What Does 2014 Hold For Metals? [Goldcorp Inc. (USA), Agnico Eagle Mines Ltd (USA), Barrick Gold Corporation (USA)]

gold silver metalsEric Lemieux, a mining analyst with Laurentian Bank Securities in Québec, is a realist, which makes his optimistic outlook for miners in 2014 that much more compelling. Lemieux believes that with the wheat separated from the chaff over the past tumultuous year, the truly strong companies have emerged. But you may be surprised by the jurisdictions he predicts will come to life in 2014. Lemieux makes some startling, but happy forecasts in this interview with The Gold Report.

The Mining Report: Eric, your top stock pick in 2013—Virginia Mines Inc. (VGQ:TSX)—outperformed the S&P/TSX SmallCap Index. What’s your recipe for picking stocks in 2014?

Eric Lemieux: The secret to success in picking stocks in 2014 will be simple: management. The senior vice president of Laurentian Bank Securities, who recruited me, asked me a question during my interview way back in 2007: What was the most important element when I was looking at a company? I started to talk about some financial ratios, etc. He began to laugh. He said there are three things: management, management and management. I know that’s easy to say, but it is true. It is the team that’s behind the company. That’s the most important secret for success.

TMR: What’s your top pick for 2014?

Our top pick remains Virginia Mines Inc. because the company has an exceptionally well-managed team and a focused business model.

EL: It remains Virginia Mines because the company has an exceptionally well-managed team and a focused business model. CEO André Gaumond has said he wants to be at the beginning of the food chain and the end of the food chain with a royalty portfolio. I think he is adamant about applying what he’s good at and that’s being a top explorer and being able to decipher royalty portfolio opportunities. He has always said he is not a producer and I respect that. So far he has been proven right. That should remain the same in 2014.

TMR: The royalty that you’re referring to is Goldcorp Inc.’s (NYSE:GG) Éléonore project in the James Bay region of Québec, which should go into production in 2014. What’s interesting is that some exploration done by Goldcorp seems to have delineated an entirely new zone of mineralization. What do you know about that?

EL: Goldcorp disclosed a new zone called 494, which would be about 500 meters (500m) north of the Roberto zones. It appears as a new ore shoot. It still has to be fully defined, but the hypothesis is that its geometry looks to be another Roberto. It’s most interesting because it’s not too far from the mining infrastructure that’s being built. It could effectively double the size of Éléonore; which is also wide open at depth. That deposit is set to grow.

The key catalysts for the Éléonore royalty in 2014 are 1) new reserve and resource numbers that most likely will be disclosed by Goldcorp in February and 2) the start of production by the end of the year. There could be a major rerating of the value of Virginia’s royalty. It is tremendous. I think it is going to be a world-class operation soon.

TMR: You’re predicting an average gold price of $1,400/ounce ($1,400/oz) in 2014. That’s down from the previous estimate of $1,750/oz. Nonetheless, most observers would call $1,400/oz optimistic given the current spot price. What gives you confidence that the gold price will rise in 2014?

EL: I’m fairly optimistic. The price of gold is gravitating around $1,200/oz, so there’s a substantial difference. I’m looking at the global picture. Yes, the price of gold has gone down, but it’s approaching a floor of production costs. By midyear the price of gold will be higher.

TMR: Many of the companies you cover operate in Québec, which just passed a new mining act. Is that good news for investors?

EL: By and large, all this is good news for companies operating in Québec. It’s not perfect. There are a few irritants, but it is a middle ground—a relatively well-balanced law.

TMR: An application for a mining lease now requires a feasibility study. What do you make of that?

Pages: 1 2 3 4

Leave a Reply

Your email address will not be published. Required fields are marked *