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  • Paul Renken: Bottom-Fishing For The Best Junior Resource Equities

    It's the lazy days of summer and Paul Renken, senior geologist and analyst with VSA Capital, is bottom-fishing. He sees a lot of value in unloved resource equities and spends much of his time sifting through the lot to find juniors that will get the increasingly sparse financing needed to turn potential into production. Renken offers an abundant catch of equity picks in this interview with The Gold Report.

    The Gold Report: VSA Capital recently published a research report that reads, "One of the key parts of exploration funding and the acceptance of risk versus monetary reward was the considerable correlation between share price appreciation and the reduction of geological risk." However, this no longer seems to be the case. What's broken?

    Paul Renken: What has transpired for the last couple of years, particularly in the junior and very small-cap exploration space, is that the money to find deposits and advance them along the risk profile to a bankable state has largely disappeared. The dollars required to define a resource have been viewed by the market as an opportunity to sell shares to take advantage of any short-term price strength. From the long-term shareholders' point of view, the money was wasted. Companies should have sat on the cash and not bothered with any exploration.

    The directors of these companies need to realize that at the early stages of a project, they have to consider the probability of finding a significant deposit and how much it's going to cost to define it. Investors, and institutional investors in particular, are looking for very low costs of discovery.

    TGR: Has that become part of your investment thesis for junior resource equities?

    PR: Yes, we're looking to bottom-fish particularly good stories with good deposits that have languished for some time but that are now showing good economics. There are many firms out there seeking capital but there just isn't much capital to finance all of them, or even the majority. If you're going to commit capital to bring some of these stories to production, why not cherry-pick the best stories and the best deposits at the most economical cost? The smaller you get in the resource space, the good deposits or good corporate stories are available at very low valuations simply because the sector has been so out of favor for so long.

    TGR: When is risk capital going to return to the sector?

    PR: The exploration side of the business, a subsector of the mining space, needs to show that it has the same or greater potential for a return on investor capital versus other sectors. It is a competition for the available dollars among all the different companies in all the different sectors-as well as debt capital and currency markets-not just other mining companies.

    We seem to be at the bottom or bouncing along the bottom in the small-cap mining space. I'm looking forward to seeing some signs, likely in a matter of weeks, that we have seen the bottom of the market.

    TGR: Where in the bulk commodity space should investors look for performing equities?

    PR: Companies that have a strong component of their earnings in industrial metals-lead, zinc, nickel, etc.-should do better than those in the iron ore space. As a large-cap company, Glencore International Plc (OTCPK:GLCNF) [GLEN:LSE] is likely best positioned among large mining firms listed in London. Glencore is pretty well situated in metallurgical coal and base metals concentrates, particularly lead-zinc concentrates. It is also getting involved in vanadium. It has its finger on the pulse of a variety of different bulk commodities that are traded on the London Metal Exchange, as well as on the mining side.

    TGR: You cover a number of industrial commodities, including tungsten. Tungsten has the highest melting point of any metal, but at $370/metric ton unit [$370/mtu], it's not exciting many investors. What's the investment case for tungsten?

    PR: Tungsten's primary use is in carbide cutting tools, essentially a proxy for manufacturing activity. If the banks and governments across the world are going to get the economy moving faster, they have to increase manufacturing activity. Manufacturing activity means being able to create, cut and sell metal-everything from fabricated products to metallic tools to sheet metal, including auto body panels.

    Auto manufacturing is increasing in both China and the United States. And because China wants to maintain its manufacturing dominance, it is no longer exporting tungsten as it did in the 1980s, when it essentially swamped the worldwide tungsten market. These days, some sources say as much as three-quarters of the arable land in China is contaminated. The Chinese must address this issue and that means no longer accepting quick and dirty methods of metals production. We expect Chinese tungsten exports to continue to tighten, and therefore tungsten should have fairly robust demand going forward.

    TGR: You also follow the rare earth elements [REE] subsector. It seems to be the most volatile, yet Reuters reports that one of its biggest players, Molycorp Inc. [MCP:NYSE], may have finally overcome their many challenges to become bona fide REE producers. Should investors believe the hype?

