Interview with Mr. John R. Ing of Maison Placements Canada

Is It Time To Invest In Gold?

As gold remains above the psychologically important $700/oz level for the second straight day, I’m sure investors are probably wondering if the metal is going to surpass its May 2006 high of $730/oz. Below I have outlined a few of the reasons why gold might take out $$730/oz and go higher. However, since my views mean little, you will also find my interview with one of my favorite precious metals analysts – Mr. John Ing of Maison Placements.

--> September - October is a seasonally favorable period for gold as jewellery demand from India’s wedding season and Diwali kick in during this time.

--> On September 7th 2007, the US Dollar Index broke below its crucial 80 technical level, hitting a 15 year low. Continued bearish sentiment towards the US Dollar is expected with investors pricing in a few interest rate cuts before the end of the year.

--> According to Reuters, the latest data showed gold held in New York-listed StreetTRACKS Gold Shares, the world's largest gold-backed ETF, rose to 549.42 tonnes, another record high, up 33.98 tonnes or 6.6 percent from the start of the month.

--> According the data from the Nymex, gold warehouse inventories fell by 67,663 troy ounces to stand at 7 million troy ounces. As inventories decline and seasonal demand increases, the price of gold is ideally poised to continue rising.

--> Lastly, as volatility continues to persist in the markets and the repercussions of the credit crunch continue to be felt, Gold may be the beneficiary of capital inflows as its reputation of being a safe haven from financial tensions garners some attention.




John R. Ing is President and Chief Executive Officer of Maison Placements Canada Inc. (http://www.maisonplacements.com/) based in Toronto, Canada. Mr. Ing specializes in the precious metals sector, and has been featured on BNN (formerly RobTV)several times. He has served on various industry committees including serving as Chairman of the Toronto Stock Exchange Stock Listing Committee since 1993.

He started his career with Jones Heward & Company in Montreal as a portfolio manager. He joined Mead & Company in 1971 culminating as Senior Vice-President and Director. He was responsible for the management of their portfolios, chief investment strategist and a specialist on the gold industry. In 1980 he joined Pitfield Mackay Ross as a Vice-President and Manager of the Investor Services Department. He was a member of that firm's Investment Policy committee and was responsible for the group that provided investment advice to Pitfield’s many branches and clients. When Pitfield merged with Dominion Securities, Mr. Ing became a Vice-President of that firm, where he was also a member of the Investment Strategy committee. Mr. Ing left Dominion Securities late in 1984 and joined Maison Placements Canada Inc. in February of 1985 as President and Chief Executive Officer.

Me: Mr. Ing, in the face of the recent market correction we recently witnessed, what are your current views of gold and gold stocks in general and where are you currently finding the most value among gold stocks - in large cap producers, mid cap producers, emerging producers or exploration stocks?

Mr. Ing: The credit crunch crisis will continue over the next the few months despite an expected reduction in interest rates. The solution is not slashing interest rates and printing money. America must lower its debt load, reduce leverage and redress its balance sheet. Gold and gold stocks often serve as a safe refuge and this time this group will benefit from not only the re-liquification of the financial system but also the expected pickup in inflation. In the last eighteen months, the gold stocks have been laggards but I expect this to change. Given the institutions’ penchant for liquidity, the big cap stocks are expected to be the initial beneficiaries. Gold stocks will outperform gold bullion this time.
I expect gold to retest the old May 2006 high of $730 but will surpass the $850 per ounce peak, the all time high in 1980. Only after the big cap stocks have moved, will there be a rotation down into the mid-tier and eventually the developers. Of interest is that the junior stocks have been beaten up in the last few weeks in the rush by hedge funds for liquidity and they are actually at attractive levels but only for the very long term investor.

Me: If possible can you please give us a summary on how you evaluate/quantify geopolitical risk, in light of the Eldorado mine shutdown in Turkey and also the price volatility experienced by companies such as Aurelian Resources that are exploring in Ecuador?

Mr. Ing: The Eldorado Gold (ELD:TSX, EGO:AMEX) forced shutdown was a disappointment. However, mines in the past have operated without permits thus I do not expect Eldorado to be penalized. My understanding is that the Higher Court will uphold the lower Court decision by upholding the permit. As such, I expect a decision from the Courts in the next 30 days or so and Eldorado to bounce back to the level from which it was trading at. As for Aurelian Resources (ARU:TO), I do not share the market’s enthusiasm. The stock is priced for at least 5 million ounces, and to date I have not seen enough evidence that there is even 2 million ounces. I would be cautious with this one.

Me: I was wondering if you could please summarize in a few sentences, your views on the rapid capital cost escalations that have been showing up in the earnings of gold companies and at what pace must gold prices keep rising to outstrip these rising costs or how are gold companies attempting to minimize these cost escalations?

Mr. Ing: Mining cost increases are not surprising given the escalation in energy (energy prices can make up more than 30% of the total cost of extraction). Today many gold mines’ cash cost are in excess of $400 an ounce. Gold mines are capital intensive and there is also a need for maintenance capital. Since we expect higher energy prices, and gold mines are getting deeper, I do not see any reprieve in the price to mine gold. However, gold miners are leveraged to the gold price and once the Street is convinced that the price will stay above the old high of $850, I expect the profit margins to widen. A review of the gold miners has shown gold miners to be vigilant on costs, but the group has not spent enough money on exploration. Exploration is often sacrificed when it should be the lifeblood of mining companies. Too many of the producers do not spend enough on exploration. I would cut back on the palatial offices and put more money into the ground.

Me: If possible can you please highlight one sector among resource stocks (eg. it can be aluminum stocks, nickel stocks, steel, gold, silver etc.) that you believe to be overbought and due for a correction and one sector that you believe to be oversold and due for a bounce and why.

Mr. Ing: The group that is ahead of itself remains - the uranium stocks. There is no shortage of uranium and investors do not yet realize that the spot price is not the price that most uranium is sold at. Uranium stocks are grossly inflated in value and are still vulnerable for a correction.

Me: Lastly, if there was only 1 stock you could hold for the next 12 months, which one would it be and why?

Mr. Ing: Agnico-Eagle (AEM:TSX) remains a stock to be held for the next 12 months. Agnico-Eagle’s production is expected to grow by 5 times between now and 2010, and the company has the balance sheet to finance these mines without further dilution. Management is young and aggressive and the company will also benefit from the pick up in zinc, silver and lead prices.

Thank you Mr. Ing!