Jocelyn August: Catalytic Events Moving Gold Stocks (GDX, GDXJ, AZK, CDE, PAL)
George S. Mack: Sagient Research Systems is known for its investor research in the drug and medical device field, but the firm has also tailored its scientific approach to market-moving catalysts in the precious metals industry. In this exclusive interview with The Gold Report, Senior Analyst Jocelyn August discusses looming events in a select group of natural resource stocks that are expected to move as information flows out.
The Gold Report: Jocelyn, you are following catalysts that affect resource stocks. Tell me about that.
Jocelyn August: We have started looking at catalysts in the natural resource sector. Originally, our CatalystTracker was designed to look at just medical devices and diagnostics as well as drugs and the catalysts involved in their development. But we did another impact study for the natural resource sector and identified some large-impact events in the minerals sector. Similar to drug and device development, you can follow a timeline for the development of a natural resource from the planning stages to exploration, and you can see similar catalysts in terms of the testing of the natural resources and results that might be announced. We think those types of events have large impacts for these companies.
TGR: And you publish on these events, right?
JA: We recently completed a Q212 Outlook Report for natural resources, and we discussed four upcoming gold catalysts for the second quarter.
TGR: Speaking generally for a moment to the differences between drug and resource development, I’m thinking that you have much shorter development times with mines than you do with drugs. Don’t you?
JA: It depends. I think there definitely are companies that have been developing a mine for a long time and have run into a lot of regulatory and permitting hurdles.
TGR: Can we talk about some of the impending events and companies?
JA: One that we highlighted in our report for gold was the General Metals Corp. (GNMT:OTCBB; GMQ:FSE). This is a very small company with a $5.8 million (M) market cap. It is working on the Independence mine project in Nevada. We expect it is going to announce a preliminary economic assessment (PEA), which is an important step in moving the mine toward production. It’s going to tell us if this mine is going to be economically viable in terms of development. So it’s a necessary step for moving on in the feasibility stage. It will be an important event for the company considering that that market cap is so small.
TGR: How important will this PEA be as a catalyst for General Metals?
JA: The company has announced that it does not have the additional funds to proceed with the plan of operation. So if the PEA is negative, then it’s going to be hard for it to come up with additional development funds. Because this is its only project in development right now, it might be forced to cut back or even cease operations if the PEA is negative. On the other hand, if it is a positive announcement, then this could be a major step for the company with pretty significant upside for that specific event. We think that that’s going to be happening in Q212 as well.
TGR: What else have you written about in your Q2 Outlook Report?
JA: We are looking at several different gold companies that have some updated resource estimates. There is a project in the Marban block in Quebec for Aurizon Mines Ltd. (NYSE:AZK). It has an option agreement with NioGold Mining Corp. (NOX:TSX.V; NOXGF:OTCPK) for this project. NioGold is currently the 100% operator of the project, but through its option agreement Aurizon can earn an additional 50% and then potentially up to 65% if it completes certain developmental milestones. So this updated mineral resource estimate for Marban would mean further fulfillment of the requirement for the option. It would mean that Aurizon would be at least a 50% operator here. That should work for both of them. That is also supposed to occur in Q212.
We also have an updated resource estimate projected for mid-2012 for Coeur d’Alene Mines Corp. (NYSE:CDE) for the Joaquin project, which is the gold and silver project in Argentina. It has already released some information on the estimate, and it is expecting to announce another update. That should give us a better indication of how much is actually present in that resource.
TGR: Coeur has a market cap of about $1.9 billion (B). How much can these catalysts mean?
JA: Coeur is a larger company with some other projects, but it should help give investors a better idea of where the company is going, how it’s continuing to develop its resources and continuing to make money. Obviously, all mines have a certain lifespan, and all these mining companies have to continue to find new areas to develop so they can make up for other mines’ production going down. It’s like a pipeline in drug development.
TGR: Is there one more you might mention?
JA: The only other one we have is North American Palladium Ltd. (NYSE:PAL). It’s a palladium company, obviously, but it is developing the Vezza mine, a gold mine in the Abitibi region of Quebec. The gold project is functioning as a diversification vehicle for the company, and we think that’s appealing. It is expecting to announce the start of commercial production in Q212.
TGR: Thank you very much.
JA: Thank you.
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 the University of California, San Diego and graduated cum laude from the University of California, San Diego with a Bachelor of Arts degree in sociology.
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1) George S. Mack of The Gold Report conducted this interview. He personally and/or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Aurizon Mines Ltd. Streetwise Reports does not accept stock in exchange for services.
3) Jocelyn August: I personally and/or my family own shares of the following companies mentioned in this interview: None. I personally and/or my family am paid by the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this story.
Related: Market Vectors Gold Miners ETF (NYSEARCA:GDX), Market Vectors Junior Gold Miners ETF (NYSEARCA:GDXJ).