    PR: Molycorp has disappointed investors simply because they are taking too long and using too much money to reach their goals. Molycorp continues to have issues with bringing its mine back to the level of commercial production that it had achieved decades earlier. Institutional investors are going to have to be very patient to realize any return on capital.

    TGR: What's your view on the REE space in general?

    PR: I'm positive on the REE space. Further down the food chain there are a number of interesting REE stories with simpler mineralogy that should require simpler plants and processes to produce REE. That means their capital expenses should be a lot less, too. The Chinese have controlled REE production for a number of years but China is trying to seize greater control of the market inside its borders because there has been so much illegal REE mining and smuggling.

    The Chinese realize that the volatility experienced in REE pricing just a few years ago caused many end users to seek alternatives. The subsequent steep decline in REE prices has been difficult for Chinese REE producers. By the same token, annual REE demand growth is in the high single-digit range. That's expected to continue for some time.

    TGR: Perhaps one more REE junior?

    PR: Another one is Tasman Metals Ltd. (NYSEMKT:TAS) [TSM:TSX.V; TASXF:OTCPK; T61:FSE]. Tasman has two REE deposits, but the primary one is called Norra Kärr in Sweden. That particular deposit is relatively low grade in total REE at below 1%, but geologically it is skewed toward the heavy rare earths. It may also very well be quite profitable. The other interesting thing is that it is the only rare earth deposit in the development stage with a direct market into the European Union [EU]. The EU has declared REEs to be among a number of different metals and materials, including tungsten, that are critical to its industrial future as a trading block. I suspect that once the Norra Kärr feasibility study is complete, some financing doors will open in short order.

    TGR: In a February 2014 interview, you told us that investors should be in precious metals, gemstones and uranium. While precious metals' prices were up in the first half of this year and the diamond equities you mentioned have performed, uranium continues to flounder. Is it as simple as asking investors to have more patience?

    PR: It certainly has been a disappointment for uranium investors and for analysts who can see that it should be performing much better. The issue is that Japan has not brought its nuclear program back on-line. Japan has a surplus of uranium from long-term contracts that it can't use because those reactors are not operating.

    Japan is forced to resell that material for whatever it can get. This is costing the Japanese economy billions. How long will it continue to do this? It has already gone on longer than any of us anticipated. The government intends to bring these reactors back on-line at some point, when it is satisfied that it is safe to do so.

    TGR: What should investors do?

    PR: If they are still holding uranium equities, they must decide whether it's worth holding that position. A few uranium equities out there are definitely good bottom-fishing situations because the grade or size of the deposit dictates that they will be put into production as long as there is a global nuclear industry.

    TGR: Could you give us an overview on the nickel space?

    PR: The nickel space has been quite interesting ever since the Indonesian export ban went into effect in January. It's done wonders for the value of nickel. The price moved to the $9/pound [$9/lb] range from about $6.50/lb. We expect nickel to stay in that range until Chinese pig iron producers are able to source other nickel-laterite ore or cheap nickel concentrates. Until a source is found, we think the price will remain strong.

    TGR: Do you want to discuss gemstones?

    PR: The fundamentals for diamonds were looking quite good at the end of 2013 and that has proven to be the case. Most diamond equities, particularly the producing equities, are showing nice gains this year. That's based on improvements in both cut and raw stone prices on the auction tenders of these companies over the first seven months of 2014. U.S. and Asian retail demand continues to improve and we're comfortable projecting further gains.

    Among the names are Gem Diamonds Ltd. (OTC:GMDMF) [GEMD:LSE; GEMD:VIRTX; ZVW:FSE]; Petra Diamonds (OTC:PDMDF) [PDL:LSE]; and Dominion Diamond Corp. (NYSE:DDC), formerly Harry Winston. Those are names that I follow closely.

