Gwen Preston Talks Gold Prices and Junior Mining Stocks

The Investing News Network recently had the chance to catch up with Gwen Preston, publisher of the Resource Maven newsletter, about gold price trends and some of the junior mining stocks she’s watching right now.
Despite brighter predictions from many analysts earlier in the year, the gold price has continued to falter and as Preston has said, “it’s ugly out there.” Speaking a bit about what investors can do in the current situation, she advised market participants to “be patient,” suggesting that while no one can predict exactly when the market will start to turn, it will be obvious when it finally happens.
“Wait for the rebound to announce itself, and then be ready to go,” she said.
Preston also spoke about what needs to happen for the gold price to turn around, and provided some insight on Uranium Energy (NYSEMKT:UEC) and Nevsun Resources (TSX:NSU). Finally, Preston touched on two stories she’s excited to hear more about this year. Watch the video above to find out which companies she’s interested in and why.

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Interview transcript
INN:   To use your own phrase, “It’s ugly out there.”  But you have a plan.  So what can investors do in this situation?
GP:  I mean be patient.  One comment that I heard last week is “the rebound will announce itself.”  So, as resource investors, we’ve been very patiently getting through this bear market and are aware that a rebound will happen, we’re all excited for when that happens.  But at this point, pretty much everyone has stopped trying to guess the timing of that.  And that’s okay.  We don’t need to know exactly when it’s going to happen.  When it starts to go, it will be obvious that it’s starting.  
So, whether you position right now; whether you’re already positioned; whether you position as that rebound starts to announce itself, it doesn’t really matter.  It’s all in the bottom area.  So be patient.  Watch for the signs.  Don’t stress out over moves in the gold price this and that because there’s nothing we can do about it.  And just wait for the rebound to announce itself, and then, be ready to go.   
INN:   Okay.  And you really love gold specifically, which has kept falling along with everything else.  So what needs to happen for the gold price to turn around?
GP:  That’s a good question.  There are as many perspectives on that as there are people in the world at this point, I think.  What the gold price primarily needs is a weaker US dollar.  How that’s going to happen, again, lots of ideas.  
My perspective is increasingly that the US – either through policy or whether it’s an interest rate hike or other currency-war-type moves or through an economic downturn, a stock market downturn, perhaps related to an interest rate move –  I feel like that weakening of the US dollar is coming.  The strong US dollar is starting to hurt American international companies quite significantly.  And we kind of went through this phase where Japan had the chance to have a weak currency; Europe has had the chance to have a weak currency.  It’s kind of America’s turn to have a chance to have a weak currency to lift their economy.  When that starts to happen, then, gold will sort of have its opportunity to go.
INN:   Interesting.  Okay.  So, talking about some specific companies now.  When you UEC’s (NYSEMKT:UEC) share price dropped in June, you mentioned that that was a good entry point into the stock and you provided some more insight into the slam story that caused the fall.  That said, at the conference that you and Brien Lundin and some other people put on together recently.  He said that betting on legal outcomes was his biggest mistake.  So is that a worry for you?
GP:  Brien definitely had a good point.  There’s lots of legal outcomes that I wouldn’t touch with a 10-foot pole.  But there are some that aren’t even really legal issues.  There are short sellers, there are slam stories that are trying to pretend that there’s an issue when there isn’t.  That’s very difficult for management.  It’s annoying.  It takes up lots of time.  But it does create an entry opportunity for investors if you’re watching.  
Now, Uranium Energy, the group went after them, they were publicly disclosed as having shorted the stock, then they wrote this article, that didn’t say anything that wasn’t public information, but just riled people up, and the stock fell.  So I do see that as an entry opportunity.  The stock has remained at about that level for a while because it takes some time for these things to play out.  But I have a lot of faith in Amir Adnani who’s the CEO there.  Their insurance is covering all of their legal costs.  They have like the best – they have some really good lawyers working on it.  I chatted with him just about it just last week.  I am sure that there is nothing in that legal situation.  So, yes, there’s lots of legal issues that you shouldn’t bet on.  
But this one isn’t actually a real legal issue and it’s a really interesting company if you’re looking for one to ride uranium’s rally when it happens.
INN:   Okay.  And you also like Nevsun Resources (TSX:NSU) which has an excellent project although some people might not be comfortable with the jurisdiction.  And you talked about how the forced labor situation there is perhaps old and unimportant.  Can you elaborate on that?  
GP:  Absolutely.  So, Nevsun operates the Bisha Mine, which is in Eritrea, I’ve actually been there.  I was there when the mine was under construction.  
The issue there is that there is conscription in Eritrea.  You have to do two years of mandatory military service.  Some people are not allowed to leave that mandatory military service because the government, which is a dictatorship, finds it quite useful to have this pool of laborers.  The government is a partner in the Bisha Mine, which in itself is a commendable situation for Nevsun to have navigated.  The government paid for its stake in the Bisha Mine.  And that partnership means that the mine is very stable in terms of ownership.  Because the government’s getting benefit from it, significant benefit.
But what it means is that while the mine was under construction, there was the chance that some of these forced conscripts were used to help build the mine.  When that issue first arose, Nevsun was distraught about it.  They have put in incredible measures to verify the presence of every single person who is now on this onsite.  So, it is no longer happening.  I’m completely comfortable to say that it’s no longer happening.  Did it happen to a certain extent five or six years ago when the mine was under construction?  It might have.
More generally, Eritrea is not a free country.  I don’t think that necessarily means that Eritreans should be deprived of the benefit of resource development.  So Bisha’s a fantastic mine.  It’s creating great employment, great training opportunities and putting a lot of money into that country.  So, sure, ideologically, I don’t agree with the Eritrean government, but I don’t think that means we should abandon Eritreans as a people in terms of the benefits that they can get from resource extraction just the same way we get from them in Canada.

