Jun 30

Gold vs. Bitcoin: How Do They Compare?

Gold Price Comments Off on Gold vs. Bitcoin: How Do They Compare?

Ever wondered how gold stacks up compared to bitcoin? Well, wonder no longer. Visual Capitalist has put together an infographic that compares the two.

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Jun 30

Central Planning: Job Well Done. For Now

Gold Price Comments Off on Central Planning: Job Well Done. For Now
Fade words like “fiat”, “debasement” and “hyperinflation” from the pro-gold cult…
 

TODAY’S rolling inflation of credit and money won’t hit the value of money, especially not the US Dollar, until confidence is lost in the system, writes Gary Tanashian in his Notes from the Rabbit Hole.
 
We are about a million miles away from that condition right now (see second chart below). Confidence will be lost first in the assets that are benefiting from the inflation – like stocks, so strategically at the heart of the wealth effect that policy makers are trying to stimulate – and then in policy makers themselves. Then we’d have a big bull market in gold for all to see.
 
But if confidence comes out of inflated assets, like over priced momentum stocks and hideously over priced junk debt (benefiting from a full frontal and manic chase for yield) money is going to rush to safe havens sure, and ironically Uncle Buck would be a prime beneficiary; again, as long as the majority continue to think in linear terms like “oh, asset markets are dropping, I better go to cash”. Only when the system begins its death rattle will the currency put on its death mask.
 
People have been wrong in fetishizing currency collapse since the beginning of the gold bull market. The ‘Dollar Collapse’ cult is a cartoon that presents its case for easy understanding by the masses (and the marks). Ultimately, the case for gold is the case for a lack of confidence in the economy and in those trying to blow asset bubbles in support of the economy.
 
Gold vs. the CCI commodity index (counter cyclical asset vs. cyclical assets) is but one big picture view that – as long as point 4 remains a viable ‘higher low’ to point 2 – tunes out all of the hysterical ‘currency collapse’ noise and simply awaits a turn on the global macro backdrop.
 
 
Meanwhile, gold exists in a lowly state for a reason and that reason is confidence in the system. In very simple and even cartoonish terms, gold is not going anywhere while people are feasting upon the wonderful benefits of what has thus far been wildly successful (and ever so cynically maniacal) policy making.
 
 
The above is a picture of confidence and a job well done over at Central Planning. Gold is boxed in at the depths of a bull market breakdown as measured in S&P 500 units. Fact.
 
When confidence starts to wane then safe havens like Uncle Buck and gold should get bids to varying degrees and at varying times. Don’t over complicate it by waiting for the ‘Dollar Collapse’ cult to be right. Minimize words like “fiat”, “debasement” and “hyperinflation” and value words like well…value…and patience…and perspective.
 
The Dollar has no intrinsic value whatsoever? Well yes it does, it has a whopping negative value due to the debt-for-growth (official credit bubble vs. Greenspan’s commercial credit bubble) Ponzi Scheme that simply has to keep on rolling. But in an environment of confidence by the majority, it has functional value and people would probably flock to USD like Lemmings (wait, do Lemmings flock?) in the next market liquidation. At least initially.
 
As for gold, it simply has monetary value and it is going to get where it is going. Watch point 4 on the first chart above and have patience and perspective. People are falling all over themselves lately jumping from the gold bear to gold bull camp (and in some cases right back again) and they are increasing your noise level.
 
“Shhh. Be vewy vewy quiet, I’m hunting wabbits.”
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Jun 30

Should Anything Replace London’s Gold Fix?

Gold Price Comments Off on Should Anything Replace London’s Gold Fix?
Where next for the world’s central bullion market’s daily price…?
 

SINCE a Barclays trader was found guilty of manipulating gold prices and Barclays fined $44 million, writes Julian Phillips at the GoldForecaster, the entire “Fixing” process has come under the spotlight.
 
The bankster involved is thought to reflect one or maybe other ‘rogue’ traders, not a condemnation of the whole process of the “Gold Fix” by the banking fraternity. 
 
