Best of the Week
Most Popular
1.RED ALERT: Paris Terror Attacks - What to Expect Next - STRATFOR
2.Paris Terror Attacks, Death Pangs of a Dying Religion, and Impact on BrExit EU Referendum - Nadeem_Walayat
3.Paris Terror Attacks, Islamic State Attempting to Spark Civil War in France - Nadeem_Walayat
4.Three Shocking Charts That Prove Gold Price Rally Is Coming - Sean Brodrick
5.Stock Market Nifty-Fifty Becomes Fab-Five; Return of the 'Four Horseman' - Mike_Shedlock
6.Africa Population Explosion - Why Europe's Migrant Crisis is Going to Get A Lot Worse - Video - Nadeem_Walayat
7.Gold Mining Stocks May Be The Buy Of The Century - Jeff_Berwick
8.Grandmaster Putin Beats Uncle Sam at His Own Game - Mike_Whitney
9.BRICS? No, CRISIS - Raymond_Matison
10.UK Housing Market Affordability, House Prices Momentum and Trend Forecast - Nadeem_Walayat
Last 5 days
Turkey Downs Russian Jet to Draw NATO and US Deeper into Syrian Quagmire - 28th Nov 15
Stock Market Quiet Week as Primary 5 Continues - 28th Nov 15
Black Friday, Weekend for Europe's Migrants - 28th Nov 15
HUI and Gold - Who's Leading Whom? - 28th Nov 15
Gold And Silver - No Ending Action, But End May Be Near - 28th Nov 15
Social and Cultural Distress Dividing The Nation - Fourth Turning - 28th Nov 15
Sheffield Houses Prices 2015, Best Estate Agents As Rated by Buyers and Sellers - 28th Nov 15
Stock Market Top Valuations, at a Critical Juncture - 27th Nov 15
The Top Shopping Opportunity on Black Friday - 27th Nov 15
Economics Is About Scarcity, Property, and Relationships - 27th Nov 15
UK Immigration Crisis Hits New Extreme of 336k Net Migration, up 32% on 2014 - 27th Nov 15
Vauxhall Zafira B Fire Danger Recall - What to Do Video - 26th Nov 15
Triggers In US Dollar Collapse - 26th Nov 15
Apple Stock is a 10-Year Short - Bear Market Environment - 26th Nov 15
U.S. Federal Reserve Rate Hike - 26th Nov 15
George Osborne's War on Buy to Let Sector Trending Towards Doomsday - 26th Nov 15
Will Turkey Drag NATO into War With Russia in Syria? - 25th Nov 15
George Osborne’s Autumn Statement and Spending Review Full Text - 25th Nov 15
Will Fresh QE From ECB Boost Gold? - 25th Nov 15
Sheffield, Yorkshire and Humberside House Prices Forecast 2016-2018 - 25th Nov 15
Investors Watch Out For The Auto Industry… - 24th Nov 15
BEA Revises 3rd Quarter 2015 US GDP Economic Growth Upward to 2.07% - 24th Nov 15
Stock Market Supports Are Being Broken - 24th Nov 15
Is Gold Price on the Verge of a Breakout? - 24th Nov 15
Fed’s Tarullo: U.S. Interest Rates Liftoff Should Wait for Signs of Inflation - 24th Nov 15
Silver Price, COT, US Dollar Updates and More - 24th Nov 15
UK Regional House Prices Analysis - Video - 23rd Nov 15
Crude Oil Swinging For The Fences - A 20 to 1 Option Play - 23rd Nov 15
US Dollar, CRB, Oil, Gas, Copper and Gold - The Chartology of Deflation - 23rd Nov 15
UK Regional House Prices, Cheapest and Most Expensive Property Markets - 23rd Nov 15
Stock Market Rally Losing Momentum? - 23rd Nov 15
Will Gold Price Drop Below $1000 Soon? - 23rd Nov 15
Gold and Silver Sector Big Green Light and Low Risk Entry Setup... - 23rd Nov 15
Limits to Economic Growth - Challenge and Choices - 22nd Nov 15
Long Dollar Trade and Current Copper Price Below Cost of Production - 22nd Nov 15
UK Housing Market House Prices Affordability Crisis - Video - 21st Nov 15
The Fed Has Set the Stage for a Stock Market Crash - 21st Nov 15
Stock Market Primary V Wave Continues - 21st Nov 15
Gold And Silver - Value Of Knowing The Trend - 21st Nov 15
UK Footsie Bulls Set To Foot The Bill - 21st Nov 15
UK Housing Market Affordability, House Prices Momentum and Trend Forecast - 21st Nov 15
GDX Gold Miners’ Strong Q3 Results - 20th Nov 15
End of Schengen, Stock Market’s Technical Strength Grows - 20th Nov 15
Justice for All and The Curious Case of Zambia - 20th Nov 15
Paris, Sharm el-Sheikh, and the Resurrection of Old Europe - 20th Nov 15
Silver Prices and The Management of Perception - 20th Nov 15
Stock Market Nifty-Fifty Becomes Fab-Five; Return of the 'Four Horseman' - 20th Nov 15
Waiting for Goldot Again - 20th Nov 15
Michael Curran Goes Down-Market Shopping for Gold Stock Winners - 20th Nov 15
Why Isn’t This Incredibly Bearish Bond Market Development Making the News? - 19th Nov 15
SPX Appears to have Stopped its Rally - 19th Nov 15
The Great Fall Of China Started At Least 4 Years Ago - 19th Nov 15
Using Elliott Waves: As Simple As A-B-C - 19th Nov 15
Has Deflation Been Ddefeated? - 19th Nov 15
Dow Jones Stock Market Index is Not Going to Crash - 19th Nov 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

