General Base Metals
General Precious Metals
Brien Lundin of the New Orleans Investment Conference on Navigating Unprecedented Volatility at the NOIC 2022
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is someone that really doesn't need an introduction. This gentleman is in charge of one of, actually not one of, I got to be honest, it's my favorite conference of the year – The New Orleans Investment Conference. I'm biased. It was the very first event I went to once upon a time way back in 2008. And look, I absolutely love the conference. Of course, I'm talking about Mr. Brien Lundin. How are you, Brien?
Brien Lundin: I'm doing great. Was it really 2008?
Gerardo Del Real: 2008 was my very first time going to the conference. A gentleman that you and I are very familiar with. Mr. Jeff Phillips, invited me out there. I was on the retail side of things back in the day, and he said why don't you come out to this conference? It's wonderful for networking. You'll meet some really neat people and you'll get exposed to some brilliant minds and I've been back every year since. And so I thought it timely to have you on. The conference is in October. I'm excited to participate again, along with Mr. Nick Hodge and so thank you for the kind invite, but look as always Brien, you've put on a blockbuster lineup. It's a shame that everything is so stable politically and fiscally and monetary wise, everything is just a bastion of stability and there's not going to be much to talk about this year, unfortunately, right?
Brien Lundin: Yeah. It's been so boring, I tell you. It's hard to even come into work every day. Just nothing going on, is there?
Gerardo Del Real: Interesting times. Jokes aside, can you just for the folks that may be new to the conference or maybe are considering attending this year, can you provide just a brief overview of what people can expect in terms of lineup this year? Because it's as usual a phenomenal lineup.
Brien Lundin: Yeah, it's always, we are known for having an incredible lineup of speakers and what I've been trying to do over the last couple of years, and I guess it might have kind of started during COVID, I really realized that there are some absolutely brilliant thinkers out there with incredible insights that have been coming out of the woodwork as it were because of these extraordinary times. And just having to comment and having to analyze what we're going through because none of this that we're going through is normal despite how the talking heads may pretend on CNBC. None of this is as it should be and so a lot of really smart people have come up and tried to figure out what's going on.
So I've tried to feature a lot of these names over the past few years. Now, some of them of course have been around for a while, like Jim Grant is speaking this year in person. Very excited to have him and we have him every year at the New Orleans conference because he's the most eloquent defender of free markets in gold and the most insightful commentator in the markets around today. We also have a lot of familiar names. Danielle DiMartino Booth who made her debut at our conference about five or six years ago on the speaking circuit. Jim Rickards, Doug Casey, Dave Collum who's just an absolute hoot, incredible guy. George Gammon, Jim Iuorio, Rick Rule, Dominic Frisby, Tavi Costa, Jon Najarian. The Real Estate guys are back. They are fantastic.
We've got Brent Johnson. We've got somebody named Nick Hodge and Gerardo Del Real coming. Joe Stack, Peter Boockvar. I mean the list just goes on and on and on and on. Dozens upon dozens of the most enlightening and entertaining speakers out there and experts out there. And it's not just the speakers, it's not just what's presented from the stage, it's also the entire environment, the audience. As you look around you in our general session room you'll see some of the most successful, smartest investors out there and they're all willing to share their ideas and just the intellectual energy at this event is something that has to be experienced.
Gerardo Del Real: I couldn't agree with you more. I mentioned that I'm excited to be presenting there alongside Mr. Nick Hodge, but I'm equally excited just to listen to some of the voices and these minds that you've been able to put together. I'm a huge fan of Danielle DiMartino Booth. I'm a huge fan of Mr. Grant. I'm a huge fan of Peter Boockvar and so again, I'm looking forward to presenting, but I'm also looking forward to taking it in and obviously saying hello to everyone in person. I joked about the lack of stability across the board right now.
And I want to start by talking gold. Look, despite the fact that the dollar index is flirting with the 109 level and just recently was flirting with the 110 level, gold’s held in there remarkably well. Just putting a floor right around that $1,750, $1,800 level. Despite that we've had some amazing opportunities in the gold space, specifically with the gold juniors, companies that you can buy for pennies on the dollar. And so I wanted to get your take on the consolidation in the gold juniors and then I want to talk opportunities in this space. Maybe some companies that you think are attractive at current levels, because I think we're going to have a really exciting September, October, November, and December in the gold space.
Brien Lundin: Yeah, I agree. And people talk about the juniors and what's going to change the sentiment in the juniors and how bad it's been. And what I tell people is you don't worry about the sentiment on Bay Street. Don't worry about the sentiment in Vancouver and Toronto and among those of us dedicated to the junior mining space. It doesn't really matter what the sentiment is. It will turn around in a flash if and when we get gold prices turned around because gold doesn't really care what the sentiment is in Vancouver. Doesn't really matter. It gets driven by much larger issues and the minute we get a sustained up trend in gold, sentiment in the juniors will change in a flash. I mean, you'll get whiplash, it'll change so quickly. So really you have to look at the metals themselves and where you think they are going to go.
