Legendary Investor Jeff Phillips on 3 Juniors He's Buying... and Why (Part 2)
by Gerardo Del Real
Editor’s Note: Below is Part II of the interview with Jeff Phillips about private placements and the junior mining industry. Yesterday (here), we discussed the importance of having a network to source and vet deals, and Jeff said he used Nick Hodge’s private placement service — Hodge Family Office — to get into private placements. Today, Jeff covers some of the companies he is currently invested in and buying in the resource space. Enjoy. — Gerardo Del Real
Jeff Phillips: I can give you a good example, Gerardo. I think I told you this story. I've participated in a number of the placements Nick has offered and most of the companies I don't know. Again, I know a lot of resource companies, and so some that Nick recommends I do know — and I don't participate in everything. But I've done a number of them and done really well.
Recently, he sent out a note on a lithium company called Critical Elements Lithium (TSX-V: CRE)(OTC: CRECF). I'd never heard of it. He had an opportunity to recommend the private placement to his subscribers, of which I'm one. And it was late at night, and a lot of times especially high net worth individuals don't get the amount they want.
So I sent a big number off. I'd had a couple glasses of wine. I read Nick's report on the company — that I'd never heard of, which surprised me — and I'm not going to go into the whole thing but the structure looked good, the people look good. It was in final permitting. Big, hard rock lithium resource. But most importantly to me from his writing, again I didn't know this, was the gentleman who took over as the CEO is the same gentleman who had sold his last lithium company for billions of dollars and he'd come in to run this company.
So clearly he liked the asset. I liked the fact that he sold his last company for billions of dollars. So I sent an email out thinking I wouldn't get it all — it was a six figure amount of stock, dollar-wise — and 10 minutes later I get an email back: "You're in." And I laughed because it was quite a bit of money. Even in my own deals that I'm raising money for it was a good chunk of money.
And anyway, I ended up participating and the jury's still out but I think the financing was at C$0.30 two months ago, a week later Tesla announced that they were doing a joint venture with a hard rock lithium project in a small company. The stock in that company went from I think $10 to $30 or something like that, Gerardo, and the lithium space lit up.
Now, all of a sudden this little Critical Elements that Nick introduced me to is now trading close to C$1.00 a share. I paid C$0.30. Again, my stock still has a hold on it but I feel pretty good being up 200% in two months and holding all those warrants I got also.
So, that example alone would pay for the next 100 years of Nick’s — if it works out and I'm able to realize that, which I think I will be able to — it would pay for years of Nick’s service from one piece of advice through his network.
There are not a lot of people that run those types of things. And, again, I have brokers that recommend deals but a lot of times by the time the broker recommends a private placement to you it's the stuff that gets passed down. If there's any left it tends not to be the best deals. So, I don't want to be the last one on the totem pole to get offered a private placement in that scenario. Because, again, if it was really that great it would have never got offered to me in the first place in the brokerage scenario. So yeah, I do my own mostly, Gerardo, but again I've done very well with Nick Hodge's service.
Gerardo Del Real: Well, obviously I'll make sure that we put a link up to his service, which is now up and running. I can't let you go, Jeff, without getting your take on the current consolidation, if you want to call it that, in the gold price here. And then I have to ask right after that if you're adding during this weakness as I am. And I think you and I have had conversations about companies that I'm actually quite enjoying to see a pull back in because it allows me to be a bit more aggressive on the buy side of it. But your take in the gold space, you've seen multiple bull cycles, you've seen pullbacks, what do you think and how does it look?
JP: I think it took longer for the pullback to happen than I thought it would. If you listen to my last... I think I did an interview with you in late August and I thought we were going to have a pullback. I think we didn't for a month longer. So you've had a good run in the price of gold and the equities have had a good move. So now you've got the noise that people are saying, "Gee, this was it. We need to get out." It's like 2016. Or you've got the other side that says, "Gold's going to $10,000 an ounce."
My personal feeling is that you have an unprecedented amount of money being printed right now. I think all assets are going to do well. I think the stock market's going to do well. I think Gold's going to do well for two reasons. The dollars are going to be printed. Gold can't be printed, similar to the argument with Bitcoin. And that's a whole nother topic we could talk about. But the bottom line is that I think assets are going higher and gold is going to go higher. Plus gold has that safe haven. At some point this debt and amount of money being printed is going to create people not getting paid back at the borrower level from companies. I think government's not paying people back. So, gold to me is a great thing to own. I speculate in the resource space and some of those are precious metal stocks.
