Categories: Base Metals
Topics: General Base Metals

Top Resource Expert Discusses 2 Stocks with BIG Potential

Editor’s Note: I got an opportunity to catch back up with contrarian resource legend Jeff Phillips to discuss what we both expect is going to be a resurgent resource market in the second half, along with some key insights into two stocks that are gaining upward momentum on recent developments. I hope you’ll enjoy the discussion. 

—Gerardo

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Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me once again is friend and legendary contrarian resource speculator — Mr. Jeff Phillips. 

Jeff, it's great to have you back on. Everybody really, really enjoys the interviews and the conversations with you and your insights. How are you doing today?

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

Gerardo Del Real: Well, let's get right into it. The markets are kind of interesting. On the one hand, you have the Dow and the major indices… they've been on a pretty good run. On the other hand, you have CPI data, not just here in the US but globally, that indicates that we're probably in the midst of a pretty significant slowdown. All of this while mortgage rates have just hit a 22-year-high and the Fed seems intent on raising at least one more time. 

So I thought it would be an excellent time to get you on. It's the summer doldrums. A lot of people are outside, as they should be. But I thought I'd get you on and just get your take on multiple things, including the overall indices and the recent economic data.

Jeff Phillips: Yeah, Gerardo, everybody can talk about the overall indices and the economy and what the Fed is doing… it's all timing and no one knows the timing exactly. That's what the markets are. 

So the simple fact is we've had low interest rates for a long period of time, which encouraged people to borrow and buy things, which increased asset values. And now you have interest rates that are moving higher and probably going to still move higher. 

You've had money that's been created out of thin air, and quite a bit of it, trillions of dollars, and that, at some point, is going to cause a problem. Whether that's a month from now or three years from now, I have no idea. And like you said, the most important thing is to enjoy the summer.

So I think you need to be prepared. It's hard to make a prediction but it's good to be prepared. So I definitely think we're going to have a different market over the next 10 years than we did over the last 10 years in the overall markets.

Gerardo Del Real: I’ll tell you why that's interesting… you and I have had many conversations about multiple markets. And the exception — and I don't mean to put words in your mouth so correct me if I'm wrong — but the exception to that over the next several years, I think, we tend to agree that the commodity space is going to be pretty robust. Is that still a belief of yours? Is that accurate?

Jeff Phillips: Absolutely. I think the commodity space, and especially the natural resource companies I specialize in — high-risk exploration and development companies — are in the worst market I've seen for a long time. 

Summers are always bad but the volume on those exchanges is way down if you look at it over the last 10 years. So I think you're at an inflection point where people are just worn out. Typically, that's a good time to buy. So yeah, I think there's going to be a good market in the resource space. I think that might bifurcate in different commodities. 

Obviously, electric metals will continue to do well even in a slowdown in the overall economy. We're going to keep moving to the electrification of things. And I think gold, which sort of is on its own, can do real well in an environment that people begin to realize that the dollar is being devalued continuously. 

Even things like Bitcoin... will probably see a following; they already have. But again, I'm more of a gold guy and I think people are going to gravitate towards hard assets when they realize a lot of the other things are overvalued.

Gerardo Del Real: You are very selective in the companies that you write checks for but you're even more selective in the companies that you consult for. And I know that you and I recently wrote a check to a company that initially I wasn't going to write the check for. 

And the more we chatted about it, and the more I dug into it, the more I realized this company has got such a unique moat and such a unique value proposition, I just couldn't find a peer comp that was doing anything similar. 

The company, of course, I'm referring to is MineHub Technologies (TSX-V: MHUB)(OTC: MHUBF). What was attractive about MineHub not only for you to write a check but for actually deciding to take it on as a client?

Jeff Phillips: Well, first off, you and I have talked before about share structure, shareholders, and timing of things. And normally, I look for companies that are newer and where I understand where the shares are going to be and that they're good shareholders that are going to be with the company as they develop that company.  Because all of these companies in the resource space need to raise more money. 

MineHub is a company that I've followed since they went public, or actually before they went public, a couple years ago… so probably three or four years ago. I like the idea they have but I'm very familiar with the cycle of developing an asset. 

People get excited, especially with these junior companies. Stocks tend to run up and then the early investors tend to take profits and collect warrants. But I watched the company develop over the last couple of years, and it was near a low, and it's still much lower than it traded a couple of years ago or a year and a half ago.

And I looked at the MineHub platform, which is really an SAS [Statistical Analysis Software] platform. They made a key acquisition in March, which has actually expanded their platform. But they're basically digitizing the supply chain for miners all the way to end users, to the smelters. And there are other avenues they can get into. 

