I was out there two weeks ago. Miranda Gold is in a very big district in the Cortez Trend in Nevada. If they were a pure exploration company, I would be leery, but they’re not. They use the JV model, so they don’t spend their own money. They have JVs with five or six different major companies who spend the money, so Miranda has the ability to have a piece of the big find, but they’re not spending their money. And they have $9 million in cash and a market cap of $6 million. I told them, “Look, guys, you actually are not using your money wisely. Sitting in Canadian dollar T-bills is dangerous. You need to start buying up some of the juniors that are good plays and you need to start buying your own stock.” But you can buy dollar bills from Miranda for 66 cents.
TGR: How about Rare Element Resources (TSX.V:RES)?
BM: Rare Element’s an interesting situation. Somebody I know who is the expert in rare elements says there are two plays there. An alkaline gold deposit is being drilled by Newmont, who’s the major partner—and again, Rare Element is not spending its own money; Newmont is spending the money. And Rare Element is drilling a rare element deposit that could be economic, with the emphasis on the “could be.”
TGR: When will they know?
BM: Soon, very soon. Rare elements is really a spooky area; the chemistry, the mineralogy—just all kinds of issues. It’s a very difficult field. Even though the demand for rare earths is going through the roof, just because you’ve got a deposit doesn’t mean you have an economic deposit. I can’t say it’s economic, but they’re bringing in the guy I think knows more about rare elements than anyone else in the world, and he will be able to say whether it’s economic. Rare Element is another company that’s real good, well cashed up, and has Newmont spending the money.
TGR: How about Pediment Exploration Ltd. (TSX.V:PEZ) (PEZFF:OTCBB)?
BM: Pediment has three or four really good projects. They’ve got a deposit in the Baja that is absolutely a production story and I’ve been beating on Gary (Freeman) to get this damn thing in production. I think they have about $18 or $20 million in cash, so they’re very well cashed-up. They have another deposit up in the Sonora district, a mine and a mill that I think will be getting into production, too.
TGR: Do they also use the JV model?
BM: They do on some of the projects. They have JVs on two or three deposits that we don’t hear that much about but that have significant potential The project down in the Baja they’re doing strictly themselves, and also the project at La Colorada, although they might use contract miners to put it into production.
TGR: Any comments on First Majestic Silver Corp. (TSX:FR) (PK SHEET:FRMSF)?
BM: One of the best-run, soon-to-be mid-tier silver companies in Mexico and I happen to really like silver and I happen to really like Mexico. First Majestic is a great company.
TGR: One of the companies coming across our radar screen a lot just because people are following it is Great Panther Resources (TSX.V:GPR).
BM: Great Panther. I love them. I was the first newsletter writer to visit the project; I saw it literally as Bob Archer was negotiating for it. They are another good, soon-to-be mid-tier silver producer. They have two or three producing projects there now. They’re increasing their resources, well cashed-up, excellent management, and the same thing’s true of Endeavor Silver.
TGR: What about Evolving Gold Corp. (TSX.V:EVG) (OTCBB:EVOGF)?
BM: Interesting situation. They will be coming out with assays in the next week or two on an alkaline deposit up in Wyoming. It’s a diatreme, which is a fairly predictable volcanic structure and they’ve already had some excellent drill results. If the new drill results confirm the old drill results, they probably have a pretty good size deposit. Alkaline systems like Cripple Creek in Colorado tend to be very big. Evolving Gold went out and got financed a year ago based on a theory that they had an extension of the Getchell Trend and the Carlin Trend in Nevada. They really over-promoted it, but they did get cashed-up and they brought some new management in. The new management said the problem there in Nevada is that they are very deep and expensive holes. One hole out of 20 actually hits something, but when it hits something, it’s a monster deposit. They decided they would be better off with a JV model on that.
TGR: Do they have a joint venture partner in mind?
BM: Actually, they put the Nevada project on the back burner. They’re doing some drilling, but the deep drilling—sometimes 3,000 or 4,000 feet—is very difficult from a technical point of view and very expensive. They have drilled some holes this year and are still waiting for results, but I would far rather see that as part of a JV.
TGR: When we talked a few months ago, looking forward to see what sectors would emerge or survive, you indicated energy and focused specifically on oil. What do you think today, and where do renewables and alternative energy fit in?
BM: Alternative energy is viable. I had mentioned oil only because our entire system is based around oil. Like natural resources or gold or silver or metals, any energy investment should be safe for the future. Peak oil is very real and the Chinese are expanding like crazy and using more energy all the time. Natural gas is good, coal is good, nuclear is good. Renewables, unfortunately, are a 3% solution. Wind power’s another 3% solution. It’s never going to be anything but a 3% solution. Guys like Boone Pickens can spend millions encouraging people to invest in wind power, but our current infrastructure will not support it. It’s not just a question of investing in the wind power; you have to invest in the infrastructure as well and nobody ever wants to talk about that.
TGR: Where’s a comfortable range for oil?
BM: Somewhere in the $80 to $110 range. But that will be increasing because peak oil, in fact, is real. Oil production peaked in May of 2005 and peak oil also means peak food.
TGR: So you’d say this is a time to hunker down.
BM: It is time to hunker down, but I would like to say there are some very encouraging things. The Fourth Turning, written about 10 years ago, actually forecast this chaos that’s coming. And the fellow’s point of the book was that better times are coming. You go to absolutely insane extremes—which I think everybody can agree we have—and then you go back to sanity. Even during the depression, families came closer together because they had time for each other. They may have not had money to do things they were doing before, but it did bring the families closer together. Money is the journey; not the destination.
Bob Moriarty and his wife, Barb, launched 321gold.com as a private website seven years ago, when they were convinced gold and silver were at a bottom and wanted to help others understand what they needed to know about investing in resource stocks. Since then, they’ve introduced a second resource site, 321energy.com. Bob travels to dozens of mining projects a year. He was one of the first analysts to write about NovaGold, Northern Dynasty, Silver Standard, Running Fox and YGC Resources, among others. Prior to his Internet career, Bob was a Marine F-4B pilot at the age of 20 and a veteran of over 820 missions in Viet Nam. Becoming a Captain in the Marines at 22, he was one of the most highly decorated pilots in the war.
Courtesy: www.theaureport.com
