Successful entrepreneur turned bullion dealer Greg McCoach brings more than 20 years of business experience, a vast network of mining contacts and his unique precious metals industry insights to the mining investment newsletter he launched in 2001, The Mining Speculator. In this exclusive interview with The Gold Report, Greg outlines the ‘new’ criteria for junior miners, explains why he favors the juniors over more senior producers and advises a combination of both physical metal and stocks for investors to protect themselves in today’s market.
[Editor’s Note: Please click here for Part 1 of this interview]
TGR: Let’s talk about some of the companies on your top 10 list. Pediment Exploration Ltd. (TSX: T.PEZ, Stock Forum) is at the top; can you give us an update?
GM: Since they bottomed, Pediment has more than doubled. They’re hanging around the dollar trading range, which some people have been disappointed with. But what I say is, look, Gary Freeman, the CEO, is just weighing his options right now. He’s not making much in the way of news. That’s okay. He’s lying low, he’s looking at his options right now, and this is a company that is about to release a new 43-101 that will have more than two million ounces of gold in the ground. This is a verified situation. That’s a significant number because once a company, a junior, crosses the two million ounce gold mark, it gets on the radar screens of the majors.
Gary has a lot of things he’s weighing out. After the market meltdown, he decided to reduce costs, get things trimmed down, and get the burn rate really low to conserve cash. So, in the last few months there has not been much in the way of news. The company is lying low for now, but I think you’re going to see that change as PEZ announces their new 43-101 resource calculation. At that point I think you’re going to see Pediment start to have a lot of news flow, which should be very good for the share price.
He’s got the Baja property we just talked about that’s going to have the new 43-101. I don’t see how it’s not at least two million ounces based on my back-of-the-envelope calculations, but you never know with these things until they actually come out. I would guess it’s going to be over two million and there’s plenty more to be discovered there. In my opinion, this deposit could be greater than three million ounces before all is said and done. Well, that’s a major discovery. It’s in the right jurisdiction, with very low development costs and it’s in an existing mining area, so it should do very well.
Now, Pediment also has a project called La Colorada that could be a near-term producer. It’s the old open pit that El Dorado Gold Corporation (TSX: T.ELD, Stock Forum) produced from, which really made El Dorado Gold what they are today—what launched them—that discovery and putting it into production. Pediment now controls it and other people are interested in it. Should Gary vend it out to somebody else, take the cash and run, or should he develop it himself? He has lots of options. He has lots of cash. He has lots of great properties. Gary has many different things he can consider at this point, so I think he wisely just stepped back, started to look through everything that he has and what options are available. We’ll see what happens but the prospects for the company look very good.
I’m sure there’s been interest by majors already on the Baja Project. He’s probably gotten plenty of calls, where the majors are already saying, "Hey, look, what if we just take you out at this price?" Is it high enough? Is it worth taking the money now and running, letting somebody else deal with it? Or is it better for the company to go down the road a little bit further, develop it themselves in the hopes of getting a much higher price later on? These are things we all have to weigh out. Is it better for us as shareholders to take the money and run right now, even though we might get a lower price for it? Or should we wait a little bit longer, and get a higher price when they develop it? These are things we have to look at. So, with that being said, in my opinion, as we see these higher gold prices and with the news that’s about to come out, I think Pediment’s a two dollar stock in the next six to eight weeks.
TGR:Capital Gold Corp. (TSX: T.CGC, Stock Forum) is also on your list, correct?
GM: Yes, and as Capital Gold runs up to the 90 cent level—it was recently in the 80 cent range—as it gets close to 90 cents Canadian, I’m telling people to start selling, start taking some profit. What’s going to happen is the company is going to do a reverse stock split, which is going to be a minimum 4:1 stock split. These stock splits are always negative for current shareholders. Let’s just say they decide to do the reverse split at a dollar. They’ll reduce their outstanding shares by 75% and the stock would be at four dollars at that point, which would get them their AMEX listing (which is a good thing), and that’s why they want to do it. But, typically, what happens, after they do a reverse split, the stock gets hammered. The four dollar share price gets leveled and it usually retracts to a level that is very damaging to current shareholders. So this is why I’m saying take some profit as Capital Gold gets over 90 cents, hold the cash.
I think Capital Gold is worth holding in the portfolio, but wait ‘til after the reverse split and the detrimental effects that reverse splits typically have on share prices. Wait for the share price to retract, and then buy in again because I think Capital Gold will be a good company to hold. I just think you should take some profits at this point.
