Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
There may be blood in the streets, but in today’s market, the tribulations of junior miners could represent a boon for investors. With gold prices testing and retesting the bottom, and despite his dour outlook on the future of global economics, newsletter publisher Greg McCoach tells The Gold Report that to survive the endgame, investors should both hold gold and seek out stock in explorers with solid prospects.
The Gold Report: When we talked last October, you warned that the endgame for the economy was inevitable, as the government is running out of ways to manipulate the market. Did we avoid a crisis, or are we eight months closer to it?
Greg McCoach: As we discussed last fall, there are many troubling signs that spell the inevitability of disaster for the bankrupt U.S. government and world financial system. But as I mentioned, just because something is inevitable does not mean it is imminent.
As an investor, this is a very difficult environment to operate in because many of us understand the rug could get pulled out at any moment, while the economy, financial system and the market seem to defy the laws of gravity and physics.
Trying to live and invest in such an environment really boils down to hoping for the best and preparing for the worst. Based on what I see, I can’t look at things any other way.
The troubling issues I monitor continue to get worse, while the powers that be continue to paint an “all is well” portrait for the media and markets. The obvious meddling with precious metals prices, markets, interest rates, world affairs, etc., has now been proven beyond any shadow of doubt. What is even more despicable is that the people pulling the strings are evidently above the law.
How could we get to such a place? The unavoidable conclusion I have come to is that America’s wars have not protected our liberty but, instead, have destroyed liberty. As Alexander Solzhenitsyn said, “A state of war only serves as an excuse for domestic tyranny.”
In my view, the powers that be, in trying to evade natural consequences, have no other choice than to try to play God and control everything. When you see the FATCA capital controls being implemented July 1, 2014, and hear the drums of war against those who no longer want to go along with our fiat currency scam, namely Russia and China, then you know we are getting closer to, not farther from, the endgame.
To answer your question, we will continue to dodge bullets—as individuals just trying to survive every day, or collectively as a country—until the bullets start to hit us. When that happens, both individually and collectively, as a country or world financial system, is still up for discussion. But I continue to raise the warning flag: All is not well and it’s getting worse by the moment.
TGR: Your advice last fall was to buy gold and silver. Do you think the price has bottomed or could it still be tested lower?
GM: During the last eight months, gold and silver appeared to hit the bottom, only to retrace and test those bottoms again. I think wise purchases of gold and silver at lower levels will eventually prove to be the correct move.
In my view, investors must own physical gold and silver to protect themselves against the inevitable conclusion of the U.S. losing its benchmark currency status. That process is already well underway and will only get worse as time goes on. How and when it all goes down is anybody’s guess, but keeping a portion of a portfolio in physical gold and silver is the basis of how to best survive.
TGR: Gold started the year positive, but has been stuck in the $1,200–1,300/ounce range. What is keeping it range bound, and what could help it break out?
GM: The criminal rigging of the gold and silver prices to protect the U.S. dollar from the negative effects of quantitative easing will end when there is a physical shortage of gold that leads to a large buy order not being filled. I feel the potential for this to occur could happen this fall, given the demand shock I see coming from China and India later this year.
I have never seen a market set up for such an amazing short squeeze. India and China, in particular, are going to see major increases in demand for gold this fall. Because of this, I believe we are going to see a demand shock for gold that finally causes a complete capitulation of the criminal gold cartel activities.
The bottom for gold may have been last year. In the fall, I clearly see the potential for gold and silver to make new all-time highs.
TGR: You are getting ready to publish your list of the Top Four Exploration Plays for 2014–15. Why are you excited about explorers right now?
GM: Until gold and silver prices recover, the only stocks in the mining space with the potential to make big gains for investors are the junior exploration companies, which have the best chances of making a new discovery or significantly advancing an existing discovery.
I am writing a report that will come out before drill results come in. If any of the companies I’ve identified have success with drilling, their share prices could deliver big returns. Last year, in the pit of despair that was the worst junior mining market I have ever witnessed, I had two of my recommended exploration stocks hit great drill results, which propelled their share prices to very exciting levels. I believe the four companies I’ve picked have an excellent chance of delivering 4x or more, if they can deliver the kinds of results they are hoping for.
Regardless of what you hear and what the market is doing, a new discovery always makes money for those who bought low, before the discovery was announced. The junior mining market is anemic right now, and you don’t want to touch most companies with a 10-foot pole. But some companies are onto big potential discoveries that could make investors a boatload of money. I proved this last year, when Colorado Resources Ltd. (CXO:TSX.V) went from CA$0.26 to CA$1.70 on excellent drill results. Tinka Resources Ltd. (TK:TSX.V; TLD:FSE; TKRFF:OTCPK) also rewarded us handsomely last year, when it hit big intervals of high-grade zinc that propelled the share price to CA$1.30.
TGR: What differentiates winning explorers from the rest on the TSX Venture?
GM: The process I go through to make recommendations is very thorough. While there is no guarantee that exploration success can be achieved, you can invest with the right people in the right areas to put the odds in your favor, instead of having them run against you, as is the case with most retail investment of junior mining shares. What makes this time so great is that the bad market has given shrewd investors an incredible entry point for exploration success later this year.
TGR: After all the losses last year, why would investors want to return to the market now?
GM: As difficult as losses in the overall sector have been over the past several years, investors need to understand that the way to make money in this sector is to buy when there is blood in the streets. To make the big gains you need to understand how volatile the junior mining market is in both directions. When it moves the right way, those wise and fortunate souls who had the tenacity to buy in difficult circumstances will come out on top. It’s just how this market works.
Most investors like to invest with the herd. You won’t make money in junior mining stocks investing in that manner. You have to understand that within the next two months the bottom will likely be behind us, with an excellent chance that this fall, we finally see an overall sector recovery. Now is the time to be looking for the values, not shying away from this market.
TGR: You just changed publishers for the Mining Speculator and Insider Alert. What will this mean for readers?
GM: I think the overall experience will be much better, now that my name will no longer be used to hype newsletters or products that I am not involved with. The relationship between a newsletter writer and a publisher never seems to last in the long term. I had a good run with Angel Publishing, but circumstances changed and it was time to move on.
Based on my new circumstances at Discovery Publishing, I feel subscribers will see a much more professional marketing approach and service response.
Also, I hope to offer other qualified writers through Discovery Publishing, when I can find the right voices. Jason Butler is the new writer for our Health Quest newsletter, which will cover health, diet, exercise and nutrition. The first issue will be free, so investors can test-drive it.
TGR: Thanks for your time, Greg.
Greg McCoach is an entrepreneur who has successfully started and run several businesses in the past two decades. For the last nine years, he has been involved with the precious metals industry as a bullion dealer, investor and newsletter writer (Mining Speculator and The Insider Alert). McCoach is also the president of AmeriGold, a gold bullion dealer. He writes a weekly column for Gold World.
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