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Craig: Greetings once again from Sprott Money News and sprottmoney.com. It is May 2020, and it's time for your "Ask The Experts" segment I'm your host, Craig Hemke, and joining us this month is Mickey Fulp. Many of you are familiar with Mickey. He's known as the mercenary geologist. You can find his work at goldgeologist.com. You can follow him on Twitter @mercenarygeo. You can find him there. Great follow on Twitter, and obviously he has a great free newsletter that you can receive by email. He's a mining analyst, popular speaker, a writer and always great to pick his brain a little bit. Mickey, thank you for spending some time with us here at Sprott Money.
Mickey: Hey, Craig. Thanks for having me. Once again.
Craig: Always fun to visit with you, Mickey. You know, it has been such an interesting time obviously, in the last couple of months. For a while Sprott Money was shut down, considered to be non-essential up there in Toronto, but we are back in business. and supply lines are finally starting to reopen, and gold and silver prices obviously are climbing fast. So sprottmoney.com is open again finally, although there are still shipping delays in place. We do have Royal Canadian Mint golden Silver Maples, 110 ounce, RCM silver bars and more available right now. So please visit sprottmoney.com, or of course, call us at 888-861-0775. Mickey, we have been collecting questions for you all month. I thought too since I've got you here and you are an equity analyst, I'd lay on you some of the names that come in for Eric every week as well. So I've got a number of questions for you. If you're ready, should we just dive right in?
Mickey: Let's do it.
Craig: All right. The first question is kind of something that Eric and I don't talk about much and so this is a great one for you. we're seeing a rally again, in some of the rare earth companies. Equities in U.S. and Canada have started to pick up, show a little life. Is this the start of rare earth mania 2.0?
Mickey: In a word, no. It's much different this time. The focus in outside of China has gone into production, not mining, because we've realized that there are very few mining or exploration plays. We did that back in the 2009 to 2012. Most of those projects have failed. two big ones came into production, Mountain Pass now owned by MP Materials, and Southeastern California and Linus in Western Australia. They have supplied the majority of rare-earths outside of China. So The focus now is on processing, getting supply chains built outside of, say the mines to magnate supply chain. So now we've got the mines. We've got a couple other small mines, one in Africa, which have now reduced the world's dependence on China for rare-earths from something like 99% in 2009 to less than 60% now.
So really the focus should be on companies that have processing plants in progress, separation techniques in progress in North America, and that is happening as we speak with monazite deposits that are leftover from heavy mineral sands operations in the Southeast U.S. Monazite is one of the three minerals that is easily cracked for rare-earths. And then we've seen companies like Energy Fuels, which is historically a uranium and vanadium company, they have an initiative right now, they're going big time into rare-earths, because they've got the White Mesa Mill processing capability in Southeast Utah. So that's where it's going much different. But anybody that thinks rare earth mania is back is feeding you a line of bull in my opinion,.
Craig: Putting the cart before the horse perhaps?
Craig: Well, let's use that though, as a segue to the second question that was sent in, and it's specific to the jurisdiction of Africa. You mentioned rare-earth mining in Africa. This question is wondering about mines and mining operations in Africa. What is your view of the political risks, the geological potential down there as a jurisdiction?
Mickey: Well, certainly great potential for gold deposits in Sub-Sahara Africa, especially Western Sub-Saharan Africa. But for me, Africa is off limits because of inherent geopolitical risk. You don't know which country or company is gonna blow up next. And so personally, I have never speculated in a junior stock that had a focus in Africa.
Crag: Yeah. You know, I gotta say, Eric talks about that, too. I mean, there's so many opportunities in places like Canada and the U.S. where you know a little bit more about the rule of law.
Mickey: Absolutely. Mineral tenure and the rule of law. So segueing into that idea. I have really pulled in my horns outside of the Americas over the last few years because I got burned in various parts of the world that I thought were, for the most part safe geopolitical jurisdiction. About 90% of my focus or even more now is in the Americas. You know, I even got burned a couple of times in Scandinavia, in Finland, and Sweden, which are thought to be very pro-mining jurisdictions.
Craig: Yeah. Yeah, it happens. All right. From here, we're gonna focus more on individual names. Mickey, I think before I ask you more questions, though, I failed at the beginning to ask you about your service. So this would be a good time for you describe what you do and how people can get the free email newsletter you have and then we'll get to some of these names.
Mickey: Yeah. So I write about a variety of things. Macro-economics, libertarianism, commodities analysts, analysis, ratios, correlation coefficients, all the sort of stuff involving markets and commodities. But I also write about specific companies. I run a sponsor model, which allows my newsletter to be free. And to get my stock picks you need to be a free email subscriber. So just go to my website, mercenarygeologist.com. Right below my mug shot, there's a banner, it says, "Click here for free subscription." You give us a name, you can fake your name, you give us an email address, that's got to be a working email address. And then you'll get my stock picks, you'll get something from me every Sunday that outlines everything I put on the website that week. We are very busy. We'll have over 200 pieces of content, go up on our website to share. And then you'll get my so called mercenary alerts which are the stock picks, and you get them the minute they're published.
