Brien Lundin | Some Junior Gold Stocks Could See 100% Gains Before Year End

Brien Lundin is the editor of the Gold Newsletter and CEO of the New Orleans Investment Conference.  In this interview Brien shares his insights regarding the current gold market and the junior resource sector.  Brien also offers his thoughts on gold-backed cryptos and blockchain-related companies.  Lastly, he provides an overview of this year’s upcoming New Orleans Investment Conference and what attendees can expect.

The New Orleans Investment Conference, having been around for over four decades, is one of the most respected investment conferences and features top financial and political commentators.  To learn more about the 2018 NOIC click HERE:

0:05 Introduction of topic and guest

0:59 Brien’s current gold market analysis

5:06 Brien’s analysis of the current COT report on gold and silver and its significance

6:31 Brien’s observations from attending the recent 2018 Sprott Conference

7:32 M&A activity in the resource space and what to expect

9:12 Thoughts on Coeur Mining’s acquiring of Northern Empire Resources

11:30 Current risks for investors in junior resources

13:10 Brien’s thoughts on gold-backed cryptos

16:42 Brien’s thoughts on blockchain & blockchain companies

18:01 What to expect at the 2018 New Orleans Investment Conference

BEGIN TRANSCRIPT:

Bill: Welcome back, ladies and gentlemen to another mining stock education expert interview. I’m Bill Powers, your host. Thanks for joining me. We’re here in the summer doldrums. If you’re a resource investor or a precious metals investor today as I speak, gold and silver have both hit 52-week bottoms. Today’s topic is regarding gold, silver, and the resource markets, and I have joining me on the line today, Brien Lundin, the editor of Gold Newsletter and the CEO of the New Orleans Investment Conference. Brien, thanks for taking the time to chat with me today. 

Brien: Great to be with you, Bill.

Bill: Brien, you lay out a very clear and cogent case for the bullish macro narrative for gold. I was at the Sprott conference a couple of weeks ago and I attended the Maple Gold Mines luncheon where you presented the bullish case long-term bullish case for gold, but here we are, gold’s hitting 52-week lows. When you’re a precious metals or a resource investor, there’s a lot of volatility and your emotions can get the best of you. What would you like to share with listeners that are tracking and invested in the gold market and where do you see gold going in the short term and also medium term? 

Brien: Well, I still believe that gold is in a bottoming process right here and there is some downside risk and it always seems like gold hits the support levels that other assets would bounce off of and then breaks through those support levels. It just seems like, in kind of a sadistic manner, gold just wants to give us another twist of the knife and drop a little bit further just to shake out the last of the weak hands or even some of the strong hands. And I think that’s what it’s doing right now. It’s in a bottoming process. It’s kind of a typical seasonal summertime bottoming process or correction. It may be a bit more than that, but I think the downside risk for gold is, you know, in the order of 5% from these levels, but the upside risk if and when it does rally in a typical kind of late summer rally, we should see about a 10% or more rally in the metal, and if that happens, then this junior mining stocks can offer, you know, 100% or more upside potential. So if investors have the courage and the cash to buy some of the bargains that are lying around right now, I think the upside potential is really extraordinary.

Bill: What are your comments on gold’s relationship to the US dollar at the moment, and what do you see happening with the US dollar for the second half of this year? 

Brien: Well, 95 has been the key level on the dollar index and it’s just failed to break through that ceiling over and over again. Now, as I speak today, as we speak today, it’s peaked its head over that 95 level by a few bases…by about a half a percent or so. So it remains to be seen whether it’s going to turn back down over the next day or two or whether it will decisively and finally break through that resistance. The dollar and gold have been, you know, there’s a natural inverse relationship between the two. It doesn’t always work. Sometimes they actually go up or fall together, but over the last couple of years or so, that inverse relationship has been very strong and very close. So in the short term, you want to really look at the dollar to see where gold’s going. And you know, at that Sprott conference, this is one of the things that I was telling people is as they looked around and walk the streets of Vancouver and everybody’s down in the dumps and worried about how bad sentiment is in the junior mining share market.

Really that market is driven by gold and the dollar and much larger asset classes and much larger issues, and those asset classes really don’t care what people are thinking in the junior mining share market. And once we see a significant downtrend in the dollar and once we see a nice uptrend in gold, then these junior stock markets and all the other associated markets are going to turn on a dime, and you’ll get whiplashed; they’ll reverse course so quickly and head upward. So it really is to my mind, if you’re invested in the junior mining stocks, you need to look at where gold’s going and to look where gold is going to see where it’s going, you need to look at where the dollar is going.

Bill: As you analyze the most recent commitment of traders report on gold and silver, what are you seeing and what’s its significance? 

Brien: Well, you’re seeing record net short positions for the longs, for the large speculators and so they are having record net short positions. They’ve never been more short than they are right now. Now, if you look back and see the last time they were anywhere near these levels on a net short position, it was in January of 2016. As we know, that was right before gold rose 19% and many of these junior mining stocks went up three, four or five times over during the first half of that year. Hopefully, we’re going to see the exact same or closely similar type of performance in gold and the mining shares from this level. That really does indicate though that as you know, these speculative longs typically get the direction of the market wrong. It’s the commercials they get it right. And when the speculators get really largely on one side of the boat ready to tip over, that’s when we see these big market terms and that’s precisely where we are right now.

