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

Soar Financial Canada CEO Kai Hoffmann Talks Financings in the Resource Space and a Few Stock Picks

Gerardo Del Real: It's Geraldo Del Real with Resource Stock Digest. Joining me today is the CEO of Soar Financial Canada Corp., Mr. Kai Hoffmann. Kai, how are you this morning?

Kai Hoffmann: I'm doing great. How are you, Gerardo?

Gerardo Del Real: I'm doing fantastic. And you are in Germany so I want to thank you for your time, I know there's a slight difference in time zones obviously.

Kai Hoffmann: No worries. That works well. Friday, the weekend is just around the corner.

Gerardo Del Real: Absolutely. I give a very, very general introduction there. You are, of course, the CEO of Soar Financial Canada Corp., which is the company behind the junior financing information platform Oreninc. And I'd love to get into your background, what you do, how long you've been doing it and you also write a very influential and widely read stock letter, which I want to talk about a bit later as well. But first things first, a bit about your background, Kai. How'd you get started in the business?

Kai Hoffmann: Sure, I started out in the industry about nine, ten years ago working here in Frankfurt in a small boutique. And one of the deals we worked on, it was a rare earth deal in ’08. As you can imagine, markets were hot, rare earths or the rare earth story was incredible. Nothing I've seen since, obviously, it's been crazy, we've had a lot of success. I caught a sniff of the markets and we got to market the client back in Vancouver, San Francisco, at the conferences back in the days. I just fell in love with mining. I haven't ventured out, I haven't focused on tech,  or anything else, I stuck to my, to what I thought I know or what I think I know is mining and have focused on that and built myself a nice little group of companies here.

You mentioned Oreninc. The Investor Magazine is my German publication here as well, been running that for the last five and a half years. Soar Financial Partners is a German IR Company I'm running as well. And what I started back in 2011 when I started my own company there, it was Soar Financial and been busy ever since with that. Of course, we've had a couple of really bad markets but it's been fun the last 18, 24 months here.

Gerardo Del Real: Absolutely. It definitely looks like we're coming into a much better commodity cycle. It's a cyclical business. You mentioned rare earths and obviously, if there's a poster child for the risk reward proposition that the junior resource space brings, I think rare earth stocks via 2008 would be a perfect, perfect example of what makes the sector so compelling. Tell me bit more about Oreninc, for those that aren't familiar with the company.

Kai Hoffmann: My pleasure. Oreninc was started by a gentleman called Benjamin Cox back in 2011 and what we do is we collect all relevant financing information in the junior commodity space. We track over 1,400 companies that are listed on the TSX, TSX-V, and CSE and make that financing information available on our website. We collect over 40 data points and we track the overall health of the market as well. It's called the Oreninc index. We send that out to our subscribers free of charge once a week. We can pinpoint momentum changes instantly, pretty much. By tracking the market we can also tell where is the money flowing, who's getting financed, and who's got the best track record, obviously.

Gerardo Del Real: Interesting, interesting. This time last year there was obviously a big uptick in precious metal stocks, specifically in the junior resource space. What are you seeing trend wise, Kai, that has stuck out to you between last year or we could even take it back further, the last several years, compared to the market that we appear to be in now?

Kai Hoffmann: What we've seen here recently, we've seen very strong seasonality. It seems like it was more intense even this year. There's always seasonality but my gut feeling says just this year was really bad. The Oreninc index, if you look at that, actually proves that as well because we fell below our 20 point lows actually. It has been really slow. But what I've seen as well, and what makes me really optimistic now, and that's been proven over the last three days here, is that companies have been terribly busy behind the scenes. We've seen a nice increase in financing activity over the last couple days. I know you're tracking press releases like nobody else as well. Just on Tuesday I was busy until midnight just following up on the press releases here. I think we're looking at a really busy fall, catapulting out of the summer here.

Gerardo Del Real: Excellent, excellent. Now let me ask you this, obviously the quality companies are the ones that have been busy behind the scenes. In the last good cycle that we had for commodities there was a drastic misallocation of capital. Where are you seeing capital flowing to first? Is it the precious metal space? Is it the base metals? Is it a combination of both? Is it mid-tiers? Is it juniors?

Kai Hoffmann: It's a really good combination actually. What makes me hopeful is that we're seeing a lot of financing also going to the juniors and the overall financing, the dollar amounts are increasing. The last few weeks or few months we've seen a lot of smaller financings but before then, even starting in 2016, the total average size of financings has been growing actually, which makes me quite confident as well that it's not just the majors anymore raising money but we've also seen companies in the market cap range below $50 million raising substantially more money.

Gerardo Del Real: Excellent, excellent. I know you track capital flow, regional capital flow. Are there certain regions that are hotspots that are standing out to you?

Kai Hoffmann: Canada is obviously still or has always been one of the hotspots, if you want to say. BC, the Golden Triangle, quite a few dollars are flowing in that direction. And of course, it also follows management groups from what we've seen. Just last week the Osisko Group raised another $80 million just in various trenches of flow through financing and money follows the success stories.

Gerardo Del Real: Absolutely, absolutely. That's a perfect segue into my next question is about your stock newsletter. It's very influential, it's very widely read, especially in Germany. I don't believe there's anybody that's doing what you're doing in that part of the world. Can you talk a bit about the letter?

Kai Hoffmann: Yes, it's the Investor Magazin and I started that in 2012. It's a free subscription newsletter because back in 2012 I didn't dare charging for a newsletter.

Gerardo Del Real: And people wouldn't have dared pay.

