Michael Berry: $1,600 Gold in Reach
Source: Brian Sylvester of
The Gold Report
Gold is once again hitting new highs, closing at $1,589/oz. on
July 14. In this exclusive interview with
The Gold Report,
Dr. Michael Berry, principal of discoveryinvesting.com and editor
, predicts $1,700 gold by year-end and points to the juniors that
could bask in the enhanced glow of all the metals, including copper
: CANAMEX RESOURCES CORP. - FREEPORT-MCMORAN COPPER & GOLD INC.
GMV MINERALS INC.
- GRANDE PORTAGE RESOURCES, LTD. -
GUYANA GOLDFIELDS INC.
- QUATERRA RESOURCES, INC. -
- SACRE COEUR MINERALS -
SANDSPRING RESOURCES LTD.
- SOUTHERN SILVER EXPLORATION CORP.
The Gold Report:
Dr. Berry, you are going to go before the Federal Reserve and meet
with Congressional representatives on July 18. Could you give our
readers a Coles Notes version of what you plan to say?
I go before the Federal Reserve twice a year. In this presentation
on Monday, I'll talk about the geopolitics of growth in emerging
countries and issues related to the dollar, gold, convergence of
the rest of the world and the weak global recovery.
Monday afternoon, I'll head over to the House and meet with the
Chairman of the House Natural Resources Committee and Senator Lisa
Murkowski's (R-Alaska) natural resource staff to discuss extractive
resource policy, natural resource exploration in the U.S., critical
metals and what's really happening in the rest of the world
regarding resource nationalism.
I also believe I'll be meeting with Senator Murkowski's natural
resource policy representative, McKie Campbell. I'm trying to
educate the Congressmen and Senators and their staffs on how
important natural resources are to the U.S. and what's going on in
the world with respect to critical metals, metals supply and demand
and what policies we need to enact in this country.
Do you feel you've made progress toward legislation that's a
bit more pro-mineral development or metal development?
Yes, I think we've made some progress. It's a long education
process and it's difficult to do because you have to be
consistently in front of them. Congress has three bills pending
now-two in the House and one in the Senate-that relate to natural
resource development in the U.S. for critical metals. Not just rare
earth elements, but a number of others as well. They also relate to
exploration and development policy. I think we're making some
inroads with Congress and others in Washington. It's very important
that we keep that pressure up.
On Thursday, the price of gold for delivery in August flirted
with $1,600/oz., going as high as $1,594.90/oz. before closing at
$1,589.30. What is causing this continued upward climb and what
does it mean for juniors going forward?
There is just a tremendous amount of uncertainty regarding
the debt ceiling and the U.S. credit rating. That is pushing gold
and silver prices higher, which is positive for gold miners and
exploration stocks. Look for $1,700/oz. gold by the end of the
What happens if there is no third round of quantitative
easing and our elected officials come to an agreement on the debt
ceiling? Does the gold price climb lose its momentum?
Nothing is standing in the way of gold and silver going
higher. There will be some accommodation on the debt ceiling and
something will be done to try to keep the economy moving just
because no one wants to see higher interest rates. In the meantime,
investors have come to the realization that precious metals play an
important role in the portfolios of individuals, institutions and
countries, which are now buying large quantities of gold. It will
continue to hit new highs as the 250-day moving average is
In the second quarter, we witnessed a significant sell-off in
speculative positions in both gold and silver. Do you believe a
portion of that speculative money could find its way into
There's tremendous pent-up demand for copper around the world
because of emerging economies. It is also much more difficult to
make world-class discoveries today. I think copper prices will be
very strong. Metals like zinc are also really starting to look very
attractive to the exploration industry. There's a lot of potential
for discovery investment flows into some of the base metals,
including copper and zinc, and some of the special metals such as
manganese, vanadium and graphite.
Any discussion about copper has to include China. Beijing
recently raised interest rates to fight inflation, but the economic
indicators in China continue to improve and that ultimately means
greater demand for copper there. Will supply disruptions converging
with greater demand push the copper price above $5/lb. this
That is certainly possible. I can remember when copper was
$0.65/lb., so obviously there is real upward momentum. Copper is a
"quality of life" metal. Infrastructure can't be built-out without
copper. I think that prices are going to be quite strong as we
approach the fall season.
