Gerardo Del Real,
Editor
Sept. 28, 2021
Editor’s Note: Jeff Phillips has over three decades of experience investing and speculating, and has used a contrarian approach to build substantial wealth for himself, family and others. I reached out to Jeff to ask him about that contrarian approach, and why it’s paying off in the uranium space right now. Enjoy the interview, below. And be sure to check out Part 2: How to Profit from Uranium, Gold, and Copper Stocks
Click here for my up-to-date premium uranium stock recommendations.
— Gerardo
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GERARDO DEL REAL JEFF PHILLIPS
Gerardo Del Real: Joining me today is one of the most respected voices in the natural resource space and a very good friend of mine, Mr. Jeff Phillips. Jeff, it's great having you back on. The timing is excellent. How are you doing?
Jeff Phillips: I'm doing well, Gerardo. Thank you for asking.
Gerardo Del Real: I say the timing is excellent because the last time you and I spoke, we talked about using bear markets to your advantage. You mentioned to me that oftentimes you get in cycles — and you've seen multiple cycles now — where you wait ten years to make money for two years. But those two years... the gains are so phenomenal that it's well worth it.
It seems like we're entering that in the uranium space. I know the last time we chatted, you mentioned a company that you really liked. That company has now been approached to be bought out. It's up over 150% since the last time you and I spoke. Do you believe that this uranium bull market has legs? Or are you of the opinion that it's a head fake like some “experts” out there have signaled to their audience?
Jeff Phillips: Yeah, well you can get opinions from everybody. And with valid facts behind those. The uranium market, the spot price of uranium's moved up considerably from what, roughly $30 a pound. It was over, slightly over $50 a pound in less than what, a four or five-week period. That principally is because Sprott, the Canadian money management firm, launched an ETF in the uranium space and started buying physical uranium, which is a very opaque market. I mean, uranium is obviously used in nuclear power plants and it is critical for those plants, but the narrative on uranium has been the same as you've said for the last eight years. The uranium price is cheaper than it costs to produce the uranium in 90% of the mines of the world.
So at some point, prices have to go higher. But what you now have is this Sprott physical uranium trust buying uranium, putting it away in the market as an investment. And they went from $300 million to announcing another, I think, billion dollars that they're raising to put into that supply. The generally accepted number is $60 a pound is what it takes for some uranium production to come back online and for people to get interested in looking for uranium again. So I think this physical uranium trust will buy uranium up to $60 a pound over time. And the market's often overshoot that. So could you see uranium at $100 a pound? Yes.
Gerardo Del Real: How big a factor do you think the utilities will play? Because obviously, that's the largest consumer. They seem to be asleep at the wheel to me. They seem to be on the sidelines believing what some experts believe is a head fake. Do you see it playing out where Sprott drives that price to $60 and maybe $70, and then maybe the utilities come in?
Jeff Phillips: Yeah, the utilities that, unlike natural gas, which for a power plant is a much bigger cost factor in the overall production of the energy. In nuclear, I believe it's 5% of the cost. Marginally, the price of uranium isn't going to affect the profitability as much. So, everyone's talked about the fact that the utilities have not signed new long-term contracts. Many of these are running out over the next one to five years and they have to renew those contracts. So, absolutely, I think you start seeing utilities wanting to come back into the market and buy uranium, but whether they pay $60 a pound or $90 a pound isn't necessarily going to affect their profit margins that much.
Gerardo Del Real: Where the uranium comes from seems to be becoming a more and more critical and important factor with geopolitical considerations with jurisdictional risk increasing around the world. Is that why you pick a company that has US-based assets or are you willing to look at other places outside of stable jurisdictions?
Jeff Phillips: I mostly look at stable jurisdictions, not just in uranium, Gerardo, but also in other commodities too. I like North America, South America and places like that. I like uranium assets in the United States. There are people who specialize in taking higher risks on African assets and obviously it’s higher risk… if things go right, the returns can be higher. But I like to focus on North and Central and South America, Canada, Australia, and some countries in Europe. Definitely North America for uranium.
