Categories: General Market Commentary
Topics: General Market Commentary

Securing Mining-Stock Gains in ‘23

Legendary resource investor Jeff Phillips reveals one of his Top-Picks for mining stock gains for the coming year in this exclusive interview with Gerardo Del Real of Resource Stock Digest fame. 

Inside, Mr. Phillips details the merits of staking an early position in Bravo Mining Corp. (TSX-V: BRVO)(OTC: BRVMF) which is advancing the Luanga PGM+Gold+Nickel+Rhodium project in the world-class Carajás Mineral Province in northern Brazil.

The tier-one-potential project boasts a 5.7 million ounce historic resource estimate [142 Mt @ 1.24 g/t Pd+Pt+Au & 0.11% Ni] done by Vale — one of the largest iron ore and nickel producers in the world.

The 7,800-hectare Luanga project is so important — in terms of its “green-energy” commodity mix — and is so potentially rich in PGMs (Platinum Group Metals) plus precious and base metals that it has been elevated by the Brazilian government as a Strategic Minerals Project.

The project comes with the enormous benefit of Vale’s 50,000 meters of previous drilling across approximately 250 diamond drill holes. The vast majority of those holes were drilled to a depth of only 150 to 200 meters with all holes ending in mineralization. That’s key as it provides the Bravo field team with a roadmap for uncovering deeper mineralization along with potential mineralized “feeder zones” at-depth in the upcoming drill rounds. 

Read on to discover why Jeff believes Bravo Mining has the right people, the right project, and the proper share structure to deliver outstanding results for shareholders who get in at this early development stage.

Please enjoy our exclusive interview with Mr. Jeff Phillips! 

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Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is one of the most respected voices in the resource space, a gentleman that I call a friend and that is known for taking a contrarian approach to his speculations and investments — Mr. Jeff Phillips.
Jeff, it's great to have you back on. We promised our audience that you would be back to share some of your top picks going into 2023. We'll get into that in just a second. First and foremost, how are you today?

Jeff Phillips: I'm doing well, Gerardo. Thank you for having me.

Gerardo Del Real: Well, listen, let's get right into it. You're somebody that's been a friend and a mentor to me in this business, and we've known each other for some 14, 15 years now. And we joke that I tend to be optimistic and you joke that you're an optimist with experience.

And I mention that because you said something to me about a company recently that we're both shareholders of that stood out to me because you're very, very conservative, usually, when you speak about projects and management teams. And you mentioned a company called Bravo Mining (TSX-V: BRVO)(OTC: BRVMF). And correct me if I'm wrong but if I recall correctly, you told me, ‘Gerardo, if this one doesn't work, I'll walk away from the resource space.’

And so we promised our audience in our series of interviews that we would have you back on. And maybe go one at a time here… I want to start with Bravo today but I'd love to do more of these. We promised people we would get some of your top picks, and so I think Bravo is an ideal place to start. 

That's a heck of a statement — if this doesn't work, you'll walk away from the resource space. What did you mean by that? Why are you so bullish on this company?

Jeff Phillips: Well, I think I said, ‘If this doesn't work, I should walk away from the mining space.’ It's been a tough 10 years with a couple little blips in there in the mining space. It's a pretty tough market but it's typically that way. The natural resource exploration development space is high-risk, and every 10 years or so you get an opportunity for a couple of years to do really well. I think that's coming up. And so yes, I'm not a pessimist; I'm an optimist with experience.

Gerardo Del Real: Correct.

Jeff Phillips: So there are three things I look for in resource companies, and Bravo Mining checks all of those boxes in spades. So that's a company that, when the chairman of the board says, I want to build a C$2 to C$3 billion company in the next several years… it is possible to do that if things line up. And they already have. So we can go through those three things if you'd like.

Gerardo Del Real: Let's do that. I want to provide a bit of context. When the chairman says he wants to build a C$2 to C$3 billion company, I want to be absolutely clear that Luis Azevedo has monetized multiple assets, billions of dollars' worth of assets in the past. This isn't someone that's new to this. 
I also want to be clear that when he talks about building a multi-billion dollar company, the current market cap is roughly C$170 to C$175 million the last time I looked. So the potential there is, potentially, 10- to 15-fold returns at the very least if he's able to succeed in that mission.

Now, let's get into those three things that you look for when you're evaluating a company because I think this is a good opportunity for people to get an idea of what the Jeff Phillips due diligence checklist looks like.

