Categories: Energy
Topics: General Energy

Legendary Contrarian Investor Jeff Phillips on Profiting Off a Lithium Bull Market & Finding the Next Great Bull Market

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is one of the most respected contrarian voices in the resource space and someone I call a friend, Mr. Jeff Phillips. Jeff, how are you today? Thank you for coming on.

Jeff Phillips: Doing well, Gerardo, thank you for having me.

Gerardo Del Real: Listen, it's the end of August. A lot of people are still out of the office enjoying the last days of summer. Despite what seems to be a very quiet and unenthusiastic market in the gold space and even the base metals space, the battery metals space is absolutely on fire. I wanted to reach out, I wanted to talk all things resource space. But I wanted to start with the bright spot, which of course, so far has been the lithium space.

There was a big announcement this morning from Volkswagen, joining the chorus of automakers that want to start taking a stake in battery metals companies. So I wanted to get your take, I wanted to see how you feel about the space, and then let's get into, as always, some specific names that maybe you've done well with, and some names that you think you're still going to do well with.

Jeff Phillips: Yeah, Gerardo, that sounds good. Yeah. You had mentioned the Volkswagen news. I think that, again, we've been predicting that the auto makers were going to have to get in the natural resource space now for 12 years, at least I have, whether it be rare earths or graphite or lithium or cobalt. And it always takes longer.

I think you may have also seen the news a couple days ago, and I used to think this was going to happen 12 years ago, that Neo Materials, which is a major rare earth processor, most of their capacity in China who produces most and sells most of the refined rare earths, but they also have a plant in Europe. They announced yesterday, back from my rare earth days when I was involved with a lot of the rare earth companies, they announced the acquisition of Hudson's Greenland rare earth project, which again, and to supply their Estonia in Europe plant, the only real plant outside of China that they have. So I think you're starting to see a lot of these bigger companies move into this space and look at how they're going to secure the raw materials and process those. So, yeah, the Volkswagen news and Mercedes was excellent. What was the second part of your question?

Gerardo Del Real: Oh, the second part of my question is let's get right into some names that you've done well with. Clearly you feel that, unlike the rare earth days, a one-year cycle in the lithium space, it sounds like you feel this is going to last for several years with auto makers coming in trying to secure the raw materials they need to remain competitive. Would you agree with that part, that this is going to be a multiyear bull market, unlike the rare earth days back in the 2010, 2011 mania, where a lot of people, including yourself, did really well, but that was a short lived bull market? Do you think this lithium bull market continues on further?

Jeff Phillips: Yeah, absolutely. I think that this is a new bull market that's going to last throughout the rest of the decade. That being said, if you have a major financial crisis or the markets sell off massively, on paper, you're stuck owning some of the best stocks out there but again, there's some assets out there that are only going to increase in value over time. It's timing that entry point. You asked me about several lithium deals. I think last time we did an interview was the beginning of summer and I said, I wasn't buying a lot of resource stocks, I was getting ready to. I have been buying a few in the market. I participated in a few private placements in August when nobody wants to write checks. So those it mostly been in lithium companies.

I think you saw the news yesterday, because I know we're both shareholders, I'm a fairly large shareholder of Patriot Battery Metals, again I believe your subscribers and I participated in a big way in their original financing a little over a year ago with 16 cents. So I'm sure your subscribers are quite happy with that. It only takes one company it's 16 cents to be at $5 to make up for a few misses. Right?

Gerardo Del Real: Absolutely.

Jeff Phillips: But their news yesterday again the markets have been rough this year, but their news yesterday that they've added, I can't think of Ken's last name, but he's the ex-chairman and the person who brought the last lithium mine in Australia into production from exploration to an $8 billion market cap company today that he's joined their board. And even more so that he's options are being set at seven and $9.20. When the stocks trading well, it's up to $5 today is a pretty good indication of how someone who sits on the London metals exchange, lithium advisory board, and has built a major lithium mine. The same type of metal feels about that project. That being said, so your listeners know, I own millions of shares at much cheaper prices.

