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Survival Week: Precious Metals Hang In There, Brace for December Expiry - Weekly Wrap-Up (November 22, 2019)

Survival Week: Precious Metals Hang In There, Brace for December Expiry - Weekly Wrap-Up (November 22, 2019)
By Craig Hemke 23 days ago 268865 Views 4 comments

November 22, 2019

As The Weekly Wrap-Up heads into an off-week due to the American Thanksgiving, Eric Sprott and host Craig Hemke deliver an extra-long shot of all the gold and silver news you need.

In this edition of the Wrap-Up, you’ll hear:

  • The 2020 outlook for precious metals
  • Why you should support the Save Canadian Mining initiative
  • Plus: The overlooked value Eric considers before investing

“Just surviving this huge December expiry is very, very critical. I mean, we’re down to what? About 230,000 contracts still open in gold, I think, on the December contract. That’s 23 million ounces. I mean, that’s a lot of money. We have a huge open interest… Well, we hit record open interest during the week! It came down yesterday, but it’s way up there. So there’s some kind of titanic struggle going on, but I think particularly in silver.”

Listen to the Weekly Wrap-Up on: iTunes SoundCloud Spotify Youtube

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Since 2008, our customers have trusted us to provide guidance, education, and superior customer service as we help build their holdings in precious metals—no matter the size of the portfolio. Chairman, Eric Sprott, and President, Larisa Sprott, are proud to head up one of the most well-known and reputable precious metal firms in North America. Learn more about

Transcription

Announcer: You are listening to the "Weekly Wrap-Up" on Sprott Money News.

Craig: Well, happy Friday from Sprott Money News and sprottmoney.com. It is Friday. It's November 22nd, 2019. It's time for your "Weekly Wrap-Up." I'm your host, Craig Hemke, and of course, joining me this week is Eric Sprott. Eric, happy Friday to you.

Eric: Hey, happy Friday to you too, Craig. And you know, to me the week feels like a survival week. You know, we knew that we're kind of set up that bad things could happen on the COMEX. And so far, they haven't happened. So, touché to that and we got about four more days before the December contract expires. So, let's see how we do here.

Craig: In the U.S., it's also survival week. We got a lot of relatives and family coming next week too, Eric. So, yeah.

Eric: Yeah.

Craig: Yikes. Anyway, it is that time of the year, though. It is the holiday season and it's time for the Sprott Holiday Catalog. We talked about the PAMP Suisse bars last week that Sprott Money now has. It is definitely time for silver bar. Check out the Sprott Holiday Catalog at sprottmoney.com. This year, we've made online shopping easier and fun with that interactive online catalog. In it, you'll find unique gifts to treat your friends, family, even yourself. Eric, I think I'll buy you a silver bar. Would you like some silver for Christmas?

Eric: We can trade silver bars. I've got lots of silver bars here. I get a lot of them with my name on them too. And of course, they sell Lowe's there as well.

Craig: Let's do this. I'll ship you one of the ones I have and you could ship me one of the ones you have. I bet yours are a little larger than mine, so that'd be a good deal.

Eric: Well, mine are 10-ounce bars.

Craig: Aw. Okay.

Eric: I also have 1,000-ounce bars. Would you want me to send you a 10,000-ounce bar?

Craig: Yeah. Yeah. My friend, like you said...

Eric: Okay, man.

Craig: ...that 1,000-ounce bar is hanging in there, in terms of value so far this week. What are your thoughts? What have you seen this week?

Eric: Well, at the outset, as I said, I mean, just surviving this huge December expiry is very, very critical. I mean, we're down to what? About 230,000 contracts still opening gold. I think on the December contract that's 23 million ounces. I mean, that's a lot of money. We have a huge open interest. Well, we hit record open interest during the week. It came down yesterday, but it's way up there. So, there's some kind of titanic struggle going on I think particularly in silver. Because silver open interest is hardly budging here and the price has moved up a little this week, I believe, net. And then the way the playing field sets up is the commercials are always the shorts...the banks are the shorts and the speculators and funds are the longs and so far, you know, it's a soft. But there's. . .if anybody asked for delivery here, it could change things dramatically. So, we'll see.

Craig: Yeah. We will see. It will be interesting. We've got Option Expiration, the COMEX on Monday, just for everybody keeps track of that. And we've got a market holiday, U.S. Thanksgiving next Thursday and then those December contracts officially go off the board and delivery next Friday. So, we've got all of that on the calendar ahead of us next week. A lot of lousy economic data this week, Eric, out of the U.S., which would foreshadow more QE, lower rates next year. But in the meantime, it seems it's all about the trade war. That's all that matters.

