Fear Behind Rising Gold and Silver Prices - Weekly Wrap-Up (January 31, 2020)

Male: You're listening to the "Weekly Wrap-Up" on "Sprott Money News."

Craig: Happy Friday from "Sprott Money News" and sprottmoney.com. It's Friday, January 31st, 2020. And it's time for your weekly wrap-up. I'm your host Craig Hemke. And joining us from his automobile today and driving down the freeway is Eric Sprott himself. Eric, how are you?

Eric: Well, I'm pretty good so far. I got to make sure I don't whack into something here, but the traffic seems to be pretty good so let's drive on here, no pun intended.

Craig: No pun intended. All right, both hands on the wheel, my friend.

Eric: I've got both on there, baby.

Craig: Aren't there laws against doing podcasts and driving at the same time, kind of like texting and driving? I'm not sure.

Eric: I don't think so. I don't think so. I think it's okay.

Craig: All right. We don't want the mounted police coming after you.

Eric: No, we wouldn't want that.

Craig: Hey, and before we get started, we mentioned last week, that with it almost being tax prep time again, that "Sprott Money" is hosting a registered investment lunch and learn in Toronto on Tuesday, February the 18th. Anyone interested in adding precious metals to their registered investments or curious about how to do it, just RSVP at submissions, the word submissions, @sprottmoney.com. We'll also be discussing the case for buying physical silver given the current market conditions. Of course, you can find out more on all of this at sprottmoney.com, or just give us a call at 888-861-0775.

Eric, the prices of all those metals are going up this week, a lot of it having to do with fears of economic slowdown, global economic slowdown during this coronavirus. We talked about it a little bit last week. It's only seems to have gotten worse.

Eric: Well, as I mentioned last week, you're dealing with mathematics here, and the rate of growth is just incredible. And probably the best way to start off in terms of having the listeners understand, I think this time last week we had 200 cases, 200. We added 2,000 today, and we're up to, you know, pushing 10,000 cases here. And I've seen some numerical studies, they're just numerical, that would suggest that by Sep. 20th, we could have something like 500 million occurrences and a million deaths. Now, it's just something on a piece of paper, but this thing is effectively out of control.

Our health authorities seem to do everything but health. You would think they would kind of warned you about what is going on the coronavirus and they always seem to be a little late to the party. So, for example, there is human to human transmission. Who's kidding who here? Do you think 9,000 people went to the fish market in Wuhan? Forget it. People, it's transmitting itself human to human.

Two, it would appear that younger people can acquire the virus and not manifest it as readily because their systems are more able to handle it. That is a bad, bad thing that people could be walking around with this virus not knowing it and spreading it. That was not the case with SARS. SARS, you got it, you knew it. We have more cases of coronavirus today than we had ever of SARS. We're just starting. And so they announced how many cases 9,700. Then he say, "We have..., I'm talking about China now, we have whatever, 28,000 under observation." Like, are you kidding me? Like it's just I'm sure the numbers are understated, okay? I'm sure the numbers are understated. So this thing can blow up.

Now, what happens if it blows up? Well, first of all, as we've seen with the airlines and the casinos and hotels, like, forget it all. Nobody's going to be moving around, okay? And most countries should advise their citizens not to go to China, and there should be no flights from China. I can't believe that, you know in Canada, I'll just use them as an example, you know, some guy comes in from Wuhan, he clears customs, and later finds out he has a problem. And I wonder, "Well, why wouldn't customers have asked him, "You came from China, were you in Wuhan at all?" No, they don't ask him that. You know, like, it's ridiculous.

I want to give you one other data point. So, for example, when the Japanese sent a plane over to Wuhan, they brought back 200 Japanese residents, and three of them were found to have the disease. One was manifesting symptoms and two who weren't. Now, here's what I find interesting about that, that's one and a half percent of the people on the plane. Well, what if one and a half percent of the people in Wuhan already had it? That's 165,000 people, not nine. That's huge. Everyone will just stop doing what they're doing. No one will go to restaurants, no one will go to basketball games or, you know, various things. Everyone is going to start wearing masks. Like, try to get a mask, okay, that's almost impossible now anywhere in the world. So you can see that...the people are reacting faster than the damn health authorities. That's kind of the inverse of what should be happening here.