So, and to answer your question on what I'm buying, I bought a lot of stocks over the last three, four years. I've done some private placements, a number of private placements, over the summer. I'm buying things that I really like. And in this last run-up I sold a few things that I didn't really understand why I still owned them and culled some of those smaller positions. So, some of my bigger positions in companies I really like. Again, I believe we're in a bull market that's going to be one for the ages in the resource sector and other asset classes, too. So I think these things are going a lot higher next year. But there will be setbacks. That's what a bull market is and that's what we're in right now.
JP: I've been buying Chakana Copper (TSX-V: PERU)(OTC: CHKKF). I originally bought the stock, which is a long story, cheaper. They didn't have permits. They're now drilling with their permits and hitting what they thought they’d hit. And I like what I'm seeing. So I'm still buying stock at these current prices. And again, I'm up considerably on my initial purchase but I'm buying lots of stock. I think I bought 250,000 shares yesterday. That being said Gerardo, I also consult for Chakana because often companies want to hire me to get my advice, not just as a large shareholder. It's critical that you raise your money and when you do private placements from the company standpoint you do it with people that are going to be supportive of the company and help you build that company. So, I often consult with companies to make sure that, because I'm a large shareholder, yes I will participate in the future but I want to make sure you understand who we should be trying to get to participate to help build this company out.
Because my ultimate goal with something like Chakana is if it's a raging bull market and the stock’s trading at $4.00 or $5.00 like I've seen in the past with these resource bull markets, I may take some money off the table. I’d still own some stock, but realistically I think it's the type of company that can be bought out in this cycle. Goldfields is their largest shareholder and they're very happy. They’re the major miner that’s been funding this drilling. I expect they'll continue to want to fund the drilling because they've had great results.
So that's one I've been buying in the market. I'm buying it because even though I think they will raise money, my feeling, my guess is that it's not going to be brokerage firm money. It’s going to be major type money or majors or players that aren't in it to play the stock in a short period of time. So I probably won't be able to participate in that type of private placement. So, I'm better off just buying some more stock in the market if I want to own more.
What else have I been buying? I think that's the only thing I bought this week if that's what you're talking about. But over the last couple of months I've been buying Almaden Minerals (NYSE: AAU)(TSX: AMM), which you and I have talked about. It’s a gold deposit in Mexico. Trades on both the New York Stock Exchange under AAU and AMM on the Toronto Stock Exchange. But I like that asset. It's an extremely good looking asset. It's got a bankable feasibility study. They're waiting for their permit. And that is the risk. It's been slowed down in Mexico, there's always politics, there's coronavirus, the courts were closed, there's all these things, government agencies aren't open. So it's taking longer to get that permit. And granted, I think they're going to get the permit and then this company is worth considerably more than it trades at. So if they don't get the permit I'll be wrong. But that's one I've been buying. And again, there's a number of stocks over the last couple of months but the only one I think I bought this week was the Chakana.
GDR: Excellent. Jeff, it’s been insightful and informative as always. Is there anything else that you'd like to add? And let me thank you for your time, of course. I appreciate it.
JP: Just that the resource sector is extremely high risk. Again, it's extremely high risk. The fact of the matter is that what most people do wrong in the resource sector is they get advice from a broker, a newsletter, and they end up owning 40 stocks, small amounts in 40 different companies that they can't track. That even the newsletter writers, in a lot of cases, aren't tracking that well. And even if one of those companies hits it big and goes up 20-for-one they don't own enough to make a difference. So, if you are going to get in the resource space you want to keep your portfolio small. If you are an accredited investor it's great to get warrants. And again, understand the risk level.
You can make multiple times your money in this sector very quickly, especially in a bull market. I mean you and I remember the last bull market. Things move very quickly when people are all running into a certain sector. And I think you'll have that in the resource sector because it hasn't happened for a long time. But that would be my advice. And get good advice from someone. Like you said, if you're listening to a broker... Why is his advice good? Well, is he a geologist? What are his connections? What's his network? Or if you're listening to a newsletter writer... what do people say online about this guy? How many stocks is he covering? And again, make sure you're listening to people that know what they're doing.
Such as yourself and Nick Hodge.
GDRl: Jeff, thank you so much. I appreciate the kind words. I really appreciate your time and the advice and the guidance. And again, advice from one of the best in this space everyone. Thanks a lot Jeff.
Gerardo Del Real
Editor, Resource Stock Digest For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Resource Stock Digest, Junior Resource Monthly, and Junior Resource Trader. For more about Gerardo, check out his editor page.