    TGR: In a report titled, "Emerging Market Forex and the End of the Commodity Market Super-Cycle," Goldman Sachs says that bulk commodities, like iron ore, copper and oil, will see five years of price softness to the tune of $80/ton iron ore, $6,600/mtu copper and $100/barrel for Brent crude. Do you concur?

    PR: We'll probably see some volatility in that very flat marketplace. Goldman Sachs is quoting prices that are 10-20% under the current prices, yet some of these prices are moving in the opposite direction. For instance, geopolitical risk is pushing up the price of Brent crude.

    To reach $3/lb or lower for a sustained period, copper would require a significant surplus over the next five-year period. The amount of copper coming into the market has been consistently lower than analysts' projections. Last year, there was a slight deficit. There may be as much as a 400,000-tonne surplus this year in my view, but that isn't significant enough to sway prices. I would peg the five-year average copper price closer to $3.20/lb.

    As far as iron ore is concerned, it may try to test $80/ton at some point, particularly if there's a decline in steel output in China. I suspect that the overall average for five years would be closer to $90-100/ton for 62% iron CFR [cost and freight].

    TGR: Parting thoughts?

    PR: I'm hopeful that we are looking at the bottom for mining equities. We may see another trading range for gold and for silver. Silver is certainly playing out according to what we had anticipated at the end of last year. Gold is a bit stronger than we had expected, largely because of geopolitical risk and retail interest from Asian investors. Platinum group metals prices are looking quite good and will continue to because of labor risk in South Africa and geopolitical risk in Russia. Overall, we see strength in a number of different commodities. It's time for equities to catch up.

    TGR: Thank you for talking with us, Paul.

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

    Paul Renken has a broad range of experience in various aspects of the mining and minerals business. He began his career as a geologist for Canadian junior resource companies in the western United States. Owning a stake in a private consulting firm as vice president of exploration, Renken searched for various base metals, precious metals and industrial minerals. In the UK, he worked in the equity market media outlets of Digitallook and Hemscott before joining VSA as mining analyst in 2006.

    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 recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

    DISCLOSURE:
    1) Brian Sylvester 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 independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.
    2) The following companies mentioned in the interview are sponsors: None. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
    3) Paul Renken: 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 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.
    6) 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

    Jul 28 4:56 PM | Link | Comment!
  • Doug Loud And Jeff Mosseri: Three Reasons Why Gold And Gold Stocks Will Rise

    It's hard to see the present until it's in the past. What does this mean for gold? Money managers Doug Loud and Jeff Mosseri of Greystone Asset Management say that a bull market may have already begun. All the signs are there: rising political tension, a shortage of new supply and a cull of the weakest stocks. In this interview with The Gold Report, Loud and Mosseri list a dozen gold, silver and copper companies that should ride the crest of the wave.

    The Gold Report: Over two days, July 14 and 15, the price of gold fell over $40 per ounce [$40/oz], more than 3% of its value. To what do you attribute this drop?

    Jeffrey Mosseri: I don't think it was a very extraordinary event. Gold has been trading around $1,300/oz. We see sharp upward and downward movements triggered by, for instance, something Federal Reserve Chair Janet Yellen said or a negative report by Goldman Sachs. It looks as if gold will stay in the $1,300/oz range for a little while. We'll see which way it breaks out. We believe it's going to break out on the upside.

    Douglass Loud: Gold had been running up for a while, and every so often investors want to take some money off the table.

    TGR: How high do you believe gold will go?

    JM: The average sustaining cost of production for gold is about $1,500/oz. If gold continues to trade below that level, at some point no new mines will be brought on. Supply and demand indicates higher prices for gold. At the same time, we're dealing with a seasonal trading pattern. Usually the position for those commodities tightens up around September-October. We think this will happen again this year. Higher prices? Yes. How much higher? We don't know.

    TGR: Given that the financing for junior gold companies collapsed years ago, shouldn't the concomitant shortage of new supply have led already to higher prices?