Craig: Well, and that economic impact runs around the entire globe, affecting the global supply chain, and ultimately, global growth. Already U.S. data this week was poor here on Friday. The Chicago Purchasing Managers' Index fell sharply into recession and contraction territory. You can see this now in the bond market, Eric, interest rates are falling sharply. Now, the Fed is behind the curve again and probably owes us a rate cut in March. And all of this is reflected in gold prices now breaking higher again, we're up around $1285.

Silver, though, I'm sure you have some thoughts on silver after what happened there on Tuesday.

Eric: First of all, we should complete the theory of gold going up. And of course the theory of gold going up is stocks going down. As you mentioned before we started this call, apparently the Chinese stock markets will open up on Monday, like, God forbid what they're going to do. But, you know, most people will figure out, "You know, I'm better off owning gold than this other paper stuff." That's one.

Two, when a guy's business, company's business goes down, but his debt is the same, how do you pay the debt off?

Craig: Yeah.,

Eric: You know, like, that's the problem with all this debt now. Because we might just be sort of within the cusp of somehow they can't afford to pay it. Well, particularly, imagine if you're some airline company and your people flying, you're down is 50%, but you've still got the debt to pay. And God forbid that the bankers panic. You know, then it would be a real disaster. But anyway, it's those are the things that would cause people to choose gold over other things, let alone the fact that there are manifestations of shortage of these metals, we've seen in palladium we've seen it in rhodium. I think we're seeing it in gold to be very honest with you that I think there's some issues there with the physical supply.

And then, of course, you look at silver and, of course, the thing that makes me sick is the total manipulation of markets. We had options expiry on I think it was Wednesday. So, sure enough, the silver price goes down whatever $0.60 cents on Tuesday, put all the options down to $1750 would expire worthless. And, of course, the next day it goes right back up again. It's so crooked it drives me crazy. And, you know, one of the things that you and I talk...maybe we should talk about is to save Canadian mining bringing back the uptick rule. And they should have the uptick rule in all markets, commodities, stocks. Because these people who don't have any restrictions on shorting can make anything go anywhere because they've got more money, they're bigger than the market. And so, it's just frustrating as could be. But I think people who own gold and silver are in the right side of things these days.

Craig: Yes, absolutely. No doubt about that. Even outside of all this recent news of the last couple of weeks, the case has been pretty strong with the falling interest rates and the slowing global economy, and this is only going to make it worse. It does set us up, though, for an interesting year in the shares. You've mentioned, man, if we could get that Save Canadian Mining initiative to gain some traction...maybe we can post a link to that this week to get people to check it out.

I do have a lengthy list of names that were sent in, Eric, this week. Before we get to them. I thought I'd better just double check to see if they're...

Eric: Not in particular. I think we should move on to the stocks.

Craig: Okay, let's do it. And again, as Eric mentioned, a good thing to watch Sunday will be if the Shanghai and the other Chinese markets reopen. If they do, it will probably be rather volatile. If they don't, that'll send a sign too. So watch for that Sunday evening U.S. and Canada time.

All right, Eric, I've got a list of names. And, again, I want to thank everybody for sending them in each week. We had about 15 names this week and about half of those, Eric, did not have an opinion on. It was a company maybe he didn't know much about so if you don't hear your company mentioned, it's because of that. But, Eric, let's start with one that you do know something about. How about Balmoral? Balmoral, however you say it.

Eric: Sure. Balmoral is very interesting and it probably would, when I make comments on Wallbridge, it will...people will understand more why Balmoral is interesting. And I know that I think the company on their website suggests that I'm just under 10%. I may in fact, be over 10% now. I think I'm sure I bought some shares this week. It's just in the Sunday like the information zone, which is the area between Detour Mine and the potential Wallbridge Mine here. They're actually the larger landowner. They've had some pretty stunning results there from time to time over probably the last decade, but never been able to stick it together. But perhaps the more Wallbridge announces results, and perhaps the more we understand the geology and how the manifestation of the gold, then perhaps Wallbridge could start sticking the two things together and come up with some kind of resource that the market would find intriguing. So it's a stock that I'm active in and I think it'll do well.