Nevertheless, many are saying it is archaic and should be done away with. The danger with this attitude is that the need for the “Fixing” is critical to the bulk of gold that it traded globally. Accordingly there are three proposals, at the moment, to be discussed in a Forum arranged by the World Gold Council. It is appropriate that the WGC hosts such an event as they are funded by gold producers across the world and will favour not just a buyer’s position but the seller’s. 
 
Twice a day the five London bullion banks link up by phone and bring all their clients together to weigh up a price that reflects demand and supply within 50 bars of gold. Then the price of gold is “Fixed” at that price and all deals discussed at the session are done at that price. Please note that when we say the bank’s clients, we are talking of clients who cover the range of participants
 
Let’s be clear on what this process really is. It is not an average price during a day, it is not a random price set at certain times, it is a price where the greatest volume of gold is traded in one ‘place’ at one time, twice a day. It is favoured because it is the most representative price of gold’s demand and supply at those two points in the day. It is where the greatest volume of gold is traded. And that is the point that must be emphasized.
 
After the Fix, the gold price may move strongly in another direction, but this will be on smaller volumes or involve far fewer players, not representative of the total market. If gold trading were restricted to just these two processes in London, then it would be a true reflection of demand and supply. But this could never happen in view of the diverse nature of the gold market.
 
Because the London Fix finds the closest price to balance demand and supply traded on a daily basis, it is taken as pertinent to setting contracts outside of the Fixing market. Any other mechanism that does not reflect, at least in main part, demand and supply on a daily basis would fall short of the market requirements for price setting. As we have seen it may occasionally be manipulated by a bankster, but it remains the closest to a true reflection of demand and supply. Any alternative system must bring the same elements to a replacement price setting process.
 
In London’s afternoon at 1500 hrs the second “Fixing” takes place at around the time that the US markets open, thus reflecting a more global consensus of demand & supply. Why is this process necessary in the first place you may well ask? 
 
Some commentators have said that the Fixings reflect 90% of the world’s physical demand and supply at any time. We are sceptical about this number because much of the world’s gold traded uses the “PM Fix” (held at 3pm London time) as a reference price to be used in contracts where gold is supplied at a particular set of dates. This gold is then delivered to the client at those prices. These contracted amounts don’t pass through the London bullion market nor the “Fix”.
 
Nevertheless, there is a need for a daily price that reflects the value of most gold traded on any particular business day. This need is thought to cover the bulk of the world’s gold traded, certainly at wholesale levels. Without it such contracts would find it difficult to find a truly reflective price of demand and supply on that day.
 
To what extent the Fixings allow large clients to trade physical in the short-term is not quantified, but certainly there is ample opportunity to do so with no intention of delivering to others. This does add swings to the gold price but cannot at the end of the day detract from real supply and demand outside of these professional traders. In other words such trading will not defeat the underlying trends of the gold price. Contained within the volumes seen at the Fix such swings are prevented from being disruptive in the longer term.
 
Some may say that New York’s Comex futures exchange sees a far greater volume of gold contracted, but we beg to differ. Only 5% of deals done on COMEX are ever done with physical delivery intended. Even there the buyer and seller must notify the exchange that they have this intent beforehand.
 
So London remains the hub of physical gold trading worldwide. Comex is essentially a financial derivative market, not a gold market. Even such derivative trading has a muted affect on the gold price. The positions taken there are in support of physical positions either through hedging or backing up a long or short position in the physical market (as we saw April 2013).
 
With the above criteria in mind we look at two proposed alternatives.
 
Some have put forward the concept of a ‘snapshot’ price at different times of the day with these times changing frequently. This would ignore the key virtue of the gold “Fix” and that is to reflect the bulk of global demand/supply two times daily. We have seen the way speculators try to manipulate the gold price by picking the quiet times of the day to swamp the gold price in the hopes that holders will be panicked into selling because of the change in price when they do this. 
 
