Gerardo Del Real
Feb. 10, 2023
Editor’s Note: Please find my latest interview with mining financier Jeff Phillips, below. He shares three of his top junior resource stock ideas right now: one lithium, one copper, and one in the PGM/gold/nickel space. Enjoy.
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me once again is one of the most respected voices in the resource space, contrarian investor and friend — Mr. Jeff Phillips. Jeff, how are you today?
Jeff Phillips: I'm doing excellent, Gerardo. How are you?
Gerardo Del Real: I am well. Thank you for asking. Listen, you and I had a conversation last week. That interview has been reshared several hundred times. I've gotten some amazing notes on the dialogue and we agreed to pick back up in a week or two and you agreed to come back on and maybe share a few picks.
And so I thought for this conversation I could maybe pick your brain a little bit and get a lithium pick, maybe get a copper pick, maybe a gold pick, and then anything else that you see out in the market right now that's attractive to you… and it doesn't have to be in that order.
But before we get into that, I’ve got to say, you and I had a conversation about what everybody knows right now is my largest personal holding and a big win for us, right? We financed it at C$0.16. We're up some 10,000% on that position. The last time you and I spoke publicly about the stock, we talked about the new non-executive chairman coming on and why that boded well for the company fast-tracking the many catalysts it has.
That was C$11 or C$12 ago. The stock was trading around C$5. We acknowledged the fact that he was taking his options at much higher prices. That seemed bullish to the both of us. I’ve got to ask you, Jeff, I know you have a pretty substantial position as well… how are you feeling about Patriot Battery Metals (TSX-V: PMET)(OTC: PMETF) right now?
Jeff Phillips: I think Patriot is the real deal and I think they’re onto a big lithium discovery. And like you said, I don't think that interview was, what, four or five months ago or maybe less? I don't know when Ken Brinsden came on as chairman but when you see a guy who's built a company from a hundred million dollar market cap to C$14 billion in Pilbara — another lithium discovery that's now in production — and he comes on the board as chairman and takes his options at 40% higher than the stock's trading and even 60% higher… you’ve got to believe that he knows what he's doing.
So the stock's gone from C$5 to now C$17. I like to calculate it every day because I sold half my position at tenfold returns, which comes out to about C$1.60 or C$2 a share. So at C$17, I like to calculate those millions of shares. But the good news is I still own quite a few shares.
So anyway, I like Patriot. I've made a lot of money on it. I plan on holding a big position that's really getting bigger by the day dollarwise. Yeah, I think that stock is the real deal. I think your risk in the short term is the price of lithium or the overall markets. I've talked to people at the company and I think they'd like to see C$50 a share and be bought out so I think that's what they're working towards. Whether that happens or not, we'll see. But I'm still holding a big sizable position in the company, Gerardo.
Gerardo Del Real: Well, that's well said. It's funny that you picked that C$50 target because for my holdings, I would be disappointed if the company was bought for anything less than C$50. There are rumors out there of pretty aggressive buying by a certain group. I've spoken with several sources, and those rumors appear to be true. But we won't know for sure until we actually see a reporting document that outlines just how many shares have happened in Australia.
That threshold is 5% here in Canada and the US, of course that's going to be just under 10%. So curious to see how that plays out and really curious to see if maybe a Rio Tinto or a Pilbara doesn't decide that it's not going to have this asset that's shaping up to be a generational lithium discovery taken away without a good fight. And look, I’ve read about Voisey's Bay. I wasn't around back then in the resource space. But if it's anything like that, I think we're in for a treat. And so fingers crossed on the many, many shares that both you and I still have. Let's pivot a little bit.
Check out our latest free research reports for in depth analysis on specific market trends. View Reports
Jeff Phillips: Gerardo, if it's anything like that, I'll really be calculating the shares I sold… but I'll still be happy. I'll be really, really happy and really sad at the same time!
Gerardo Del Real: Champagne problems, Jeff, if it gets to C$50. And if it's anything like Voisey's Bay, I think you'll be more happy than sad.
Jeff Phillips: Yep!
Gerardo Del Real: Let's pivot. Let's get right into it. I brought you back because I know that you're a consultant to many companies. You also actively speculate on a lot of companies. You're very selective. You're one of the most methodical, process driven speculators that I know, hence, the reason that you decided to sell the amount of Patriot shares you sold. It was the prudent thing to do in most cases. But what are you looking at out there right now… what do you like? Let's start wherever you want to start, how's that?
Jeff Phillips: Alright, sounds good, Gerardo. So when you say consultant, I take large positions in companies and often people I know sidecar in. I don't get anything but people that are very knowledgeable in the business and friends of mine like Doug Casey, Bob Bishop, Van Simmons — guys that are pretty well known and have been around a long time — tend to invest alongside me because I end up consulting for the company.
And what that means is that I watch after our money and we often write checks in future financings. And I also make sure I give them advice on raising money with the right people at the right time, and hopefully they meet their milestones and are able to raise money at higher prices.
