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Mickey Fulp, the Mercenary Geologist, Gives His Contrarian Take on Uranium and a Few Junior Resource Stock Picks

June 16, 2017

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the Mercenary Geologist, Mr. Mickey Fulp. Mickey, how are you this afternoon?

Mickey Fulp: I'm doing well, Gerardo. How are you?

Gerardo Del Real: I'm doing well also. Thank you for asking. Now, you and I recently had the opportunity to catch up for a bit in New York at the 121 Mining Investment Conference. I'd love to start by getting your thoughts on the conference. I, myself, thought it was very well organized. There were some quality presenters including yourself, and I'd like to talk about that here in a bit, but I'd love your thoughts on the conference. How'd it go for you?

Mickey Fulp: Well, first, thanks for the kind words. I thought it was very well run. I've known the three principals. It's Leo Stemp, Pablo Martin, and Charlie Hastings. I've known those guys for several years when they were with Mines and Money, so they've got the expertise, and extremely well organized for a one-on-one meeting sort of setting.

Gerardo Del Real: Absolutely. I’m looking forward to attending next year. Now, let’s talk about your presentation. You gave a very well-done presentation on the uranium space and, obviously, you're known as a contrarian in the space, Mickey. I’d love your take on uranium, where it’s headed, and just your overall take on some companies that you might like in the space right now.

Mickey Fulp: Well, I would have to say I’m probably known as a perma-bull on uranium. It has to happen. The title of my talk was Uranium: Bull or Bear? Then subtitle is Why and When? Well, I’m very bullish on uranium in the mid to long-term, but the real question is when’s it going to turn? It’s very difficult to predict. Currently, the spot price is $20 a pound or less. No one in the world can make money mining uranium or even enriching uranium at those prices with an enrichment underfeeding, so there’s a big inventory, a stockpile. This has all come about because of Fukushima, and the fact that Japan took 55 reactors off the power grid, so that's something on the order of 15 million pounds of uranium a year.

Japan’s starting to accelerate the restart of reactors. There's now 5, and 19 are being permitted for restart. Kazakhstan’s shut down 10% of their production. Cameco is shutting down 2 million pounds this year. You got the thing going on with Paladin Energy right now and the Chinese, and there’s been some rumors the Chinese are selling into this spot market to reduce the valuation as they try to take over Paladin. So, you’ve got all these factors. The question is when? It’s such an opaque market no one knows when. I think we're probably all in agreement it can’t last that much longer because utilities have to start contracting again, and they haven’t started that. So, a wild guess would be in 2020 is probably when.

Gerardo Del Real: Interesting. Now, how do you feel about ISR deposits? That was a part of your presentation, and I know UEC, Uranium Energy Corp, recently had an acquisition, and it seems like they're focused on consolidating the US projects. They’ve done an amazing job throughout the years of sustaining in this bear market. Are you a fan of the ISR deposits? Are there companies in that space that you’re looking at?

Mickey Fulp: Well, absolutely, I’m a fan of ISR deposits. In the US and, really, anywhere in the world with the exception of Kazakhstan, you need something on the order of a $40 uranium price to make it work. Kazakhstan’s going to come in less expensive than that. But, yeah, I’m a fan of UEC. I’ve been a shareholder of UEC for a long time. I’ve covered them off and on probably over the last three or four years. They have an amazing ability to create volume and volatility in that stock, so I generally have a core position and a trading position. It’s rewarded both me and my subscribers quite well time and time again over the last, say, three or four years. They have been consolidating. They recently acquired the Reno Creek property in the Powder River Basin.

The other consolidator, the premier consolidator in the United States though, has to be Energy Fuels. I’m also a shareholder of Energy Fuels. I’ve covered them in the past, and likely to cover them again at some point in the future. They have really aggressively consolidated the ISR projects or companies in the US, both in Wyoming and in South Texas. So, you’ve got these two companies. Really, there’s only three domestic-based and domestic-focused uranium companies left in the producer/developer space, and that would be those two, and the other one would be UR-Energy. Everything else is advanced exploration plays, or further down the line sorts of plays.

Gerardo Del Real: Well, it certainly seems that they’ve positioned themselves well for the next upturn. Switching gears a bit, Mickey. The precious metals space, we've seen a pullback. It seems like gold had a little bit of traction. The precious metals space had some traction. We’ve seen a pullback here in the last few days right after the Fed decision. The dollar’s tightened up a little bit. What are your thoughts on the precious metals space?

Mickey Fulp: Well, it seems that every time the Dems, and everybody knows I spell that D-I-M-S, think they’re going to have a chance of impeaching Trump the price of gold goes up, right? Then something happens to knock it right back down again. Generally, they come back to reality and realize that they’re not going to be able to impeach Trump, or you’ve got the Fed coming on, and doing what everybody knew they were going to do, which is raise the interest rates. Then Yellen gets up and gives a talk and the price of gold, I mean, it went up what? $15 bucks yesterday, and dropped $15 bucks again right back down. Today it’s at $1254 as we speak.

Probably not very bullish on gold in the short term. It keeps bumping up against very strong resistance at $1300 and falling right back down. To my knowledge, I don’t think it’s touched even $1300 all year. It’s gotten really close a couple of times, so that’s very strong resistance. We're coming into the summer doldrums. In fact, I would argue that the summer doldrums actually started this year in the late spring. And this is, in the coming two months, is historically the low time for gold as demand goes away, and people are away from their desks, the markets have low liquidity, and so I’m not very bullish on gold in the short term.

Gerardo Del Real: Okay. Well, with that being said, the equities tend to move ahead of the price, right? Are there companies that make sense at these price levels that you have your eye on, Mickey?

