Maurice Jackson: Gerardo, please share your background and tell us about Resource Stock Digest.
Gerardo D.: I've been involved in the resource space in one way or another for just a little over a decade, about 11 years now. And so it's truly a passion of mine, and Resource Stock Digest was launched a couple of years ago. It's absolutely free, and we really take pride in providing quality exclusive content. So every week, if you go to the site, you can count on exclusive interviews with analysts, CEOs, geologists, and some of the top minds in the junior resource space.
Maurice Jackson: One of the virtues that I enjoy about this industry is that it is people driven. You and I are friendly competitors and have a mutual respect for one another, because our ultimate goal is to share the value proposition for our subscribers. So that being said, I want get your take on the precious metals market. Are you currently buying? And if so, what and why?
Gerardo D.: Maurice, I have been as aggressive in the junior space this year as I have been the past seven or eight years, and allow me to explain why. I believe that when it comes to the gold price, we need to breech that $1,365 level, and then get through the $1,374 level before we see a real breakout. I think once we do that, and we get that $1,400 gold price, we're going to see some sector rotation, back into the junior resource space, specifically the gold stocks, and so there's a time to buy and a time to sell, and I've been trying to preach for the past year and a half or two, that this is the time to buy. Personally, every month I'm adding the best names with the best teams, at what I feel are absolutely depressed prices. So I view 2016, 2017, and the first part of 2018 as opportunities to really get the pick of the litter per se, and get some of the best names in the portfolio at prices that, I don't think after this year, we're going to see again.
Maurice Jackson: Speaking of the best names, let's discuss some issuers that have your attention at the moment.
Gerardo D.: Let me backtrack a bit and explain my process a bit. I'm big on share structure, I'm big on people. You mentioned this is a people business. It's a relationship business. It's not a coincidence that the top 5% of management teams outperform the other 95%. That is not a coincidence. So I'm big on teams, I'm big on share structure. Then, of course, once we get past those two, we can definitely look at assets.
One company in the gold space, in the gold/silver space actually, that I find pretty compelling right now is Almaden Minerals Ltd. (AMM:TSX; AAU:NYSE). It's run by a gentleman by the name of Morgan Poliquin. He is among the best geologists in the space. Has a track record of making discovery after discovery in eastern Mexico. He and his father, Duane Poliquin, actually pioneered exploration for mineral deposits in that part of Mexico, in eastern Mexico. They have a database that's about three decades ahead of everybody in the space, and why do I think Almaden is a compelling proposition at these levels?
Well, Almaden had a prefeasibility study on the Ixtaca deposit that outlined an after-tax net present value of about $310 million, and an internal rate of return of 41%. That was using a $1,250 gold price, and $18 an ounce silver, which we're higher there on the gold price, we're lower on the silver price, but the market cap is about CA$104 million, and by the way, the company also owns a mill that shaved about $70 million off of the initial capital. And so, you have a $70 million mill, you have a polymetallic deposit, great community support, and it has excellent exploration potential in upside, so that's a company I think is a bargain at these levels, and one that I continue to buy at these prices.
Maurice Jackson: And equally just as well as Almadex Minerals Ltd. (AMZ:TSX.V), which is basically the same ownership, and coincidentally, Duane was actually one of the pioneers for the Project Generator Model, is that correct?
Gerardo D.: That is absolutely correct.
Maurice Jackson: And Rick Rule's very high on them. Anyone else?
Gerardo D.: You mentioned Almadex, we can talk about it. The company is at a very important juncture in the company's history; the company made a discovery in Vera Cruz, Mexico, called the El Cobre Project, and that recently attracted the attention of Newcrest. In exchange for 19.9% of the company, Newcrest invested $19 million I believe in Almadex. Almadex is spinning out the remaining exploration portfolio, and royalty portfolio, which is robust, and creating a new company. So shareholders here at the end of May, will have one share of Almadex, which hosts the El Cobre deposit, which will see significant and aggressive drilling this year, and they'll spin out that new spin co.
All of the other assets will go into a new company, and believe me, that exploration portfolio should not be underestimated. This is the same thing that happened with Almadex, when Almaden spun out Almadex, and so I think if you look at the history there, it's a pretty compelling opportunity.
Maurice Jackson: And speaking of that, that ended up being a tenbagger when Almadex was spun out of Almaden. For speculators out there that are looking for a company that's a good steward of capital in your portfolio, Almaden, Almadex, these are some quality names. How about some other sectors?
Gerardo D.: Let's switch gears a little bit, let's talk about the lithium sector. Morgan Stanley put out a note two or three weeks ago that basically scared a lot of the lesser informed investors and speculators in this space. The premise was that there would be an oversupply of lithium here within the next couple of years. A lot of the better names, quality names, really took a beating, and I personally, I've added to my positions here recently.
