₪ David Pescod's Late Edition June 20, 2006
AN INTERVIEW WITH JOHN GREIG
(From June 14, 2006)
With what’s going on in the commodity and metal markets
of late, we figure why not go visit John Greig because of
the expertise he has gained over the last four or five decades,
he might have a lot to offer. For those who have forgotten
about John, he was the fellow along with partner
Mike Kenyon who created the successful story Sutton Resources.
When it was sold out to Barrick Gold, Mike Kenyon
took over Canico Resources and developed the Onca
Puma project in Brazil, which was sold for $876 million.
Along for the ride was a major investor – John Greig. Greig
is also a founder and director of EuroZinc Mining (EZM)
and sits on many mining boards. When we interviewed
him, Western Keltic (WKM) was a story he thought a lot of
and it was $0.38. Since that time, it has run to as high as
$0.94, but then in the general market retreat, has weakened
as well. Greig had a seven-figure holding in the company
and still has.
Dave Pescod: So John, some of your thoughts on this
metal market right now and the concern around the world
about interest rates?
John Greig: Well, I guess obviously people are concerned
about interest rates and grinding the economy down a little
bit and lower demand would certainly have an impact on
the base metals. I don’t think that the interest rate question
is going to be quite as severe as some people think. I still
think as far as base metals and gold are concerned, the
fundamentals are still intact and I am still positive on base
metals and gold. I think we are looking at a correction that
was widely expected, perhaps a little more severe in degree
and perhaps a little faster than many corrections we see,
but I still think the sun will shine soon.
D.P: One thing that has gotten a lot of press has been
these venture funds that have gone into commodities and
taken them to ridiculous levels. Some people tend to forget
that copper at $4.00 isn’t necessary and lots of people
can make tons of dough at $1.50 or less.
J.G: That’s absolutely right. We’ve been kind of spoiled
with these very high metal prices, copper being one of the
better examples and certainly the industry is still very
healthy at much lower prices. In the medium term, I don’t
expect to see copper and zinc prices (zinc in particular) to
fall much lower than they are now. At least that’s my feeling.
D.P: If you had to predict commodity prices for say, July 1st
next year, what number would you come up with for gold,
silver, copper and zinc?
J.G: Gold - $700 to $800 range; silver - $10.00 to $15.00;
copper - $2.50 to $3.50 level and zinc, probably $1.25 to
$1.75 level. As for lead, probably $0.50.
D.P: These again, might not be good numbers for commodity
funds, but they are certainly good for potential miners.
J.G: Those numbers would be excellent for the miners.
D.P: Are there certain commodities you like more than
most?
J.G: Zinc is one that I like very, very much and it’s just a
matter of supply and demand. There is not enough zinc production
to meet demand, and inventories have been coming
off fairly dramatically over the past year. Next, as far as
base metals are concerned, would be copper. Nickel I would
rank third, but I think all will do very well. For gold, I think
we have bottomed now and I would expect it will gradually
strengthen in the year ahead.
D.P: Can you see ongoing volatility in all of these?
J.G: I do certainly for the next few months.
D.P: Having said this, the one thing we do have to worry
about again is interest rates because if interest rates go
higher, Americans won’t be able to buy more houses or buy
all those products that are made in Asia these days. Your
comments?
J.G: That is the big worry now. Certainly American consumption
is a big factor. But my own bet is that although
there is concern and there will be somewhat higher interest
rates in the U.S., I don’t think it’s going to be overdone. I
don’t think the impact will be as bad as some feel.
D.P: Now getting to specific stories, you had featured Western
Keltic and you are a major shareholder. Could you give
us an update on Western Keltic?
J.G: I’m not a director or part of management, so I really only
know what I am tracking in the news releases. John McConnell
and his team are working on a feasibility study at present.
