Biography
Éric Lemieux, MSc., P. Geo. - For about eight years, until January 2008 Eric worked on contract for the AMF (Autorité des marchés financiers) and the New Brunswick Securities Commission as a field geologist. He is currently employed with Laurentian Bank Securities as their metals and mining analyst.
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Question 1: Mr. Lemieux, with base and precious metal prices being where they are, why are the prices of juniors explorers, in general not reflective of this? Additionally, do you think the average junior (i.e. those that have a NI 43-101 compliant resource) is over or undervalued?
Eric: Flight of capital due to risk aversion in this present market turmoil leaves very little room for the speculative niche that is mineral exploration. So its not surprising that with robust base and precious metal prices, the junior mineral exploration companies are undervalued (or not up to speed with the commodity prices). Mineral explorers provide leverage and in these uncertain times, because of the gung-ho gambling schemes of certain financial players, very little is left unfortunately for a business that attempts to discover real wealth. The junior mineral exploration market will probably be well positioned when overall sentiment finally cast away the present gloom. I see this present period as opportunity.
As for the second question, I simply enjoy putting the following:
At times, too much value is put because a project simply has NI 43-101 mineral resources. NI 43-101 should not be used for branding. Projects should be analyzed for their overall merits and be the object of proper due diligence.
Question 2: If possible can you please give us your thoughts on mining jurisdictions that you feel offer the least risk and most potential? Where and what areas if any, do you think investors should be focussing on?
Eric: Obviously in the last months, jurisdictions such as Ecuador, Mongolia, DRC (Democratic Republic of the Congo), Venezuela and etc. have rightfully got bad press. Political and social stability are paramount elements and lame governments can compound mining risks to such a level that World-class deposits are left in the ground pending better senses. Having said that, even good mining jurisdictions have their challenges and policies are ever evolving. In the near term, I see that establishing quality projects in stable political and social jurisdictions having favour. I also stress the importance of establishing corporate strategy based on these elements. I remain convinced that exploring in North America is a fair and good proposal as geological potential remains high. Also, one must never forget that challenged projects (by political, economic, technical, etc. reasons) with their mineral deposits are not gone forever. The mineral deposits still remain: Galore Creek, Fruta del Norte, Oyu Tolgoi will one day be producing assets of this World.
Question 3: After a huge run that saw the price of Gold top out at just over a 1000/oz, I was wondering if you could give us your thoughts on Gold and Gold equities as we slowly move into a seasonally weak period for the metal?
Eric: Indeed the summer is historically a weak period and I see gold gravitating in the current price set (800$/oz. to 900$/oz. range). Remaining fundamentals make me bullish on gold as the underlying premises that rendered gold’s rise still remain pertinent. I see gold at the 950$/oz. range by year end. Gold equities should outperform in general and it remains that mining companies produce a tangible asset. 8 years ago, mining was discounted as a dying science, activity, sphere of influence, but true fundamentals prove that “nuts and bolts” (as well as “bread and butter”) remain the driving elements of economies. I still believe gold as a “valeur refuge” that will slowly and surely be re-recognized.
Question 4: Mr. Lemieux, can you also provide a summarized view of your thoughts and outlook of base metals? What is your opinion/analysis regarding the recent high grade discovery made by Noront Resources in the McFaulds Lake, James Bay Lowlands area in Ontario?
Eric: Without going into specifics and addressing each base-metal commodity, it remains that current production shortfalls (for political, social, weather-related reasons) as well as the long lead absence of mineral exploration (and hence discovery of ore deposits and renewal of the mineral supply process) suggests that in general base-metal commodity prices will hold up or even go higher.
As for the Double Eagle project, I see more interesting projects elsewhere and would suggest proper due diligence.
Question 5: Lastly, if possible can you please highlight one sector among resource stocks (eg. it can silver stocks, nickel stocks, zinc, gold, iron ore 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.
Eric: I usually do not like to pinpoint one commodity sector in particular. However, considering the capital investment requirements of iron projects, perhaps this is one area where there has been wishful thinking. The fundamentals of copper appear most enticing.
Thank You Mr. Lemieux.
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