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Mickey Fulp, the Mercenary Geologist, on Tariffs, Trump, the US Dollar, & Metals Prices

July 27, 2018

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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?

Mickey Fulp: I'm well, Gerardo. And you?

Gerardo Del Real: I'm excellent, I'm excellent. Thank you so much for asking. We were talking off air a little bit. You've been busy with conferences. How is the energy out there? What are you seeing?

Mickey Fulp: Well, it's hard to tell about the energy, but here's what I do see. The conferences I've been at are mainly for high net worth investors. These are people that have been through bull and bear markets previously. I think the overall mood is cautiously optimistic that we have better days ahead.

The metal prices are at 52 week lows, pretty much across the board or there about. That's not so unusual. Commonly, we see seasonal trends that lead to summertime, if not yearly, lows. I think it's exacerbated by all this trade tariff work, which in my opinion, is a lot of talk that's part of negotiations.

From that same viewpoint though, the Toronto Venture Exchange has hit multiple 52 week lows pretty much every week over the last four weeks. That really is, I think, in response to low metal prices.

Gerardo Del Real: You touched on the geopolitical factors and there's a lot of bark. There's a little bit of bite. Do you think we're going to get more bite here soon or do you see that becoming less of an issue as we move forward?

Mickey Fulp: I see it becoming less of an issue. Trump has already started to – or, the Europeans have started to cuddle up to Trump, let's say. US is still the world's largest economy by far. We're kind of in the driver's seat on this stuff. I buy into the idea that we've been treated on an unlevel playing field by our trading partners and also the World Trade Organization for quite some time now.

This whole thing is aimed at China with the theft of intellectual property and a very uneven playing field with the Chinese. There will be some collateral damage to that. But ultimately, our two best friends, in my opinion, are our neighbors to the north, Canada, and our neighbors to the south, Mexico. I think really what Trump's aiming for is a dissolution of NAFTA and a free trade zone through the Americas with no tariffs. And wouldn't that be nice? We'll see where it all goes, but in my opinion, a lot of it's just talk. It's the art of the deal. He is a great negotiator, just like Reagan was a great communicator in my opinion.

Gerardo Del Real: Well said, Mickey. I think you have a better handle on it than he does.

Mickey Fulp: Yeah, but he's got the bully pulpit. I actually think he knows what he's doing. He's got Larry Kudlow, who is a very staunch free-trader, who's also served in the Reagan administration and has been a pundit on CNBC as long as I've been watching CNBC. He's got Kudlow behind him and Kudlow supports what he's doing right now. But ultimately, I think, at least in the Americas, we're moving toward no tariffs, free trade. At least, I hope that's so.

Gerardo Del Real: Let me ask you this, Mickey. You mentioned Larry Kudlow, who, of course, is a very, very strong advocate for a strong dollar. Do you think that that will have an effect as far as policy goes and how does that affect the little tiny space that we speculate in, the junior resource space?

Mickey Fulp: It's a bit of a flip of the coin there in terms of Kudlow. Trump is on record of wanting a weak dollar. A weak dollar, I think, helps our economy because it makes our goods more attractive overseas. It's also good for our business because when you have a weak dollar, you're going to have metal prices that are going to go up.

Really, a lot of the downturn over the summer has been become the dollar's gone up, let's say, over five points. Actually, from its low it went from 88.50 or so in mid-April, and it’s hit as high as 95.50. It's 94.70 today, but that's over a 6% rise, even at today's price of DXY in the last, what, three months.

Gerardo Del Real: Absolutely.

Mickey Fulp: Meanwhile, gold's down about 10% over that period of time. So, a significant amount of the weakness in metals can be attributed directly to a stronger US dollar. From that point of view, I welcome a weaker US dollar.

Gerardo Del Real: How do you take advantage of that, Mickey? What sectors are interesting to you right now? What's most appealing out there?

