Categories: Energy / Precious Metals
Topics: General Energy / General Precious Metals

Legendary Investor Jeff Phillips on Navigating a Gold Bull Market: “We're Going to Have an Historic Run” (Part 2)

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me once again, for Part 2, is one of the most insightful contrarians in the resource space, Mr. Jeff Phillips. Jeff, how are you?

Jeff Phillips: I'm good, Gerardo. Thank you for having me again.

Gerardo Del Real: We chatted recently and the conversation went, frankly, over 20 minutes. Right near the end of it, you promised to come back on and hopefully share a couple of ideas for people to do due diligence on, companies that you think have the potential to maybe fit for someone's portfolio if they're looking to speculate. I know you don't give financial advice but I'd love to hear some of those ideas in this gold bull market.

Jeff Phillips: Sure, Gerardo, as long as your listeners realize I don't know what their financial situation is. I'm just talking about my own portfolio. I shared with you that I like to buy companies that I think are going to get bought out in the cycle, or companies that have something that's somewhat advanced as we enter a bull market so that they have a chance at being bought out, to get into a PEA or pre-feasibility study on something that's actually meaningful. Just having a PEA and a pre-feasibility study doesn't mean your deposit's any good. A lot of these companies have those.

Again, with the speculation and gold at $2000. Gold doesn't have to go higher. What I believe will end up having is a bubble form in the resource sector. It started with the gold and silver and the precious metal stocks. It's like all of these things, whether it was the internet or, if you've been in the resource sector, there was a uranium boom or rare earth boom. Valuations just go, you're hoping to get 300% and you get there. Then you're selling some stock, but all of a sudden the stock goes 300% from there, and you can't figure out why. It's because it's a bubble.

I think we're early on in a bubble. Again, I'm happy to give you advice. The companies I talked about, I own a lot of shares in. At least two of the companies I'm going to talk about are companies that I actually have decided to consult for because I own a lot of shares and they want my advice on future financings and how to steer the company, especially in a market where there's going to be lots of capital.

The key when you're raising money is to get the best money you can. I always like to say, you're really just renting the money. There's obviously different ways to raise that money. It could be more beneficial to shareholders, especially if I'm a shareholder, to have a strategic mining company or a strategic high-net-worth individual or a strategic institution becoming a large shareholder, as opposed to a brokerage firm with 200 clients and 50 brokers finance you. Because then you've got 50 different people all trying to get commissions. As soon as the stock's available to trade, a lot of times they'll trade it if they're up, collect the warrant. That's their business, there's nothing wrong with that. You want to look for companies that know how to do their financing so that it sets them up for current shareholders to have the best share price appreciation. That being said, what was your question?

Gerardo Del Real: Give me a couple of names in the exploration space that you like. Companies earlier on that have maybe a very high potential project, but a project that hasn't been fully explored because of the nasty bear market we're coming out of that, now that we're in a better market you believe will see the attention it deserves and could yield something significant.

Jeff Phillips: You also have the COVID environment, where you've got to speculate that certain things are going to reopen and so forth. One of those companies I've been buying for over a year, but it's moved up, mainly for good reason. There's a company called Chakana Copper (TSX-V: PERU)(OTC: CHKKF). The stock symbol's PERU like the country, Peru. I'll try to keep this interview short. A great management team. I believe they're an honest management team. 

When that company got started, I liked the asset and crew they had. Two, three, four years ago, I can't remember, I looked at it, but I didn't like the share structure. I didn't like the people who put the deal together. It wasn't management. There were some people in management, they're obviously insiders, but they didn't understand that the other people, the financing side, was probably going to be selling their stock as soon as they could.

So I avoided it. But once that happened and I saw the people who put the deal together, what I call the promoters, exit the stock and Chakana had raised, goodness, it's probably $20-plus million, $25 million at between $0.50 cents and $1 a share. When the stock got down to $0.20, I thought it was interesting. The other problem they had is they had several setbacks. They were able to drill a few of their targets and had fantastic drill results. That's why the stock had done so well, but they couldn't drill 80% of the targets they had there. Again, they were having such success on the previous targets. People are excited to see those other targets get drilled. Because they had to get another permit, it took a lot longer. It took over a year. It was taking forever and people lost patience.

Recently they just announced they have that permit. I believe they just announced today that they'll be drilling in mid-August. This is a company that's had fantastic drill results. They're going to have a resource. Their largest shareholder is Gold Fields, a major mining company, that's put roughly $8 million in it at $0.51, $0.52 cents a share. The stock is up from the bottom. But again, they just announced they'll start drilling. I suspect they're going to have some very good drill results. I don't have a crystal ball, but I can look at the past and see that they had a lot of great drill results. Sure, there were some misses, but again, I'll take that. Heading into drilling, and if nothing happens COVID-wise, it doesn't get worse, they should be drilling, as they've announced, in two weeks. I suspect we'll start seeing results while they plan on continuing to drill.

They're fully funded. Gold Fields funded the company. So you don't have to worry about some financing suddenly being announce, that puts a cap on the stock for a while. So Chakana Copper, symbol's PERU, is an interesting speculation. Again, you should talk to people like yourself or listen to the guys that build portfolios, because that just fits into my portfolio, and I like Chakana.

Gerardo Del Real: I like Chakana as well. The target they're drilling, or the targets because they have over 92 on the property, are amongst the most prospective of the entire Soledad Project. This is a project that's yielded intercepts of over 200 meters of 2, 3 grams per tonne gold equivalent and a couple of percent copper. So a very, very rich system. 