    DL: Well, there are games going on. Every once in a while some big bank will say that gold is too high. Then it goes down. After that, some big bank will say investors should buy gold and gold goes back up again. Institutions can profit by shorting gold and then buying it back before it rises in price, or so the conspiracy theorist in me thinks.

    TGR: The world is becoming a more dangerous place. We have the civilian airliner shot down over Ukraine, civil wars in Iraq and Syria, Hamas attacking Israel, and Israel striking back, as well as a burgeoning territorial dispute between China and Japan. As a result, do you expect a flight to safety by investors?

    JM: Actually, we are flummoxed by the apparent disconnect between what's going on in the world and commodities prices in general. We think that the reason for this is that the U.S. dollar is the least dirty shirt in the laundry basket. Investors are fleeing to the dollar because it's easier and cheaper, but if these hot spots continue to get hotter, it will almost certainly translate into more gold buying.

    DL: Then there's the issue of real gold versus paper gold. There may be much more paper gold than real gold to support that paper.

    TGR: The traditional argument for gold bullion is that it is a rare, real good that cannot be multiplied endlessly. Before gold exchange-traded funds [ETFs], if investors wanted exposure to gold that wasn't in bullion they had to invest in mining stocks. Do you think ETFs have resulted in a substantially changed gold market?

    JM: For many years the traditional relationship between gold and gold stocks was that the stocks predicted the direction the metal would go. This changed with the introduction of ETFs, and for the last few years, the tail has been wagging the dog.

    The ETFs were an interesting introduction. They have been and will continue to be a very good way to play gold, but they did result in putting gold stocks out of favor. Now people are beginning to realize that it is the mining companies that produce the gold, and they're going to make the profits.

    TGR: Historically, the end of a recession led to big increases in gross domestic product. We've yet to see this after the post-2007 recession. Why not? Are we now living in a new world of permanent low growth?

    DL: We're supposedly out of a recession because a bunch of statistics say so, but tell that to the shopping malls that are one-third empty and to the people who don't know how they're going to pay for the increases in food and fuel that are no longer included in the inflation statistics.

    JM: Serious economic growth has been stymied by a rash of new regulations and by the standoff between Congress and the Obama administration. This disincentivizes capital investment and capital creation. Most of the stimulus money created from 2008 went to firm up bank balance sheets and did not get into the economy proper. And so the recovery has been a lot more anemic than in the past.

    Now, however, business loans are beginning to be made by the banks. Little by little this will percolate into the economy. And the $8 trillion [$8T] created by the central banks has to find a home somewhere. We believe this will be reflected in higher gold prices, and, in fact, higher prices for commodities in general.

    TGR: The Financial Times reported in June that public institutions, central banks mostly, have invested $29.1T in the markets, mostly the equity markets.

    JM: Well, because of continued very low interest rates, most of the stimulus has gone into improving bank balance sheets and into the equity markets but not into the economy proper.

    TGR: HudBay Minerals Inc. (NYSE:HBM) has taken over Augusta Resource Corp. and Osisko Mining Corp. was taken over by Yamana Gold Inc. (NYSE:AUY) [YRI:TSX;YAU:LSE] and Agnico-Eagle Mines Ltd. (NYSE:AEM). Can we expect more such buyouts?

    JM: Yes. What's interesting about recent takeovers is that they were initiated as hostile bids. This is very unusual for Canada, which is a much more gentlemanly arena than America, Britain or Australia. We believe it's a question of value. Mining assets are now cheap, and well-financed companies can buy good properties cheaply.

    DL: We were in a meeting the other day with some executives whose company almost went under simply because their project took longer than expected. The company kept having to make payments on its equipment to keep its place in line, and pretty soon it used up all its cash. Time can kill a smaller business. And so mining companies can be bought on the cheap because they have no money and can't raise it.

    TGR: The Osisko buyout has resulted in the creation of a new royalty company called Osisko Gold Royalties Ltd. (OTC:OKSKF) [OR:TSX], which began trading at the beginning of June at $13.50/share and has since risen to $15.95/share. Why does the market value this company so highly?