Eric: Well, the market seems to have a life of its own and a mind of its own here as you and I have discussed many times. I mean, there's plenty of signs that there's weakening in the economy. Probably the most notable one is the GDP. Now statistics that we see, where two of the reserve banks are suggesting GDP might grow like .3% or .4% this quarter, which is very weak. We see all sorts of data in the transportation area with transportation, whether it's car loadings, truck haulage, truck sales, whatever it's all falling on some stores that come out and have disappointed Home Depot, Kohl's. Even, you know, Nordstrom and Gap both reported today and the market seemed to like them. But Nordstrom's sales were down 2.2%, and Gap's were down 4%. So, you know, it's amazing how you can announce ahead of time, you're going to have a weak quarter. Everyone adjusts their earnings estimate and then you beat it. And, "Oh, they beat." You know. But anyway, they're just poor quarters.

So, I think the other noteworthy thing is that Bitcoin is getting beat up quite a bit here now. I think I saw trading at $71,000 or $7,200. So, the trade deal comes and goes. It doesn't sound like, you know, they're really making any headway there. So, not much to grab on to if you're a bull because the earnings weren't great. The outlook seemed to be weakening through time. So, maybe this market will have to prove itself. The whole Unicorn thing looks like it's dead, you know, whether it's Uber, or WeWork, the whole SoftBank thing. Maybe even Tesla as I keep watching this stone hitting the window of the new Tesla truck. The window keeps smashing every time I watch it. Anyway, yeah.

Craig: I gotta get me one of those broken windows.

Eric: Yeah. You better get one. Yeah.

Craig: Yeah. I gotta one as fast as I can. Kind wrap this back into to the COMEX. Are you thinking as I am? We get these explorations behind us, we get into December, we get some tax-loss selling behind us. As people began to look into next year, again, the out looks a lot like this year. The economy is slowing, more QE, more rate cuts. I don't see any other path, do you?

Eric: No, no. There can be no other path because around the world, everything's cooling out, right. So, every central bank in the world is trying to support their economy. And of course, there've been many, many great articles written about the fact that, you know, as you get this more and more debt out there, it's harder. You've got to keep printing more each year to support the market because the debt keeps going up. So, I mean, we might end up like, you know, Weimar Germany here. We can hardly print this stuff fast enough. But that's I think what our future is.

Craig: Yeah. Yeah. Even Chairman Powell was warning about that last week that the debt is just growing too fast, but you know, they're there to print the money if they need it. Hey, one more thing before we start getting into the questions. I wanted to lay this on you. We are almost on our two-year anniversary, Eric, of you asking me to keep track of the exchanges for physical every day. Remember that?

Eric: Yes, sir.

Craig: It was 2017 when all of a sudden, we started seeing 10,000, 15,000 contracts a day show up in the exchange for physical category, which allegedly is...we never really even gotten to the bottom of it. It's like you're swapping a COMEX contract for some GLD or...

Eric: Who knows?

Craig: Who knows?

Eric: We still don't know.

Craig: All right. So, on November 24, 2017, you said, "Why don't you start keeping track of that?" Let's see what the total is. All right, Eric, it's been almost two full years. You want to know the total?

Eric: I do.

Craig: As of yesterday, through yesterday, 4,420,395 COMEX contracts have been exchanged for physical.

Eric: Wow. Four hundred million ounces.

Craig: That's exactly right. At 100 ounces per contract, that's 442 million ounces. And, I'm sure you've already done the math. That is 13,750 metric tons.

Eric: Yeah. Well, that's five years of production, right?

Craig: Yeah.

Eric: Something like that.

Craig: If anything shines a light on what a scam,that whole COMEX thing is.

Eric.

Craig: Okay. All right. Eric, I've got a whole list of questions for you. But before we get to them, I want to ask you about something you're involved in because it directly relates to so many of the shares and people need to get behind this. And it is the Save Canadian Mining initiative. What can you tell us about that?