And of course the timing is the hardest part in all of that. If we look at the turnaround or look at the 60 day price chart, we can see a very, what appears to be a very clear bottom in about the third week of July and an up trend since then. And then over the past week, minus yesterday and today as we talk, we had another little down trend, another dip that was really kind of worrisome. Now we put a couple of days together as we speak of a couple days of nice gains and for really not a lot of underlying rank factors that should really elevate goals. It seems to me like we might be seeing just positive sentiment in a more bullish atmosphere for the metals. Still, the timing's the thing. When are we going to see a more sustained up trend? I think roughly speaking, probably sometime in the fall, right around the New Orleans conference, quite coincidentally.
Gerardo Del Real: Funny how that works out, huh Brien.
Brien Lundin: Yeah. I plan it that way every year.
Gerardo Del Real: Well done, sir.
Brien Lundin: I think that what's going to happen, there's something happening right now in that we're seeing the cost of servicing the debt, which are tracked quarterly on the Fed's websites, Fed's data, have already started to soar to levels of approaching or actually exceeding where they were pre pandemic, well above where they were pre pandemic around $600 billion a year. And that because it's quarterly numbers it only really looks at the second quarter, which only really incorporates the first one or two of the Feds rate hikes, not those tremendously large and rapid rate hikes. Very aggressive rate hikes that they've done since then. So we've already seen those interest costs sore. It's only going to get much, much worse and I think it's going to be a headline issue. Everybody's going to be talking about this come October and November. And I think that's really what's going to cause the Fed to take their feet off the gas and maybe even pivot, but at least stop the rate hikes. And I think that would be enough to light a spark under the metals.
Gerardo Del Real: I couldn't agree with you more. Are there specific companies in the space right now that are doing quality work and just not being rewarded yet? You mentioned the potential for a pretty rapid re-rating and how it happens quickly in this space. I have a gentleman that's a close friend of mine that prides himself on being a contrarian and he jokes, he says everybody wants to buy low and sell high, except when it's time to buy low, right? Everyone wants to be a contrarian, but nobody actually wants to go through what it takes to be a contrarian. If you're going to maximize profits you have to buy during pullbacks like the one we're experiencing now. Are there companies that are doing good work that just haven't been rewarded yet, but you can see maybe having one of those rapid re-ratings that we talk about that frankly that we write checks for, right?
Brien Lundin: Yeah. And you're right. It takes two things to have to buy at the bottom, cash and courage. And it's hard to find both at the same time. Yeah, there are a lot of companies out there that are really very undervalued compared to where they would be. And that's an argument I make, have been making a while is that you can find companies right now with established resources doing good work, maybe even to the stage of having a PEA or some economic supply to those resources and they're trading at around a third to a quarter of where they were at the last peak or when we were in a more normal market environment.
So if you're just betting on a normalized market you can get the kinds of returns of three to four times on very established, relatively established companies. Nothing's very established in the junior space, but relatively established companies with established value and just betting on the market being normalized you can get the kinds of returns that you would normally get on a drill hole play that's successful with much greater risk in the latter example. So if you can focus on these companies there's some real opportunities and some of these that I like at the current levels and I'm just looking down our list here. I like Blackrock Silver in the silver space. I like Cassiar Gold. I own both of those, by the way.
I like i80 Gold although it hasn't come down a whole lot because it's a great company I think it's going to be a mid tier at some point. What else do I like? I like Grande Portage Resources. I do own that one as well. I do not own i80 as of yet. Just trying to pick out some of the ones that have actual resources from our list and trying to find one that I don't own, but I do have a lot of these. Vizsla Silver is a great one, great silver play that I don't currently own, but dammit I think I need to buy that one at these levels. So those are a few. They have significant resources set to grow and the market's just not appreciating that value and these are companies that really have the potential to triple from current levels and in most of those cases I believe have already sold in their history for three times current levels.
Gerardo Del Real: I was talking to a gentleman from Westhaven Gold here recently, and Westhaven just closed I think it was a private placement. It was oversubscribed of just over $4 million. And I look at that team, I look at the high grade nature of the resource. I look at the exploration upside and how aggressive and successful they've been with their drilling and they've been rewarded by having their market cap slashed in half over the past six months. It went from 75 cents right on the heels of an exciting discovery back down to the 40 cent level today. And so when I talk about buying low and selling high, those are the types of opportunities. And I think you explained it beautifully Brien, of a company that's got a resource, drills turning, exploration upside, phenomenal infrastructure, great jurisdiction, and a very accomplished team. And again, you can buy the company at a 50% discount of where it was six months ago and I could argue it's a much better company because it's had a resource announcement.