So the ability to bring the bulk of gold buying and selling professionals and their deals together at one particular price twice daily served far more than picking a representative daily price. It reflects the twice daily times of the maximum volumes of gold traded that day. If the “Fix” failed to bring such high volumes of deals together at those times then it would be no better than an unrepresentative ‘snapshot’ of gold prices. “Snapshot” prices would also be open to far more corruption than the “Fix”. The difficulty would then be, “who would take the snapshot and would he be beyond manipulation?”
 
A change is taking place in most global financial markets that is being noticed but not yet appreciated. It is based on the transfer of wealth and power from west to east. As we have quoted before, in the past 80% of global cash flow accrued to the developed world. Between 2016 and 2020 this will have changed to 35% to the developed world and 65% to the emerging world. We are already at 40% to the emerging world.
 
In the gold market we have seen Asia dominate demand for a few years now. In 2013, we have seen China overtake India as the largest source of that demand with much more growth on the way. With that in mind it makes sense for China to become the hub of the gold world in the future. And so it should, in that Middle Eastern, Indian and Chinese demand makes up 74% of true gold demand.
 
So for the gold “Fixes” to be truly representative of the prices of the bulk of trades done that day we should have three or four “Fixes”, both morning and afternoon in both Asia and London. Before this happens, the gold market would need to see gold producers or their agents delivering gold direct to Asian markets like the Shanghai Gold Exchange and not through London. 
 
Indeed, Shanghai has jumped in importance in the last year as Swiss exports to the region reportedly reached 2,711 tonnes in 2013. China has moved a long way towards being able to accommodate a “Fix” through the offering of a Yuan contract system and opening its market to international banks. It would only require direct delivery of gold from gold producers world-wide to ensure that control moved from the banking system to buyers and sellers at the “Fixes”. For sure China is headed towards its own representative system in time unless it agrees to the reforms to be discussed, with them in mind.
 
The joy of Shanghai, to date, is that it is primarily a physical market with the bulk of trading leading to the delivery of gold to clients. With the proportion of speculative trading far smaller than in the West, we see Shanghai reflecting true demand and supply much better.
 
With the ‘Fixing’ Forum coming up, it would be good if such an expansion of the system could be developed inclusive of Shanghai too. While the Forum is discussing a London system, it needs to recognize that it is part of a 24-hour market. To avoid future contentions and inadequate representations of the gold price reference point, these evolutions of the gold market should be built in to any reformed system. This would result in an improvement on the current London based system as well as make it less vulnerable to distortion and manipulation, globally.
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Jun 30

End of Zero Rates

Gold Price Comments Off on End of Zero Rates
Selling stocks just because rates rise would be foolish…
 

MOST experts don’t want to admit it, writes Steve Sjuggerud in his Daily Wealth, but there’s actually plenty of room for stocks to go much higher from here – even through the end of 2016.
 
We certainly have some signs of a market top out there. But before you sell everything, I urge you to seriously consider this.
 
Most folks are scared of what happens when the Federal Reserve raises interest rates. But the end of zero-percent interest rates doesn’t mean the end of rising stock prices.
 
When will the Federal Reserve finally raise rates? If we look to the Federal Reserve committee members, the answer is clear.
 
The 16 members of the committee in mid-June gave their best guesses for interest rates at the end of the year for the next three years.
 
Their average forecast is for 0% rates through 2014, rising to 1.25% by end-2015, then 2.5% by end-2016, and finally 3.75% in the “long run” after that.
 
So clearly, the Fed will not raise interest rates this year. Clearly, they will raise them sometime in 2015.
 
What exactly will it mean for stocks when the Fed raises rates next year?
 
Most people think it’s all over when the Fed raises interest rates. But history tells a different story.
 
For example, the last time the Fed raised rates was from 2004 to 2006. The S&P 500 index soared from around 1,000 to around 1,500 for a 50% gain, before the Fed cut rates in 2008. Take a look:
 
 
This wasn’t a one-off occurrence. Over the last 30 years, every time rates have gone up, stock prices have gone up.
 
Why have stock prices gone up every time the Fed has raised interest rates over the last 30 years?
 
