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Jeff Phillips Gives His Take on a Coming Gold Bull Market, Some of His Top Holdings, and Companies He Likes

August 4, 2016

Gerardo Del Real: This is Gerardo Del Real for Resource Stock Digest. Joining me today, once again, is President of Global Market Development, Jeff Phillips. Jeff has been involved in the natural resource space for over two decades. He's a large shareholder of, and consults for, several companies. And, is one of the most influential and respected people in the business.

Jeff, thank you for joining me today once again.

Jeff Phillips: Thanks for having me, Gerardo.

Gerardo Del Real: Absolutely. Now Jeff, the last time we spoke was immediately after the Brexit vote. There was a lot of volatility and questions surrounding the impact of the vote. Since then it seems that the effects have been pretty subdued by global standards, but the price of gold has hung in there and trades near the same level as it did then. What's your take on gold in the metals markets right now?

Jeff Phillips: I think that you're seeing ... I think Brexit's a small piece of the overall puzzle. You're seeing competitive currency devaluation in different forms around the world by governments and I think people are nervous. You have a record bull market in stocks length of time at this point. The length of time that it's been going on. Your credit markets have a record expansion. We have more debt than we've ever had.

I think this is systematic of things. Decisions have been slowly getting worse over the last 20 years at the government level in many countries, including our own.

Gerardo Del Real: It's interesting to see that. It seems like it's definitely unsustainable, but it's globally unsustainable. It's not just here, it's in Japan it's in Europe. It's interesting to see all of it kind of converging at the same time.

Jeff Phillips: Yeah. When I look out over time I see hard assets ... whether that be land, gold, or things that you're going to be able to buy ... assets basically at a discount or to protect your wealth. I see those doing better and better. That being said, nobody knows the timing and people are always predicting we're about to fall off a cliff. That cliff is coming, but the timing of that is anybody's guess. The market can remain irrational far longer than most of us can remain solvent. You don't want to bet the farm. You can be right and still lose money.

Gerardo Del Real: Yes, sir. Been there. Been there.

Speaking of predictions, you were at the recent Sprott conference in Vancouver. Can you share some take-aways from the conference? What you saw, what you heard, how it felt?

Jeff Phillips: There were a lot of good companies on display. It's a well-run conference by Sprott. A lot of those companies ... from where they were at last year at this conference ... it's a whole different ball game. They couldn't raise ten dollars. Now, they're having millions and millions of dollars thrown at them. The market sentiment has changed, as it does in the resource sector quite drastically. Specifically with precious metal stocks. A lot of the companies there were high quality companies. A lot of them were up anywhere from 2% - 500% in the last six months.

The real question is, is this the start of a major bull market? Where in this case, precious metals and precious metal stocks continue to do very well? Or what you have is a lot of people who lived through a long four-year bear market. That because of that, fear is still in them. They're cautious about buying new things and taking some money off the table. I think this is going to prove to be a very big bull market over time. Using proper risk allocation and not worrying what happens in a quarter by quarter basis, I think you could do quite well.

Gerardo Del Real: One of the things that struck me about the conference, to be honest ... I expected a lot of news flow, because in past markets the conference comes up and everybody wants to put their best foot forward. You get a lot of news releases highlighting the quality work that's being done. It struck me as odd ... odd I think is the right word ... that there was such a lack of news during the week. We've talked about deal flow, and we know how many deals land in your inbox every day. What are you and your group seeing out there in regards to quality deals?

Jeff Phillips: The problem is quality is a relative term. In a bear market you really want to find quality. Some of those companies I'm a shareholder in ... that have done very well, are still very high quality ... have real assets that can go into production and be bought out in this cycle. This bull market cycle. A lot of projects the stock can go up 1,000% and still not be mined in this cycle, or bought out and go through another bad cycle.