Craig: Get a lot of interest in the sector for the obvious reasons, growing through this year. People, I mean, I can't emphasize this enough. I do this at my site all the time. You don't wanna be out there flying blind. You need objective fair minded analysis. Free obviously means you're about as objective as you're gonna be. And so...
Mickey: Well, and I have skin in the game too. So any companies that I cover, and I do not recommend, not a certified financial advisor, I basically tell people what I'm doing in a market with specific companies and realize that I'm operating in my best interest and because I'm a shareholder, and I pick these stocks because I think they're gonna go up, and for the most part, we've been very successful in bull and bear markets.
Craig: Again at mercenarygeologist.com or goldgeologist.com, you'll find a place to sign-up. Mickey, let's now catapult forward toward question number three with all of that in mind. This person wanted to know what your view is on royalty companies, and if you have a favorite player too in the segment right now, and why?
Mickey: Yeah. So royalty companies are protected because they have little risk other than the fact that they pay money for the royalties but especially when in gold, and silver, and metal, prices are high, they do quite well. Because they get what's called Net Smelter Return, they've done quite well. They have been the shining star of the gold, and silver, precious metals space since things turned in 2003. And for good reason, because they are low risk companies. My favorite stock there is one we picked at nine cents in February of 2018, so a little bit more than two years ago. It closed yesterday at a buck 15. So that's what 11,12-bagger, 13-bagger. And people will know they're familiar with Sprott, it's one of Eric Sprott's, favorite companies. Eric is a significant shareholder. He's a reporting issuer, a control person of illegal royalties and he continues to do deals and put money into the company. And although it's moved up significantly over the last year and a half or so, we think it has more room to grow.
Craig: That's fantastic.
Mickey: Now, I no longer cover that company, but I do maintain the majority of my position I started with and added to. Now, I'm not selling everything at a buck 15. You know, I could take my money out right now and generate a 12-bagger on the remainder of my stock, but I choose to play it for the upside.
Craig: You mentioned how consistent they can be in growing earnings. I'm sure, Franco Nevada has probably gotten so large that so many people don't look at it anymore. But that's a great example of a stock that just keeps rising it seems year after year.
Mickey: Yeah. And the royalty companies have outperformed all other sectors in the gold space since 2000.
Crag: Well, with that in mind, let me ask you about some gold companies. I wanna first ask you some of the names that come in for Eric every week that I think he didn't have an opinion on or we don't have time to get to, and then I'll ask you maybe for some of your favorite names, and in particular let's start with gold. Do you know anything about, let's start with Skeena?
Mickey: Yeah, I know Skeena pretty well, and so called "Golden Triangle of Northwest BC." They have the past producing Eskay Creek mine. And they're still, although that was one of the best performing mines and shut down with phenomenal returns to shareholders well more than a decade ago, there's additional ore and Skeena's drilling it out and they've done quite well with quite a lot of success. The issue there is it is in a very remote, harsh, glacier-ridden part of the world, so infrastructure costs and production costs are high. ButEskay Creek remains one of the best mineral deposits on the planet.
Craig: How about Corvus Gold or Pure Gold?
Mickey: Well, I'll take Corvus Gold. That's in the bullfrog district of Southeast Nevada, run by a friend of mine, I've known him for a long time, Jeff Pontius. Have a nice discovery there. I don't know exactly what stage they're in right now, but it looks like to me a mine in the making at some point.
Craig: All right. And any other, I guess, gold stocks in that category that you favor at this point or have piqued your interest?
Mickey: Well, I like Nevada, so things in Nevada generally pique my interest. For instance, Ely Gold Royalties, is actually a hybrid company. It's a prospect generator with only over 70 projects, the majority of which are either generating option payments or royalty payments, or advanced royalty payments, or have reverted to royalties at this stage. But anything Nevada always catches my interest. I'll probably decline to add other names at this point because I generally, I'm researching right now and I've got some targets, and if things come to pass, my subscribers will hear about them.
Craig: Yep, just sign up for that email and you'll hear about it first. Let's turn to silver. We had a number of people asking for your thoughts on silver and favorite silver plays. Some of the names that have come in for Eric that we haven't been able to touch on include well, Discovery Metals and Great Panther, and I know those aren't ones that you follow either. But I know you do have some thoughts on SilverCrest.
Mickey: Well, yeah, SilverCrest is a really good company. I've known the CEO, Eric Fier, for 35 years since when he was with Pegasus in Montana, I was working in Montana at the time. a very good engineer and geologist, has degrees in Mining Engineering and in Geology, and he spans that transition very well. He's been very successful, sold a project, at least one project, maybe more to First Majestic, and I expect him to do it again in northern Mexico. So SilverCrest is a very well run company.
