http://community.nasdaq.com/News/2012-02/the-gospel-of-gold-according-to-peter-peter-grandich.aspx?storyid=120414
The Gospel of Gold According to Peter: Peter Grandich
Source: Brian Sylvester of The Gold Report (2/10/12)
http://www.theaureport.com/pub/na/12525
Peter Grandich believes that we're in the midst of a stealth gold bull
market. Grandich, editor and publisher of The Grandich Letter, recently
penned the book Confessions of a Wall Street Whiz Kid, the moniker "Good
Morning America" gave to him after he predicted the Black Monday stock
market crash in 1987. He's now predicting gold to top $2,350/oz in this
exclusive interview with The Gold Report .
The Gold Report: Going back to your time as a fund manager in the '80s on
Wall Street, how does what was happening then compare with what is
happening now?
Peter Grandich: It's dramatically different. The biggest change is that the
game is stacked against the average investor more so than at any other
time. For example, the mortgage debacle a few years ago was equivalent to
all the big car companies manufacturing cars that they knew were going to
crash and buying life insurance on the people that they sold the cars to
knowing that they would die so they could collect on both ends. That's what
the financial institutions did. Those people are still in charge of the
game. I take exception when I hear people talking as if the game is fair
and the average person has a reasonable chance.
TGR: One revelation in your book is that your struggles led you to a belief
in Christianity. Does your spiritual life influence your investment
decisions?
PG: Yes. There's far less chance of me pushing the envelope and touching
the gray area-or even going into the red area.
TGR: Another theme in the book is about being wrong and accepting that as
an investor. Could you talk about the psychological pitfalls of investing?
PG: I could write a book about losing. The ultimate crime of investing is
not being wrong. The crime is staying wrong and that happens to a lot of
investors. They institute the worst investment strategy and simply hope
things will change. Hope is a wonderful spiritual strategy but a very bad
investment strategy.
The majority of investors usually can withstand the financial risk that
they're taking, but greatly underestimate the mental anguish that can come
from the downside of what their investments or speculations/gambling will
bring. Wall Street created the word "speculating" so that it doesn't have
to use the word "gambling," but it's gambling. You have to be prepared to
lose part or all your money when you gamble and I don't think most
investors are. They think of the best possible scenario and never think of
the worst.
Most investors don't operate with a real plan either. That's why they lose
over time because they don't have a written strategy and instead choose
emotions and day-to-day, seat-of-their-pants thinking.
TGR: At the Cambridge House investment conference in Vancouver, you said
that you don't look fondly upon the economic outlook for the U.S., but you
remain bullish on some foreign markets, especially China. China's markets
lack transparency and even some Chinese companies listed on North American
markets have proven to be less than trustworthy, such as Chinese timber
producer Sino-Forest Corp. Are you sending investors into the lion's den?
PG: It's foolhardy to think that the U.S. is the safest place and China's
the worst place to invest in equities. There's no question that China's
going through some growing pains. But there are also shady things that go
on here in the U.S. that don't get reported or are twisted.
It's no longer a question of if China will become the world's largest
economic power, but when. To not have exposure to Chinese equities over the
next several years would be like not getting exposure to U.S. equities
during our greatest growth in markets from the '50s-'90s. And right behind
China will follow India. If we don't have exposure to China and India and
the companies that do business there over the long term, we're
shortchanging ourselves.
TGR: How should investors get exposure to China without getting exposed?
PG: The simplest, safest way is through exchange-traded funds or mutual
funds that specialize in a group of stocks to avoid getting caught in one
particular stock or style of business.
TGR: What are some Chinese investment themes that perhaps investors can
piggyback on?
PG: China has a tremendous need for resources. That appetite is not going
to disappear anytime soon. It's underpinning the commodities bull market,
in particular steel and iron ore.
TGR: I read a report recently that said China was seeking alternative
sources of iron ore for its smelters as part of an effort to limit its
reliance on iron ore from Australia and Brazil. China's looking to
northeastern Canada in the Labrador Trough. Do you know anything about that?
PG: A couple of my clients are there and some of my largest personal
holdings are there. The Labrador Trough is probably the most interesting
play in the world right now. A Chinese company recently did a big deal
withAdriana Resources Inc. (ADI:TSX.V; ANARF:OTCBB; A7R:FSE) up there.
I'm very bullish onAlderon Iron Ore Corp. (ADV:TSX; ALDFF:OTCQX) . I call
it the son of Consolidated Thompson because it has many of the people who
were successful at Consolidated Thompson and is following Consolidated's
path, but in a more expedited way. I believe it's going to go the same way
and be taken over within 12 months.
TGR: Alderon has the Kami iron ore project near to Consolidated Thompson's
Bloom Lake deposit in the Labrador Trough. A recent preliminary economic
assessment (PEA) on the project reported a pre-tax net present value ( NPV
) of just above $3 billion ( B ). How does the Kami deposit compare with
its peers?
