Hard Asset Digest November 2020

Gerardo Del Real: Mike, thank you very much for having me. It's a pleasure to be with you today and it's an interesting story. I actually met my wife in Anchorage, Alaska. She was born and raised there. And so I lived there for a total of 17 years. The joke in the family is that after we met, it took me another 13 years to convince her to head south for a warmer climate!

And so here we are now just outside of Austin. We've been here for about eight years and we’ve absolutely fallen in love with the city.

It's interesting because I was living in Alaska when I started speculating in the resource space. At that time, I was also speculating in real estate and realized that that bubble was about to burst.

And so I began looking into different ways to diversify into something that provided a much higher reward to go along with the elevated risk factor. And that led me straight into the junior resource space where I’ve been ever since.

I began educating myself… I chanced upon a book by Bob Bishop, formerly of Gold Mining Stock Report, that he wrote in the mid-80s called The Investor’s Guide To Penny Mining Stocks, and I became fascinated by the potential to make life-changing gains in this space.

Now, admittedly, I was a bit naive to the true risk aspect of it, but the market has a way of teaching you those lessons in due time. I certainly learned a few of those… and that's the very short version of how I got into the resource space.

GDR: I’m happy to, Mike. That’s awesome by the way… and it really points to what a small world the resource space actually is.

So yes, going back in time a bit, my first resource speculation was a company called Animas Resources back in 2008. And that’s actually how I got my start writing research reports and consulting for high net worth financiers.

You know the old saying… It's sometimes better to be lucky than good!

Literally, by pure chance, I came across the Animas Resources website and dug into it. Their flagship property was in a part of Mexico I was familiar with.

The team they were putting together seemed like a dream team of geologists and people with serial success. People like Odin Christensen and Greg McKelvey; Jeff Phillips, whom we both know and respect, was the original financier that had put the land package together and structured the company.

You know, I've always had an appetite for learning, and the more I dug into how that particular deal was structured, the more fascinated I became by this consolidation of what I thought could be a district of multi-million ounce gold deposits in Mexico.

One thing led to another. I began attending mining conferences including Brien Lundin’s New Orleans Investment Conference. That became really instrumental in my development because it allowed for introductions to people like Bob Bishop, to people in the business, to geologists — people I wouldn't otherwise have had access to.

That really helped me as I began developing my network of contacts in the space. I had some early success that led to me thinking I had things figured out, which as you know is when the market tends to really teach us how little we know. I learned some valuable lessons as all resource speculators eventually do.

In addition to Animas there were several large percentage winners early in my speculating career that contributed to my youthful confidence. One was a company called Rare Element Resources.

I got in I think at 24 cents and over the next year and a half it got as high as $18 per share. QuestRare Minerals, I got in at around 8 cents, and it eventually traded as high as $8; I think I got out around the $6 mark.

I was also trading leveraged options of those companies as well which should tell you everything you need to know about my naiveté.

Though I did very well with the options trading during the rare earth boom, it wasn’t because of smarts — it was just lucky timing. I don’t advise anyone trade leveraged anything.

Almaden Minerals was one of my second or third gold-silver speculations — and that went from 50 cents to as high as $5 on a discovery in Mexico.

And then, Nevada Sunrise Gold, which I'm crossing my fingers and toes that I get to duplicate those past gains one more time. I started buying that company at around the 8 cent level — and it traded as high as $1.75 per share, but unfortunately that was a round trip back to around 15 cents today.

Yet, I was fortunate enough to do well with a lot of my early speculations, and those early successes were both a blessing and a curse. A blessing in the sense that it allowed me to develop my passion for the business in a way that was profitable, but also a bit of a curse because as I mentioned earlier I thought maybe I was smart!

GDR: Yeah, around 2016 is when I launched the current incarnation of ResourceStockDigest.com along with my business partner, Mr. Nick Hodge, and that coincided with my first premium newsletter under Nick’s guidance. I wrote for a division of a publishing company that he oversaw. And so that led to my first published newsletter.

I really cut my teeth in the business the six years leading up to 2016. That’s where I began doing consulting work for some high net worth investors. And the very simple version of that is — I would analyze deals.

I would analyze share structures and companies' management teams and jurisdictions and everything that led me to refine my due diligence process.

And so I am extremely thankful for the guidance and the experience of those six years because it definitely allowed me to be more thorough and diligent in the way I went about making my recommendations — which, of course, I do to this day.