And it took them two years to build that platform out. But just in the last year, they’ve acquired a company called Waybridge. They've added some clients. They just had news today that Codelco, the world's largest copper producer, I believe, at about 11% of [global] copper production, has signed a three-year contract with them to onboard all of their customers onto this system.

So it's a mining sort of play, which, obviously, I'm familiar with. But what I really like about it is there's no real competition. There's no other company offering this. And you've got companies like Codelco coming in. MineHub also announced a couple of months ago that Sumitomo, one of the largest Japanese trading and metals firms, a massive firm, has signed up for the platform. 

So with these larger companies starting to onboard their clientele, MineHub gets a small piece of all those transactions. And I think that's the way this is all going… is to digitize this… even being able to track where the commodities come from, which is a plan down the road for MineHub. And to certify that, sort of like blood diamonds, I think you're going to have people requiring to know where that copper came from or where that lithium came from and other metals.

Right now, they're mostly focused on copper. But I think you'll see that expanding. So MineHub — I think it was at a point where they've done all of the hard work pushing the stone up the mountain for two years — I think it's about to start rolling down the other side. You can see that in the clients that are signing up. 

And I think all of the early shareholders that were short-term are gone, and I'm willing to take a bet on it. So that's why I financed MineHub and agreed to consult for them and hopefully help them, down the road, pick the right people to finance them further to profitability, which I think can happen next year.

Gerardo Del Real: Now, again, it's rare in the space that a company can go from private to profitable within a three-year timespan. I mean, oftentimes, in the mining space anyhow, and in the tech space, it's 10, 15, 20 years if it ever gets to that point. 

So kudos to the MineHub team. I think they've executed brilliantly. 

I'm excited to be a shareholder, and I'm really looking forward to what else comes up for them here later this year. Are there any other companies that you've taken on as clients that you're excited about here in the second half of the year once people get back inside the office and start looking at their screens?

Jeff Phillips: Yeah, when I take on a company as a client, I also write a big check, which is really the risk because the client isn't going to pay for the risk. I'm trying to make sure that my money, and the shareholders they bring in, are like-minded shareholders that want to see the company develop. 

So I haven't done a lot of deals. I've done a couple that are very early stage which aren't really appropriate to talk about until they develop and see how their assets develop. The company that, I think, last year, you and I talked about that has developed nicely is Bravo Mining (TSX-V: BRVO)(OTC: BRVMF). 

I still like Bravo. I own all of my shares. We've talked about it… it has pretty much been a nice chart from when they went public at C$1.75 — and I financed them privately — but it's now close to C$5 per share.

I think they're going to have some more drill results… I know they are because they're doing the Phase-2 drilling down at their deposit there. And I think what we'll see is that this deposit was only originally drilled to a hundred meters — and they're drilling deeper. 

And my expectations are that we're going to see this thing get much bigger. And I think Bravo is one of those that could turn out to be one of the biggest winners I've had in 25 or 30 years. But again, there's always risk. You never know. The markets, the overall markets, world wars, whatever happens… but I quite like Bravo. So I’ll pay attention to their drill results coming out and see what that has.

Gerardo Del Real: I'm a biased shareholder, as are you also, and helped write a check privately. Obviously, very, very happy with how that has gone. And I think if that massive nickel sulfide discovery proves to be of any kind of scale and grade, it's going to be off to the races. 

I think the company is undervalued based just on Luanga with the PGM plus rhodium and gold deposit that already exists there. The infrastructure is excellent; it’s on private lands. The share structure is topnotch with management owning close to 60% of all outstanding shares. 

And I think the game-changing catalysts are close if that nickel sulfide discovery turns out to be what a lot of people think it could be. Jeff, anything else to add to that before I let you go? It's been insightful as always.

Jeff Phillips: Well, I liked your summary of Bravo right there. It made me excited… I've got my fingers crossed. I think it could turn out to be something big. And on MineHub, I bought more stock here today. So again, it's not just that I financed it, I actually think that it offers good value. And those stocks, I think, can go higher… so that's why I talked about those two.

Gerardo Del Real: Well, do your own diligence, everybody… but both of us are biased shareholders in both companies we discussed today. I hope everyone enjoys the rest of their summer. And Jeff, hopefully we can do this again here in a couple of weeks.

Jeff Phillips: Let's hope the market changes a little bit, Gerardo. Usually, after August, we start to see more action in the resource market into September… and we'll see if that rings true this year.

Gerardo Del Real: Looking forward to it… thank you again!

Jeff Phillips: Thank you, Gerardo.

Gerardo Del Real
Editor, Resource Stock Digest