PG: Alderon should be able to develop Kami at a lower cost, which is key in
that area. There's no question that there's a lot of iron ore up there, but
success is a question of cost, efficiency and effectiveness. The
expectation is that it will get port access in a relatively short period.
The last missing ingredient will be an offtake agreement with a Chinese
company, and the company seems to be suggesting that it's in advanced
talks. All in all, the next big deal in that area appears to be Alderon.
A year from now, Alderon could be worth $10-12/share based on what
Consolidated Thompson was worth. It's a legitimate target to have in the
back of our minds.
TGR: Are there any other iron juniors that you're following?
PG: A big story on the exploration front is going to beCap-Ex Ventures Ltd.
(CEV:TSX.V) . I was able to see Cap-Ex's plans for its drill program in
2012 and it's just unbelievable. This deposit already looks like it's much
bigger than anything else there. The company has four to six drills going.
It's an interesting story. There is alsoZone Resources Inc. (ZNR:TSX.V;
7ZR.F:FSE) , a little company that is very low priced, very early stage and
high risk. Its recent results from its 2011 program indicate that it could
be into something significant. There is some serious talk that Quebec's
government and the Chinese may expand infrastructure in the far north,
where there presently isn't much now.
TGR: You expect the U.S. dollar to weaken once attention shifts away from
the troubled euro. At that point, do you expect gold to have a sizeable run?
PG: I have called this the mother of all gold bull markets. I don't think
we'll see a bull market like this again in our lifetime. However, it's also
been the most stealth bull market. North Americans, and particularly
Americans, have shown little or no participation, yet the price has
increased five to six fold. All the fundamentals remain in place: central
banks have gone from big sellers to net buyers and major producers don't
forward sell much anymore.
The news that the Fed plans to continue flooding the system with cheap
paper is just another example of why gold's path of least resistance is to
the upside. I believe an all-time high, not just a nominal high, but
adjusted for inflation, could reach $2,350-2,500/ounce (oz).
TGR: Which of your junior gold equities that you follow have recent news
that could act as catalysts?
PG: Of all the companies that I am involved with, just about every one is
an undervalued junior because they have multiple, advanced-stage
exploration projects in either prefeasibility or feasibility studies. Their
values are far more than their market caps. For instance, ifSunridge Gold
Corp.'s (SGC:TSX.V) project wasn't in Eritrea, this stock would already be
many times its current price.
TGR: Wouldn't it then be taken out?
PG: Yes. The market is discounting this project somewhere between 80% and
99% because it's in Eritrea. However, the country risk is even less than
what it was. The U.N. sanctions against the country ended up getting
watered down. The Chinese have announced a major investment in Eritrea and
are talking about doing more.
It's extremely good for Sunridge and bullish for the bigger company in
Eritrea at the moment,Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.A) . I would
not put it past Nevsun to acquire it, but I would think Nevsun would wait
until Sunridge's projects are more advanced. Once Sunridge's studies are
in, Nevsun, another company or Sunridge will develop it. It's close to
getting updated resources on multiple projects, so it's just too compelling.
Even though they've moved up somewhat, Sunridge shares are still
substantially lower than their 52-week high. This is a key year for
Sunridge. It's gone through tough times. Its stock went down to pennies on
the dollar. If it demonstrates what I think it's going to in these reports,
no matter that it's in Eritrea, it should have a much higher valuation.
Some people that I've met who are familiar with Sunridge believe its Emba
Derho zinc-gold-copper VMS deposit is bigger than Nevsun's Bisha project.
That says a lot.
TGR: Could Nevsun be taken out by something like Rio Alto Mining Ltd.
(RIO:TSX.V; RIO:BVL; RIOAF:OTCQX), BHP Billiton Ltd. (BHP:NYSE;
BHPLF:OTCPK) or a Chinese company?
PG: Both Nevsun and Sunridge could be gobbled up by a bigger company. But
Nevsun could also be interested by something that's worth 5 to 10 times
more than its current value with the advantage of being in its own backyard.
Also, Cliff Davis, the chief executive of Nevsun, and the principals of
Sunridge go back a long time. They have cooperated on a lot of things. But
no matter what happens, Sunridge's stock is extremely cheap.
TGR: Many retail investors hope that they will exit their junior resource
equity positions via a takeover at a considerable premium. Shareholders
ofMinefinders Corp. (MFL:TSX; MFN:NYSE) recently got their wish when Pan
American Silver Corp. (PAA:TSX; PAAS:NASDAQ) made a $1.5B takeover bid in
January. Did that news bolster your hopes of takeovers for other companies
with properties in Mexico, likeTimmins Gold Corp. (TMM:TSX.V; TMM:NYSE.A)
andGeologix Explorations Inc. (GIX:TSX) ?
PG: I believe that they're both prime takeover candidates. The difference
is that only Timmins could actually be an acquirer, as well as be acquired.
