LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

GoldSeek.com to Launch New Website
By: GoldSeek.com

Is Gold Price Action Warning Of Imminent Monetary Collapse Part 2?
By: Hubert Moolman

Gold and Silver Are Just Getting Started
By: Frank Holmes, US Funds

Silver Makes High Wave Candle at Target – Here’s What to Expect…
By: Clive Maund

Gold Blows Through Upside Resistance - The Chase Is On
By: Avi Gilburt

U.S. Mint To Reduce Gold & Silver Eagle Production Over The Next 12-18 Months
By: Steve St. Angelo, SRSrocco Report

Gold's sharp rise throws Financial Times into an erroneous sulk
By: Chris Powell, GATA

Precious Metals Update Video: Gold's unusual strength
By: Ira Epstein

Asian Metals Market Update: July-29-2020
By: Chintan Karnani, Insignia Consultants

Gold's rise is a 'mystery' because journalism always fails to pursue it
By: Chris Powell, GATA

 
Search

GoldSeek Web

 
Mexico's Silver Mines Shine



-- Posted Thursday, 22 March 2012 | | Disqus

Precious metals analyst "Mexico Mike" Kachanovsky, who opines on junior mining and exploration stocks at smartinvestment.ca, is bearish on the world economy, but bullish on mining stocks. Although he has seen a recent rise in narco-violence, in this exclusive interview with The Gold Report, Kachanovsky urges sensible investors to continue to look at firms exploring Mexican metal deposits because the upside is enormous.

The Gold Report: Last September, you predicted gold would rise above $2,000/ounce (oz) by the end of the year. It didn't quite get there. What do you see as a price limit now?

Mike Kachanovsky: I also suggested that silver would hit $50/oz before the end of last year. I was dead wrong on that prediction as well. But my outlook hasn't changed. It's difficult to put a specific timeline on price trends. It's more important to have confidence that the factors that have contributed to the rise in both gold and silver prices for the last decade are still in effect. What we can accurately predict is how factors driving these prices will play out, while sometimes delays and countertrends and mini bear markets occur along the way.

We are currently trading at a sideways consolidation for gold in the $1,600–1,700/oz range and silver $30–35/oz. I am confident that we are going to see a lot higher than $2,000/oz gold and higher than $50/oz silver. Metal trading is volatile. But I feel very strongly that before the end of 2012, we'll see both of those levels surpassed.

TGR: You said in your September interview with The Gold Report that we're likely in a double-dip recession. Is the global economic situation improving now or worsening?

MK: The United States is still in a recession. A lot of people have tempered their bearish sentiment because the official data suggests that things are getting better. A case in point is the way unemployment is calculated. It appears that the unemployment rate is falling because of the way government agencies classify and organize the data. But there are more people looking for work now than there were at this time last year.

There is lasting recession in Europe. There's less spending. Gross domestic product is generally in decline. Worldwide, more people are unemployed and looking for work. That reality is not necessarily reflected in the data.

TGR: Are we headed into a triple-dip recession?

MK: No matter how you look at it, we are in a secular slump. It's a real challenge. Decades of malinvestment and debt buildup have to be resolved. It's going to take years before the economic foundation is reset for another period of growth.

TGR: Will another round of quantitative easing help?

MK: Quantitative easing has been in place all along, although it has not been officially acknowledged. But where's the money coming from? Interest rates are being held at artificially low levels. The Federal Reserve prints money by buying bonds to keep the interest rates low. That officials have not acknowledged this fact does not mean that it's not occurring.

TGR: How does quantitative easing affect mining stocks?

MK: In the wake of the first two rounds of quantitative easing, a lot of hot money started chasing natural resource stocks. Printing money contributes to inflation. One of the ways to protect against inflation is to be leveraged in commodities—real stuff, for lack of a better word. But the prices of oil and gas and gold and silver and metals and hard commodities rise in an inflationary environment. Speculators flock to resource stocks to protect against inflation and more inflation ensues.

TGR: What statistical indicators are key when looking at junior mining stocks?

MK: You can't talk about junior mining stocks as a group. There are three different subsectors. The first subsector is the early stage explorers who don't have any real assets. They control properties, and they're spending money on defining a deposit. The second subsector is the emerging producers. These companies have recently commenced mining, and they generate money from operations. The third subsector is the established producers who have been around for a few years. They are far less risky. They are earning lots of money in the current metals price environment. They have strong balance sheets. Investors need to be aware of those distinctions. The early stage companies are attractive only if you're going to be patient. It may take months or years before those stocks become market leaders.