What I'm seeing is the quality companies have had major moves, even the not-so-quality companies. It's very hard. Most deposits and most discoveries never turn out the be mines. That doesn't mean the stock won't go up in a bull market substantially. I use a lot of geologists that I've used for years that are very respected economic geologists. They have a hard time finding things they think offer value. Mainly because a lot of the stuff has gone up so much. That being said, in a bull market it's going to go up a lot more. A lot of these companies, even if they've got a ... let's say a company has an exploration discovery. There's some of those happening right now. A lot of those discoveries the stock can go up ten-fold on the discovery. Even if we believe the eventual prize is only ... might be a million ounces of lower grade gold, if they're lucky. The stock, as they start drilling that off, is going perform lots better. Even if the geologists know that, the market doesn't care because greed's taking over now.

Gerardo Del Real: Absolutely. So you think we're still early enough in the new bull market to see that kind of leverage? Specifically with the juniors?

Jeff Phillips: Yes. It doesn't mean I don't think we can see a pull back or not. I don't know. I have a core position I always hold. I hold those companies because I'm consultant for them and my goal is to get them bought out. It takes away my decision, and these are large positions, whether I'm going to ... just because a stock's up now, my exit strategy is to sell the company. I also own companies that I buy that I hope go up. I don't consult for them, and if they double or triple I'm going to take some money off the table.

I think if you're buying into ... again, there's a lot of people coming to this gold and silver market. You're seeing more and more people. Big Wall Street types. Whether it be Bill Gross, who's at Pimco. Or was with Pimco, I forget who he's with now. You have very concerned about assets. Or Jeff Gundlach, or however you pronounce his last name, one of the largest bond funds out of L.A.. These guys are very much starting to talk about things like gold and hard assets. Again, a lot of that some people may argue from a contrarian standpoint that after stocks have moved up a lot that's probably a sign of maybe it's time to sell. I personally believe that this is early on in a bull market and I think there will be significant pull backs. I think this will continue and be a very good market over the next two to five years.

Gerardo Del Real: Agreed. Agreed. I would be doing listeners a disservice if I didn't ask you to share a few companies that you like right now. Any names that might come to mind?

Jeff Phillips: Yeah. First off, just so you know Gerardo, because this happens every once in a while. I don't do a lot of interviews. Anybody listening to your interview, I assume they know the risks of natural resource stocks. Precious metal or otherwise. Copper, uranium, or anything else. Again, they shouldn't be listening to an interview and making decisions on companies based on my beliefs. Because I don't know what their situation is, their portfolio. All of these are high risk and really should be for your high risk money that you have set aside to essentially gamble with. The reason people do that in this space is because the returns can be spectacular. A thousand, two thousand, three thousand percent in a bull market. Again, it's very high risk. Any companies I talk about is not advice to buy or an offer to sell any stock. I'm just talking about what I'm doing personally.

Basically, at the show there were quite a few good companies. Companies I like. Some I own, some I don't. I'll start with the ones that I own, I guess. Midas Gold was at the conference. Midas Gold is a 6-plus million ounce deposit in Idaho run by some very respected people that have built mines before. It's in a safe jurisdiction, obviously, here in the United States. John Paulson of the Paulson Funds recently invested 40-something million into the company. Actually, that's wrong. They raised that much. He actually put in less than that, but still a sizable amount to make him an insider. Another person that's bullish on gold. But, it's real people at Midas Gold with a really big deposit. They're permitting that now. I think it's a company that's definitely highly leveraged to the price of gold, if you believe that gold's going higher. And, I think it's a very interesting deposit at the current prices to move forward and head towards productions. It offers a lot of leverage there.

Another company that I own a lot of shares and I consult for is Almaden Minerals, which has a 4-plus million ounce deposit in Mexico. Over the last 20 years, Mexico has been very good to me. I've had three or four companies that have been bought out by larger companies that made discoveries there. I helped them develop that and consult for them. Almaden has a 4-plus million ounce deposit they discovered from scratch about five years ago at the beginning of the bear market. They've done a great job of going from a discovery to over 4 million ounces. It's in a great area of Mexico that the land is private. I think as they advance that project, and they've acquired quite a bit of the land there that the mine would actually be on, you'll see more and more majors taking a look at Almaden as they need to replace what they're mining. They need to do it with ounces that make sense. I think Almaden Minerals is a company that fits that bill.

