One company turned down a $2 a share takeover offer

The following is an excerpt from an interview with 321Gold’s Bob Moriarty, which was conducted by Karen Roche

The Gold Report (TGR): In a recent 321Gold report, you wrote what a great pleasure it is on your site visits "to see those companies that get it exactly right. They are few and far between." Can you tell us what some of these companies are getting exactly right, and what makes them stand out?

Bob Moriarty (BM): A company that gets it exactly right is a 1-in-100 company. When I first started dealing with NovaGold Resources Inc. (NYSE.A: NG, Stock Forum); (TSX: T.NG, Stock Forum), it was just making incredible progress back when no one else was doing anything. But NovaGold had five people then. The company still has some extraordinary projects but they got bigger and fatter. They probably have hundreds of people working for them now. It's really easy for a five-man company to get it exactly right, and NovaGold had it exactly right for a long time. It's really hard for a 200- or 300-man company to get it exactly right.

TGR: Who would you say is getting it exactly right nowadays?

BM: One example is Premium Exploration Inc. (TSX: V.PEM, Stock Forum). Del Steiner, who runs the company, comes from Idaho. He spent 50 years thinking about creating something to exploit this one district, and he's pretty much controlling the whole district now. There's more damn gold there than I've ever seen in one particular area. We drove for about 20 miles and saw indications of placer workings. The mountains on both sides were loaded with gold. He has a really good team. They're being very conservative with their money. They're coming up with extraordinary results. It's so far under the radarscope, it's absolutely amazing; over time he will get credit.

TGR: Any others you see that have it exactly right?

BM: Rio Alto Mining Limited (TSX: V.RIO, Stock Forum) is close. I really like this company. They have the ability, if they do it right—and again, this is a work in progress—to pick up a 10 Moz. gold deposit essentially for free. They did a better job of taking advantage of the 2008 crash than anybody else I know. They negotiated really fabulous terms. If they actually do what they say they're going to do, they're going to make a lot of money for their shareholders. They're about 65 cents to 70 cents a share now. I know they turned down $2 in February because I was the one who took the offer to them.

TGR: How quickly can they make up that $2?

BM: Very quickly. They're starting work on pads now. They've got the money to get into production, and should be in production in December. If they don't screw it up, they'll do very well.

TGR: Who else comes to mind?

BM: Another company that is in a little bit earlier-stage work-in-progress than Rio Alto is Kiska Metals Corporation (TSX: V.KSK, Stock Forum). It has some potential for being one of those companies to get it exactly right. Kiska has a big district in Alaska that probably has the potential of a Northern Dynasty Minerals Ltd. (NYSE.A: NAK, Stock Forum); (TSX: T.NDM, Stock Forum). I'm going to go see them in mid-July. Kiska is very cheap and management appears to be very good. Kennecott Exploration Inc.—a subsidiary of Rio Tinto Ltd. — has back-in rights to the Island Mountain Discovery in Kiska's Whistler Project. If Kennecott exercises these rights, it would be financially very lucrative for Kiska. If they don't, it would remove the uncertainty. Investors hate uncertainty. It doesn't matter if Kennecott backs in or not, there is uncertainty.

TGR: They're just finishing some assays on that?

BM: Yeah. They have a major program underway. And again, they've tied up an entire district. It's going to be a very big, high-grade project.

TGR: How does Kiska's property compare to the district that Del Steiner's tied up in Idaho?

BM: Kiska has the potential of being a NovaGold or a Northern Dynasty with up to 40 Moz. of gold. Del Steiner's is a lot smaller. Del's might be 5 Moz., but he has the ability to put it into production really cheaply. He has to do a lot of things right to get it going, but it should be a very profitable. It's a nice size district with lots of potential.

TGR: What about costs for Kiska?

BM: Kiska's is going to be an expensive project; it will be one of those projects that costs $1 billion to get into production. I don't remember for sure, but I think NovaGold spent $9 million just on its earn-in and has easily spent $50M–$100M at Donlin Creek. It's like Northern Dynasty, where hundreds of millions of dollars have been spent. When you're dealing resources worth between $10 billion and $30 billion, you have to spend the money in exploration.

TGR: That should be an interesting trip for you. Are there other companies that are getting it close if not exactly right?

BM: I simply do not understand the market right now. It's brutal and very difficult to make money. Stock goes up, they release good results and the stock get hammered and cut by two-thirds. That's happened to Evolving Gold Corp. (TSX: V.EVG, Stock Forum), Revett Minerals, Inc. (TSX: T.RVM, Stock Forum) and Richfield Ventures Corp. (TSX: V.RVC, Stock Forum), which has a big project in northern BC, where they've come up with some extraordinary drill results. Richfield is very cheap now, and their results have been very good.

Revett is another company that's very close to getting it exactly right. It's a small but potentially very profitable company, with excellent management and a really good work force. They understand exactly what they're doing, have things under control. They're awaiting a judicial decision on their Troy property in Montana, where they anticipate annual production of 1.4 Moz. of silver and 12.6 million pounds (Mlbs.) copper concentrate. If they get that into production, they would be a major.

TGR: Speaking of silver ... what's your view of silver vis-à-vis gold as we face a deeper depression, oil rain and the financial devastation you see on the horizon?

BM: Funny you should ask. I know of no other commodity where the experts—and I use the word "experts" in big quotation marks—are so full of crap. They've been touting the stuff for 10 years, talking about some shortage of silver, saying silver is going to go 10x faster than gold. It's never happened and they've never changed their tune.

Silver is a commodity. It is not money. Gold is money, as well as being a commodity. Silver will go up relative to everything else only when it becomes a monetary metal. My belief, my opinion, is that we will go back to a silver and gold standard. When we do, silver will go up relative to gold. But these guys who say silver will go from 70:1 to 16:1 have always been wrong and always will be wrong. Silver's not going to change relative to gold until something changes in supply and demand. That something is using silver as money.

TGR: Your investments are primarily in gold and platinum?

BM: Pretty much gold. Platinum's a really tough area. Interestingly enough, Del Steiner has a platinum project in Montana, near Stillwater. I would love to see that advanced. Really big potential there.

TGR: In terms of price points, can he develop that project at current platinum prices?

BM: Oh, yeah. $1,500 or $1,600 platinum is a lot of money. $1,230 gold is a lot of money. $19 silver is a lot of money. For all the guys who are running around saying, "Oh it's a catastrophe. It's controlled," those are pretty good prices. Anybody with a silver, platinum or gold deposit who can't make money at these prices is running a scam. I'm serious. If you can't make money at $1,230 gold what are you doing? Wait until it hits $10,000?

Convinced that gold and silver were at a bottom and wanting to give others a foundation for investing in resource stocks, Bob and Barb Moriarty brought 321gold.com to the Internet almost 10 years ago, and later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on the current events affecting both sectors. Before his Internet career, Bob was a Marine F-4B and O-1 pilot with more than 820 missions in Vietnam. A Captain at age 22, he was one of the most highly decorated pilots in the war and the youngest Naval Aviator in Vietnam. He holds 14 international aviation records, and once flew an airplane through the Eiffel Tower's pillars "just for fun."

DISCLOSURE:
1) Karen Roche, of The Gold Report, conducted this interview. She personally and/or her family own the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Premium, Rio Alto, Kiska, Evolving Gold, Revett and Richfield.
3) Bob Moriarty—I personally and/or my family own the following companies mentioned in this interview: Premium Exploration, Rio Alto, Evolving Gold and Richfield. I personally and/or my family am paid by the following companies mentioned in this interview: None. Premium Exploration, Rio Alto, Kiska and Richfield Ventures are advertisers on 321gold.