Gerardo Del Real
March 16, 2022
Editor’s Note: Back once again to discuss uranium, gold, and copper is resource financier and consultant Jeff Phillips. He’s become a bit of a regular guest as we continue to see rising prices for metals nearly across the board.
Jeff has a track record speculating on junior resource stocks that is envied by many.
Today, he shares his insights — and favorite small companies — in uranium, gold, and copper.
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me once again… one of the best, most informative, and insightful voices in the resource space — Mr. Jeff Phillips. Jeff, how are you this morning?
Jeff Phillips: I'm well. How are you, Gerardo?
Gerardo Del Real: Excellent. Thank you in advance for your time. It's always great to have you on. It’s a different world than the last time you and I chatted, Jeff, before the invasion of Ukraine by Russia… before what I see as a growing resource war — as a subtext to the war-war.
You and I had a conversation last month… and we talked about uranium… and you were kind enough to share your thoughts. You mentioned Skyharbour Resources (TSX-V: SYH)(OTC: SYHBF) during that conversation. And anyone that would have listened to that interview would be up over 50% since then. So I figured, with everything going on in the world — with gold near US$2,000 an ounce and with uranium breaking 10-year highs — it'd be a great time to have you back on.
So let's get right into it starting with uranium. I mentioned Skyharbour Resources and how well that's done since the last time we spoke. A much different world, obviously, but I’d love to get your thoughts on the uranium space. And then, I’ve got to pick your brain to see if you have something out there — maybe a name or two — that you think can perform the way Skyharbour has the last little while here.
Jeff Phillips: Sure, Gerardo, I’d be happy to! And thank you again for having me back on. My reasons for liking uranium stocks and uranium as a commodity haven’t changed in light of the recent and very sad events evolving in Ukraine.
What it has done is it's made more people aware of what I've already known, and what most people in the resource industry have known, which is that there's a fine line between our supply of these critical elements that we require for energy, defense, etc. and the stability of the countries we procure them from.
We have a lot of environmental rules here… but people still want to drive a new Tesla or own that new Porsche… or we want to have more stuff in the cloud, which is a server room on the ground and takes electricity to run. All of those things require vast amounts of energy, and we have to get the raw materials for a certain percentage of that energy supply from somewhere.
And so what you end up with is an overreliance on countries that don’t always have our best interests in the heart such as China, Russia, Kazakhstan, and elsewhere. And that's why I continue to like uranium. Countries around the world are realizing that — in order to replace coal and other fossil fuels with clean-burning alternatives — nuclear power, which runs on uranium and has zero carbon emissions, is going to play an ever-increasing role.
And that means nations are going to be upgrading their reactors, building new ones, and investing in new technologies such as SMRs (Small Modular Reactors)... and all of those things require vast amounts of uranium.
Simultaneously, the world is waking up to the fact that Kazakhstan, a former Soviet republic, supplies nearly half of the world’s uranium. And that’s placing a renewed emphasis on uranium sources that are closer to home, such as Canada, and right here on US soil.
It’s a seachange that’s long overdue… and, in response, uranium prices are finally making their way above that crucial US$50 per pound mark where North American production becomes economically viable.
Like most people, I hope this war comes to an end soon, with Russia’s ouster, and with the Ukrainian people returning to their homeland to begin the delicate process of rebuilding — both in terms of infrastructure and, obviously, the emotions involved.
In the immediate term — and this was not unexpected — we’re seeing many commodities moving up in price. I already mentioned uranium and gold. We’re literally seeing it across-the-board in the precious, base, and green-energy metals.
As a resource stock speculator… albeit no one wants to see a war in Europe or elsewhere for that matter… we’re currently at one of those junctures where well-informed investors can make money by speculating in select small-cap mineral explorers; the companies that discover and produce the raw materials we need to survive and prosper.
Gerardo Del Real: Well said as always, Jeff. And with Skyharbour Resources, as well as a couple of other names you’ve been kind enough to share last time, I’d be doing my audience a disservice if I didn’t ask for another pick or two that you believe has the potential to perform well in the current commodities bull market.
Jeff Phillips: Well, as you know, Gerardo, my picks are not based on things going up 25% to 50% over the course of a couple years. When I speculate in the resource sector, I'm looking for anywhere from 3X to 10X returns, or more, in rapid succession. Of course, it doesn’t always work out that way. But that’s what excites me and what keeps me in the resource space, which, obviously, is extremely high risk.
As you know, I’ve consulted for Skyharbour Resources for some time. I like the company and I like the people involved. I firmly believe we’re going to see uranium move toward US$75 and perhaps even US$100 per pound. A move like that would no doubt result in much higher prices for select uranium explorers, including Skyharbour.
Another is Labrador Uranium (C:LUR) , which just started public trading a couple of weeks ago. Their symbol is LUR on the Canadian Securities exchange. I believe it’s trading just below C$1 per share as we’re talking. I participated in their IPO, and I am going to be consulting for them as well.
As the name would suggest, the company is focused on uranium exploration in Labrador, Canada. Their flagship is the Moran Lake uranium-vanadium project in the Central Mineral Belt. They’ll have boots-on-the-ground there starting this summer.
One of the things I like about Labrador Uranium is that it was three separate companies that spun different land areas into the deal resulting in a massive land position in Labrador, which, by the way, is ranked as one of the most mining-friendly jurisdictions in the world. There actually used to be a moratorium on uranium mining there… but that, obviously, has since ended.
