Restructuring to Consolidate in Fragmented MarketMon, 10/22/2018 - 16:24
Q: What is your view of gold prices and how do you expect the price to trend?
A: Marlin Gold is a little unique because it is a portfolio company of a hedge fund called Wexford Capital. Wexford invests in many different assets including stocks, bonds, commodities and private businesses. We have a very favorable view of gold and silver given our view of global monetary policy. We think that central banks around the world have overstepped their boundaries concerning rate policies and quantitative easing. As a result, markets have been distorted and at some point, there will be an unwind of this distortion. Gold tends to do very well in environments where there is uncertainty, like the uncertainty we see coming.
Gold is the dog and silver is the tail; the tail never wags the dog. When gold went up, silver went up more and when gold dropped, silver dropped more. Silver also has an industrial component in that it is used in electronics and solar panels, so it has slightly different properties than gold. We think gold will eventually break out to the upside, but until that happens, there most likely will be little action in silver. We are convinced the move will be amplified in silver but we do not read too much into the ratio itself.
Q: You have doubled your investment in equipment and mines compared to last year. How will this position you to strengthen operations going forward?
A: I wish I could say that the investments we have been making have been for growth. But in Sinaloa our investment was largely for the removal of waste to be able to access the remaining ore. We have, however, been making growth-oriented acquisitions. From Santacruz Silver we acquired the Gavilanes exploration project located in Durango, right next to San Dimas. Apart from Gavilanes, we acquired a project in Arizona and we are in the process of merging with Golden Reign, which has a project in Nicaragua. We see the Nicaragua market as a window of opportunity right now.
Q: How will the merger with Golden Reign impact your business and what value did you see in this transaction?
A: The value is that the company will now have longevity. At our Mexico mines particularly, we have mined out most of the gold. We have a very large land package so if we spend a lot on exploration, I am sure we will find something else. But Nicaragua brings to the table a fully-permitted, high-grade project that can be brought online for an investment of roughly US$30 million.
In terms of autonomy, Wexford owns 85 percent of Marlin’s shares. When we merge with Golden Reign, Marlin shareholders will own about 45 percent, and of that 45 percent Wexford will own about 38 percent. That is still a very large percentage. Marlin officers will no longer be involved in the day-to-day management but we will represent the largest shareholder on the board. We are happy to have been given this opportunity for sustainability because ultimately the market has not yet turned around. This downturn has lasted almost seven years and we are lucky that we have the backing of Wexford and we will survive this, even if the downturn lasts another two to three years.
Q: How are you planning to capitalize on the mineral wealth in La Trinidad and what are the further plans for that deposit?
A: We have about 120,000ha surrounding our small pit and there are gold and silver showings everywhere. We need to build some basic infrastructure to access many of these areas. When our mine in Nicaragua is in production and we have cash flow, we may spend a considerable amount of money looking into exploration in both Nicaragua and Mexico. We are also open to JVs for prospects in these jurisdictions.