It is interesting to note that the Chinese started buying again
as the price of copper fell in the last couple of months. Their
demand is crucial. They are also bidding for copper companies
around the world. I think we're in the third inning of a very long
commodity supercycle in the world. Copper rightly will take its
place in that cycle. Copper miners in Indonesia and Chile are
experiencing labor problems as well.
Recently, China's Jinchuan Group trumped a $1B bid for the
African-focused copper company Metorex Limited (JSE:MTX; LSE:MTX).
Do you expect Chinese firms to take more runs at companies as a
means to lower the cost of copper?
I do, but I think the primary motivation of the Chinese is
going to be infrastructure build out. It's a huge country with a
growing middle class. Somewhere around $4 copper is probably very
cheap to the Chinese.
But it will be more than just the Chinese that come into this
game. Companies like
Freeport-McMoRan Copper & Gold Inc. (
are going to get involved because there just hasn't been a
lot of new high-grade discoveries that have been turned into
reserves. It's a very interesting game that's being played. Africa
is in play in terms of natural resources. No doubt.
Given the jurisdiction risk in Africa, could there be a bit
of a premium on western copper plays?
The Murkowski Bill, which passed in a unanimous, bi-partisan
vote but hasn't been signed by the president yet, should help ease
exploration in U.S. Some of the discovery progress in Arizona and
Nevada now is going to become increasingly sought after by
companies like Freeport, Rio Tinto PLC (NYSE:RIO; Paris: RTZ.PA),
even Barrick Gold Corp. (TSX:ABX; NYSE:ABX), and of course some of
the smaller copper companies. I think there's going to be a premium
on what's happening in the U.S., Canada and, to a lesser extent,
Which companies do you think could benefit?
One that I've followed for years and in which I own a big
Quaterra Resources Inc. (TSX.V:QTA, NYSE.A:QMM)
. It just exercised its option to acquire the Yerington Mine, which
was mined from about 1952 to 1978 by Anaconda. It's the most
significant land position in the Yerington District. Adjacent to it
is Nevada Copper Corp. (
), which has a huge skarn find. Rio Tinto has a 13% position in
Entree Gold Inc. (
), which acquired the Anne Mason Property in Nevada, also adjacent
to the Yerington Mine.
Yerington is the newest and safest copper district in the U.S.
It could realize 50 Blb. to 60 Blb. of copper. Anaconda mined 1.7
Blb. during its 25-year life. Quaterra went through the rigorous
process of taking this mine and property out of bankruptcy. It now
controls water rights and about 8 Blb. of copper. No one
understands this story, so the QMM stock is very cheap. I estimate
that Yerington, the Bear Deposit and its nearby open pit MacArthur
mine are worth $3 to $4 per share of Quaterra.
Another company that I follow closely is
Redhawk Resources (TSX.V:RDK; Fkft:QF7;
. Redhawk sits in the Copper Creek area of southern Arizona,
actually Pinal County, where several big copper porphyries are
located. It is drilling a huge defined copper and moly resource
there. The stock is trading around $0.50, so companies like
Freeport, BHP Billiton Ltd. (NYSE:BHP; OTCPK:BHPLF) and Asarco
Grupo Mexico, whose Hayden smelter is just a few miles away by
road, are likely to take a big interest in Redhawk.
That property has been thoroughly explored before. Is it
getting a second look because of where copper prices are right
There has been a lack of new high-grade discoveries lately,
so companies are coming back and readdressing some of the
properties where maybe $0.65/lb. copper didn't work, but $4/lb.
copper works beautifully. These are places that already have a lot
of infrastructure and safety isn't a risk as in Africa or
Redhawk said in its scoping study that it's going to need
about $400M to build the mine and mill there. Is it going to have
to do a joint venture or an off-take agreement?
I would imagine that Redhawk will not raise that kind of
money, but it may not have to build one. Several mills operate in
the area, including Asarco's Hayden mill, which would be a natural
fit. There's good transportation infrastructure and Pinal County is
all about mining culture. My guess is that the company will strike
a deal to use someone's existing facilities or perhaps be
Quaterra and Redhawk are fairly mature. Do you have any
Southern Silver Exploration Corp. (TSX.V.SSV;
, southeast of Tucson, Ariz., is in the early stages of exploring
for copper porphyries, specifically a Resolution-type target,
jointly with Freeport-McMoRan. I think it has a good chance for a
discovery at this stage on its Dragoon project. Freeport thinks
enough of it to be drilling it at this stage.
