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  • Will The January Effect Give Gold And Silver Miners A Bounce?

    The January Effect, the surge that small-cap companies may experience at the beginning of the year, goes back some seven decades. What will 2015 bring? The Gold Report talked to some experts to find out what they are expecting in the early days of the new year and which companies might be in position to take advantage. Most experts were optimistic about a bump, but some had some very interesting ways to profit from it.

    Louis James, senior editor of the International Speculator, Casey Investment Alert and Conversations with Casey: We certainly had plenty of tax-loss selling, and I think most investors who know resources see the sector as close to bottom, so, yes, I do expect healthy January buying. I'd differentiate that by commodity, however, as bad economic news could push oil and copper further down, while pushing gold and silver up, and the January effect won't be enough to offset another sharp decline in industrial commodities.

    Low-cost producers are the obvious candidates for dollars returning to the market, followed by developers with great projects with positive economics already in hand. Grassroots exploration will have its day in the sun again, but not on the back of January buying; I expect we'll see that when the whole market gets frothy again.

    Adrian Day, founder of Adrian Day Asset Management and author of "Investing in Resources": The early part of the year [not necessarily exclusively January] is typically a seasonally strong period for resource and resource equities. Given the very oversold nature of most resource stocks, I would expect a bounce in the new year.

    This will affect the major mining companies, including possibly the oil stocks, though they have already bounced off their lows. In particular, it will affect stocks that have been subject to tax-loss selling. In the resource sector, that means pretty much everything! Given that resource stocks are one of the few sectors in the U.S. where investors have heavy losses, this selling has been particularly vicious this year. Even without significant new buying volumes, the removal of tax-driven selling will cause a bounce in these stocks.

    The particular stocks affected may depend to some extent on what happens to gold and other resources. Some companies are particularly leveraged, and if gold falls in the first week or two, then these stocks, even if they have been subject to heavy tax-loss selling, would not move as much as others.

    Having said that, stocks such as Almaden Minerals Ltd. (NYSEMKT:AAU) and Reservoir Minerals Inc. (OTCPK:RVRLF) [RMC:TSX.V] could be beneficiaries.

    One should note that year-end tax-loss selling followed by a January bounce is so widely known that the effect has become less pronounced, the January rally depending as much on other factors such as the resource prices themselves.

    Jeb Handwerger, founder of Gold Stock Trades: When stocks are beaten down as far as they are now, it is a sign that we are at a bottom and an uptick is coming. January-specifically the beginning of the month-is traditionally a good time for the natural resources space. After tax-loss selling in December, many buy back their stocks or use year-end bonuses to purchase. This is the time smart investors look for value situations.

    Small stocks tend to outperform the broader market. This year, producers may do well as the collapse in the oil price is a good thing for gold producers because that lower price tag for a key cost can impact the bottom line. Producers have been warning the market about a future supply shortfall as high grading uses up the best ore and less money has been invested in exploration. There will come a time where producers begin outperforming and the valuations go from bad to less bad until suddenly they are very good. That is also when we could start seeing a lot of mergers and acquisitions, which is a very good thing for investors.

    A rebound or even a stabilization in the gold price could surprise everyone as the dollar rally could turn into a gold rally. The fundamentals pushing the dollar up right now-flight to a safe haven-are the same ones that could support gold once people see that the dollar is overbought.

    I like Goldcorp Inc.'s (NYSE:GG) balance sheet. The Canadian mines could be a big benefit for the company.

    A lot of exciting names can be picked up right now for almost nothing because the market is irrational and our job is to stay rational and stay the course. This is the craziest time I can remember when it comes to valuations, but that all could change this month.

    Mike Kachanovsky, author of the Mexico Mike column in Investor's Digest of Canada: I am expecting the same uptick in stocks and metals in 2015 as we saw in 2014. Things have gotten so oversold that the price of gold and silver is below the price of production. That has to push it higher. Plus, the dollar rise does not seem in line with fundamentals for such strength. When it corrects, that will help silver and gold. In fact, I expect silver to outperform gold this year.