    DL: Because it has a royalty on the Canadian Malartic gold mine in Quebec. So the company is like a mine without the mine.

    JM: Streaming companies are very attractive so long as they finance good projects. Investors see this stream of cash flow, and they love it. It's less risk with more visibility.

    TGR: Osisko Gold Royalties has $157 million [$157M] in cash. How big a player does it intend to become?

    JM: Clearly it will be a major player. The question is, will it buy other existing streams or will it buy other projects that will stream later? I think it will do both.

    TGR: HudBay now has Augusta. Its Reed copper mine in Manitoba is now in production, and its Constancia copper mine in Peru is scheduled to begin commercial production in the second half of 2015. How do you rate this company?

    JM: Very positively because we see its production going up radically in 2014-2015. Copper production should increase by over 50% next year. We happen to be very positive on copper. We also think HudBay will increase its gold production. And Augusta may not be its last acquisition.

    TGR: How likely is it that HudBay will be able to move forward its newly bought Rosemont copper project in Arizona within a reasonable amount of time?

    JM: All these big projects come down to two things, permitting and financing. The financing part should be easier. We think HudBay will move it along at a good pace, and that it will overcome any permitting hurdles.

    DL: Otherwise, there would have been no point in HudBay buying it.

    TGR: How ambitious is HudBay? How big does it want to be?

    JM: HudBay has extremely good management and will operate within its financial constraints. Other than that, I think the company will grow as big and fast as it can.

    Talking of permitting, after 10 years, we feel that Polymet Mining Corp. (NYSEMKT:PLM) [POM:TSX] is very close to obtaining its permits and its financing, and will finally be going into production on its huge copper-nickel deposit in Minnesota.

    TGR: In a previous interview, you talked a fair amount about Yukon mining. Are you still keen on that region?

    DL: Yes. There are those who feel that expenses went through the roof, which they kind of did, but we still like some of our companies up there. For instance, Alexco Resource Corp. (NYSEMKT:AXU) [AXR:TSX] and its Eastern Keno Hill Silver District. The company is run by some really smart guys. For example, Alexco used to pay Air Canada about $600,000 yearly to fly its workers in and out. It has solved that problem, and it has gotten other costs under control as well. Additionally, there's a lot of zinc up at Keno Hill, and if zinc comes back, it will be a very profitable project.

    When I was in the Yukon a while back, someone told me jokingly that the Yukon ought to annex northern British Columbia [B.C.] because it was more like the Yukon than B.C. There are a lot of good projects in that region.

    TGR: What is the status of Alexco's Bellekeno silver mine?

    DL: I think it's coming along very nicely. And Alexco has found a wonderful new site called Flame & Moth. Unfortunately, it's right under the mill it just built, so it is building the entrance to this new mine right next to the mill. The company will have two major production areas going. If it produces, for the sake of argument, 3 million ounces [3 Moz] of silver a year, it could well do 6 Moz of zinc.

    In addition, Alexco has its environmental recovery division. There are an awful lot of big companies that have bought a lot of little companies over the years, and they've got a whole bunch of little mines that maybe weren't cleaned up the way they should have been. Alexco is poised to profit from that.

    TGR: What else interests you in South America?

    DL: Because of the government of President Cristina Kirchner, Argentina has rather taken itself off the grid. If she is replaced with a more mining-friendly leader, then we like Yamana, which bought the Cerro Moro project. We would also revalue McEwen Mining Inc. (NYSE:MUX).

    JM: A better regime would also benefit Barrick Gold Corp. (NYSE:ABX) and Pan American Silver Corp. (NASDAQ:PAAS) [PAA:TSX].

    TGR: Argentina has been troublesome for business ever since Juan Perón first came to power in 1946. Does there come a point when mining companies decide to write off a country once and for all?

    JM: In the end, greed trumps grief.

    DL: And don't forget the grades in those Argentine projects are extremely high, which should make them very profitable.

    TGR: Are there any other precious metals companies you'd like to mention?