It's trading at about $0.17 a share, so it's certainly what some
of us would call a "penny dreadful." But I like the management and
I like their properties and they have several in addition to the
Arizona copper target.
You recently went to Guyana with a group of Chinese
investors. Guyana is starting to see some major gold projects come
into development, such as
Guyana Goldfields Inc.'s (TSX:GUY)
Aurora Project and
Sandspring Resources Ltd.'s (TSX.V:SSP)
Toroparu Project. However, I see a few challenges facing
companies looking to develop mines in Guyana. One is a severe lack
of infrastructure and a pristine rain forest environment. Another
is a shared border with Venezuela where several gold projects have
been nationalized by the Hugo Chavez regime. Also, the Guyanese
government is relatively unfamiliar with mining.
You're probably right about some of those concerns. There is
a lack of infrastructure. For example, when we flew into the jungle
GMV Minerals Inc. (TSX.V:GMV)
, we helicoptered in for about 70 miles. GMV has a huge land
position. I think it has perhaps one of the better chances to make
a significant discovery. I like the management team under Ian
Klassen very much. They just have a good idea of what's going on
I don't believe that Venezuela is a factor at all. I don't
foresee any problem with the Venezuelan government interfering in
the internal affairs of Guyana.
There are some health risks. Malaria and yellow fever are a
problem there. But I still think the glass is half full for Guyana.
Especially, if foreign companies-primarily Canadian companies-bring
their expertise, talent and jobs for the locals.
Is the government mining-friendly?
We met with the Prime Minister and it's fair to say that in
every developing country there are going to be nationalist
undertones. But the government is welcoming in exploration and
development. Some of the big companies, like Teck Resources Ltd.
(NYSE:TCK; TSX:TCK.A, TCK.B) and Barrick, are now looking carefully
at Guyana primarily because Venezuela is so inhospitable. The
government seems to know what it's doing with mining law. I don't
foresee that the taxes will be more significant there than anywhere
else in the world.
One of GMV's properties is right beside Guyana Goldfield's
Aurora Project. Is that property likely to become GMV's flagship
GMV has done the geophysics and flown almost the entire
country and analyzed the data carefully. No other company has this
database. The company has a better idea of where the gold veins are
located than anyone else there. The property it's working on now
has tremendous potential. We were there when it drilled its first
hole. It's going to be a while before we really know much about
GMV, but I really like its potential because it has a lot of
targets to drill. I believe the company will farm out some of the
properties and drill the best ones.
Can you tell us about Ian Klassen, GMV's head, and his
He's an experienced hand in Guyana. He's really done a
thorough job of working with prominent local mining families, soil
sampling, ground geophysics and airborne geophysics. He's kept
costs to $50/m on the drilling, which are relatively cheap. He's
just announced a deal with
Canamex Resources Corp. (TSX.V:CSQ; FSE:CX6)
for several million shares, where Canamex will take a GMV
property that is about 10% of its land position. He's very good at
monetizing some of the company's holdings that couldn't be utilized
in the near term due to the large size of its land holdings. Ian's
had a lot of experience in Ottawa with the Canadian government and
is moving forward with
Grande Portage Resources, Ltd. (TSX.V:GPG)
on the Herbert Glacier where they have reported visible gold
intersections. He's ready to create value for GMV shareholders.
You visited Sandspring's Toroparu gold-copper deposit in
Guyana on your previous trip. That junior recently released the
results of its infill drill program. Did you see those results?
I did. The company is getting one and two gram gold and has a
copper credit. It just needs to step out and keep drilling and it
will find a lot more gold. There's a lot of opportunity for the
companies already in Guyana with camps set up. Sandspring has about
10 Moz. in various resource classifications from measured and
indicated to inferred. I expect that it will get higher grades as
it keeps drilling. I've owned that stock for about two years.
Sandspring shares reached $3 late last year, but fell back
below $2.50. What's going to be the next catalyst to push
Sandspring stock above $3?