Eric: Sure. Well, I got a call a couple of weeks ago by a fellow named Terry Lynch. He said, "Well, we want to try to reinstate the uptick rule in short selling." And I said, "Man, that would be the most important thing that can happen." Because an uptick rule only allowed you to short when a stock on the previous tick had gone up, so you couldn't just hammer it down. Okay? And those of us in the small-cap area, we see all too often stocks just getting pounded. We had one yesterday with [inaudible 00:08:41] I talked to Wallbridge, which went down 15% in one day. Like, what the hell is going on here? And in an hour almost, right? Like, it's ridiculous. Who would do that? Who, trying to sell to make the most money would do that? Only the guy who's shorting it. So, we started this campaign where we're going to ask the regulators, the politicians, companies to support us, individuals to support us, to try to reinstitute that uptick rule because it just gives the shorters whose only intent is to destroy value. What a wonderful calling in life. Your intent is to destroy value.

It just, you know, gives them just too much of an open playing field to hammer on things. And I think, you know, this rule was in place for like 100 years, if not more. Because people always knew that if you let people just pound on things, it's always like the explanation follows the performance. You know, why did Wallbridge go down 15% yesterday? Well, because of this, this, this, and this. Well, what if it...Because none of those are the reasons of course. But it's just because the guy hammered it down. So, people make up reasons. In fact, the short-sellers start going to the chat boards and making up all sorts of bullshit about why the stock's down and then get other people to sell it. So, it's horrible where we've gone with all of that and I'd like to see it change. And if you go to savecanadianmining.com you can, I think, press on a form there, where you send your name in and I would encourage the listeners to do that.

Craig: Absolutely. One hundred percent. All right, my friend, some general questions first and then I've got a list of...what do we have? Six miners that you can comment on. First of all, a questioner wants to know, what is the approximate price the Market Price has been paying for 43-101 gold ounces in the ground?

Eric: Yeah. Okay. Well, what's the market paying?

Craig: Yeah.

Eric: The market doesn't pay what the guy taking them over pays. Okay? That's the first thing. Because maybe the market pays some cases, $50, maybe some cases, $100. I don't think much more than that. But there've been take-outs where the guy taking them out will pay a $200, $300. And I would point out that even in answering the question, not all ounces are the same. And when I get to discussing Wallbridge later on, I will very, very, very much make that point. So, some ounces are worth a hell of a lot more than other ounces.

Craig: All right. How about, the value and the importance you place upon jurisdictions, countries, where miners are located when deciding to make an investment?

Eric: Yeah. Well, I must admit, I don't like investing in places where some guy is the president, or premier, or whatever, then the other guy gets elected and he changes everything, and/or there's corruption. And of course, that happens in some continents more than others. So, I primarily stick with North America, including Mexico. I don't mind some South American investments, but some countries are a little more than other ones. I tend not to go too far east of Toronto. You know, some of the Eastern European countries I get concerned about sometimes or a communist-dominated country. So, no, it's a starting factor in all decisions. You know, you have to wait the risk-reward and the risk with, you know, a government that just comes along and changes the rules. It can be devastating. So, it's like what's happened in Burkina Faso all of a sudden, it's not even the government has changed. It was a very good place to invest in the gold mining business. Next thing you know, they got a bunch of radicals there shooting up buses and killing all sorts of mineworkers. So, it can happen in a heartbeat. So, you gotta mind where you are investing.

Craig: All right. And then one extra question, just basically, you invest a lot of explorers, things like that. How often do you run into a situation where the drill result looked great, but the company ended up in bankruptcy because they kept drilling and they never found the actual gold or silver?

Eric: Well, all I can say, Craig, is if you find the gold and it's economical, someone will care about it. Okay? Someone will care about it. In other words, you won't go bankrupt. If you didn't find the gold, of course, that's a whole different story. So, people aren't necessarily gonna keep throwing money at a campaign that's not producing results. So, a guy might want to drill more because he says, "I think I'm going to find it." But you know, it's sort of fool me once sort of thing and I'm not going there the second time. So, anyway, most good companies survive, most ore bodies survive that are economical. And there's various reasons why some ore bodies that might've been considered uneconomical come back to be economical. And of course, the biggest one is the price of gold going up. And/or, you know, a change in political environment. There's lots of reasons why all of a sudden you might go back somewhere and look again, where it had gone bankrupt before.

In fact, I think, Kirkland Lake has gone bankrupt a couple of times, if I'm not mistaken, way back when. Of course, the price of gold back then was, you know, $25 or something an ounce. But there's lots of history of guys going broke, but it's not...if you're making money, I don't think anybody's going to be going broke here.

