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Gold & Precious Metals

Attempts To Stem The Rising Tide Of Gold and Silver Will Be Short-Lived

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Posted by Jeb Handwerger - Goldstocktrades.com

on Monday, 05 March 2012 06:34

The recent selloff is just one of the many shakeouts that somehow manages to occur when precious metals are about to take off.  For weeks we have stated that we were on the verge of a breakout at $35 in silver, $4 copper and $1800 gold. Coincidence??? Gold Stock Trades thinks not.

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In 2012, we have recently witnessed a dramatic 18% move in gold from $1525 to approximately $1800 gold and silver has made an impressive 30% move from $27.5 to $37.50 since the beginning of the year.  It is characteristic in gold and silver to witness short term volatile pullbacks at the beginning of major moves to shakeout the short term speculators looking for overnight riches and who lack patience and fortitude.

.....read more HERE



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Gold & Precious Metals

Billionaire Hugo Salinas Price - Central Banks Smashed Gold

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Posted by King World News

on Friday, 02 March 2012 07:34

Today multi-billionaire Hugo Salinas Price told King World News that central banks were definitely behind the smash in the gold price yesterday.   He also said people should ignore it and continue buying gold and silver.  But first, here is what Hugo Salinas Price had to say when asked about the plunge in gold yesterday:  “I definitely think the central banks were behind it.  I look at the graph of the gold price yesterday and when it collapses down $100 in about an hour, that is not natural market action.  I think people are getting used to this.  This is standard procedure and it doesn’t worry me at all.”

Hugo Salinas Price continues:

“The paper money people (central bankers), the fiat money people all over the world who are keeping us in this game, they are now in retreat.  What you saw yesterday was a ‘Rear guard action.’  In reality, the gold and silver forces are overcoming them and overrunning them.

The gold and silver buyers are forcing a higher exchange rate between let’s say the US dollar and gold and silver.  So every once in a while they mount an attack and fend off the army of gold and silver buyers."

“If I saw the price declining little by little, day after day, that would be a worrisome signal.  That would mean the market is not anxious to acquire more gold or silver, but that’s not the case."

....read more HERE



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Gold & Precious Metals

Updated: Opportunity Knocking - Gold & Silver to "Explode HIgher"

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Posted by Peter Grandich - Comment by Mark Leibovit

on Thursday, 01 March 2012 16:00

Peter Grandich "This an opportunity for those not yet fully invested in gold and silver. Last call! Train to pull out of the station on the way to new highs by summertime"...........   Mark Leibovit -   "The bottom line here is we will still see a big move to the upside because we have a tight physical market and that’s going to cause the price to explode higher."

GOLD – ACTION ALERT – BUY  - Written 3/01/2012 by Mark Leibovit
Perhaps I had a sixth sense that something may be ‘rotten in Denmark’ when I wrote yesterday morning: "Though I am on a BUY signal, remember, chasing any market is not a wise financial practice. If you have been slowly accumulating positions all along (at all levels), there is less stress in trying to ‘catch up’ and chase prices when they are rising. The ‘boys’ have the power to pull the plug at any time. We learned that last year. I suspect the ‘big’ players (hedge funds) are also part and parcel to the current upside action. When they change their mind, watch out. I suppose NOT seeing gold and silver into new record highs this year might act as such a catalyst on their part."

Gold prices were selling off Wednesday after Federal Reserve Chairman Ben Bernanke indicated that an additional round of quantitative easing was becoming increasingly unlikely. We experienced a ‘flash-crash’ type scenario yesterday. Short-term, a ‘Key Reversal’ and Negative Leibovit Volume Reversal patterns on some daily and weekly charts. At the worst levels, spot gold declined $106.00 measuring from Tuesday’s 1792.40 high to yesterday’s 1686.40 low. Silver declined from the morning high of 37.62 to 33.88 or $3.74.
Central planners can’t announce they are going to have constant and massive QE or everything would go to the moon. So the idea is floated around that QE3 is off the table. If gold and silver are going to head a lot higher from here, this is what you would expect the manipulators to do ahead of that move to make sure as few people as possible are on the long side. The bottom line here is we will still see a big move to the upside because we have a tight physical market and that’s going to cause the price to explode higher.

