Endeavour to Pinpoint One Major Growth Spurt
Well, perhaps the double entendre in the headline will make you shake your head the way my "What Are You Wheaton For?" headline caused fleabagger some consternation. :)
But, as you might have guessed, it's the content I care about ... so please let me know what you think of this article based upon an interview I conducted with Endeavour Silver's Chairman and CEO Bradford Cooke a few days before their second quarter earnings release.
I want to offer special thanks to ChrisGraley for submitting questions for Mr. Cooke in the hours before my interview took place. Although the following article -- as long as it is -- represents a redacted transcript of our discussion, the content that Chris' questions spawned was really the highlight of the conversation from where I'm standing. Let me know if you agree.
Questions from the CAPS community
Barker: Before our conversation today, I invited readers of my CAPS blog to post questions of theirs, and I wanted to pose a series of questions offered by Motley Fool CAPS member ChrisGraley. First, he was curious to know your overall outlook for the silver price.
Cooke: I consider myself a modest bull on precious metal prices, but I do think we are coming into the next wave up for both gold and silver. More accurately expressed, I think we're looking at the next wave down for paper currencies, and that I think is for the fourth quarter of this year. So for silver, I am looking for some short-term softness (in the $17 range), and by year-end I am expecting to break through and retest the old high of $22. And that's simply a currency-based argument. There's really nothing in global demand to say it should go there, except that these paper currencies are in trouble, and these government debts worldwide finally have to be routed out.
Gold led us into the summertime correction. It's actually been much gentler and shallower than in previous years. Gold typically bottoms in August and starts moving in September in advance of any other commodity. So I'm looking for probably an $1,100 to $1,140 bottom in August, and a fairly aggressive next wave in the fourth quarter ... certainly going through the old high of $1,260, and I'm looking for $1,350, and maybe even as high as $1,500 this year. I'll be even more aggressive next year.
Barker: I also anticipate silver gaining ground on gold on a percentage to close that gold-to-silver ratio a bit.
Cooke: Oh, for sure. The ratio moves in cycles, and we cycled from an original base in around 2001 of 50-55 to one, down to a low of 45 at the peak in 2007, to a trough of 85 during the crisis of 2008. And now we're back in the 65-70 range. And I can easily see it over the next two-to-three year cycle going back and breaking below 45.
Barker: Which companies do you consider your toughest competitors out there?
Cooke: I admire the work that Jorge Ganoza has done at Fortuna Silver. I admire the work that Bob Archer has done at Great Panther.
Barker: What advice do you have for investors looking into silver?
Cooke: I think everybody should have some exposure, simply because they have returned to their historic function as the currency of last resort. A lump of gold, you know, doesn't change in value from year to year or century to century. A lump of gold is a lump of gold. It's how we measure -- what we use to buy and sell it -- that changes.
I'm expecting another three to five years in the gold and silver cycle, and I'm certainly not alone in that view. So it's not late in the cycle; these stocks are not overpriced. In fact, if anything, they're underpriced.
Barker: Is being taken out by a senior silver producer desirable from Endeavour's standpoint?
Cooke: I think there's no question that if you can get all of your shareholders out at the tip of a friendly deal, that's the best way to maximize value for stockholders. That's part of our exit strategy -- to build a company that somebody else will totally want to own.