Craig: Right, exactly. All right. And before we get to some of these specific shares, just a reminder, a couple of things. I've got maybe 20 of them this week. I want everybody listening to know that if you submit a name, I do ask Eric about it and if he does not have an opinion, if he doesn't know anything about it, we don't talk about it. So, I don't want anybody to think you're being ignored. We just simply can't get to all of them in that kind of sense. Eric, before we get going, I want to double back to something we had last week because a lot of people...you know, we were talking about Wallbridge and Balmoral. And we talked about Wallbridge, but we never got a chance to talk about Balmoral. So, if you could go there again for us

Eric: Sure. Sure. Well, as people...Oh, let's see. I'm trying to think of a...No. Okay. You know what? I probably shouldn't comment on Balmoral this week. I will for sure next week. Okay?

Craig: Okay.

Eric: I think I have to leave it at that.

Craig: All right. How about Wallbridge? Do you want to...

Eric: Yeah, sure. No, I do want to talk about Wallbridge. Yes. And of course, I know lots of the listeners care about Wallbridge and perhaps a lot of them are invested in Wallbridge. And the first thing I want to say about yesterday's actions, I've been, "Oh my God, I wish I could buy this stock." Well, I'd love to be able to buy this stock. Of course, I can't because I'm over a certain threshold. And I do believe it's a bear raid. And I want to tell you that having spent probably another six, or seven, or eight hours looking at Wallbridge subsequent to the last news release, and kind of putting together what they have, and when I look further at the drill intersections, I would much rather explain it as over 11 meters of 80 grams. Eleven meters of 80 grams. That's two-and-two-thirds ounces. Okay? Better than the average grade at Fosterville, this swan zone, better than. Okay. Then they come out and say, "We've done 100-meter undercut and it has 13 meters of visible gold, and sulfites, and things like that, but we don't have an asset yet." Then they said, "We stepped up 70 meters over here, did an undercut, and it had 30 meters of visible gold and sulfites."

Now I can tell you that 200 meters by 200 meters by 10 meters gives you a million tons, okay? That's just simple math if you put the specific gravity in. And now if you've got a million tons, if they were even just an ounce, you got a million ounces, okay? A million ounces is worth $1.5 billion U.S. For the Canadian listeners, $2 billion. Wallbridge is trading at under $300 million today. And this could be mined...an area, 100 meters by 100 meters by 10 meters could be mined in two years. So, you can mine your million ounces in two years at 500 tons a day. And it's all you have to do. That's what they were already mining in their bulk sample. So, that'd be the simplest thing in the world. And it would make...I mean, if it was something like 80 grams, they'd make 75 grams of profit. Okay? So, on the $2 billion of Canadian revenue, they'd make about $1.8 billion of pretax profit. And when I say, some ounces are more valuable than others. When an ounce can net you $1,300, you pay more than $100 for it in the ground.

But there's lots of ounces that, for example...and I'm not picking on Detour, but it's on the same formation we are, where they have the low grade of big open pit and they make about 15% on the dollar of sales. So, essentially, they're making 200 bucks an ounce net profit. Okay? Net profit. So, you know, what are you going to pay for somebody who makes 200 net profit sometime in the future? I don't know whether you're gonna pay more than 100 bucks today because you got to wait for this stuff. In fact, this stuff that Walbridge has, we're not going to have to wait. And what if the 200-meter undercut that they're now drilling hits? If it hits, you double all the calculations I just made. You double them.

So, you could be looking at, you know, $2.7 billion U.S. of net realizable pretax value. Sure, that might take you four years to get it our. Big deal. But those grades are so special. So, I just love what's likely to happen here, notwithstanding what happened today. I mean, those guys, I just love them to phone me up and short me 5 million. It was that last week. And I guarantee, if I could be buying it, it wouldn't be trading here. So, there we go. That's Wallbridge. Okay.

Craig: Okay. And I've got five remaining. So, I'll just try to go through these as quickly as we can. How about Moneta?

Eric: Moneta, low-grade property in Canada. I think that one time they sort of suggested they might have, I think, 5 million ounces, but the new management thinks, "Well, we think we can get it more to like a million ounces, but higher grade and therefore, a much more profit." So, hopefully, if the gold price keeps going, more interest will happen there soon. I own it.

Craig: We haven't had a chance to talk about Novo Resources down in Australia for a while.

Eric: Sure. The only new thing about Novo is some of this discussion that you've had on ore sorting, where they believe that the techniques of sorting the ore as it comes out of the mine or the open pit, that can be very, very economic. And the numbers they present are like stunningly economic. So, if there is gold in the Pilbara, they might very well be able to get it out for a very low price. So, you maybe could easily have less than a gram a ton and it would be probably quite profitable. So, that part of it looks good and they're testing it in the field as we speak. And hopefully, we'll see some tangible results soon.

