In this month’s conversation with Bob Moriarty we discuss sentiment in the junior mining sector and the mounting signs of a tradable bottom that Bob is seeing across the precious metals sector. Bob believes we are close to an important bottom in the juniors, and investor sentiment on social media is helping to confirm this theory. We also discuss the prospect of a new global reserve currency supported by China and Russia that could be backed by gold. We then delve into Eloro Resources, Eloro’s recent drill results, and why Bob believes Eloro’s Iska Iska Project could become one of the most important mines in South America. We conclude by discussing a recent blog post that I wrote on CEO.ca about what drives the gold market, and why the recent gold downturn has been particularly frustrating for many precious metals investors. Without further ado, Energy & Gold’s July 2022 conversation with 321gold founder Bob Moriarty….
Bob, It’s a pleasure to speak with you this afternoon (Friday July 22nd). I noticed on 321Gold that you did a YouTube interview, where you say now is the time to buy miners, and that we’re going to get an explosive rally. Can you tell us a little bit more about that?
Well, that gets very interesting because you should go to it again and listen. People change what you say to make it more attractive to their audience. I didn’t actually say that a bottom was in. I said that we were very near a bottom. I think we are near a bottom. I think I said that on the seventh. All the sentiment indicators are suggesting that we’re very close to a tradable bottom. This is the time to start loading up on really attractive, really cheap stocks. Everything’s down 50%, 60%, 80%.
If you go back to 2008 or 2015, or March of 2020, the moves off the bottom are absolutely exhilarating. There have been two stocks lately that have literally doubled overnight, based on good results. One was Snowline Gold (CSE:SGD) going from $.84 at the end of June to $1.86 last week.
Snowline Gold Corp (One Year)
Last week Western Alaska (TSX-V:WAM) went from $1.70 Monday to $4.45 on Thursday. On Friday of last week Nulegacy (TSX-V:NUG) went from a low of $.04 to $.065 on the day. Of course, that’s what investors are looking for. Yeah, I’m not going to say we passed the bottom. I’m just going to say we’re in the neighborhood of an important trading low in the resource stocks. Now, you and I have spent a lot of time talking about DSI.
The DSI for silver got down to 10, which could indicate a bottom. It never got below 26 on gold so gold could still go lower. Resource stocks, silver and gold are like dancing, sometimes you lead, sometimes you follow.
Okay. What would you really be looking for to indicate a bottom is in or confirm a bottom is in? What are your thoughts on seasonality?
We’re in a pretty favorable time of the year historically for precious metals and mining stocks. Normally, we see a rally from right around now through Labor Day.
You’re absolutely correct. What I look for is extremes of emotion. Now, if you go back to March of 2020. I had predicted a market crash. I talked about it in January, and I talked about it in February. I said, “Hey, we are going to have a crash.” Silver went down to 12 bucks an ounce. Okay. It actually went below 12 bucks, an ounce and that’s such an extreme of emotion, that I was convinced that it had to go higher. Of course, here’s the key and that’s what people don’t understand.
The more extreme the sentiment, the higher the recovery. Now, I’ve gone out on CEO.CA in the last week. The number of people just whining, and crying and, “Oh my God, it’s never going to go up. I hate gold and I hate people who recommend gold.” Strange enough, that’s a good measure of psychology. At tops, everybody loves the commodity and at bottoms, everybody hates the commodity. There is no perfect indicator. However, there’s a number of different indicators that tell you where you are, DSI being very important. We certainly are in the neighborhood of an important tradable bottom.
I think that’s a very important point about market participants’ behavior. Everyone gets cranky when it’s a much better time to buy, and everyone gets euphoric when it’s actually a better time to sell.
Let’s turn to central banks and the Fed. This is a topic you normally don’t really like to talk about, but I think it’s important today, because central banks have such an impact on financial markets right now. We’re going to get a Fed meeting and announcement on Wednesday. Everybody thinks that it’s going to be a 75 basis point rate hike. The Fed has been wrong about inflation for over a year.