Seasonals warn of a top at the end of February for Gold and an equivalent top by mid May, so much of this may be just a cyclical phenomenon regardless of Bernanke. That said, technicals rule and until we clear highs from earlier today and/or Positive Leibovit Volume Reversals are formed, some caution needs to be exercised if you’re trading. I am in the camp that any washout (including this one) is a buying opportunity, so I remain on my BUY signal. That said, picking the exact bottom of such events is more of an art than a science – so I cannot provide you a precise downside target for this correction. Indeed, we could have seen the lows yesterday. If you believe as I do that silver is headed into triple digits (maybe high triple digits) and gold could see $11,000 an ounce in the current decade, any washout is an opportunity to do some buying.

For details the Leibovit VR Gold Letter (www.vrgoldletter.com) and the VR Forecaster (Annual Forecast Model) report which is now available at: https://www.vrtrader.com/subscribe/index.asp

After Gold's No-QE3 Plunge, Market Clear For Another Rally 

posted @ 3/01/2012 @ 4:37PM by Forbes

"What caused such a violent drop?  Evidence points to Fed Chairman Ben Bernanke’s omissions regarding further easing, and QE3 specifically, in Wednesday’s Congressional testimony.  Dennis Gartman and UBS’ Edel Tully agree on that, and so does the price chart. "

...read full article HERE

Opportunity Knocking

I see gold close near $1700 and silver under $35. I am travelling back from vacation in Florida and consider this an opportunity for those not yet fully invested in gold and silver. Last call! Train to pull out of the station on the way to new highs by summertime. Peter Grandich Written 02/29/12 Grandich.com


 Fractal Gold Report: Flash Crash

One of the really interesting things about Wednesday was how the carnage was for the most part limited to gold and silver. Other markets saw an uptick in volatility, and some scattered selling, but really nothing close to gold. Even oil came down for a 38.2% retracement and bounced right back up, and stocks didn't really do all that much.

So what the heck happened?

It seems hard to believe, but gold did a 38.2% retracement of the entire move off the bottom in just one trading day, and almost right to the tick. Such a super-intense retracement can still be part of a bullish pattern -- in fact, if the market survives such a test, this sort of hard retracement can become the impetus for a giant rebound, and a trending move that extends for weeks.

mar012012 5

Silver also completed a to-the-tick 38.2% retracement of its full move off the bottom.

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So even though it didn't remotely resemble anything bullish, this type of sell-off can still be considered part of an ongoing bullish pattern, in both gold and silver. The problem is the size and scope of the moves in precious metals right now, as these patterns are not exactly unfolding on a "user-friendly" scale. It's crazy out there, and that's not likely to change anytime soon.

In fact, this set-up reminds me of another Bernanke-inspired sell-off about a year ago that was the direct precursor to 14% rally over the ensuing 6 weeks.

mar012012 8

An equivalent rally from here will take gold back to the all-time highs around $1,920. But I think this could actually be the set-up for a bigger rally up to the $2,100 target area. A very hard 38.2% retracement typically triggers an even bigger response in the direction of the trend. And I can't recall ever seeing a harder 38.2% retracement.

So it's alarming to see gold plunge like this, but it's definitely not over yet for this emerging pattern. However, the bullish case will suffer a major set-back, at least in the short-term, if gold sinks below $1,690 and can't get right back over.

But if gold holds here, and especially it if quickly rebounds over $1,733, then the bullish pattern should be stronger than ever. In fact, this could be a perfect set-up for options, futures, and leveraged positions, as a market that survives and rebounds after a hard retracement will often see relentless upside pressure for weeks.

By David Nichols

Fractal Editor’s Note: 38.2% retracements are the building blocks of every single trending move in markets, and the closest thing to a “market law” that will ever be characterized.  This is because the 38.2% retracement is a component of the golden logarithmic spiral, which is based on the golden ratio and the Fibonacci series.  The golden spiral is a foundational pattern for financial markets, as it is a universal shape that is infinitely scalable in both directions, both outwards and inward, which is a necessary characteristic for fractal systems like markets.

mar012012 7



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Gold & Precious Metals

Gold & Silver: 24 Rational, Perceptive Thoughts

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Posted by Stewart Thompson

on Wednesday, 29 February 2012 04:20

1. Ancient wisdom says, “your friend is your enemy and your enemy is your friend”. In the gold & silver market, this ancient wisdom may be particularly valuable for investors today.

2. Gold plays the role of punisher in this crisis, and punishes the debt-a-holics. The crisis is enormous, and could go on for decades, but just because the crisis may have decades to run doesn’t mean that gold rises forcefully, all the time.