Craig: Let's go to Wellbridge. Great results and a lot of folks want to hear your opinion on it. Interesting, of course, those predatory short sellers immediately attacked it on the news. But then, hey, it turned around and rallied 20% the next day. What do you think of all that?

Eric: Well, it was kind of funny because the news on the Monday...there were two news releases, Monday and Tuesday, and the news release on the Monday was basically, the grade of the 800 meters step-out and few other odds and sods, and it was nothing splashy and the stock sold off. But the Tuesday release was so incredible, and I can tell the listeners, you know, if I could buy this stock, which I can't, boy would I be buying it."

Now, what was interesting, though? Well, first of all, the headline number was 44 grams over 19 meters. To die for. Where do you get that? And then, then they come along, and they got a 120 meters intersection with six visible gold intersections in it. 120 meters? Are you kidding me? And this is way down in the Tabasco Zone. Then they say, "Well, you know, the dimensions are 400 meters wide, 500 meters deep, 50 meters wide, and the grade's 10 grams or greater. And you know what? You can multiply those three numbers, put in the [inaudible 00:12:05]; you come up with the number 2.7 million ounces, if you can multiply, okay? Now, I've done it for you. So we got 2.7 million high-grade ounces there. And the lowest intersection is at 850 meters, they're going to drill a hole down to 1500 meters. That was more than double that number. They're going to drill a long strike. That would more than double the double number. You could be up four times bigger, i.e, 10 million ounces, if they were to hit in those two, the wide step-out at 400 meters and the big step-out down to 1500 meters depth.

They also informed us they get to four kilometers of the Jeremy Pluton here on their property. And we've only got 400 meters of strike length so far. Well my God that could be 10 times bigger. I tried to figure out how the gold manifests itself in two different directions. We've got Tabasco goes northwest-southeast, and the other ones strike almost due east due west.

Oh, by way, I want to thank a couple of posters here. I enjoy meeting the posters who spend time studying these things, because of course I have to spend time studying these things. And there's a couple of guys, Jeff Deboro[SP], Mark Hannah [SP], Marvin Lar [SP]. These guys, they spend a little time at it, and believe me, it's helpful, because I'm looking, they're looking and you want to make sure that you figured it out here, and it's good to have other people share their wisdom on it.

But the reality is that it's a huge opportunity. And this whole discussion I've just had, it's just the Tabasco Zone. We're not dealing with the low-grade open pit stuff or the lower grade bulk mining underground. So you know, when a couple of times back when I said, you know, there could be tens of millions of ounces, there's nothing I feel more confident about than that today, so it's [inaudible 00:14:00]. Yeah.

Craig: All right. Well, take that under advisement. Let's move on to Sokoman.

Eric: Yep. Well, Sokoman is drilling in Newfoundland. And I'm involved with something called New Found Gold that just came up with a 19 iterator section of 89 grams. And it looks like the geology in Newfoundland is a little foster mill like. It's early, I know the people at Sokoman think that their property is [inaudible 00:14:33] like and I know that New Found Gold looks [inaudible 00:14:35] like but it's very early so we got to wait for some more drill holes to play out but, boy, there could be some things happening there.

Craig: Three more quick ones to go. How about Abcourt?

Eric: Well, Abcourt, I only know it because they have a mill in the Abitibi region of Quebec. And the names come up, because they're one, a producer to the [inaudible 00:15:04] it's near the Fenelon property, so it could be of some interest to Wallbridge. I know nothing that says they do or don't. You know, and it's a cheap stock, so I don't own it, but I'm aware of it.

Craig: Canadian Palladium? I like how that kind of rolls off the tongue.

Eric: Yeah. Well, you know, I was pretty active in palladium stocks a week ago, and that's one of the ones I bought. A lot of these companies have major deposits with a great...wasn't quite there to make them economic. But when you take the price of, you know, palladium from $1,100 to $2,200, it makes a lot of things economic. So that's one of the ones that I think has come on to the economic playing field. So, is palladium going to hold in here?