Now, they’re tightening rapidly, into a rapidly decelerating and weakening global economy. First of all, that’s one question, do we care about the fed at all? Should we care about the Fed or central banks? The second one is, do you think that we’re entering a period of rapid boom bust cycles, where all this central bank tinkering and meddling is just accelerating things on the upside and the downside?
I think that’s a fairly good way of describing it. Now, as far as central banks are concerned, I’ll be candid with you. I don’t really give a shit what they do. They’re so stupid and they’re so wrong. They’re always wrong when paying attention to them, it’s like listening to CNN talking about what they think the stock market is going to do. These guys are always wrong. I’m convinced they’ve painted themselves into a corner. The malinvestment is so severe, that they literally are destroying the world’s economy.
I think there’s an excellent chance that next week they could raise rates a full percent. Then turn around and panic when they realize what they’ve done to the stock market, and start QE five or QE six, or eight or 10, or whatever the hell it is. I think that central bank people across the board, throughout the world, they are stupid people who have no clue whatsoever. You can eliminate all of the central banks and it would be better for the world’s economy.
Russia, Ukraine, NATO, obviously this is a charged topic but it’s an important one. We’re seeing Europe have serious challenges on the energy front. Yeah, let’s talk about Russia, Ukraine and NATO. Now, obviously this is a charged topic, but it’s an important one. It has massive implications for pretty much everything in the world. We’re seeing Europe go through some real challenges on the energy front, due to the so-called sanctions on Russia, even though it seems like they’ve been buying more oil and gas than ever in 2022.
But if Russia cuts off Germany and the Netherlands, it’ll be a crisis, it’ll be an absolute crisis, especially in the winter. How do you envision this situation playing out? Obviously, Russia has taken a lot of losses in Ukraine. They’ve taken a beating. Ukraine has taken a beating. A lot of casualties on both sides. Seems to me, as a casual observer from across the ocean, that it’s entering more of a stalemate period now and there’s no end in sight.
I’m going to disagree with that. There are three or four telegram channels that I subscribe to. Very clearly, Russia is achieving everything that it intended to achieve in the first place. The United States and Germany, and Poland and all the NATO countries that really were fighting Russia by providing weapons to Ukraine, are doing nothing but increasing the corruption in Ukraine and making the war go longer. I’m not sure what the numbers are, but it appears to me that somewhere between 300 and 1,500 Ukrainian soldiers are being killed or wounded every day. The losses by Ukraine are probably five times or more higher than that of Russia.
There’s a lot of stuff that you should be hearing about, but you’re not. There’s no question, there’s a lot of Ukrainian soldiers being killed or wounded. What people who have not been in combat don’t understand, is that from a tactical point of view, you’re far better off to wound people than to kill people. If you kill a soldier in combat, you bury him and you don’t worry about it anymore. But if you wound somebody in combat, it takes six support people to get him into a hospital, and provide care for him and take care of him.
The Ukrainian hospitals have to be in absolutely terrible condition. The Ukrainians have already lost more kills, soldiers, than the United States lost in Vietnam. We had a 20 year war in Vietnam. This has been a four month war. This war is catastrophic for Ukraine, and NATO and the EU are going to fight the war to the last drop of Ukrainian blood. Don’t be confused for a minute, the Russians are winning this. They are going to win this. They’re going to separate Ukraine into three separate countries.
According to the EU, they’re continuing with the sanctions, even if Russia achieves its goals. The sanctions are going to force the biggest change financially in the world financial system in history. Russia and China, and India and Iran are going to go back to a commodity-based financial system and I’m convinced it will be based around gold, because there really isn’t any other choice.
You say that Russia’s going to win. First of all, nobody wins in war.
You’re using my line now. Everybody loses something. Donbas, what’s been shelled, had 14,000 people killed or wounded. Putin was absolutely forced into this war against the most corrupt country in Europe and West Asia, and he’s accomplishing his military objectives. At the end of the war, it will be clear that Russia accomplished their objectives. Yes, a lot of Ukrainian soldiers have died. Yes, a lot of Russian soldiers have died, but there are some times, you actually have to defend your country.