I know you have more than one name, Jeff. Can you share a few more?

Jeff Phillips: Yeah, before I share a few more, I need to give you credit. Because on Chakana, I had obviously looked at it early on, but I looked at it every once in a while. But you were the one who brought it back up with me.  You and I talked about it at the New Orleans Gold Conference, a great conference run by Brien Lundin. You had talked about it and I started talking to them. You reignited my interest in the company. So thank you very much, Gerardo.

Gerardo Del Real: Well, it helped that you were correct. The people that put the deal together did sell quite a few of their shares and got the price back down and made it very attractive at that point. You're very welcome. But you were spot on on identifying the structure and some of the faults early on. That's been cleaned up, in large part by you and people friendly to you. I think the best days are ahead for Chakana.

Jeff Phillips: Yeah, I was happy to step in as well as one of the people I respect most in the business, and someone who really helped me get my start 30 years ago, or 25 years ago. It's kind of funny, I called him because there was a block of stock that needed to be sold from a bank. You think a guy like that wouldn't know the smaller companies or anything. I called him and I said, "I don't know if you have any interest. I know your geologists like the project. I've heard that before. But I don't know if you have any interest in Chakana, but I'm going to be taking a block of stock off a bank that has to sell it. They've got a new fund manager."

He immediately said, “Yeah, I like Chakana a lot. It was a horrible structure, was destined to come down, but I'd like to buy it here.” He knew. That's why he's good at what he does. You can take almost any company with him, he knows the backstory. It was nice to have him validate my thinking.

I like Chakana here in this market. I'm hoping that drilling goes smoothly. Obviously the key, and the company has discussed it, is making sure everyone's protected and doing things responsible. But I think it'll be interesting.

So you want another pick so we don't make this a 20 minute interview?

Gerardo Del Real: I would love another pick.

Jeff Phillips: Something outside the resource space. I thought I may have talked to you about it before. It's done nothing. Probably trading at the same price last time I talked about it, is Azarga Uranium (TSX: AZZ)(OTC: AZZUF). That's the Dewey Burdock Project in the United States. It's an ISR uranium project. It's an advanced-stage uranium project. Again, uranium can take forever for a bull market to materialize. But whether that materializes soon, I think there's going to be more interest in uranium. I think that the precious metals market's going to create more interest in a lot of metals. They're very close – it could go wrong – but I feel that with the current administration and how far they are, they should be getting one of their final key permits, the biggest hurdle, here in August. Once that happens, that's a U.S.-based uranium project that actually is one of the higher grade, will be lower cost, ISR uranium projects. I know you know that company because we've talked about it before. I think the company has been trading below $0.20. I think it's got as low as $0.13 and as high as $0.28. It's probably around the high teens, right now.

Gerardo Del Real: It's at $0.18 as we speak.

Jeff Phillips: Yeah, I can absolutely see a number of companies, should they get the permit – which is what I'm speculating on and I believe they will – that that stock could easily be a takeout candidate without a bull market. If uranium prices start to move that if you start to get into a bubble, like we're getting in precious metals, I don't know where prices will be 12 months from now on some of these junior stocks. But Azarga Uranium, if you want to be patient and buy a real asset that's extremely advanced. It sort of has been in that boring permitting stage. Once you get your permit, especially if that coincides with a bull market, it can be very exciting.

Gerardo Del Real: I've always said that uranium is a when question, not an if question. I expected this year to be the year that really set off a uranium bull market. There's still a lot of year left. Do you see that as the next sector in the commodity space to really take off, similar to the way that gold and silver has?

Jeff Phillips: Well, I absolutely see uranium prices going higher. The hard part is, when is that going to happen? So if I knew that for sure, Gerardo, I probably would be more retired than I am.

Gerardo Del Real: More retired.

Jeff Phillips: I get that. My brother jokes, "You are retired." But I do what I like, and I still play in these markets because I enjoy it. The fact is I don't know exactly. Being a contrarian, you buy stuff when others don't want it. You buy the best quality assets. You got to be prepared to keep writing checks, especially when you're financing companies like me, to keep those companies going. When the game starts, which is the beginning, like we've started this game in the precious metal sector, you've got to be in the game and have a good share structure and be able to participate in the game. If you don't get to the start of the game, I don't care how good a contrarian you are, you lose.

So Azarga is one of those deals. You could interview me two months from now and say, "Jeff, you told me to buy that at $0.18 cents and it's $0.45 today.” It wouldn't surprise me, but I also don't know that that's going to happen. I believe they will get this permit and be moving forward in August. In the next six months, it's a very attractive takeout candidate for some larger players in the space, especially because it would be U.S.-based uranium production. As we both know, the U.S. government's looking at certain metals, specifically uranium and others. We can't rely on some of the places we would rely to get those. They're key to our strategic, in uranium's case, to our power grid.

Gerardo Del Real: Agreed. Amongst other things, right?

Jeff Phillips: Yeah.

Gerardo Del Real: Fantastic. Jeff, one more name.

Jeff Phillips: I tell you what, why don't you give me a call next week. I'm looking at a couple of things. One I'm buying, and I'd be happy to share that with you next week, and what I paid for it and why I like it. You put me on the calendar and I'll share another name or two next week.

Gerardo Del Real: Absolutely, you got it. Thank you so much for your time, Jeff. It's been a blast as always.

Jeff Phillips: Thank you, Gerardo.