TGR: What about SilverCrest Mines Inc. (TSX: V.SVL, Stock Forum)?
GM: Silvercrest is a great story. Their production scenario at Santa Elena in Mexico is a high-grade silver-gold kind of scenario. They just came out with their resource update. The resource is growing and the project should be in production by the end of 2009. Things are looking very good so I’m going to keep the company in my portfolio. This resource should grow with time. It’s got all the things that the market’s looking for—precious metals-oriented in Mexico, near-term production and the company should have cash flow.
TGR:Riverside Resources Inc. (TSX: V.RRI, Stock Forum) just joined your top 10 list, right?
GM: Yes, they made their entry into the top 10 because they have shown me that they know how to manage the prospect generator model with success. The CEO, whom I like very much, really watches and guards the treasury and watches out for shareholders. He’s managing his properties very well, and I think he’s got not just one but possibly multiple discoveries. And this is what you want with a junior exploration stock. Some people say, "Greg, don’t you want to have people who have a production cash flow?" Yes. We’re going to have some of those in the portfolio, but the exploration companies—the good ones that can make the discoveries—is where you get the biggest leverage of all. And I think Riverside is in that category. So they are now number nine on our top 10. I like them very much and I think it’s a good play.
TGR: Can you talk about another from your top 10 list— Allied Nevada Gold Corp. (TSX: T.ANV, Stock Forum)?
GM: Allied Nevada is a good story because they’re getting the Hycroft mine back into production. It’s going very, very well. The stock price has rebounded very nicely, and I think it’s probably poised to make a new high. Now we saw some selling pressure, some people were taking profits in January and early February as the stock was recovering; but now I think that selling pressure is gone and the stock is back up over the $6 level again. With higher gold and silver prices, I think you’re going to see Allied make a new all-time high and I wouldn’t be surprised to see the stock at $7 or $8. So there could be a profit opportunity on that one coming up here.
TGR: Now Vista Gold Corp. (TSX: T.VGZ, Stock Forum) is not on your top 10 list, but you cover them, correct?
GM: Yes, I like Vista Gold. Allied Nevada and Vista used to be one company before they did the split. The better properties I thought went with Allied Nevada, but Vista Gold still has plenty of good situations. Their model of acquiring cheap gold ounces in the ground, increasing the value of them in a market where gold prices are going higher, is a very valid market. They have a good share structure, they have cash in the bank, and they’re a very well-managed company with top management talent. So, with higher gold prices, that model should do very, very well.
They’ve got multiple projects with big gold deposits in Australia at the Mt. Todd deposit, which is a six million ounce gold resource. They’ve got the Awak Mas property in Indonesia that is a very large holding of gold. And higher gold prices make these kinds of projects worth more and more. They’ve also got some great projects in Mexico next to Pediment’s project on the Baja. They have the Paredones Amarillos Project, which is kind of waiting on a permit situation that they thought was already done years ago that seems to have had a little glitch there, but that’ll get worked out. And they’ve got some other good projects in Idaho and one other one (I can’t think of it off the top of my head), but it’s a good scenario and that model should work well. If you believe in higher gold prices, Vista Gold should do very well.
TGR: Greg, this has been great. We appreciate your time.
For additional comments on Romios Gold Resources Inc. (TSX.V:RG), Copper Fox Metals Inc. (TSX:CUU), NovaGold Resources Inc. (TSX:NG) (AMEX:NG), Pediment Exploration Ltd. (TSX.V:PEZ) (OTCBB:PEZFF), El Dorado Gold Corporation (ELD.TO) (AMEX:EGO), Capital Gold Corp. (TSX:CGC), SilverCrest Mines Inc. (TSX.V:SVL), Riverside Resources Inc. (TSX:RRI), Allied Nevada Gold Corp. (TSX:ANV) (ANV), and Vista Gold Corp. (TSX:VGZ) (AMEX:VGZ), from newsletter writers, money managers, and analysts, click on the respective links or visit The Gold Report.
Greg McCoach is an entrepreneur who has successfully started and run several businesses the past 22 years. For the last eight of these years he has been involved with the precious metals industry as a bullion dealer, investor, and newsletter writer (Mining Speculator). Greg is also the President of AmeriGold, a gold bullion dealer..
Greg's years of business experience and extensive personal contacts in the mining industry provide unique insights that have generated an impressive track record for The Mining Speculator since its inception in 2001. He also writes a weekly column for Gold World.
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