3. The economy can have enormous bouts of strength while slowly disintegrating, and you have all seen the shockingly bullish economic reports pouring out, in recent months. Analysts continue to under-estimate the economic numbers.

4. Something has got to give here; either the analysts are correct and economic numbers are about to nose-dive, or the economy is surfing a much bigger up wave than the analysts comprehend.

5. You can click here to view a larger version of the current gold chart below. Note the small head and shoulders top pattern in play, and the broken uptrend line. I personally couldn’t care less about the microscopic fall in price implied by this technical action. I'm only interested in buying price sales of $100 or more.

2012feb28gold1

6. My interest lies with the divergence between gold and silver, and why that divergence may be occurring. Silver investors can click here for a larger version of the chart below. I’ve talked about the importance of silver investors holding your ground against “big sister gold”. Life as the little brother can be frustrating at times, but this could well be your time to shine, but not because silver is “poor man’s gold”.

2012feb28silver1

7. Last night the price of silver ripped thru its right shoulder high, and the price action is beginning to resemble the action of the Dow, even more so than that of gold. Click here to view a larger version of the Dow “chomping at the 13,000 point bit”. Silver’s price action in the $36 area is very similar to the price action of the Dow in the 13,000 point area.

2012feb28dow1

8. If we are on the cusp of an institutional capitulation, one that acknowledges that a much bigger recovery has started, then silver, platinum, and palladium could all out-perform gold.

9. If not, then silver is likely to resume its role as “gold’s sidecar”, and still fare pretty well. Platinum and palladium may not fare as well as silver if the crisis accelerates dramatically.

10. Gold appears to be silver’s best friend, but if a shocking economic revival is just around the corner, perhaps it is the supposed enemies of silver, the Dow and real estate, who will become silver’s friends, at least for a period of economic time.

11. How big of an economic surge am I talking about? To view the shocking super-rally in real estate that I am predicting, click here for a larger chart.

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12. That’s the IYR-nyse real estate ETF from ishares, and I’m predicting a near-immediate rise in price to my $100 price target, a scenario that will cause 99% of the gold community to do the ultimate “double take”.

13. There’s an enormous head & shoulders pattern on the monthly chart, and the daily chart also looks extremely positive. Click for a larger chart here. Note the position of the Stochastics oscillator, and the solid support in the $58 price range.

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14. Both real estate and the Dow may add surprising fuel to the silver rally, but that doesn’t mean you should buy today. Bullish price patterns reveal where price might go on the upside, but they are not buy signals.

15. It’s critical to understand that surprise is the theme of this crisis. It’s equally critical to understand that the markets are a fight more than an investment. You don’t really have “fellow investors”. You have opponents that you need to ravage and destroy. You can face that fact, or be destroyed by those who live the markets in fight-mode.

16. You can’t buy silver after it has skyrocketed, because you will be buying it from strong hands, and doing so alongside weak hands. If you don’t feel morbid when you buy, don’t buy.

17. What’s better, to feel morbid when you buy, or morbid when you sell out at a loss? Buy in the morbid zone and sell in your personal party and analysis zone. Those who want to feel good both on the buy and on the sell are likely living a pipedream.

18. If we are entering a period of shocking economic growth, albeit growth printed out of an electronic photocopier machine, then perhaps silver and other industrial-precious hybrid metals will substantially outperform gold for a period of time.

19. If real estate joins the Dow in ravaging the dollar, then gold stocks could also join silver in outperforming gold. I’m fully aware that most of the gold community is highly invested in gold stocks, with many in the community owning no gold bullion at all.

20. While the policy of holding no gold bullion is a bad mistake, that doesn’t change the fact that it could be your time to shine, if you are all-in on gold stocks. Real estate and the Dow, the gold stock community’s “enemies”, may soon become your trusted friend, for at least a period of time.

21. You can click here for a larger chart to view the GDX chart. I’m an immediate buyer at the $55.50 and $53.50 price points. Note the action around the $58 price point. GDX is attempting to blast over the red trend line. If the Dow surges through 13,000 and the IYR rips up through $61.68, I think GDX could experience a “price flash” to $70.

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22. The incredible 35% rally in gold junior stocks, via GDXJ, has been all but forgotten, and with good reason. Most gold junior investors are 50-70% underwater, and more so in some cases. Just because the Dow investors of 1929 were wiped out didn’t mean the Dow couldn’t rise from the ashes, and it is the same with junior gold stocks today.