Reasons to Get Excited About Japanese Stocks

The Enduring Value of Gold and Silver

Commodities / Gold and Silver 2013 May 25, 2013 - 04:20 PM GMT

By: The_Gold_Report


Do you follow your own advice? Ivan Lo, editor and founder of and The Equedia Weekly Letter, does. Lo doesn't just follow companies in the gold and silver space, he actually paused this interview with The Gold Report to receive a shipment of silver bars. Following the notion that "knowledge is power," Lo also explains the philosophies that guide his publications, the reasons why educated investors have nothing to fear and why some companies remain good bets in the out-of-favor mining sector.


The Gold ReportSome recent headlines from The Equedia Weekly Letter include "A Scary Prediction," "Prepare for a Crisis," "A Nuclear Threat" and "A Shockwave Is Coming." Should investors be fearful, or does fear help sell your newsletter?

Ivan Lo: Fear helps sell the newsletter but not necessarily in the way you've worded it. Where there's fear and concern people go looking for answers, and we try to provide them. There's a lot of fear and concern right now—war with Syria in western Asia, nuclear threats from Korea, tensions between Japan and China, tension with China invading India's territory. These situations affect our safety and our financial well-being.


I think investors should be educated. If people are educated they are more prepared and don't feel the need to be fearful. Too many people in North America live inside of a small little box and have no idea what's going on around them, let alone in the world.


TGR: In a recent newsletter you wrote, "When you consider that we're in the middle of a currency crisis and a currency war, gold really is your only last form of liquid protectant." What would you say to the doubters who believe that money printing is already built into the gold price?


IL: A very fine line needs to be drawn between gold as a safe haven and gold as an investment. Stocks and real estate are investments. Gold is a currency that's held as value; it has had real value since the beginning of time. It doesn't suffer from inflation. There is a downside to gold, which may be what the doubters are talking about: It doesn't generate interest.


People get it wrong when they talk about gold as an inflation hedge and that they don't want it because the inflation numbers aren't there. The price of gold is less affected by the rate of inflation and more by the level of real interest rates. The real interest rates drive the appeal of holding gold relative to other currencies. In the end, I'm not telling my readers to go and buy gold to make money. I say you own gold so you won't lose money. Don't trade it. Own it.


TGR: But that doesn't mean gold equities will necessarily perform. Make the case for gold equities.


IL: Some incredible deals are out there if you know what to look for. People should start looking at gold plays as more of a real estate–style investment, where the idea is to get your hands on the rarest real estate project at the lowest possible price.


Natural Resource Holdings conducted a study last year and identified about 439 gold deposits in the world with over a million ounces. That's not a lot. Of that 439, about 189 are already producing mines. That leaves us with about 250 undeveloped deposits of over a million ounces. Consider that the majority of them are uneconomic, and you're left with 100 at the most. Right now, economic gold projects are not only ultra rare but cheap. Rare is good, but cheap is even better. That's my case for select gold equities.


TGR: What are some select gold equities at the production stage?


