Commodities, including gold and silver, have plunged to become so deeply oversold that a snapback rally looks likely soon. This could be sharp and could trigger a wave of short covering. Such a rally is likely to be sparked by a dollar reaction, as we will see, but it is likely to be followed by further heavy losses across the sector if a general market crash ensues as expected.

We will start by looking at the latest dollar index chart, as a dollar reaction will be what ignites a commodity rally. The 2-year chart for the dollar index shows that the dollar is rounding over beneath a zone of resistance that dates back to a reversal that occurred at this level last October and November. The pattern that has formed from last July looks like a large head-and-shoulders bottom, with the right shoulder of the pattern about to form.

If this is what it is, it implies that the dollar will in due course go considerably higher to the 102–104 area, which we can expect to happen during the market crash phase. But first there is the little matter of the right shoulder forming to balance the pattern, and if a more or less symmetrical right shoulder forms, then we are looking at the dollar dropping to the 91–92 zone over the near term, which will be sufficient to generate a significant snapback rally in commodities—which, as mentioned above, is likely to be magnified by short covering. That is the theory that I have and which is mine and what it is too.

So now, let’s proceed to review the charts of a range of important commodities: copper, gold, silver and platinum, which will give us more of an idea regarding how likely it is that they will soon rally. The 1-year charts are selected to enable us to relate them directly to the COT charts, which are also for 1-year.

Starting with gold we see that it has accelerated into a deeply oversold state on its MACD indicator and relative to its moving averages, with the drop from its April peak clipping $150 off its price. Clearly gold didn’t take kindly to the dollar’s latest rally. Gold’s accumulation line has held up well, however, which increases the chances of a snapback rally imminently, which will be augmented by sudden short covering, as mentioned above.

Not surprisingly, gold’s COTs have improved substantially as this drop has unfolded, and this past week arrived at a level that is construed as bullish, as the manic-depressive and wrong Large Specs gave up on gold in increasingly numbers. These are the best readings we have seen for a year, and while they don’t guarantee an immediate rally, they make one highly likely.

Silver has also dropped, albeit rather grudgingly, because it is already so depressed, and it is noteworthy that it is approaching—but has not dropped below—its lows of last July, as we can see on its 14-month chart (this timeframe selected to show this low). While not as oversold as gold, it too looks set to bounce back as well, although it will encounter significant resistance above $16. As with gold, silver’s accumulation line has held up well and supports a rally soon.

Silver’s latest COT chart shows that the Large Specs suddenly got enthused some weeks back, before they were shot off the parapets and finally crawled back into their holes last week in a capitulative manner after their long positions plunged to a low level. While commercial short positions could drop a bit more (Small Specs are still quite bullish), they have certainly dropped enough to permit a rally to develop.

Moving on, we see that poor old Dr. Copper has “taken it on the chin” in recent weeks, after a failed attempt to break out into a third up-wave was followed by a violent reversal and breakdown from its long-term uptrend. This alone has bearish implications for the entire world economy. However, it is now deeply oversold, at support, and thus in position to stage a relief rally. We are looking at a 2-year chart for copper to see the origin of its long-term uptrend, and also to see the significant support that exists at and just below current levels, which arises from considerable trading in the trading range from November 2016 through July 2017.

Copper’s COTs now look decidedly bullish for the near term, with the Large Specs, having taken a severe beating, giving up and heading for the hills—which, of course, greatly increases the chances that it will now rally.

You may recall that we thought platinum had hit bottom some weeks back, largely on account of the collapse in Large Spec long positions. But it has since dropped even farther in sympathy with the sector. We now have a situation where the Large Specs are short to a significant degree, which is considered very foolish given how undervalued platinum is relative to gold. Of all the metals, platinum looks like the best value here. The spike down to a low early in July looks like a capitulative move, and the low of a few days back looks like a double bottom that will probably lead to a significant snapback rally—at least until the markets crash.

Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years’ experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.

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Disclosure:
1) Clive Maund: 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: None. CliveMaund.com disclosures below. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Charts provided by the author.

CliveMaund.com Disclosure:
The above represents the opinion and analysis of Mr Maund, based on data available to him, at the time of writing. Mr. Maund’s opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund’s opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.

In a July 19, 2018, research note, Haywood Securities analyst Colin Healey reported that on July 18 the U.S. Department of Commerce launched an investigation into how uranium imports may be threatening national security. “U.S.-focused uranium equities rallied yesterday on the news, although we expect some profit taking is likely in the term,” added Healey.

The DOC’s move came in response to a joint request for such an inquiry, in accordance with Section 232 of the Trade Expansion Act of 1962, filed in mid-January by two of the U.S.’ largest uranium producers, Ur-Energy Inc. (URG:NYSE.MKT; URE:TSX) and Energy Fuels Inc. (EFR:TSX; UUUU:NYSE.American).

Healey pointed out that in that correspondence, the two companies purported that the domestic uranium mining industry is vital to U.S. national security but is suffering dramatically from having to compete with heavily subsidized ex-U.S. producers.

Ur-Energy and Energy Fuels offered two solutions, that a cap be placed on uranium imports and that utilities in the United States be required to buy uranium produced in the U.S. For example, “if the government were to mandate that 25% of its nuclear fuel be sourced domestically, this would require an incremental increase of about 10 million pounds of uranium,” Healey indicated.

Healey relayed that the most recent data shows 83% of the uranium the U.S. requires is imported. About 25% comes from Canada, about 24% from Kazakhstan, about 20% from Australia and about 14% from Russia. U.S. uranium production has plummeted by about 90% since the peak in 1980.

The DOC’s investigation and any subsequent action are expected to take about a year. By law, the commerce department has 270 days to complete and report the findings of such an investigation along with its recommendations to the U.S. president, who then has 90 days to take action.

The imposition of any tariffs, quotas and/or federal utility purchase mandates resulting from the investigation would greatly benefit U.S. uranium producers and developers because it would allow them to capture a larger share of the domestic market. “This could eventually lead to outperformance from the associated equities and turn the group into sector leaders,” suggested Healey.

The companies that could benefit, he wrote, are: Ur-Energy, Energy Fuels, Uranium Energy Corp. (UEC:NYSE.MKT), Azarga Uranium Corp. (AZZ:TSX), Laramide Resources Ltd. (LAM:TSX; LAM:ASX), Peninsula Energy Ltd. (PEN:ASX) and Cameco Corp. (CCO:TSX; CCJ:NYSE). Haywood’s favorite stocks in the sector are: NexGen Energy Ltd. (NXE:TSX; NXE:NYSE.MKT), Denison Mines Corp. (DML:TSX; DNN:NYSE.MKT) and Uranium Participation Corp. (U:TSX).

In the interim, near-term drivers of share price in the sector will be news flow, particularly related to the Section 232 investigation, and market sentiment. As such, Haywood recommends investors build positions in “quality uranium names, using news-driven price shocks such as this as an opportunity to rebalance security exposures,” Healey noted.

The analyst concluded, “We continue to believe we are in the very early stages of a secular bull market in uranium and that sentiment is beginning to perk up. . .we expect a sustained increase in the long-term price to be the sector’s most salient catalyst.”

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Energy Fuels and Azarga Uranium. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Azarga Uranium, a company mentioned in this article.

Disclosures from Haywood Securities, Uranium Sector Update, July 19, 2018

Haywood Securities, or certain of its affiliated companies, may from time to time receive a portion of commissions or other fees derived from the trading or financings conducted by other affiliated companies in the covered security. Haywood analysts are salaried employees who may receive a performance bonus that may be derived, in part, from corporate finance income.

Haywood Securities, Inc., and Haywood Securities (USA) Inc. do have officers in common however, none of those common officers affect or control the ratings given a specific issuer or which issuer will be the subject of Research coverage. In addition, the firm does maintain and enforce written policies and procedures reasonably designed to prevent influence on the activities of affiliated analysts.

Analyst Certification: I, Colin Healey, hereby certify that the views expressed in this report (which includes the rating assigned to the issuer’s shares as well as the analytical substance and tone of the report) accurately reflect my/our personal views about the subject securities and the issuer. No part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations.

Important Disclosures
The following Important Disclosures apply:
▪ At the end of the month immediately preceding this publication either Haywood Securities, Inc., one of its subsidiaries, its officers or directors beneficially owned 1% or more of Azarga Uranium and NexGen Energy
▪ Haywood Securities, Inc. has reviewed lead projects of Azarga Uranium, Denison Mines, Energy Fuels, NexGen Energy and Uranium Energy Corp. and a portion of the expenses for this travel may have been reimbursed by the issuer.
▪ Haywood Securities Inc. or one of its subsidiaries has managed or co-managed or participated as selling group in a public offering of securities for Uranium Participation Corp. in the past 12 months.
▪ Haywood Securities, Inc. or one of its subsidiaries has received compensation for investment banking services from this company in the past 12 months: Azarga Uranium Corp.
▪ Haywood Securities, Inc. or one of its subsidiaries has received compensation for investment banking services from this company in the past 24 months: Azarga Uranium Corp. and NexGen Energy.

Other material conflict of interest of the research analyst of which the research analyst or Haywood Securities Inc. knows or has reason to know at the time of publication or at the time of public appearance: n/a.

I’ve written about both Group Ten Metals (PGE-V) and Metallic Minerals (MMG-V) before. I’m going to group the two companies in one piece today for a number of reasons. The companies share management. One, Group Ten Metals Inc. (PGE:TSX.V; PGEZF:OTC), is a platinum/palladium company. The other, Metallic Minerals Corp. (MMG:TSX.V), is oriented toward silver in the Keno Hill silver district.

Inflation is directly responsible for the price increase of everything. That doesn’t mean that all commodities or financial instruments go up in unison, they don’t. But soybeans or silver are not inherently more valuable today than they were a hundred years ago. What has changed is the value of the dollar, not the commodity. Markets search constantly for the correct price. That is why prices go up and prices go down. The market never quite knows what is the right price for anything so it searches until buyers and sellers are satisfied with price and make a transaction.

Human behavior causes distortions in price between commodities. It’s like dancing. Sometimes you lead. Sometimes you follow. An astute investor can profit when the price of one commodity in comparison to another deviates from the mean. We can be assured that eventually price will regress to the mean. Understanding how deviation from the mean and the ultimate regression to the mean allows savvy punters to speculate on the price difference between two commodities without the need to place a bet on the direction of price for either. I explain all of this at length in Nobody Knows Anything.

Over the past one hundred years the ratio of silver to gold has varied from about 17-1 to just over 100-1. That means it took seventeen ounces of silver to equal one ounce of gold at the extreme. The average ratio has been about 53-1. Therefore without guessing what price will do, we know from factual history that when silver is below 53-1 gold is relatively cheap and above 53-1 silver is relatively cheap. As I write the ratio is about 80-1 which means silver is a lot cheaper than gold. So either silver goes up, or gold goes down or both at the same time and eventually we will regress to the mean of history.

Likewise, for 95% of the time since the discovery of platinum in 1748 the metal has had a premium to the price of gold due to it being a lot more rare than gold. Lately the prices of the two commodities have inverted and platinum sells at about a $420 discount to gold. That’s a record by the way.

Buying or selling anything when it is an extreme of emotion is the best way to profit. We can only guess from one day to the next what the correct price is for anything. But a study of the history of prices will immediately reflect when you are somewhere never gone before. In short at least compared to gold, both platinum and silver are cheap. If the level of debt in the world makes you think that maybe spending is not a surefire way to profit and debt is the same as slavery, it might be nice to own something that you can hold in your hand that has always had some value. Gold, silver and platinum make great insurance policies in times of financial chaos. Right now both silver and platinum are relatively better value than gold and those companies who are going to produce them should increase in value more than those of gold.

Group Ten Metals has put together a large land position in the Stillwater Complex in Montana adjacent to the 80 million ounce Pt/Pd resource belonging to the Sibanye-Stillwater Mine. The exploration on the Group Ten package is brownfields with management having a solid background and experience with PGMs and Ni projects including Stillwater, Wellgreen and Goldfields.

The 54 square km land package the company refers to as the Stillwater West project shows an 18 km long PGM soil anomaly also containing cobalt and gold. Just like the Stillwater Mine next door.

Within the Stillwater West property are found 12 major geophysical anomalies from 3 to 6 km in length to overlie the soil anomalies. Group Ten has drill data from 215 holes with over 28,000 meters of drilling. They have 11,000 meters of drill core. The Phase 1 exploration program in progress consists of relogging and assaying the 11,000 meters of core and putting together all the data into a geological model. At the conclusion the Phase 2 portion will drill test the highest priority targets. A drill permit has been applied for and the company believes drilling will commence later this summer.

I should remind readers that 78% of platinum production comes from South Africa. Certain political parties in the country are calling for an open season on white farmers. When South Africa goes the way of Zimbabwe it will leave Russia as primary producer of the PGMs. There is, of course, a coup d’état in progress in the United States with various powerful three-letter agencies determined to overthrow the democratically elected president and to go to war with Russia. I happen to believe that is the worst of bad ideas but who am I?

Should South Africa go the auto-stupid route and the coup succeed, it might be nice to have another alternative source for PGMs.

Both companies are headed by Greg Johnson; he has used the same model as he used with Novagold going back to 2000 in Alaska. He targeted a mineral and then put together a package of land properties in the same region. He has done the same with both Group Ten and Metallic Minerals, where he assembled a known package of similar claims into one big program. He did it in Montana and also in the Yukon in the Keno Hill silver district.

Metallic is focused on high-grade silver in a known district with past production of over 300 million ounces. Their 166 square km land package adjoins Alexco. Given the past production of silver from near surface and recent discoveries, Metallic believes the district has billion-ounce silver potential. Over the past 18 months the company has expended their land position and started a serious exploration program.

The 2018 drill program at Keno has started with four core holes completed from the Gold Hill target and sent to the lab. Results should be announced within the next month. Metallic is currently drilling the Caribou target. Drill applications have been submitted for the Formo target and the company believes drilling will start later in the summer.

After some severe pain to the ever-hopeful speculators, the price for the precious metals is going to turn with a vengeance. Silver and platinum companies should do better in relative terms than just gold. I own shares in both Group Ten and Metallic. Both companies are advertisers and naturally I am biased.

Any company that Greg Johnson is associated with is going to be good at communication and these companies are no different. Interested readers should browse through their presentations to learn a lot about both the companies and their commodities. Group Ten Metals presentation here. Metallic Minerals presentation here.

Group Ten Metals
PGE-V $0.185 (Jul 19, 2018)
PGEZF OTCBB 42.8 million shares
Group Ten website.

Metallic Minerals Corp
MMG-V $0.28 (Jul 19, 2018)
MMNGF OTCQX 56.5 million shares
Metallic Minerals website.

Bob and Barb Moriarty brought 321gold.com to the Internet almost 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.

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Disclosure:
1) Bob Moriarty: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Group Ten Metals and Metallic Metals. Group Ten Metals and Metallic Metals are advertisers on 321 Gold. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Mineworx Technologies Ltd. (MWX:TSX.V; MWXRF:OTCQB) and its joint venture partner Enviroleach Technologies Inc. (ETI:CSE) reported a number of significant recent achievements in their shared operations in July 17 press releases.

Mineworx reported the doubling of their current 7,050 sq. ft. fabrication facility in Coquitlam, British Columbia, to almost 14,000 sq ft; the leasing of an additional 13,674 sq ft facility in Vancouver (Surrey), BC; the commencement of a 20 ton per day E-Waste concentration plant to be assembled at their new Vancouver (Surrey) facility with EnviroLeach; and the appointment of a human resources, health and safety Manager.

“These combined facilities will quadruple the capacity of Company’s E-Waste fabrication and production capabilities to almost 28,000 square feet,” said Greg Pendura, CEO. “This expansion now enables Mineworx to move quickly upon the site acceptance of the Memphis, Tennessee E-Waste processing plant to immediately expedite our business model in this dynamic sector.”

Meanwhile, EnviroLeach announced new upgrades and enhancements to its process has yielded positive results in a series of bulk tests.

The modifications and enhancements to the EnviroLeach process, which included the addition of a proprietary three-stage concentration process and minor formula modifications, have delivered significant improvements in performance and recoveries, said the company’s press release.

The benefits of these enhancements include improvements in the overall recoveries of precious and base metals to over 90%; the production of a refinery-grade, saleable concentrate; the reduction of formula/chemistry losses to in-leach contaminants; 50% improvement in process flow and feedstock throughput; advancements in the mechanical processes including grinding, pumping, filtration and agitation; improved leach kinetics and characteristics; increased process pulp density from 10% solids to 25%solids; extended reusability of the formula; improved gold electrowinning characteristics; improved base level economics; and reduced environmental footprint.

The company has hired Sarah Heath as the manager of human resources, health and safety to facilitate the expansion and transition into a fully operational organization.

“Sarah brings multiple years of experience in these functions and will assist with the progression of the Mineworx/EnviroLeach JV as it moves into commercial production,” said the Mineworx press release.

Mineworx has positioned itself for growth through partnerships with advanced mining and E-Waste opportunities utilizing its proprietary and patent pending extraction technologies, said the press release. “These innovations will increase and enhance business opportunities by deploying cost effective, environmentally friendly extractive metallurgy solutions.”

For its part, EnviroLeach said it has completed several lab to pilot scale and full-scale tests to confirm the results of its modifications on various low to mid-grade circuit boards with positive results overall recoveries of 91%.

“The results of the bulk testing indicate that the gold (Au) is almost evenly distributed between both the heavy (56%) and light fractions (44%) with all other metals predominantly reporting to the heavy (Concentrate) fraction,” said the press release.

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Disclosure:
1) John McPhaul compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Mineworx Technologies. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with EnviroLeach Technologies. Please click here for more information.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this interview, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Mineworx Technologies and EnviroLeach Technologies, companies mentioned in this article.

In a July 17, 2018, research note, Eight Capital analyst Ralph Profiti reported that Lundin Mining Corp. (LUN:TSX) plans to initiate a formal bid around July 27, 2018, to acquire Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.MKT) for CA$1,436 million. This will be Lundin’s fifth purchase proposal, as Nevsun rejected the previous four, all submitted earlier this year.

Profiti explained that under the most recently proposed arrangement, Nevsun shareholders would receive CA$4.75 per share in cash from Lundin, an amount that represents a 12.8% premium to its closing price on July 16, 2018. Euro Sun Mining, present in previous proposals, is not involved this time.

For the prospective acquirer, “we believe this transaction still makes sense with Nevsun’s European assets providing a strong fit for Lundin and now includes a risk-adjusted bid on the Bisha asset,” Profiti noted. Specifically, Nevsun’s Timok project fits Lundin’s criteria in that it is “a potentially value-accretive, copper-focused development project in a favorable jurisdiction with optionality.”

Lundin should end Q3/18 with $1.5 billion in cash and $350 million in available credit, for total liquidity of $1.85 billion, Eight Capital estimates, using spot prices. If the takeover were to go through, Lundin’s liquidity afterward would be about $750 million.

With respect to the takeover target, Nevsun, it would not recoup its full value through the current proposal, Profiti indicated: “We believe that Lundin’s CA$4.75 per share offer is inadequate.” Eight Capital derives a higher value for Nevsun, of CA$5.50–6.50 per share. The investment firm, however, favorably views the all-cash structure because it lowers transaction risk to Nevsun shareholders.

At CA$4.75 per share, the deal would be 6.3% accretive to Lundin’s net asset value per share, Profiti explained. At CA$5.50, it would be 3.7% accretive.

On Lundin, whose stock is trading today at around CA$7.51 per share, Eight Capital has a Buy rating and a CA$12.50 per share target price.

On Nevsun, Eight Capital also has a Buy rating but a CA$6 per share price target. The current share price is about CA$4.74.

Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Nevsun Resources, a company mentioned in this article.