At over 500 square miles, Labrador Uranium has now consolidated the largest land position in the Central Mineral Belt, and they have known resources on some of their properties. As many of your listeners are likely aware, Gerardo, Labrador Uranium was recently spun out of Consolidated Uranium, which has done quite well.
Thus, as a Labrador Uranium shareholder, you also have Consolidated Uranium, Altius Minerals, and Mega Uranium as fellow stakeholders with significant skin-in-the-game. That’s something I like! So I think Labrador Uranium is excellent speculation with significant upside to rising uranium prices.
A couple of good drill results and LUR could trade multiples higher in the not too distant future. Of course, it’s extremely high-risk. I think I mention that every time we talk about resource stocks… your readers are probably tired of me saying that!
Gerardo Del Real: No, no… I think it’s important to keep the risk factor front and center when discussing the resource space, particularly the small-caps. Thank you for that and for your insights on Labrador Uranium.
Jeff, you touched on gold. It seems to me that US$1,950 an ounce — or somewhere in the high US$1,900s — is kind of the new floor, right? We went through that consolidation phase for a year and a half where it seemed that US$1,800 was going to be the new floor.
And I should mention there's a lot of very, very attractively priced producers that are doing very, very well with US$1,800 gold. Obviously, they're going to do a whole heck of a lot better at US$1,950 gold. But do you share a similar sentiment that this is likely a new floor… and where do you see the gold price going here in 2022.
Jeff Phillips: Yeah, Gerardo, I'm not very good at predicting floors but what I do see is a ton of inflation. And that was well before Russia’s invasion of Ukraine. That conflict is exacerbating the inflationary pressures that were already in play here in the US and around the world. And with gold being a traditional safe-haven asset and inflationary hedge, well, it’s reacting the way you’d expect.
And then, you add in all of the trillions of dollars of money printing we’ve seen over the last several years, and it’s pretty apparent that gold is going to continue to do well over the short and medium-term. That’s not to say there won’t be significant pullbacks along the way. There always are. But as I said earlier, hopefully, we’ll be seeing a peaceful resolution for the people of Ukraine.
Here at home, what we have is a Fed that’s in a self-induced, no-win predicament. They’re trying to rein in inflation by raising rates. Yet, there’s only so much raising the Fed can do because rate increases have a direct impact on the cost of servicing our nation’s record debt load.
It’s like we’ve been running into little icebergs… but now we’re about to crash into a few big ones!
It’s essentially a trap situation. And it’s one that soundly favors gold. So for those reasons, I like gold as an insurance policy, so to speak, against the erosion of the US dollar. And, as you well know, Gerardo, I’ve always been involved in junior gold stocks… and these stocks tend to perform extraordinarily well in a rising gold environment.
Gerardo Del Real: True indeed! Jeff, any companies in particular that stick out? You mentioned Labrador Uranium. Full disclosure, I'm biased… I also wrote several checks and am looking forward to writing checks at higher prices. Anything in the gold space that's attractive to you?
Jeff Phillips: One company I work with and am a very large shareholder in, Gerardo, is Almaden Minerals. They trade on the Toronto under the symbol AMM and on the NYSE-American under the symbol AAU.
They own the Ixtaca gold-silver project in Puebla State, Mexico. It’s a very large precious metals deposit with proven and probable reserves of 85 million ounces of silver and 1.38 million ounces of gold. Unfortunately, they've gotten tied up in an environmental group's lawsuit against the Mexican government on minerals and the indigenous people who inhabit the area.
The lawsuit isn’t even against Almaden per se. It's actually against Congress, the President, and the Mexican government. Mexico’s Supreme Court announced a ruling in February, saying that the Mexican government and Congress haven't done anything wrong. They've told the specific agencies in Mexico that they need to go back and review with Almaden and talk to the local people again.
Naturally, there’s an elevated risk factor there because you never know what's going to happen in a court setting. Yet, the Ixtaca deposit is worth 20 to 30 times what the stock is trading at now, which is below C$0.50 per share. So to me, Almaden Minerals is great speculation — or lottery ticket I guess I should say!
On the base metals side, I also like Kutcho Copper. The company trades on the Toronto Venture Exchange under the symbol KC and on the US-OTC by way of KCCFF. They recently put out a Feasibility Study on their flagship Kutcho copper-zinc project in northern British Columbia. They also just completed an excellent deal with Wheaton Precious Metals whereby Wheaton now owns about 15% of the company.
Gerardo Del Real: Excellent! So just to summarize uranium, has great fundamentals; gold, comfortable owning it at current levels with the belief it’s going higher. Labrador Uranium in the uranium space; Almaden Minerals in the gold-silver space; and Kutcho Copper in the base metals space. Is that a pretty good summary, Jeff?
Jeff Phillips: Yep, absolutely. Again, high-risk. There, I said it once again! These are just some of the things I’m doing with my own money. Everyone has their own risk profile, and everyone should do their own due diligence.
The hope is that these companies are able to advance their projects to a point where there’s either a construction decision or a buyout by a larger company. And as any experienced resource speculator knows, the largest percentage gains typically occur during the early stages of exploration as, hopefully, positive drill results are released pointing to the very real potential for an economically viable mineral deposit.
That’s truly the name of the game in resource speculation…
Gerardo Del Real: It sure is! Jeff, thank you for your time as always. Looking forward to doing it again soon!
Jeff Phillips: My pleasure, Gerardo. Thank you as well!
Gerardo Del Real
Editor, Resource Stock Digest