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

Renowned Resource Speculator & Financier Jeff Phillips on Contrarian Opportunities, Top Resource Stock Picks, and Why Summer Weakness Creates Opportunity

 

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today, at a perfect time, by the way, with the summer doldrums, is one of the most successful contrarian speculators in the natural resource space, a friend and a mentor, Mr. Jeff Phillips. 

Jeff, it's always great to have you on. The timing couldn't be better if you're a contrarian, in my opinion. How are you doing today?

Jeff Phillips: I'm doing great, Gerardo. Thanks for having me on the show.

Gerardo Del Real: Well, listen, you're known for being a contrarian. You're known for being very, very disciplined with share structure. And look, it's the summer doldrums. It's the end of June. We are in the process of a consolidation in the precious metals space. News is light, and despite that, there's a lot of really good work going on in the market right now that I think presents a lot of value.

You and I both — and I couldn't be more excited, by the way — are headed to Boca Raton, Florida, for the Rule Symposium on Natural Resource Investing July 6–10, which is one of, if not the best put-together conferences in the world for natural resources. 

So for me, there's a lot to be excited about. You tend to be, as you say, optimistic — but cautiously optimistic — I believe, is the term you like to use. What are you seeing in the market right now? What do you make of this recent consolidation?

Jeff Phillips: First off, I like to say I'm not a pessimist. I'm an optimist with experience.

Gerardo Del Real: There you go.

Jeff Phillips: So anyway, the market got real. We had a great market the last quarter of last year and the first quarter of this year. And like you said, we're in the summer doldrums. The market has pulled back. The prices of gold, silver, and copper have pulled back.

But the amazing thing is that right now is the time to be looking at buying, and people just don't want to do it. They're scared. But come September or October, when things are most likely rocking again, then everyone's paying a lot more for the same positions.

So I'm very excited as a contrarian. There are some things that look like great value to me here. Companies that are very well cashed up and aren't going to have to raise money and dilute in the future, and yet their share prices have come down.

And like you said, we're coming up on the Rick Rule Symposium in Boca Raton, Florida, from the 6th to the 10th of July.

That's got just about everybody in the industry. You're going to be there. I'll be there. Tons of people will be there. I believe the conference is sold out in person at this point, but you can register virtually.

If you look at the roster of mining executives who will be there, you've got people I respect like Bob Quartermain, who I originally got involved with at Silver Standard back in the '90s. Sean Rosen will be there. Rob McEwen. Craig Perry from the Inventa Capital — another great guy.

Then, just the caliber of the speakers you get to listen to, whether you're in person or online... I mean, people like Adrian Day, who's a great asset manager I've known forever. Jonathan Goodman, who's the CEO of Dundee Corporation, will be there giving talks. You've got Nomi Prins and Kerry Stevenson as the MCs and keynote speakers. One's based in Australia, the other's based here. They're bestselling authors and incredible people to talk to.

The list goes on and on. I'm looking forward to Brent Cook and Joe Mazumdar, two of my favorite geologists. Joe writes the Exploration Insights newsletter. They'll both be there. Your partner Nick Hodge will be there. Brian Lundin. The list just goes on and on.

So it's a great conference and a great time to be looking at resource stocks because we've had a pretty good pullback. If you're a contrarian, there's going to be a lot of good ideas. And all those companies at Rick Rule's conference are vetted.

It's definitely worth the money to be able to listen to these talks and hear people's ideas. It's some of the best minds in the natural resource business.

Gerardo Del Real: Yes, I couldn't agree more. We will provide a link for those of you who are listening where you can go and get the full roster of phenomenal speakers. It's quite the list.

Jeff Phillips: You guys are sponsoring the show. I know your publishing firm is there also. 

Gerardo Del Real: Yes, absolutely. We couldn't be happier to have the opportunity to be executive sponsors. So we will most definitely make sure we provide that link. There's a ton of very, very useful information.

And again, given the pullback in the space right now, I think the timing is absolutely perfect to add or initiate positions because, again, the pullback provides the opportunity. As you and Rick like to say, you'd rather buy things on sale than when markets are frothy.

So with that being said, what do you think is on sale right now? What looks good from the seat of Jeff Phillips here on a sunny June day toward the end of the month?

Jeff Phillips: Well, I mostly finance and participate on the front end of the curve — usually something that's been discovered in the past but doesn't have a resource, and I think it can become a resource. That's high-risk speculation.

I have companies that I've done that with that have graduated and gone on to C$100 million to C$500 million market caps. Other people come in, and some of those companies have come down in price. Those are much more advanced — NI-compliant 43-101s and bankable feasibility studies. So it depends on what you're looking at.

Again, if you're not a natural resource investor and this is your first introduction listening to us, you need to do a lot of due diligence before you ever invest in this sector. You need to get financial advice from a registered professional. 

I'm not giving financial advice. I'm just talking about things I'm looking at personally, which doesn't make them interesting to someone else at all. You should talk to a financial professional. But as for the companies I'm excited about, the first one hasn't pulled back. I'm very excited as a shareholder. 

It's a company called Gladiator Metals Corp. (TSX-V: GLAD)(OTC: GDTRF). Gladiator has the Whitehorse Copper District up in the Yukon, and I've been involved with it for three or four years. They've continued to grow their main asset there. They'll have a resource out later this year, but they're drilling some of the other targets now and they're hitting almost every hole.

The stock is close to a 52-week high, but I believe this is a tremendous discovery that's going to add additional discoveries in that district. I think the big vote of confidence you just saw is that they announced an institutional financing with no warrants, and BlackRock was the main order.

BlackRock is one of the largest asset managers in the world, and it's their resource division. Obviously, they're worth fortunes, but it's a great vote of confidence to see someone like that come in and write a big check.