Disclosures from Eight Capital, Lundin Mining and Nevsun Resources, First Impressions, July 17, 2018

Conflicts of Interest: Eight Capital has written procedures designed to identify and manage potential conflicts of interest that arise in connection with its research and other businesses. The compensation of each Research Analyst/Associate involved in the preparation of this research report is based competitively upon several criteria, including performance assessment criteria, the quality of research and the value of the services they provide to clients of Eight Capital. The Research Analyst compensation pool includes revenues from several sources, including sales, trading and investment banking. Research analysts and associates do not receive compensation based upon revenues from specific investment banking transactions.

Eight Capital generally restricts any research analyst/associate and any member of his or her household from executing trades in the securities of a company that such research analyst covers, with limited exception.

Research Analyst Certification
Each Research Analyst and/or Associate who is involved in the preparation of this research report hereby certifies that:
• the views and recommendations expressed herein accurately reflect his/her personal views about any and all of the securities or issuers that are the subject matter of this research report;
• his/her compensation is not and will not be directly related to the specific recommendations or views expressed by the Research Analyst in this research report;
• they have not affected a trade in a security of any class of the issuer whether directly or indirectly through derivatives within the 30-day period prior to the publication of this research report;
• they have not distributed or discussed this Research Report to/with the issuer, investment banking at Eight Capital or any other third party except for the sole purpose of verifying factual information; and
• they are unaware of any other potential conflicts of interest.

The Research Analyst involved in the preparation of this research report does not have any authority whatsoever (actual, implied or apparent) to act on behalf of any issuer mentioned in this research report.

Additional disclosures are available here.

Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE) recently announced that its subsidiary, Wheaton Precious Metals International Ltd., has agreed to acquire an amount of gold and palladium equal to a fixed percentage of production from the Stillwater and East Boulder mines, from Sibanye Gold Ltd.

“What mainly attracted us to this opportunity was the quality and size of the J-M Reef deposit, coupled with the ongoing expansion at the Blitz Project. There are over 12 kilometres of undeveloped mineralization associated with the J-M Reef between the two currently producing mines. With a mine life extending well into the foreseeable future, we believe Stillwater will be one of Wheaton’s foundational assets for many years to come,” said Randy Smallwood, the president and CEO of Wheaton.

Upfront cash consideration of US$500 million will be paid upon closing of the precious metals stream by Wheaton International to Sibanye-Stillwater. Additionally, “Wheaton will make ongoing payments equal to 18% of the spot gold price and spot palladium price until the reduction of the advanced payment to nil, and 22% of the spot gold price and spot palladium price thereafter.”

For the life of the mine, Wheaton International will receive an amount of gold equal to 100% of the Stillwater gold production. In addition, “Wheaton International will initially receive an amount of palladium equal to 4.5% of Stillwater palladium production, decreasing to 2.25% and then 1% based on defined delivery thresholds, for the life of mine.”

Wheaton’s estimated Proven and Probable gold reserves increase by 410,000 ounces (410 Koz) and Inferred gold resources increase by 920 Koz following the acquisition completion. Production is forecast to average approximately 14.5 Koz of gold and 29 Koz of palladium per year, or approximately 37 Koz of gold equivalent per year, for the 10 years beginning in 2019.

The largest primary producer of platinum group metals outside of South Africa and the Russian Federation, Stillwater is located in Montana.

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Disclosure:
1) Jake Richardson compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Wheaton Precious Metals. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Wheaton Precious Metals, a company mentioned in this article.

met·tle [ˈmedl] NOUN
“a person’s ability to cope well with difficulties or to face a demanding situation in a spirited and resilient way.”

My beloved Fido is an awesome pet and one truly remarkable canine. Not only is he as strong as a bull, great with children, highly protective and unwaveringly obedient, he is also able to disembowel toy giraffes and imitation grizzly bears with wondrous aplomb and frightening fervor. As a particularly hectic three days had passed without the pleasure of his company, I asked my patience-of-Jobe partner where he might be hiding, given that I thought I had weaned him off the irritating habit of hiding under the tool shed every time I embark on one of my vitriolic tirades complete with soaring desk adornments and tumbling furniture. I had just completed an exceedingly unsightly excavation of the sub-toolshed cavern in search of my fine canine when I was reminded that the trusty lad went missing on July 5^th, a day which saw trade war fears torpedo “all things metal” and slam energy and grains but MAGICALLY allow for sharp gains in stocks.

What happened that morning was that after the desk lamp went flying into the “wild blue,” I allegedly grabbed a family heirloom given to me by a distant American cousin and attempted to use it as a weapon. You see, my cousin barely survived the Mount St. Helens volcanic eruption that literally obliterated the mountain and everyone living on it. My cousin had sent me a memento, which was a glass ball with water and a small imitation town named St. Helens that, when you shook it, rained down volcanic ash in the same manner that those Christmas snow globes create the semblance of a snowfall. In a moment of ill-timed outrage, I imagined the “volcano globe” as a five-pin bowling ball and proceeded to hum it down the hallway at what appeared to be five decorative pink flamingos closely resembling bowling pins. At the very last moment, the flamingos revealed themselves as Fido’s legs prompting a screeching, “Fido JUMP!” Barely missing the barreling ball, Fido raced from the room and the house and, most importantly, my VILE presence, never to be heard from nor seen ever again. Meanwhile the speeding orb slammed into the door jamb and exploded into a shower of glass, water, imitation post office and general stores and a disgusting film of “real Mount St. Helens ash” all over the just-washed kitchen floor. Needless to say, I was, for the remainder of the day, persona non grata in the eyes and minds of both the canine and non-canine inhabitants of our humble abode.

Now as upset as I was at losing the volcano globe, I could not have been nearly as upset as the zinc zealots and copper cowboys that are now bleeding from the eye sockets from their unwavering and unconscionable worship of the “base metals trade” all based on inflationary expectations and global growth. What they forget is that by the time they are discussing the fundamentals for ANY trade in an internet forum, the guys that convinced you to buy (that make a living off driving volume) have sold. They are gone; they have vamoosed; they and the King have LEFT THE BUILDING. You, in your undying loyalty to the now-dated ownership rationale, are left holding a very large and very empty bag. I could cite more than a few examples of this but there is none more glaring than Noront Resources back in 2009 that was “THE NEXT COMING OF VOISEY’S BAY!!!!” I recall IBK Capital Founder Bill White holding the Jacquie McNish book on Bob Friedland and the Voisey’s Bay nickel discovery over his head urging some 200 attendees to “BUY THIS BOOK!” or miss out forever! Well, Noront is now at $0.36 after hitting an all-time high north of $7.00 in 2010.

Prominent fund managers took massive losses on Noront and then a small group of them actually removed management after the stock peaked at $7.25. It was one of the most masterful mining promotions to ever grace the hallowed halls of Bay Street, and it made a lot of the early speculators fortunes while those that continued to echo the “next Voisey’s Bay” meme were crushed. And that is exactly how the much-daunted “Trump Inflation Trade” has been replaced with the “Trump Trade War Dump” while all of the base metal bag holders continue to echo the very old and very stale “global demand/supply tightness” mantra all the way down from copper $3.30/lb to the very painful $2.76/lb. Classic…

Copper is down 15.3% from $3.30/lb a month ago and sits a snick above $2.80. Zinc is down 19.49% in the same period while lead is down a paltry 11.1% over the same period. These are ONE-MONTH hits and they are wreaking havoc on managed money P&L’s “Business First!” hero, Donald J. Trump, has brought all of this on with his bellicose attitude toward literally every country on the planet. “If ya’a ain’t WIF me, ya mus’ be AGIN me!” is the mantra carried into battle by this self-proclaimed “swamp drainer” and he is certainly proving it with his anti-China bellicosity. For a man whose business endeavors have included more than his share of bankruptcy filings, DJT is playing a high stakes game of poker with the one country that holds all of the ink that winds up on the cards.

I was in a small touristy-type shop on Frying Pan Island in western Georgian Bay yesterday and there was an $80 sweatshirt with the marina’s name on it that was tagged “Made in China” that you could buy in any Dollarama for under $10. If DJT isn’t careful, the Chinese might decide to sabotage the beloved NYSE by dumping massive amounts of treasuries into an already illiquid market, triggering similar moves by overly leveraged longs in both bonds and stocks. The central bankers have had an easy time maintaining the chokehold headlock on gold and silver because they are relatively puny markets, in terms of order flow. However, when you throw base metals volatility at them as a first barrage followed by a collapsing bond market, the equity markets will be thrown about like corks in an Indian monsoon.

Since I began studying global debt levels back in 1972, I was consistently assuming that the constant buildup of debt and public sector entitlement would eventually result in a default reset that would repudiate paper and revalue gold on the basis of its collateralization utility. If I am Italy and I am a borrower of private capital, I must have gold to sanctify the purchasing power of the currency. If I am the United States and I need to maintain my role as provider of the global “reserve currency,” then I must demonstrate that my currency sanctifies the pricing structure for gold. The disconnect arrives courtesy of the paper markets, where derivative contracts are used as tools designed to disrupt and discourage trends that dishearten the bulls and accentuate trends that deflate the bears. This is the world in which we live today.

To say that we gold and silver investors have needed copious amounts of “ability to cope well with difficulties or to face a demanding situation in a spirited and resilient way” is at once nothing short of understatement. The conditions in the global debt arena carry hugely bullish overtones for the fundamentals for gold and silver (and the PGM complex) but those very same conditions carry ambiguous overtones for the pricing structure for gold and silver. I will explain: You cannot confuse bullish “FUNDAMENTALS” with bullish “PRICE POTENTIAL.” Global gold production has zero bearing on investment demand and global demand has zero bearing on pricing. The only thing that affects the price of the precious metals is the edicts handed down by the price managers manning the bullion bank trading desks across the globe. Period.

One glance at the chart posted above evokes a number of emotional responses: 1. Shock 2. Revulsion 3. Embarrassment and, (finally) 4. Disgust. All four responses are classified as synonymous with similar emotions seen at every market BOTTOM and I am fully aware that a great many blogsters and markets commentators are quick to point to the dreadful sentiment so prevalent out there as noted in a recent Financial Post OP-ED that said that Bay Street financings for mining-related issues was $21 million as at end-of-June 2018 versus $830 million at the same period last year. Dreadful “sentiment readings” are great attractions for those who prefer to buy cheap and await more favorable conditions in which to dump their holdings into the salivating mouths of the trend-chasing algobots, but those sentiment indicators were flashing “BUY” signals a month ago with RSI at 27 and yet prices continued to plummet. I bought a 50% position in the GLS July calls and will undoubtedly see them expire this Friday but keep in mind that my major position for 2018 is the GTSR (gold-to-silver ratio) in which I placed 70% of my trading portfolio in April at 82.70 and which now resides at 78.40. Betting that silver would outperform gold from an above-80 level seemed like a good idea back in April when everyone was strutting their stuff about a gold “breakout” at $1,375 being “imminent.” It wasn’t. I shorted gold and hedged it with an equivalent silver long position and now I am alive—not RICH, but at the very least, alive.

The number one junior exploration issue in my portfolio in terms of size and expectations in January 2017 was Canuc Resources Corp. (CDA:TSX.V)(C$0.18), which we (my friends and I) financed at $0.10 in 2015–2017 and then added to during the RTO at $0.25; it resides today at $0.18, which means it is modestly positive despite one horrific first-half 2018 for the vast majority of junior exploration issues. Stakeholder Gold Corp. (SRC:TSX.V)(C$0.105) has been a different story, touching a multi-year low today at $0.105 despite a superb share structure and highly prospective land positions in Canada’s Yukon Territories and the Carlin/Nevada Rift/Getchell trends. It has been agonizing trying to decide whether or not to move ahead and drill the Goldstorm project, given its proximity to Seabridge Gold Inc.’s (SEA:TSX; SA:NYSE.MKT) Snowstorm property located adjacent to and abutting Stakeholder to the northwest. However, when I spoke to Seabridge early last year, they were talking about a $25-million-plus drill program and in this putrid gold exploration market, the new plan is as such a mere $1.35 million:

Seabridge Chairman and CEO Rudi Fronk said: “Peak gold is the new reality in the gold business with reserves now being mined much faster than they are being replaced. Our industry is hungry for large discoveries and our exploration team’s success in finding gold resources over the past 15 years has been second to none. Although it has its challenges, Snowstorm is uniquely qualified to host a discovery that adds significant value for our shareholders, which is why we took it on,” said Fronk. “We are excited by the potential at Snowstorm. To have this much land in such a prospective location with this much data is a rare opportunity. Our initial focus on Getchell-style targets reflects the great value of these deposits which historically tend to be higher grade. Refining the most prospective stratigraphy with the best structural information should generate several drillable targets later this year. Although we are anxious to begin drilling, this background work needs to be completed first to give us the best chance of early success,” Fronk continued.

Stakeholder is located closer to the Midas and Hollister mines, which were indeed the initial evidence of these extremely high-grade gold mines in the vicinity of the Goldstorm property, so the dilemma that I face as an investor is this: With the enviable share structure (23 million shares issued), do I invest here to add to my holdings? If it does a $0.10 financing to adequately fund a Goldstorm exploration program, and it were to match Seabridge’s $1.35 million program, SRC would issue 10.35 million new shares with an additional 5.175 million new warrants with the new fully diluted capital at roughly 40 million shares issued (warrants but not directors’ options included). As a shareholder, I am torn between my innate optimism over the gold price outlook and the sad state of the junior exploration space as to what the correct move will be for SRC management to ponder.

If precious metals continue to decline, nothing will change investor appetites for discoveries. On the other hand, if a non-mining business venture materialized, the excellent share structure could make SRC an excellent candidate for an RTO or rebranding into a venture deemed worthy of millennial or Gen-X-er investment dollars. Bottom line: As painful as it is to watch SRC fade into these listless summer mining markets, to do anything dilutive would be madness especially if it is exploration and gold/silver-centric. I will await better markets in order to proceed.

As to the gold price, in mid-late-June I wrote that I was opening a modest 50% position in the GLD July calls as RSI (relative strength index) had dipped under 30, a level deemed oversold and from which gold had rallied on numerous occasions. Two weeks later, the RSI is back at 25.88 but gold is trading at $1,228, a solid $42 below where it was in June. The RSI readings are normally decent lead indicators for timing gold’s turning points but obviously this is one of the few times it has failed me. Mind you, if we get the seasonal strength for gold that is the July–December period, being a couple of weeks early won’t be a disaster but it WILL be a disaster if I fail to add to my holdings. This is the second day of the down move for the RSI under 30 so with the current print of 25.88, there might be another day or two of weakness so I’ll buy 25% tomorrow and scale into the GLD October $120 calls starting at $1.30. October should be enough time to allow for a significant upward move and one which includes the month of September, seasonally the strongest month of the year for gold, falling into the Indian Diwali wedding season and the restocking of inventories for the Italian jewellery trade preparing for Christmas.

At the risk of resembling the hands of a broken clock and their twice-per-day accuracy record, I continue to call for a significant advance in the precious metals to kick off in this month of July. Based upon sentiment, gold stock resiliency, seasonality, and my forty-plus years as a gold investor, all of the stars are aligned for rally of majestic proportions. While I can’t yet identify the catalyst, sometimes price alone becomes the spark and with Large Specs starting to really lean on the short side, there is a lot of very dry timber awaiting that spark.

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

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Disclosure:
1) Michael J. Ballanger: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Stakeholder and Canuc. 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 referred to in this article: Stakeholder and Canuc. I determined which companies would be included in this article based on my research and understanding of the sector. Additional disclosures are below.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Seabridge Gold. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Canuc Resources and Stakeholder Gold, companies mentioned in this article.

Charts courtesy of Michael Ballanger.

Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.

In a July 12 press release, eCobalt Solutions Inc. (ECS:TSX; ECSIF:OTCQX; ECO:FSE) provided an update on construction progress at the company’s 100% owned Idaho Cobalt Project (the ICP), located near the town of Salmon, in the heart of the historic Idaho Cobalt Belt.

The ICP remains the sole, near-term environmentally permitted primary cobalt deposit in the United States, said the press release.

“Construction activities continue at the mine site and we are expanding our production-ready team as we advance the ICP towards production,” said Paul Farquharson, president and CEO of eCobalt. “Activities are ramping up with delivery of critical equipment to site for the construction and finalization of all environmental systems. We have energized the main transformer with installed grid power now operational.”

The concrete plant is on site and the company has begun constructing foundations for the water treatment plant, said Farquharson.

“Furthermore, I am pleased to report that we continue to attract talented individuals possessing a high level of operational expertise, with a total head count of 29 in our Salmon, Idaho office,” he said. “It is through our team’s hard work and commitment that we have made excellent progress at the ICP to date.”

Completed works at the mine site includes delivery of over 70,000 tons of crushed aggregate to the site for construction activities, engineering, fabrication and delivery of the water treatment plant, preparation of the water treatment plant site for building construction and provisions on site for emergency medical services,” said the press release.

Work in progress includes: installation of liners for the Tailings Waste Storage Facility (TWSF) and water management ponds, installation of the potable water wells and distribution system, completing building pads for the crusher and concentrator, establishment of a construction workforce camp near the property, access road improvement projects and planning and procurement in preparation for construction of production facilities.

“The company’s main objective is to ensure that all environmental systems are in place to manage mine water and waste rock prior to commencing underground operations,” said the press release.

These systems include the ground water protection wells, piping and instrumentation, installation of the liners on the TWSF and water storage Ponds, and the completion of all access and maintenance roads.

“These activities are part of the use of proceeds from the February 2018 public offering and, due to weather delays earlier this spring, are now anticipated to be completed in early fourth quarter of 2018,” said the press release.

In support of these efforts, the company said it recently hired additional senior support personnel. Positions currently filled include Vice President / General Manager, Process Manager, HR Manager, Controller, Process Control Foreman, Senior Metallurgist, Mill & WTP Superintendents, Environmental Manager & Technicians, Health & Safety Manager and Coordinators, Field Project Manager, Senior Geologist and Purchasing Superintendent.

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Disclosure:
1) John McPhaul compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: eCobalt Solutions. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

In a July 13, 2018, research note, CIBC analyst Oscar Cabrera reported that Freeport-McMoRan Inc. (FCX:NYSE) entered a nonbinding agreement with state-owned PT Indonesia Asahan Aluminium (INALUM) and Rio Tinto regarding the Grasberg joint venture (JV) project in Indonesia.

Upon closing of the transaction, expected in the second half of 2018, PT Freeport Indonesia will own 60% of Grasberg, and INALUM will own the remaining 40%, after 2022. “The successful closing of the Grasberg transaction should close the price:net asset value gap to peers,” Cabrera added, referencing Freeport McMoRan.

The analyst provided the agreement’s terms, which are:

1. INALUM would acquire Rio Tinto’s 40% interest in the Grasberg JV for $3.5 billion. (Rio Tinto is PT Freeport Indonesia’s JV partner in Grasberg. PT Freeport Indonesia is a subsidiary of Freeport-McMoRan.)
2. INALUM would acquire 100% of Freeport McMoRan’s interest in PT Indocopper Investama for $350 million. (PT Indocopper owns 9.36% of PT Freeport Indonesia). On closing of the transaction, INALUM would own ~51% of PT Freeport Indonesia, and Freeport McMoRan would own ~49%.
3. Rio Tinto “would forego to Freeport [McMoRan]” an amount equal to the former’s share of JV cash flows received between Jan. 1, 2018, and the deal’s closing.

Cabrera noted for the deal to go through that PT Freeport Indonesia’s mining rights need to be extended through 2041. Shareholders need to develop and agree on an arrangement for Freeport’s continuing management of PT Freeport Indonesia’s operations. Also, environmental regulatory issues need resolving.

Upcoming catalysts for Freeport-McMoRan, indicated Cabrera, include a rising copper price, a successful closing of the Grasberg transaction, “a potential special dividend and/or share buyback by the end of 2018 and execution of the Lone Star development project over the next 18 months.”

As for Freeport generally, Cabrera asserted, “We continue to consider Freeport as the best-in-class North American copper miner.” CIBC maintained its Outperformer rating and $20 per share price target on the copper miner, whose stock is trading today at around $16.77 per share.

