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Mickey Fulp, the Mercenary Geologist, on the Metals He Likes Best & a Handful of Stock Picks

April 17, 2018

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 morning?

Mickey Fulp: I am doing quite well, Gerardo. How are you?

Gerardo Del Real: I am doing excellent, thank you very much for asking. Listen, it's an interesting time in both the overall markets and the junior resource space. The junior resource space for the past several months, frankly, has been like watching paint dry, although the commodities have actually moved somewhat. We have geopolitical tension everywhere. The juniors, very few have actually outperformed the underlying commodities. So I wanted to get your take first on the junior resource space, the liquidity, and the lack of performance for most of the juniors. And then we can get into some of what you do like and what you think will perform well here in the coming months.

Mickey Fulp: Okay. Yeah, so gold price is pretty high. $1,344 as we speak. Well, it actually went briefly over $1,360 last week, I think, on Wednesday. And the shorts came in and promptly knocked it down. Base metals have come off their very lofty highs, specifically lead and zinc. Zinc, at an 11-year high two months ago. Lead, about six weeks ago, at a 7-year high. And copper reached a high of $3.29. It's now back down to $3.10, and actually went below $3 briefly. A lot of that had to do with geopolitical risk or perceived thereof, when Trump was on the bully pulpit about trade tariffs. And we've seen that his tweets and his public announcements are really negotiating ploys.

I've come up with this idea that Reagan was the great communicator and Trump is the great negotiator. Once the market kind of settled into that, those metals have settled down. But we haven't seen the juniors, in any way, shape, or form, perform this year. The index, TSX-V index, which I use as a proxy, hit a multi-year high on January 9th, if memory serves, at 9:40. And it promptly came off of that. It had quite a rise from something less than 800 during tax loss season, and went screaming up. And in retrospect, that was driven by the cryptocurrency and marijuana and, to a certain degree, lithium bubbles, which collapsed soon thereafter, as all bubbles do.

And since then, it's hard to get bid on the exchange. It's just gone down and down and down. It bottomed last week below 770, and we hope that's the bottom. And it's shown some strength in the intervening five days. Now trading today, I'm looking right now, at 797. It went over 800 yesterday, and has given up a little bit today. So we're starting to see some interest coming in, led by the gold miners, which oftentimes is what leads us out of these malaise periods of time.

Gerardo Del Real: Wonderful. Now, Mickey, you're a geologist. I am not. But I absolutely love when companies add value via the drill bit. It's been a painful, painful five or six, seven, eight years, frankly, when it comes to quality exploration. There are some very, very good exploration programs out there and quality companies doing quality work, once again. That's exciting to me. There's several companies that I have my eye on. What specifically are you looking for? How do you feel about the exploration going on right now? Do you share the sentiment that it's picking up, the quality of the exploration work is finally starting to thaw out, if we want to frame it that way?

Mickey Fulp: My answer to that is an unequivocal yes. We have seen lots of good projects sprout up over the last nine months to a year. Some of the ones you're involved in, I'm also involved with. I'm very bullish on the western US for a number of reasons. The catalyst was the Trump election and the rollback of regulations and the taming down of bureaucracies.

And so what we've seen is some mid-tiers and some major gold companies, and bear in mind, the Venture Exchange is always driven by gold, rightly or wrongly. Some majors have spun out some significant past-producing mines, from the times in the '80s and '90s. Most of those mines shut down when gold prices were at their lows of $250 back in '99 and 2000. Those have now been spun out into some quite good juniors with very competent management teams. New companies, so share structures are well managed so far.

And some wonderful projects that have significant gold resources in the ground that, at the time the mines shut down, went from reserves to resources, basically, because the gold prices. So those are the sorts of things that are attracting me at this stage. I cover five companies right now, and four of those are based in either the western US or Alaska.

Gerardo Del Real: Let's talk about some of those companies, Mickey, if you don't mind. I cover several in the western US. It's fascinating to me that a lot of those companies with great share structures and excellent projects, a lot of those projects are projects that are past-producing projects, mostly oxidized deposits, open pit, and lots of amazing potential at depth. That really has me excited, because a lot of the drill programs this year that I'm following not only are being drilled to bring resource estimates up to date, but they're also finally testing the potential at depth. Are you seeing the same thing with some of the companies in the western United States that you're covering and following?

Mickey Fulp: Absolutely, and those are the ones that attract my attention. I can give you the five companies I cover right now. One is Trilogy Metals (TSX: TMQ), and that’s in Alaska and northwest Alaska, with arguably the two best undeveloped, highest grade, giant copper deposits in the stable part of the world. They recently did a bought deal, actually yesterday it was announced, for $25 million dollars. Stock’s trading at $1.13 today, coincidentally that's what the bought deal was done. It's actually come off about 11 cents this morning. Catalyst there is they have their cobalt results, significant amount of cobalt, in the Bornite Deposit. And that will be quantified very soon here.