23. Click here for a larger chart  to view the asset class most likely to continue the out-performance that it began two months ago. GDXJ has entered an uptrend channel and is showing light volume on this decline.

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24. You should be an immediate buyer of GDXJ at $27.16, if you are lucky enough to see price go there. If you like gold junior stocks, stare hard into the copper, real estate, platinum, and palladium charts. Those asset classes look set to blast higher and may drastically outperform gold!   


Stewart Thomson
Graceland Updates
website: www.gracelandupdates.com
email for questions: stewart@gracelandupdates.com
email to request the free reports: freereports@gracelandupdates.com

Tuesday Feb 28, 2012
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Gold & Precious Metals

Opportunities abound: Gold & Silver Stocks Set to Rebound in 2012

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Posted by The Gold Report

on Tuesday, 28 February 2012 01:57

"Every segment of the gold stock market is very cheap today." Opportunities abound across the spectrum of precious metal equities, which remain undervalued as bullion prices continue their upward trends. That's the word according to Charles Oliver and Jamie Horvat, both senior portfolio managers at Sprott Asset Management. In this exclusive interview with The Gold Report, Oliver and Horvat express cautious optimism about the prospects for gold stocks in 2012.

COMPANIES MENTIONED: BARRICK GOLD CORP. - BELO SUN MINING CORP. - CANACO RESOURCES - COEUR D'ALENE MINES CORP. - COLOSSUS MINERALS INC. - CONTINENTAL GOLD LTD. - GOLDCORP INC.- HECLA MINING CO. - LAKE SHORE GOLD CORP. - PAN AMERICAN SILVER CORP. - PERSEUS MINING LTD. -PREMIER GOLD MINES LTD. - SCORPIO GOLD CORP. - TAHOE RESOURCES INC.

Gold and Silver Stocks Poised to Recover in 2012: Charles Oliver and Jamie Horvat

The Gold Report: When we talked in the wake of the debt ceiling crisis last fall, Charles, you expected volatility to be good for gold and forecast a continuing long-term bull market for precious metals. These days, the scary stories pertain to the European Union (EU). Will negative headlines continue to play a role in the price of gold and silver?

Charles Oliver: Absolutely. The headlines about the European Central Bank (ECB) infusion of billions of euros into the banking system has been very good for the price of gold. Since the ECB announced it would be issuing €489 billion in December, gold has had a nice little rally off its lows. I expect in the next couple of weeks a further issuance of money will be quite supportive for gold.

Europe is still a mess. Greece seems to be heading to bankruptcy in slow motion. That problem has been going on for two years and we could find these issues still persisting a year from now. Ultimately, central banks around the world will continue to print and debase their currencies, which will be very good for the gold price.

TGR: Jamie, do you agree with that? Or might Greece strike a deal to pay off its debt, turning the price of gold down?

Jamie Horvat: I think the deal is based on the fact that the only tool governments have at their disposal is the continued monetization of debt and the continual printing of money, which is always good for gold. On the other hand, if Greece does not get the sought-after debt relief and restructuring or, if it is kicked out of the EU, it could result in the unwinding of the European banking system and could have larger implications globally. If that happens, we'll see a short-term hiccup in the gold price as it is used as a source of liquidity and investors sell their future in an attempt to live and fight today. That may be the tail-risk event as we continue to see additional quantitative easing (QE) programs all over the world. From Japan to the UK, more than $1 trillion could be spent in the next few months to provide ongoing liquidity in Europe. That is why the longer term outlook for gold is still positive.

TGR: In a November television interview, Charles, you expressed concern about China's growth. Has that changed? And what are the implications for precious metals?

CO: The China story affects the industrial metals more than the precious metals, but I'm still concerned that we see weakness in China. The volume of loans being done now and the contraction we're seeing there both signal that weakness. A number of other economic statistics indicate that China is clearly slowing down; the only question is how big a slowdown it is. Ultimately I think it will impact the base and bulk metals more than gold and silver—copper, iron ore, steel, those types of things.

TGR: Your $644.5 million Sprott Gold and Precious Minerals Fund ended 2011 with a tough quarter, off 10.6% compared to an 8.7% loss on the benchmark S&P. Your quarterly report cited tax-loss selling as one of the reasons for thinly trading stocks performing poorly. Have you adjusted your portfolio since then?