    If you are sitting on a pile of money right now, that is a good place to be. The large, established producers are at historic lows right now and have a very low risk level.

    I particularly like Silver Standard Resources Inc. (NASDAQ:SSRI). The company has been around a long time and management knows how to survive downturns. It is more leveraged to the silver price than any other company in terms of defined silver resources in the ground and its two operating mines are very low cost producers. Plus it has a healthy pipeline in production.

    Agnico Eagle Mines Ltd. (NYSE:AEM) is another one that has been around and knows how to survive. It is highly diversified with production on several continents. This is a company that knows how to develop new mines efficiently and is positioned to acquire promising companies in 2015.

    Roger Wiegand, author of Trader Tracks: We continue to be upbeat. The stock market will continue to rise at least into the first quarter with the normal ups and downs. Small caps are just more volatile and the healing process for the junior miners will be difficult, but I see signs of stocks basing out.

    Gold, itself is in a trading range. To really break out, it will have to get past $1,450 an ounce [$1,450/oz]. Silver may not go above $20/oz until the fall. When that happens, the seniors will be the first group to take off. Companies like Goldcorp and Hecla Mining Co. (NYSE:HL) will move because the funds will buy into those. The juniors will take longer, but those days will come. I would look for ones with reserves in the ground and operating capital to cover a couple of years, particularly ones sitting next to big operations that may be in a position to buy them out. When stocks have been knocked down this low, the step back can be stunning.

    Thom Calandra, author of The Calandra Report: January, as you know, can have two faces, or more. That is more than mythological.

    In recent years, the so-called January Effect that supposedly lifts small company stocks made brief appearances, then disappeared. When I say small, I mean very small, as in companies with market caps worth below $500 million.

    The new face of January is now lacking a pronounced lift for small stocks. The main culprit is probably because everyone in North America, in Europe and in the UK, among other jurisdictions, are trading or managing the bulk of their money in retirement accounts. Thus, no reason to recapture the equities investors might have sold in November or December to capture tax-loss advantages.

    Probably the one potential beneficiary of any fresh sweep into a sector in January is biomedical and healthcare stocks. That is one face of January that continues in recent years. The biomedicals are getting more approvals per capita in North America than ever before, regarding FDA-approved pharmaceuticals.

    As for resource equities, I see little evidence that January is kinder than other months of the year-in recent years, definitely since 2011. Maybe with the decline of resource stocks since 2011, January can be argued to have a less devastating effect on the metals equities than during other months.

    If there is one thing that bears watching this January, it is the tremendous rise of the dollar-the U.S. dollar is sending all currencies to 7- and, in some cases, 10-year lows. Gold's buying power is keeping pace, as bullion is holding its ground. That means dollar-denominated gold holds a lot of buying power versus other currencies.

    The decline of most currencies against the dollar also helps miners and prospectors that report their expenses in other currencies. That is good.

    Plus, as investors with dollars, we get more buying power when we purchase Canada, U.S., Japan and other listed resource stocks.

    This interview was conducted by JT Long of The Gold Report and can be read in its entirety here.

    Find out what experts are saying about the January Effect on other commodities in The Mining Report.

    Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

    DISCLOSURE:
    1) JT Long conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an employee. She owns, or her family owns, shares of the following companies mentioned in this interview: None.
    2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Almaden Minerals Ltd. Goldcorp Inc. is not affiliated with Streetwise Reports. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.
    3) Mike Kachanovsky: I own, or my family owns, shares of the following companies mentioned in this interview: Silver Standard Resources Inc. and Agnico Eagle Mines Ltd. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
    4) Jeb Handwerger: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview as they are sponsors on my website: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
    5) Adrian Day: I own, or my family owns, shares of the following companies mentioned in this interview: Reservoir Minerals Inc. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
    6) Roger Wiegand: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
    7) Thom Calandra: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
    8) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
    9) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.

    10) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

    Streetwise - The Gold Report is Copyright © 2014 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

    Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

    Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

    Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies.