In my opinion, the most advanced quality compelling proposition in the junior space has to be Advantage Lithium Corp. (AAL:TSX.V; AVLIF:OTCQX). The company has a project in the Cauchari basin; it owns 75% of it. Advantage's partner, Orocobre, is already producing and frankly, I think they're a take-out target within the next 12 months. The company trades at about a CA$1. Quality team, advanced stage asset. We should have an updated resource estimate here within the next month or two that I think is going surprise to the upside, and I think the stock's a bargain at these levels.
Maurice Jackson: How about uranium? You and I have a mutual interest in a company that is a sponsor for both of us, and that is Fission Uranium Corp. (FCU:TSX; FCUUF:OTCQX; 2FU:FSE).
Gerardo D.: I'll give you four names that are at different stages in their company's history. Fission Uranium, what can you say? Quality team, world-class asset, world-class exploration potential, large strategic investors; when you buy it you put it away to have as a great long term. I think one of the more advanced stage companies has to be Fission.
In the U.S, there is Uranium Energy Corp. (UEC:NYSE.MKT), UEC, which is run by a gentleman by the name of Amir Adnani, who is among the brightest and most active CEOs in the space. It has quality assets here in Texas, quality assets in the U.S., and with the recent news coming from the Russian Parliament that they may cut off uranium and titanium exports to the U.S., it is actually going to be debating this on May 15, the stock has been up about 20 or 30 % in the last few days, in large part because of the safety that the assets provide jurisdiction wise. So two advanced-stage companies that I really like, UEC and Fission Uranium.
Two lesser advanced, but quality names, are Skyharbour Resources Ltd. (SYH:TSX.V), and URZ Energy Corp. (URZ:TSX.V; URZZF:OTC). Both of those have a lot of runway here, in what I view as a coming bull uranium market. And for readers who are familiar with uranium bull markets, they are violent. They always surprise to the upside, and I think we're right on the cusp of another one of those.
Maurice Jackson: It's as Rick Rule says, it's the other yellow metal. What is your position on physical metals?
Gerardo D.: I'm a big fan of buying gold every month, regardless of what the price does, a little bit at a time. There are some coins that I prefer, some older Mexican coins, the centenarios, they're beautiful coins. But whatever your preference is, you buy a little bit and you just put it away. If you look at monetary history in this country and throughout the world, you can look back, pick a chart, pick 100 years, pick 50 years. Let's go back 5,000 years if you want to take it on a more macro stage. The one thing you can always count on is governments taking money away from productive citizens, through taxation, misallocating it, and then debasing the currency. Anybody who is familiar with the history on this planet should be able to track the fact that there should be a place in everybody's portfolio when it comes to gold. That's the strategy that I take. I buy it, I put it away. If it goes up, if it goes down, it really doesn't bother me much.
Maurice Jackson: It's just a common theme I know in this industry, with those that are serially successful, so thank you for sharing that. Gerardo, last question here. What did I forget to ask?
Gerardo D.: I think we covered a lot of bases. I would preach to investors to really do your due diligence. The junior resource space is among the riskiest in the entire world, and it's high risk, high reward for a reason. You can really do yourself a favor and minimize the risk if you get familiar with quality management teams, if you learn how to vet share structures, and if you never, never, ever buy a junior with money you can't afford to lose. So I would caution to minimize the risk, and when the reward part works itself out, everybody's really smart and everybody pats themselves on the back, but you should start by minimizing the risk in this sector. It can be very rewarding, I love it. I'm privileged to do this for a living, and those are some of the lessons I've learned here in the last 11, 12 years.
Maurice Jackson: Gerardo, how do we subscribe to Resource Stock Digest?
Gerardo D.: You can go onto the site. It's resourcestockdigest.com if you want exclusive content direct to your inbox. You fill out your email, you click the subscribe button there on the homepage, and we'll send out every single interview that we do. We'll make sure that you get a weekly recap at the beginning of each week, and I encourage everybody to go to resourcestockdigest.com and the outsiderclub.com. I write a free editorial for the Outsider Club every week, and you can catch some of my ranting and raving there as well.
You can reach me directly by email at [email protected].
Gerardo Del Real, of Resource Stock Digest, thank you for joining us today on Proven and Probable.
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. He brings his extensive experience to the public through Outsider Club, Resource Stock Digest, Junior Mining Monthly, and Junior Mining Trader.
Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.
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1) Gerardo Del Real: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Almaden, Almadex, Advantage Lithium, Fission, URZ Energy, Skyharbour and Uranium Energy Corp. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: Almaden, Almadex, Advantage Lithium, Fission, URZ Energy, Skyharbour and Uranium Energy Corp. are sponsors.
2) Maurice Jackson: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: Fission Uranium is a sponsor of Proven and Probable. Proven and Probable disclosures are listed below.
3) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Fission Uranium. Click here for important disclosures about sponsor fees.
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