In this Gold Report interview Stephan Bogner, analyst with Rockstone Research and CEO of bullion dealer Elementum International, talks about precious metals as the only way to shelter from the increasing uncertainty and excesses of our financial and economic system:
I was pretty bullish on gold and silver in 2002 when I completed my university diploma thesis on the exotic topic “Gold in a Macroeconomic Context.” I’m even more bullish today because the macroeconomics did not change; it got worse. The fundamentals for gold and silver have never been as bullish as they are today.
From an investor perspective, you can view the current temporary bear market as a good thing because only the best companies will survive. Finding these companies before other investors find them can be the chance of a lifetime. Now is the time to start buying mining equities when they are heavily discounted and priced down. Take all your courage, go out there and buy when everyone else is selling as if there was no tomorrow.
The interview features a lot of his favorite companies. The one stock that really stood out to me is Santa Cruz Silver Mining due to it’s low capex and incredible growth potential:
A Mexican silver producer that meets all of the above criteria, and is a prime example of how to do it right in today’s difficult mining environment, is Santacruz Silver Mining Ltd. (SCZ.V), which has succeeded in bringing into production a mine during the period of low metal prices in Q2/13. Average mill throughput currently “only” stands at around 120 tonnes per day (120 tpd), ramping up to 200 tpd in Q4/13 and 500 tpd in 2014 to achieve an output of around 2 million ounces (2 Moz) silver equivalent per year. When Rosario starts running at full capacity in 2014, silver prices may have recovered to higher levels. This could provide huge leverage on the share price because the company is currently producing relatively few ounces during this period of low silver prices, an estimated 2013 output of around 400,000–500,000 ounces (400–500 Koz) silver equivalent. Normally, a comparable 2 Moz per year silver mine requires $60–80 million ($60–80M) capex, but Santacruz only spent $10M to construct Rosario, and Santacruz is ready to do it again with its San Felipe project, for which a capex of only around $20M is anticipated.
San Felipe will be at feasibility stage by late 2013; three rigs are drilling as we speak. The initial drilling exceeds all expectations, exhibiting higher grades than historic drill results and superb core recoveries of around 95%, compared to historic records that show poor core recoveries of around 70%. Santacruz is getting the picture now, exploring and developing another world-class deposit that is easy to mine and highly profitable even during these depressed times.
Imagine how such a business will do during high silver prices and then try to imagine how the share price will develop from its current low levels. For the upcoming weeks and months, we anticipate an increased newsflow on San Felipe: the reporting of assays from around 10,000 meters (10,000m) of drilling. We expect San Felipe to start production in 2014, and it being much larger in scale than Rosario because Santacruz plans a 700 tpd mill throughput for its second mine.
The third mine on Santacruz’s agenda is Gavilanes, which is even higher grade than the average 200–250 grams/ton (200–250 g/t) silver at Rosario and San Felipe. Gavilanes has a historic Inferred resource of 1.2 million tons ore averaging 420 g/t silver, representing some 15+ Moz silver. However, this historic resource calculation is based only on 500m of the known 1,000m strike length of the single GSA vein that was drilled for only 3,200m in 1990. Santacruz has already successfully identified six other veins on Gavilanes with the Descubridora vein being the most promising one right now.