Categories: Base Metals / Precious Metals
Topics: General Base Metals / General Precious Metals

Legendary Resource Investor Jeff Phillips on Why This Metals Selloff Changes Nothing

 

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me on a historic day in the metals space — and I couldn’t have a better guest — is contrarian speculator and one of the best in the business, Mr. Jeff Phillips. 

Jeff, you’re a contrarian by nature, and there’s a part of me that thinks you’re probably sitting back and smiling. We were just at the Vancouver Resource Investment Conference, and it was extremely upbeat and extremely busy. 

You and I chatted about this market being driven by greed and fear — and there was definitely a lot of greed in that convention center. I’d love to get your thoughts on a day like today where gold is down about 9%, silver is down roughly 28%, platinum is down about 20%, palladium down around 15%. 

The lone exceptions hanging in there right now are copper and uranium — copper down about 1% and uranium pretty flat on the day after recently breaking the US$100/lb mark. 

Thoughts on this pullback?

Jeff Phillips: Hey, thanks for having me, Gerardo. My voice is a little shot. As you said, I was at the Metals Investor Forum for two days, rolled right into VRIC — the Vancouver Resource Investment Conference — and rounded it out with Roundup at the end. 

So I was up in Canada for a week, and my voice is a little rough. But I’ll tell you what I think. It’s the same thing you and I talked about while we were up there. The exuberance was off the charts, and I said the entire time, “This isn’t healthy. We need a correction in precious metals prices.” 

Every day we were there, gold and silver were up. People I hadn’t seen in 15 years were crawling out from under rocks. A lot of deals were lining up to get financed that shouldn’t have been financed. I met a lot of investors — including a lot of people from your show — who came up and asked me what I liked. And I told them, “I like these companies on the next pullback.” So yes, I’m very happy with today from a long-term perspective. We needed a pullback. 

What I didn’t foresee — even though I said all week, “I wouldn’t buy anything right now” — was the speed of it. I expected a healthy correction in a bull market, but I thought it would last one to three months and scare out a lot of the punters and latecomers. 

Instead, I got back late last night, looked at gold and silver, and I actually think this is really good. Rather than a prolonged rough quarter, I think we’re looking at a few days to maybe three weeks to find a bottom. If you can buy that bottom in the metals in the next couple of weeks, I firmly believe we’ll see new highs later this year. 

This is a very healthy correction. It also cleans out a lot of the garbage deals that were about to be financed. It puts people on notice. Does that make sense?

Gerardo Del Real: It makes all the sense in the world. I’d ask whether you’ve ever seen this kind of volatility in gold and silver before but I know that at least with silver, this is the single most volatile day in percentage terms on record. Have you seen anything like this?

Jeff Phillips: No — but we didn’t see the run-up either.

Gerardo Del Real: Right.

Jeff Phillips: I laugh because I’ve done a couple of interviews today and people keep asking, “Have you ever seen this in silver?” For most of my career, silver traded under US$30 an ounce. So a US$30 drop is obviously something I’ve never seen — but I’ve also never seen silver at US$115 or US$119. It moved so fast I can’t even remember the exact number. But this is healthy.

Gerardo Del Real: Yes.

Jeff Phillips: I’m excited. As a matter of fact, when I get off the phone with you, I’m calling my bullion dealer and buying some silver. It may go lower in the next few weeks but this violent correction tells me this bull market isn’t over — and, again, this is healthy.

Gerardo Del Real: I happen to agree with you, for whatever that’s worth. I can’t have you on a historic day without asking for a couple of company names that might present an opportunity after this pullback — anything worthy of listeners doing some due diligence.

Jeff Phillips: I haven’t looked at all of the royalty companies but I’m sure they’re correcting hard. A royalty company with exposure to gold and silver makes sense if my scenario is right and we bottom in the next few weeks before heading to new highs later this year — especially if cash-flow positive. There are several larger royalty companies I like. 

I’ve also talked to you before about Empress Royalty (TSX-V: EMPR)(OTC: EMPYF) — a smaller royalty company, first-class management team, cash-flow positive. It’s similar to picking up gold or silver here over the next couple of weeks. I also like the prospect generators. By their nature, they’re not trying to raise money to build a mine — they’re trying to discover a C$1 billion or C$10 billion asset. Many of them are well-funded. 

A couple I’m involved with and consult for include Headwater Gold (CSE: HWG)(OTC: HWAUF), which is run by the same group. They’ve got close to C$100 million in potential partner funding and are drilling all over the place. Short-term market moves don’t matter as much — it’s about discovery. They’re run by good people, and the market cap is down today. Over the next few weeks, that’s one I’d be watching. 

Kincora Copper (TSX-V: KCC) is another — looking for giant copper-gold porphyries in Australia. We should see results from Anglo’s program from last year. And from what I understand, Anglo will be doing more drilling later this year. They’ve got other JV partners, and the company has about a C$40 million market cap. Whether you buy it at C$30 or C$40 million, the upside you’re looking for is tens of billions. Short term, anything can happen. 

I think this is a relatively short correction given how violent the first day was. I’ve been waiting to buy more gold, so this is good for me. Stocks are more of a longer-term play.

Gerardo Del Real: If you’d told me two years ago that silver’s new floor would be around US$80 and gold’s new floor would be between US$4,500 and US$4,800, I would’ve been thrilled. Context matters.

Jeff Phillips: Exactly. Another company I like — and I’m a big shareholder — is GreenLight Metals (TSX-V: GRL)(OTC: GRLMF). They’re cashed up after raising C$12 million at around C$0.35 per share with no warrants. That’s important — no warrant clipping. They’re focused in Wisconsin, well-funded, and should be drilling this month. If you can buy it below the financing price, that’s an excellent speculation.

Gerardo Del Real: I couldn’t agree more. Jeff, it’s great to have you on a day like this. I’m curious to see where the market closes today and how it opens overseas on Sunday and here on Monday. Anything else to add?

Jeff Phillips: Just this — I’m not giving investment advice. I consult for some of the companies I mentioned and I’m a large shareholder. I’ve been buying gold and silver for 30 years. I still own gold I bought in 1999 at US$295 an ounce. I’m not a short-term trader. But the one thing I know for sure is that 10 years from now, gold and silver will be higher.

Gerardo Del Real: I couldn’t agree more. Jeff, thank you so much. Let’s do it again soon — maybe on the next leg higher.

Jeff Phillips: That sounds good. Maybe next week we’ll talk about why gold and silver have bottomed and are screaming higher — or maybe three weeks from now.

Gerardo Del Real: Or maybe at new all-time highs next week. That kind of market. Historic, for sure. Thanks again.

Jeff Phillips: Thanks for having me, Gerardo.

Gerardo Del Real: Thanks for coming on.