If I didn't own any, I would probably buy shares on the news today, betting that he thinks his options are going to be worth a lot of money. He's built an $8 billion lithium company before. So that's great news, especially for your subscribers who are in it. Well, I think you put people in the placement, but you've recommended that stock multiple times and every time at the lower prices than it trades today, correct?

Gerardo Del Real: That's absolutely right. We help finance it at 16 cents subscribers to Junior Resource Insider participated there that also had a full warrant at 25 cents, which obviously is very much in the money Junior Resource Monthly subscribers then got a recommendation at 34 cents. And we even put a trade on it, 43 cents if I'm not mistaken in the trading service. And so obviously all three positions, different approaches, some longer term, some shorter term, but have done well. And look, as you mentioned, it's been it's been a heck of a run and I think there's a lot of runway. I agree with you 100%, but yeah, it only takes one Patriot Battery Metals from 16 cents to $5 with runway to make the rest of the portfolio look better. The gentleman, by the way that you mentioned was a Ken Brinsden who was CEO of Pilbara Minerals, who bought, which by the way is a nearly $10 billion lithium company that he helped build that has a massive cash position.

So the appointment of him as a non-executive chairman is interesting and strategic to say the least, lastly, I'll say there's an Australian exchange listing that is upcoming for Patriot, which I think will be very well received given the amount of cash that Mr. Brinsden has made Australian investors in the past. So no look, it's always great to celebrate a win with Patriot. It's been a good one thus far, any other, maybe more speculative companies on your radar in the lithium space Jeff?

Jeff Phillips: The couple I just financed, I'm not really going to talk about only because I put a sizeable amount of money and down in the lithium triangle and I like that area in South America, but one of the other high risk lithium companies I own a lot of, and I also consult for it in full disclosure is Nevada Sunrise Gold. We joke that they should change their to the Nevada Sunrise Lithium, but I've told you, I still like their gold asset Kinsley Mountain that they have in Nevada and with a joint venture partner, but they've made a lithium discovery, a clay discovery in Nevada and there's a number of clay companies that have done very well, even though it hasn't been proven yet that a clay deposit can actually will be economic at producing lithium.

There's a number of Canadian companies that have raised tens of millions of dollars on those. And Nevada Sunrise looks to have something very similar and hopefully they've only put two holes a kilometer apart, but as they drill that out, it should get, hopefully they gets closer to surface. And I think that will spark some interest, but the real speculation there is that they had lithium in brine water, sort of a different kind of brine, a muddy brine, and it was getting stronger as they drilled the hole and they never got through the clay. So what is really interesting is if there's brine deposit there that flows enough to be economic, that's a company maker similar to Patriot Battery Metals, right? We don't know that's going to happen, but with a $20 million market cap and the clay deposit already discovered in a gold asset, it's an interesting speculation, right? That's what it is a speculation.

So that's one that I'm very excited. They'll be drilling in September. And I'm looking forward to the drilling, hopefully you and I are doing an interview and talking about it at much higher prices and why it's still undervalued, but it is possible that they'll throw more clay and won't hit the more brine and it'll still be something that backstops the value, but it may not be fivefold tenfold type return and which it can be with a major discovery of brine deposit.

Gerardo Del Real: Now. And again, just to be completely transparent for those of you that maybe aren't subscribers to the paid services that I manage, look Patriot is my single largest personal holding. So I am biased on that front, Nevada Sunrise Gold is my second largest holding. So I'm clearly biased and rooting for success there. Let's talk about being a contrarian. Jeff, I joked the other day, I was joking with the co-owner of this company, Mr. Nick Hodge and I was joking and said, "everybody wants to be a contrarian, but nobody wants to go through the buy low part of the buy low sell high". And he said, "Gerardo, how much lower are some of these gold names going to go? I keep buying low and they keep going lower". So I wanted to get your take on being a contrarian and what if anything, in the gold space you actually like?

Jeff Phillips: Oh, that's tough being a contrarian. And it gets tougher, the less cash you have. I like a mentor of mine Jim Dines used to say, and he passed away, rich or poor it's good to have cash. So again, when you're speculating or investing, it's always good to have a cash position because you can be right and things can go the wrong way for a period of time. And it can be difficult and you can also be wrong. I mean, again, let's face it you can be a contrarian and things don't work out, the drill doesn't work out or the metallurgy doesn't work out when it comes to resource investing or in biotech the phase three trial doesn't work. So you got to be able to withstand a time and to be a contrarian means that you're happy to buy something you have conviction in and it's cheaper prices than you've paid in the past. And you really hope that it goes even lower so you can buy more of it.