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Disclosures from CIBC, Freeport McMoRan Inc., July 13, 2018

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Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst’s personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.

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Important Disclosure Footnotes for Kirkland Lake Gold Ltd.

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In a research note dated July 16, 2018, analyst David Talbot reported that Eight Capital upgraded its rating on Azarga Uranium Corp. (AZZ:TSX) to Buy from Neutral and raised its target price to CA$0.40 per share from CA$0.30. The stock price is currently CA$0.27 per share.

These changes came following Eight Capital’s visit to Azarga’s flagship Dewey Burdock and Dewey Terrace properties in South Dakota and Wyoming, from which Talbot came away “quite impressed.”

As for Dewey Burdock, Talbot wrote, “we affirm [it] is one of the best undeveloped in situ recovery (ISR) projects in the U.S.” There, Azarga plans to produce up to 9.7 million pounds (9.7 Mlb) of uranium over 11 years at a cash cost of US$18.86 per pound. Projections show a pretax 8% net present value of US$149 million (US$149M) and a 67% internal rate of return based on US$65 per pound uranium. Capex would be “low” initially, at US$27M, as toll milling would take place at a nearby ISR plant.

The uranium mineralization at Dewey Burdock is associated with vanadium, and a 2015 PEA leachability test suggested vanadium recoveries of 70–5%, relayed Talbot. Thus, the potential to mine vanadium from the project exists.

An updated preliminary economic assessment (PEA) on Dewey Burdock is expected in Q4/18, following a resource update in Q3/18. “Dewey Burdock is robust, with a mineralized footprint likely having doubled since the initial resource and PEA was completed in 2015,” Talbot wrote. “Uranium prices permitting, we could see wellfield deployment as early as 2019.”

Talbot indicated that in the interim, Azarga continues to work toward obtaining its final Environmental Protection Agency Permit. First, it must resolve the issue of its application for a Nuclear Regulatory License (NRC) being in contention. The NRC indicated it will respond by July 23, 2018. The Oglala Sioux tribe has until Aug 17, 2018, to do the same. The Atomic Safety and Licensing Board, the ultimate arbiter on the NRC, could make its final decision in mid-September, at the earliest. The analyst relayed that the “worst case is this drags out to May 2019, but this might better align with Dewey Burdock development plans.”

As for Azarga’s other property, Dewey Terrace, it “may be a potential satellite operation to complement a central processing facility at Dewey Burdock,” said Talbot.

He reiterated that Azarga’s recent acquisition of URZ Energy bolstered the company’s project pipeline, as it gained the Gas Hills and Juniper Ridge assets. On the roughly 13 million pounds of uranium resources gotten from URZ, Eight Capital revalued it in situ at CA$0.50 per pound, up from CA$0.25. Via the acquisition, Azarga also gained “financing, marketing, development and production experience,” which, Talbot suggested, “should be useful in the advancement of Dewey Burdock and its nearby satellite deposits.”

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Azarga Uranium, a company mentioned in this article.

Disclosures from Eight Capital, Azarga Uranium Corp., Rating Change, July 16, 2018

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Centenera Mining Corp. (CT:TSX.V; CTMIF:OTCQX) recently announced it signed a definitive property option agreement for the Esperanza Copper-Gold Project in San Juan Province, Argentina. Previously, the company entered into a binding Letter of Intent with an arm’s length vendor by which Centenera was granted an exclusive option to acquire a 100% interest in this project.

“Signing a definitive option agreement for Esperanza is an important milestone for Centenera. The recent drill program at the project returned excellent results, confirmed our belief that Esperanza has significant bulk tonnage potential and sets the stage for us to actively seek joint venture partners to advance the Project,” said Keith Henderson, Centenera’s president and CEO.

The Esperanza Copper-Gold Project consists of 32 mining claims in the San Juan Province.

Some of the drilling highlights from this project are:

• 2018 drill program intersected continuous mineralization from surface to end of hole: 387m in Hole 18-ESP-025, 451m in Hole 18-ESP-027
• Deposit remains open both laterally and at depth
• Four priority drill targets identified to assess bulk tonnage potential.

Through the payment of US$2,306,000 and the issuance of common shares in the company valued at US$500,000 to the vendor, Centenera has the exclusive right and option to earn a 100% interest in the project, subject to acceptance by the TSX Venture Exchange. Of the first figure mentioned, US$208,000 has been paid to date.

Headquartered in Vancouver, Canada, Centenera is a mineral exploration company with a diversified portfolio of assets in Argentina.

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Disclosure:
1) Jake Richardson compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Centenera Mining. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Centenera Mining, a company mentioned in this article.

Libero Copper Corp. (LBC:TSX.V:, LBCMF:OTCQB ) recently announced it has completed the transaction with B2Gold Corp. to acquire 100% of the Mocoa porphyry copper-molybdenum deposit in Colombia. Libero has issued 10,400,000 shares comprising a 19% stake in Libero Copper and a 2% royalty on the project.

B2Gold will have a right to participate in future equity financings to maintain its current stake.

Additionally, Libero has a right of first refusal on a sale of the royalty.

The Mocoa deposit inferred resource at a cut-off of 0.25% copper equivalent is 636 million tonnes of 0.45% copper equivalent, including 4.6 billion pounds of copper and 511 million pounds of molybdenum.

The Mocoa deposit takes its name from town of Mocoa, which is 10 km away and is near the Ecuador border. B2Gold has already conducted diamond drill programs there, 5,123 meters in nine holes in 2008 and 1,768 meters in three holes in 2012.

The Mocoa deposit lies in the Eastern Cordillera of Colombia, a 30-kilometer-wide tectonic belt. This area is also the site of Mirador (438 million tonnes measured and indicated at 0.61% copper and 235 million tonnes inferred at 0.52% copper), San Carlos (600 million tonnes inferred at 0.59% copper) and Panantza (463 million tonnes inferred at 0.66% copper).

Drill tests there have shown the copper concentrate had a grade of 24% copper with a recovery of 86% and the molybdenum concentrate had a grade of 55% molybdenum with a recovery of 83%.

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Disclosure:
1) Jake Richardson compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Libero Copper, a company mentioned in this article.

Maurice Jackson: Today, we have a very special guest joining us to discuss the natural resource space and your portfolio, the legendary investor, philosopher, bestselling author and serially successful Doug Casey.

A number of speculators are confused and frustrated with the current state of the natural resource space. I hear comments that it just seems to be dragging along. In my experience, strong hands love the current value propositions and the weak hands fold.

Our listeners are seeking your wisdom on how to cultivate the mental fortitude that you’ve had to make you so successful over the years. Take us through for a moment your thought process when sentiment is low. What does Doug Casey, one of the most serially successful speculators, do?

Doug Casey: The first thing I try to do is watch my own psychology. None of us are immune from emotion. When I find that I’m getting enthusiastic and bullish about anything, I try to stop myself, and look at the other side of the coin.

We were speaking momentarily before we started this interview. You mentioned that at the upcoming Sprott Conference, there were 700 or 750 people registered last year. This year, it sounded like there’s only about two-thirds of that number. I find this very indicative.

Prices of these resource stocks are currently quite low. People are not talking about the commodities in general, or metals in particular. The way I see it is that the world situation is more explosive than ever. I’ve got to say that I’m a bull.

Maurice Jackson: Please provide us with a macro view of the current state of the natural resource space.

Doug Casey: The last time commodities peaked was way back in 2011. That’s seven years. It’s been, in effect, a seven-year bear market. There’ve been some bounces and some false starts along the way, but all this while, the general price level has been getting higher. Inflation is there, but the prices of all commodities have been going down in dollar terms, and the dollars themselves are worth less.

The longer this goes, the more bullish I have to become. I don’t know if the markets are going to turn around next week, next month, but I can’t believe that it’s going to go on yet another year. This is a time to prudently, and of course using the word “prudent” in the same sentence as speculation on natural resources is almost contradictory, but still I’ll say it, this is a time to try to accumulate really sound companies with good management, good properties, good financing, and so forth.

I expect, whether it’s next year, or two years, or three years from now, we’ll be in the middle of a raging bull market for these things, at which point I hope I can overcome my personal emotions and instead of buying more, sell what I have. But in order to do that, you need to buy at low points, and that was a low point.

Maurice Jackson: Is there a catalyst that you have your eye on that will spark the natural resource space?

Doug Casey: This is a dangerous time in the markets, as far as I’m concerned. You’ve got to remember the analogy that I like to use for the current economic climate. We entered a gigantic financial hurricane in 2007 and we went through the leading edge of that hurricane in 2008, and 2009, and part of 2010. Now, since then, it’s a very big hurricane, it’s got a very big eye in the storm, but I expect we’re approaching the trailing edge of the hurricane now, and it’s going to be much worse, and much different, and much longer lasting than what happened in 2008 and 2009.

Why do I say that? Because the governments of the world, not just the U.S. government, but all of the world’s governments working in concert, in fact, papered over the problems that came to the fore in 2008. They poured oil on the water, in effect, by creating trillions and trillions of currency units. That has put the general stock market in a bubble. It’s put the bond markets in a hyper-bubble with zero or even negative interest rates some places in the world. It’s bulled up the real estate market, especially in major cities.

Now, when we go back into the trailing edge of the storm, what’s it going to be like? They’ve already reduced interest rates as far as they can go, so they’ve shot that arrow from their quiver. They’ve created trillions and trillions of currency units all over the world. Are they going to do more of that? I guess so. All of these governments are looking for inflation, as if inflation was a good thing.

I think we’re headed for something of catastrophic proportions. The longer that we go on here in the eye of the storm, the more I liked it, because I like good times more than bad times, but I’m convinced bad times are coming.

Maurice Jackson: I’d like to hear what you’re doing to prepare for the bad times, but I have a two-fold question here first. How much of an effect is the trade war having on the space and how is the natural resource space impacted in the long term when First World nations participate in a trade war?

Doug Casey: First of all, the trade war, of course, is something that has been set off by Mr. Trump. I think I ought to make a brief comment on Trump. In general, I support him. Why? Because he’s not a card-carrying member of the Deep State, number one. Number two, he’s never been in politics before. That’s good. He’s been in business his whole life. He tends to think like a business guy, not like a political guy.

I support Trump for those reasons. I support him for the fact that he’s not Hillary and he’s not a Democrat, because the Democratic Party at this point has just jumped the shark. It’s turned into a cesspool of every bad economic and political idea that you can imagine. In fact, Trump is rolling back a lot of regulations. It’s quite amazing. These are all good things.

But, and here’s the big but, he doesn’t have a philosophical core. In other words, he’s somebody that has never, I don’t think, has ever studied economics or history, so he basically does what seems like a good idea at the time instead of acting according to any principles. I hope his playing chicken with the Chinese and the Europeans doesn’t turn into a trade war because the way the human race increases its standard of living and its net wealth is by trading with people that do one thing better, trade with people that do other things better. It’s a question of marginal utility. He’s really playing with fire.

The answer to the question is if it turns into a trade war, and the Chinese are very proud, and Trump doesn’t want to feel like he’s ever going to lose anything, this could be a genuine catastrophe because of the very fragile state of the world economy. That’s my answer.

I’m on tenterhooks because it’s completely unpredictable what these political types are going to do. The people who are in governments in China, the U.S., and Europe, all over the world, they’re not the best and brightest. It’s the opposite. They’re power-seekers. They’re busybodies. They’re people who actually think they have a right to control other people. I find it very scary. They’re capable of anything.

Maurice Jackson: It seems to me that Mr. Trump could benefit from one of the presentations that you conducted at Jayant Bhandari’s Capitalism and Morality conference and/or he should read a book called “Economics in One Lesson,” by Henry Hazlitt. You had referenced us going through the storm, the eye at the moment. What are you doing to prepare yourself should the events come to fruition?

Doug Casey: I got involved in the cryptocurrencies about a year ago, actually, which was late in the game. It took me a while to understand the value proposition of bitcoin and many clones, but they were very, very good to me in the last half of last year until I sold almost all my position in December. I didn’t buy at the bottom, but I got lucky in top of the market.

I’m still involved in them for a number of reasons. I’m optimistic about the future of them. There are 2,000 of them right now. They’re like junior mining stocks. Most of them are either frauds or losers.

But I think the area is going to do well, especially as these cryptocurrencies spread to the Third World, countries in Africa, South America and Asia, where the currencies are only good within that country. I think that increasingly, and we’re talking about two-thirds of humanity here, can only save in their worthless local currencies, kwachas, or pulas, things of that nature. More of these people are going to get involved in bitcoin and its clones in the future because they’re transferrable internationally. You don’t have to use one of these bankrupt banks in any of these countries.

I actually like the cryptocurrencies. I’m doing that, to answer your question. I continue to buy gold coins. Not so much silver. I own a lot of silver, but it’s very bulky, believe it or not, so I continue to buy gold coins.

Incidentally, I buy the small gold coins, things like British sovereigns, or Swiss and German 10 and 20 mark pieces from the 19th century. The reason I do that is all of these governments’ customs services are on the lookout for things that look like one-ounce gold coins, personal experience traveling in Africa and South America. But the small coins look like small change: nickels and dimes. Who cares? I’m just buying the small coins.

Those things, I’m buying, speculating in junior mining companies, which are very cheap right now. It’s number three. Number four, as big as your economic risks are today, I think your political risks are even bigger; I continue to diversify my assets internationally. Those are the four things that I’m doing.

But I might say a fifth thing, which is continuing to look for entrepreneurial activities, goods and services that I can supply to the market that people will be willing to pay for because those things are of more benefit to them than their currency. I think that probably sums it up.

Maurice Jackson: Well, it’s a very interesting perspective there. I personally like divisibility myself, so I was surprised to hear you reference that. I think a lot of people get amazed at these 100-ounce bars. I always say to them, “Your best bet is divisibility.” My personal preference as well is 1/10 of an ounce versus an ounce. I’ll do that all day long.

But let me ask you this in reference to precious metals before we leave that. We all have our favorites. Can you tell us what your thoughts are on gold, silver, platinum and palladium, respectively?

Doug Casey: Four different elements and four different investment propositions. I continue to favor gold because it’s a very high unit value. It’s widely recognized. You know, out of all the metals, there’s 92 elements on the periodic table, most of them are metals. In their pure form, refined, they are only two metals that don’t look silverish. In other words, all the metals, iridium, rhodium, platinum, palladium, silver, iron, all of them, when they’re refined and are pure, they all look kind of silvery. They’re hard to tell apart. There are only two that standout. One is copper, which has a copper color, and gold, which is gold in color.

I’m a big fan of gold. I continue to buy it. Silver, I think, however, is the cheapest of the metals that you can speculate in, and the most volatile because it’s a small market. It’s worth maybe 10% of what gold is. As a speculation, I really like silver.

Platinum and palladium, this is a bet on technology, number one, and a bet on where they’re mined, number two. Because unlike gold, most of the gold that’s ever been mined is still in existence. It’s historic. It’s money. It’s an asset. But like silver, platinum and palladium are mined and they’re used, so there’s not a huge inventory overhang.

The question is the supply of those metals comes mostly from Russia and South Africa, but South Africa is a time bomb waiting to go off. That can present a lot of problems on the supply side. On the demand size, yes, they’re high-tech metals, and new uses will continue to be found for them on the one hand. But on the other hand, they’re mainly used as catalysts in the automotive industry today. The world is definitely going to go to electric cars where they’re not going to be needed.

Back in the 1960s, platinum traded for $30 an ounce or less. It wasn’t price-controlled the way gold was for the government. I don’t want to stick my nose in that game with platinum and palladium. There are bull arguments. There are bear arguments. But as a speculator, I don’t like to do things unless I can see that the odds are tilted heavily in my favor. It’s a 50/50 bet with those two metals from my point of view, so I’ll pass.

Maurice Jackson: If I were your son, which would you encourage me to do first: buy some precious metals or buy some mining companies?

Doug Casey: The first thing you’ve got to do is build capital. You’ve got to have an asset base. The first thing is to have the metals themselves. After you get a foundation of capital, at that point, you can start speculating in the mining companies because it’s the most volatile market in the world. Most of these companies dry up and blow away. That’s why people like Warren Buffett never touched them because they’re just way too risky and way too volatile to use as an asset.

Now is an excellent time because the markets are quiet. The metals are low. Now is a good time to build a position in them, physical cash position. It’s an excellent time to start building positions in well-managed, well-capitalized junior mining stocks. This market will turn. They’re going to run. When they do, it could be absolutely explosive.

Maurice Jackson: You know, I asked that question because I hear this frequently, and I’m pretty sure you’ve heard this throughout the years, someone gets excited about the space and they want to get into the mining companies. Then when they get this multi-bagger, that’s when they’ll decide to go ahead and get the metals. I always share with them, from my perspective, I’ve studied your work, I’ve studied others who are serially successful, they do the opposite and you just conveyed that. They get the metals first and then they go into the mining companies. Thank you for conveying that.

You’re still an active buyer in precious metals after all these years and you have a big position. Why?

Doug Casey: Because gold, and to a lesser extent silver because it’s an industrial metal as well as a monetary metal, gold is the only financial asset that’s not simultaneously someone else’s liability. Very important. Most people, their wealth is based on paper and that’s very risky in today’s world.

But there’s another reason I’ve got to draw to your attention. It’s that China is on its way up. The Chinese economy is already the size of the U.S. economy and it’s growing much faster. Not that there aren’t lots of problems in China. There really are, but still, looking at it over the long run, if we look a generation ahead, China is going to be triple the size of the U.S. economy. That’s going to change a lot of things.

What they are going to try to do, what they’re trying to do, is to have the Chinese yuan replace the U.S. dollar as the world’s currency. It’s going to take a while for that to happen, but in order to speed it up, I believe what they’re going to do is they’re going to back the yuan with gold. In other words, the yuan is going to become like the U.S. dollar was before 1933, or at least before 1971. When that happens, they’re going to find a lot of people buying gold.

Maurice Jackson: Conversely, when that does occur, would it not also then send a lot of those Federal Reserve notes back to the U.S.?

Doug Casey: Over the last generation, the major export of the U.S. has been dollars. We ship out dollars. The nice foreigners ship us in return Mercedes, and Sonys, and cocaine, and everything else. At this point, there are tens of trillions of U.S. dollars floating around outside the U.S. In fact, the U.S. dollar is the defacto currency of dozens of countries around the world.

The problem is this. When confidence in the U.S. dollar is lost, those dollars are going to start heading back to the U.S. In other words, other foreigners won’t want to take them, but Americans have to take them. They’ll come back to the U.S. in exchange for titles to American companies, titles to American land, and everything else. It’s quite possible for that reason.

We’ve had an artificially high standard of living in the U.S. because of the export of dollars for the last generation or more, but that could go in reverse. We could have a vastly lower standard of living for the next generation.

Maurice Jackson: If a lot of our listeners aren’t aware, the effects could be duplicitous because you could really just see the prices, not the value, but the prices of things exponentially just grow because all these new currency units are here and competing for your purchasing power. Now, as a reminder, we are licensed to buy and sell precious metals through Miles Franklin Precious Metals Investments, so if you have any inquiries, please feel free to contact us.

Of the four metals, which do you see ready for a breakout? It doesn’t have to be immediately, but of the four, which one do you see?

Doug Casey: Silver is the cheapest and the most volatile of these four metals. For capital gains, I’d go for silver, but silver is only worth, what, $16 an ounce, in that area. It has pretty low unit value. It’s rather inconvenient because it takes many, many, many pounds to be worth much money. Now still, as a speculation, I think it’s the place to be.

Maurice Jackson: Doug, I’m not alone in conveying this, but I believe you have a crystal ball in which you can see into the future. If anyone doubts me, I would encourage you to read Mr. Casey’s book entitled “Crisis Investing,” written in 1979. Now, can you share with us, using this crystal ball, what has your interest at the moment in the natural resource space that speculators are not paying enough attention to that may become the next big thing?