And so that was my six year degree, if you want to call it that, in the junior resource space… knowing when to say no, when to say yes, picking good entry points and knowing where we are in the cycle.

GDR: Yes, very exciting indeed! As you know, Nick Hodge is the founder and CEO of Digest Publishing – a new publishing venture that he and I co-own – and we're up and running. I have my two new products, Junior Resource Monthly and Junior Resource Trader.

GDR: Absolutely… the timing could not be any better! I'm extremely excited about this new gold bull cycle we’re just now entering. And again, luckily we've had the past four-plus years to sharpen our knives and really refine how to maximize this current cycle.

Not only for myself, but for the subscribers, which is ultimately why we're in this.

GDR: Definitely. First off, I would say one should never, ever speculate in the junior resource space on leverage and definitely not with money you cannot afford to lose.

GDR: Yeah, I mean the gains can be absolutely spectacular but the losses can be equally devastating. And so you don't want to find yourself on the wrong side of a mining stock speculation too often. It does happen… but the idea is to minimize the inherent risk factors before you wager your risk capital.

With that being said, you know from your own experience in the business and from your father's experience as well that this is a relationship business. It really is about the network… how you and I met, how I ended up meeting Mr. Bob Bishop, how I ended up connecting with someone like Nick Hodge and so on and so on.

That network is all made possible by introductions that people friendly to us have been able to play a large part in. And so that really helps bolster the access to geologists and financiers; the movers and shakers in the business that really have their finger on the pulse.

And so when I get into analyzing a company and deciding whether or not I'm going to allocate capital toward it, the very first thing I look at is the share structure and who owns the shares.

For example, if a company just went public, what do those pre-public shares look like? The pre-IPO shares, were they done at a penny? Were they done at five cents? Were they done at 1/10th of a cent? Are the shareholders insiders who are in it for the long haul?

We could do a whole interview just on share structure. But in general you want to make sure a ton of cheap stock is not about to become free trading by investors who are just looking for a flip. It can mean the difference between a company going from 10 cents to 25 cents versus a company going from 10 cents to $10.

And then, of course, I look at the people running the show. The network that we've developed really allows for vetting of people's backgrounds. And so I have to like the management team; I have to know that they've been successful, that they're able to duplicate what they're attempting to duplicate — which hopefully is past discovery and development success.

I don't want a gold-specific team to all of a sudden become lithium experts and tell me that I should write a check for a company to help them learn how to process lithium. It's not going to work, folks. It's not their knitting, and so you want to make sure that management has experience doing what they’re setting out to do.

The very next thing I would encourage everybody to dig into is jurisdiction. And I'll give you a very clear example of how that can lead to success. Back in 2016, Nick Hodge and I identified Idaho as the next up and coming US jurisdiction where we believed the politics and the economics of the state would allow for a very friendly environment for mineral exploration companies.

Fast forward five years, and we now have Midas Gold on the verge of being permitted for their Stibnite Gold Project in Idaho.

You have companies like Revival Gold advancing a brownfield project there that’s been permitted in the past and just put out a PEA that it can now fasttrack toward a production decision.

You have companies like Integra Resources and Liberty Gold — quality companies doing exceptional work and doing so with bipartisan support in a jurisdiction that, just five or six years ago, was off the radar for a lot of people.

So jurisdiction is very, very important. And, on the flip side of that coin, there are jurisdictions where the political risk simply outweighs the potential reward.

GDR: For sure. And I think there's a lot still to like in Idaho.

One more box I like to check is upcoming catalysts. At the end of the day, you can have a proven team in a mining friendly jurisdiction with a solid share structure… but you also need upcoming catalysts – such as drilling or permitting – that can move the needle forward.


Midas Gold, for example, is awaiting a feasibility study and, hopefully, a permit next year. Those are the types of catalysts that can add instant value. You don’t want to get stuck holding dead money where there’s nothing happening and nothing much on the near-term horizon.

GDR: Mike, I'll tell you the only short-term concern I have about this gold bull market – and by short-term, I mean the next quarter or two – is gold's ability to rise alongside a rising dollar. I think there's a very distinct possibility that, with the Euro weakening, the dollar moves higher over the next quarter or two.

Now, I could be completely off on that. And ultimately, if this gold bull cycle plays out the way I believe it will, it won't be consequential. Yet, I’ll preface my next point by saying be careful in the next month or two speculating with capital that you can't afford not to grow or if you need that capital back in the next quarter or two.