 
INN:   Thank you for that overview.  And finally, Gwen, what are two stories that you’re really excited to hear more about over the next year?
GP:  Two stories, that’s a tough one.  So it’s a good thing you said, “Year.”  Because within 2015, I don’t necessarily expect a lot of excitement.  I think the stuff with the US dollar and gold is going to take a while to play out.  But if we’re looking at a 12-month time frame, I think gold will start to move within that time frame.  
So one would be a very low-cost like low all-in sustaining cost producer with a rising production profile.  So that’s B2Gold (TSX:BTO).  They’re one of my top picks right now and it’s because they give such good leverage to a rising price of gold.  It’s producers that go first when the gold price moves.  So B2’s going to move as soon as the gold price does.  So I think that they’re – and they’re at an incredible value right now in terms of the share price.  So I like that story.  
And another that I’m going to put out there, I haven’t formally recommended the stock yet, but I am very interested in it.  It’s Auryn Resources (TSXV:AUG).  So they have a large like very large early-stage, well, not too early stage gold project in Northern Canada.  The team behind the company is very proven.  They have basically already – they’re the team that was behind Cayden that recently got bought, the team that was behind Keegan that was also bought.  So proven management.  Very cost-driven.  They understand how the market works.  They are doing promotion in exactly the right ways – investor’s aren’t going to buy a stock if they’re not going to hear about, it so promotion’s really important.  
And this is a really prospective land package.  And the idea is to get out there with some of these very simple, shallow, minimally disturbing rigs and just test as much as they can to outline where the gold might be because there’s gold up there for sure.  It’s a really an interesting neighborhood in terms of who’s working nearby.  And Auryn’s share price has been bucking the trend.  They’ve been gaining when everybody else has been losing.  So there’s something going on there for sure.  
So there’s two.
INN:   Okay.  Thank you for that, Gwen.  
GP:  You’re welcome.  
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article. 
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. 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.
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Gwen Preston: Opportunity in a Bear Market