Doug Casey: What is the next big thing? I’ve got to draw your attention, Maurice, one of my other books, “Crisis Investing for the Rest of the 90’s,” is actually a much better book, and more recent, and more sophisticated. Don’t be afraid to look that one up, too.

What’s out there that people aren’t looking at today? I think the next 20 years could be breathtaking. I’m a fan of Ray Kurzweil’s thoughts on this. He wrote a book, which I recommend everybody read, called “The Singularity is Near.” Essentially, what he’s saying is that Moore’s Law, which basically posits the computer power doubles and costs halve every year to 18 months, it’s actually underway, not just with computers and artificial intelligence, but in robotics, in virtual reality, in genetic engineering, in space exploration. In other words, this is going to be the big thing over the next generation, over the next 20 years. It’s the advance of technology.

Now, I make the case that ever since biologically modern humans appeared on this planet roughly 200,000 years ago, technology has actually been advancing at the rate of Moore’s Law, but not at the current acceleration of Moore’s Law. In other words, when people first learned how to make fire, or use fire, say 200,000 years ago, maybe there were no further advances for another 50,000 years. Then they learned to make fire by rubbing sticks together. Then maybe it was another 50,000 years before they learned how to effectively knock flint, and then the bow and arrow, and then the this and that.

Technology has been accelerating from a very low pace, very slowly, for lots and lots of time. But since the end of the last ice age, 10,000 years ago, when agriculture developed, and cities started to develop, things moved faster and faster.

In other words, look at it this way. Suppose we’re standing in a huge sports stadium. At the bottom of the sports stadium, there’s a drop of water. At first, the drop of water doubles in size. There’s two drops and it takes an hour. Then to double again, it only takes a half an hour the next time. To double again, to get eight drops of water, it takes 15 minutes.

Still, as observers, we wouldn’t notice it was happening. It would have to double and double and double again. But at this point, the bottom of the stadium is covered with a sheen of water. If it doubles and doubles and doubles only three or four more times, we’re going to be washed away. That’s the way exponential growth works.

I think that we’re right at that stage right now. As serious as the problems of the world are, technology is going to overwhelm everything over the next 20 years. It’s the biggest black swan. Well, not really a black swan because a black swan is one that you don’t even know exists. But it’s the biggest thing that’s happening and it’s growing at an exponential rate right now. It’s going to change the whole character of the world.

Interestingly, this is happening at the same time as the world’s economic and financial foundations are withering away. Technology is expanding. I’m not exactly sure how it’s going to work out. Maybe science fiction is the best predictor. I’m not sure that’s a good answer to the question, but I’m just expecting gigantic change.

Maurice Jackson: Let’s switch gears here. In our last interview, we discussed the first book of the High Ground series entitled “Speculator,” and since, you’ve released this second book in the High Ground series entitled “Drug Lord.” It appears that the main character, Mr. Charles Knight, he’s back at it again. But before we discuss Drug Lord, for someone not familiar with “Speculator,” tell us about it.

Doug Casey: What my co-author, John Hunt, and I have tried to do is write a series of novels that reforms the unjustly besmirched reputations of highly politically incorrect occupations. It starts out with Charles, our hero, at age 23. He gets lucky with a mining stock, doesn’t have any money, has very little money, but he hits a long-ball home run, and decides to go off to Africa to investigate this company that’s made him all this money. He finds out it’s a fraud. He gets involved in a bush war in Africa and so forth.

It’s a hell of a good yarn about adventures in Africa. It’s quite an education in economics and in the mining business and politics and everything. That’s “Speculator,” the first in the series.

Last year, we released the second in the series, “Drug Lord,” where Charles, after running around the world with the money that he’s made from the first book, he becomes a drug lord, both legal and illegal drugs, FDA-regulated and DEA-regulated drugs. We explain the drug business, how you do it, how money is made, how money is moved, and so forth.

Now, of course, just like in the first book, the government steals most of the money he makes. Now he’s a little bit unhappy. The third book is called “Assassin.” It’s a study of the occupation of politician assassin. This is a hot potato, obviously, when you talk about a political assassination, but what we’re looking at is the morality of that, the techniques of it, and a revisionist history of famous political assassinations throughout history, and what Charles does with this information.

I’m just telling you what it’s about, but I’m not going to tell you what Charles does, but I think it’s going to be a blockbuster on its way to the fourth book in the series, which is more radical yet. I don’t even want to mention that. It’s going to scare too many people.

Maurice Jackson: What I want to share with you is please don’t share it with us because I’m looking forward to reading it because I’m just in Chapter Four of “Drug Lord.” For anyone that is involved in the natural resource space, “Speculator” is a must-read. We have it listed under our education tab on our website. When you just learn the nine P’s, you’ll discover how “Speculator” will assist you in your natural resource endeavors.

What I enjoy about reading your books is that you make a very clear distinction between the virtues of liberty and the vices of government. Again, it’s always fun to read your books, specifically in this High Ground series that you’re conducting here.

For our audience, if you’re seeking to purchase the High Ground series books, please visit highgroundseries.com.

Before we close, you are one of the featured speakers at the Sprott Natural Resource Symposium, which is being conducted the 17th through the 20th of July in Vancouver, British Columbia. What will you be discussing?

Doug Casey: Well, everything under the sun, quite frankly, because I’m giving a keynote speech, but in addition, I’m on a couple of panels. I want to be very wide ranging. At the same time, I want to be practical and give people some specific ideas about what they ought to do with their money.

These conferences, like this one we’re going to, Maurice, are very important. They give you an opportunity to hear lots of ideas in a short space of time, and talk to the managements of lots of companies, which is very important if you’re going to speculate in this area. I urge your listeners to show up and I look forward to greeting them personally; anybody that would like to meet me. I’ll certainly be there.

Maurice Jackson: I look forward to seeing you again. It’s always an honor, but one of the things, also, when you attend a conference such as the Sprott Natural Resource Symposium, is the intellectual capital that you also have from fellow investors and the networking you can do.

If I may just slightly digress here, two years ago, I met a gentleman at the Sprott Natural Resource Symposium in Vancouver. I read your book last year, “Speculator.” Lo and behold, I think in the interview, you gave a charge that stated basically, “If you want to become rich, you need to go to Africa.”

Well, lo and behold, I went to Africa twice last year, and the second trip I went there, there’s this gentleman who was with me in Vancouver that I met at the Sprott Natural Resource Symposium. Lo and behold, guess what. He also read “Speculator.” Here we were at a site visit. We were just discussing your book and we’re living, we’re actually being Mr. Charles Knight in some regards. It’s just an amazing experience, the networking that you can do, and the lifelong friends that you also have an opportunity to meet here at the Sprott Natural Resource Symposium.

Now, a day after the symposium, on the 21st of July, you’ll be speaking at Jayant Bhandari’s “Capitalism and Morality.” Can you share what the topic will be?

Doug Casey: It’s a fantastic, one-day conference that Jayant puts on. It’s about capitalism and morality, exactly what it says it’s about. The people who attend it are fantastic. They are motivated. The speakers are all great. If you’re going to Sprott, which you should do, you should definitely stick around one more day and go to Jayant’s “Capitalism and Morality” seminar. I’m glad you mentioned that, Maurice.

Maurice Jackson: Your presentations are phenomenal. The difference there is, just for clarification for our audience, the Sprott Natural Resource Symposium is investor-based, and Jayant Bhandari’s “Capitalism and Morality” is philosophy-based. I find it intriguing that the serially successful members in the natural resource space tend to have the same philosophical and political views. I don’t know if that’s just coincidence, but is there something you can share regarding that by chance? Do you notice the correlation there usually?

Doug Casey: Not necessary as a correlation, but very helpful, because you’ve got a lot of successful speculators like George Soros, who are moral cripples, in my opinion. But look, it’s very helpful to have a philosophical basis for what you do.

It is very hard to become wealthy if you believe that money is evil, or the love of money is the root of all evil, which is actually what the Bible says. You’re fighting against yourself if you believe that. This seminar is to overturn a lot of the false psychological, philosophical and moral beliefs that people have that actually limit them from becoming wealthy. It clears your mind, in addition, so very important.

Maurice Jackson: Last question. What did I forget to ask?

Doug Casey: One more thing, glad you asked, is that my first book was called “The International Man,” subtitled, “The Guidebook to Making the Most of Your Personal Freedom and Financial Opportunity Around the World.” I’ve recently acquired that website from my publisher, Legacy. We’re totally expanding and improving it. I hope everybody who’s listening goes on their computer to internationalman.com and signs up.

Every day, I think we’re going to send something that’s really going to be interesting and potentially very profitable. We want to make it into one of the most noteworthy websites on the web, so go to internationalman.com and sign up.

If anybody wants to get in touch with me, they can do so via that internationalman.com.

Maurice Jackson: Last, but not lease, please visit our website, www.provenandprobable.com, where we interview the most respected names in the natural resource space. You may reach us at [email protected]

Legendary investor and author, Doug Casey, thank you for joining us today on Proven and Probable.

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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The following interview of CEO Bill Willoughby, Phd, PE of Cypress Development Corp. (CYP:TSX.V; CYDVF:OTCQB; C1Z1:FSE) was conducted by phone and email over about a one week period ended July 11th. I’ve written several articles about this Epstein Research website sponsor—so far management has delivered on promises. In June, the company delivered a maiden lithium resource estimate of 3.3 Million tonnes (Mt) Lithium Carbonate Equivalent (LCE) in the NI 43-101 Indicated category, plus 2.9 Mt LCE Inferred.

Cypress has the third largest lithium resource in North America, but the lithium is hosted in clay, and no clay-hosted lithium projects have reached commercial production. However, that’s very likely to change as Bacanora Minerals’ (BFS-stage) Sonora, Mexico, clay project is expected to start production in about two years and unconventional/clay projects owned by Global Geoscience and Lithium Americas, (both at PFS stage, both in Nevada), could commence production within three to four years.

Cypress is just weeks away from reporting key metrics of a PEA. Lithium Americas recently delivered key PFS metrics on its Thacker Pass clay project, including an after-tax NPV(8%) of ~C$3.4 billion and IRR of 29.3%. That’s based on a two-stage production ramp up reaching 60,000 tonnes per year LCE in 2026.

Cypress is contemplating less than 60,000 tonnes/year in its upcoming PEA, but if it can demonstrate attractive op-ex with relatively moderate cap-ex needs, a NPV well into the hundreds of millions of Canadian dollars seems likely. Compare that to Cypress Development’s market cap of ~C$22 million.

Without further preamble, here’s the exclusive interview with CEO Bill Willoughby.

There’s been a lot of good news at Cypress Development Corp., a maiden lithium resource estimate and rapid progress on a PEA (expected in next several weeks). Let’s start with the maiden resource; what are the key takeaways?

We have a very significant resource. It’s been a little over a year since Cypress started drilling and we have an NI 43-101 compliant Indicated resource of 697 Mt at 886 ppm lithium. This alone equates to 3.3 Mt Lithium Carbonate Equivalent (LCE). And, we have another 2.9 Mt LCE in the Inferred category, making our overall project (we believe) the third largest lithium resource in North America.

Most drill holes ended in mineralization, so additional drilling could grow the resource, and well placed holes could increase overall grade and improve the proportion of Indicated vs. Inferred tonnes.

The technical report shows what we’re calling a “preliminary pit,” where our consultants at GRE outlined nearly 200 Mt of clay around some of the higher-grade holes. So, it looks like there will be room in the PEA to optimize grade by selective mining.

In the chart below, a cut-off of 900 ppm Li generates an average Li grade of 1,126 ppm and ~36 years of production at 20,000 tonnes/yr. from the Indicated category only (i.e., not including Inferred). This gives us substantial tonnage as a starting point for our PEA.

A resource estimate by itself is not an economic study, but it does contain an economic basis in the form of a third-party (GRE) selected cut-off grade. The economic premise for our project depends upon metallurgy, and specifically that the lithium is in an acid-leachable clay. So far, we’ve done metallurgical bench tests on material from three drill holes, two of which are within the preliminary pit shell.

Tests show that lithium can be leached rapidly with relatively low acid consumption. If this were not the case, it’s doubtful we would be moving ahead at the pace we are.

While it’s exciting that a PEA is expected within weeks, what’s the rush to get it out? Aren’t there a number of open questions on metallurgy and the process flow sheet that need to be answered?

We see a good project and the steps ahead include more drilling and environmental studies. While we don’t need these steps to complete the PEA, we need the PEA to define the scope of the project so that we can keep it moving in these other areas.

As for metallurgy, we already have enough information in hand for the PEA. We know our flow sheet, which includes agitated tank leaching using sulfuric acid. We know our options on how to treat leach solutions and arrive at an end product, whether lithium carbonate or hydroxide. We know we have more work to do and questions to answer.

Cypress is sitting on a “clay-hosted lithium” project. There’s no meaningful lithium production anywhere in the world from clay. Why have clay-hosted projects been so difficult?

The process we are planning—agitated tank leaching—is quite conventional. We’re talking about lithium, which doesn’t have a long history in mining. The world’s very first lithium brine operation started just 50 years ago, and that was next to us in Clayton Valley, Nevada, at Albemarle Corp.’s Silver Peak.

It’s very true that clay-hosted deposits have been very difficult to exploit. The deposit you’re probably thinking about is Kings Valley, in northern Nevada. That deposit is very good grade but contains the clay mineral hectorite, which requires heating to high temperatures to leach the lithium. Until the recent rise in prices, the economics for a hectorite project weren’t there.

Lithium Americas, owner of Kings Valley, just in the last year announced a very large resource at Thacker Pass that is not hectorite and is acid leachable. A company working west of Silver Peak, Global Geoscience, is also pursuing acid leachable lithium at its unconventional deposit, Rhyolite Ridge.

As far as processing goes, the idea of acid leaching clay is quite common. For Clayton Valley we are looking at a standard crusher followed by agitated leaching, purification and recovery of lithium from the leachate. The flow sheet is what you might see on the hydro-metallurgical end of hard rock lithium projects, quite similar in concept to agitated leaching of gold or copper oxide resources.

How is Cypress’ clay project different?

You touched upon our extremely low strip ratio. The clays are soft and won’t require drilling/blasting, so mining costs should be “dirt cheap,” excuse the pun. As mentioned, the lithium appears to leach quickly with low acid consumption at relatively mild temperatures. This suggests a plant that could potentially have high throughput and low operating costs.

When you talk about a hard rock operation, you have drilling and blasting and overburden removal involved. You’ve got to crush and grind to the appropriate size faction, then do gravity and flotation to make a spodumene concentrate, followed by pyrometallurgy and leaching. If you look at our flow sheet, we’re virtually just scooping the material out, putting it in the mill, then jumping straight into the hydro-met section. So you can see there’s a whole series of events that we’re bypassing.

What’s the current status of metallurgical testing, what further testing needs to be done for the PEA?

We have the information for the PEA as far as testing goes. We are, however, still doing work to improve our knowledge and obtain information for what will come after the PEA. As mentioned, we have five clay units defined in the resource estimate. So far, we have worked in the labs with two composite samples from three holes.

In the next stage of testing, which we are working on now, we will look for differences between the clay units and by location across the property. We are also looking into ways to purify leach solutions and recover lithium to end product.

Are there noteworthy read-throughs from Lithium Americas’ press release describing its Prefeasibility Study on the Thacker Pass clay project (in Nevada)?

Overall, there are similarities that feed the tendency to compare our projects. Thacker Pass is located in northern Nevada in the McDermitt Caldera. Historically, the deposits there have been known for difficult metallurgy due to the presence of the clay mineral hectorite. With Thacker Pass, Lithium Americas has identified a new resource area that is acid leachable. The grades are higher, averaging around 3,000 ppm lithium, and the PFS shows positive economics, producing 30,000 to 60,000 tpy of lithium carbonate.

However, there are significant differences, most notably in mining cost and acid consumption, that could offset the difference in grade. We might be able to say more when our PEA is done.

What have been the biggest positive or negative surprises with regard to the metallurgy?

The most positive finding, of course, is that we have acid leachable clay. We are able to leach a high percentage of the lithium in a short period of time, in mild leach conditions and with low acid consumption. To be clear, we still have room for improvement, and we have found a few steps in the leaching and treatment of the solutions that are encouraging, possibly unique or proprietary to our deposit.

What’s the latest on how much water might be needed, can water be recycled, can the company obtain water rights in Clayton Valley?

We have estimated what we need for water, which will be in the PEA, and have identified options regarding how to get it. Water is a concern, but until we have the PEA in hand and additional funds to pursue our options, we aren’t actively looking to acquire water rights at this time. Instead, we’re identifying ways to minimize use, including reclaiming process water and opting for dry-stack tailings as opposed to a tailings pond.

Given talk about the Trump Administration’s proposed fast-tracking of natural resource projects (for select minerals/metals deemed to be of high strategic importance), is there any evidence of this with regard to the BLM and Cypress’ Nevada project?

That’s a good question. We haven’t progressed that far into permitting yet, but we have heard that other natural resource companies are seeing some changes. We’re hopeful that when people see our PEA and the scale of our project, they will put it together with the importance of lithium as an energy metal and our project being a significant potential source of domestic supply.

Nevada is a world-class location due to its infrastructure, rule of law, skilled mining labor force and mining equipment/services availability. The newly enacted tax law, a federal tax rate of just 21%, with no federal or state royalties, is a big deal. In Chile the only producers in the country—SQM and Albemarle—are paying a sliding scale royalty on lithium sales currently equal to about 20%.

Thank you so much, Bill, for your time and detailed answers to my questions. The world awaits your PEA.

Peter Epstein is the founder of Epstein Research. His background is in company and financial analysis, and he is a Chartered Financial Analyst (CFA). He holds an MBA degree in financial analysis from New York University’s Stern School of Business.

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Disclosures: The content of this interview is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Cypress Development Corp., including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Cypress Development Corp. are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed / registered financial advisors before making investment decisions.

At the time this interview was posted, Peter Epstein owned shares and/or stock options in Cypress Development Corp. and the Company was an advertiser on [ER]. Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.

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In a June 4 Junion Exploration Report, analyst Mick Carew indicated that Haywood Securities Inc. added Juggernaut Exploration Ltd. (JUGR:TSX.V) to its Watch List, which means, for one, it is expected to announce news during Q3/18.

As for the latest developments, Juggernaut just began a CA$3.5 million 2018 exploration program at its 100%-controlled Midas and Empire projects located south of British Columbia’s Golden Triangle. Geochemistry, mapping and sampling will be done, followed by drilling of several targets to help the company prioritize them for additional work.

Subsequent to that, the explorer will drill the northwest trending King Solomon gold zone at Midas, which is “of particular interest” and where a 2.1 by 1.6 kilometer area of volcanogenic massive sulphide polymetallic and gold mineralization has been identified, Carew wrote.

The Empire property spans 16,400 hectares and “comprises several targets,” Carew described. Area infrastructure includes logging tracks for access, power that is 8 kilometers away, roads and rail. Highlight assays from rock chip and channel sampling in 2017 at the Rockstar zone included 6.02 meters (6.02m) grading 1.53 grams per ton (1.53 g/t) gold, 1.38% copper, 0.23% zinc and 0.13% lead. One rock chip sample returned 21.7 g/t gold, 0.94% copper, 3.42% zinc and 11.55% lead.

The Midas property, which covers 16,653 hectares, has nearby infrastructure and “is defined by an 18 by 10 kilometer alteration zone of oxidation and quartz-sericite-pyrite alteration,” Carew indicated. Rock chip and channel sampling elicited high-grade gold mineralization, including 4.34m grading 10.28 g/t gold.

Both Midas and Empire are under option agreements with the DSM Syndicate in which Juggernaut has a 20% interest. Per the agreements, Juggernaut must pay, through cash, shares and warrants, CA$13.35 million per project over five years.

The company also just closed a private placement of CA$2.74 million, which boosted its cash balance to CA$3.5 million. The company has no debt.

