A New Price Target for Silver and Gold

A Note From the Editorial Director: Gold has been the hot asset class of 2016. As economies across the globe falter… as interest rates sink… and as we digest the mere idea of Britain saying farewell to the EU… gold demand is soaring.

It’s up 21% so far this year.

It’s no wonder the shiny metal is on our minds.

That’s why today we’re sending you something a bit different from our usual market commentary and insight. We urge you to read the interview below. It’s from the latest episode of Marc Lichtenfeld’s Oxford Club Radio.

During the interview, the Club’s expert on all things gold, Sean Brodrick, discusses an exciting mine visit and what he sees next for gold, plus the details of an investment that has more than doubled Members’ money in the past few months.

Read on…

– Andrew

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Marc Lichtenfeld: Our guest this week is the always, always exciting and funny and interesting Sean Brodrick, Oxford Club Resource Strategist and Co-Editor of the Oxford Resource Explorer. Sean is just back from investigating silver mines in Mexico.

Sean, welcome back. Tell us, what did you find in Mexico?

Sean Brodrick: Well, I found some great operations down there, and one of the things is that – I mean, we’re already in a hot market for the metals, right? And we’ve seen things building higher, but these miners have been beaten down for 4 1/2 years. Many of them pulled in their horns very, very far, and they weren’t really looking for, say, new metals and new resources.

So what they are now doing is they’re actually starting to explore again. So it’s an exciting time down there, especially for those guys. I mean, they had a four-year-long bear market. They were really kind of depressed for a while. But now it’s go, go, go, so there’s really lots of excitement down there.

Marc Lichtenfeld: And which companies’ mines did you visit, and what do you look for when you’re at the mines?

Sean Brodrick: Right, well, I went to two mines owned by a company called First Majestic, which is symbol AG on the New York Stock Exchange. I went to Santa Elena, which is one it picked up from another miner called Silvercrest. I also went to San Martin, which is another mine it has, but it has a whole bunch of mines down there.

And when I visit mines, what I look for is I like to speak to the people working at the mine and get their feel for what’s going on and see if they’re hitting their targets. I also look to see if they’re actually coming in ahead of their targets – if they’re making changes that maybe haven’t been reported in the quarterly reports yet.

And so you can pick up on how things are going – like one thing that company is doing is it’s really working on streamlining operations and also automating things, and it’s going to save the company a tremendous amount of money. Because it used to be, for example, you used lime as a part of the process of refining silver, and it used to be spread by a guy who would walk around, throw clumps of lime, you know, stuff like that. Sometimes he’d even just throw in a big bag.

Now there’s an automated system that has cut the amount of lime that it actually uses in half and should pay for itself in about five years. So that’s the kind of thing that I found really interesting.

That along with the fact that the mine had really wide silver veins.

I mean, there are actually two kinds of mining, which I just need to explain because your listeners may not actually know this. One is on-the-surface mining, and usually that’s a big halo of gold. It generally tends to be lower grade, and so you use big scoops and you really go after it that way.

With vein mining, you have to go after the higher-grade stuff, and so you’re chasing those high-grade veins down into the earth, and when those veins get big and wide and they’re still rich, that’s an exciting time for mining. And so it had some of that down there too.

Marc Lichtenfeld: And you get to actually see these wide veins when you’re down there?

Sean Brodrick: Oh yeah. I was down in there. Now, this is one of the lucky mines where you get to drive down in a pickup truck. I’ve also been in mines where you have to hop into this little elevator – and I’m a big dude, you know – and so me and this one poor Mexican dude were squeezed into this thing facing each other, and then going down, down, down.

No, these you drive in in a nice pickup truck. Then, of course, we’d always have to zip off into these pull-offs because these huge mining trucks would just come rumbling by, and you’d have to get out of their way. But we could go down, look at the veins, inspect them, see what the company is doing.

It has new drills, too. That’s one more thing I should mention. And these cut through the rock, as the old saying goes, “like butter,” and so that’s really aiding the underground exploration because it knows it has veins, but it needs to know what’s around them and where it should actually go next. And so that’s really what it’s doing down there.

Marc Lichtenfeld: You know, one thing I find really interesting that management would grant you that access, particularly if things are not going wonderfully.

Sean Brodrick: Well, yeah, but if things weren’t going well, management probably wouldn’t be showing off the mine, would it? So I mean, there is that. And it has to grant you access. Otherwise you get suspicious.

So as long as you can speak a little Spanglish, which is what I do, because I should mention that that’s one company that uses almost an entirely Mexican workforce. But many of them are extremely well-educated and they speak English – I hate to say it, but some of them a little better than I do.

So you can speak to the people, see what’s going on, and they’re proud to show off new machines, new techniques they have going on, things that they’re changing and stuff like that. So you can really learn a lot from speaking to the people who are actually working the mines.

Marc Lichtenfeld: All right, we have about two minutes left. Give us your thoughts right now on gold and silver. It’s had a nice rebound this year. Where do we go from here?

Sean Brodrick: Well, I actually got a new price target on silver yesterday. That’s $25.50, and I know that’s quite high, but I expect we’ll hit that in the next year. Gold actually may trail silver going higher percentage-wise, but we should still see a very good move, probably over $1,400. I’m looking for $1,450, something like that.

But you know it will not be a straight ride. You can buy the dips. We were in a 4 1/2-year-long bear market. The first year coming out of that is generally incredibly good. Things tend to run up. Even stocks that are really mediocre can do well. But if you pick the right ones, you can really go on a rocket ride.

First Majestic for us is up like 120%, probably going much higher, and we have other picks like that as well that are doing incredibly well, because the really well-run miners can do extraordinarily well in this market. And I do believe we are in a new bull market for precious metals.

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