In short, people see the hike in interest rates as a sign that the economy is doing better – that it doesn’t need help from the Fed anymore. So they buy stocks.
 
The conventional thinking out there today is that the stock market boom will end when we see the end of zero-percent interest rates. But history is clear on this one – rising interest rates aren’t necessarily bad for stocks. The conventional thinking today will likely turn out to be wrong.
 
So you don’t want to sell stocks just because we reach the end of zero-percent interest rates. Based on history, that would be foolish.
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Jun 30

Columbus Gold Announces Resource Estimate for Montagne d’Or

Gold Price Comments Off on Columbus Gold Announces Resource Estimate for Montagne d’Or

Columbus Gold Corporation (TSXV:CGT) released the results of a mineral resource estimate for the company’s Montagne d’Or gold deposit at the Paul Isnard project in French Guiana.

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Jun 30

Colombian Mines’ Sabana Blanca Zone Strike Length Expanded, New Zinc-Dominated Mineralization Discovered

Gold Price Comments Off on Colombian Mines’ Sabana Blanca Zone Strike Length Expanded, New Zinc-Dominated Mineralization Discovered

Colombian Mines Corporation (TSXV:CMJ,FWB:X6C) intersected mineralization 230 meters to the east along strike from the Sabana Blanca tunnel at the El Dovio project, expanding the drill indicated strike length of the Sabana Blanca zone. A new zone of zinc-dominated mineralization south of the Sabana Blanca adit was also discovered.

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Jun 30

Canamex Issues Shares to GMV Minerals for Aranka North Property JV

Gold Price Comments Off on Canamex Issues Shares to GMV Minerals for Aranka North Property JV

Canamex Resources Corp. (TSXV:CSQ,OTCQX:CNMXF,FWB:CX6) issued a total of 1,000,000 common shares to GMV Minerals Inc. for the Aranka North property Option and Joint Venture Agreement.

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Jun 29

Love Trade Looms for Gold

Gold Price Comments Off on Love Trade Looms for Gold
Overbought to some, gold is set for the annual “Love Trade” to boost demand this fall…
 

The CHATTER in late June was gold, writes Frank Holmes at US Global Investors.
 
The precious metal flew up $45 an ounce on Thursday, surprising investors, the media and markets alike.
 
If we look back just six months ago, gold was sitting at record lows, signaling that it was in extremely oversold territory. This was the time that many investors let fear take over and dismissed the fundamental reasons for owning gold: as a portfolio diversifier and store of value.
 
With the price spike this week, however, some of the perpetual gold naysayers suggested the metal had shifted to overbought status. Spot gold was up nearly 3% for the week, while gold stocks were up around 7%. So is gold overbought?
 
Some see gloom and doom. We see the bounce we said was coming. Based on our historical observations and the math of the markets, gold is not overbought, in our opinion, but is simply reverting to its mean.
 
This mean reversion has shown that eventually, both gold stocks and gold bullion will move back to their historical averages. Right now, as you can see from the chart below, gold stocks have seen a reversal to the long-term mean…
 
 
…but we are still waiting for gold bullion to do so as shown in the second chart.
 
 
Similarly, for gold bullion to reach overbought territory it would need another 20% move, and for gold stocks to be overbought they would need another 30% move.
 
There is always an emotional bias against gold, whether it is soaring high or dipping low, and that is why it’s important to manage these emotions when positioning a portfolio.
 
At US Global Investors we look objectively at the action of both gold stocks and gold bullion by monitoring these long-term data points and paying attention to buy and sell signals based on the trend of mean reversion. 
 
Additionally, I remind investors that moderation is key when it comes to gold. Your exposure should be 5% to gold stocks, 5% to gold bullion, while rebalancing annually.
 
Another reason that gold is moving is it’s beginning its seasonal cycle, driven by cultural gold buying. The demand of gold reflected over the next several months and characterized by the purchase of the metal for cultural celebrations and religious holidays, I refer to as the Love Trade.
 
If you look at the chart below, you will see that July marks the beginning of the Love Trade with the celebration of Ramadan.
 