    DL: In Mexico, there's First Majestic Silver Corp. (NYSE:AG) [FR:TSX;FMV:FSE], which is well run and keeps finding more silver.

    JM: It has very high-quality management, and the company always seems to find a way around whatever problem is presented.

    TGR: The current bear market in precious metals goes back to April 2011. When will it end?

    JM: We think it may have already ended. The recession has cleaned out a lot of doubtful companies. The survivors with really good projects will either be bought out or get financed. We think that's going to start to happen in the very short term.

    TGR: How long will the trend have to keep moving upward before we can say that we're now in a bull market?

    JM: Metal stocks did extremely well from 2002 to 2010. Then there was a correction. We think that we are preparing for the next upward move, which should last for several years. There is a tightness in various metal markets, which will mean higher metal prices. This could lead to more mines going into production in the future.

    TGR: When you consider your favorite companies, which qualities do they share?

    JM: Good, solid management is one. Good deposits and good grades are another, and either being in production or being close to production is a third.

    DL: And we're very sensitive to country risk. I mean, we're not going to touch the best mine in the world, if it's in the Congo.

    TGR: Jeff and Doug, thank you for your time and your insights.

    This interview was conducted by Kevin Michael Grace of The Gold Report and can be read in its entirety here.

    Douglass N. Loud joined Greystone Asset Management at its founding in 2005 and has been senior managing director of Axiom Capital Management Inc. since 2009. Prior to that, he was with Murphy & Durieu, where he served as executive director of the Private Clients Group. Loud has over 35 years of investment management and securities industry experience. He holds a degree from Yale University and a law degree from the University of California, Berkeley.

    Jeffrey N. Mosseri established Greystone Asset Management in 2005 and became a director of Axiom Capital Management Inc. in 2009. He was a stockbroker and investment manager at Goldsmith & Harris for 20 years. Mosseri also worked as a stockbroker and investment manager for Carnegie Capital, the investment advisory division of Prescott Ball & Turben, where he ran the international arbitrage division and developed the gold mining research and investment department.

    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 recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

    DISCLOSURE:
    1) Kevin Michael Grace 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 independent contractor. He owns, or his 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: None. Streetwise Reports does not accept stock in exchange for its services.
    3) Jeffrey Mosseri: I own, or my family owns, shares of the following companies mentioned in this interview: Alexco Resource Corp., First Majestic Silver Corp. and McEwen Mining 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. The fund has holdings in the following companies mentioned: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. 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) Douglass Loud: I own, or my family owns, shares of the following companies mentioned in this interview: Alexco Resource Corp., First Majestic Silver Corp. and Polymet Mining Corp. 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. The fund has holdings in the following companies mentioned: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. 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) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
    6) 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.
    7) 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

    Jul 23 3:30 PM | Link | Comment!
  • Jocelyn August: Upcoming Catalysts For Precious And Base Metals, Uranium And Oil And Gas Plays

    Timing the market is sometimes more important than finding the right equities. But if you can time the market and find the right equities, that can be the most direct path to success. Jocelyn August, senior analyst and product manager with Sagient Research's CatalystTracker.com, follows catalysts that move resource stocks with regularity, sometimes 10% or more. In this interview with The Mining Report, August discusses some upcoming catalysts in the precious and base metals spaces, and names others in uranium and oil and gas.

    The Mining Report: The top catalysts Sagient Research follows tend to move resource stock prices 6-10%. What are the top three catalysts in precious metals equities?

    Jocelyn August: The top three catalysts for absolute movements-either up or down-in precious metals are the ones that help investors determine the potential success of a project, so we're looking at preliminary economic assessments [PEA], government approvals or permits-that's when a company actually receives the decision-and resource estimates. The PEA is on top, with about an 8% movement, either up or down. When we look at only positive movements, the PEA remains on top, with a move of more than 12%. A positive PEA has a big effect on the stock price. Feasibility study results and the start of drilling round out the top three for positive movements.