CO: The portfolio is continuously being upgraded. We made a number of changes during the last quarter. We did some of our own tax-loss selling in the portfolio. When I sold some of those stocks, I tried to redeploy the proceeds into some of the other names that I wanted to own that were also experiencing tax-loss selling. A lot of companies in the junior space were down 70%. It wasn't through any fault of their own; it was just because the market had no interest in small companies because it was risk averse last year.

TGR: Were the other names you were buying into mainly juniors?

CO: Yes, there were a fair number of juniors, but every segment of the gold stock market is very cheap today. I can find great valuations in small-, mid- and large-cap stocks. All of them are extremely cheap. That's not always the case. You might think all segments would move together, but in reality one segment often does much better than the others during a particular year. 

TGR: It appears as if about 30% of the fund is dedicated to the small-cap issuers, which have a little bit higher risk profile then the large caps. Do you see those small caps as the way to drive growth in the portfolio?

CO: If you look over the last decade, a lot of the alpha that's being generated in the gold fund has been through small- and mid-cap names. That's across the board. Whether in the gold space, the oil space or any other type of stock, generally speaking, small-cap stocks have better growth and long-term growth returns. 

TGR: What are some of the juniors you picked up as you were redeploying at the end of the year?

CO: I can mention a few names from my most recent year-end report for investors. Canaco Resources Inc. (CAN:TSX.V) is a small cap with a project in Tanzania. It did a financing at around $5.40/share back in March 2011. It's a good stock, but through tax-loss selling and an aversion to small-cap stocks, it has traded down to below $1.50/share. What a great opportunity. 

I looked at Canaco several years ago. It was really interesting, but it was a little on the early-stage side and it got away from me. I'm not one who likes to chase stocks; I don't run after them. And then last year, Canaco had a lot of cash on its balance sheet and suddenly came under severe selling pressure. I thought, "Great, I'm getting a second opportunity to buy something at a much better price." Additionally, I expect its property in Tanzania will one day be a mine.

TGR: How many years away is that?

CO: Probably 5 to 10 years. The lifecycle in the mining industry is usually at least that long from a grassroots discovery through permitting, construction and ultimately getting into production. In the small-cap space, I'm always on the lookout for companies that I believe will have a mine at some point in the future. Canaco is a good example of that.

TGR: Any other examples of companies that could be big movers in 2012?

CO: Another company, Lake Shore Gold Corp. (LSG:TSX; LSG: NYSE) was down 70% in the last year. I actually owned it a couple of years ago, and thought it got expensive. It was trading north of $4.50/share not too long ago, and went down to almost $1/share. The company had a few hiccups in terms of its mine plan, but the stock has been overdone. I sold it up much higher and took this as an opportunity to get involved with it again.

TGR: How high could it go?

CO: There is no reason Lake Shore Gold can't get back to the highs it made last year if it executes on its strategy. These things usually just take a bit of time.

TGR: Eric Sprott is probably one of the leading silver bulls in the world. In your view, what's the ideal balance between gold and silver equities and bullion in an investors' portfolio?

CO: I believe it makes a lot of sense to have a combination of both stocks and bullion. It really depends on the individuals in consultation with their financial advisors to get the appropriate allocation. Bullion is an asset that helps preserve capital. You're not there to make a killing. You're there to protect capital, especially in the context of the currency debasement that is going on. Gold stocks are more of an asset used to capture capital gains during the bull market we are in. Many studies have suggested that 5–10% on a long-term basis is a good allocation to precious metals. I've heard some numbers much higher at the Sprott organization, but again, I think it ultimately depends on an individual's goals, propensity for risk and capital preservation requirements due to age and circumstances. 

TGR: What are some of your favorite names among silver equities?

CO: I like the large caps. Pan American Silver Corp. (PAA:TSX; PAAS:NASDAQ), which is trading at about 9–10 times its price/earnings (PE) ratio, has potential to double production over the next five years as it builds its Navidad mine in Argentina. Pan American is fully funded to get that growth.

Coeur d'Alene Mines Corp. (CDM:TSX; CDE:NYSE) is another one trading at about 9–10 times its PE ratio. It has doubled production over the last four to five years. This company actually has done a great job; it's one of the few over the last couple of years that have managed to do a pretty darn good job of keeping cash costs very low. If you look at almost all of the large-cap silver names, you'll find most of them trading either at high single-digits to low double-digit PE ratios. They are extremely cheap. 