    101 Second St., Suite 110
    Petaluma, CA 94952

    Tel.: (707) 981-8999
    Fax: (707) 981-8998
    Email: jluther@streetwisereports.com

    Jan 07 3:27 PM | Link | Comment!
  • Are You Ready For The January Effect?

    As far back as 1942, economists have noted that small-cap companies in particular tend to surge at the beginning of the year in a cycle known as the January Effect. After the year we have seen in the natural resources space, The Mining Report checked in with sector experts to find out whether they are expecting this traditional gift, how they are preparing for it and what companies could benefit.

    Rick Mills, founder, Ahead of the Herd: There has been a general long-term downward trend in the resource sector. Junior resource companies have had the stuffing knocked out of them; many are oversold and ripe for a bounce.

    The January Effect is a calendar or seasonal-caused increase in the relative strength of small-cap stocks over large caps in late December and early January. This seasonal effect is mostly over by the end of the first full trading week in January and is not to be confused with the "January Barometer," an old market saw saying, "As goes the full month of January so goes the market for the year."

    The January Effect, as it pertains to the junior resource sector, is caused by both large and small individual investors [and institutional investors window dressing-dumping laggards so they won't show up in year-end reports] selling their stocks/rebalancing their portfolios starting in November and well into December to create a tax loss to offset capital gains.

    Smart investors and traders buy select stocks, starting as early as late November, through to the last day, or even a day or two beyond, of eligible tax-loss selling for the year.

    A great way to leverage any uptick in the uranium price is Uranerz Energy Corp. (NYSEMKT:URZ). [Editor's Note: This interview was conducted on Friday, Jan. 2, 2015. On Monday, Jan. 5, Uranerz announced an all-share buyout by Energy Fuels Inc. (OTC:UUUU)].

    I believe in commodities. If you do as well, then these companies are worth putting on your radar screen.

    Steve Palmer, founding partner, president and chief investment officer of AlphaNorth Asset Management: December, January and February are historically the best performing months of the year. There is no reason to believe the current situation will be any different. The TSX Venture index has been under severe pressure over the past few months, which has taken it down 30+% since August. It has recently been below the lows of the 2008 financial crisis despite an economic environment that is far better. I believe the current risk/reward is highly skewed to the upside for the TSX.V.

    Angelo Damaskos, founder and CEO of Sector Investment Managers Ltd.: We generally do not trade short-term technical volatility in markets but prefer to focus on fundamental value that is likely to be rerated over the medium term. Nevertheless, given the extreme selling conditions we have experienced in the last four months of 2014 in the energy space, there is a higher probability of a sharp rebound early in 2015. Historical review of previous corrections before the year-end in oil-related shares shows a seasonal pattern of recovery in the first quarter of the following year: The winter double-bottom pattern was observed in 2008-2009, 2006-2007, 2001-2002, 1998-1999, and 1993-1994.

    We, therefore, advise our clients to increase their allocations to mid-cap oil producers for three reasons:

    1. Extreme adversity against oil shares has led to solid companies trading at Price/Cash Flow and Price/Net Asset Value multiples last seen in the 2008 meltdown;

    2. Bearish calls for the oil price dropping below $50/barrel [$50/bbl] are widespread; a contrarian investment view would support a rebound to above $60/bbl. Fundamentally, it is widely accepted that oil prices at $60/bbl are extremely damaging to supply from marginal fields and prolonged trading at this level would result in a lot of supply shut-ins, thus removing any supply overhang within 6-12 months; markets are likely to discount such change in supply with a 3-6 month lead;

    3. Large short-selling interest built up in the months of November and December that may be closed on first signs of rebound-mid-cap shares are likely to respond first, followed by small caps after a sustained rally.

    We believe, nevertheless, that investments should be focused on companies with strong production growth even at lower oil prices based on sustainable capital expenditure programs [primarily funded out of organic cash flow], lower average cost of production contributing to profits at current prices and strong balance sheets with low debt and fixed obligations. Examples of such companies include RMP Energy Inc. (OTCPK:OEXFF) [RMP:TSX], Advantage Oil and Gas Ltd. (NYSE:AAV) and Parex Resources Inc. (OTC:PARXF) [PXT:TSX.V].