Bill: While we were both at the Sprott conference two weeks ago as you went from booth to booth and interacted with speakers and attendees, what are some of the key takeaways from that conference for you? 

Brien: Well, that’s an event, very similar to my conference here in New Orleans, that’s an event where you get really smart people. Smart attendees, people who have been through a few cycles and even the company representatives, company management teams have been through a few cycles and it’s more of a sophisticated crowd. They’ve seen this before. The attendees I thought weren’t really shaken by where the market has been in over the last few weeks and few months there. They were more so looking for opportunities and fairly confident that we were going to see a turnaround and I agree with them. I’m totally on board with that view and have been expressing it for some time now. So I didn’t see, you know, the kind of depressing atmosphere that you might have at some of the other shows or some of the free conferences.

Bill: Rick Rule and Robert Friedland at that conference, both told listeners that we should expect a lot of M&A in the next two years, and for savvy investors, there’s a lot of money to be made. What are your thoughts on M&A in the mining industry in the next two years and where can we find the best opportunities? 

Brien: I absolutely agree with that. I think we’re going to see that. We’ve seen the bit the majors have not spent money on exploration over the last five to seven years and not much money in exploration. They have not refilled the pipeline of gold reserves and they’re going to be desperately looking to rebuild their reserves over the next few years, especially if the market improves, the metals market improves as we expect. So they’re going to look at companies that have large scale proven resources hopefully or ideally with some economics attached to them and there’s about four or five or six companies that are near the top of that list right now as potential takeover targets. Those are the companies that investors need to focus on. And also because at the bottom of a seasonal bottom like we’re seeing now at the bottom of a correction in the market, those companies are selling at fire-sale prices. They’re selling for pennies on the dollar of where they would be and will be once gold really turns around. They’re the earliest and quickest movers when gold begins to rally again and I think that’s a prime area where investors need to focus their buying right now.

Bill: We saw Coeur Mining today as we speak, acquire Northern Empire Resources. And, as I look at the US ticker symbol for Northern Empire, it only went up 12.5% today on the news of the takeover. From the perspective of a junior mining investor, we often buy these companies because we’re thinking 5 or 10 baggers. Should an investor get excited about a takeover where once the takeover is announced the stock only goes up 12.5%? 

Brien: Yes, I do. I think in particular in this case, Northern Empire was a company that I think gold newsletter was one of the first to recommend. And so when it got taken out today or at the projected share price, it was about a 70% gain for our readers. So that’s pretty good in a market that is not very good at all, and in fact, it’s one of the worst we’ve seen in recent years. I think that Northern Empire is a bit of a special case because it’s been widely followed, it’s done a great job, it’s in Nevada, so it’s share prices actually strengthened over the past few weeks a good bit. In fact, they did not show up at the Sprott conference a couple of weeks ago despite the fact that they had spent a lot of money on lunch and presentation, etc., they were no-shows.

And as you probably know, that’s usually not a good sign for a company to be a no-show at an investment event. But in this case, in Northern Empire’s case, I think it was a sign that they didn’t want to expose themselves to having to answer questions or say anything. And to me, it was a sign that there was an impending deal and I alerted my readers to that fact. But, you know, I think a lot of that speculation was already in the price, so it only went up about 12% or 13%. Also, it was a bad day in the market generally. Gold found a good bit of its losses accelerated during the day and Coeur itself was off about 4.5% today so that in effect lowered the buyout price for Northern Empire as the day wore on.

Bill: So if someone’s looking to invest in the junior resource market, now it’s August 2nd as we speak, what would be some of the greatest risks that they should avoid? 

Brien: Well, the risk generally right now is that we’re going to see gold dip below $1,200 and then perhaps lose another $20 or so in a kind of a cascade of selling. I think that’s a possibility given where we are now, given the fact that there’s news coming out on the economy over the next few days, etc. So that’s the primary risk. I think though when you look at the levels of the market, a lot of the risk has been wrung out of the junior mining share market. If you focus on companies that have proven resources that have, you know, obvious resources, good resources, gold, and silver primarily, hopefully with economics attached, ideally with economics attached to them, a lot of the risk has been wrung out of these markets and you have to look at how long of a trade or are an investment you’re looking at. If you’re looking at a few weeks to a month or so, you may have some significant downside risk if you buy at these levels, but if you’re looking longer term over the next year or two, buying some of these companies at these levels is something that is very likely to pay off very handsomely over the next year or so.

Bill: Yeah. And if I could just chime in, don’t invest in a pre-revenue junior miner that needs cash within the next few months because this would not be a good time to raise money. Moving onto gold-backed cryptocurrencies. What are your thoughts about gold-backed cryptos? 