In other words — don’t go all in!

I think there's a risk of a dollar rise, and we’re going to have to wait and see if gold is able to perform alongside the dollar and new record highs in the US indices before I'm convinced we're ready for the next leg up.

Now, with that being said, let's be absolutely clear: We are in the midst of the biggest counterfeiting operation in the history of the world. Forget blue waves and red waves. We're in the midst of a wave of corporate socialism where central bankers are literally printing trillions of dollars out of thin air.

They lend it to corporations at ridiculously low rates. Then, they use the rest of that counterfeited money to prop up stock prices by buying stock in the same companies that just borrowed the money in the first place.

Of course, this is all facilitated by the central bankers. Don't try this at home, Mike, because you would go to prison if you did.

And so, there's absolutely a theme, and it's not just US-centric. It’s global — where central bankers have decided they’re going to continue to punish savers. And they’re going to keep rewarding risk takers that have exposure to financial assets. And I think that’s not a policy you can just decide to pivot away from.

We saw toward the end of last year, when the Fed indicated it was ready to pivot away from that strategy, and the market threw such a fit that, two quarters later, we were talking about the possibility of negative interest rates in the United States.

And so that, to me, is the biggest driver of why gold will likely have a historic gold bull market that lasts many, many years.

GDR: I honestly don’t care much for the hyperbole of $10,000 per ounce gold and $20,000 per ounce gold. But I can clearly see a scenario where $3,000 to $5,000 gold over the next 3 to 5 years is within reach.

Frankly, if all gold ever does is stay at $1,900, we're going to do very, very well because we're fortunate enough to be able to identify companies that can perform well at much lower gold prices.

GDR: Mike, I'll preface what I'm about to say by explaining that I do gravitate toward the higher-risk, higher-reward companies. And so I'll give you a very high-risk, very potentially high-reward pick that has done well for me in the past.

And I mentioned it earlier — Nevada Sunrise Gold (TSX-V: NEV)(OTC: NVSGF).

It is a 20% owner of the Kinsley Mountain Gold Project in Nevada. Excellent jurisdiction. Nevada Sunrise Gold has a very decent share structure. I'm a biased large shareholder of the company. And we are, I believe, weeks, if not days away from the first set of assays from Kinsley Mountain with operator, 80% owner, New Placer Dome Gold, and they've drilled, I believe, up to 50 holes now.

So there's going to be newsflow between now and at least February — precisely what we were discussing earlier in terms of near-term catalysts that can add value.

Nevada Sunrise Gold currently has a market cap south of C$12 million. If Kinsley Mountain delivers the type of results I think it's capable of delivering, the company will trade at multiples of today's prices in very short order.

We'll see what mother nature has in store. But if you’re someone who gravitates toward high-risk and high-reward, I would say Nevada Sunrise Gold is a risky but potentially very profitable speculation at this point.

If your readers are looking for something that’s being de-risked with seemingly every news release, I would look at something like Chakana Copper (TSX-V: PERU)(OTC: CHKKF) because I’m really liking copper right now.

Plus, I really like gold, and Chakana Copper, with its Soledad project in Peru, is onto what I believe is a very significant copper-gold-silver discovery that the market hasn't fully processed yet. And I think it will.

There's a resource estimate that's anticipated in the early part of 2021 that I believe will start to allow the market to put some numbers around the potential tonnage, the potential grades, and the potential scale.

They have a partner in Gold Fields that has been very active in Peru. And I think if Chakana Copper continues to deliver with the drill bit, it's a prime takeout target.


And so, again, depending on what the overall markets do — will it get taken out at $70 million, $100 million or $500 million? Well, the market will decide what that is and mother nature to an extent, but a medium-risk, high-reward pick would be Chakana Copper.

And I'll give you one that I believe just became a much lower-risk pick with the potential for very good rewards. And I mentioned this one earlier as well when we were discussing Idaho — Revival Gold (TSX-V: RVG)(OTC: RVLGF).

Revival just announced a PEA on its Beartrack-Arnett project. And the PEA is only on a fraction, about 25%, of the overall resource — just the heap leach oxide gold aspect of the project.

Just with that small portion of the resource in the current PEA, we’re talking 72,000 ounces of gold production per year for 7 years for a total of 506,000 ounces at an all-in sustaining cost of $1,057 per ounce of gold — meaning the margin currently sits at about $820 per ounce.

