gold investing

VIDEO - Brien Lundin: Use Cash and Courage to Play the Market Right Now

Jul. 26, 2018 10:00AM PST
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Brien Lundin, editor of Gold Newsletter, says the most successful resource investors are able to divorce themselves from the emotions of the market.

The summer is typically a slow time for the resource space, but Gold Newsletter Editor Brien Lundin believes there are ways for savvy investors to see success.

“The really smart investors, the most successful investors in the resource stocks, have been able to divorce themselves from the emotions of the markets — these emotional swings and price swings — and actually have the cycle work to their benefit. They buy at the bottom,” he said. “This is the time to buy.”

For his part, Lundin is looking at companies with “large, really world-class resources.” He named Almaden Minerals (TSX:AMM,NYSEAMERICAN:AAU), Maple Gold Mines (TSXV:MGM) and GoldMining (TSX:GOLD) as stocks he has on his shortlist. “These are all companies that have very large resources,” he said.

Speaking about the kind of upside these and other companies could see once the market improves, Lundin explained, “as bad as it seems right now, it’s a typical summertime bottoming process, and gold typically posts a late summer rise of about 10 percent at least off these summertime lows.”

He continued, “you probably have a 10- to 15-percent near-term upside potential for the gold price, and if we have that kind of a typical rally off of these lows, these junior companies that have really large-scale identified gold and silver resources, they could go up 100 percent or more from these low levels.”

Watch the interview above for more insight from Lundin on gold, as well as uranium. You can also read the full transcript below.

INN: I believe the last time we spoke, at least in person, was at PDAC. We were talking about gold — how have we seen gold perform since then? It’s not doing too well right now.

BL: Not well at all. We’ve had some ups and downs, and this year has been a bit different since we bottomed in late 2015. We haven’t had a consistent rise. We’ve had short rallies followed by some more extended downturns. And as you know, right now everybody’s pretty bummed out — every gold long, every gold bug is pretty bummed out because we’ve dropped down to yet another low. But what I’m telling people is that this is really —  as bad as it seems right now, it’s a typical summertime bottoming process, and gold typically posts a late summer rise of about 10 percent at least off of these summertime lows. If you look at where we are now, you maybe have a 5-percent downside risk to the gold price. You probably have a 10- to 15-percent near-term upside potential for the gold price, and if we have that kind of a typical rally off of these lows, these junior companies that have really large-scale identified gold and silver resources, they could go up 100 percent or more from these low levels.

So it’s a great risk/reward dynamic that you’re facing right now with a minimal downside risk, but the potential — if you have the cash and the courage to take advantage of these down markets, you have the potential to have really good gains over the next three to six months if you can buy these lows.

INN: Are you able to give an example of one of those types of juniors or the qualities that they might have?

BL: You want companies that have large, really world-class resources, sometimes with economics applied to them. A shortlist of companies would be Almaden, Maple Gold Mines, GoldMining — these are all companies that have very large resources. In Almaden’s case, they have economics applied. And these are the kinds of companies that even longer term, when the majors come looking for resources, they’re going to be near the top of the list.

INN: So we have this low summer seasonality type thing going on for gold. We also have trade war things going on. We’ve got Trump saying all kinds of things. Should we expect — should we be seeing more impact from those things? Why aren’t we?

BL: I think we have seen the impact. I think we’ve seen the impact primarily from the trade war rhetoric and actually the inaction of some of these tariffs. We’ve seen the impact in copper and zinc. I mean, both metals were doing quite well, and then over the last month or so they’ve just had waterfall patterns. And I think this is really a temporary buying opportunity that this political rhetoric has created.

The trade war — we’ll get by that at some point because we have to, it just makes sense. And that could happen at any time, and I think what you’ll see is when we get past that this kind of artificial drop in base metals prices will be lifted, and they’ll rebound quite strongly. So I do like copper and zinc, and copper and zinc plays at this point in time.

INN: Does the same kind of logic that you were mentioning for the gold juniors, does that apply to copper and zinc as well?

BL: Yes. And of course in some cases they cross over a bit. There are companies like Trilogy Metals (TSX:TMQ,NYSEAMERICAN:TMQ) that would be a great copper play.

INN: We’ve talked about gold, copper, zinc. What other metals are you watching right now, or commodities?

BL: Well, one of the commodities that’s just made news is uranium because we’ve seen that there’s talk that the US is going to put in some kind of preferred quota for US utilities to buy US-produced uranium. And that I think is going to result in kind of a bifurcated market; there’ll be a dual pricing for uranium, there’ll be a higher premium paid for US production, and the utilities will need — if they have 25 percent of their usage having to come from US producers, that’s probably about 12 million pounds annually, and the current production rates are about 1 million pounds. So I think you’ll have a higher domestic price for uranium, and companies like Energy Fuels (TSX:EFR,NYSEAMERICAN:UUUU), UEC (NYSEAMERICAN:UEC) will be the primary beneficiaries of that.

INN: There’s really not too many US uranium producers I don’t think. 

BL: No, Ur-Energy (TSX:URE,NYSEAMERICAN:URG) as well would be one. They’re actually a party to the petition to enact this quota. So yeah, there aren’t that many. Ironically, there is a US uranium producers association, which is not dominated by, but has significant membership from, foreign Russian and French companies, and so it doesn’t really represent the US producers. But a couple of these producers have come through and filed this petition and it looks like it’s going to work.

INN: We’ve outlined some things for investors to be doing right now, they should be looking at these different commodities. Are there any other tips you would leave for investors as we head into Q3? Or any takeaways — we’re here at the Sprott Natural Resource Symposium, any takeaways you’ve had here?

BL: Again, cash and courage, if you can buy at these levels. The really smart investors, the most successful investors in the resource stocks, have been able to divorce themselves from the emotions of the markets — these emotional swings and price swings — and actually have the cycle work to their benefit. They buy at the bottom. This is the time to buy — the exhibit halls here at the Sprott show are filled with companies that are … on sale right now, selling for pennies on the dollar. And again particularly those companies that have proven world-class, large-scale gold and silver resources I think are great buys and great opportunities right now.

Don’t forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: Energy Fuels is a client of the Investing News Network. This article is not paid-for content.

The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in contributed article. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

brien lundinsprott natural resource symposiumgold investing
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