TGR: What are some catalysts that could take Coeur d'Alene to the next level?

CO: I think it's just a matter of time and execution. Ultimately these companies will make good earnings and cash flows at the current price. One of the things we've seen in the gold sector, and are certain to see a bit in the silver sector, is that a lot of these companies are starting to initiate dividends. Last yearHecla Mining Co. (HL:NYSE) announced a plan to pay a dividend linked to the silver price. In a recent presentation I attended, Coeur d'Alene suggested that it might start looking at paying a dividend sometime next year. 

TGR: Could that have a big impact on the share price? 

CO: We will have to wait and see, but I think investors look for good companies that pay nice yields.

TGR: What are some other promising silver names?

JH: On the development and exploration side, Tahoe Resources Inc. (THO:TSX) has great potential as it moves toward production on its flagship Escobal project in Guatemala. We like what we see in Tahoe's exploration there—the whole development story. It may have a world-class asset with the resource and reserves it currently has on hand—plus significant exploration upside as well.

Scorpio Gold Corp. (SGN:TSX.V) is a junior that has come off the bottom. Scorpio has been viewed in the past primarily as a base metals company and a zinc producer, but most of its upside in terms of both exploration and production now comes from silver exposure. I continue to like Scorpio. 

TGR: With so many companies in the small- and large-cap area beaten down, how do you determine which ones will deliver?

JH: As Charles mentioned, valuations are pretty depressed. Looking at the large caps broadly, you have to distinguish between those that are executing projects and those that aren't. Among the companies reporting recently, Agnico-Eagle Mines Ltd. (AEM:TSX/NYSE) and Kinross Gold Corp. (K:TSX; KGC:NYSE) are two examples of companies that unfortunately lost some ground. Agnico enjoyed a premium thanks to its growth profile, but lost that premium because it didn't execute on that growth profile. Kinross, too, has declined due to the lack of execution. 

On the other hand, Barrick Gold Corp. (ABX:TSX; ABX:NYSE) was in line and Goldcorp Inc. (G:TSX; GG:NYSE) was above estimates. Both Barrick and Goldcorp have growth projected into 2016, but they're trading at depressed multiples to the group. Goldcorp has 60% growth ahead of it.

Investors who have been going to the price participation of exchange-traded funds or gold bullion will slowly start coming back to the market if some of these companies continue to capture that cash-flow margin and continue to increase dividend payments. They will be attractive to investors if they show a willingness to return capital to shareholders. In terms of the market in general, investors seem to want to be paid to participate in the market, so they are looking for companies with yield.

TGR: What names fit the criteria you mentioned for companies that have upside ahead of them?

JH: Based on projects in development and assuming they continue to execute and move the projects forward, some of the names I like are Belo Sun Mining Corp. (BSX:TSX.V)Colossus Minerals Inc. (CSI:TSX)Continental Gold Ltd. (CNL:TSX)Premier Gold Mines Ltd. (PG:TSX) and Perseus Mining Ltd. (PRU:TSX; PRU:ASX). These are all things I continue to monitor and continue to like.

TGR: Belo Sun is sitting at about $1/share now. What do you like about it?

JH: Belo Sun's 100% owned Volta Grande project in Brazil is located in an area with good infrastructure and the government is building the world's third-largest hydro-damming facility just to the north. It's a really good project with recent—and continuing—exploration success, in a good jurisdiction with good economics around the project. I believe that has the potential to be a mine one day. 

Belo Sun also has added significantly to the resource and continues to move the project forward. I'll continue to like those types of projects as long as they continue to execute. So far, though Belo Sun hasn't been rewarded for its success. Small caps were down 38% on average in 2011.

TGR: Do you have favorite jurisdictions? 

CO: When you look at the jurisdictions in our portfolio, about 80% of the companies are domiciled in Canada while 80% of the operations are international. We do have some big concerns about politics and country risk. A couple of years ago, when a lot was going on in Africa, we decided to cut back on some of our African names. Not eliminate them, but reduce the weighting and redeploy those funds into operations in North and South America. Now we are unfortunately experiencing some issues in South America, such as what is going on with the governments and some of the mining projects in Peru today. As with Africa earlier, last year we made an active decision to reduce exposure in Peru because of those concerns. 