 
The Indian Festival of Lights comes after, followed by wedding season and, of course, Christmas.
 
This seasonal pattern is one of the most powerful drivers for gold demand. Monitoring this pattern, while remaining aware of other fundamentals to gold, such as mean reversion and a prudent 10-percent portfolio weighting (5% in gold stocks and 5% in gold bullion, while rebalancing annually), are imperative to understand when investing in gold. These trends allow us to manage short-term swings, small or large, that usually cause more concern than they are truly worth in the long term.
 
If you’re curious to learn more about the trends in resources, I will be speaking July 22-25, at theSprott Vancouver Natural Resource Symposium. You’ll be able to take a front row seat to learn why experts in the field believe next year will be one of the most opportune times in history to invest in natural resources.
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Jun 29

Where’s the Weak Link?

Gold Price Comments Off on Where’s the Weak Link?
Debt piles up as central banks print money. Until…?
 

WE CONTINUE looking for the weak link, writes Bill Bonner in his Diary of a Rogue Economist.
 
A chain of deception, humbug and larceny has corrupted the entire US economy. From top to bottom, every financial decision has been twisted in one direction or another.
 
From student loans and payday loans, to the corporate borrowing binge and the stock buybacks it fuels – from link to link, money from nowhere leads to somewhere people want to go. Especially, to higher asset prices.
 
At the lower end, it doesn’t look so good. Students who graduate this year, and who took out government-backed loans, are saddled with an average of $33,000 in debt. They’ll spend decades paying it off…at best.
 
Homebuyers, too, find themselves not so much benefiting from cheap money as competing with it. Private equity firms with billions of Dollars in ultra-low cost leverage have bid up the cost of homes in key markets.
 
The average buyer pays higher prices as a result…and then finds himself indentured to the lenders for most of his life.
 
The typical American household also finds itself with a major headache. Rising real prices press from the right (about which more in a minute). Falling real wages squeeze hard on the left. And its debt burden, though slightly smaller than it was in 2007, is still heavy.
 
But at the upper end people are delighted. Banks – with the happy connivance of the Fed – create new money. Corporations use it to buy their own shares. Central banks buy shares too. (What else are they going to do with all the money they create?)
 
Besides, buying stocks seems to please everyone who matters. Investors are happy. Speculators are happy. Economists are happy. Politicians are happy, too.
 
After all, a rising stock market means the economy is getting better, doesn’t it?
 
But there is a heavy price to pay, dear reader. The financiers end up owning more of the real businesses…the real enterprises…the real houses…the real output of the real economy.
 
Wall Street firms own more houses. And more stocks. All are bought with money that they – or their cronies – created.
 
Imagine that you were a well-connected Wall Street insider. You had borrowed at the beginning of last year and bought the S&P 500. What a genius you were. With a 30% gain in the stock market…and a cost of money at only, say, 4%, you’re 26% ahead – on money you never earned nor saved!
 
What a hoot!
 
“Print” more money. Buy more assets. Keep at it until you own the whole shebang, no?
 
And what’s to stop you? Who complains? Who even notices?
 
But there has to be a weak link in this chain somewhere. Yesterday, we looked at the inflation numbers. The Bureau of Labor Statistics says consumer prices are rising at an annual rate of 2.1%. MIT says they’re going up twice as fast. And John Williams of ShadowStats reminds us that if you figured the CPI according to the formula used by the US government as recently as 1990 (it’s been changed since), you’d have an inflation reading of 6%.
 
And if the inflation rate is 6%, real (inflation-adjusted) GDP is collapsing.
 
Nominal GDP growth (which doesn’t take account of inflation) in the first quarter was only about 1%. Reduced by 2% in real terms, it left the real GDP growth for the quarter at minus 1%. Adjust for 6% inflation, on the other hand, and you get growth at minus 5%.
 
Six per cent inflation also cuts deeply into the rest of the economic numbers. Hourly wages, for example, may be back to 1968 levels when adjusted by official inflation numbers. But adjust them using John Williams’ calculations, and wages, too, are collapsing.
 