This goes back to Russia saying, “Look, we want secure borders and we are willing to fight to have secure borders.” The amazing thing is there have been three million illegal immigrants brought into this country by the Biden administration. I’m sorry, that’s criminal. That is totally insane. The United States has no concept of secure borders. Russia has an absolute concept of what they want. They demanded it, it was reasonable.
If Zelenskyy turned around and said, “Yes. Okay, we will give you secure borders. We will do what we said and execute. We will insist the United States did what it said it would do 30 years ago,” there would’ve never been a war. Sometimes you have to fight, and in that situation, Russia had to fight. The United States made it clear they want to destroy Russia. Now somebody says they want to destroy you, you have to defend yourself. I’m a warrior, I’m not totally anti-war, I’m just against really stupid wars. Putin was pushed into this war and Russia is going to win.
Did you just see what was announced? Russia and Ukraine, with the help of Turkey, have signed a deal for the export of grains. That they’ve opened up the export of grains to the rest of the world for 120 days. The agreement can be extended once the 120 days is up. It looks like Erdogan is playing a peacemaker role.
Interesting because Turkey’s been supplying arms to Ukraine. It’s interesting to see this dynamic, where Turkey and NATO member that has had a pretty close relationship with Putin, is also supplying arms to Ukraine and helping to broker a grain deal. What do you think about that?
That’s very interesting and it actually supports my position, that the Russians are not the bad guys. Now, what nobody in the Western media tells anybody, is that it wasn’t Russia that prevented the grain from being exported, it was Ukraine. Ukraine mined their own ports and, of course, the grain ships couldn’t sail through the mined area because their insurance would be invalid. It was Ukraine that was preventing the export of grain.
When the history of this war is written, and it’ll take five or 10 years for people to actually understand it, Russia’s been very reasonable this whole time. Now, here’s what’s absolutely unequivocal. If Russia wanted to prevent the sale of Ukrainian grain, they could do that and they’re not, okay. They’re being quite reasonable about the whole thing. It was Ukraine that was preventing the export of grain, and Russia’s allowing Ukraine to export grain.
I happen to think that’s a very good thing, from the point of view of we’ve got two issues with inflation now. One is a food issue and the other is an energy issue. Now, because you need natural gas and you need fertilizer to produce food, there is going to be less food produced in the world this year, which is part of the problem. Then you’ve got the issue of because Russia and Ukraine, I think, provide 45% of the world’s grain.
As long as there’s a war going on, there’s not only going to be a shortage of energy, there’s going to be a shortage of food. I’m glad to see Russia and Ukraine get together and say we need to do something. Erdogan has always played both sides so that doesn’t surprise me in the slightest, but it’s a good move for the world overall. I think there’s like 800 million people in the world, who are on the verge of starvation.
It wouldn’t take very much in the increased cost of food, for those 800 million people to starve. The real issue isn’t Ukraine, it’s not Russia. It’s the 800 million people, who are either going to freeze or starve, so it’s a good move on both sides.
Switching topics, Russia and China officially announce a new global currency. Now, this is very interesting and it’s gotten some coverage in the goldbug world, but I haven’t seen any mainstream coverage of it. What is happening here? What does this mean for the US dollar? Does gold play a role in this?
That’s a really good question. You picked up on one of the most important economic issues literally in world history. The debt-based financial system of the West goes back to Rome and Greece, where people were allowed to borrow money and they had to pay interest. It was legally enforceable, and they would lose the collateral if they couldn’t pay. Of course, from a mathematical point of view, when you have loans being made and interest charged on those loans, you always have more money owed than actually exists. So periodically, you’re going to have some kind of blow up.
Now, The Great Reset is all about taking this debt-laden world that we know can never be paid back, and all of the assets will belong to the 1/10 of 1% Davos crowd, and the 99% will be turned into slaves. You will owe nothing, and you will own nothing, and you’ll be happy. That is the definition of slavery. The key is Putin was actually one of the 3,800 people, who were in the Young Global Leaders program who were indoctrinated by Klaus Schwab. He knows exactly what their plans are.