    We are generally cautious/bearish on the overall markets as we feel global economic growth is likely to slow, impacting earnings expectations. Central banks of both developed and emerging economies may raise interest rates, thus further slowing growth and negatively impacting equity valuations. Resources sectors have been sold off hard, so it is unlikely they would suffer further in correlation to a general market correction.

    This interview was conducted by JT Long of The Mining Report and can be read in its entirety here.

    Look for an article about the January Effect on precious metals in The Gold Report on Wednesday, Jan. 7.

    Want to read more Mining Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see recent interviews with industry analysts and commentators, visit The Mining Report home page.

    DISCLOSURE:
    1) JT Long conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an employee. She owns, or her family owns, shares of the following companies mentioned in this interview: None.
    2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Uranerz Energy Corp. and Energy Fuels Inc. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.
    3) Rick Mills: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
    4) Steve Palmer: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. AlphaNorth Funds own all of the companies mentioned. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
    5) Angelo Damaskos: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. Funds I advise hold shares in RMP Energy Inc., Advantage Oil and Gas Ltd. and Parex Resources Inc. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
    6) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
    7) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.

    8) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

    Streetwise - The Mining Report is Copyright © 2014 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

    Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

    Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

    Participating companies provide the logos used in The Mining Report. These logos are trademarks and are the property of the individual companies.

    101 Second St., Suite 110
    Petaluma, CA 94952

    Tel.: (707) 981-8999
    Fax: (707) 981-8998
    Email: jluther@streetwisereports.com

    Jan 06 2:41 PM | Link | Comment!
  • Brent Cook: Investing During The Era Of Peak Gold Discoveries

    We've hit peak economic gold discoveries, but unlike the new fracking technologies that saved the oil industry, there's no fracking technology to coax mineral wealth from ever-deeper deposits. In the face of this shortage, expert geologist Brent Cook of Exploration Insights is scouting out companies that are cashed up and poised to deliver value when other miners may be left scraping the bottom of the barrel. In this interview with The Gold Report, find out what Cook expects for gold exploration in 2015, and why the next few years are going to be very interesting indeed for yellow metal miners.

    The Gold Report: Brent, you've quoted Goldcorp Inc.'s (NYSE:GG) CEO, Charles Jeannes, saying that we've reached peak economic gold production. What led us to this point?

    Brent Cook: That's a big question that really goes back to what was happening in the global exploration sector 20+ years ago. I don't want to get into the peak gold production idea but instead focus on the discovery curve and what's behind the problem we are seeing in the gold sector.

    Why aren't we finding as many gold deposits as we used to, or at least as many economic deposits? In 1995 or so, the discovery boom in the gold sector peaked and that success is largely tied to the opening of large areas of earth that were previously off limits to serious exploration. Since then, exploration success and new discoveries have trended down. However, in terms of gold production, it's taken about 20 years for all those discoveries to work their way through the system to come into full production.

    So what Charles Jeannes sees is that in 2015 or so, gold production is going to be tapering off as opposed to expanding. That's especially true given the current gold price and cost structure. A lot of these companies aren't making much money, or any money at all. They'll be shutting down loss-making projects over the coming years.

    TGR: Are we running out of gold in the world, or did we just not make an investment in a timely manner, say, 20 years ago?

    BC: No, we're not running out of gold. We're finding gold deposits, but most of them are not economic. That's really the issue here. For example, there are 20 million tons [20 Mt] gold in the ocean seawater, but it grades about 13 parts per trillion and will never be economic. It's that economic hurdle that is really at issue here.

    In the 1990s, the world opened up to exploration. We found a lot of deposits sitting at the surface in jurisdictions that were once inaccessible, basically the low-hanging fruit. But by and large, there is a finite number of outcropping ore bodies and the few remaining are increasingly difficult to find. We've nearly exhausted the surface and are forced to drill for blind deposits through barren rock using really esoteric methods. The odds of success are much lower, and the costs are much higher.