Mickey Fulp: Well, as before, I'm very focused on US gold plays, western US. Advanced plays in the western US. We share some commonality there with companies that we're involved with. Always looking for good copper plays, I am extremely bullish on copper. It's taken quite a hit here over the last ... well, it was down six, seven weeks in a row. But it's rallied a bit this week. It's up to $2.85. You know when it hit $2.70 or whatever last week, that's below the marginal cost of production of about 10 to 15% of the world's copper. So you knew that wasn't going to last very long. We have the labor agreement that has to be settled at Escondida by Tuesday. If that doesn't come about, you're going to see a short-term bounce, at least a short-term bounce, in the copper price.

All in all, looking for copper plays, looking for gold plays. With recent developments in the uranium sector with Cameco putting McArthur River and the Key Lake Mill on undetermined shuttering, who knows how that's going to last. That's 19 million pounds average annual production, off the market. In regards to that, uranium jumped from $23.88 in the stock price on Wednesday to $25.63 on Thursday, for over a 7% gain. Nobody's still making money producing uranium at $25, $26 bucks, but it looks like we're probably headed eventually toward a $40 price. And that makes US ISR production economic.

Gerardo Del Real: I agree 100% Mickey. With that being said, what companies do you like? Are there specific companies right now that have peaked your interest?

Mickey Fulp: Well, the companies I cover right now. Trilogy Metals (TSX: TMQ)(NYSE: TMQ), that's a copper play in northwest Alaska. Arguably, the two best undeveloped, highest grade, giant copper deposits in the world in a favorable geopolitical jurisdiction. That said, we picked that stock last May 25, so a year and two months ago, at $0.65. It reached its all-time high of $2.01 yesterday. These are all American prices. It's listed on the New York American Exchange (NYSE). That one may have got away from people if they were already in it. I haven't sold a share since I bought it. I need to take some profits at some point, I suppose.

Gerardo Del Real: It's always wise.

Mickey Fulp: Yeah. That's a good three-bagger for subscribers. We always want to take profits.

The other company I cover presently is Ely Gold Royalties (TSX-V: ELY)(OTC: ELYGF), a hybrid prospect generator royalty company with 70 projects in Nevada in various stages of exploration and development. Very quickly turning more to royalty model, but continuing to generate projects. They've got about 40 of their 70 prospects ventured out either via option or where they are collecting advanced royalty payments at the present time.

That stock's got a price of, the last time I checked, about $0.11, $0.115. 76 million shares outstanding, if memory serves. You're looking at a Canadian market cap about $8 million bucks. We think it needs to be, should be, deservedly should be valued as a small royalty company. You look at its peers and they're trading for 10 to 20 times the market cap that Ely Gold Royalties has.

Gerardo Del Real: Excellent stuff, Mickey. I wouldn't be a great Cub fan if I didn't ask you about your Cardinals and talked a little baseball here. What's the season look like the rest of the year? I know Matheny got outed recently.

Mickey Fulp: The trade deadline's on Tuesday, also. There's moves coming. Cardinals are a .500 baseball team. They do have a three-game series in St. Louis with the “Small Bears” this weekend, but I expect them to make moves today. The bullpen's a mess. They got a great leadoff hitter and some people are underachieving.

Other than that, there are moves coming. I think for the most part, it's a long shot that they make the playoffs this year. Three years in a row not making the playoffs, if that happens, that is absolutely unacceptable in St. Louis. Rest assured, changes are coming.

Gerardo Del Real: Good stuff, Mickey. Thank you so much for your time. I really appreciate it.

Mickey Fulp: All right. Thanks a lot.

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MARKET SUMMARY

INDICES

Name Last Change
DOW 24100.50 2.06%
S&P 500 2599.95 1.95%
NASDAQ 6910.67 2.31%
TSX 14595.07 1.06%
TSX-V 555.38 0.00%

Resource Commodities

Name Last Change
Gold 1238.38 0.29%
Silver 14.57 1.17%
Copper 2.76 0.000
Platinum 787.00 0.000
Oil 51.20 2.70%
Natural Gas 3.83 7.76%
Uranium 28.53 0.35%
Zinc 1.22 0.00%

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