IL: Timmins Gold Corp. (TMM:TSX; TGD:NYSE.MKT) is a favorite. The company continues to increase revenues, cut costs and expand its mine life with funds paid from production. It just had another record-breaking quarter. Its profit from operations grew 40%; earnings are up 155%; cash flow is up 50% or 51%, and it sold 30% to 35% more gold than it did last year. This is all at a cash cost per ounce on a byproduct basis of $703. That's an all-in cost. Even if prices fall to $1,000/ounce ($1,000/oz), Timmins is still making money. In the gold space that's rare.


TGR: Have investors missed the boat on that stock, or is it still undervalued?


IL: It's still undervalued compared to its peers, such as Argonaut Gold Inc. (AR:TSX). Timmins isn't even close to being fairly valued. Some of the analysts have price targets double where Timmins is currently trading.


TGR: Do you think Timmins will use its cash flow to purchase other assets, or will it stick to its knitting?


IL: That's a tough discussion to have. If Timmins announced it was going to acquire other properties, people will start hammering the market expecting something to happen. If it doesn't happen, they'll penalize Timmins for it. I don't see these gold equities moving anywhere in the near future, so Timmins has time on its side.


TGR: What's another producer?


IL: I love the silver space. The Equedia Weekly Letterhas never introduced a silver company that didn't show our readers great returns. Aurcana Corporation (AUN:TSX.V; AUNFF:OTCQX) has great exploration upside at two of its mines―La Negra in Mexico, and Shafter in Texas. I believe the two projects are on the same belt line. Once Aurcana's new mine, Shafter, is operating at full capacity, it should become the largest pure silver mine in the U.S. and one of the largest primary silver mines in North America.


TGR: Shafter has had quite a few production issues. Why do you think Aurcana will get it on track?


IL: They're just operational issues. That happens when you try to put a mine back into production. Maybe one of the crushers isn't working and the company needs to get a new one. Everybody always penalizes companies for that, and that's why I don't like to set the expectations too far into the future. Now may actually be one of the better times to own the company because people are penalizing it.


TGR: Does Aurcana's strong institutional coverage provide you with an extra measure of confidence in talking about the stock?


IL: It does, but I don't necessarily count on the institution and the coverage it provides. A lot of that relies on "If you scratch my back, I'll scratch yours" funding. That's the space we're in, and that's how analysts cover certain companies.


TGR: What are some other equity stories in the exploration and development stage?


IL: My favorite undeveloped project in the silver space is MAG Silver Corp.'s (MAG:TSX; MVG:NYSE)Juanicipio project. It has 146 million ounces (146 Moz) with an average grade of about 728 grams per ton (728 g/t) silver and 1.9 g/t gold and an Inferred resource of 85 Moz silver with an average grade of 373 g/t silver and 1.6 g/t gold. That's high grade. And it just drilled more holes at Juanicipio. It hasn't announced it, but it has an agreement with its partner, Fresnillo Plc (FRES:LSE), to do that.


MAG Silver owns 100% of Cinco de Mayo, which is a monster of a discovery. It's going through some property issues in Mexico right now, but I believe those will be resolved because Juanicipio went through the same thing. Then it will be off to the races.


TGR: Do you think that MAG Silver is being valued solely on Juanicipio and investors get Cinco de Mayo for free?


IL: Absolutely. Even without Cinco de Mayo, I think Juanicipio is undervalued right now. People are penalizing the company because it has to wait for Fresnillo to get this thing going. I believe it's going to break ground very soon, maybe even in the next month or two.


TGR: When would it enter production?


IL: A few years because it has the mine development phase. Brian, can you hang on for a second?


TGR: Sure.


IL: Sorry about that Brian. I just received silver bars that I ordered.


TGR: Really? Where did you buy them?


IL: I ordered them out of the U.S. I was supposed to pick them up, but they shipped them right to my door. It goes to show you that I actually act on what I say.


TGR: That's funny. What are some other development stage equities you're fond of?


IL: Balmoral Resources Ltd. (BAR:TSX.V; BAMLF:OTCQX) and Corvus Gold Inc. (KOR:TSX) are both excellent exploration plays. They're undeveloped projects. Corvus is closer to the production stage, so it's ahead of Balmoral, but Balmoral has the advantage of being next to Detour Lake, one of Canada's next biggest gold mines.


Balmoral is a high-grade story, while Corvus is a low-grade, near-term production story. However, Corvus might be on to a high-grade feeder zone that can dramatically change the outcome and economics of its near-term production project. It just raised more than $7 million ($7M) without warrants in this crummy market environment, so it must be doing something right. Balmoral, Corvus and MAG Silver all have tons of cash, so they can weather any storm in this market. That gives me comfort.


