Why A Fed Rate Hike Could Be A Blessing For Gold Prices: Brien Lundin

TGR: Let's talk about some currently producing companies in the portfolio that you think still have upside.

BL: Great Panther Silver Ltd. (GPR:TSX; GPL:NYSE.MKT), GoGold Resources Inc. (GGD:TSX) (GLGDF), Excellon Resources Inc. (EXN:TSX; EXLLF:OTCPK) and a new play,Newmarket Gold Inc. (NGN:TSX.V) (NMKTF), fit that description.

TGR: Let's start with Great Panther. When will the exploration pipeline at its two operating mines and progress at the Guadalupe de los Reyes project in Mexico begin to impact the stock price?

BL: Normally, production growth or exploration success would be a catalyst, but in this market where silver prices have been trending lower, many silver companies are in a difficult situation. Investors have to closely watch the internal production metrics. Is the company making money at current prices? Will it make money if silver takes another dive downward?

That used to be Great Panther's weak point, but its latest quarterly results are amazing. The company generated higher production levels and lower cash costs despite a stronger U.S. dollar. Production was up over 50%. All-in sustaining costs dropped about 50%. I was very pleased with the numbers that Great Panther was able to deliver. It is making money on every ounce of silver it produces, although it did report a net loss due to currency exchange issues. So I'm positive going forward.

TGR: Excellon is a recent addition to your portfolio. What makes you think this company can overcome operational challenges and be profitable?

BL: Excellon has been the highest-grade silver producer in Mexico for over a decade, and the company did encounter some operational challenges as the mine got to a depth below the water table. Its grouting program didn't work very well and production rates fell. Management brought in new expertise and allocated the capital investment necessary to alleviate the problem. A new economic study showed that with the improvements, the company could lower costs substantially and increase production. It has just begun to implement that program, and it looks as if it's getting the expected results. The company should be rerated once it can prove it can lower the production cost-per-ounce to levels that would allow it to make money in virtually any silver price scenario.

TGR: GoGold was one of the few companies that actually impacted its stock price when it announced Q2/15 production numbers for the Parral tailings project in Mexico. Are you optimistic about management's ability to manage debt and put the Santa Gertrudis mine into operation?

BL: Yes, I am. You can never go wrong betting on Fred George of GoGold. He's a relentless entrepreneur who has enjoyed a series of big-time successes. I'm very confident that he'll do the same with GoGold. The Parral project was a very smart acquisition. It's being proven now with revenue coming in higher than expected. This will allow the company to address development of Santa Gertrudis, where it was able to prove up resources that the previous owners were not able to delineate. The company completed a major credit facility raise recently that will allow it to go into production. Not only does it have proven resources, but it also has a production profile that's rapidly rising. Almost irrespective of what the overall market does, I think the shareholder value will increase with GoGold. It's a great investment opportunity.

TGR: Is Newmarket an Australian turnaround story? Are you expecting more acquisitions there?

BL: It's partially a turnaround story. It acquired Crocodile Gold Corp. (CRK:TSX; CROCF:OTCQX), which was a somewhat troubled, midlevel mine in Australia, but in truth, that production turnaround at the mine was already in place as Newmarket was acquiring the company. So Newmarket was very fortunate in its timing. But Newmarket is also more of a thematic play where it is going to be aggressively acquiring producers in this depressed market at very low prices and then riding a rebound in the metals that seems inevitable. If anything, this company would like to have the turnaround in gold and silver wait until it's able to make more acquisitions. Regardless, I think that Newmarket is an up-and-coming company that is going to really surprise the market.

TGR: You also have a platinum group metals (PGM) project in the portfolio. Are you bullish on the supply and demand fundamentals for platinum or is this a management story?

BL: It's a bit of both. You can never divorce management from the equation. It is typically the most important component in analyzing a company. But Wellgreen Platinum Ltd. (WG:TSX; WGPLF:OTCPK) has a polymetallic project in the Yukon so large that it is a strategic resource for some big player down the line. I look at Wellgreen as not so much a play on any specific situation in platinum, palladium or nickel, but as a well-run company with a resource that is absolutely world class. It represents one of the few primary PGM projects that is not in a high-risk political regime. At some point, the Wellgreen project will represent a safe, secure, large-scale source of PGMs, and that will have value much greater than what the market is currently assigning to the company.

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Disclosure:

1) JT Long conducted this interview for Streetwise Reports LLC, publisher of  more

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