We also saw yesterday that the official numbers show consumer prices up 39% since 2000. The Fed’s favorite PCE deflator (a measure of the change in the cost of living similar to the CPI) shows them up only 31%. But taking an average of food, energy, transportation and housing – the things that really matter – prices are up about 50%!
 
Where’s the weak link?
 
It is in the money: the stuff the links are made of. This is not money that was forged in real commerce…tempered by beads of real sweat…and hammered with the sledge of savings.
 
No…this money lacks tensile strength.
 
Put it to the test. What will it do?
 
Our guess is that it will break.
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Jun 29

Grade Is Only 1 Factor

Gold Price Comments Off on Grade Is Only 1 Factor
Strong junior gold miners need much more. Marijuana, for instance…
 

LAWRENCE ROULSTON is an expert in the identification and evaluation of exploration and development companies in the mining industry. 
 
A geologist with engineering and business training, plus more than 20 years of experience in the resource industry, Roulston has generated an impressive track record for Resource Opportunities, a subscriber-supported investment newsletter.
 
According to Lawrence Roulston now, the continuing woes of the junior gold sector present a tremendous opportunity to those with the knowledge, savvy and will necessary to take advantage, as he explains here to The Gold Report
 
The Gold Report: Given how troubled the junior gold space has been since 2011, why should investors continue to place their money there rather than the Dow Jones Industrials, which go from strength to strength?
 
Lawrence Roulston: The simple answer is that there are extraordinary bargains to be had in the junior resource space right now. We’re seeing a bifurcation in the sector as the quality companies are beginning to move up, while the majority of companies are still on a downtrend. Anyone who can differentiate between the good companies and the others has the potential to make a lot of money.
 
TGR: You’ve argued that it’s a fool’s errand trying to predict the near-term outlook for metals prices, especially gold, as there are too many variables involved, and the variables change too quickly. Should investors therefore base their decisions on an assumed future gold price of roughly $1250 per ounce?
 
Lawrence Roulston: When I look at a company in the gold space I’m using that number as a baseline. When I examine companies, I consider them first and foremost as investments in projects and management. Metal prices are a secondary consideration. If it doesn’t make sense at $1250 per ounce, then it’s not a good investment. If the gold price rises, that’s a bonus.
 
TGR: Gold prices and gold equities have spiked in recent weeks due to rising tensions in Ukraine and the chaos in Iraq. How should investors regard these events?
 
Lawrence Roulston: I think they are primarily short-term reactions. These events cause prices to rise one day and fall the next. And they are really hard to predict.
 
TGR: A gold price of under $1300 per ounce, as compared to over $1900 per ounce in 2011, makes the all-in production cost crucial. In today’s market, how high can production costs go and still remain acceptable?
 
Lawrence Roulston: That’s a tough and a complex question. The all-in sustaining cost incorporates a large amount of capital expenditure that is spent to get the mine into production. In the long term, of course, it’s very important. If the capital is already committed and the company is generating profits on the basis of its cash cost, it makes sense for the company to continue operating in the short term.
 
It all comes down to margins. Most of my attention is devoted to companies that are in the development stage, not the production stage. Mine developers must be able to demonstrate substantial margins based on the current gold price.
 
TGR: Is an all-in cost of $1000 per ounce still doable, or must costs be lower than that?
 
Lawrence Roulston: I look at specific companies, and I tend to evaluate them based less on all-in sustaining costs and more from the perspective of discounted net cash flow.
 
TGR: You have declared, “We do not need higher metal prices to make money in the mining business. We just need to own companies with high-quality metal deposits.” How do you define high quality?
 
Lawrence Roulston: Important determinants are grade, metallurgy and size. Grade is really a function of the specific circumstances of any given deposit. A big open-pit deposit at 1 gram per ton may make a lot of sense. In an underground situation you probably need a much higher grade, perhaps as high as 8-10 grams per ton. But grade is only one factor. Metallurgy is important: How is the metal recovered? There is a big range of costs across the different recovery techniques. In some cases, it simply isn’t economic to recover the metal. Size is important too, as well as the ability to meet a production level that will result in interest from larger companies.
 