Craig: Do you have any other within the sector that you've got your yes on?
Mickey: Well, I'm not a silver bug. And right now we're looking gold-silver ratio, it's been above 100, as high as 120 since March, the third, or sixth, or something like that. It went below 100 for the first time in, what? Seven weeks yesterday. It's at 100 as we speak, and it's no longer a monetary metal. It can act as a precious metal in times of financial duress, but it really is an industrial metal. And for the most part, all silver companies are really lead zinc companies who produce byproduct silver. Even though the silver may contribute to a majority of cash-flow, they still need a smelter to process those lead, zinc ores. So that's why a lot of them are domiciled in Mexico, or Peru, or places that have smelters, lead zinc smelters. And so just not a portion of the exploration development. resource base that interests me.
Craig: Fair enough. Well, with that, let's segue into the final question I had for you, that kind of combo, I call them combo companies but they're these companies that pull just about everything out of the ground. The questions that have come in for you involve Northern Dynasty and Centerra.
Mickey: Okay. Well, Northern Dynasty is, project is pebble deposit and, in southern Alaska. I've been on the project a number of years ago. It's owned by, or it's controlled as part of the of HDI, the old Hunter Dickinson group. Extreme environmental opposition that got nowhere, some real shenanigans during the Obama administration. A lot of that's cleared up, but the real problem with Northern Dynasty, it's so remote and it's so hard to get to and get fuel and supplies to, that if you look at the feasibility studies that have been done, look at the major miners who have come and left. And really the problem is the deposit as its presently designed, a big open pit, copper gold porphyry mine is sub-economic. You know, it does not... It's got a huge CapEx, the NPV is a fraction of that CapEx, big red flag there. You should never put your money in a project where the NPV is less than a CapEx. My threshold's about one and a half times the NPV over the CapEx. So it's a sub-economic deposit, besides the environmental opposition that it's generated, most of which is not real. You know, this whole salmon spawning ground does not really hold scientific water. But the point being that if it was a compelling economic deposit it would be developed, and it is not.
Craig: And the other one was Centerra.
Mickey: Yeah. So Centerra and the Kyrgyz Republic. You know, I talked earlier about how I avoided geopolitical risk. Well, one of the plays that I'm involved with right now and it's still a private company, soon to be public is a Carlin type play in the Kyrgyz Republic. Centerra has had a very checkered history there. The country used to be called Kyrgyzstan, now it's Kyrgyz Republic. They solved most of those issues with the Kyrgyz government a few months ago, and if memory serves about November of 2019, so six, seven months ago. It's a very good deposit. It's got huge reserves, it can go a long time. But point being that there is some geopolitical risks there. Although a lot of the questions about that deposit and its viability going forward, certainly the deposit and the mine is a world class situation. But there is some political risk there.
Craig: Terrific. Again, Mickey, it's so much fun to pick your brain because you know so much about this stuff after all these years of doing it. Remind everybody one more time where they can find your free email newsletter and how they sign-up.
Mickey: Yeah, mercenarygeologist.com. Sign-up, give us a name, an email address. You'll get something from us one or two times a week. And then I would encourage everybody to check out my Twitter feed @mercenarygeo, 51,100 followers. So somebody thinks we're doing some good stuff there, but we have a lot of fun with it. We span all sorts of stuff from stock picks to libertarianism to commodity analysis to the sport teams I follow, my fishing ventures, etc. So we use that to have fun.
Craig: You bet, you bet. You got one of those blue checkmarks yet Mickey?
Mickey: I don't know what that is, but I'm sure I do. I think that means something that the powers that be at Twitter don't like some of the things that I say. Every once in a while, I notice that I lose a bunch of people that I follow, which means they're being banned. And as a result, our Twitter followers go down every once in a while and we don't really know why, but then we look at the ones we're following and they've dropped a concomitant amount too. So we push the envelope on Twitter, no doubt.
Mickey: Well you're a great follow. And again, just to remind everybody. Yeah, it has been a crazy couple of months but we are back open for business at Sprott Money, and no time like the present to be adding to your physical stack with everything, the madness of the global central banks.
Mickey: I'll second that, my friend.
Craig: Yeah, I hear you. Again, sprottmoney.com is where you wanna go. You can always check the deals tab. But again, just look for simple things like RCM gold and Silver Maples. We've got plenty of them on hand, and you can visit sprottmoney.com, or again, that number is 888-861-0775. We've been speaking with the mercenary geologist, Mickey Fullp, and old friend, always fun to get caught up with him. Mickey, thank you so much for your time.
Mickey: Thanks a lot, Craig.
Craig: And from all of us at Sprott Money News at sprottmoney.com. Thank you for listening. We'll have another "Ask The Expert" segment next month.