And by the way, I'm a little mixed on what palladium and platinum should do in an economic weakness because, you know, they used a lot in industrial really. So, I think the jury is out on whether or not these would lead to [inaudible 00:16:04]. Certainly, I'm very certain that gold and silver will command a lot of interest from investors. But platinum and palladium because they're used in the car market and the car market might start shrinking here, we've got a little more analysis to do.

Craig: Right. All right. I think I saw something copper has had its longest losing streak since 1986, to that point.

Eric: Exactly.

Craig: All right. One more. How about Pure Gold?

Eric: Well, Pure Gold is in the Red Lake area. They announced some pretty good results here this week. They've had good results all along. They've got a good ore body of high-grade. It looks like it could easily expand. I mean, they're exactly in the right place [inaudible 00:16:49] mine, drilling around the mine, high-grade. I'm a share owner. I like it.

Craig: And lastly, Eric, let's touch upon the merger that was I guess it's going to be finalized now because the Detour shareholders approved it. The Kirkland Lake purchasing and acquiring Detour. The stock, Kirkland Lake, has gone down. Maybe you can talk to some of your friends or get them to start paying a dividend, so they can really stick it to the shorts.

Eric: Well, they're talking about a dividend and they're talking about a...I've heard that they're going to have a bigger buy-in buy program. We'll see whether that manifests itself or not. I thought the most interesting thing and I wasn't there for the meeting, but I understand that the shaft at Macassa is going to be built a year sooner and $100 billion less. So that's very good, because then maybe we start getting an uptick in production in '22, or maybe even '21 from Macassa.

I personally think that Kirkland has stolen Detour. Of course, with a rising gold price, Detour was going to way outperform Kirkland because the margin they're making on the gold is increasing much more dramatically than the margin that Kirkland's making on the gold, because already make way too much on their gold because of the [inaudible 00:18:11]. So, I think it's great. I'm very interested to see whether Detour can get their mill increase approved from 75,000 tons a day to 90,000 tons. That would be, you know, at least a 20% increase.

And I mentioned most of that is just gravy. So and I think they've had a good fourth quarter. We don't know the results yet. We know the mining results were good. We know that Kirkland's quarter was good. So I think good things are going to happen. The stock's been very active and strong today. So hopefully, we're through the jitters about the low margin Detour gold. There's going to be a big addition to the cash flow of Kirkland, and I think we can all look forward to some of that helping us out.

Craig: Don't they have $700 million in cash or something there?

Eric: I think it's $800 million.

Craig: Oh, $100 million short?

Eric: Yeah, and I think the cash flow is going to be like a billion and a half or something per year now with Detour in there. So, there's no shortage...

Craig: So, by all means. Yeah, I just think of all the people selling their shares because they think there's maybe a better deal out there. I'm not so sure.

Eric: I'm not so sure.

Craig: All right, my friend. It has been an interesting week and, boy, is it going to be interesting as soon as Sunday night to kick off a new week. Hey, one last thing, who do you got in the Super Bowl?

Eric: I think I like your Kansas City team there. [Crosstalk 00:19:36].

Craig: That's what I'm talking about.

Eric: There you go. Who you picking?

Craig: Yeah, you can imagine who I'm picking. I'm dreaming about it almost every night. I still can't believe that they're actually in the Super Bowl. It's astonishing.

Eric: Well, don't drink too much on Sunday.

Craig: Okay, I'll try not to. I'll be sitting there watching the Super Bowl checking my phone to see how the markets are opening in China is what I'll be doing.

Eric: Oh, no, that's awful.

Craig: Yeah. All right, my friend. Have a great weekend. And from all of us...

Eric: Okay. Thank you, Craig.

Craig: And before we go, I almost failed to mention. it is almost February. It's the last day of January, which means the Sprott signature sale will be back. Throughout the month of February, we'll be adding more products to our deals page each week, making this our biggest sale of the year. After all, it is our Sprott Signature Sale. Check out the deals page at sprottmoney.com for this week's sales or of course, call us 888-861-0775. Things keep going on like this, prices are only going to continue higher next week. So check it out as soon as the calendar flips to February.

Eric, thanks for your time. Have a great weekend.

Eric: God bless you.

Craig: And from all of us at Sprott Money News and sprottmoney.com, thank you for listening. We'll talk to you next Friday.