The next catalyst could be the discovery of a higher grade
system. Most of the share prices of these gold juniors, even the
ones with NI 43-101 resources, came off significantly in the past
few months. It wouldn't surprise me to see Sandspring go back above
$3. If the company keeps drilling and keeps adding resources, it's
going to get a significant premium on a takeout from a major player
at some point in time.
Are there any other Guyana-focused juniors that you're
Sacre Coeur Minerals (TSX.V:SCM)
was part of a controversial takeout by OAO Severstal
(LSE:SVST; RT:CHMF) that ultimately fell through. The stock is very
cheap. Coming down from a high of $1.57, it was recently trading at
around $0.40. The company's property is very close to GMV and
Sandspring's properties in eastern Guyana.
Recently, the Peruvian government rescinded Bear Creek Mining
Corp.'s (TSX.V:BCM) permit for the Santa Ana Silver Project in
Peru. Since then, the company's share price has plummeted to about
one-third of its previous value. Did that move send some shockwaves
through the mining investment community in South America?
Peru and Guyana are on the same continent, but they're almost
totally different in every respect. The Peruvian decision has sent
shockwaves through the mining community there. There's a lot of
gravitation to places like Colombia and Guyana and away from places
like Venezuela and Peru. However, Peru, Ecuador and Chile have some
of the great deposits and a lot of investors are willing to take
When something like this happens, there are shockwaves and
shockwaves scare investors. The Peruvian government is smart enough
to know that they need to attract money into the country. I'm sure
that Bear Creek will handle it well and its stock price will come
back over time.
Is there a risk of anything like that happening in
There is an election forthcoming in Guyana and things could
change. I don't think that they will change for the worse in
Guyana. The country recognizes the need to have their country
developed, to have capital coming in, to increase investment and
infrastructure. I expect the election will be favorable for mining
and offshore oil work.
Any parting thoughts for us, Dr. Berry?
Canadian Nobel Prize winner Michael Spence has written a book
on the coming convergence of the emerging world. I think we have
between 20 and 30 years. He thinks we have 50 years of this
convergence of emerging country quality of life. If that is true,
we have the next three to five decades of converging lifestyles.
That means that the commodity and natural resource sectors, in
particular the mining sector, will be a wonderful place to be
invested. And we're going to be there with the discovery investing
opportunity. We're going to focus and push very hard toward that
down the road.
Thanks, Dr. Berry.
Dr. Michael Berry
has lived in the U.S. for 36 years, but was raised in Canada.
A math major at the University of Waterloo in Ontario, he earned an
MBA at the University of Connecticut and obtained a Ph.D.
specializing in quantitative analysis and investment finance from
Arizona State University. He has specialized in the study of
behavioral strategies for investing and has been published in a
number of academic and practitioner journals. His definitive work
on earnings surprise, with David Dreman, was published in the
Financial Analysts Journal. While he was a professor of investments
at the Colgate Darden Graduate School of Business Administration at
the University of Virginia, Michael spent considerable time with
some world-renowned geologists on the Carlin Trend. While a
professor, he published a case book,
Managing Investments: A Case Approach.
Dr. Berry also held the Wheat First Endowed Chair at James
Madison University in Virginia, and managed small- and mid-cap
value portfolios for Milwaukee-based Heartland Advisors and
Chicago-based Kemper Scudder. His
publication, distributed worldwide, provides analyses
of emerging geopolitical, technological and economic trends, as
well as identifying opportunities for the Discovery Investing
strategy he developed. Dr. Berry has presented
to a subcommittee of the Natural Resource Committee and
U.S. House of Representatives.
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1) Brian Sylvester of
The Gold Report
conducted this interview. He personally and/or his family own
shares of the following companies mentioned in this interview:
2) The following companies mentioned in the interview are sponsors
The Gold Report:
Redhawk Resources Inc., Guyana Goldfields Inc., Sandspring
Resources Ltd., GMV Minerals Inc.
3) Michael Berry: I personally and/or my family own shares of the
following companies mentioned in this interview: Quaterra
Resources, GMV Minerals, Sandspring and Redhawk Resources. I
personally and/or my family am paid by the following companies
mentioned in this interview: Redhawk, GMV Minerals.
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