    I'll give you an interesting ballpark figure that is based on how geology and the earth work. For every, say, 10 gold deposits of 1 million ounces [1 Moz] grading 1 gram per tonne [1 g/t], the earth formed one deposit of 1 Moz that grades 2.5 g/t. Those are more or less the odds. The problem is that although a 1 g/t deposit may be economic at surface, when it lies under 200 meters of barren cover, it is no longer economic. The unfortunate reality for us explorers is that those odds mean that we are still going to find about ten 1 g/t deposits for every 2.5 g/t deposit. Our economic success rate has to go down, and the data back up that conclusion. That is also the reason we have so many companies boasting NI-43-101-compliant resources that in my view will never be converted to economic reserves-never.

    TGR: Isn't there just a lot less investment in exploration happening right now, with companies trying to cut costs?

    BC: Yes, that's a really good point. Exploration has been cut to the bone across the sector. In the junior sector, it's almost impossible to raise money for exploration. So, yes, we're not spending enough money to find quality deposits, and this situation is going to get worse. Additionally, consider the fact that new discoveries are going to cost more to make because 1) for the most part they are going to be deeper so they will require more drilling just to have a look, 2) as I mentioned previously, we are going to find more uneconomic or marginal deposits than economic ones, and 3) for the most part those uneconomic deposits will have to be drilled out just to see what they grade. So each new economic discovery will cost the industry more than in the past but we are spending considerably less looking. What does that tell you?

    TGR: What's the lag time? When are we going to see the effect of that lack of investment?

    BC: I think we'll start seeing it next year and, certainly, into the coming years. My investment thesis is that the mining companies that are currently in production are going to eventually wake up to the fact that they have nothing on-line to replace what they've been mining. That's when they're going to have to go out and buy the few deposits that make money. Those are the deposits you want to own early on.

    Now the simple fix for what appears to be a fundamental gold supply-demand equation is, of course, higher gold prices. However, I'm not convinced there is, or will be, a gold supply problem that will translate directly into higher real prices that bail out the miners and their marginal deposits. Almost all the gold that has ever been produced is still available in some form or other and much of it potentially for sale at some price.

    So, unless there's a real run on gold, as well as gold hoarding, we may not see the gold price rise to compensate for less economic deposits. Plus, as we saw in the last big boom in the gold price, input costs, labor, equipment, supplies, power-everything-rose in tandem with the gold price. So even with $1,300/ounce [$1,300/oz] gold, miners' margins didn't increase much. I think it's going to get really interesting in 2015, 2016 and 2017.

    Some people are theorizing that new technology is going to change the game, as it did for peak oil. I don't see it. Hard rock geology and minerals mining are much more complex and difficult than oil and gas extraction. We can and do continually make small improvements in technology, metallurgy and such that take a few dollars or tens of dollars off the per ounce production costs, but those aren't anything like the fracking technology.

    TGR: Even when discoveries are made, is it getting more difficult to get permission to mine in many parts of the world?

    BC: That's another consideration. Let's say you do make a discovery. Inevitably, you have social issues to deal with. You have politicians and everyone within a hundred miles yelling for their piece of the pie. You have permitting to go through, and permitting is much more difficult than it used to be. In 1995, it took maybe 10 years to get a big deposit into production. It's now averaging 10-20 years to get a big deposit into production. So these mining companies have to look at a discovery and make some projections, not just as to what the gold price is going to be 15 years down the road but, also, what the labor costs are going to be, what the power costs are going to be. And those unquantifiable risks keep companies from making investments.

    TGR: Are there some places that are easier to do business in than others?

    BC: Most certainly. I think Canada is pretty good, and Quebec is a great place. In the U.S., Nevada, Utah, Wyoming, parts of Idaho are good places to work. Mexico in general and a lot of places in Latin America are good including Peru and Chile, although with Chile one has to consider water and power issues early on. West Africa is generally good. So there are certainly safer places to work. But there's always a risk things will change politically. We recently saw Zambia raise the royalty on companies from 6% to 20%, and Barrick Gold Corp. (NYSE:ABX) shut down its copper mine.