I cover Allegiant Gold (TSX-V: AUAU) in Nevada. Spun out of Columbus Gold in early February. They're drilling at their Eastside resource right now. That will increase significantly. Untested parts of the deposit that are contained within the pit shell but don't have drill holes, so that will convert a bunch of waste into resources.

I cover Integra Resources (TSX-V: ITR), the DeLamar district of southwest Idaho. They're drilling 10,000 meters as we speak to test what you just referred to, the open pit potential, and to increase that resource, which combined is about 3.5 million ounces of open pit-able oxide gold, and higher grade potential as they drill across these structures. That mine produced from 1880 to about 1910, 1920, very high grade bonanza gold veins, which were never tested when it was operated by NERCO and Kinross in the '80s and '90s time period.

Gerardo Del Real: Mickey, before you move on to the fourth company. Again, you being a geologist, let me ask you a question for listeners that may be newer to the space. Can you explain why it's so advantageous and why it de-risks the project so much when you have a past-producing project where the metallurgy is already understood? Can you explain to people that are maybe newer to the space why that's a significant advantage over a greenfields project that maybe has some nice mineralization, but you still have that metallurgical risk?

Mickey Fulp: Yeah, well, a fatal flaw, one of the most common fatal flaws in any mineral deposit is the metallurgy. It's usually the last thing that is evaluated before you publish a feasibility study. There's lots of ways to process gold, both oxide and sulfide, and if you have a past-producing mine that has established a metallurgical process, that essentially removes one of the potential red flags in a fatal flaw analysis.

An example of that would be Integra at DeLamar. That deposit which produced, if memory serves, something on the order of 2.5 million ounces of gold, including Florida Mountain, they actually didn't use heap leach technology on that. So part of what Integra is doing right now is their drilling will collect some material for heap leach possibilities, and preliminary results look very good there. But regardless, that was an economic mine using more conventional leaching and recovery processes versus heap leach.

Gerardo Del Real: Perfect, perfect. Thank you so much. And you had, I believe, the two other companies that you're following and covering.

Mickey Fulp: Yeah, and they're a little different. They're prospect generators. I cover Ely Gold Royalties (TSX-V: ELY) with 70 projects in Nevada. Recently rebranded it, it's now a hybrid prospect generator royalty company. They continue to pick up, purchase, and vend Nevada prospects and royalties in that state. That company should be cash flow positive this year with its advanced royalty and its option payments. Very bullish on that company, it's still trading with a market cap that reflects its previous incarnation as a prospect generator. It does not have the market cap of its now peers, small junior royalty companies, which are trading at 5-10 times market cap.

And finally, a bit off the beaten path, I cover Eagle Plains Resources (TSX-V: EPL), which is a prospect generator which spun out Taiga Gold. That went ex-dividend last Thursday so you can't play that the way I have played it and my subscribers have, which was, for the one to two spin out Taiga Gold, which will start trading here probably the beginning of next week. Has five properties in Saskatchewan adjacent to or on trend from SSR Mining, ex-Silver Standards, SeaBee operations. Two significant high grade underground gold mines. And SSR Drilling has presently got two rigs on the Taiga Gold properties with the intent to drill 18,000 meters this year in initial drill tests.

Gerardo Del Real: That's pretty significant. As far as commodities go, before I let you go, Mickey, what do you like? What are you bullish on here for the rest of the year?

Mickey Fulp: It's got to be gold. Gold's what drives this market. We need to get above $1,360 and stick, then the next resistance could be at $1,400. We bounced up against that three or four times, and the manipulators, the shorts, the speculators come in and knock it right back down. We need a weaker dollar for gold price to go above $1,360 and remain there.

And then always, I'm bullish on copper, always looking for good copper prospects. In fact, I am on my way to the field on Monday to look at an intriguing copper prospect.

Gerardo Del Real: Very interesting. Well, maybe we can have you back and you can report back if you like what you see, Mickey.

Mickey Fulp: I would be glad to do that. In the interest of full disclosure before we go here, I am a shareholder of all the companies I mentioned today, and they all sponsor my website. So I am very financial involved with these companies, and my opinions are very skewed to the upside because of that.

Gerardo Del Real: It's always good to eat your own cooking, Mickey. You've been on the farm, I'm sure you can appreciate that.

Mickey Fulp: Absolutely, Gerardo.

Gerardo Del Real: Wonderful. Mickey, where can people find you?

Mickey Fulp: MercenaryGeologist.com. I run a free subscription newsletter with 6,650 subscribers. And @mercenarygeo is the Twitter feed, with 62,000 Twitter followers.

Gerardo Del Real: Fantastic. The Mercenary Geologist Mickey Fulp. Thank you for your time, sir.

Mickey Fulp: Thanks a lot, appreciate it. Always my pleasure.

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Name Last Change
DOW 25798.40 2.12%
S&P 500 2809.92 2.10%
NASDAQ 7645.49 2.81%
TSX 15579.74 1.09%
TSX-V 699.81 0.00%

Resource Commodities

Name Last Change
Gold 1224.84 0.00%
Silver 14.64 0.00
Copper 2.77 0.020
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Natural Gas 3.24
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Zinc 1.21 0.00%

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