Brien: I love the concept. I think the key is going to be implementation as with every great idea, but I think that’s the solution here. I think putting something real behind a cryptocurrency will finally, you know, it’ll solve the weaknesses of crypto right now, because it’s, you have a real asset backing it. It also makes it harder to steal because there’s a record that you owned it, that’s forever enshrined, and that if somebody steals your cryptocurrency, if they steal a bitcoin, well, who knows what that bitcoin is, but if they tried to steal a gold-backed crypto, it’s traced back to that percentage of that bar or however you know that particular cryptocurrency is functioning, but you’re able to trace it back to an actual real asset, you’re able to trace it back to the previous owner.

So I think that’ll solve part of it. I think the attraction of having a real asset that’s been the really the original cryptocurrency for all of human history, will give people a lot more confidence in investing in the area and using it as a means of savings. The key again will be what role the dominant player emerge, which will be the dominant player to emerge because that’s where you’ll have the liquidity in greater use. Unless you’re some type of a universal standard developed. So it’s nascent and it’s going to be developing. I think it is the ultimate solution, but again, it’s all gonna be in the implementation.

Bill: And I think two of the greatest counterparty risks for a gold-backed cryptos is the integrity of the trustees or the people running the company and also where the gold is stored; where it’s vaulted. Because a gold in your own possession that is the safest way you remove the counterparty risk except there is theft possibility. But, you really got to judge, in my opinion, the integrity of the people running that gold-backed crypto. 

Brien: You really do. And what I tell people is, you know, I have some very good friends in the industry and people I trust in storage, people I trust selling the bullion, but I tell people, don’t ever put all of your eggs in one basket. You can never, absolutely guarantee against some exogenous event or look in the hearts of men, you know, and, or even to see, to know what staff people may do. So don’t put all the eggs in one basket, spread your holdings among, if you’re doing storage, spread them among a number of services, both foreign and domestic, and have some basically available. Have some that are some physical metals that’s immediately accessible and not in a bank safe deposit box either, but have it somewhere where you can get it in a pinch, and spread it around. That’s the only way to really mitigate all the risk out there is to dilute it and diversify it.

Bill: Before we fully leave the topic of blockchain, any thoughts on the usefulness of blockchain in society and any thoughts on investing in blockchain-related companies? 

Brien: Well, I do know that there’s a lot of smart people that say this technology will be transformational and change the way a lot of things are going. My concerns with blockchain are how it will scale. I know that you can fork the various currencies, but I think that as each transaction has to go to, be recorded on every other holder over time, you’re going to get scaling problems. And so I think it’s probably gonna be a very important technology like most things. I don’t think it’s going to be nearly as important or transformational as some of its evangelists may say. I really can’t recommend which blockchain companies to invest in frankly, because I’m not an expert in that area and don’t follow many that closely, but I would, as of all things I would say buyer beware and do your homework.

Bill: You’re the CEO of the New Orleans Investment Conference. So for the 2018 conference, this will be Thursday, November 1st through Sunday, November 4th. Can you give us a rundown of what we can expect in terms of the agenda and speakers? 

Brien: Absolutely. Simply put, the best of the best. We work our way from geopolitics into economics and downward into the various investment sectors. And of course, we have a long-standing legacy as being the place to go to learn about metals and mining and the latest opportunities they are. This year we’re featuring Robert Kiyosaki, Mark Stein, Jonah Goldberg, James Grant, Doug Casey, Rick Rule, Peter Shipp, Dennis Gartman, Guy Adami where we have panels featuring all these and more experts on the economy, precious metals, mining stocks, global investing. We’re also going to have a special retrospective panel on Charles Krauthammer this year. We have some of the people who have known him well over the years, including his personal assistant and review his impact on the New Orleans conference. He was a very good friend of the conference and came every year for about five years.

And you know, it’s the place to mingle with some of the smartest, most sophisticated and successful individual investors you’re gonna find anywhere. I tell attendees every year that yes, you’re going to get some great advice and some great tips from the stage of the conference, but look around you at the people sitting to your left and right, make a point of trying to meet people and mingle with them and during our many social events and presentations during the conference, share ideas because these are really some of the smartest people you’ll find anywhere. And you can fill a notebook full of notes just from talking to them. And it’s the place to go in uncertain markets. It’s proven that over four and a half decades. It really performs well when times are uncertain and that’s precisely the kinds of times we’re in right now.

Bill: And that conference again is going to be November, 1st through 4th in, of course, New Orleans. I’ll put a link in the show notes below if you’d like to click on that and learn more. You can follow Brien on twitter @brien_lundin. That’s brien_lundin. Brien, any concluding thoughts in light of what we’ve spoken about today? 

Brien: Yes. I guess it’s the thing I can tell people, the most important thing is to keep your wits about you. If you’re invested in this sector, read everything, learn everything, go to conferences, talk to people who’ve been in the sector for a long time. Talk to company management teams, educate yourself because there are a lot of nuances to this and steel yourself for times like this. It’s a cyclical sector. And when prices, when the market’s down like it is now, a lot of people run for the hills, but the smart people start buying and finding opportunities and just keep your eye on the big picture because the big picture argues for much higher gold and silver prices over the longer term.

Bill: Well said. Brien, thank you for taking the time to chat with me today. I appreciate it. 

Brien: Great to be here with you. Thank you.