Mickey Fulp: Well, I’ve really focused this year on base metals. I cover a copper company, and a zinc company, and one gold company that I took on in the third quarter of last year. At this stage, the Toronto Venture Exchange is acting like it’s in the summer doldrums. It’s on a nine-day run of losses right now. Closed the day, memory serves, at 771, and so this is the downtime. I would look at this as a contrarian over the next couple of months. You generally want to let this play out a little while and not get in too early, but good companies with good fundamentals, share structure, people, and projects. This looks like it’s going to be a pretty good buying opportunity this summer if you think like I do, and think that we are in an incipient bull market for commodities and junior resource stocks.

Gerardo Del Real: Agreed. Agreed. Now, when I was in New York one of my primary focuses was meeting with base metal companies because I’m bullish in the midterm on copper and on zinc. I had the pleasure of sitting down with Michael Hudson for Hannan Metals, which I know that you cover as well. Any thoughts on Hannan?

Mickey Fulp: Well, I cover Hannan. I’m a very early shareholder of Hannan. Actually, a pre-RTO shareholder of Hannan. It is a zinc company I cover. I’m very bullish on zinc in, say, the short to midterm. Looking out two to three years I think there’s a window. I know these guys. I’ve covered previous companies. I’ve been associated with this group through a group of strategic investors of which you know, and I think you’re a part of at times. So, very comfortable with management. The project is quite amazing. They acquired Lundin's County Clare project, and staked a bunch more ground around that in southwestern Ireland. Lundin and previous operators put something on the order $30 million Canadian into the ground in this project, and Hannan can buy it with a three-year option and pay $1 million bucks. Now, if they go into commercial production or get financed, there’s a $5 million payment if memory serves, but quite a good deal. Very excited. I’ll be in Ireland later this summer looking at that project.

Gerardo Del Real: Well, I may join you on that visit, Mickey. It’s …

Mickey Fulp: Oh, cool.

Gerardo Del Real: … tough to find quality base metal companies with good, solid share structures. There’s a lot of assets that, I think, have a lot of exploration upside with pretty robust resources, but share structures during the bear market got decimated, and I think Hannan to its advantage has a very, very favorable share structure. I agree with you that Hannan is a very, very interesting and compelling speculation. You mentioned Mawson, which Mr. Michael Hudson, obviously, also is a part of. Would you like to share your thoughts on Mawson Resources? High-grade, district-scale land package, what do you think?

Mickey Fulp: Yeah, so very high-grade gold, and a mainly covered terrain near the Arctic Circle in Finland. I’ve covered Mawson since the early days of discovery of this occurrence. In November of 2010 was when I first covered Mawson. Covered them for a couple of years. It was one of our great wins during that bull market. We picked it at a buck, and seven trading days later it touched $2.65. It never has seen that value again, but we picked it off again here in September at somewhere around $0.40. I think it’s gone to $0.57 on drill results, and probably trading below $0.40 right now. But huge land package. Just finished a five-rig drill program. Results have been trickling out. Some results to come, but really a huge project. Something 200 square kilometers of scattered gold occurrences in glacially covered terrain. So, very bullish on that, and for a company that is getting rather long in the tooth now, something on the order of, must be, 10, 12 years old now, still a relatively tight share structure.

Gerardo Del Real: Agreed. Agreed, and I know they had permitting issues for three or four years if I’m not mistaken that they had to work through, and it’s good to see them finally have worked through those and be able to drill a lot of those really high-grade, highly prospective targets. I think it’s going to be an interesting summer for Mawson. Well, Mickey, it’s been a pleasure. Is there anything else that you’d like to add?

Mickey Fulp: Well, I’ll mention the other company I recently covered, and I gave a talk on copper at the Vancouver International Metal Writers Conference immediately before we went to New York, and that’s Trilogy Metals. The rebranding of NovaCopper. Arguably the two best undeveloped copper, plus or minus other metal, projects in the world in Northwest Alaska. You’re from Alaska. You know what you need up there, and that’s infrastructure, and they’ve got the state of Alaska on board with building a road out into the Ambler district in the south of the Brooks Range. It seemed to be the time to cover that stock, and we initiated coverage a couple of weeks ago somewhere around the mid $0.60 range which it's currently trading at. Right now, there’s just no interest in the market, Gerardo, and so this is a time to pick out some good stocks.

Gerardo Del Real: Well, spoken like a true contrarian. Mickey, thank you very much for your time. I look forward to having you back on here in the near future as the summer doldrums kind of come and go, and we get closer to the September timeframe where things start turning around.

Mickey Fulp: Well, I hope to be able to quaff a pint with you in Ireland sometime this summer.

Gerardo Del Real: We could talk Cubs and Cardinals. You mentioned Alaska, and I spent 17 years there, but you know deep down at my core I'm a Chicago kid, so maybe we’ll talk about that.

Mickey Fulp: No, that’s fine. Yeah, we can have a discussion about that for sure.

Gerardo Del Real: Sounds good, Mickey. Everybody, the Mercenary Geologist, Mr. Mickey Fulp. Thank you for your time, Mickey.

Mickey Fulp: Thank you, Gerardo.

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MARKET SUMMARY

INDICES

Name Last Change
DOW 24809.80 0.64%
S&P 500 2693.55 0.66%
NASDAQ 7000.64 0.92%
TSX 16138.75 0.60%
TSX-V 805.15 0.00%

Resource Commodities

Name Last Change
Gold 1261.34 0.48%
Silver 16.14 0.56%
Copper 3.11 1.98%
Platinum 912.50 1.77%
Oil 57.30 0.45%
Natural Gas 2.61 2.76%
Uranium 24.25 N/A
Zinc 1.44 0.00%

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