So I'm hesitant to tell you, you've asked me a couple times about what I'm buying this summer and there's only a few stocks I've bought in the open market. I've done some private placements because I see value. But you want me to go ahead and tell you the stocks I'm buying in the open market?

Gerardo Del Real: I would absolutely love just maybe a brief couple of names here before, but before we let you off, I absolutely enjoyed the time and appreciate it. But yeah, before I let you go, I got to get a couple of names quickly, if you don't mind.

Jeff Phillips: Well, I'm going to give you one I'm still buying so I hope no one's listening to your interview, but anyway but a good example is something I think offers tremendous speculation potential is a company called Almadex Minerals. One of the Poliquin’s group of companies. Pretty simply Almadex trades that the market cap right now is probably about, I don't know, 16 to 17 and a half million. They have 17 and a half million in cash in the bank, which actually went up last quarter, even with all the listing fees and everything else. And the reason that money's gone up is because they own six rigs that they use for themselves when they're drilling their own properties, but they rent those out and they're actually making money. They actually made money the last six months. And they'll probably not only cover all their costs, but their own exploration costs this year on their own properties.

So I'm paying less than cash for a company that besides having their own drill rigs also has some very interesting exploration properties. The Poliquins have discovered 3, 4, 5, 6 deposits. Morgan's done three since he joined the company and Morgan's Duane's son, so they're drilling some, a project in Nevada now, and again, that money's being paid for by renting their rigs out. They've also just reacquired a hundred percent of a zinc asset in Canada that they used to have 20% of that was stuck in a bankruptcy with a Chinese company that had a producing zinc mine. And this was their second plan and it got all locked up. Well, they've gotten a hundred percent of it back. That's a very large drilled off zinc deposit in Canada. I mean there's many companies in Canada that that would be their asset.

And that's what they'd be raising money on at probably higher market caps than Almadex trades today. So and then you factor in that Almadex has two royalties on two projects that total almost 6 million ounces of gold Mexico. Mexico's difficult right now. But I think those will become mines. Almadex to me is the ultimate contrarian play. I'd love to see the stock drop from 26 cents to 13 cents and someone to sell me 2 million shares at 13 cents, but I've bought several million share or at least a million shares probably in the last three months, anywhere between 25 and 30 cents. So hopefully no one's listening to you, but that would be what it looks like.

Gerardo Del Real: Spoken like a true contrarian, Jeff. Obviously still like Patriot Battery Metals, still like Nevada Sunrise Gold for both the gold optionality and the lithium action there. And then Almadex Minerals. Jeff, it's always a pleasure. Is there anything else you want to add before I let you go?

Jeff Phillips: Yeah. The only other company I've been buying and we can talk about this later is a little company in Peru, which Peru's got its own political problems, but Michael Hudson's Hannan Metals. I've paid higher prices for it. And I'm happy to buy some here at these prices. I think that project is not really a project. It's really one of the largest, it's the largest holding of any small company in Peru. You'd have to give the measurements, but it's massive. And it's a new style, they have a joint venture on one of their massive properties with JOGMEC, which is like a $30 million joint venture.

And they're spending the money $2 million this year, but their other project, they have a hundred percent of, and it's massive and they've identified, I forget, is it five porphyry targets there? It's been explored, it's the kind of thing that people that are much more knowledgeable than me in their resource space and are around longer than me look for but you have to be patient. I think that'll develop into, over the coming years, into a major asset. So I've been buying that stock also. That's about it.

Gerardo Del Real: I am biased there as well. I think anybody that's followed my work for any period of time knows how I feel about Hannan and the expectation on how it will perform over the coming several years. Jeff enlightening and insightful as always. Thank you so much for your time. Looking forward to catching up in person soon.

Jeff Phillips: Thank you, Gerardo. And we'll go over a few more companies next time.

Gerardo Del Real: Sounds good.

Jeff Phillips: Thank you.