Kai Hoffmann: It's also sponsorship free. I'm really proud of the publication. I really enjoy writing it. Since I'm in Canada quite often, I'm offering a lot of information nobody else can. There are obviously, a couple of other publications in Germany but I'm among the quality ones. There are not too many that can offer the kind of insight that we provide. I'm personally quite proud of that.

Gerardo Del Real: Excellent, excellent. Not to get too specific but let's get specific, Kai. Can you give me two or three companies that you're following the companies you like and just the reasons why.

Kai Hoffmann: We follow a wide range and the cutoff, our theoretical cutoff in terms of market cap is usually around a billion five. Just because I personally prefer being in touch with the CEOs, with the management personally and when a company gets to a certain size you lose touch because you become irrelevant for them.

Gerardo Del Real: Absolutely.

Kai Hoffmann: A company I've been following for a long time, which is still one of my favorite stocks actually, is Kirkland Lake Gold. I've had tremendous success, I was just looking that up a minute ago. But we recommended the stock back in July 2015. And we're up 225% on that one alone. I think that's going to do well also until the end of the year. That's one of my picks for the second half of 2017.

Going down the market cap scale here, one company I'm closely following is Barkerville, it's part of the Osisko Group. I recommended that stock at 40 cents and we're trading at 88 or around 90 cents these days. Quite happy with that one. It's got an interesting growth profile. I hear they're supposed to pour first gold from their Bonanza Ledge mine within the next few days here.

The third one, I was just looking at the list here actually, I do have a couple favorites but I do like New Range Gold, although I'm down on it. It's a quite interesting play out in Nevada in terms of gold. Gold discoveries, early stage exploration, obviously, but very early stage. The company could be a surprise to the market.

Gerardo Del Real: They have a very interesting exploration program that's underway and it's a company that I'm actually looking at and keeping track of. It's always interesting when you see companies taking the type of approach that they're applying in a place like Nevada.

Kai Hoffmann: I was lucky enough to be on site. I was on site back in June, a day after they announced their monstrous drill results. Was fortunate enough to fly out there and see it firsthand. I'm quite intrigued and can't wait for further exploration results there. I got a long term approach on those things. That's why I personally don't mind that we're down because I think mid to long term we'll do really well with that stock.

Gerardo Del Real: Absolutely. The newsletter, does it take a mid to long term approach? There's obviously different types of services out there. Is that your approach? Do you take a very cyclical approach being that's it's cyclical business?

Kai Hoffmann: Yeah, mid to long term I'd say. It's tough to put a finger on, let's say, the period of time, like years or something we are looking at but it's generally mid to long term. We come out once a week so it's tough to trade. For that reason we don't trade any derivatives or we don't really go short or long in the letter with any other instruments. I'm usually trying to buy close to news events, hopefully the stock developing nicely then maybe 12, 18 months later we'll reevaluate and see where things have gone. It's mid to long term.

Gerardo Del Real: Excellent, excellent. Now gold, silver, precious metals have kind of been range bound. We've seen gold poke its head up and try to challenge that $1,362 level. It hasn't been able to breach it yet. I think the past two years we've really seen it just be range bound and consolidating. What are your views on the precious metals space?

Kai Hoffmann: Personally I gave up on predicting the precious metal prices, quite honestly. I gave up on it. I remember a day I was sitting in front of the computer, the US was minutes away from being bankrupt and the gold price was going down. So that's when I said, this is it, let other people write books about the gold price developments. It's irrational. My opinion doesn't really count here and that's proven correct. I do think from the fundamental side, any day something could happen that'll trigger a massive spike in the gold price. Just geopolitically it's insane what's happening out there in the world right now. I wouldn't say I'm a gold bug but I'm definitely long gold but I can't predict the gold price. I just gave up on that.

Gerardo Del Real: A mentor of mine once told me that anybody that tells you they know what the price of gold is going to do next is a liar. I think it's much easier to pick trends than to make price calls.

Kai Hoffmann: Exactly.

Gerardo Del Real: Let me bring it back, Kai, to companies. What do you look for in a company? Are you looking at share structures? Are you looking at management? What's your checklist before you add it to the portfolio?

Kai Hoffmann: It sounds very cliché and I'm sure a couple people mentioned that before me but I really do start with management. And also coming from the Soar Financial side, from the IR side, I've never taken on a client, for example, that I haven't met personally and that underlines my philosophy also with the newsletter. I really want to see or look people in the eye when they tell the story. Because I'm not a geologist, you can trick me on the rocks but I can tell whether somebody's being honest with me and is really hard working towards something and that I can appreciate. Obviously share structure, that can be an issue. But something that's out of my hands, it's a card you're being dealt. Of course, you can run away from a stock but if a project is too compelling you just got to limit your risk by maybe putting a closer stock loss limit on a share price than maybe with some others.

Gerardo Del Real: Sure. Excellent, excellent. Well, Kai, it's been fascinating spending time with you and getting to know you a bit more. How can people get a hold of you? Can we tell them about Oreninc? Can we tell them about the newsletter? Where can they find you?

Kai Hoffmann: Please do. Oreninc, it's solely North American focused, it's free to sign up, oreninc.com. And the newsletter, unfortunately is in German but I'm told that Google Translate does a decent job of translating it. It's investor-magazin.de without an E because it's German.

Gerardo Del Real: Excellent, excellent. Well Kai, thank you again for your time, I look forward to having you back on. It's picking up in the resource space, I anticipate we're going to have a pretty decent fall and winter and it should be a very, very interesting 2018. We'll definitely catch back up.

Kai Hoffmann: Geraldo, much appreciated and thanks for having me.

Gerardo Del Real: Thank you for your time, Kai.

Kai Hoffmann: Thank you.