You can't pick where the mines are—that's geologically where the gold deposits are and it takes you to some challenging places. That is why we like to be in a lot of different countries, to diversify that risk. I have concerns about Peru but I've got a little bit of Peru. I don't like Russia particularly, but I've got a little bit of Russia. Having a basket of these cases can minimize the risk. Having said that, I should be able to buy these companies in higher risk regions at cheaper valuations. Otherwise I certainly wouldn't invest there.

TGR: Do you agree with that Jamie?

JH: Definitely. Taking a basket approach and diversifying the risk within the portfolio has been our practice for a long time. There have been a lot of discussions around people seeking more politically secure jurisdictions. But even in Canada, even in British Columbia, we have seen mines not get permitted based on native land rights issues, water usage issues and other local issues. So risk isn't confined to places such as Africa or Peru. Using that basket approach definitely helps mitigate the jurisdictional risk. 

TGR: You mentioned investors might start moving from bullion back into the stocks after a year when equities weren't performing in line with the metals prices. The cliché is that investors are always wavering between greed and fear. What will give investors confidence to take a chance on some of these undervalued juniors?

JH: I think it all comes down to execution. Are you executing on that project? Are you moving it forward? Are you building per-share value by growing the resources and converting them into reserves? Are you advancing the project and doing the feasibility studies? Are you wrapping the economics around the feasibility of the project and the value and the leverage that you can obtain from putting that into production in the market? Companies that continue to execute and build their resources and reserves will get rewarded. Unfortunately, a lot of companies have made some missteps in the market.

TGR: Any other thoughts you would like to leave our readers with before we say goodbye?

CO: Gold equities didn't do very well in 2011. It was a tough year. The last time we had equities perform so poorly was 2008. Then 2009 and 2010 were exceptionally good years for gold stocks. That pattern makes me cautiously optimistic that 2012 will be a very good year for gold stocks. 

JH: I totally agree—2011 was a "lite" version of 2008. Small caps were down 78.5–79% in 2008, and last year they were down 38% on average. The U.S. banks and the mortgage-backed securities issue were at the heart of the 2008 liquidity crisis, and in 2011 the issues have rolled into a European bank and sovereign debt crisis—with the U.S. opening up the swap lines again, with unlimited U.S. dollar amounts to help with liquidity to European banks through to February 2013, I believe. Taking all of that into account, I'm cautiously optimistic. I'm hoping that as in the second half of 2009 into 2010, when we had a significant recovery in the precious metal space, we will see a similar type of recovery in 2012.

TGR: Thank you, gentlemen.

Bringing more than 21 years of experience in the investment industry, Charles Oliver joined Sprott Asset Management (SAM) in January 2008 as an investment strategist with focus on the Sprott Gold and Precious Minerals Fund (TSX:SPR300). Prior to joining SAM, he was at AGF Management Ltd., where he led the team that was awarded the Canadian Investment Awards Best Precious Metals Fund in 2004, 2006, 2007, and was a finalist for the best Canadian Small Cap Fund in 2007. At the 2007 Canadian Lipper Fund awards, the AGF Precious Metals Fund was awarded the best five-year return in the Precious Metals category, and the AGF Canadian Resources Fund was awarded the best 10-year return in the Natural Resources category. Oliver obtained his Honors Bachelor of Science degree in geology from the University of Western Ontario in 1987 and his Chartered Financial Analyst (CFA) designation in 1998.

Jamie Horvat joined SAM in January 2008. He is co-manager of the Sprott All Cap Fund, the Sprott Gold and Precious Minerals Fund, the Sprott Opportunities Hedge Fund LP and the Sprott Opportunities RSP Fund. He has more than 10 years of investment experience. Prior to joining SAM, Horvat was co-manager of the Canadian Small Cap, Global Resources, Canadian Resources and Precious Metals funds at AGF Management Ltd. He was also the associate portfolio manager of the AGF Canadian Growth Equity Fund, as well as an instrumental contributor to a number of structured products and institutional mandates while at AGF. He joined AGF in 2004 as a Canadian equity analyst with a special focus on Canadian and global resources, as well as Canadian small-cap companies. Horvat spent five years at another large Canadian mutual fund company as an investment analyst before joining AGF. He holds a diploma in mechanical engineering technology from Mohawk College and earned an Honors Bachelor’s of Commerce degree from McMaster University. He is a member of the International Research Association and a licensed international financial analyst. He is also a member of the Ontario Association of Certified Engineering Technicians & Technologists.

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