    For negative catalysts, government approvals or permitting decisions are highest. When a government doesn't approve a permit, that's obviously going to hurt the share price. That will send a stock down more than 9%. Also in the top three are construction and prefeasibility study completion. We see this particularly when construction has been delayed from its original timeframe. A prefeasibility study may let investors know that the project isn't as robust as expected, which definitely results in a negative stock movement for the company as a whole.

    TMR: Are the catalysts similar for base metals?

    JA: We see similar large catalyst movements here. Government approvals/permitting is a large mover, as well as the start of drill testing and feasibility study results. A lot of these are where we see whether the project is going to be successful.

    TMR: And uranium equities?

    JA: In the uranium space, the highest absolute move comes from a resource estimate. That's about 7.7%. Production starts and feasibility study completion complete the top three.

    TMR: Which three catalysts typically move stock prices the most in the oil and gas space?

    JA: In the oil and gas space, we've noted that for absolute catalysts, the top three that move stock prices are drilling- and testing-related. Testing completion, testing starts and testing results are all part of the development pipeline for exploration and production companies, and tend to move share prices around 6-7% in either direction.

    When we look at just the positive stock movements, the same three are on top. A testing start is the highest, at about 7.85%. Testing completion and testing results follow, at just over 7%.

    For negative stock movements, test completion and testing results catalysts remain in the top three but are joined by regulatory filings, usually a filing for a permit or government approval. That's the filing phase, not the approval stage.

    TMR: Given your experience tracking investment catalysts, when is the best time to buy a resource company pre-catalyst?

    JA: If you expect that it's going to be a positive catalyst for the company, the best time would be at least a month before the catalyst, so you can get the stock run-up. Any less than a month and you will probably miss it. But it can be difficult to precisely predict when those catalysts are going to occur. Some companies keep delaying their results or announcements.

    TMR: Do these catalysts move large companies in the same manner they move small-cap equities?

    JA: We obviously see higher percentage movements with small-cap companies than with large caps. Small caps tend to have fewer assets, so if something happens with one of those, it has a greater impact than it would with a larger company.

    TMR: If companies are late with announcements for feasibility studies, environmental assessments, production starts or well testing, does that lessen the impact of those catalysts?

    JA: It definitely does. When these companies are late with their announcements it becomes much more difficult to anticipate when the event is actually going to happen. And if a company frequently misses deadlines and does not make timely announcements, then obviously it becomes much less credible. When the company finally makes that announcement, it's already been factored into the stock price, and the impact of that one specific catalyst is going to be far less.

    TMR: Your subscriber-supported CatalystTracker monitors stock-moving events. What are you seeing in the different commodities?

    JA: I was looking at some catalysts that occurred over the last six months, and base metals look pretty hot, especially copper. Over the last six months, we've seen 28 copper-related catalysts, which had an absolute average change in the stock of 7.81%, plus or minus. In the precious metals space, we see an average for all the catalysts we follow of closer to 5%. For all the base metals, we recorded 47 catalysts and saw an absolute average change of 7.5%.

    TMR: What's happening with the catalysts in the energy space over the same timeframe?

    JA: The percentage moves were a lot smaller, in general, for the last six months or so for energy. Gas drilling catalysts were 5-5.5% on average, whereas oil drilling catalysts were more like 4.5%.

    TMR: Are there any other precious metals companies with catalysts?

    JA: We're also looking for some catalysts from Augusta Resource Corp. (NYSEMKT:AZC). It has a lot of things going on at the Rosemont gold-silver-copper-molybdenum project in Arizona. Augusta is the subject of a takeover bid from HudBay Minerals Inc. (NYSE:HBM), but we're looking for a couple things. First is a Section 404 permit for clean water, as well as the record of decision for its environmental impact study. Both of those should occur by the end of Q3/14.

    Another one we're following is Alamos Gold Inc. (NYSE:AGI). We're waiting for environmental impact assessment approval for its Aği Daği project in Turkey. It's currently under review by the Turkish Ministry of the Environment and Urbanization. Alamos submitted the final environmental impact in February, so we're hoping that it is going to give us an update when it publishes its Q2/14 earnings in August. The company had its first project in Turkey approved-the Kirazli gold project.

