Doug Loud And Jeff Mosseri: Supply And Demand Will Rescue Gold Soon

JM: Not necessarily. What we have is a huge amount of supply at the moment. So much of it is stored in tankers that we have a tanker shortage. But this oversupply will eventually work its way through the market. In the meantime, cheap diesel fuel has resulted in a dramatic reduction in mining costs, and this has lengthened the amount of time that gold will sell at a lower price.

TGR: When do you see a rebound in the price of gold?

JM: It's difficult to predict, in view of all the factors mentioned above, but we will probably see a bounce in the second half of this year, and more thereafter.

TGR: Why are you confident that gold equities will soon make a comeback?

JM: Gold equities are now selling at ridiculously low valuations. These valuations will be adjusted when it is believed that the price of gold will rise. A breakout in the equities will be the signal that the gold price has bottomed and will be moving significantly higher.

TGR: Which near-term junior gold producers are your favorites?

DL: I like Victoria Gold Corp. (VIT:TSX.V) (VITFF) and its 2.3 million ounce (2.3 Moz) Eagle gold project, which will produce gold at $600/oz. The Yukon is excited because this will be one of the biggest gold mines in the history of the territory and will create many jobs. Victoria now needs only its quartz mining and water permits. The company has only one project, so it isn't affected by the new environmental regulations like some other companies with multiple projects in a single district.

JM: And we like Pretium Resources Inc. (PVG:TSX; PVG:NYSE) and its 6.9 Moz Proven and Probable deposit in the Valley of the Kings section of the Brucejack project in northern British Columbia. This a beautiful deposit: about half an ounce per ton. The project is now fully permitted and by 2017 should be producing 500,000 ounces (500 Koz) per year for the first few years. All Pretium needs now is to put together the financing, which the company is working to secure, as we speak.

We also still love Exeter Resource Corp.'s (XRA:NYSE.MKT; XRC:TSX; EXB:FSE) Caspiche gold-copper project in Chile.

TGR: Brucejack's capital expenditure is $747 million ($747M), and Eagle's is $383M. How doable do they look in today's market?

DL: Dicey. But I look at Victoria as a project that will be derisked up to the point where it gets eaten by a larger company. And it is my belief that Victoria can get started on Eagle without spending the entire $383M and building one giant plant.

JM: As for Brucejack, anything under a billion dollars today is more doable than it was a year ago. Pretium has a great project with great grades and a great management team, so capital should be readily available for it.

TGR: How badly are the Yukon's new environmental regulations hurting mining?

DL: Alexco Resource Corp. (AXU:NYSE.MKT; AXR:TSX) has a whole silver district at Keno Hill, encompassing several different projects. But now the company is forced to re-file on every project whenever it wants to change the information on any one project. I think regulations will be improved in the course of time, but it makes doing business quite difficult now.

TGR: Do you still like Alexco?

DL: I do, especially if the zinc price starts to rise. Then it will go from being a silver company with a lot of zinc to a zinc company with a lot of silver.

Another company I like in that area is Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) and its KSM project in British Columbia. It is now fully permitted and has Proven and Probable reserves of 38.2 Moz gold and 9.9 billion pounds (9.9 Blb) copper. This company now has at least twice as much gold in the ground as it had when it was $50/share and the shares are under $6 now.

TGR: Are you worried that a well-connected spinoff group from the Sierra Club is determined to kill the 5.2 Blb KSM project?

JM: It can try, but that doesn't mean it will be successful. Any company with enough money to buy KSM would be a company with enough money to fight any environmentalists.

TGR: Which junior gold and silver producers do you like?

JM: Among the midsize producers, we like Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE). This company has excellent management. With its takeovers of Cayden, Osisko and Soltoro, it has been buying good projects cheaply and then integrating them really well.

View single page >> |

Disclosure:

1) Brian Sylvester conducted this interview for Streetwise Reports LLC, publisher of  more

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.