Craig: Okay. How about Jaguar?

Eric: Jaguar, now, that's a company I own about 43% or 44% of. I just met the management yesterday. Things are improving there. I think the outlook for next year is quite good. They had some hedges on, which I never would have supported. That will run off effectively this year. The effect of them will run off this year. So, we'll get a full shot at selling gold at a more appropriate price. So, I'm kind of hoping we could come up with some quite surprising numbers and that people realize it's very, very inexpensive on a cashflow basis.

Craig: How about a company called GoldSpot?

Eric: Well, GoldSpot is a company I invested in that uses artificial intelligence to find mines on behalf of mining companies and their own. It's a technology that I think is likely to work because they can process scads of data and sort of go back home. That really looked good. Probably there were some guy drilled that 13 years ago, you know because of whatever is in the information that maybe somebody missed. So, it's sort of a bit of a concept stock. But I'm an owner and I think, in the long run, it'll do very well.

Craig: By the way, I invested in some more Yellow Spot Irish whiskey just yesterday. It's delicious.

Eric: Good for you.

Craig: Yeah.

Eric: You like Irish whiskey. Do you?

Craig: Oh, yeah. Green Spot and Yellow Spot are terrific. So, just for what it's worth.

Eric: I'm just taking that up a little, so I'll watch out for that.

Craig: Yeah. And finally, how about TUDOR? You had mentioned a couple of weeks ago, you were getting ready to meet with them or something like that.

Eric: Yeah. Now, I haven't met with them. I have not. I thought the VP, exploration would come through...was coming through town on his way from Vancouver over the Europe. But that has not happened. I think it's still expected to happen short-term. I think they reported some results, which were good results. But, you know, I really want to talk to him about, well what does it all mean? There's not gonna be any more drilling until the spring. But I still believe they will have a very, very large deposit. It's a great investment for, you know, rising gold price environment because these low-grade deposits that will be large, all come back onto the economic playing field here. So, I really like it. And I've stayed active in the stock.

Craig: And again, that's it for this week. But I want to encourage everybody, if you have a miner or a company, you'd like to get an expert opinion on, we're going to record, "Ask the Expert," our monthly series next week with Brent Cook, who is the head of a company called Exploration Insights. And I think respected, I'm sure Eric, you know, Brent. You've probably known him for years.

Eric: Yeah.

Craig: I mean, gosh, brilliant guy. So, please, if you have some questions for Brent, he might very well have an opinion. We're recording that next week. So, get to this today or over the weekend, send them to submissions@sprottmoney.com or you can tweet @SprottMoney using the hashtag #AsktheExpert. And we'll see if Brent perhaps has an opinion on the company that you have, that's in question.

My friend, I think that's it for now, though, on our end. I wanna thank you for all your time. I very much appreciate it. This has been a lengthy call.

Eric: It's been fun. Look forward to next week.

Craig: And one more thing about next week, it is the American holiday of Thanksgiving. So, with the market holiday and the market shortened day on Friday, there will not be a "Weekly Wrap-Up" next week, but we will be back Friday, December 6th. In the meantime, happy Thanksgiving to all of our American listeners and we'll talk to you again in two weeks.




Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities. Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.



The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.You may copy, link to or quote from the above for your use only, provided that proper attribution to the source and author is given and you do not modify the content. Click Here to read our Article Syndication Policy.

STUART GERSTEN 23 days ago at 7:01 PM
ERIC OF ALL THE JUNIORS YOU OWN WHICH ONE O TWO DO U FEEL IS THE NEXT GREAT BEAR?
Kathy Pedwell 20 days ago at 2:24 PM
Craig - Love the weekly sessions. Could you ask Eric a question? He always talks about Kirkland Lake, etc. where he has done very well. Just saw that a company has a Sir Harry Oakes property in the same neighbourhood - Sparton Resources (V.SRI) issued a video/press release today about their work at Hawley Lake near Alamos Gold's Young Davidson mine.
http://www.spartonres.ca/news/press-release-nov-25-2019/
What does Eric think? The stock is only at 2.5-3 cents. Thanks...
Sherman Garner 20 days ago at 3:43 PM
Of course, is Kirkland a sell here at $40? I'm holding it because of Eric Sprott even though my due diligence at $45 confirmed a buy. Did Eric sell his position?
R Joseph Rathwell 18 days ago at 11:46 PM
Another Excellent Show,

Thank you Eric & Craig for making the time

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