Quality Gold Juniors Poised to Soar: Lawrence Roul Quality Gold Juniors Poised to Soar: Lawrence Roulston
Source: Zig Lambo of The Gold Report (2/29/12)
The Gold Report: Quite a bit has happened on the international economic and geopolitical fronts since you last spoke with The Gold Report in January 2011. In your view, how have these things affected the markets for precious metals and junior resource stocks?
Lawrence Roulston: Of course, most people who have invested over the past year have probably suffered some pretty serious losses and may be wondering why they ever got into this business. From where we sit now, I think the worst is over, and I'm very optimistic about what's coming up in the near term. There was a tremendous amount of uncertainty over the last year with the euro, the dollar and the growing debt levels.
Gold and silver, of course, have again become a safe haven for investors who are concerned about all of this uncertainty, reflected in very strong metals prices. Governments both here and in Europe are throwing out trillions of dollars and euros in bailouts to prop up failing companies and countries. Longer term, that's going to have a tremendous impact through devaluated currencies. That brings us back to gold and silver, not just as safe havens in the near term, but also as long-term hedges against currency devaluation. So that is very positive for the precious metals markets.
In the meantime, the companies that are involved in these metals were clobbered last year. Investors wanted the security of bullion, but fled from the risk of equities. But it's very clear now that the equity prices are coming back. Over the past couple of weeks, we've seen fairly strong growth in trading volumes and prices, which are starting to trend higher. I think now is just absolutely the best time in years to be getting into the market with the major risk factors being more-or-less put aside and stock prices beaten down to a level where there's tremendous value.
TGR: One hopes a lot of these juniors will be able to benefit from some of this market movement, too, because a lot of the really cheap stocks don't seem to have any ability to go anywhere regardless of what kind of news they come out with.
LR: We're in an early-stage recovery here. The smart money always gets in first—the people who are closest to the industry, who understand it. A lot of sophisticated investors who've been waiting for the opportunity are the first ones to make a move. These are the people who are best able to judge the companies and pick the high-quality ones from the also-rans. Typically, in the early stages of recovery like this, it would be the higher quality companies that get the early attention for their long-term potential. Some of the companies in this business don't deserve to be here at all. They will eventually get recognition, but it's going to be later, once the recovery is well underway.....
..... Another example is Smash Minerals Corp. (SSH:TSX.V). Investors are giving very little credit right now for the project that's held by its merger target, Prosperity Goldfields Corp. (PPG:TSX.V). Prosperity has made a very substantial gold discovery in Nunavut in Northern Canada, but it's in a far-off place and early stage and not getting much credit. Investors will soon realize that the Nunavut discovery is actually far better than the early-stage results that came out of Underworld Resources Inc.'s (UW:TSX) discovery that kicked off the Yukon Gold Rush. Those are just some examples of the kind of stories that should attract a lot of attention as investors come back into the market, which they're beginning to do now.
TGR: When would you expect that people will recognize these companies and really get onto them versus the companies that are getting most of the action these days?
LR: Newstrike is getting significant recognition now. It has a multi-hundred-million-dollar market value in advance of any kind of formal resource. So there is potential for a company to get that kind of valuation even in a really bad market. The other ones are starting to move. I think within weeks those companies are going to start to get much higher valuations than they're getting now.