Brien Lundin: And I should have mentioned them. In fact, they may be the best example of what I was just talking about because they really made headlines a few years ago with that initial discovery and they weren't able to immediately duplicate that. They got some great drill results, but not duplicating those original big hits. Still in all and the reason I originally recommended Westhaven, just the resource that they outlined in that initial discovery more than justified their market cap back when I originally recommended the company and yet they had so much more yet to prove. They had an established multi kilometer trend with really high potential targets that they were going to in succession test.
Since that time, as you mentioned, they're down to a small fraction of where their market cap was and they've had success in that trend. They've actually had another discovery, big discovery with almost equal drill results and are expanding that. And then they have yet more along that trend. So, I mean, there's only so many ways you can slice and dice it and say this thing, this company has this pathway to much higher valuation and it has this pathway and it has that one. This is one company that is undervalued significantly by perhaps a third or a quarter on what it's already proven. But you've got that excitement of further discoveries that you have a very good feeling are going to come because they control the district.
Gerardo Del Real: I absolutely agree. It's my understanding that Westhaven will be at the conference. I encourage anyone that's attending to reach out to those guys and gals. Really, really, really good team of professionals over there that really know what they're doing. Great stewards of capital and yeah, I couldn't say better things. There's not a lot of companies that understand both the capital markets and have the technical acumen to advance a project and discoveries along the way that that group has.
Brien Lundin: Yeah. Yeah. And coincidentally I have an update call scheduled with them for this afternoon. So it's quite the coincidence that we're talking about them right now because I'm about to get on the phone with them to get an update.
Gerardo Del Real: Well, there you go, there you go, outside of the gold space Brien, are there other sectors in the resource space that you like? I'm big on lithium. I'm big on uranium. I've done well this year luckily with those two sectors and positioning there, but are there other sectors that you're looking to right now that excite you?
Brien Lundin: Yeah, I like copper.
Gerardo Del Real: Yeah, absolutely.
Brien Lundin: For the long term. I love it, but I tell people all the time in the junior space you're not going to get the really, the rollicking bull market, the kind of excitement in these ancillary metals without an underlying bull market in gold and silver, primarily gold because silver's going to follow gold, but then that brings everybody to the sector. Then they start branching out. So I like copper. I have a number of copper plays in our portfolio, always looking for more. I do think it's going to be a longer term story, at least in the junior space because that you're going to have to get investors into the sector via gold before those juniors really start to move. But if you look at the fundamentals for copper, it just seems like a slam dunk. And of course you know there's no such thing as that in investing, but you can be as confident as you can be in anything that the copper price is going to likely double from current levels over the next five years.
And that means, and still not bring out enough supplies to meet the demand. So that means that not only are the copper companies in my portfolio, in your portfolio, not only are they going to rise and benefit and deliver significant gains, but every significant copper deposit right now that's been identified, let's say 500 million metric tonnes or larger is going to have to be developed because the vast majority of those projects are not currently economic or not economic enough to justify the risk capital, but it's not a matter of picking and choosing. Every one of those will have to be developed to meet the surge and demand that's about to hit the copper market.
Gerardo Del Real: It's a lot easier to allocate capital to a speculative space when it's a matter of when not a matter of if a, as Rick Rule likes to say about the uranium sector and did so for many years and did so very profitably multiple times through multiple cycles, by the way. So, no look, Brien, I appreciate your insights. I appreciate the invite to the conference. We'll make sure to put a link up. I'm looking forward to seeing everyone out there. Is there anything else that you'd like to add?
Brien Lundin: Well, I think that people need to make their plans for New Orleans now and the best sales spiel or argument for coming that I can possibly give is find somebody who's been there. And that's it. Just talk to them. Ask them what it's all about and you'll find out that it is something that is important to attend just about any year. It's really important to hear from the top experts in the world in this kind of environment. But this year, especially, I mean, we are at a crossroads, like nothing we've seen in years.
And of course we've been through a lot, but now it's all coming to a head. And a lot of the excesses of the past are going to have to be wrung out. The Fed is faced with little options right now and the markets will be shook by what's going to happen in the months just ahead, right now and over the coming year and you need to be prepared and we've got the best people out there to analyze what's going on and tell you how to be prepared. Now, all of this said our room block is filling up. So it is important that people act as soon as possible to register and they can go to neworleansconference.com to get all the details. Very simply neworleansconference.com.
Gerardo Del Real: Well said, Brien. Thank you so much for your time. Looking forward to catching up in person. Say hi to the folks at Westhaven for me.
Brien Lundin: I surely will. Thank you, Gerardo.
Gerardo Del Real: Thank you, sir.