So I really like Gladiator. It's not an inexpensive stock. I did interviews with you earlier this year where we talked about it when it was about a C$100 million market cap, and I said I believed it could go from a C$100 million to a C$500 million market cap with drilling success now that they had their full permits.

Since then, I think the company is trading at about a C$340 million market cap, and I still stand by that. Again, if it continues having the hit rates it's having and expands into some of these other areas, I'm hoping it's one of my biggest winners ever. But there are no guarantees.

Gerardo Del Real: Well, look, I think with a structural deficit in copper that's materialized — and that looks to be accelerating here for the foreseeable future — combined with the jurisdiction and the infrastructure in place. That's a past-producing asset. I think, obviously, the company has a whole heck of a lot going for it.

And like you said, working through the due diligence process that a firm like BlackRock puts companies through, and then them being inspired to write a C$35 million check without a warrant, that's a substantial endorsement of the company.

What else is out there maybe that isn't as richly valued yet but also has substantial upside?

Jeff Phillips: There are companies that have come down that have done good work. They went up and they've come back down. 

But you really want to look and see how well they're cashed up because, again, if there's a financing coming or the company needs to raise money, that usually creates selling pressure in the Canadian markets. You've got brokers and other people, depending on the share structure, who are hoping to get into that next financing and sell shares. 

So a company that comes to mind that'll be at Rick Rule's conference is Kincora Copper (TSX-V: KCC). It's a prospect generator in Australia. They're in a joint venture with Anglo on two big pieces of ground. Anglo is drilling now. They've got several other joint ventures. They're drilling their own gold project in Australia, and we could even see drill results before Rick Rule's conference.

I know they're excited about what they're seeing in the rock, but again, you don't have assays yet. Those could come out before Rick's conference. More importantly, they just sold a very non-core asset in Mongolia. They've collected US$1.5 million. The total sale is US$10 million. Again, it's on schedule. The company has said it expects to close another US$3.5 million of that before Rick's conference.

So it's a prospect generator that doesn't spend a lot of money. It's sitting on a lot of cash, and the stock's gotten cheaper. You can buy it at about a 30% discount from where it was two months ago, and the company's only improved. They've done the Mongolia deal since then. They have a lot more cash. So Kincora is interesting.

Another company I know that won't be at Rick's conference is Kingsmen Resources (TSX-V: KNG)(OTC: KNGRF), which has Las Coloradas — their flagship project in Mexico, which they drilled last year on a limited program and had some success. 

They were able to raise through a financing that was immediately free trading at the top of the market back in March of around C$12 million at C$2.25 a share. The stock is currently trading at about C$1.05 a share. 

They're in the midst of a big drill program. My guess would be they're around the 13th or 14th hole in the program. They're well cashed up. With the cash they raised and the cash they already had, they probably have about C$14 million in the bank with only 34 million shares out. They're not raising money anytime soon.

So you're going to see a lot of drill results coming out here over the summer and into the fall. I think if you like silver, Kingsmen is an excellent speculation — but it is a speculation.

Those two are very interesting, Kincora and Kingsmen. But is that enough, or do you want something else?

Gerardo Del Real: No, that's fantastic. If you've got another one that you want to share, great. I should note both those companies are sponsors on Resource Stock Digest. I should also note I'm a shareholder. I'm biased. So look, do your own due diligence.

But again, if a company comes out of my mouth or it comes out of Jeff's — not to put words in your mouth, Jeff — but it's likely that we're biased to the positive. If not, we wouldn't have written checks and we wouldn't be shareholders, correct?

Jeff Phillips: Yes, there are a number of good companies... again, companies I own shares in, companies I don't, although I might become a shareholder in some of them at Rick's conference. But if you're going to Rick's conference, or if you sign up for the virtual package, you should definitely stop by the booth if you're there, or visit them online. 

One more is Headwater Gold (CSE: HWG)(OTC: HWAUF), which is a prospect generator in Nevada and Idaho. A first-class operation, great company, with multiple majors drilling. So Headwater Gold is a company you should look up at Rick's conference.

Latin Metals (TSX-V: LMS)(OTC: LMSQF) is another prospect generator that’ll be at Rick's conference, and I believe they have two or three companies that'll be turning drills this year on their properties. That stock has come down a little bit over the last three months along with everything else.

Bravo Mining (TSX-V: BRVO)(OTC: BRVMF) is an older company I still own shares in and will also be at Rick's conference. Bravo is more like Gladiator. It's a C$200 million to C$300 million market cap with a tremendous asset in Brazil. You can buy that cheaper than the people who wrote big checks. BlackRock is a big shareholder in Bravo too, along with some other funds. And Luis Azevedo, the CEO, owns 50% of the company.

So if you want to talk about people and share structure, Bravo has it in spades. They'll be at the conference.

I'm trying to think who else. These are companies I do own shares in. There are other companies that will be at the conference such as Banyan Gold (TSX-V: BYN)(OTC: BYAGF), which has had a great year. Tara Christie runs that company as president & CEO. She'll be at the conference. I'm not a shareholder but it's worth looking at.

I'll be looking at four or five new companies while I'm there. But yeah, those are companies you should be looking at.

Gerardo Del Real: That's a whole heck of a lot of bang for your buck. This one's on the house! Jeff, thank you for your time. Excited to see you there. Excited for the conference. We'll see you next week in Florida.

Jeff Phillips: It's going to be a big week. Right after the 250th birthday of the United States — we've got a week of resource conferences.

Gerardo Del Real: There you go. Heck of a way to kick off the second half of the year.

Jeff Phillips: Alright, thanks for having me, Gerardo.

Gerardo Del Real: Thank you for your time as always, Jeff. Appreciate it.