So I definitely see this as a project that can be funded, developed, and ultimately put into production, which makes Revival Gold an excellent medium-risk speculation.

GDR: Mike, I think uranium has made a fool of many of the smartest minds in the space. These are people you and I both know and respect — and some of them have been calling for a uranium bull market for the last five years!

For me, I thought that by calling for a uranium bull market in 2020, I'd be able to get it right. And sure enough, it has made a fool of me as well.

So look, the reality is that the fundamentals are all there for higher uranium prices. The supply destruction that we anticipated has materialized. What hasn't materialized, however, is the utilities stepping off the sidelines and coming in to sign contracts at higher prices.

It’s clear from the market's reaction that until that happens – until we see that first contract signed at $50 a pound, $60 a pound, $70 a pound – we're not going to get the rerating in the space that we’ve all been anticipating for some time.

Nevertheless, I like to buy when people are not looking. That’s the nature of being a steadfast contrarian.

I did it during the bear market in the gold space, and I did it during the bear market in the copper space. And I'm doing it during this bear market in the uranium space because when the uranium bull truly kicks off, it will be beautiful to see, and it'll be more than worth the pain we've had to withstand.

And the reason for that is there's simply not enough quality uranium juniors – or uranium companies period – to absorb the amount of capital that’ll chase the sector once it heats up.

We’re not there yet… but if you’d like a couple of uranium names, I'd be happy to share one or two with you that I think have great mid-term potential for excellent gains.

GDR: Okay, one would be Azarga Uranium (TSX: AZZ)(OTC: AZZUF).

Azarga has one of the highest-grade, lowest-cost ISR projects in the United States. I think a permitting decision at their flagship Dewey Burdock project in South Dakota is imminent. By imminent, I mean, I thought it would be granted weeks ago. And so I think any day now we'll wake up and Azarga Uranium will be permitted for production.

And I think it immediately becomes a very accretive asset in a buyout scenario for a North American producer looking to leverage their production profile. So Azarga is one that I think is, by junior resource standards, a relatively lower-risk pick from the uranium sector.

A second name in the space I really like is Energy Fuels (TSX: EFR)(NYSE-American: UUUU) — a company I coincidentally think would probably consider Azarga Uranium as a great addition to its portfolio.

It's producing, it's permitted, it’s got infrastructure. And it just announced recently that it has produced – for the first time in a couple decades – rare earth concentrate.

It can scale that up and is looking to do so. With the geopolitical situation being what it is with President Elect Biden committing to a clean energy bill, I think it makes perfect sense to have exposure to a bigger uranium company like Energy Fuels.

GDR: Too true, Mike.

GDR: Sure, I’d be happy to. Junior Resource Trader, as the name implies, is a trading service wherein I provide buy-sell trade alerts on junior resource companies in real time. It basically mirrors my personal trades using the process I’ve developed over my years as a professional trader.

Junior Resource Monthly is my portfolio-based monthly newsletter, which offers buy and sell recommendations for longer-term junior resource speculations. I provide ongoing coverage of each position, and I try to focus more on the macro picture. And so you get a lot of my macro musings… you get a lot more about my process. You can expect picks from the precious metals space, the base metals space, and energy metals.


You can currently subscribe to both publications by clicking here. You'll also see Nick Hodge's suite of services, which is everything from a private placement service for accredited and high net worth investors to other services that are sector-agnostic.


I tend to focus specifically on the resource space. Mr. Hodge tends to be an expert in seemingly everything he gets his hands on and takes an interest in. And I would highly encourage everyone to look at Mr. Hodge's services as well as yours, Mike. You have two services yourself that I know bring together insights from the top minds in the space.

I think what’s offered is a pretty well-balanced array of opinions and sources for the due diligence process. I was taught very early on, if you want to be successful in this business, you need a wealth of research that you can compare notes on. And I think ResourceStockDigest.com is a heck of a place to start.

GDR: It’s been my pleasure, Mike. And again, this is something I'm fortunate enough to be able to do for a living. It's an absolute passion of mine. It's something I'll do as long as I'm mentally able to. And with a lot of hard work and a little bit of luck, I think we can do really well in the cycle we've entered.

GDR: Mike, I appreciate it. Thank you for having me on and fingers crossed for a very long and powerful gold bull market.