Jeff Phillips: Sure. Basically, you're looking at the project or projects that the company has; the assets they've put together. That's actually the least important of my three things. 

The second thing you're looking at is the structure of the company. How is the company structured? Is this a typical highly speculative bunch of promoters of a Canadian deal where there's going to be a lot of people that are just looking to flip their stock and make money? Or is this a deal that's set up to actually build something with a real asset? So you're looking at structure. 

And the third thing and most important thing in these companies is the people running the show. Have they had success before? Do they know what they're doing? Do they have experience in that jurisdiction? Do they have experience with that metal? And have they built and sold a company before? 

So those are the three things you're looking for.

So applying that to Bravo Mining: Cormark Securities just came out with an excellent report on Bravo. And if you can find that, Gerardo, and link to it, it's a very complete report on Bravo. And I encourage anybody looking at the company to read it. 

Bravo’s flagship is a very large mineral project. It's the Luanga PGM (Platinum Group Metals), gold, and nickel project; plus it's got rhodium. It’s in the Carajás Mineral Province in Brazil. It's in Vale's backyard, the major mining company there. Eighty percent of global palladium is produced in Russia and South Africa, so this is a very important asset that can provide a critical metal outside of some less-friendly countries.

Vale has actually spent about $50 million on this asset, which puts Bravo one to two years ahead and already moving forward. There's a historical resource there of 142 million tonnes at 1.24 grams per tonne gold, platinum, and palladium, plus 0.11% nickel. 

Plus, they're now assaying for rhodium and getting pretty good grades, which is going to increase the value of that rock. So you already have a pretty darn good historical resource there and some comparables in the market that are trading two to three times where this company is trading at now.

Even more important, the Brazilian government has put this in a permitting place, which is to fast-track it to production. It’s something they'd like to see go to production. So you always like to see the country you're in wanting to move the project forward faster. 

Bravo’s main job going into the first quarter of 2023 is to prove that historical resource. And so far, they're actually proving about 20% higher grades. So they've also made a massive sulfide discovery, which is a new type of mineralization that they hadn't seen before when Vale was working there. And they're exploring that. 

That could be an even bigger game changer… just the fact that the current resource, in my belief, is worth a lot more than the company currently trades at. So you have the project in spades, right? Do you want to go on to the next thing, Gerardo?

Gerardo Del Real: Absolutely. Fire away!

Jeff Phillips: So the next thing — and actually the most important thing — is the people. Bravo’s executive chairman & CEO is Luis Azevedo. He’s a Brazilian national. He's a founder of a well-known law firm. He's also a geologist. That law firm specializes in helping companies move things in Brazil through exploration, permitting, and development. I believe his firm has been involved in the permitting of the last seven or eight mines in Brazil.

A while back, he actually put a deal together called Avanco where he was not the president and CEO but was on the board and was the largest shareholder. They built Avanco from a resource stage company to a producer and sold it for AUS$418 million to Oz Minerals — a major Australian mining company. 

It was in the same district in Brazil as this new project with Bravo. The difference this time is he has actually put his name on the letterhead as the CEO for the first time ever. And again, remember, he has built multiple mines or been involved with it in Brazil. So that's the number one person you want to look at.

You also have several board members that I very much respect. Stephen Quin, who's been involved in permitting gold mines coming into production to permitting and discovering a copper mine and selling it off to another copper producer. Stephen sits on the board. 

And Nikki Adshead-Bell, who's a very accomplished geologist; she's well-known in the resource business. She’s been involved with lots of companies that have gone on to be successes. She's also on the board along with numerous other mining professionals. So again, you have the people there that make discoveries and build mines — and that's what they do. And that's the type of company I look for.

Gerardo Del Real: So to be clear, what kind of upside are you looking for in Bravo? I told you, I'm a biased shareholder. I participated in a recent financing. I think, clearly, there's a path for a 5-fold to 10-fold rerate. And that's not including this new potentially game-changing nickel discovery that's a new style of mineralization that the Bravo team is onto that we're awaiting further assays on. But what kind of upside, when you write a check to this company, are you in it for?

Jeff Phillips: Quickly, let me just tell you about the structure of the company, which is also important. People always ask… is this a good deal… how much is it going to cost… what are people valuing the company at now? It’s important to know all of those things before answering such questions. 