The biggest mistake junior companies make is not planning ahead for their future raises and selling stock to people that aren't necessarily going to be good long-term shareholders. And if there are too many of those people in a deal, me being a longer term shareholder, it's not good for my investments. So I tend to consult; I call it parental supervision, really, because I own large amounts of shares and some of my friends that are professionals in the business own shares too.
And I want to make sure, in a high risk business, that we get the best bang for our buck. And sometimes they don't work out and sometimes they do. But I want to find out through the drill bit and not through being diluted and being involved with crappy shareholders. So what would you like to start with, Gerardo — lithium?
Gerardo Del Real: Let's do it. Fire away. That's been good to us.
Jeff Phillips: One of the companies you and I have discussed before — and I think it probably trades maybe a little bit higher than when we first discussed it here — is Nevada Sunrise Metals (TSX-V: NEV)(OTC: NVSGF).
It’s a company that's made a clay lithium discovery in Nevada. They've also encountered some brine in those holes that's running lithium. They have several properties. But the main one they're drilling now is Gemini, and they just came out with some drill results.
The market seemed to be mostly flat on the results. I thought they were pretty decent. The clay deposits for lithium have not produced yet. There are a number of companies working on processes and ways to get lithium out of clays. You saw the news a few weeks back that GM has committed US$650 million to Lithium Americas (TSX: LAC)(NYSE: LAC); I think it's called the Thacker Pass Clay Deposit in Nevada. They’re dealing with some court issues at the moment.
Gerardo Del Real: They just had a favorable ruling on that, by the way.
Jeff Phillips: Oh, did they? That's excellent. I think that's going to go a long way to show that you can get lithium out of clays. And having someone like General Motors being involved, I believe, helps all of the clay lithium discoveries in Nevada. So I like Nevada Sunrise. They've only drilled four holes into the property. Every one of them hit lithium and clay.
They would like to see mineralization closer to surface, and they'd like to find more brine. They're drilling another hole as we speak. Those holes have been half a mile to a mile apart and they're still hitting mineralization. They have another lithium clay property called Jackson Wash that I'm quite interested in. And also, their Kinsley Mountain gold property in Nevada is about to see drilling. So I think it's a great speculation.
I own a lot of shares in the company and I also advise them. Hopefully, with the GM news and some more lithium clays, we'll see some strategic joint venture financing people on that deal. So again, I like Nevada Sunrise Metals in the lithium space. What other metals would you like to talk about?
Gerardo Del Real: How about platinum, palladium, gold? I know there's a company that both of us, just like Nevada Sunrise, have written checks for in the past that we're pretty bullish on. Is that a company you want to mention today?
Jeff Phillips: Yeah, I like Bravo Mining (TSX-V: BRVO)(OTC: BRVMF). I believe that's who you're referring to. Bravo is a very thinly traded stock. I think we talked about it when it went public at C$1.75. I've bought stock at those prices. It traded there for a couple months. I think it's very undervalued for their asset in Brazil.
The chairman of the board and CEO, Luis Azevedo, is a very experienced Brazilian mining attorney and geologist. He's had his hand in something like the last six mines that have been permitted for other companies in Brazil. His last company, where he wasn't chairman but put the deal together, sold for AUS$418 million.
Bravo Mining is his new deal. The stock has moved from C$1.70 to C$2.50. He owns half the company; management owns another 10%. BlackRock, the major financial group, owns 10%. And there's actually another hedge fund that owns 10% that’s also a very long term shareholder.
So I don't think you’ll see a lot of selling in that stock because people realize it’s probably going to turn into a billion dollar asset that’s currently trading at a market cap of just over C$250 million. I think it can go even higher than that with a major discovery. Their flagship asset has a proven resource that I believe could already justify a higher valuation than where it’s currently trading.
So as Bravo releases more drill results as the year goes on, I think the stock keeps working its way up. Last time we talked, it was at C$1.75 and now it's at C$2.50. So I think it's possible that next time we talk it'll be a C$5 stock. So I like Bravo Mining. I like the structure and I like the people.
Gerardo Del Real: Couldn't agree more. I own a nice position in Bravo as well. We’ve gotta talk copper. If we're going to talk palladium and we're going to talk lithium battery metals, then we have to get into a copper name or two. Is there anything in the copper space that seems attractive right now?
Jeff Phillips: Yeah, I'm just going to give you one example from each space. Like I said before, Gerardo, you should own a minimum of 10 to 12 of these stocks and hope for a couple of them to turn into a Patriot Battery Metals. Or really, you hope that every decade or so, one of them turns into a Patriot Battery Metals and hope that some of the other ones become tenfold or more returns in a bull market in that specific commodity. So you should own a basket of resource stocks… but I'm just picking one from each metal off the top of my head.
So for a copper stock… I don't consult for this company currently; I did at one time and may again in the future… but one that I like and that I’m a large shareholder in is a company called Kutcho Copper (TSX-V: KC)(OTC: KCCFF). Kutcho is advancing a medium-sized copper deposit backed by Wheaton Precious Metals (NYSE: WPM), who's the largest shareholder. It's an excellent land position.
