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Value Market in Gold Will Work for Patient Investors: Jocelyn August



-- Posted Thursday, 28 February 2013 | | Disqus

Source: George S. Mack of The Gold Report  

 

Even in a depressed gold market, knowing your catalysts in mining stocks is indispensable and is still the fundamental yardstick for buy-sell decisions. Senior Analyst Jocelyn August of San Diego-based Sagient Research understands the impact that events can have on your portfolio, and she has mastered the art and science of fortunetelling by keeping an eye on the calendar and those occurrences that will move shares. In this interview with The Gold Report, August discusses what factors give investors an edge right now in this kind of market.


The Gold Report: Jocelyn, I'm looking at a portfolio of junior precious metals mining stocks, and all I can see is red ink. All in that group are underwater for the past 52 weeks. We are currently in a down-trending precious metals market, and I'm interested to know if catalysts matter anymore.

 

Jocelyn August: Catalysts absolutely do matter right now. We may see a catalyst occur in a company followed by a 2% uptick in its stock, on the same day the sector as a whole may be down 2–5%. We may see that even in this price environment. If you were aware of that catalyst and you bet on it, you would actually have fared better than the sector on that day. By comparison it actually did help the stock price.

 

Conversely, we also see a fair amount of catalysts that might have a negative consequence to the stock price, particularly when it comes to permit approval decisions that may go the wrong way for the company. You could get pretty badly burned.

 

TGR: In this kind of depressed gold and silver market, it appears that the effect of negative news is magnified. Is that in fact the case?

 

JA: I'd definitely say so. If it's a negative event for the company and the overall sector is down, you're going to experience magnified effect there.

 

TGR: The old thinking was that the juniors could perform independently of markets on their own merits as exploration and production companies. Can they indeed perform independently?

 

JA: Juniors can perform well on their own merits. But obviously, the spot price does have an impact on the company itself. That's because a lot more companies can invest in higher-risk, higher-cost projects when the spot price of the metal is at a higher price. So if you're looking at a spot price of $1,750/ounce ($1,750/oz) for the price of gold, that's a lot different than a spot price a couple of years ago when it was in the $1,200s/oz.

 

TGR: In essence, all of these stocks, whether large or small, are being held hostage right now by the underlying metal price. Is that what you're saying?

 

JA: I would say so. Looking at the environment several months ago or in the last year compared to right now, we were seeing a lot more positive price action in these stocks than we are seeing now.

 

TGR: Jocelyn, on Friday, Feb. 15, we read that Soros Fund Management had cut its stake in two exchange-traded funds (ETFs). The Dow Jones Industrial Average is close to 14,000 and near an all-time high. The NASDAQ is at a 12-year high. With such strong industrial and technology performance, can investors be expected to return to gold shares with this kind of news permeating the markets?

 

JA: If you didn't expect gold to go down at some point compared to the overall market, then you probably weren't thinking too far into the future. Those Feb. 15 events as well as a potential for gold markets to continue their current trends mean simply that an investor can't just throw a dart at any gold stock and see success. In this type of market, investors need to do their homework to identify gold companies that look to have better prospects than some of the others. Particularly with gold prices dropping, it's important to examine the potential costs of the mining projects that the company is involved in. You can have success with gold in the long term.

 

TGR: People who invest in juniors don't invest for slow growth, and they tend to be impatient. But your long-term success scenario suggests that you believe patience is important, even with juniors. Is that right?

 

JA: You definitely need to have patience in order to have success in them.

 

TGR: Can good catalyst news at the company level propel gold and silver stocks up in this kind of environment? Are you seeing it happen?

 

JA: I definitely think that it is possible.

 

TGR: Do you believe that juniors can access capital to move their programs forward in this kind of market? Do they have to explore their lowest-risk plays in this environment?

 

JA: To some extent, they do need to focus on their lowest-risk plays in this environment. With gold spot prices going up over the last couple of years, companies were looking to develop the higher-cost, higher-risk plays because the economics allowed them to, and they could afford it. But now these companies probably should be looking at lower-risk and lower-cost prospects, but that's not to say they can't get access to financing.

 

TGR: What are you looking for in junior precious metals miners? What factors give investors an edge right now in this kind of market?

 

JA: For catalysts, we look for projects that have positive resource estimates and positive updates as well as positive dealings with the appropriate regulatory authorities. Permit holdups can certainly add to the capital costs and prolong the start of production and delay the start of revenue. So we're looking for positive regulatory filings, deadlines being met and we're looking for those companies that consistently keep the market updated as to their progress. There are some junior miners that are really good about giving updates—even if they're not quite meeting the deadlines they've set. They are making sure that they are transparent in what they are divulging. But there are some that maybe aren't quite as transparent. I tend to believe no news isn't necessarily good news. We're looking for that kind of transparency in those miners.

 

TGR: Right now, are these permit approvals the biggest catalysts for moving share price?

 

JA: Permit approvals are not at the very top, but they are in the top three movers—on both a positive and a negative basis.

 

TGR: I've enjoyed speaking with you, as always. Thank you.

 

JA: I look forward to speaking with you again.

 

Jocelyn August is currently the senior analyst and product manager for CatalystTracker, a proprietary research product focused on identifying and analyzing the future events that will materially impact publicly traded companies. In her five years at Sagient, she has developed expertise in the highly event-driven medical device and diagnostic sector. In addition, she spearheaded the development of a new Natural Resource Industry product within the CatalystTracker product line with the publication of the "Catalyst Impact Study: Natural Resources Sector." Outside of Sagient, August was named the director of communications for the San Diego Professional Chapter of MBA Women International. August received a Master of Business Administration from the Rady School of Management at University of California, San Diego and graduated cum laude from the University of California, San Diego, with a Bachelor of Arts degree in sociology.

 

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

 

DISCLOSURE: 
1) I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview. 
2) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent. 
3) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. 
4) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews 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 - The Gold Report is Copyright © 2013 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.

 

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, 28 February 2013 | Digg This Article | Source: GoldSeek.com

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