He said, “Hey, this is bullshit, okay. What we need to do is go back to some system based on reality.” And if need be, we have debt jubilees, where we write the debt off. One thing that I think that everybody understands, it’s very important to understand, is there’s far more debt in the world that can actually be paid. The Western system, which has held the commanding position literally since 1492, is that debt has to be paid and the debtors have to suffer.
But if you go back to Babylonian time and time of Palestine, they had debt jubilees every 50 years and they wiped out the debt, because they wanted the farmers to be able to farm, rather than to be enslaved. And that’s very important. People don’t understand this in the United States, but if you’re in debt, you’re a slave. The whole Great Reset is about slavery and turning all of the power over to the 1/10 of 1%. These people are so crazy, the UN is voting on some kind of solution now to allow insects to be used in food.
You’ve got 1,500 of the rich, powerful and beautiful, flying their personal jets into Davos to talk to each other about how smart they are. They’re eating steak and lobster, and talking about how the rest of humanity should be eating insects. It’s not going to work. The Great Reset, it’s failing. There’s riots in Spain. There’s riots in Italy. There’s riots in Holland. Canada wants to do the same thing as Holland, and they literally killed much of their agricultural industry. We got a food crisis and Holland’s saying, “Okay, we need to shut down 30% of the farms.”
Now I’m sorry, but that is totally insane. We’ve got this insane president of the United States, who has said he wants to kill fossil fuels. Well, if killing fossil fuels is a good idea, you’ve got to have an alternative in place first and we don’t. Literally, there’s a direct analogy between a chart of energy produced and population. They’re saying, “We’re going to reduce the population. The way to do it is we’re going to reduce energy.” I tend to agree the world is overpopulated, but I don’t think the Davos crowd has the right to be mass executioners.
Very interesting. What role do you see gold playing in this new world order, this global monetary reset?
You were asking exactly the right question. Now, when the Chinese, and Indians, and Russians talk about it, they talk about a basket of currencies, but here’s the deal. If you’ve got a basket of different turds, they’re all still turds. You’ve got to have something that has real value and functions well as money. I’ve always believed we’re not going to go back to gold because anybody thinks it’s a good idea. We’re not going to go back to gold because anybody wants it.
We’re going to go back to gold because we have to, because for 5,000 years it’s been the only thing that works when you have a financial crisis. So it’s my belief, and I’m not a goldbug in that I worship gold, but gold is a wonderful form of money. We’re going to go back to a gold standard, not because we want to, we’re going to go back to a gold standard because we have to.
But the key here is, it’s not going to be the West that does it. The Western financial system, the debt-based financial system is dead. They don’t understand it yet, but it’s dead. We’ve got these idiots running central banks, who screw everything up. Russia and China are going to get together, and they’re going to come to the conclusion that a new world reserve currency needs to be created, and it’s going to be based around gold.
What kind of implications would you imagine that could have on the gold price? Does that mean gold has to reset to a much higher valuation?
I think so. Here’s an argument that you’ll be very familiar with. There’s a lot of people that are saying, “Look, the Federal Reserve has to increase above and beyond the 75 basis points, they have to go to 100 basis points.” But a lot of people are saying once they do that and once the stock market crashes. I’m convinced it’s going to continue to do, we’re in a dead cat bounce right now. What’s going to happen is the Federal Reserve’s going to change course and go to QE instead of QT.
When they do that, the price of gold and silver are going to explode. I believe that’s absolutely true. The world is functionally bankrupt and you can either hold pieces of paper in your hand and imaginary currencies like Bitcoin, or you can hold a real asset. And what the Russians and Chinese have woken up to, it’s you want to hold real assets. Gold and silver are not going to go up. What’s going to actually happen, is all of the paper assets are going to go down.
You’re certainly going to see it even in Canada, where people are lowering the prices of real estate by 10%, 20%, 30% to sell it. We are in a financial system that is absolutely irrational, and something has to break. The end result is going to be good for real assets and bad for paper assets.
So switching gears to specific junior mining companies, a company that we’ve talked about many times is Eloro Resources (TSX-V:ELO, OTC:ELRRF). Now, Eloro is drilling out a very large caldera in the Potosi Department of Bolivia. They put out news yesterday, the drill results from Santa Barbara area, the southeast Santa Barbara area, ELO intersected 188 grams silver equivalent per ton over more than 300 meters in the core of the feeder zone at the Santa Barbara target at the Iska Iska Project in Bolivia.