TGR: Pan American is putting a lot of stock in Mexico. Obviously,
Minefinders has had some problems with its Dolores operation, but it's
going to bring its expertise to bear on a promising deposit.
Timmins Gold had production of about 21,500 oz in Q411 from its San
Francisco mine. But its recoveries were only 65%, up from about 50% in
Q311. Do you have any reservations about Timmins because of its low
recoveries?
PG: No. Timmins started from scratch and was producing within three years
during the worst financial crisis in the modern era. CEO Bruce Bragagnolo
should be congratulated. The company seems to be quite assured that it has
the heap leaching all worked out. It is quite confident that it will reach
100,000 oz in 2012.
TGR: Geologix continues to drill the Tepal project in Mexico, which is
really a copper play. Drilling has revealed that there's significant
mineralization at depth. That could lead to an underground operation after
the open pit is completed. What could that do to the share price?
PG: The share price is just too cheap. Regardless of that, the drilling
news indicates that it could have something bigger. But by the time the
reports start to come together in the spring, Geologix may not be around.
It could become an acquisition target before it has a chance to be
reasonably priced. That's not a problem for those of us who entered
recently, but it may not get the full value that it wants.
So many good, advanced-stage exploration projects were beaten down in
2011-some to 80% below their 52-week highs. The Geologixs of the world are
on the lists of the majors because the majors still struggle with
replenishing resources. Mexico, despite its problems with crime, is still a
very favorable mining district without many of the headaches some other
areas of the world have.
TGR: Do you have any other stories you'd like to tell us about today?
PG: There is one company:Excelsior Mining Corp. (MIN:TSX.V) , a copper
project in Arizona. It's my largest holding, so I'm speaking my book. It's
incredibly cheap, but once management puts a couple of things in place,
it's going to tell the story in a big way and I hope the stock will react.
It's truly an unknown story right now. It could be worth a lot more than it
currently is.
TGR: Its primary project is North Star, where it is doing in-situ recovery.
What are your thoughts on that method of copper recovery?
PG: It's safe and environmentally friendly, but people don't understand it.
Another company has run into some issues with part of its project being
close to a town and there's been a push to not allow it to have permits.
The good news for Excelsior is that it's truly out in God's country.
There's no situation like that facing it.
TGR: The PEA stated an NPV of $480M with an internal rate of return of 34%.
Would you like to see that a bit higher?
PG: Making money at about $0.60 copper costs is livable. There still needs
to be a better understanding of the deposit, metallurgy and exploration
potential, too. Because of the style of the management team, I anticipate
that this won't end up being a one-project company.
TGR: Any parting thoughts for us today, Peter?
PG: The mother of all gold bull markets remains intact. The bears have once
again been bloodied and they'll go into hiding until we go through
$2,000/oz and then they'll come out again. Then the media will flock to
them to tell us for the 19th time why gold has topped out.
TGR: Thanks for sharing your forecast.
Financial Adviser and Market AnalystPeter Grandich started publishing The
Grandich Letter -now a blog-without a high school diploma or even a day of
formal training. His ability to interpret and forecast financial
happenings, which once earned him the moniker "Wall Street Whiz Kid," has
led to hundreds of media interviews. He is regarded as one of the world's
foremost market strategists. He's also published a new book called
Confessions of a Wall Street Whiz Kid.
Want to read more exclusive 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 ourExclusive Interviews page.
DISCLOSURE:
1) Brian Sylvester of The Gold Report conducted this interview. He
personally and/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: Alderon Iron Ore Corp., Geologix Explorations Inc., Sunridge
Gold Corp., Timmins Gold Corp. Streetwise Reports does not accept stock in
exchange for services.
3) Peter Grandich: I personally and/or my family own shares of the
following companies mentioned in this interview: Alderon Iron Ore Corp.,
Cap-Ex Ventures Ltd., Excelsior Mining Corp., Geologix Exploration Inc.,
Sunridge Gold Corp. and Zone Resources Inc. I personally and/or my family
am paid by the following companies mentioned in this interview: Alderon
Iron Ore Corp., Cap-Ex Ventures Ltd., Excelsior Mining Corp., Geologix
Explorations Inc., Sunridge Gold Corp, Zone Resources Inc., Timmins Gold
Corp. I was not paid by Streetwise for participating in this story.
Streetwise - The Gold Report is Copyright © 2012 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.
The Gold Report does not render general or specific investment advice and
does not endorse or recommend the business, products, services or
securities of any industry or company mentioned in this report.
>From time to time, Streetwise Reports LLC and its directors, officers,
employees or members of their families, as well as persons interviewed for
articles 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 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_at_streetwisereports.com
The views and opinions expressed herein are the views and opinions of the
author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
Read more:
http://community.nasdaq.com/News/2012-02/the-gospel-of-gold-according-to-peter-peter-grandich.aspx?storyid=120414#ixzz1mJvpbn2z
----[Mailing List for Eritrea Related News ]----
Received on Mon Feb 13 2012 - 22:20:35 EST
