Paydirt Prospector: Gold, Silver Will Bounce Back

Jeff Clark's father was a gold prospector, and he is one, as well — of sorts. He started thegoldadvisor.com to share his own mining stocks with investors and wrote a book called PAYDIRT: Mining for Profits with Gold & Silver Stocks. Now, he's also taken over Gwen Preston's well-known The Maven Letter as Paydirt Prospector.

After getting his advice earlier this year on mining stocks, we at Streetwise Reports thought it was a good time to check back in with him, as it's been a very interesting year for both silver and gold so far.

Gold Was a Short-Term Victim

Gold hit its highest price ever of US$2,483.35 last month, but then sunk to US$2,383.78 over August 5-6. It stood at US$2,424.45 on Friday.

Clark said the price got dragged in the short term because of margin calls.

"August 5 was a liquidity event, and gold was a victim of it," he told Streetwise. "We've seen this many times in the past — the Covid crisis and the 2008 crash are good examples. Investors sell what they can in these circumstances, including gold."

But Clark said precious metals historically snap back quickly. "If history follows suit, big corrections like we saw are short-term windows where one can get bargains if they don't have as many ounces as they want," he said.

He said that gold should be viewed as a "long-term core holding that makes whatever is happening in the short-term a temporary event."

Clark noted that the yellow metal is a hedge against recessions and geopolitics. "Remember, gold is money," he said. "It is a better store of value than any currency. Until the currency system is redesigned to a more solid and honest structure, in my opinion we must be overweight gold."

He said research has shown the ideal amount of gold in a portfolio is 20%, and this amount is "especially critical in the current environment, one that carries numerous vulnerabilities."

'Spiky' Silver Could Outperform Gold

Clark said a similar market selloff hit the silver market. Spot prices rose to a new all-time high of US$32.43 per ounce on May 20 but have remained volatile since then. The price was US$27.50 on Friday.

"But silver is a monetary metal, despite its increasing use in industry, and it will respond to monetary events," Clark said. " It should be held for the long-term like gold."

The metal is also very "spiky," he said, meaning it has short bursts that push it higher suddenly.

"There have been numerous spikes since the 1970s, and there will be another one," he said. "The average gain of those spikes is basically a double since the 1980s."

Clark also said silver "historically outperforms gold."

"It tends to start slower, but before the bull market is over, silver has gained significantly more than gold," he said. "The most recent example is the Covid bounce: gold rose 40%, while silver rose 140%. History says this type of outperformance will occur in the next run, too."

Independence Gold Corp.

One stock Clark likes is Independence Gold Corp. (IGO:TSX.V), which he started following in 2022. The explorer, which is 16.2%-owned by major Newmont Corp. (NEM:NYSE), has holdings ranging from early-stage grassroots exploration to advance-stage resource expansion in British Columbia and Yukon.

"It's run by highly successful CEO Randy Turner, a geologist with 50 years’ experience," he said. "He and his team are working on some highly prospective projects in pro-mining jurisdictions, and they all have major skin in the game. These are major criteria for me."

The flagship property is the 8,840-hectare 3Ts Project in British Columbia.

"It has a small gold resource, but what makes it appealing is that it is high-grade, and only two of 11 zones have been explored," Clark noted. "It's also located just 16 kilometers from Artemis Gold’s Blackwater project, a 11.7 Moz (million ounce) gold deposit that is nearing production."

He said Newmont or Artemis "may want the projects close to them if the company proves up a mineable deposit."

"This is a very strong team, in a pro-mining jurisdiction, actively drilling on highly prospective ground," Clark said. "This is exactly what you look for in a mining speculation and why we cover it in our free Gold Advisor newsletter (sign-up required)."

Assay results are pending for the company and another drill campaign is being planned for September.

"What's compelling for me is that this drilling is outside where the resource is located," Clark said. " This tells us Independence is likely to add a significant number of ounces to the next resource, which could begin to attract fund managers and other investors to it. I’m personally overweight the stock."

According to Reuters, about 4.3% of the company is held by insiders and management, and about 8.2% by holding companies. The rest is retail. Besides Newmont, top investors include Randy Turner with 3.99%, Michael McPhie with 0.15%, Terrance Salman with 0.12%, and Louis Montpellier with with 0.04%.

Its market cap is CA$29.28 million with 167.8 million shares outstanding. It trades in a 52-week range of CA$0.34 and CA$0.12.

Western Exploration Inc.

Clark said he announced coverage of Western Exploration Inc. (WEX:TSX.V; WEXPF:OTC) in March, right after this year's Prospects and Developers Association of Canada convention in Toronto.

"I can tell you it had one of the most crowded booths at the event," he said. "That’s because this gold explorer has a 1.35 (Moz) resource that, based on recent high-grade step-out results, looks like it could hit 2 (Moz) ounces and maybe more. The company just embarked on a drill campaign to answer that very question. It’s spearheaded by a geologist that’s made multiple discoveries, with two producers and multiple institutions invested in the stock."

WEX's 100%-owned Aura Project consists of three locations in Nevada: Doby George, Gravel Creek, and Wood Gulch. Earlier this year, the company announced that it is expanding the size of the Wood Gulch/Gravel Creek resources area and working toward a Preliminary Economic Assessment (PEA) for Doby George.

Clark said the company "has the three legs of the stool in place — a CEO geologist who's made gold discoveries before, working in one of the strongest mining jurisdictions in the world, on a project that shows all the geological signs that it can be materially bigger."

The company's summer drilling campaign "gets at the heart of our investment," he said. "Prior drilling here returned grades that were significantly higher than what's in the resource and covered an area that was again the same size as the existing resource. There are no guarantees in this business, but this is one we consider a strong speculation."

Clark said he is also personally overweight in the stock, which fell in July but has rebounded.

"Drill results will be out in the fall, so we have told subscribers to accumulate ahead of assay results," Clark said. "It only has 43 million shares out, so the leverage could be big if drill results are strong."

About 67% of the company is owned by strategic investors. This includes Golkonda LLC, a syndicate of dozens of high-net-worth investors, which owns about 46% of the company, and Agnico, which owns 14%.

Management and directors own about 3%, and other institutions own about 12%. The rest is retail.

Western Exploration has a market cap of CA$38.98 million and has 43.8 million shares outstanding. It trades in a 52-week range of CA$1.50 and CA$0.46.

Important Disclosures:

1. Western Exploration Inc. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Western Exploration Inc.
3. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
4. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

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