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Disclosures from Haywood Securities, Junior Exploration Report, June 4, 2018

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Important Disclosures
The following Important Disclosures apply for Juggernaut Exploration:
▪ Haywood Securities, Inc. has reviewed lead projects of this company and a portion of the expenses for this travel have been reimbursed by the issuer.

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The Gold Report: Sam, recently we’ve seen a major intersection of the markets with politics. Would you touch on macroeconomic themes you see happening with politics, gold and other precious metals?

Samuel Pelaez: This is probably one of the times, in recent memory at least, when we’ve seen the greatest level of political interference in markets. In particular, trade has an enormous impact on the world of resources. The United States and China are the two largest producers and consumers, importers and exporters of resources globally, so any news headline involving trade between the two nations, and now protectionism and potential trade wars, would have a disruptive effect on resource markets. We’ve actually seen quite a bit of that over the last two or three months, and it only appears to be intensifying as we go deeper into the summer.

There are a lot of signals that would suggest this is probably not the greatest time to be investing in resources. But once I list those points, I’d like to show how this actually may be setting up one of the greatest opportunities that we’ve had in a couple of generations to be allocating to the resource market. I’ll start with the negatives and then slowly transition into how this could be an opportunity.

To begin with, we have a pretty aggressive tone from the U.S. toward China as it relates to trade. If the U.S. levies additional import tariffs or duties on resources, the U.S. being the largest importer of many of them, that suggests domestic production will do well. But domestic production is insufficient, so it’s going to increase the price of some of these commodities in the short term. But over the long term, this increase in price may actually have a detrimental effect on the economy. If the U.S. levies imports on iron ore or steel, then the price of construction goes up in the U.S.; the price of car manufacturing and cars as a general consumption product also go up. And over time, this has a nefarious effect on the economy and on consumption.

Initially the tariffs may be read as a positive, but it has very negative implications for the economy as a whole. Very early on in the conversations about steel import duties, I saw a chart that showed there are about 330,000 Americans who work, directly or indirectly, in the steel industry, but there are more than 330 million Americans who ride in cars daily. The protectionist measures help a substantial amount of people, 330,000, and the communities around them, but it has a negative effect on the pockets and the economics of families of 330-plus million people. This has a disruptive effect on the resource universe.

The other thing that’s been impacting commodities and natural resources negatively in recent times is the slowdown in economic activity globally. Since 2016, we were in a pretty strong upward trajectory as measured by the Purchasing Managers Index (PMI). PMI is one of our favorite economic indicators because it’s has some statistical predictive power as to what’s going to happen with the price of resources in the future. The PMIs turned around the end of 2015/early 2016. Up until the beginning of this year, they were in a very strong uptrend. Since then, we’ve started to see them slow down. We are still in expansionary territory, which is positive, but we’ve started to see them slow down to a point where the resource world may have to adjust to that new level of demand growth.

With those negatives in mind, we’ve seen a few of the major commodities—not oil, which is in a specific category that I will touch on later—haven’t had a good year. As of June end, copper, the most important base metal, is down nearly 10% year to date. Iron ore is down 9%. Coal is also down. Gold prices are down as well. This reflects the slowdown.

TGR: With all these negatives, why do you say we have a once-in-a-lifetime opportunity in resources?

SP: There is a chart that we’ve been discussing over the last year or so. Jeff Gundlach from DoubleLine Capital LP included this chart in his 2017 year-end review, suggesting that we’re near the beginning of a new cycle, and resources are one of the sectors of the market that should perform best going forward. The chart shows the S&P Commodities index, divided by the S&P 500 Index. The chart measures how many units of resources you can buy with a unit of the S&P 500. This chart has never been at a lower level than where it’s sitting right now, suggesting we may see a major mean reversion where the S&P Commodities Index outperforms the S&P 500 Index for a number of years.

The last time the ratio was at these levels was in the dot-com bubble. Remember, there was a lot of exuberance in the markets; lots of growth expectation and technology was leading the markets. Resources was not a sector that people were allocating to. And that was the genesis of the later industrialization of China. It was a great catalyst. And from then, the S&P Commodities Index outperformed the S&P 500 Index by a factor of about 4:1 over the next decade.

This chart shows that we’re in a similar predicament right now. If we go back to what happened two decades ago, there’s going to be an opportunity where resources have the potential to outperform the overall broader market, as measured by the S&P 500, by multiples. Last time, it was 4:1 over a decade. I’m not sure what it could be this time, but if mean reversion does take place, I find this chart a very compelling reason for allocating to resources.

You can tie this opportunity with the medium- to long-term trend of what’s affecting resources, and you’ll see we have a few very interesting major projects in the works. We have the much-discussed One Belt One Road Initiative and China partnering up with over two dozen countries to rebuild the original Silk Road. We’re seeing development of trains, highways, ports and new utility plays, both nuclear and others. So that’s going to be a multigenerational development that will be very heavy in demand for resources. With the last cycle, we saw the development of China. Maybe this cycle will be the development of that corridor in Central Asia that connects China with Europe.

The other interesting catalyst that comes to mind is President Donald Trump’s infrastructure rebuild. If you’ve been to New York and have seen La Guardia Airport recently, you would have seen how aggressively they are rebuilding that airport. I think we may expect to see a big wave of renewals and rebuilds across the U.S. The U.S. being the largest economy in the world, we cannot disregard how important this rebuild could be for the global economy, but especially for the resource market.

Third, and perhaps this is a little bit harder to quantify, if we dig through the resource literature, what we’ve found is that new technologies have allowed resource companies to extract resources more profitably, to explore and develop them more profitably as well. But when you look at the deposits that are being mined or the oilfields that are in production today, they are of much inferior quality to the ones we had 30 years ago. Grade profiles have declined. We are extracting crude from greater depths.

That’s a race that we have pretty much lost against nature because of all the new deposits that are being discovered, none of them equates to the quality of deposits that we’ve been mining over the past few generations—for instance, the big copper mine near Salt Lake City, Bingham Canyon, which opened in 1906. We don’t have any deposits of that quality, that great profile in a jurisdiction where it’s safe to develop both from an environmental angle but also from a security angle. And it suggests that it’s going to be harder and harder to make the economics of these mines work, which generally bodes very well for resources and the prices of commodities if we do have that development of the One Belt One Road and also the development of the infrastructure plans in the U.S.

Going back to the original point I wanted to make: Even though the news headlines suggest that resources is not a great place to be, when you look at the medium-term and the long-term opportunity as evidenced by that chart, I believe this is one of the greatest opportunities that we’ll have in our lifetimes to take advantage of this great economic growth.

TGR: What signs are you seeing that this turnaround is happening?

SP: Corporate M&A is one that we’ve been waiting for to kick off. Interestingly, the month of June has been very productive from that angle. Earlier this year, we had a few other deals. They’re what I call share-for-share deals, a company acquiring another one using their shares. That type of M&A doesn’t release capital into the market.

When a company acquires another company with cash, it is the equivalent of an influx of liquidity to the resource market. It’s a transfer of capital from a corporate balance sheet to the investment community in the resource space. And those situations tend to feed further activity in the markets. Markets get excited, people need to reallocate the capital, there are positive changes. It’s a very exciting time to be in the markets. In June, we’ve started to see sizable cash deals.

One that comes to mind was South32 Ltd. (S32:ASX), the Australian base metals and industrial metals company, buying Arizona Mining Inc. (AZ:TSX), which owns a sizable base metal deposit, very well located near I-10 in Arizona, with a multidecade mine life. There are nearby properties that are also coming into play that have the same feeder zones that may also be part of a larger transaction going forward.

Companies are more comfortable with their balance sheets and with the markets. The new tax plan for companies in the U.S. has certainly helped. It improved the economics of the projects. I think this trade war conversation also factors into it because if the U.S. is going to go through this new wave of infrastructure buildout, it’s going to push for domestic inputs as much as possible. If we’re looking at this as a multidecade project, then buying and building a mine today to be in operation in five or six years may be a great time to benefit from this new demand.

Other catalysts that we’re seeing—not so much in the U.S.—but China has continued to allocate very substantial amounts of capital to the space. Just last month we saw CITIC Metal Co. Ltd. (267:HongKong) make a major investment into Ivanhoe Mines Ltd. (IVN:TSX), famous for being led by Robert Friedland. It operates exclusively in Africa, South Africa and the Democratic Republic of the Congo, but it has two of the three most highly sought and highly prospective mining development projects in the world. The CA$723 million cash investment shows that there is a strategic appetite among global players for high-quality, long-life assets.

TGR: Would you talk about the relationship between the price of gold and currency exchange rates?

SP: There have been a lot of conversations in the gold space the last couple of weeks as gold has been selling off. That’s been a result of the U.S. dollar going up, which has been happening for several reasons. One of them is the trade situation, the other one being the Federal Reserve continuing to hike rates whereas other central banks around the world are not.

What we found most interesting is gold prices have been going down, but the interest in gold equities has gone up. And that’s evident by the inflows that have been documented into the major gold equity exchange-traded funds (ETFs). During the first three weeks in June, we had hundreds and hundreds of millions of dollars a week being allocated into these funds. Initially, it was thought that it was potentially people shorting the market. With ETFs, it’s easy to see whether that’s the case. We got confirmation that that is not the case; this is actually long exposure allocation to these products.

I think there are two reasons for that. One is gold equities may have a pretty important diversification angle, especially in these kind of markets. We’ve seen high volatility. We’ve seen headline-driven investing. People are looking to these gold stocks for some solace from that volatility.

The second, and the one that some people have failed to recognize, is that when gold drops in U.S. dollar terms, as it has been doing for the last month or so, it doesn’t mean that it necessarily drops in other currencies. The U.S. is a major producer of gold, but so is Canada, Australia, South Africa and many other countries around the world. The miners that have high exposure to countries like Canada and Australia are not seeing the economics of their mines negatively impacted by gold dropping. If anything, in some cases, like in Canada for example, gold is actually up year to date in Canadian dollar terms. When you’re a gold ETF, you’re not just buying U.S. domiciled gold companies with production in the U.S. You’re also buying companies with production elsewhere.

Our own ETF, the U.S. Global GO GOLD and Precious Metal Miners ETF (GOGO:TSX; GOAU:NYSE), has actually outperformed its peers quite dramatically this year. One of the big reasons for that is the smart beta construction, which has allocated a greater percentage of the fund to Canada, Australia, South Africa and a few other key places. Almost all these stocks trade in North America, but they have direct exposure to the commodity in other countries. Australian gold companies have performed phenomenally well this year. We have an overweight in those. And a big part of that is the currency has dropped more than gold has dropped, so net-net they’re actually receiving more revenue in Australian dollar terms than they were receiving last year.

TGR: Let’s touch on crude oil for a minute.

SP: Crude oil is the best performing major commodity year to date; prices are up around 20% this year. The entire commodities index is actually up year to date, and it’s pretty much all a result of crude being that strong, whereas most of the other commodities that I mentioned earlier are down year to date. There are a couple of reasons for that.

Number one, the Organization of the Petroleum Exporting Countries (OPEC) has pretty much maintained its self-imposed production cap. It had a recent meeting in Vienna to discuss an increase in the cap and is going ahead with boosting production slightly. But there are other factors in the market that have taken some of the production away. One of the things is the re-imposition of U.S. sanctions on Iran, which, as of the late summer, forces U.S. allies to stop buying crude from Iran. The expectation is that that will take about 1.5 million barrels a day out of the market, roughly 1.5% of the volume of the market.

That is being compounded by the fact that the Permian Basin in the U.S. in West Texas is capacity constrained. There’s not enough infrastructure for the crude out of this region to reach the Gulf in a timely or efficient fashion. The U.S. was on this very aggressive growth profile of its crude production, but now it is going to start to slow down. That’s giving investors some comfort that the U.S. cannot continue to grow its production at the same rate.

Second, and this is short term, Canada is having issues at the oil sands with one of the major processing facilities being taken out of commission for an indefinite amount of time to address technical issues.

With lower production from Canada, stranded capacity in the U.S., Iran being unable to export to U.S., we find ourselves with a very favorable market for crude. We have seen evidence of this in the official Department of Energy weekly inventory numbers. The last week of June saw the largest single weekly inventory draw we’ve seen in many years. Crude has been the biggest highlight of the year.

TGR: Let’s talk about some companies that you like.

SP: Staying with oil, in Canada, there’ve been several political situations that have not allowed pipelines to get built, resulting in serious logistical issues. As a result of that, the energy market is Canada is essentially flat year to date. When you ponder crude prices being up 20% in U.S. dollars, the Canadian dollar having depreciated relative to the U.S. dollar, we’re talking about a commodity that’s moved aggressively in favor of the Canadian producers. Yet we haven’t seen much appetite yet.

I call it “peak bearishness”; this feeling that Canada can’t figure out a way to export its crude, to develop new midstream infrastructure. I think we’ve hit the point where that bearishness is so pervasive that people have given up. And perhaps this is the greatest time to be buying.

One Canadian name we own and like is called Peyto Exploration and Development Corp. (PEY:TSX; PEYUF:OTC). The reason we like it is because it’s not that junior. It’s a company that has a reasonable market cap, being liquid enough for institutions to invest in it. On a value metric, it trades at about a 25% discount to its peers on an EBITDA basis. And the return on capital is about 20%, which is multiple times higher than the average return on capital in the Canadian exploration and development space. It also has a substantial free cash flow yield. Those three factors: the free cash flow yield, the return on capital and the discount on its EBITDA valuation relative to its peers, are some of the factors that we like to look at. So that’s one of the companies that I recommend.

Switching gears but still in Canada, we continue to see great opportunity in the lumber market. The lumber market has been one that’s been freely talked about in the headlines with the North American Free Trade Agreement (NAFTA) renegotiations, President Trump and potential escalation of a trade war with Canada. What people fail to realize, number one, is the lumber exports to the U.S. have their own provision outside of NAFTA, so the renegotiation of NAFTA does not affect them.

The second is a lot of the Canadian paper and forest producers are very diversified; they have ownership of mills and access to lumber directly in the U.S. They’ve performed quite well because the U.S. housing market continues to be strong, and there’s no angle for them to necessarily be affected by the trade war rhetoric.

While lumber prices are near all-time highs, the companies in the sector are still trading at very substantial discounts to the materials sector, and their returns on capital have been growing in excess of the sector. We recommend the whole sector, and the one stock I would highlight is Canfor Corp. (CFP:TSX). It trades at about a 50% discount to the materials sector, and their returns on capital are nearing a staggering 30%.

TGR: Let’s switch gears to metals.

SP: One of the names that I’ve been quite interested in, that we currently own, and it has a big trade war angle to it is Alcoa Inc. (AA:NYSE). If you recall, a few years back, Alcoa split its upstream and its downstream operations. The new Alcoa, which has retained the upstream—the production of aluminum—was not a market darling after the split. But now it seems to have gotten a new stride. It’s trading at a very compelling valuation. Both the return on capital and the free cash flow yield have been increasing. So now it’s at a level where we’re happy to own it. But also, it has this tailwind from the U.S. infrastructure buildout and the U.S. protectionist measures that have been implemented or are currently being discussed. So that’s something that I’ll highlight for investors to have a look at. That’s on the industrial metals space.

On the base metals space, there are not a lot of opportunities in the U.S. market. Freeport-McMoRan Inc. (FCX:NYSE) is still in discussions with the Indonesian government. It makes it subject to politics and news headline risk.

There are two phenomenal base metals names in Australia if investors are willing to look at the Australian market. My favorite is OZ Minerals Ltd. (OZL:ASX). It also trades at a very attractive valuation. Its returns on capital have not been increasing, but that is because it is self-funding out of its own cash flow the development of what’s going to be one of the largest, new base metal mines in the world, called Carrapateena. OZ is spending about a billion dollars from its own self-generated cash flow. It’s one of the interesting names that gives you growth prospect without any share dilution. It hasn’t had to raise debt or equity to finance this project, so we expect the return on capital to increase quite dramatically once this new mine comes into production, the benefit being you get it without the share dilution that generally accompanies this type of explosive growth.

TGR: You said you had two phenomenal base metal names in Australia; what is the second one?

SP: It is called Sandfire Resources NL (SFR:ASX) and has a similar story to OZ Minerals. It also offers organic growth, and has a vastly superior return on capital metric, to the tune of 50%, one of the highest in my whole screen for global resource companies. What that tells you is that this management team is a phenomenal operator and capital allocator. And it is one of the best value base metal stocks globally.

TGR: Shall we turn to gold royalty companies? I understand the GOGold ETF has a focus on gold royalty companies. Which those are you excited about?

SP: There are the three big precious metals royalty companies, well known as the three amigos. The GoGold ETF has exposure to all three of them, Franco-Nevada Corp. (FNV:TSX; FNV:NYSE), Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE); and Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX). The royalty business model is extremely attractive. When you enter into a royalty agreement, or a streaming agreement, which is the more novel way to structure it, these companies exchange upfront capital that helps the miners build projects in exchange for quantifiable production, a percentage of the production going forward. That allows these companies to be exposed to the metal prices, and it allows them to be exposed to the growth of the deposit, without necessarily being exposed to the day-to-day friction and cost of mining. We find that to be a very attractive business model. These three companies have also proven to be very successful capital allocators. If you look at the year 2015–2016, when a lot of companies in the resource market—and especially the metals space—were going through hardship, these companies were able to pick up pretty interesting assets essentially at the bottom of the market.

They changed their business model from facilitating the buildout of a mine to facilitating the restructuring of over-levered producers. Glencore International Plc (GLEN:LSE) is a great example. Both Franco-Nevada and Wheaton Precious Metals were able to buy royalty and streaming agreements from existing Glencore producing assets at the time, at very attractive valuations, which translates into very high returns on invested capital. When you look at the companies themselves, and the exact return on invested capital number, it doesn’t appear that attractive, but that is because they’ve already deployed money buying royalties that are not going to kick in immediately; they kick in after a few years. But when you look at the return on capital on a project-by-project basis, the returns on capital are spectacular.

Interestingly, the fourth company, which is an up-and-coming one, and I’d actually like to highlight it because it also trades in the U.S., is called Sandstorm Gold Ltd. (SSL:TSX; SAND:NYSE.MKT). The founders of Sandstorm are among the smartest individuals in the metals industry, I find. They did a transformational transaction in 2016, where they acquired a portfolio of royalties from Teck Resources Ltd. (TECK:TSX; TECK:NYSE), the big Canadian producer of basically most metals. One of the royalties applied to a specific project in Turkey. The company now has a 30% net profit interest, so it will earn 30% of the project’s profits. And at the end of June, the company reported the independent economic assessment of the project, which shows a greater than $1.4 billion profit expectation. Sandstorm spent less than US$200 million in total to acquire this stake, and the economic study suggests Sandstrom could be receiving more than $100 million a year from the project’s profits.

TGR: Any parting thoughts?

SP: I want to encourage investors to think about the diversification that the resource market gives them relative to the overall market. We strongly believe this should be a permanent allocation in any portfolio, and specifically gold, for the diversification characteristics that it offers in the context of a portfolio.

I’d also invite the readers to consider that chart and think about the next decade—not the next Tweet or the next news headline, but the next decade—and where the world is going in terms of the Silk Road and the One Belt One Road and the U.S. infrastructure renaissance. There is a good feel and vibe about an industrial renaissance in the U.S., and that would necessitate a redevelopment of infrastructure and certainly a significant amount of natural resource inputs.

TGR: Thanks for your insights, Sam.

Samuel Pelaez is chief investment officer and portfolio manager with Galileo Global Equity Advisors. Prior to that he was an investment analyst at U.S. Global Investors, a boutique U.S.-based investment management firm. Pelaez graduated from the Schulich School of Business with Distinction in 2012. He also holds a Masters in Finance degree from The University of Cambridge. He is a CFA charter holder and member of the Toronto CFA Society.

