I'm just back from the 2013 Vancouver Resource Investment Conference, where I was able to meet with two dozen companies we're invested in or considering for investment. The show was bigger and better attended than I expected it to be, given the bearish sentiment in the resource sector over the last year, going on two years.
That's open to interpretation, as is the drop in gold when the US Congress voted to put off its budget confrontation for another four months. This is striking to me, because giving the US government more rope to hang itself doesn't change the outcome, but does mean more money printing in the interim, which is bullish for gold. I suspect that some speculators remembered that it was the debt-ceiling crunch that drove gold over $1,900 in 2011 and were buying in advance of the 2013 version. When that crunch went away – if only for four more months – some of those buyers stopped bidding gold up.
And now we hear that US unemployment is down, leading indicators are up, China had a good month, and Morgan Stanley has cut its gold forecast. It's just as Jeff Clark wrote about in his "Wrong Way Corrigan" Analysts article on Monday. I spoke about this at the Vancouver show as well, saying that just because the fin has slipped beneath the surface, it doesn't mean the shark is gone. People want to believe upbeat numbers, and they are. But none of these things show that the fundamental economic problems that resulted in the 2008 crisis have been fixed, nor do they change the consequences of governments around the world doing the wrong things in response to the crisis: more debt, more money-printing, more and more of the same failed policies.
So long as these facts and resultant trend remain in place, these events just create buying opportunities.
- NioGold (V.NOX, C$0.32, 99.2M SO, 115.5M FD, C$31.7M MCap, www.niogold.com)
BUY FIRST TRANCHE: NioGold's JV partner on the Marban project, Aurizon, just got a takeover bid from Alamos, a larger gold producer. Aurizon has recommended that shareholders reject the bid, but if it or another offer goes through, the new company may be less interested in Marban, which has Aurizon spending a lot of money to earn in. If the Marban JV is terminated, NioGold would get 100% of Marban's two million ounces of gold, courtesy of Other People's Money. And if not, Aurizon, Alamos, or whoever will have to keep chewing through the $20 million earn-in. Either is very positive for NOX shareholders, but the possibility of getting 100% of the deposit back adds to the near-term upside, in our view.
Chief Metals & Mining Investment Strategist