For the last four years, I've tried to get the company to explore that land position while they're permitting. Their deposit is advanced, and the net present value of the project is far greater than the current market cap. So they continue to advance the project but I think they’ve finally decided that they're going to do more exploration. There are excellent targets there to grow the resource, and the value is already in the deposit that they have. So I like Kutcho Copper.
It sold off with everything else last year. I think it reached a high of C$1 and, in tax-loss selling, got as low as C$0.20. It's just starting to bounce back. I think it's around C$0.40 now. But if you want a quality speculation in the copper space with some big backers like Wheaton — Kutcho Copper fits that bill.
Gerardo Del Real: I couldn't agree more. Look, there's a net present value at current copper prices there with the feasibility study to back a billion dollars. The company's got a market cap of C$50 million, folks, so there's a lot of wiggle room between the current market cap and the net present value at today's copper prices. And if you want my opinion, which I'll give to you anyway, I think copper is headed much, much higher here in the mid-term.
Is there anything else that you want to highlight, Jeff, before I let you go? I like to be respectful of your time. I always appreciate the insights. Any other company on your radar right now that you want to mention?
Jeff Phillips: Yeah, again, we could do this for six or seven more companies. But we've talked about a company called Almadex Minerals (TSX-V: DEX)(OTC: AAMMF) before, which is a sort of a prospect generator / drilling company / hybrid discovery company.
It's run by Morgan Poliquin. It has royalties on multiple properties, including some owned by its sister company, Almaden Minerals (TSX: AMM)(NYSE-Amer: AAU), in Mexico. It has several other advanced royalties and a number of earlier stage royalties. And it has its own 100%-owned properties.
The company also owns six drill rigs. It has roughly C$18 million in the bank. I think it has another C$6 million in assets or a little more than that if you include the drill rigs. They've got a gold loan that is secure. They have a couple million dollars in other companies' shares that, in the past, they've vended properties to. And those shares could be worth a lot more in a bull market as we're starting to see a better market here than we did last year.
So really, they're trading close to asset value, not counting all of the properties they own. I think we talked about it last time below the C$0.30 level and now it's right around C$0.40. I still think you're paying, really, just for the cash and securities. You’re basically getting all of the properties and all of the royalties for free.
Check out our premium publications for more trading recommendations and exclusive coverage on the markets. View Publications
So that's a company that I think flies way under the radar when things like lithium get hot. And you see all of these companies running up two-fold and three-fold that honestly don't have anything… whereas Almadex has a lot going for it. So I like Almadex Minerals and I also liked it last time we talked.
Gerardo Del Real: It should be noted that Almadex just provided an updated resource estimate for their Logan zinc-silver project. I did the math and the in-situ gross value of the metal present is something like $3.5 billion. Again, that's one property, right? It's 100%-owned. Almadex has a market cap of C$27.8 million right now with a large chunk of that, over 80%, backed by cash.
It owns its own diamond drills, it has substantial royalties in its portfolio, and, oh by the way, it's onto a gold-silver discovery in Mexico that looks to be pretty exciting and potentially a second one in Nevada. So yeah, if you talk about mitigating risk, I couldn't agree more… Almadex is a heck of a speculation.
Jeff, before I let you go, any final words of advice to anybody out there who wants to dabble in the sector? It's high-risk, it's high-reward… we know that. Any parting words of wisdom there?
Jeff Phillips: Yeah, have different positions with varying commodity exposure. Most of these companies are exploring or developing an asset. It's not a mine yet… it's a long way from that! So you’ll want to have positions in a number of different companies.
If you're familiar with the resource space, then you know what I'm talking about. If someone listens to this and thinks, ‘Gee, that sounds like a good idea. I'm putting all of my money into it!’ Well, don't do that… it’s simply not a good idea. Again, you want to be speculating with your risk capital… NOT the money you're counting on for your mortgage.
Again, you want to have a number of positions; a minimum of six and preferably a few more. But then again, I also know people that buy too many of these stocks and end up being diluted across the board. So you don't want forty positions in the mining space. You want six to twelve that you can pay close attention to.
Do your own due diligence; don't just listen to Jeff Phillips or Gerardo Del Real. Do some research, call the company, and ask some questions. The internet, obviously, has made resource speculation a lot easier. That's my final thought.
Gerardo Del Real: I'll add to that. Pay your taxes folks and keep a little cash position. What's the old saying from the wise friend of ours there, Jeff?
Jeff Phillips: Jim Dines, who would always say… rich or poor, it's good to have cash! And that's good advice for anyone. It means don't over-leverage yourself at any point in your life.
Gerardo Del Real: There you go, folks. Jeff, thank you as always. Appreciate it!
Jeff Phillips: Thank you, Gerardo.
Gerardo Del Real
Editor, Resource Stock Digest