Jeb Handwerger: A Surge In M&As Proves That Gold Is Back

Gold stocks have been trading at huge discounts for years, but even rock-bottom prices couldn't entice takeover bids until the market hit bottom. The bottom is now here, says Jeb Handwerger, founder of GoldStockTrades.com, and M&As are off to a roaring start this year. In this interview with The Mining Report, Handwerger predicts a new record gold price within 18 months, and presents a host of gold and other metal equities poised to take off in 2015.

Mergers and Acquisitions

The Mining Report: You're fond of the saying, "As January goes, so goes the year." Given how gold performed last month, up 8%, what does this tell you about the rest of 2015?

Jeb Handwerger: Going back over the last 100 years, the statistics are on the side of the sector that outperforms in January. And this January, precious metals and junior miners have taken off, breaking out against all major currencies. Gold bullion outperformed all other currencies, and it's also beginning to break out against the U.S. dollar. The gold price broke above the 200-day moving average versus the greenback, which many observers see as an indicator of the medium- to long-term trend. Since then it has pulled back to the 50-day moving average, which should act as support as it is begins to slope higher.

"Integra Gold Corp.'s Lamaque is one of the highest-quality assets in Quebec controlled by a junior miner."

We're seeing a big increase in mergers and acquisitions (M&As). In November, Osisko Gold Royalties Ltd. (OR:TSX) bought Virginia Mines Inc. (VGQ:TSX). In December, Coeur Mining Inc. (CDE:NYSE) bought Paramount Gold and Silver Corp. (PZG:TSX; PZG:NYSE.MKT). In January, Goldcorp Inc. (G:TSX; GG:NYSE) bought Probe Mines Ltd. (PRB:TSX.V) for $440 million ($440M). And in uranium, Uranerz Energy Corp. (URZ:TSX; URZ:NYSE.MKT) and Energy Fuels Inc. (EFR:TSX; UUUU:NYSE.MKT; EFRFF:OTCQX) merged. All this tells me there's been a sentiment change. Probe and Paramount were mentioned in last year's interview as takeout candidates.

TMR: Gold ended the month over $1,275 per ounce ($1,275/oz). Is this fact in itself significant?

JH: Yes. The price of gold seems to have stabilized, and now the miners are catching up. Keep in mind that the majors and midtiers have cut exploration budgets and now rely on the juniors to provide their replacement reserves and resources. That's why M&A has increased. This tells me that the junior miners are really set for a takeoff.

TMR: Could gold in the short term come to rival or even supplant the U.S. dollar as the ultimate safe haven, especially if the broader equity markets start to go south?

"Pershing Gold Corp. is a cash-rich company with strong shareholder support."

JH: I think that's the most likely scenario. The U.S. equity markets are strong, but the economic fundamentals are still weak. Christmas retail sales were not as good as expected. The strong U.S. dollar will result in a hard landing for the real estate market, which has been dependent on foreign buyers and is now overbought and expensive. This real estate correction could put pressure on the banks and the financial markets.

TMR: What effect will the oil price collapse have?

JH: It hurts the banks, which are sitting on bad loans possibly larger than what they had during the 2007–2008 credit crisis. And the collapse of the fracking sector means the loss of most of the only high-paying U.S. jobs created since 2008, not just the drilling jobs but also the ancillary jobs servicing that industry. I believe the unemployment picture is much worse than they realize.

TMR: The Federal Reserve has tied monetary policy to the unemployment rate. How will it react?

JH: I wonder how long the Fed will continue to allow the dollar to rise with all the other currencies crashing. The U.S. led the world in quantitative easing (QE) back in 2009. Now Europe and the Japanese are leading it. When will it be the U.S.'s turn to once again devalue its currency? The Fed could be forced to bring back QE. The central banks are trying whatever they can to boost demand, but it doesn't appear to be working.

TMR: What's your gold price prediction?

JH: I see it hitting new highs against the U.S. dollar—above $1,900/oz—within 12–18 months. Investors have been moving out of world currencies into the U.S. dollar, but eventually they will diversify into real assets and real money, and also into the miners and the junior miners. I believe we're in the early stages of a bull market in gold equities, which could last anywhere from five to seven years. I further believe that the gold price could possibly double to $2,600/oz.

TMR: Which gold juniors will flourish in the new bull market?

JH: Those companies that are marketable in the U.S. to the funds and to the institutions, which are the companies with proven management teams that have been able to raise money throughout the downturn.

TMR: Is Nevada still the world's best gold mining jurisdiction?

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Disclosure: None.

Kevin Michael Grace conducted this interview for Streetwise Reports ...

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