What really stood out to me about this news release, is that according to Dr. Bill Pearson, Eloro’s VP of exploration, the feeder zone appears to extend much further to the southeast, across the center of this caldera. Actually, Eloro added an additional drill rig to drill to the southeast, to test this feeder zone. The stock has responded very well to yesterday’s news. What are your comments about Eloro?
Eloro Resources (Weekly – 3 Year)
The Iska Iska Caldera is going to be a mine. What we forget is there’s only two reasons to drill a project. Do you have any idea what they are?
Well, you drill it to fill it or kill it, right?
You got it. You just said it in two words, you fill it or kill it. If it’s not there, you want to find out as soon as possible. If it is there, you want to find what you’ve got, but it is that simple. You drill it or kill it. Everybody forgets that because they think you’re supposed to be drilling for resources. That’s bullshit. You really can find out whether you have a mine or not. And if it’s got a mine, you drill the shit out of it.
And if you don’t have a mine, you go somewhere else and drill up something else. The key is, if you look at the caldera, I would highly encourage everyone to go to Eloro’s website, take a look at the map that shows the caldera. The whole caldera is mineralized. If we were in a rational world, and we’re not in a rational world, and we didn’t have COVID, and we didn’t have six month delays on assays, they should have 10 or 15 drills drilling there now. They’ve got a two to three billion ton resource that they’re going to come up with when they get finished drilling out, and it’s extraordinary.
188 grams of silver is six ounce silver. That’s still 112 bucks, even $18 of silver. It’s an extraordinary project. Bill and the entire team have done a fabulous job. It’s such a big project that it’s going to provide a lot of income to Bolivia. And obviously, resource nationalization is a giant problem in the world today. I think that Eloro’s going to have one of the biggest and the best mines in South America.
Certainly is a very interesting project. The potential scale here, especially if they’re correct in this tin porphyry feeder zone, this could be an extraordinary, extraordinary mine. I want to wrap up with an article I wrote, a blog I wrote called Gold Isn’t Good for Anything. Now, this is an interesting topic because one of the readers of my morning emails made a comment and it was very interesting.
It was funny, but sad and true at the same time. Basically, the gist of it was that during periods of inflation, gold stocks don’t do well because the Fed is tightening and they go down. During times of deflation, you don’t want to own gold because obviously, in deflation gold goes down. Broader stock markets are doing well, like in 2021, gold tends to underperform. During a financial crisis, like 2008, they sell gold futures and gold ETFs to raise cash.
Basically, he’s making the point that all these different market periods, market environments, gold stocks don’t do well. The only time that gold has done well, this is he’s exaggerating, but you exaggerate to emphasize the point. Between April and August 2020, you have about a three to four month window. When the world’s blown up, we’re in the middle of a pandemic, a 100 year pandemic, and central banks are doing absolutely extraordinary things they’ve never done before.
Then you get an eight to 12 week run in the gold mining sector. Now obviously, he’s exaggerating a little bit, but there’s some truth to it. There’s a lot of market environments where gold stocks don’t do well. The recent one where we have surging inflation, central banks pulling back the liquidity spigot. In turn, gold and silver prices dropped, as the cost of mining for these gold companies has gone up, because energy prices have gone up, labor prices have gone up.
The price of everything’s gone up, but meanwhile, the gold and silver they’re pulling out of the ground has dropped because the Fed is starting to tighten. What a double whammy. We’ve been lied to, Bob. My whole life I’ve been told gold and silver go up during inflation and it’s not true. What do you have to say about this?
Well, a funny thing is I’m really glad that you picked up on it, because it’s absolutely true. Here’s the issue. People try to confuse the narrative with price, and it’s absolute rubbish. Some of the things that I’ve said in my books are so simple, that if people actually paid attention to it and they thought about it.
They would realize, “Hey, wait a minute. He’s onto something.” I’d say I think I’ve got a dozen rules of investing. One rule is stocks go up and stocks go down, and people have an incredible issue with that. You just made my point in a way.