I think at prices above $1.50 copper and $0.70 zinc, the
project would be feasible. So it is a matter of putting that
feasibility study together and that could take another six
months to complete. Once this correction is over and people
are looking around for good stories, Western Keltic will
be on the radar screen again. I know that John McConnell,
the President of Western Keltic has been doing a good job in
talking to mining analysts and generally making the financial
community aware of the project.
D.P: He’s quite an addition to the management team, isn’t
he? He’s got quite a track record?
J.G: Yes, he has a very good track record. He was manager
of the Snap Lake Diamond project for De Beer’s until recently
and he was senior V.P. and Chief Operating Officer for Breakwater
Resources before that.
D.P: Should we be worried that the assets are in BC and
northern BC at that?
J.G: No. BC is a very different environment than it was in the
NDP years and it is now a positive place to explore and develop
mines.
D.P: The company is fully funded for the next six months?
J.G: I don’t know the answer to that. I don’t know what their
working capital is at the moment.
D.P: Would this remain one of your favorite picks at this
time?
J.G: It would remain a favorite pick of mine. I think it is very
undervalued at these price levels.
D.P: Your target would remain about…..
J.G: About the same as what we had talked about before.
The $1.00 to $1.25 range.
D.P: In this market, it looks like there are a couple of
other bargains out there. I understand that you are preparing
a trip to Sweden shortly to see Gold-Ore Resources
(GOZ).
J.G: That’s right and Gold-Ore is probably my favorite
pick out there. They have an operating mill, and they
are making a few hundred thousand dollars a month
processing material that most people would consider
waste. Once they prove up a new area they are working
on right beside the existing pit, they expect to have
something like a million ounces of gold at a grade of
perhaps two to three grams per tonne. Given the fact
that they are making money at half a gram per ton right
now, I think this company is going to do very well. Their
production rates, I would expect would be in the range
of 75,000 to 100,000 ounces per year when they are back
to full production. It’s a great story and there is lots of
exploration potential beyond the numbers that I’ve just
given.
D.P: We’ve heard others suggesting that they could
have three to four million ounces there. Is that getting
too optimistic?
J.G: No. It is certainly possible.
D.P: Any other details on that project? It seems to be
one that has been missed by most folks on Howe Street.
J.G: The management is very solid. They are not overly
promotional and probably will not be promoting the
situation until they have the new numbers on resources
and reserves to talk about. There will be lots to talk
about in the months ahead.
D.P: If a person had to ask for a “Top Three”, obviously,
we need one more name. Is there another one that you
see at this time of bargain hunting?
J.G: I like a company called Western Uranium (WUC)
and they have assembled a number of projects in the
United States and elsewhere. Some of these projects
have established resources. It’s a new company which
started trading within the last two months. The management
is top notch. It has traded as high as $2.50 a
share and has come off fairly dramatically. At the $2.50
level, many people I know considered it undervalued at
that level. I think this has lots of room to move on a turn
around in the markets.
D.P: One comment from some of the Canaccord mining analysts
is that they feel we are in a bottoming process from now
until over the summer and that when the markets do get going
again; it’s going to be more of a stock pickers market than just
a general market. Any thoughts?
J.G: I would have to agree with that as well. People having
come through a correction like this will be a little more judicious
in their investments. Having said that, there are so many
superb stories out there in the junior mining arena – great projects
with good management, and I think even though it will be
a stock pickers market, there will be lots of good picks.
D.P: Interestingly, when we talked about commodity prices, we
didn’t mention uranium. Your thoughts?
J.G: I am very, very bullish on uranium long term. I think we’ll
see $50.00 uranium within the next 12 months and I think we
could see $100 uranium in the next five years easily. It’s a commodity
the world has to have and there is a shortage of uranium.
D.P: Last question, and we’ll make it the hardest…If there is
going to be a surprise over the next 12 months in the markets,
what do you think it could be?
J.G: That is a tough one. Most likely, a surprise would be on
the down side because I think there is lots of reason to be optimistic.
Thank you John!
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