TGR: Is it still possible to hit a homerun with an early stage company?

MK: Absolutely. History hasn't changed. But you must be very selective. Look for companies that have management teams in place that can survive difficult times. Look at the property base—is there a legitimate chance of finding a deposit that has the magnitude to allow for a rapid up cycle in value? Be careful, but leverage to that sector, because that's where the biggest money will come from eventually.

TGR: Your particular area of expertise is Mexico. How do you assess the physical and financial safety of mining ventures in Mexico, considering the drug wars?

MK: That's the big question about the Mexico stocks. There is a perception that things are spinning out of control there. I travel to Mexico regularly to visit mining projects. For sure, the violence has intensified. In the past, people's daily lives were not much affected by the gangs. Now rival gangs fight turf wars and the violence spills over into the daily lives of average people and businesses in Mexico. But, overall, it's still contained.

It is still safe to walk the streets at night. Well, you do need to have your head on your shoulders. If you're driving on a major highway at night, you are at risk of being carjacked. If you travel in certain parts of Mexico City, you're asking for trouble. The senior executives of mining companies could be targets for kidnapping. I'm not aware of that happening yet, but many executives travel with armed security guards. If you are cautious, you can go about your business safely.

TGR: Have the drug wars affected labor pools in the rural areas of Mexico?

MK: Often people who are working in the mines have close relatives who are working with the drug cartels in the hills, growing marijuana. It's unlikely that the drug gangs have a reason to target the local labor at the mine. People are very pragmatic. I've been in towns that are centers of the drug trade. In some ways, they are the safest places in all of Mexico, because the cartels won't allow anything to get out of line.

TGR: What do you like about the Mexican silver companies you follow?

MK: They have recurring production in place. They are profitable. They have fantastic leverage to the upside for future discovery. Their strong balance sheets enable them to look further afield, to make acquisitions of late-stage deposits that have been stalled and can't move forward without more money. They've just been huge winners.

TGR: Galore Resources Inc.'s (GRI:TSX.V) Dos Santos project is next to Goldcorp's successful Peñasquito mine. Is there a catalyst that would allow the market to value Dos Santos more in line with Peñasquito?

MK: Galore might get a higher speculative premium based on its proximity to large deposits in Mexico. Unfortunately, that hasn't happened yet. But Galore has drill programs in place that are capable of hitting a big new discovery zone.

A general catalyst would be for gold and silver to break out of its range, reaching a new high. And, again, that could happen very quickly. That could happen when all of the analysts are expecting lower prices and, out of the blue, a strong uptrend kicks off when no one is expecting it.

TGR: Do you see that happening this year?

MK: No. But, again, trying to put a timeline of a specific year on any stock or price target is just inviting yourself to look bad. The present pause in the bull market is long in the tooth. At some point, valuations will snap back in line with a strong bull market. I'm being cautious because there are existential issues on the economic radar screen, like Europe.

Interestingly, another catalyst that makes a difference is when a high-profile newsletter writer or analyst recommends a stock. Higher share price generates more money to work on finding metal.

TGR: Is the opposite also true? If newsletter writers frown on a company, does that affect its stock price?

MK: Oh, for sure it does. Analysis is a double-edge sword. Most analysts, including me, are biased toward finding good companies to talk about instead of being quick to pan a stock or to suggest that it doesn't have the goods. The vast majority of these mining companies are run by sincere, qualified, capable people who are doing their very best to move companies forward in a very difficult market. I think it's a very rare situation when you have a real problem in any of these stocks that would warrant putting a sell on it.

TGR: Do you tend to hold junior mining stocks for a while?

MK: Most of these companies I've owned for five years or more. I also have an active trading portion of my portfolio. When the market corrects, I can buy low. And I sell holdings during speculative highs. That is the nature our market. It can be volatile. We do not have to like it, but we have to acknowledge it and accept it is what it is: three steps forward and two steps back.

TGR: Thanks for sharing your insights.

"Mexico Mike" Kachanovsky is a consultant providing analysis of junior mining and exploration stocks. His work is published on a freelance basis in a variety of publications, including the Mexico Mike column in Investor's Digest of Canada. He is a founder of www.smartinvestment.ca, which serves as an online community for the discussion of all topics relating to junior mining stocks.

Streetwise - The Gold Report is Copyright © 2012 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

The Gold Report does not render general or specific investment advice and does not endorse or recommend the business, products, services or securities of any industry or company mentioned in this report.

From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies.


-- Posted Thursday, 22 March 2012 | Digg This Article | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.