    TGR: Based on all of that, what companies are doing exploration the right way, have the right teams in place and have the money to execute on them?

    BC: Not that many. If you're looking to buy an exploration company, first off is always the people. That's really critical in an exploration company. Are the technical people on the ground smart enough and competent enough to recognize a good system and explore it properly and, more importantly, do they know when to cut bait? Unfortunately, in this sector, people sometimes keep drilling and drilling and drilling on a project because that's how they make their living. You want to own a company that has a technical team that knows what a deposit looks like and knows what one doesn't look like. Then you need a company that has the cash to keep going-there are getting to be fewer and fewer of those-and a share structure that's not blown out in shape.

    TGR: Your next name?

    BC: Reservoir Minerals Inc. (OTCPK:RVRLF) [RMC:TSX.V] has probably made one of the best discoveries in the past few years in partnership with Freeport-McMoRan Copper & Gold Inc.'s (NYSE:FCX) exploration in Serbia. It defined something like 65 Mt grading 3.1% copper equivalent. This thing sits under 400 meters of barren rock. Reservoir has ~$38M in the bank and a number of 100%-owned projects surrounding the discovery that it is testing right now. A successful discovery there would be huge for the company. And they're smart people; they know what they're doing.

    TGR: What about the African projects? Are you watching those as well?

    BC: In Cameroon, it is very early stage. It turned up some very encouraging early results, trenching rock samples, that sort of thing. It is a company that will probably joint venture most projects. Certainly in Africa, it builds them up to the stage where there's a solid drill target and then brings somebody in to drill it and, if it's successful, mine it.

    TGR: What are some other companies that fit your criteria?

    BC: Sometime early this year, I think we're going to see a bit of optimism in the mining sector, including the gold sector and the junior sector. I wanted to buy some companies that were in safe jurisdictions, were well known and had the cash to move forward.

    Premier Gold Mines Ltd. (OTCPK:PIRGF) [PG:TSX] is a very competent group. It has cash. Its Hardrock deposit actually looks like it's going to work. That's something that I think another company should buy. Premier has projects in Nevada and in the Red Lake District of Ontario as well.

    TGR: You've commented that the gold price has held up surprisingly well in many currencies, with much of the downside behind us. You even ventured that we could see some temporary optimism. Give us something to be hopeful about.

    BC: It's been bad so long that it has to get good. I think it's a reasonable speculation that we're going to see some optimism in 2015, but overall, I'm not terribly positive toward the junior sector or the gold price in the short term. I think 2015 looks a lot like this year did. The upside there is that we're going to have real opportunities to buy the few quality exploration groups and deposits that will be much more valuable come 2016 and 2017.

    TGR: Gold prices and junior mining stocks are often very cyclical. You have tax-loss selling, then you have the "January effect" and then "sell in May and go away." Do those clichés still hold up in today's market? Can we expect a January effect in 2015?

    BC: I think so. That's my bet on those last three stocks we talked about, but who knows. It's been a pretty crazy couple of years.

    TGR: Thanks for sharing your insights, Brent.

    BC: My pleasure.

    This interview was conducted by JT Long of The Gold Report and can be read in its entirety here.

    Brent Cook brings more than 30 years of experience to his role as a geologist, consultant and investment adviser. His knowledge spans all areas of the mining business, from the conceptual stage through detailed technical and financial modeling related to mine development and production. Cook's weekly Exploration Insights newsletter focuses on early discovery, high-reward opportunities, primarily among junior mining and exploration companies.

    Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

    DISCLOSURE:
    1) JT Long conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an employee. She owns, or her family owns, shares of the following companies mentioned in this interview: None.
    2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Premier Gold Mines Ltd. Goldcorp Inc. is not affiliated with Streetwise Reports. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.
    3) Brent Cook: I own, or my family owns, shares of the following companies mentioned in this interview: Reservoir Minerals Inc., Premier Gold Mines Ltd. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
    4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
    5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.

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    Streetwise - The Gold Report is Copyright © 2014 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

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    Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

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    Jan 05 1:39 PM | Link | Comment!
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