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Disclosure:
1) Patrice Fusillo conducted this interview for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this interview are billboard sponsors of Streetwise Reports: Wheaton Precious Metals. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Samuel Pelaez: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: N/A. I, or members of my immediate household or family, are paid by the following companies mentioned in this article: N/A. My company has a financial relationship with the following companies mentioned in this interview: N/A. Funds controlled by Galileo Funds own securities of the following companies mentioned in this article: Alcoa Corp. (AA:NYSE), Canfor Corp. (CFP:TSX), Franco-Nevada Corp. (FNV:NYSE), Ivanhoe Mines Ltd. (IVN:TSX), OZ Minerals Ltd. (OZL:ASX), Peyto Exploration & Development Corp. (PEY:TSX), Royal Gold Inc. (RGLD:NASDAQ), Sandfire Resources NL (SFR:ASX), Sandstorm Gold Ltd. (SAND:NYSE), Teck Resources Ltd. (TECK:NYSE), Wheaton Precious Metals Corp. (WPM:NYSE). I determined which companies would be included in this article based on my research and understanding of the sector. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Wheaton Precious Metals and Franco-Nevada, companies mentioned in this article.

Since I covered gold and silver on Wednesday, I am switching to the base metals because they represent a dollar flow infinitely larger than the precious metals, and are therefore far more difficult to “manage” in terms of price. Also, 90% of the pricing structure for a metal such as copper is dictated by the cash or spot market, where physical delivery governs pricing.

The paper markets have grown to fear the dangers in trying to orchestrate price by way of the CME (Chicago Mercantile Exchange), as many of the blow-ups with rogue traders are in areas such as oil and copper, where the enormity of the flow is overwhelming. Base metal markets are far purer in terms of economic sensitivity because traders bob and weave around them rather than for or against them, as in the case with precious metals. As such, the prices of industrial metals often act as excellent leading indicators of global trade and commerce, with real supply and demand determining price as opposed to the fictitious supply created out of fiat whims by the paper merchants and bullion banks, which have gold and silver on a spring-loaded leash.

So, with copper crashing to $2.82/pound, what does that say about global growth and the likelihood of cost-push inflation forcing central banks to up-ratchet the interest rate structure?

As I ranted about previously, the impact of machines cannot be underestimated once a definitive trend has been established, and while base metals are especially difficult to manipulate, their trends are quite easy to exacerbate and accelerate by way of the “pile-on effect” that seems to be a specialty of the “bots.” And when they scan the news flow and come across an anti-China Trump-tweet that talks about industrial supply tariffs, the machines descend upon the markets like locusts in ancient Egypt.

Let’s examine the relationship between copper and the S&P 500 dating back to 1990. You can see that copper appeared to detect the top in 2001 but failed miserably in 2006-2007. It disagreed with the stock market from 2011 to 2016 but came to its senses in 2016. However, in the shorter-term window, shown in the 28-year chart, notice how in the past four weeks copper has diverged to the downside. It might be that copper is reacting directly to fears of trade war weakness in demand, thus inviting accelerated hedging from producers. Despite all the blogospheric commentary on the predictive powers of Dr. Copper, the last 28 years has shown little evidence of such.

However, when you take lead and zinc and add their technical breakdowns to the equation, something has the base metals spooked and that cannot be good.

Base metal prices are under a tremendous siege since the trade wars were instigated by DJT, and while the Wall Street crowd would sluff it off, saying that “he really doesn’t mean it” (wink wink, nudge nudge), the markets are most certainly taking him seriously, with base metals as the barometric harbinger of a stock market maelstrom.

Now, if you add in the MSCI All Country World Index and see that it, too, has rolled over, you have the beginning of a convergence of technical breakdowns, and an event-driven rationale that runs the risk of forcing a few trillion dollars of stock market leverage to be pruned from the system. Given the illiquidity common in summer markets, I am taking the stance that preservation of capital is critical, and since the gold and silver stocks have been woeful performers thus far in 2018, the downside risk in this space is minimal. (And the upside might be substantial.)

Now, there was nobody that called the top in Bitcoin better than this humble penman, and while I have done my best to minimize the brilliance of the call, I am going to shamelessly reprint three paragraphs from my Dec. 11 missive entitled “Cryptojunkies: Beware the Ides of December,” written one week before the top at 19,891, the very day the futures were introduced on the CME.

“This need for fiat sanctuary, insulated (or so they assume) from the devious tentacles of bankers and governments, will be tempered by the introduction of Bitcoin futures by the CME Group on Dec. 18. Just as precious metals futures are the tail by which governments and bankers wag the dog through unimpeded interventions, it is, in my opinion, the very tail by which the moneychangers are going to “reel in” cryptocurrencies. So, between now and the end of the month, the Commercials (bullion bank traders) will reduce their aggregate short position as gold’s major competition comes under the smothering blanket of intervention and manipulation.

“As I wrote about in the commentary entitled “The True Meaning of Bitcoin’s Success,” this is all about the arrival of the hyperinflationary melt-up characterized by various asset classes going into systemic price spikes. Stated another way, it is about the purchasing power of fiat currencies experiencing sudden and dramatic crashes. This recent narrative of a digital currency replacing gold as a store of value is as nonsensical as the idea that “dollars,” whether from the U.S., Canada, or Zimbabwe, will maintain their purchasing power over time. The bankers reeled in gold in 2013; they will reel in the Bitcoin as well. What both have in common is the medium of control.

Beware the Ides of December.”

Now, there has been very few occasions in the past forty years in which I have wanted to actually hop on a plane and fly across the Atlantic to punch someone in the nose, but tonight is one of those nights after reading the remarks of Bank for International Settlements chief Agustin Carstens directed to the topic of cryptocurrencies.

He starts by recounting how Sir Isaac Newton nearly bankrupted himself trying to use alchemy to create money (gold) and finishes with: “So my message to young people would be: Stop trying to create money!”

MJB response: “Why? Central bankers and government treasury departments have had that monopoly for over one hundred years!”

Then he says: “Cryptocurrencies do not fulfill any of the three purposes of money. They are neither a good means of payment, nor a good unit of account, nor are they suitable as a store of value. They fail dramatically on each of these counts.”

MJB response: “Since when have dollars, yen, deutsche marks, pounds, lira, etc., ever been suitable as a store of value?”

The greatest debasement in monetary history has occurred since 2008, and complete inflationary breakdowns in counties like Venezuela and Turkey, and Carstens talks down to the “young people,” urging them to use paper money as a “store of value”?

This type of commentary is proof that the only good thing about people like Senor Carstens is the fact that they will never be elected to office where they could do any serious damage. Perhaps he had a bad day, or had just received a large margin call on his “short Bitcoin” trade, but his nonsense actually pulled me—the ultimate Bitcoin bear—over to the cryptocurrencies’ defense. Bankers around the world have a monopoly on the most important asset in all of commerce—currency—and the fact that cryptocurrencies were invested to wrestle that control away from the elitists is not a proposition to which I might object. My only beef with crypto was that it diverted investment dollars away from the traditional safe havens, protecting wealth that were (and are) gold and silver.

And one look at the Bitcoin chart proves that money avoided the heavily managed gold and silver markets in favor of their own version of anti-fiat alternatives. The cryptos did their job until they didn’t, which magically coincided with the arrival of the CME futures. And then they were summarily vaporized with military-style dispatch.

Welcome to the world of free markets, price discovery and transparency.

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

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Charts courtesy of Michael Ballanger.

Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.

Maurice Jackson: Today, we will have a discussion regarding the value propositions you may be overlooking for your natural resource portfolio. Joining us for our conversation is legendary Rick Rule of Sprott Global Resource Investments, which is the preeminent name in the natural resource space.

Rick Rule: Maurice, it’s always a pleasure and congratulations on the incredible success of your site in the last couple of years.

Maurice: Thank you, sir. Rick, a wise man once told me and, by the way, you are the wise man I’m referring to here, two things that fit into the narrative for today’s discussion, “Everyone is a contrarian when the price goes up,” and “having courage and conviction.” I referenced these quotes because as speculators, we hear a thesis and it makes sense. We put some capital into the market and the price goes down or there are no press releases. In your experience, what actions do you see the speculator do next?

Rick: Well, that reminds me a lot of Mike Tyson’s observation that everybody has a plan till you hit them in the face. The truth is describing the rationale behind being a contrarian, buying straw hats in winter and buying things cheaply makes absolute sense, but people like company. When you’re standing alone, you often have to call into the courage of your convictions to stay a trade, even a rational trade, where the market action isn’t justifying the narrative. It can be very, very difficult to stay a trade as a contrarian. It is also a necessary thing to do.

Maurice: That’s why I wanted to cover the value propositions that aren’t obvious. Can we begin our discussion today with physical precious metals and in particular, not gold, but silver, platinum and palladium?

Rick: Those are different topics, of course. Silver is interesting because it’s difficult to know the fundamentals, so it’s inherently speculative. Let me explain that. In the first instance, unlike gold, silver is also an industrial material. So it gets used up. That’s an important part of silver. It’s used in many, many applications and only some of them involve recycling. Unlike gold, some of the supply in silver goes to what I like to call silver heaven. It gets used up in applications and goes away. The supply side of silver is much more problematic or at least much more interesting.

First, most silver isn’t produced from silver mines. It’s produced as a byproduct of other metal production like copper, lead, zinc and gold. So rather than just understanding the market dynamics in silver to forecast the future supply, you have to understand a lot about the production of other materials, where silver is a byproduct.

The second interesting thing about the silver market is that a bunch of the supply is held in private hands in South Asia, in Pakistan, in India, in Bangladesh, in Nepal and in Sri Lanka. Much of the silver is undeclared. It’s private wealth. So circumstances occur that you and I wouldn’t think of because we don’t live there. Things like the impact of a very good harvest in rural India, which means that the farmers have increased capital to save and rather than saving in rupees, that is in government currency, they might save in silver.

Conversely, difficult economic times in India or Pakistan, where their currency is collapsed, might cause those people to sell some of their silver simply because they need to use the money to feed their families. So it’s a very interesting topic in terms of supply and demand, one that I’ve worked on for 40 years and one that I must admit I have not mastered yet.

The second part of the silver story is very uncontrarian. That is, it’s the poor cousin, poor man’s substitute for gold. So when the gold market runs, because of the volatility of silver and because of its lower unit cost, because it’s more affordable to more people, it tends to run more than gold, both to the upside and the downside. So the ability that people have to forecast supply and demand in silver is very, very constrained at the same time as it is much more volatile than gold.

Moving on to platinum and palladium, these are, in addition to being precious metals, even more industrial materials. The important thing to know about both is that they have a way to move to the upside simply because the cost associated with using platinum and palladium is a very small part of the cost of the finished products that they are used in. The best example of it is, of course, as an auto catalyst.

It takes probably $150 worth of platinum and palladium to deliver the air quality standards that allow a new vehicle to be sold in developed nations markets like Germany, Japan and the United States. Now, the finished price of that vehicle is somewhere between $30,000 and $40,000 on average. So it takes $150 worth of PGMs to enable the sale of a $40,000 automobile. If the price of platinum were to double, it would have no discernible impact on the sticker price of a new car. So there’s some demand elasticity relative to price.

The second thing that contrarians need to understand about platinum, and this story has been a long time in coming, is that in the most important market for the production of platinum, South Africa, at current platinum prices, about 60% of the existing production is uneconomic. At a certain point, the South African government and the South African industry is likely to be unable or unwilling to continue to subsidize the production of uneconomic platinum. Now, in fairness, Maurice, I’ve been singing this tune for five years thus far with no discernible success.

Maurice: Well, I have to share it presents a very unique value proposition because in my view, I’m seeing anomalies and distortions. I don’t recall the last time I saw platinum being below the price of gold and the price of palladium. The unique features you’ve referenced as an auto catalyst regarding platinum and palladium, but I’m speaking more to platinum here is that its utility and it’s rare. It’s one thing. We always hear that something is rare, but the fact of the matter is it has to have utility and that’s what I like about platinum.

Rick: Maurice, you make a very good point. Platinum and palladium both are rare. They’re also constrained politically. What I mean is that almost all of the economic deposits of platinum and palladium in the world are in South Africa, Zimbabwe and Russia. There are some constraints to all three jurisdictions. Russia is probably not in as bad shape as most people think, but I would argue that both South Africa and Zimbabwe are in worse shape than people think. In addition to the economic constraints surrounding the platinum business, there are also some political constraints to supply that could have a dramatic impact on the price.

Maurice: Are you more bullish on the issuers of precious metals or stewardship of the physical metals?

Rick: I think that depends on the purpose for which the investor has it and who the investor is. One example of that, Maurice, is that you could argue that I personally wouldn’t need to own any physical precious metals at all given that my profession would benefit from an increase in precious metals prices and certainly, my investment in Sprott Inc. stock would benefit. That notwithstanding, I own a reasonable amount of gold. I own it for the reason that most people own insurance. So I’m in the odd position of owning a lot of an asset class, where I hope it doesn’t go up in price.

If you think about it, that’s rational. If you think about any insurance policy that you might have, you understand that the circumstance that causes you to get paid for is almost invariably unpleasant. Life insurance means somebody died. Auto insurance means that you had a wreck. Home insurance means that your house burned down. These are all unpleasant circumstances. I own gold precisely because I want to insure myself against unpleasant circumstances. I want to make money on my mining stocks. Unlike a lot of investors, I don’t necessarily own mining stocks as warrants on higher precious metals’ prices. I own mining companies because I believe that they can compete economically on a standalone basis and they can do something better than their competitors.

I also believe right now that the mining stocks might be more timely than the metals themselves, given that for 18 months, metals prices have held up very or at least reasonably well while the mining stocks have certainly lagged. There’s no guarantee that the mining stocks will make up for lost time. The circumstances that we’ve seen have existed twice before in my career. In both cases, the delta between the metals’ prices and the stock prices was, in fact, filled in by rising equities’ prices, something which I hope occurs this time as well.

Maurice: That’s a very interesting perspective you have there is that you’re looking at gold as insurance, not necessarily as a speculative endeavor and more or less, the issuers on the speculative side and that’s a view I’ve learned from you. When I first began this endeavor, I looked at silver as my speculative endeavor and I changed it to more of an insurance policy along with the other precious metals.

Rick, before we leave the subject of precious metals, I’d like to remind our listeners that here at Proven and Probable, we are licensed to buy and sell precious metals as gold, silver, platinum, palladium and rhodium through Miles Franklin Precious Metals Investments. That also includes safe deposit boxes, which are fully insured and secured by Brink’s of Canada, Offshore Storage Accounts and Precious Metals IRAs. For inquiries please contact [email protected]

If you’re looking to have a position in physical platinum or palladium but you don’t want to have stewardship, Sprott offers the Sprott Physical Platinum and Palladium Trust. Allow me to break this down. The stock symbol is SPPP. When you own one share, you essentially own 0.0029% of an ounce of platinum and 0.0061% of an ounce of palladium. So if you own 345 shares, you would own one ounce of platinum and 2.31 ounces of palladium. A unique feature with this Sprott Trust is that if you own a position of $200,000 or greater in the Sprott Physical Platinum and Palladium Trust, you can actually redeem the metal, which is a feature that you do not see in ETFs.

Rick: Thank you for mentioning that. It’s also worth noting that for certain American taxpayers, there are capital gains advantages to owning the metals in the form of trusts rather than directly. Direct ownership of the metal or the proxies for the metal, which are the ETFs, are taxed by the IRS at the collectible or ordinary income tax rate. While for some investors, ownership of the trusts conveys the lower capital gains rate.

Maurice: Before we move the subject to base metals with regards to issuers that we like in the space, please visit some of our sponsors. They are for gold, NOVO RESOURCES CORP. (TSX-NVO|OTQX – NSRPF), IRVING RESOURCES (CSE- IRV|OTC – IRVRF) , NORTHERN EMPIRE (TSX.V-NM|OTC- PSPGF) , NX GOLD (TSX.V-NXM|OTC-LBRHF), MINERA ALAMOS (TSX.V-MAI|OTCQB – MAIFF), and for silver, ABRAPLATA RESOURCES (TSX.V-ABRA|OTCQB – ABBRF).

Rick: I would only note that your picks and my picks may or may not be the same. I would invite your listeners to come to the Sprott Vancouver Natural Resource Investments Symposium, where many of the precious metals companies that are owned in Sprott portfolios will, in fact, be presenting.

Maurice: Moving on to energy, which constitutes a lot of base metals, what are we overlooking here?

Rick: I think the most important economic discussion that we or anybody else could have is the ascent of man, the fact that over time, there are more of us and over time, our condition, despite our government’s best efforts to the contrary, seems to improve. When the poorest two billion people on the planet enjoy gradually higher standards of living, which they are, the things that give them utility, the things that they want to buy, Maurice, are different than us. We have too much stuff already, but when poor people get more money, they might eat higher value, higher calorie foods. They might put a metal roof on what had been a thatched shed. All that stuff uses stuff.

The most important stuff to very poor people is energy. They want internal combustion engines and they want electricity. The proliferation of energy use among the poorest energy consumers in the world is an incredibly important story. Because those of us who live in the West have more access to rich people, we’re interested in the electric vehicle story. The electric vehicle story is certainly an interesting story.

In terms of the so-called battery metals or electric metals, a much more important theme in terms of the use of those metals is, in fact, the increase in living standards around the poorest two billion people in the world. The urbanization and the liberalization of China set off by Deng Xiaoping when he said, “To be rich is glorious,” is really the author of the current metals markets.

As China continues to urbanize and as the Chinese experience is repeated around the world, we’re seeing increasing interest in and increasing shortages developed in a whole range of energy-related materials. This could be oil. It could be natural gas. It will return to uranium. Also, in terms of electricity, increasingly, it has to do with the battery metals, the distributed storage of power.

You’ve seen the lithium price do extraordinarily well in the last four years. You’ve watched the cobalt price explode in the last 18 months. This will continue. Increasingly, the places that you’re going to see it are much more mainstream metals that are usually identified with electricity. One would, of course, be nickel. The lithium ion battery by weight isn’t a lithium battery at all or a cobalt battery. It’s, in fact, a nickel copper battery. Some 85% of the weight of these lithium ion batteries is, in fact, nickel and copper.

The ability to get electricity from where it’s produced to where it’s consumed always, always, always relies on copper. I think your question is a very good one. I think in terms of what sectors will benefit from the increasingly electrified world that we’re seeing, the answer is all of them. Very attractive proposition.

Maurice: Indeed, it is. Another sponsor we’d like to reference here is NEVADA COPPER (TSX-NCU | OTC-NEVDF), EMX ROYALTY (TSX.V-EMX | NYSE-EMX) they have the Malmyzh project in Russia. Looking forward to seeing what they’re going to be doing there. Then a company that is not a sponsor, which, Rick, I have to give credit where credit is due, you brought to our attention, IVANHOE MINES (TSX-IVN | OTCQX-IVPAF). This is Robert Friedland’s company. It has probably, and correct me if I’m wrong here, the biggest copper deposit in the world.

Rick: It does. All three of those companies are, in fact, worth mentioning. Ivanhoe is a superb copper discovery. Challenged, of course, by operating in Congo, which is a very hard place to operate. EMX Royalty are people that we backed for a long time and know them very well. Nevada Copper, I don’t know so well. Although, I just spent some time with the ex-CEO of Rio Tinto, who has recently joined Nevada Copper board, which is a very interesting endorsement of the company. I’ve known Yerington, which is the district that its deposits are in, for a very long time, but the fact that the ex-CEO of the second largest mining company of the world just went on the board is certainly an interesting statement.

Maurice: One of the things I’ve learned from you, and I’ve learned so much, is you follow serially successful people. How about project generators? They often seem to be neglected.

Rick: The prospect generators are neglected, which is odd. My own experience speculating with the prospect generators has suggested to me that the probabilities of success are substantially higher than they are with other forms of exploration. That notwithstanding, the narrative associated within is fairly boring. So people own mining stocks for non-arithmetic reasons. That is people who need, for one of a better phrase, sex rather than money, tend to avoid the prospect generators.