It’s really hard for a small company to develop a single mine and make money off it. The real money is made when those deposits are rolled up into larger, multi-mine producing companies. I ask the question, “Will a particular deposit be of interest to a midtier or a larger production company in terms of size, production profile, location and other relevant criteria.”
 
TGR: Since 2011, many gold companies have come to grief because they accumulated ounces for their own sake. When larger companies are looking to buy smaller companies and their assets, what are they looking for?
 
Lawrence Roulston: Potential buyers are most interested in the specific characteristics of any particular deposit. High-grade deposits are back in style, but the challenge is finding deposits that are both large and high grade.
 
TGR: You’ve noted that 12 of the companies your newsletter follows have raised a total of $184 million so far this year. Besides high-quality deposits, what else do these companies have in common?
 
Lawrence Roulston: Quality management is the crucial attribute of all companies able to raise money in this market. People committed to success. People with skills and experience but also the drive and determination sufficient to overcome obstacles and move projects forward. We hear a lot of people complaining about how difficult it is to raise money today. That attitude is just not going to cut it. There is money available. Management just has to justify to the potential investors that they will achieve a decent return commensurate with the level of risk.
 
We need managements than can recognize the benefits of a market like this. Many of the companies I follow look at current conditions and see opportunities rather than challenges. Opportunities such as buying high-quality deposits from distressed companies.
 
TGR: When we speak of quality management, does this require individuals who have proven they can bring a mine into production or sell it to a larger company for a healthy profit?
 
Lawrence Roulston: The fact that a management team has achieved success in the past is a pretty good indicator of its ability to repeat this success. Many analysts consider track record the determining factor in management. I agree.
 
But it’s also important to look for rising stars. One of the great joys I’ve had in my career has been identifying the young people who will become the success stories of the future. That involves a lot of hard work: meeting them face to face and really understanding where they’re coming from and what their plans are. This is a good way to make good profits in mining investment because the companies with established management trade at a premium. Investors who find companies with rising stars benefit from a much lower share-price starting point.
 
TGR: As you mentioned, many people complain how difficult it is to raise money today. Of course it is difficult, and given this fact, how important is it for companies to have financing experts in management or on their boards?
 
Lawrence Roulston: It is critically important. A really successful management team needs a range of skills, and that range of skills is typically much broader than one or even several people can have independently. You need a team that boasts engineering and geological skills, financial skills, as well as someone who can coordinate these skills and keep the project on track.
 
In today’s market, it’s very difficult for small mining companies to acquire all these necessary skills. One solution is collective management: a pool of people managing several different companies. This enables them to collectively have all the required skills and to spread the costs over a number of companies.
 
TGR: At the start of this interview, you mentioned the “extraordinary bargains” available today in the junior gold space. Which qualities distinguish a bargain?
 
Lawrence Roulston: Many companies are bargains today, but a year from now they’re still going to be bargains. When investors are trying to determine whether a low share price is really an opportunity, they should look for a trigger that will create a higher share price in the foreseeable future.
 
It comes back to management advancing projects and adding value. Just sitting back waiting for the market to recover is not a viable business plan.
 
TGR: Is it possible that we might fairly soon get to the point where we stop talking about companies that clearly aren’t going anywhere and focus entirely on companies with genuine prospects and that this new focus could engender a general recovery in the junior gold space?
 
Lawrence Roulston: I would very much like to see investor focus shifting to companies with real merit. There are 2,000 companies in the North American junior resource space. Having so many diffuses investor attention and diffuses the talent pool to the point where most don’t have realistic prospects of success. A number of struggling juniors have already gone into the marijuana business or other areas outside of mining. More power to them.
 
We need fewer companies with a greater concentration of talent providing a better focus for investors. It is now more important than ever for mining investors to be selective in their investments because only a few mining companies are going to prosper while most will continue to lose value until we see a general turnaround, which might take another year or two.
 
TGR: Lawrence, thank you for your time and your insights.
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