They’re supposed to always go up, Bob. They’re supposed to always go up. Come on! (laughs)
No, no. I was talking about the negative sentiment being a really good indicator as the tradable bottom. It’s absolutely nonsense. At every bottom, you’ve got guys saying, “Ah, gold’s a Chia Pet.” That was the narrative in 2015, but here’s what’s beautiful. The same guy that said gold is a Chia Pet in 2015, in 2011 he would say gold is going to go to the moon. The mob is always wrong. The narrative is always wrong. There is no direct correlation between deflation and gold or inflation and gold. Look at it and figure out what the sentiment is.
When everybody hates gold, you should buy it. When everybody loves gold, you should sell it. So rather than focusing on these memes, they’re absolute crap, and you are absolutely correct. Gold does not go up, shares don’t go up because of inflation. Okay. Sometimes they go up with inflation, sometimes they don’t, but there is no direct correlation. Let me give you an example. If you pull up Snowline Gold, okay. Same as Sierra Gold, Delta, the price of the stock on the 29th of June, was 84 cents and it traded 52,000 shares.
Somebody realized what their drill results actually showed, and there are pictures on their website. I think they came out with the press release on the 26th of June. They sat down with some big investors and they agreed to do a big placement at $1.25 per share.
The shares closed at 84 cents. The next day, they announced a placement at $1.25. The shares went from 84 cents to $1.86. You can make your fortune trading junior stocks, if you will learn to understand the difference between a bear market and a bull market. Now, I don’t call every term perfectly, but if investors will go read the piece that I wrote on the 7th of July, I said we had a tradable low coming up soon.
I happen to think if it’s not here, we’re ver8 close to it, but focus on sentiment. Don’t focus on this bullshit of inflation has something to do with it, or deflation has something to do with it. Or interest rates have something to do with it, or Ukraine has something to do. None of those have anything to do with anything.
People buy because they feel like it’s a good investment, and they sell because it’s a bad investment. So all you need to measure is sentiment.
You have a good way of simplifying complicated topics. One of the things about sentiment that’s a little challenging, is that sentiment can get negative and then it can stay negative for extended periods of time, as price continues to drop.
Just like sentiment can turn positive or over bullish, and price can keep going up for extended periods of time. So how do you know when it’s really bad enough that it’s a great time to buy?
That again, it’s an absolutely brilliant question. And what I will admit, is there is no single, perfect sentiment indicator. However, there’s a whole variety of 15 or 20 sentiment indicators that give you a feel. Now, I’ve been investing for 50 years. Okay? I’ve got a pretty good idea of Kentucky windage and I get a feel for it. In April of 2011, I called the top in silver to the day, because the Sprott Silver ETF was selling at a 26% premium.
On that day, the SPR Silver ETF was the single, best sentiment indicator that you could possibly have, but it’s not a perfect indicator all of the time. There are other indicators sometimes that are better indicators. I’ll give you a perfect example. If you go to the Gold Miners Bullish Percentage Index, it’s $BPGDM. In 2015, the percentage of the index went down to zero. You could not possibly get more negative than that. It’s down to about 10% right now, which is pretty negative, but not totally negative.
In March of 2020, it got down to 8%. In 2015 the market climbed over 200% in eight months and in 2020 it went up I think 179%. All you have to do is catch one of those moves. These are all indicators. If you take 10 or 20, or 30 indicators of sentiment and add them together, you can get a feel for it. Your guy is saying that gold isn’t good for anything, or all these negative guys on CEO.CA, that’s a sentiment indicator. When everybody hates a commodity, that’s the time to buy. That’s true of every commodity. It’s not true of gold and silver all by itself.
Well, there are a lot of people who absolutely hate gold, silver, and mining stocks right now. So if that’s any indication, it’s a great time to buy. I think that’s a great place to wrap up this conversation. I really appreciate your time and your insights. I look forward to speaking to you again next month.
Disclosure: Author owns shares of ELO.V at the time of publishing. Author has been compensated for marketing services by Eloro Resources Ltd.
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