The truth is that my own experience with the prospect generators in terms of return on capital employ has been extraordinary and I favor them and I’m delighted, in fact, with the fact that most people ignore them because that means that I can out-compete most people, given that they failed to show up for the race.

Maurice: Rick, would it be wise for project generators to consider amalgamating?

Rick: It would be wise for the whole space to amalgamate. One of the great sins of the junior mining industry is that we have too much, by way of general and administrative expense, relative to assets under administration or relative to project expenditure. So if we could take as an example the 20-odd prospect generators in the world and narrow them down to five or six, we would lower general and administrative expenditures relative to other expenditures and we would also probably rationalize project budgets and that we would allocate the money to a decreasing number of projects, which would probably be a good thing. Now, understand that there are probably 2,000 public or semi-public exploration companies on the planet. That sector would benefit mightily from amalgamation, too.

Maurice: Agreed on that one, sir. With regards to project generators, we’d like to reference three of our sponsors, EMX ROYALTY (TSX.V-EMX | NYSE-EMX), MILLROCK RESOURCES (TSX.V-MRO | OTCQB-MLRKF) and RIVERSIDE RESOURCES (TSX.V-RRI | OTC-RVSDF) and three generators that are not, ALMADEX MINERALS (TSX.V-AMZ), MIRASOL RESOURCES (TSX.V-MRZ| OTC-MRZLF) and ALTIUS MINERALS (TSX.V-ALS | OTC-ATUSF) . Sir, did you want to share any more with regards to uranium before we move on to oil?

Rick: With regards to uranium, the uranium bull market that we enjoyed in the period 2002–2006 was the most amazing bull market that I have witnessed in a career that has seen a lot of bull markets. People are bored of uranium now and beyond being bored, they still think within the context of Chernobyl and Three Mile Island. Meaning that in addition to being bored by it, they hate it, which means that it’s a very under-visited investment theme.

Maurice, it will help your listeners to understand the uranium thesis this way. If your American listeners believe that six or seven years from now when they hit the light switch, if they believe that the lights will come on, then they believe in higher uranium prices. Let me explain that.

Some 14% or 15% of U.S. baseload electrical supply comes from uranium. Uranium, right now, is priced well below the cost of production. That means either that the uranium prices will go up to a degree necessary that the industry can earn its cost of capital or the supply won’t be available.

Now, throughout the 65 years of my life, when essential commodities were priced below the cost of production, the prices rose to the extent that those supplies became available to society. So I would suggest to you that if you believe that the lights are going to come on in six or seven years in the United States, you believe in higher uranium prices. Whether or not you as a speculator have the patience to wait for that event to occur is an entirely different set of circumstances, but one must understand, ultimately, that markets work. The cure for high prices is always high prices. The cure for low prices is always low prices. Uranium prices are unsustainably low.

Maurice: Two companies we like here, they are not sponsors, is going to be FISSION URANIUM (TSX-FCU | OTC-FCUUF) and URANIUM ENERGY CORP (NYSE-UEC). Regarding oil, do you like big oil or craft oil?

Rick: Yes and yes. I think that the prices of the major multinational oil companies have not kept pace with the recovery in commodity pricing. I think that the smaller side of the oil space, certainly, the sub-billion dollar market cap, that’s absolutely been taken out and shot. That doesn’t suggest that every micro-cap or small-cap oil company is going to be a good speculation, but I have been around oil markets my entire life and I can tell you, in every set of circumstances that bull markets have followed their markets.

Will demand begin to be constrained a little bit by things like electronic vehicles and fuel cells? Absolutely. The most efficient form of transportation energy on the planet is still refined petroleum and demand for it will exist long after I personally have shed my mortal coil.

Maurice: I recall two years ago, where the price of oil was in the 20s and everyone was hitting the panic button. I recall you at the Sprott Symposium just sharing, “Hey, this shall come to pass,” and we’re looking at oil now and I believe it surpassed $75 to that year.

Rick: Correct. A couple of interesting things of note then. The example that I just gave with regards to uranium, you may recall I gave at that symposium. I told people if they believed that when they went up to their garage and turned the key to the right that their car would start, meant that they believed in $60 oil, that $30 oil was unsustainable. Either their car would not start because there wouldn’t be oil or the price would go up. Sure enough, the price went up.

The second interesting thing I think that your listeners need to think about with regards to oil prices is that the mainstream media has incorrectly, I think, identified the nature of the rebound in oil prices. They had suggested as an example that it might be as a consequence of Mr. Trump not liking the Iranians or that it might be because some young Saudi prince put a few of his uncles in jail.

The truth is that the rebound in oil prices happened simply because oil was unsustainably priced. That period of low oil prices led to a deferral of sustaining capital investments, which in turn impaired the ability of several companies and countries to produce oil, in particular, Indonesia, Peru, Venezuela and Mexico, among them suffering production declines in the range of four or five million barrels a day. That is what is really responsible for the recovery of oil prices.

Maurice: Two of our sponsors that we like in this space are JERICHO OIL (TSX.V-JCO | OTC-JROOF) and MOLORI ENERGY (TSX.V-MOL | OTCQB-MOLOF). Rick, in my opinion, agriculture fits perfectly into this discussion. What can you share with us?

Rick: It does. The agricultural investments are tough to make in equity markets because very few farming companies actually list publicly. So public investors and speculators are often reduced to, if that’s the right phrase, making investments in agricultural related themes. They might be equipment suppliers. They might be fertilizer fabricators and manufacturers. The truth is that I personally have begun to invest, again, I did it in the past, in very, very quality U.S. farmland in the upper Midwest.

I’ve done this as a substitute for commercial real estate investing, which I see the cap rates being entirely too high. In other words, I’m beginning to see the returns on capital employed in developed real estate in the United States come to levels I’m not comfortable with. While in very high quality agricultural real estate, the fact that commodity prices, corn and soybean prices are very low, has led to lower land rents. I think the prices on really high agricultural land in the U.S. upper Midwest are probably approaching generational lows. So I have begun to invest myself as a contrarian in very high quality agricultural real estate.

Maurice: Whether it’s mining, agricultural or just life in general, we all need water. I very seldom hear the discussion of water and/or water rights. What is the value proposition here that we’re missing?

Rick: The first thing is that most people aren’t interested in it. The larger theme, and it’s a really dangerous theme, is that water isn’t rationed by utility or markets. It’s rationed by political power. In reality, water flows downhill to money. Meaning that the most economic utilizers of water ought to get the most water because they pay for it, but that’s not the way it works. Water is regarded as a right. So it is subsidized and distributed politically.

The problem is that in many markets, the United States included, we have over-allocated the available water. There is evidence to suggest as an example that when the Colorado River was portioned many, many years ago, almost a hundred years ago now, the Army Corps of Engineers unwittingly measured its flow during very, very high flow years, anomalously high flow years. So now, we’re in the circumstance where about 115% of the normalized flow of the river has been allocated. As you can imagine, that’s fairly hard on the river.

When we get a real drought in the West, what we’re going to see is that we can’t vote increased supplies because there’s no way that we can increase that supply. The ownership of those few water rights, which are privately as supposed to publicly owned, in that set of circumstances might be expected to do extremely well.

I have been a water rights investor myself for a very long time and I need to say, it’s a very poor pun that water has become an extremely illiquid investment because most of the private water rights that were available for purchase are now owned by very long-term holders. The way that your subscribers may get access, indirect access to water rights would be to buy those few publicly traded shares of farming companies that, in fact, own water rights. I’m thinking of names like JG Boswell (NYSE-BWEL) and LIMONERIA (NYSE-LMNR) out in California.

Maurice: Last but not least, there’s another company in my opinion that speculators overlook and it is the preeminent name in the natural resource space and that’s SPROTT INC (TSX-SII | OTC-SPOXF). Tell us about the virtues of being a shareholder.

Rick: Well, there’s only so much I can say being the largest individual shareholder myself and also an officer and director. I can tell you that it’s a prudently run company. We have no debt. We increased our EBITA in the last two years by roughly 50%. We earn and pay a generous dividend and I would argue with most people, I don’t think I have to argue with you, that Sprott is, in fact, the best known brand name in precious metals and maybe natural resources in North America. In fact, about 200,000 North Americans now own Sprott brand and investment products. If we do, as I believe we will, head into a resource bull market, I think the value of this brand will come to be understood better than it is now.

Maurice: I think you hit the nail right on the head here. Children have a way of simplifying things and I want to just reference my eight-year-old son here, Braden. I asked him what would he like for his birthday. He shared with me, “Daddy, I want to buy Rick Rule.” It was just that simple. For him to recognize, of all the companies that I interview, he listens to my interviews, believe it or not at seven, and he shared with me, “I want to invest in Rick Rule.” I said, “Why?” He just said it very simply, “He’s the best.” He said, “You like him and he’s the best.” No way for me to refute that one.

Rick: Well, convey to this young man that flattery will get him everywhere. I appreciate it.

Maurice: For our audience, the ticker symbol is SII and on the OTC, SPOXF. Let me give that to you one more time for Sprott Inc. SII and on the OTC, SPOXF. Rick, the 17th through the 20th, the Sprott Natural Resource Symposium will be hosted at the Fairmont Hotel in Downtown Vancouver, British Columbia. This is a world-class event hosted by Opportunity Travel in conjunction with Sprott Global Resource Investments. Rick, what type of speculator attends this symposium and why should anyone listening attend?

Rick: Well, this symposium is of interest to people who are interested in precious metals and mining investments, primarily, in companies below a billion dollars in market cap. That is resource speculators. Now, larger cap companies, some fine larger cap companies, Franco-Nevada, Wheaton Precious Metals, Agnico Eagle, those kinds of companies will be present.

Most of the exhibitors, most of the companies that will be talked about will be much more speculative. Contrarians, I think should if they do not have an interest in the resources space simply because it’s cheap relative to other prices. It’s instructive to note, I think, Maurice, that one of the things that sets this conference apart from other conferences is that in order to be an exhibitor at this conference, you have to be owned by a Sprott-managed account.

Now, that doesn’t guarantee that every exhibitor in the conference will enjoy share price escalation. What it does guarantee is that we have vetted every single exhibitor. For us, exhibitors are content, too.

Another thing that I think people will enjoy at the conference is the extraordinarily high quality of the speakers. The legendary commentator, Doug Casey, is an example, but beyond him. Jim Grant, one of my personal favorites, Grant Williams, Jim Rickards, David Stockman, Steve Sjuggerud. In addition to all the gurus and editors and pundits, investors will be able to listen to and, in fact, rub shoulders with several entrepreneurs who have built billion-dollar mining companies from scratch. I believe the lessons that these men and women have to share about how they built companies from zero to billion-dollar valuations are inspiring, and they are hugely educational.

The fact that the conference has existed through thick and thin, we’re in our 29th consecutive year now, I think, says a lot for the value offered up by the conference to people who attend it.

Maurice: Equally, it is the intellectual capital that other attendees bring to the symposium and the networking that you can do is just remarkable. You referenced inspiring. If I may just sidetrack here for a moment, my first attendance was in 2015 and it was a life-changing event. Like most people listening, here’s what I did. I would listen to an interview such as this and then I would make out a little portfolio of some companies I’m going to look at and why go to the event because I have the names here in front of me. I can save on lodging, airfare, you name it. What a big mistake.

So what I did was I attended in 2015. In 2015, the networking I was able to do, the inspiration received, meeting you, having the opportunity to speak with you and another thing for me, I’m big on nonverbals, so for me to be able to actually now see you, see how genuine you are and others in this industry, it conveyed so much to me that I was in the right place at the right time and that was the moment I decided to begin Proven and Probable. That one-time investment in 2015, I’m sold forever. I will forever attend the Sprott Natural Resources Symposium. I want to thank you for that, sir. It’s been a life-changing moment for us.

Rick: Well, I want to thank you for your own contributions to the industry. Proven and Probable came about solely as a consequence of your interest and will and it’s doers that make the world. So you are to be congratulated for that product.

Maurice: Rick, I have to share that is one heck of a compliment to have the most recognized name in the natural resource space share that we’re providing utility in the space. For our subscribers, we love the demands and the challenges of bringing you what we believe are the best value propositions that we see in the natural resource space. So again, thank you for those kind words, Rick.

I’d also like to share that on the 16th of July, the day before the Sprott Symposium, I will be hosting a discussion panel at the Sea to Sky Gondola, Squamish field trip. For tickets, please email us. Also, we welcome you to come visit our booth at the Sprott Natural Resource Symposium.

Rick, at the conclusion of the symposium, you will be speaking at another event a couple of blocks down the street hosted by Jayant Bhandari, which is Capitalism and Morality. What can you share with us about this event?

Rick: I hope to see you there, first of all. Capitalism and Morality is extremely amusing. It’s a nonfinancial conference. It’s more of a philosophical conference, where we talk about human interaction that is non-government regulated. It’s my belief that interactions between all human people should be voluntary. That’s the nature of this discussion. I, myself, will put on a presentation that I hope amuses locals. It’s a speech I’ve never given before.

The title of it is The Situation Is Hopeless But It Need Not Be Serious. The point being that despite all of the government-inspired problems facing mankind, that we are so hugely inventive that to the extent that we take care of ourselves and the people we love, we get by and, in fact, our life gets better decade by decade, generation by generation.

Maurice: Oh, I look forward to hearing this one as I do with all of them. So yes, I will be in attendance, by the way. In closing, Rick, we’ve covered a lot of ground today with the audience. In my experience because I’ve done this personally, we take a discussion such as ours and take this box-out approach to deploying capital to companies simply because their nomenclature had the name of the metals what you’ve discussed today without doing their due diligence. So how can Sprott Global Resource Investments assist with this endeavor?

Rick: Well, I think the first thing that we can do and the lowest effort test that we can do for your listeners is a promise that I’ll make.

Any of your listeners that want me to personally rank the natural resource companies in their portfolio need simply email me at [email protected] To help streamline the emails, we ask you to please type in the subject line, “Proven and Probable”.

It is important that in the text of the email, not as an attachment, in the text of the email that your listeners send me both the name and the symbol of the stock in question. I will return to them on an absolutely no obligation basis my rankings, my current rankings of the companies in their portfolio and any comments that I think are appropriate to their holdings.

Maurice: Wow! You have the biggest name in the natural resource space, the world’s most respected credit analyst and he’s going to review or I should say grade one’s portfolio for free. Couldn’t ask for more. For our audience, we do not receive any financial compensation for you contacting Sprott.

Rick, let me ask you a question here. If I have a brokerage account here in the U.S., I can purchase these shares using OTCs. What’s the advantage or disadvantage of just purchasing OTCs?

Rick: Well, it’s a foreign security. That is a Canadian company and you purchase on the OTC market. What you or more probably your broker has to do is compare the U.S. dollar net cost between the U.S. over-the-counter market and the Canadian market. It is most often, but not always the case, that Canadian stocks trade with tighter spreads in the Canadian domestic market. It’s important then to note what the total transaction costs are. That is, both the commission, but of course, also the foreign exchange fees that your broker is charging you to translate Canadian dollars into U.S. dollars on your purchase and sales.

So it’s incumbent on somebody transacting in foreign securities that they understand every part of the trade. It’s complex when you first do it. After two or three goes, it gets much easier.

Maurice: As a client of Sprott, I’m able to then purchase shares directly on the exchanges such as the TSX?

Rick: That is correct. We do that shopping for you. We compare and contrast the U.S. market maker quotes and the U.S. over-the-counter market with the exchange quotes in Canada and we deliver the lowest net U.S. dollar price to our clients that could be affected on either market.

Maurice: Rick, we want to thank you for your time. In closing, can you please share the website with us, please?

Rick: www.sprottglobal.com.

Maurice: The phone number is 800-477-7853. Last but not least, please visit our website, www.provenandprobable.com, where we interview the most respected names in the natural resource space. You may reach us at [email protected].com.

Rick Rule of Sprott Global Resource Investments, thank you for joining us today on Proven and Probable.

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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Disclosure:
1) Maurice Jackson: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Novo Resources, Irving Resources, Northern Empire, Abraplata Resources, Millrock Resources, Riverside Resources, EMX Royalty, Jericho Oil, Molori Energy. 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: Novo Resources, Irving Resources, Northern Empire, NX Gold, Minera Alamos, Abraplata Resources, Nevada Copper, EMX Royalty, Millrock Resources, Riverside Resources, Jericho Oil and Molori Energy are sponsors of Proven and Probable. Proven and Probable disclosures are listed below.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Jericho Oil, Molori Energy, Wheaton Precious Metals. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Molori Energy and Jericho Oil. Please click here for more information.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Altius Minerals, Riverside Resources, Almadex Minerals, Jericho Oil, Molori Energy, Wheaton Precious Metals and Millrock Resources, Franco-Nevada, Agnico Eagle and EMX Royalty, companies mentioned in this article.

Given the impressive reversal in gold last Monday, which appeared to occur during the Asian and European trading sessions as opposed to the Crimex pit session, it looks like the precious metals are adhering to the well-broadcasted seasonality trade that has been fraught with random, rather than dependable, trading results, especially in the last four years. 2014 and 2016 had poor second-half performances, while 2015 and 2017 were marginally positive. What is reliable is that gold purchases in July have a greater chance for a successful trading outcome than any other month of the year, assuming, of course, that you took profits when gold popped in one of the following five months.

Seasonality
You can see from the chart posted below that in the months that follow July, five out of six have returns that exceed the monthly average, with the standout, September, being followed by corrective behavior in October. It has been postulated that accelerated and highly competitive buying by the Italian jewelry trade and Diwali in India accounts for strong September showings.

Oversold Conditions
Conditions in the gold pit are identical to those encountered at major bottoms in the past three years, with RSI (relative strength index), MACD (moving average convergence divergence), and the histograms all in troughs that have led to strong and very tradeable rallies. This is where I take some additional positions on as “trades” and others as “put-aways.” If I can afford a $50,000 bite, $25,000 goes to a trade and $25,000 to put-aways, but the first tranche is designed for a scalp.

Gold Miners (Warning!)
I have been staunch believer in the predictive nature of gold mining stocks since I first began tracking them in 1978. However, the usual Internet blogosphere is once again bountiful with opinionados that think they know more than they actually do. I have used the ratio of gold bullion to gold mining shares in the past and the GTSR (gold-to-silver ratio has usually been strongly reliable in calling the turns, but they are not always reliable as shown by the incredible “fake-out” that nailed us in 2015-2016.

In late summer 2015, I was buying the JNUG and NUGT calls for February and June expiry all based upon the growing outperformance in November of the miners compared to the metals. However, I stood by horrified in the very early New Year when they started to not just correct, but actually crash. By January 19, 2016, the HUI had broken 100 and the GDX:GOLD ratio was the lowest reading in over twenty-five years.

Gold versus Silver (GTSR)
I am currently short the GTSR, and early last week came very close to lifting the “short gold” leg of that very successful paired trade put on in April at 82.75. I tried to lift it by buying back the GLD shorts, but I was bidding too far under the market ($117.20). The best it could do was $118 on Thursday, only to sag to $117.40 on Monday while I was on the boat in the Massassauga Provincial Park with only intermittent Internet signals. I fear that I may have to simply ride out the paired trade to my 65 target, but that will take a major assault on $21.15 silver and $1,375 gold. If I simply lift the gold short at $1,250 (GLD $118.00), I only need $19.35 silver (SLV $18.10) to accomplish my objective.

Strategy
Before I embark on some dogmatic diatribe on the precious metals outlook and who and what are responsible for the unyielding assault on prices since last April, look no further than the base metals, where copper and zinc have once again entered bear market territories. It was only four months ago that I was debating a few of the clowns in the CEO.CA forum about “The Zinc Trade” and why at $1.66/lb. supply would magically appear out of nowhere forcing the LME (London Metal Exchange) inventories upward and negatively affecting price. All they could spin out was the same bullish case based on supply disruptions that I was writing about in 2011, when Tinka Resources Ltd. (TK:TSX.V; TLD:FSE; TKRFF:OTCPK) discovered the Ayawilca zinc deposit. As I have always maintained, when the reasons for owning a stock show up in the bullboards or chatrooms of the Internet cesspool, it is time to go the other way.

