Then there are companies that make no sense in terms of how advanced
their projects are versus their market caps. I can think of no better
story that meets that criterion than Sunridge Gold TSX:SGC. In the
next three to six months, we’re going to see prefeasibilities and
final feasibilities on multiple projects of theirs that are going to
make their net asset value multiple times more than their total market
cap. If I had to pick one stock whose price is totally out of whack,
that’s Sunridge. Why is that? A significant part is where they
operate, in Eritrea. Despite it being actually a very good place to
operate, the perception is still very bad. If that starts to change a
little, and they continue to have great success as they have on the
corporate front, we could see a dramatic re-evaluation of their stock.
Q: I’m very interested in this because the Canadian media has been
very hostile to Eritrea.
A: What happened was this little country, Gabon, which is on the other
side of Africa, was about to lose its seat on the Security Council,
and they leaked this story they were about to force everything to stop
in Eritrea. One of the things that’s going to change this story is
you’re going to see the Chinese announce an acquisition in Eritrea.
There’s a current company out there that won’t say who it’s involved
with, but it’s in talks with a major partner. The Chinese have been in
Eritrea sniffing around; they’ve looked at Nevsun TSX:NSU and Sunridge
and others. Once the Chinese take a foothold in the country, all that
crap in the UN will come to a halt, because they’re the next big thing
economically. The worst in Eritrea is going to be behind us.
http://resourceclips.com/2011/12/21/grandich-on-2011/
A December 16 interview
By Kevin Michael Grace
Q: So tell me, to what do you attribute the hammering gold took the last week?
A: I think we saw technical selling which was exaggerated by year-end
trading, where when people looked around there weren’t a lot of things
they could sell that had profits, and gold was one of them. The
physical market remained very strong. In fact, a lot of people spoke
about premiums expanding on purchase. There’s people talking about
central banking intervention and all that; that’s just more sour
grapes than anything else.
Q: Everyone is talking about the 200-day moving average being breached.
A: The thing about that, Kevin, is that that it is an important issue
for a pure technician. The problem is that it’s been broken at least a
half a dozen times in this bull run starting at $400, and that didn’t
end up stopping the market from driving much higher later on. I think
it’s an important thing to look at for the short term and even
intermediate, but I don’t think it’s something that overrides the
bullish fundamentals in that market. I won’t lose sleep over it.
Q: I wonder if that’s a problem with democracy. Bloomberg reported
that the US government fought against revealing that it gave $13
billion in secret loans to the banks, but it seems that people would
rather watch the Kardashians instead of thinking about the
implications of this.
A: Reality television is a great symbol of how bad things have gotten.
People don’t want to face reality, so they watch TV shows and dream
that their lives can be that way. There are shows now where people are
benefiting from other people’s misfortunes, like Storage Wars. Or
these shows about pawn shops; this is the whole unravelling of the
fabric of how life used to be lived.
Q: Tell me about your $1-million offer. [Grandich put $1 million in a
bank to backstop an open bet that gold would reach $2,000 before it
reached $1,000.]
A: The media just loves to wheel out the bearish viewers of gold any
chance it gets, and of course during the height of the decline they
were all brought ought, including the worst forecaster of them all,
Jon Nadler. I said enough is enough, and we really need to put our
money where our mouth is. I was pleasantly surprised at the manner in
which Dennis Gartman conducted himself with me. He took the high road,
but I wasn’t surprised to see Nadler and Jeff Christian’s comments.
For Nadler to say at MarketWatch that he’s been an advocate of gold,
urging as a core holding and has only tried to temper people when
they’ve gotten overly bullish is the biggest lie I’ve heard stated in
the gold market. We’ll see now if the gold market recovers, whether
some of the appeal of Nadler, Gartman and Christian as commentators
will be lost.
Q: Gold producers have this year been making a profit of $800 to
$1,000 dollars per ounce. I look at their share prices and find them
inexplicable.
A: Probably in a few weeks I will write something saying this is the
year for juniors. And I’ll have to cross out the numbers 2006, 2007,
2008, 2009, etc, because every year I’ve said the same thing. It is
unfathomable to look at metal prices, even after this correction, and
then look at the valuations that have been placed on mining shares. It
is unthinkable that 10 or 15 years ago, when metals were one-fifth or
one-tenth of where they are now, that we would have thought that
prices would increase to this level, and the shares would not come
remotely close to reflecting that.
Q: If, as it appears, you can actually make money with a gold grade of
0.2 grams per tonne, you kind of think gold would sell itself.
A: You would, but we must remember that even to this day if you take
the total market cap of all the major producers they don’t equal
things like IBM. It’s still a rather small part of the overall
investment portfolios for people around the world. We live it and
breathe it each day, but to the bottom line of people in general it
isn’t as critical. For Canadians, it’s frustrating because it’s really
second nature for you. Here in America, the only thing people know
about natural resources is they wonder if there enough gas so I can
drive my car around.
Q: Do you think there any particular stocks that will do well in 2012?
A: I don’t think people have recognized yet how strong this developing
iron-ore play in Quebec is. There are companies I work with like
Alderon TSX:ADV and Cap-Ex Ventures TSX:CEV that are really advancing
up the corporate ladder and had tremendous years in 2011. Then there
are companies that make no sense in terms of how advanced their
projects are versus their market caps. I can think of no better story
that meets that criterion than Sunridge Gold TSX:SGC. In the next
three to six months, we’re going to see prefeasibilities and final
feasibilities on multiple projects of theirs that are going to make
their net asset value multiple times more than their total market cap.
If I had to pick one stock whose price is totally out of whack, that’s
Sunridge. Why is that? A significant part is where they operate, in
Eritrea. Despite it being actually a very good place to operate, the
perception is still very bad. If that starts to change a little, and
they continue to have great success as they have on the corporate
front, we could see a dramatic re-evaluation of their stock.
Q: I’m very interested in this because the Canadian media has been
very hostile to Eritrea.
A: What happened was this little country, Gabon, which is on the other
side of Africa, was about to lose its seat on the Security Council,
and they leaked this story they were about to force everything to stop
in Eritrea. One of the things that’s going to change this story is
you’re going to see the Chinese announce an acquisition in Eritrea.
There’s a current company out there that won’t say who it’s involved
with, but it’s in talks with a major partner. The Chinese have been in
Eritrea sniffing around; they’ve looked at Nevsun TSX:NSU and Sunridge
and others. Once the Chinese take a foothold in the country, all that
crap in the UN will come to a halt, because they’re the next big thing
economically. The worst in Eritrea is going to be behind us.
Peter Grandich is the founder of Grandich.com and Grandich
Publications, LLC, and is editor of The Grandich Letter, first
published in 1984. Grandich Publications, Inc. provides research,
analysis, and investor relation services for certain of the companies
featured in the articles appearing in its publications. Grandich is
the author of Confessions of a Wall Street Whiz Kid, which Kevin
Michael Grace reviewed here.
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Received on Fri Dec 23 2011 - 10:03:47 EST