    TMR: How about the catalysts in the junior base metals equities space?

    JA: In base metals, we're waiting for the completion of a feasibility study at Taseko Mines Ltd.'s (TKO) [TGB:NYSE.MKT] Aley niobium project in British Columbia. The company is working to upgrade the previously announced resource for Aley so that it's compliant with NI 43-101 guidelines. Taseko is also expecting to have a metallurgical flow sheet finalized shortly. We're waiting for an update in its next earnings announcement, likely in August.

    TMR: Do you notice a difference in catalyst performance between an initial resource estimate and an updated resource estimate?

    JA: We definitely do. Initial resource estimates will usually give you a much larger movement than updated resources.

    TMR: Feasibility studies are sometimes updated, too.

    JA: Yes. If a company has a feasibility study and it updates that study, investors probably won't see as large a move as they did from the initial feasibility. But if there is a big surprise-the numbers were a lot better or worse than expected-that can definitely move the stock more than a typical update.

    TMR: What are some others in the oil and gas space?

    JA: We're also watching for an initial production response from a project that's being developed by Zargon Oil & Gas Ltd. (ZAR). It's the Little Bow alkaline surfactant polymer [ASP] project in Alberta. Based on its current construction schedule, the company is forecasting 140 barrels of oil per day incremental production in 2014. That's production response, and we're looking for the occurrence in Q3/14.

    TMR: What about some uranium companies with catalysts?

    JA: We're watching for a couple of catalysts in the uranium space. One is the production start of Uranium Energy Corp.'s (NYSEMKT:UEC) Goliad in situ recovery project in Texas. The company expects to bring the project on-line in 2014. It's fully permitted for production and ready to go, but it's waiting for stronger uranium prices.

    Another is a resource estimate and technical report for Uranium Resources Inc.'s (NASDAQ:URRE) Roca Honda project in New Mexico. We're expecting completion of that report by the middle of 2014. That could happen any time between now and the end of August.

    TMR: How much do technical reports move these types of equities?

    JA: We usually place them in the same category as resource estimates. Again, for a resource estimate, we're likely going to see an average move of 6-7%.

    TMR: Do you have research that shows how shareholders use your service? Do they typically sell post-catalyst, or do they take more of a buy-and-hold tack, given that the catalyst movement probably indicates a well-run company?

    JA: It depends on the shareholder's investment strategy. A trading firm would probably be buying and deciding how these catalysts will affect the stock in the short term. But long-term investors, like maybe a pension fund, are going to look for these catalysts to add value to these companies to help their portfolio grow in the short and long term. Moreover, they're going to look for the companies with good management teams that meet their milestones, and that have more of a balanced portfolio.

    TMR: Parting thoughts?

    JA: These kinds of event milestones are important. Whether you're investing in the short term or you're investing in the long term, the way that you invest based on these events might be different. But understanding those events and following these types of catalysts, especially those with the largest potential impact, can help you determine the companies in which you want to invest.

    TMR: Thank you for your insights, Jocelyn.

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

    Jocelyn August is the senior analyst and product manager for CatalystTracker, a proprietary research product focused on identifying and analyzing the future events that will materially impact publicly traded companies. In her five years at Sagient Research, she has developed expertise in the highly event-driven medical device and diagnostic sector. In addition, she spearheaded the development of a new Natural Resource Industry product within the CatalystTracker product line with the publication of the Catalyst Impact Study: Natural Resources Sector. Outside of Sagient, August was named the director of communications for the San Diego Professional Chapter of MBA Women International. August received a Master of Business Administration from the Rady School of Management at University of California, San Diego, and graduated cum laude from the University of California, San Diego, with a Bachelor of Arts degree in sociology.

    Want to read more Mining Report interviews 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 homepage.

    DISCLOSURE:
    1) Brian Sylvester 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 independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.
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    3) Jocelyn August: 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 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.
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