Back to your original question about do I think this uranium market has legs? Well yeah, when you get a speculative market, you're going to have pullbacks of 30% or 40% in the equities and probably the uranium price. But yeah, I absolutely think that we could easily see uranium past $100 a pound on speculation, which would make all of these prices today seem cheap for the equities. There may be a pullback first.
Gerardo Del Real: So you do see a scenario where we go higher, not just on the uranium spot price, but obviously with the very few quality uranium names out there. Right?
Jeff Phillips: Absolutely. I think these stocks, if you have a timeline that's from now till two and a half years, you're going to have higher prices than they currently trade. I can't tell you in three weeks that you couldn't have bought it 20% cheaper, but the fact of the matter is I've told you before… My best investments have always been those I make a large investment in, and then the market doesn't go my way... but I like the asset and management, and they're managing their cash well. Over time, because the markets are down or the commodities down, I end up buying more and more stock. And all of a sudden my large position goes to an extremely large position. But as long as I'm in a company that I know is going to be there for the cycle and has an asset that's real… then I can participate in significant upside when the cycle turns. So the last six weeks have been very exciting on the uranium stock front.
Gerardo Del Real: Are there any companies on your radar right now that you're personally buying in the market or that you already established a position in and you like?
Jeff Phillips: Oh, well, there's a couple other companies. I own Skyharbour Resources (TSX-V: SYH)(OTC: SYHBF), which is a uranium play up in Canada. It's not just exploration because they actually do have drill intercepts and some pounds there. And they've got joint venture partners on several projects. I like Skyharbour. You and I were talking before we started the interview that I'm going to be participating in a private placement in a new uranium… it's not a new uranium deal. The assets are quite well known. And as they're putting two or three pieces from other companies that each have a piece of this asset into one company, I'll be participating in that private placement. And you had mentioned that you were hoping to get some of your people that follow you in private placements into that. I'm looking at newer deals. That's the deal I'm very excited about that's coming along so you can let your subscribers know.
Gerardo Del Real: Excellent. We'll keep that one a secret until it's public. And absolutely looking forward to hopefully being able to offer that to subscribers of Junior Resource Insider, which of course is the private placement service that I manage. Jeff, is there anything else that you'd like to add about maybe the velocity of the uranium space for those that haven't seen a uranium bull cycle before?
Jeff Phillips: Well, one of the last real bull cycles in the resource space was rare earth metals. And I was lucky enough to be heavily invested in three of the four major companies that did the best out of that bubble and huge speculative market back 2009, 2010 and 2011. I remember when stocks doubled and tripled from 30-cents to a dollar in that rare earth space and people said, “Oh, you gotta sell them all. This is a bubble.”
One I'm thinking of in particular a year and a half later was trading at $18 a share and was on CNBC being talked about in national news. So a bubble can get very big and I like to be in the bubble early. So again, if you own uranium stocks and you're up 500%, taking some of that money off the table right now probably isn't a bad idea. Going to zero exposure is probably not a good idea at all.
You probably want to have some exposure to the uranium space.
Gerardo Del Real: You mentioned harvesting some profits. I want to have you back hopefully next week and chat about maybe where some of those profits are being rotated into. I want to talk about gold. I know we've had a pullback here, and I want to see if you believe there is an opportunity. But we'll table that for next week. Jeff, anything else that you'd like to add?
Jeff Phillips: No, I look forward to that because you just hit the nail on the head. I've taken some of those profits and I've put them into some really high-quality gold assets that I own at higher prices. And I'm happy to buy more because the market right now isn't recognizing how hard it is to find a multi-million ounce gold deposit. And just like we saw in uranium... sometime here in the not too distant future, everyone will be talking about is a gold stock still a good buy? And it's up 500%. So yeah, that's where I'm going. We'll do an interview next week on that.
Gerardo Del Real: Looking forward to it, Jeff. There you have it, ladies and gentlemen, one of the better contrarian voices in this space. Thank you so much for your time. I really appreciate it, Jeff.
Jeff Phillips: Thank you, Gerardo.
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Let's get it!
Gerardo Del Real
Editor, Resource Stock Digest