Why some gold mining stocks won't experience the usual summer lows...
LUKE BURGESS, investment director at newsletter Underground Profits, understands the intrinsic value of natural resources as commodities.
In this interview with The Gold Report, Luke Burgess gives his view on Gold Mining opportunities in the Yukon...
The Gold Report: Luke, unlike many newsletter writers who stick to a specific genre, you discuss equities involved in all kinds of mined commodities — gold, rare earth elements (REEs), uranium, iron, etc. Why are you so diversified?
Luke Burgess: Diversity is key in any kind of investing. I like the supply and demand dynamics of natural resources and commodities. If there's a supply deficit, there must be rising prices.
When we're talking about gold and specific resources, I go back and forth about when to invest. Right now, we're loading up on silver. When silver dropped from US$50/oz. to US$30/oz., I felt that that was an oversell. I wanted to get into something specific, so I went to primary silver stocks.
TGR: So, you play different movements in the market. What else helps you determine which equities to write about?
Luke Burgess: Right now, I'm interested in Yukon gold exploration because of the discoveries made a few summers ago. The Yukon has a long history of mining, but only a fraction of it is really explored; in fact, less than 3% of all the mineral occurrences there have been tested with modern techniques.
TGR: What do you consider modern techniques?
Luke Burgess: That would include geochemistry, soil sampling, geophysics — things of that nature. The Yukon is the world's largest deposit for placer gold. In the last 100 years of mining the Yukon, 15–20 million ounces (Moz.) of gold has been mined from the streams of Yukon rivers.
Generally, geologists believe the source of this placer gold is 10 times larger, which means there could be up to 200 Moz. of gold in the source.
TGR: That means upstream because placer gold is gold that's in rivers and streams.
Luke Burgess: Correct. The source of Yukon gold has never been found. But recent discoveries suggest that they're getting close to finding the source and these discoveries have launched a new Yukon gold rush. In an average year, maybe US$20–US$30 million is spent on gold exploration in the Yukon. This year, spending estimates are between US$330 and US$350 million.
With this amount of money being invested, I believe they're going to find something. I believe the market will see this as big news, will be excited and will invest in it. The excitement alone will drive investors and the retail market into Yukon gold stocks.
TGR: Is this a situation in which the rising tide floats all boats?
Luke Burgess: Well, you can't take just any Yukon gold stock and expect it to go up. You need to find out where the property is located, who's running the company, if it's had past successes, who brought the project to the company — things like that.
TGR: How is the Yukon gold rush different from those in Northern Ontario, Mexico or even Nevada?
Luke Burgess: It's different because of its massive potential. I don't think there's all that much potential in Red Lake, Ontario or Sonora, Mexico. I mean, if there really are 200 Moz. up there, I don't know why we're not spending $1 billion to find it.
TGR: Before we let you go, on the broad-stroke level, do you expect good buying opportunities over the summer months?
Luke Burgess: The expected summer low for juniors tends to become a self-fulfilling prophecy. Sell in May and go away happens every year. But particular markets — specifically, the Yukon gold stocks — won't experience that low. And, if we see silver spike up to $50/oz., we'll see silver equities go up along with it.
TGR: So, the summer low may depend on specific plays and commodities. Luke, thank you for your time and insights.
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