So the structure of Bravo Mining is probably one of the top five companies I've been involved with as far as the share structure goes. There are 101 million shares on a basic outstanding basis. 61.8% of those shares, Gerardo, are owned by Bravo management and employees. 

Gerardo Del Real: That's a lot of skin in the game!

Jeff Phillips: Yes, 61%! Luis owns 50%. And what's important when you're looking at a company — especially these Canadian companies — is Luis owns that 50% in his own name, fully reporting with the exchange. 

A lot of these guys out of Canada… the big names, the billionaires… they'll say they own half of a company. But when you look up the reporting, they only own 12%. That's because of all of the other stock they’ve moved into other people's names; they're not reporting. So again, it's very important to realize that Luis is reporting all of his shares; over 50 million shares in this company. And management owns another ~10%.

On top of that, your other major shareholders are BlackRock, the well-known private equity firm, which owns 9.9%. They owned a big chunk of his last company, Avanco, which they made a lot of money on. These guys are long-term shareholders. You also have Tembo Capital, another very respected resource fund that owns 9.3%. So right there is another 20% or so owned by major funds where making a little bit of money doesn't move the dial for them. 

You also have Franklin Templeton that owns 4%. You have 9% which is retail, which is technically your float. There are several other institutions that own smaller pieces… and you pretty much have the structure of the company there. So you have a very well-structured mineral exploration company.

So the company went public at C$1.75. I participated both in a private round and the go-public round at C$1.75. I’ve also bought a couple hundred thousand shares since it started trading in the market between C$1.60 and C$1.75 per share. 

I also consult for the company, Gerardo, on advising them on their future financings and what I would do, and making sure that they're doing the things that help shareholders like myself and these other large shareholders see positive results while minimizing dilution.

So again, I really like the company. The last part of your question was in regard to the potential upside. I don't disagree with what you said. Again, I would reference the Cormark report where I believe they put a price target of something like C$3 per share on the stock. Bravo currently trades at C$1.65. 

It's a really well-written report on the project. I think that's a conservative estimate. I think in the first quarter of 2023, Bravo will have their metallurgy out. They will have additional infill drilling going to prove up this historical resource and grow it in both size and grade. And we're going to start seeing more holes from this massive sulfide discovery, which could lead to a whole other type of deposit that could be even more valuable rock.

So you asked about what upside I see. Again, Luis, when I first met him, said, Look, I can make this company a billion-dollar company… I already believe the historic resource can justify quite a bit of that… but we'll start drilling it off. They raised C$40 million at the end of last summer in one of the worst markets for the resource sector at C$1.75 — which was incredible. You have to have a pretty good project along with good people to do that. 

He wants to do the next financing at C$4 to C$5. I believe he's got a number of larger mining companies that are already interested in the company. His goal over the next few years is to grow this into a C$2 to C$3 billion company and most likely have someone like Vale or another major mining company come back in as they've proven this out and take them out for the upside. I imagine there’ll be multiple companies that are going to be very interested in owning a large, PGM-dominant asset like this outside of Russia and South Africa.

So for me, I'm looking at a five-fold to a ten-fold return, and that's why I’m invested in it. That doesn't always mean it's going to happen… but when you have all of those things we talked about lining up — this thing should work out. 

Of course, that doesn't mean that in the short term the stock can't drop 25% because someone woke up and decided to sell a few shares. It also can go up by that much. It's a very thinly traded stock. I think buying shares under C$1.75 — or even if you paid up to C$2 — two years out, you're going to be pretty happy. 

If it drops because someone decides to sell… or the whole market goes crappy next year… you’ll have an opportunity to average down. But again, I think this is an incredible asset with incredible people that should be trading a lot higher than where it is now. 

Gerardo Del Real: Jeff, it has been an incredible conversation. Ladies and gentlemen, that is as bullish as you'll ever hear Mr. Jeff Phillips on a company and a project! Thank you so much for the time today, Jeff. Have a wonderful Christmas and New Years! Let's absolutely do this again after the new year. 

Jeff Phillips: Thank you, Gerardo. I appreciate it. Let's look for a better resource market in 2023. We got lucky with some good picks in 2022. But let's see everything go up in 2023!

Gerardo Del Real: Well said. Thanks again, Jeff.

Jeff Phillips: Thank you, Gerardo.

Check out Bravo Mining’s featured company page HERE.

Mike Fagan
Editor, Resource Stock Digest