TGR: What's your impression of the Martiniere deposit? Balmoral has had some promising drill results there.


IL: I wouldn't call it a deposit yet, but it has massive potential. Balmoral has encountered good high-grade gold zones in practically every hole it has drilled. Detour Gold Corp. (DGC:TSX) is also on the same trend. Some of Balmoral's numbers are ridiculous.


TGR: Does that story get lost in a market that doesn't reward good drill results?


IL: It gets lost for the investors but not for the companies that might take over Balmoral. If Detour Gold looks at those drill results, it could see what's happening. You can bet those guys are looking at every news release that comes out.


TGR: Tocqueville Asset Management and AngloGold Ashanti (AU:NYSE; ANG:JSE; AGG:ASX; AGD:LSE) have invested in Corvus. The company is building the North Bullfrog gold project in Nevada. Is the plan to be in production in the third quarter of 2014 realistic?


IL: It's realistic if it keeps going at the same pace. I believe it has strong enough partners to raise the money to finance it, but timing can be affected by a number of different factors, such as market environment, drill progress, etc.


TGR: Would you be as bullish on this story if it didn't have such strong institutional ownership?


IL: Yes, because I look at management. Corvus CEO Jeff Pontius has a knack for finding gold where no one else wants to find it. Not just a little bit of gold, tons of gold. He has found five different multimillion-ounce deposits, leading the discoveries of nearly 40 Moz of gold. Most geologists live their whole lives without ever finding one. I believe in management's ability.


TGR: Could you share some of your readers' success stories from the The Equedia Weekly Letter?


IL: I would say that all companies I mentioned are success stories. On a trading note, when everybody was screaming doom and gloom last year, we predicted that the S&P 500 would go past 1,500 and the Dow would go past 14,000. We said to buy in late 2008, when everyone was telling people to sell. We told our readers that Japanese stocks would hit an all-time high while the yen would fall, and we told our readers how to benefit from that with exchange-traded funds. We're very fortunate to have had success when everybody else has failed.


TGR: The S&P 500 is past 1,600 now, and the Dow Jones is above 15,000. Should investors approach equities with caution given those levels?


IL: I am extremely cautious at these levels, but I do think the market has room to climb, especially given all the liquidity injections and the record amount of money sitting on the sidelines. Interest rates keep dropping, which leads to lower worldwide bond yields, which in turn should change how investors value equities relative to the fixed income market. Long-term bond yields can't keep up with inflation and are losing value. Fixed-income investors have to eventually rebalance their asset mix toward equities just to maintain their current allocation.


I tweeted last week—I just started using Twitter because a lot of my subscribers asked for it—that global yields on $20 trillion worth of government securities now yield even less than 1%. By incentivizing these fund flows into the equity market, stocks are going to rise. This isn't a fundamental market. It's one filled with euphoria. Just remember that the bigger they are, the harder they fall.


TGR: That's a good cliché right now. How does an investor focus on the positive when there's so much negative news?


IL: I'll keep this short. There's always a positive if you know and prepare for the negative.


Ivan Lo is the editor and founder of and The Equedia Weekly Letter, an online publication focused on investing in mining and resource stocks. With over 65,000 subscribers of high net worth investors, brokers, analysts and fund managers, The Equedia Weekly Letter has become one of Canada's most trusted investment newsletters, providing information on stocks that have earned returns of over 100%. As a result of his performance, Lo now works closely with brokers, money managers and industry reporters to bring them new ideas and insights on the market.


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.


1) Brian Sylvester conducted this interview for The Gold Report and provides services to The Gold Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Timmins Gold Corp., Argonaut Gold Inc., MAG Silver Corp., Balmoral Resources Ltd. and Detour Gold Corp. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Ivan Lo: I or my family own shares of the following companies mentioned in this interview: MAG Silver Corp., Balmoral Resources Ltd., Corvus Gold Inc. and Timmins Gold Corp. I personally am or my family is paid by the following companies mentioned in this interview: MAG Silver Corp., Balmoral Resources Ltd., Corvus Gold Inc. and Timmins Gold Corp. My company has a financial relationship with the following companies mentioned in this interview: MAG Silver Corp., Balmoral Resources Ltd., Corvus Gold Inc. and Timmins Gold Corp. 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 and may make purchases and/or sales of those securities in the open market or otherwise.


Streetwise - The Gold Report is Copyright © 2013 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

© 2005-2015 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History