You and I have talked before about Kaminak, another company I liked and I owned a very small amount of shares in. It was bought out recently by Goldcorp. It was another one of these higher quality, multi-million ounce deposits. I think you more of that.

Both of those companies I like down the road. More Almaden in the short term, over the next 12 months, to be a buyout candidate. Midas as they develop their project, they actually have the people in place. I think you just recently went to Midas, correct Gerardo?

Gerardo Del Real: I did and I was very impressed, obviously, by the group that's running the company. The exploration potential for a world-class deposit in both grade and size to have that much upside still exploration-wise. It was really eye opening.

Jeff Phillips: Yeah. We've been through a bear market, but that's one of the best unmined deposits, in my opinion, in the United States. The exploration potential I've personally always known is much bigger than the current 6 million ounces. With the market not being conducive to resource or precious metal stocks, it has struggled. But, now I think highly leveraged to the price of gold and the exploration should go very well. That easily, in my opinion, could double in size with some exploration work.

Gerardo Del Real: I know there's a lot of very smart people that agree with you. It's always good to hear coming from you, Jeff.

Last time ... oh, go ahead Jeff.

Jeff Phillips: Some of the other companies I don't own shares in I found interesting were more like discovery plays. Canasil Resources has a very interesting discovery in Mexico. Their partner is drilling that. The stock's done very well, but I think that's a real discovery that could continue to grow. It's silver/gold, mostly silver obviously. What you see there is that the market's starting to look for these future deposits that really could be economic. It was an interesting company. I don't own shares in it. I really respect the CEO. He's held this company together very well through a bear market and I suspect that will continue to well.

Another interesting company there, that people wanted to do due diligence, was Midland Minerals, which is a prospect generator. The market cap has gotten a little bit more, I'd like to see it pull back. But, it's an excellent prospect generator and reminds me a lot of some of the successful prospect generators of the past.

Again, there was very interesting companies. Another company you and I had talked about ... I think you actually covered it in your subscription service ... Is Cordoba Minerals down in Colombia. That's a very real discovery. And again, you're speculating at these prices it's going to continue to grow. It looks like a very legitimate discovery with some very major financial backers in Robert Friedland. One of the top entrepreneurs in the mining sector who has had tremendous success. It's a very interesting company. I wish I owned some. I don't. I'll look for a place to enter at some point if they keep having great exploration success.

Those are three companies I don't own that seemed very interesting at the show, also.

Gerardo Del Real: Absolutely. You know, it's interesting that we were talking about quality exploration work and the one thing that all four of those companies have in common is they all have aggressive drill programs that they're executing on right now. I think the news flow for all those companies definitely merits people going out, doing due diligence, and taking it upon themselves to see if it's something that interesting for them.

Jeff Phillips: I think it depends if you want to be in the discovery-type play or like a prospect generator which shares the risk with partners. Another company that I know you and I have talked about before, and I do own a lot of share in this one, is Millrock Resources. A prospect generator run by Greg Beischer that's got properties in Alaska, Mexico, and a few in Arizona. They've got companies drilling on those properties now. Millrock Resources is a very well run company that would be worth doing due diligence on, and I think does very well if you believe the precious metals market is going to continue.

Gerardo Del Real: Fantastic! Well, Jeff, as always, thank you so much. I really appreciate your time. I know you don't do a lot of interview, so any time I can pry you away for a few minutes it's greatly appreciated.

Jeff Phillips: No problem, Gerardo. Thank you for having me.

Gerardo Del Real: Look forward to having you back on. Hopefully soon.

Jeff Phillips: All right. Thank you.

Gerardo Del Real: Bye.

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