Dr. Copper has really taken it on the chin lately, and you can lay the blame squarely in the lap of the U.S. president, who is determined to penalize countries that have executed “The Art of the Deal” better than any previous American politician could ever have imagined. While the U.S. has been running around the globe for the last twenty years playing schoolyard bully, invading sovereign nations without provocation and forcing millions of Middle Eastern refugees from the region, China and Russia have been solidifying allegiances by way of good old-fashioned “business deals.” Those deals are now no different than military alliances, and the Chinese have become masters at dangling gilded carrots in front of starving and destitute mules to win respect and ensure servitude. Adherence to the generational objectives of Chinese negotiators has become a fearsome fly in the ointment of Western business leaders. Whereas the corporate leaders in the U.S. and Europe must please only their shareholders, whose idea of a long-range plan is the closing bell of the NYSE, the CEOs of Chinese companies need only look to the Party for approval and tenure. Long-range corporate objectives remain generational for China, and that is why a severe market correction is not only possible, it is probable, with the debilitating effects being painfully more impactful upon Western markets and corporations than it would (and will be) for their Chinese counterparts.

The strategy for my personal portfolio has three basic objectives, and they are as follows:

1. Focus on preservation of capital
2. Focus on preservation of capital
3. Refer to points 1 and 2.

That is most certainly an old and very corny joke but I simply cannot overemphasize the need for prudence and caution in all areas of investment selection. Markets are no longer a battle between humans and the dual enemies of fear and greed. It is no longer about being the strongest and the smartest and the fastest in terms of intellect and perseverance. Machines can do all of that, and way better than we can. To which you counter: “But machines cannot predict human emotion because they do not experience it.” To which I reply: “They see the emotional response to a price-changing event in nano-seconds and then move with such high-frequency velocity that they are able to front-run the human decision and skip to the front of the analytical queue without the silliness of any actual analysis.”

To that, I say: “Hand your money over to the quant-geeks and let the machines battle it out.” Think about it. To allow a HFT (high-frequency trading algobot the ability to analyze your order to an exchange and execute before you is essentially stealing your proprietary research. It is corporate and intellectual thievery of the highest order, and it is what is ruining markets and driving thousands of brilliant analysts out of the business.

Here is the head of the nail meeting the claw of the hammer: If we don’t extract the dominance of technology from the investment industry, idealists will no longer seek to use financial markets as conduits for the life blood of innovation. The liquidity event that is the sensible and infinitely logical reward of the retail speculator is being denied to them by interventions in markets that used to be driven by an absolutely wonderful combination of very healthy fear and greed. In the days before the algobots and central-banking-edict-driven markets, there was a palpable excitement in the air as the only “Fear” in the room was that you would miss your fill on 100,000 shares of Foofoo Mines, which was charging on drill hole speculation. Not to be outdone, Fear’s nose-picking twin brother was inciting the investment crowd to riotous deportment, as “Greed” poured gallon after gallon of avaricious fuel on the tinderbox of raging human desire for recognition and advancement, and took away your 100,000 shares of Foofoo.

Alas, the outcome was always the same: Some won; some lost; but copious amounts of money were raised and commerce prevailed. Through the mechanism of the venture capital markets in Canada and Australia, the wealth created through this process created entire industries in remote regions, enriching local indigenous peoples completely removed from the mainstream of public interest and commentary. The explorationists that I have known and admired in my career have always said that the most enjoyment they ever experienced was before they made the discovery and before they had acquired wealth. Most refer to wealth within the context of family and friends, and need not refer to a net worth statement as it was the direct result of capital markets functioning in the manner in which they were ideated.

The problem that remains today is that no rational human will invest in a private company if he knows that the exit mechanism is flawed. In medical marijauna deals, there is a ton of liquidity and everything is functioning. In mining, it is absent. That, in itself, is bullish.

In sum, the time to be buying Gold and Gold Miners is right now. Sentiment, which you will recall was my primary driver for going “all-in” in 2015, is now fully in the category of “brutal,” and as you all know, the equal and opposite reaction is always to “buy brutal” and “sell ecstatic,” or as many of my penmanship brethren would say, “You want to be sellin’ when they’re yellin’ and buyin’ when they’re cryin’. . .”

Happy Fourth to all of my numerous and wonderful American friends. The six years I lived in the Midwest, within the Heartland of the U.S.A., carry the second-best memories of my life, the first being finding my keys and my wallet two days ago in the boat with zero need from any one else. God Bless America.

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

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Disclosure:
1) Statements and opinions expressed are the opinions of Michael Ballanger and not of Streetwise Reports or its officers. Michael Ballanger is wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the article preparation. Michael Ballanger was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
2) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
3) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Charts courtesy of Michael Ballanger.

Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.

Shareholders of URZ Energy Corp. (URZ:TSX.V; URZZF:OTC) and Azarga Uranium Corp. (AZZ:TSE) agreed, “by an overwhelming majority,” to all of the proposed resolutions described in the May 31, 2018, information circular, according to a news release.

It was agreed, according to the plan of arrangement, that URZ Energy shareholders will receive two shares of Azarga Uranium per each URZ Energy share held. Additionally, when outstanding options and warrants of URZ Energy are exercised in the future, they will be done so using this 2:1 ratio.

By way of voting, Azarga and URZ shareholders also agreed to, among others:

1. Have a total of six directors in the next year.
2. Approve the 2018 rolling stock option plan.
3. Select BDO Canada as auditors of the newly formed company for the next year.
4. Increase to 6 million from 3 million the number of Azarga Uranium common shares reserved for issuance per the employee share purchase plan.

The Toronto Stock Exchange and TSX Venture Exchange conditionally approved the plan of arrangement for both entities. On July 4, 2018, the Supreme Court of British Columbia is expected to issue a final order of approval of the plan for URZ, and URZ’s shares will be delisted at trading’s close.

The Azarga-URZ merger should go into effect on or around July 5, 2018, assuming the court approves it and the conditions are met or waived.

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: URZ Energy. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this interview, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of URZ Energy, a company mentioned in this article.

Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE) recently announced the completion of an acquisition of a cobalt stream from a subsidiary of Vale S.A. Under the agreement, Wheaton has the right to receive an amount of finished cobalt equal to a fixed percentage of cobalt production from the Voisey’s Bay mine.

Wheaton paid US $390 million to Vale and will make payments of 18% of the Metal Bulletin market price per cobalt pound delivered. In conjunction with the completion of the Wheaton deal, Vale has also finalized a different streaming arrangement with Cobalt 27 Capital Corp. Vale has been provided with an aggregate of US $690 million in funding by Wheaton and Cobalt 27. This separate deal is for for the combined purchase of cobalt equal to 75% of Voisey’s Bay cobalt production effective January 1, 2021.

As of this future date, Wheaton has the right to receive from Vale an amount of cobalt equal to 42.4% of the Voisey’s Bay mine cobalt production until the delivery of 31 million pounds of cobalt and an amount of cobalt equal to 21.2% of cobalt production after that for the life of the mine.

Voisey’s Bay is located in Newfoundland and Labrador, Canada. It is one of the highest-margin nickel mines in the world.

Wheaton Precious Metals has streaming agreements for 17 operating mines and 10 development stage projects.

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Disclosure:
1) Jake Richardson compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Wheaton Precious Metals. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this interview, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Wheaton Precious Metals, a company mentioned in this article.

TD Securities recently initiated coverage on eCobalt Solutions Inc. (ECS:TSX; ECSIF:OTCQX; ECO:FSE), whose Idaho cobalt project “is advancing rapidly toward production at a time when demand for cobalt is accelerating, driven largely by demand growth for electric vehicles,” reported analyst Craig Hutchison in a June 14 research note. TD’s initial rating on eCobalt was Speculative Buy and its target price, CA$2.25 per share.

ECobalt would be one of only two primary cobalt producers in the world, and it is “well positioned to fill the growing supply gap, from a safe and mining friendly jurisdiction,” Hutchison indicated.

The company is currently continuing preconstruction efforts and developing an optimized feasibility study (OFS), Hutchison wrote, “which will look to simplify its flowsheet by producing a bulk concentrate to sell directly to offtake parties given the strong demand for safe secure supply.” It is actively pursuing such offtake agreements, which could help finance Idaho.

Subsequent to initiating on eCobalt, Hutchison issued a company update on June 25 noting the release of the OFS is now expected in Q3/18 versus Q2/18. “The delay was primarily due to longer-than-expected testing to achieve optimum arsenic removal from the bulk concentrate,” the analyst explained.

For most smelters to accept Idaho’s concentrate without penalizing eCobalt, the arsenic content must be below 0.5%. Tests using a rotary kiln roasting method have shown 0.2% arsenic in the near-term producer’s final product.

In terms of financing, eCobalt has received “preliminary project term sheets from multiple counterparties” to finance Idaho, Hutchison relayed. Those are expected to be updated as the OFS advances.

Despite the OFS release being pushed back, the company reiterated its commercial production guidance for H1/20 and its intent to stick to the defined project schedule.

Regarding eCobalt’s timeline for Idaho, Hutchison concluded, “We continue to allow for 24 months to complete construction and permitting of an off-site arsenic roaster, with production starting in mid-2020 and ramping up to full production in 2021.”

Hutchison reiterated TD’s Speculative Buy rating and CA$2.25 target price on the company.

Analyst Eric Zaunscherb with Canaccord Genuity also addressed eCobalt’s OFS in a research report of the same date, June 25. He noted the company needs more time to conduct additional tests and “redesign portions of its flowsheet,” which are now necessary due to the switch in roaster type to be used going forward. Consequently, eCobalt is targeting Q3/18 for release of the OFS.

Based on findings during metallurgical testing, eCobalt now plans to use a rotary kiln versus a fluidized bed in its concentrate extraction process for “maximized cobalt recoveries and sequestering of arsenic in a vitrified matrix,” Zaunscherb explained.

This plan revision came on the heels of another, earlier in the year, when the company decided to pursue delivering cobalt concentrate rather than “the more expensive cobalt sulphate,” a change that “resulted in enhanced project economics,” wrote Zaunscherb.

Now, the company is conducting bench-scale rotary kiln tests to determine the best way to consistently produce a cobalt concentrate whose arsenic level is less than 0.5%.

Zaunscherb concluded the report with a look to the future. “Two key milestones we expect to see in the near term, which we believe could result in a rerating of the company, are the completion of the feasibility study and finalizing project financing.”

Canaccord Genuity has a Speculative Buy rating and a CA$1.80 per share target price on eCobalt. Its stock is currently trading at around CA$1.04 per share.

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: eCobalt Solutions. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
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Disclosures from TD Securities, eCobalt Solutions, Initiating Coverage, June 14, 2018; Flash Note, June 25, 2018

Analyst Certification: Each analyst of TD Securities Inc. whose name appears on page 1 of this research report hereby certifies that (i) the recommendations and opinions expressed in the research report accurately reflect the research analyst’s personal views about any and all of the securities or issuers discussed herein that are within the analyst’s coverage universe and (ii) no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the provision of specific recommendations or views expressed by the research analyst in the research report.

1. TD Securities Inc., TD Securities (USA) LLC or an affiliated company has managed or co-managed a public offering of securities within the last 12 months with respect to the subject company.

2. TD Securities Inc., TD Securities (USA) LLC or an affiliated company has received compensation for investment banking services within the last 12 months with respect to the subject company.

4. TD Securities Inc. or TD Securities (USA) LLC has provided investment banking services within the last 12 months with respect to the subject company.

Additional Important Disclosures
We visited the Ram deposit in Idaho and met the management team on April 10, 2018. The Ram deposit accounts for approximately 100% of our mining asset estimates. The company paid for meals and local transportation from Salt Lake City to the project site.

Full disclosures for all companies covered by TD Securities can be viewed at here.

Disclosures from Canaccord Genuity, eCobalt Solutions Inc., June 25, 2018

Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research.

Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Required Company-Specific Disclosures (as of date of this publication):

eCobalt Solutions Inc. currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided investment banking services to eCobalt Solutions Inc.

In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking services from eCobalt Solutions Inc.

Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from eCobalt Solutions Inc. in the next three months.

Disclosures are available here.

A June 29 Canaccord Genuity research note indicated that earlier in the month, on June 15, Cobalt 27 Capital Corp. (KBLT:TSX.V; CBLLF:OTC; 27O:FSE) agreed to acquire 32.6% of cobalt produced at Vale’s Voisey’s Bay mine when it starts up in 2021.

“This is the second stream in the company’s portfolio, showing the market that it is continuing to execute its business plan,” wrote analyst Eric Zaunscherb. “This stream could offer investors more confidence in the direction the company is going.”

Based on this acquisition, Canaccord raised its target price on Cobalt 27 to CA$22.50 per share from CA$18. In comparison, the stock is currently trading at around CA$9.10 per share. “Our rating remains Speculative until cash flow commences,” noted Zaunscherb.

Zaunscherb relayed that the agreement calls for cobalt delivery to Cobalt 27 of up to approximately 850 tons per year for a total of 10.8 thousand tons, followed by 16.3% of the production. Cobalt 27 will pay $300 million ($300M) up front. After, “it will receive ongoing payments equal to 18% of the cobalt reference price for each pound of cobalt delivered, until Cobalt 27 has recovered the full value of the advance amount through Vale’s deliveries of finished cobalt,” explained the analyst.

Also, he noted in the report that Cobalt 27 announced on June 27 the closing of its bought deal financing in which it raised more than CA$300M. “Although the financing was slightly more dilutive than previously anticipated, the accretive nature of the stream offset dilution,” said Zaunscherb. The company will use a portion of those proceeds to fund the stream acquisition from Vale.

Want to read more Energy Report articles like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Disclosures from Canaccord Genuity, Cobalt 27 Capital Corp., June 29, 2018

Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research.

Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Required Company-Specific Disclosures (as of date of this publication):

Cobalt 27 Capital Corp. currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided investment banking services to Cobalt 27 Capital Corp.

In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking services from Cobalt 27 Capital Corp.

In the past 12 months, Canaccord Genuity or any of its affiliated companies have been lead manager, co-lead manager or co-manager of a public offering of securities of Cobalt 27 Capital Corp. or any publicly disclosed offer of securities of Cobalt 27 Capital Corp. or in any related derivatives

Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from Cobalt 27 Capital Corp. in the next three months.

Disclosures are available here.

Ayawilca project; drilling location

1. Introduction

Investors had to wait longer than expected for a big hit, but this week Tinka Resources Ltd. (TK:TSX.V; TLD:FSE; TKRFF:OTCPK) proved that looking for substantially more mineralization first instead of preparing a Preliminary Economic Assessment (PEA) is a viable strategy. The latest hole returned an amazing intercept of 10.4m grading 44.0% zinc (Zn) at West Ayawilca, and what is particularly interesting is that management seems to be verifying their new theory on Ayawilca structural controls of geology with this result. The share price reacted accordingly, with an impressive 36% jump and 2.7M shares traded volume on the day of the announcement:

Share price Tinka Resources; 1-year timeframe; source tmxmoney.com

Obviously lots of investors were impressed, and in my view rightly so, as this news could indicate potential for more and higher-grade tonnage than anticipated. It seems a bottom has formed at CA$0.40-0.45/share, even a bit lower than my forecasted C$0.46-0.48 from the April update, as the selling took longer than expected. Fortunately, this seems behind us now considering the massive volume, also against neutral to slightly negative sector sentiment. The potential implications for the resource and economics can be read in this article.

All presented tables are my own material, unless stated otherwise.
All pictures are company material, unless stated otherwise.
All currencies are in US dollars, unless stated otherwise.
Please note: the views, opinions, estimates or forecasts regarding Tinka’s performance are those of the author alone and do not represent opinions, forecasts or predictions of Tinka or Tinka’s management. Tinka has not in any way endorsed the information, conclusions or recommendations provided by the author.

2. Exploration Results

It was a pleasant surprise for Tinka Resources and investors to see an impressive intercept like 10.4m @44.0% Zn being returned by step-out hole A18-129, as part of the current drill program at the Ayawilca project in Peru. Management started focusing more on expanding the high-grade West and South zones as Zone 3 didn’t return the results that were hoped for so far, and this seems to be the right move.

Despite all the noise about the latest and pretty large CA$16.2M financing in March-April of this year, I am convinced that Tinka management knows very well what it is doing on the exploration side of things, and it shows so far. It is also always interesting and inspiring to talk to CEO Carman, and hear him elaborating about different geological concepts that might be tested. The Ayawilca deposits don’t look very straightforward, but Carman and his team seem more than able to track them down.

Let’s have a look at the latest drill result first, as mentioned in the latest news release. Six holes were reported from the West Ayawilca area (holes A18-117, 120 to 122, 126, 129) and one from the Central area (A18-127).

Key Highlights of the West Ayawilca Area:
Hole A18-129:

• 11.9 meters at 39.6% zinc, 0.8% lead, 45 g/t silver & 761 g/t indium from 339.4 meters depth, including
  10.4 meters at 44.0% zinc, 0.4% lead, 43 g/t silver & 869 g/t indium from 340.6 meters depth;
• Shallower intercepts in A18-129 include:
• 21.2 meters at 9.0% zinc, 0.1% lead, 13 g/t silver & 53 g/t indium from 260.0 meters depth, including
  4.2 meters at 19.2% zinc, 0.1% lead, 17 g/t silver & 186 g/t indium from 277.0 meters depth; and
• 6.5 meters at 11.0% zinc, 0.1% lead, 8 g/t silver & 52 g/t indium from 290.5 meters depth.

An average grade of 44.0% Zn in a substantial intercept in sulfides is world class, and is only encountered in Tier I deposits like Arizona Mining Inc.’s (AZ:TSX) Taylor deposit (up to 31.7%Zn) and Ivanhoe Mines Ltd.’s (IVN:TSX) Kipushi deposit (their average grade is even a freaky 34.9% Zn, twice as high as the next highest average grade zinc deposit, according to Wood Mackenzie). As this is a step-out hole, drilled about 50m west of the boundary of the outlined West Ayawilca ore body, it is interesting to see that the existing ore body extends to the west via the shallower intercepts, which are at the same depths, and have very decent width and grade as well.

• Other significant recent drill intercepts include:
  Hole A18-117:
• 7.8 meters at 8.1% zinc, 5.1% lead & 183 g/t silver from 94.0 meters depth*.
• Hole A18-122:
• 2.4 meters at 14.9% zinc, 0.3% lead, 25 g/t silver & 163 g/t indium from 351.3 meters depth.
• Hole A18-126:
• 1.0 meters at 23.7% zinc, 24 g/t silver & 30 g/t indium from 101.1 meters depth*; and
• 1.7 meters at 18.9% zinc & 28 g/t silver from 111.5 meters depth*; and
• 8.7 meters at 3.9% zinc, 1.4% lead, & 117 g/t silver from 235.7 meters depth.

There is a lot of consistency in the mineralization throughout the property, as almost any mineralization shallower than say 300m is relatively narrow (<10m) in width/thickness, veiny and hosted in sandstone. Hole A18-120 and A18-121 weren’t mentioned in the highlights, so I assume these results weren’t economic. As can be seen at the map of the latest drill collar locations, (very) economic results like A18-126 and A18-129 can be located very close to uneconomic results like A18-121, so a lot of drilling is needed to precisely define mineralized boundaries:

It appears that A18-120 just remained outside the mineralized horizon, but when we start looking at the C-section, it becomes clear what the geologists were looking for: a stacked system of two or more potentially layered limestone host rock. They came to this concept after analyzing the cores more in detail on structural controls, and discovered a few low-angle thrust faults west of West Ayawilca, in the large, semi-vertical North-South trending fault area (which runs west of West and South Ayawilca), potentially capable of laterally (horizontally) displacing the mineralized limestone:

This is why hole A18-129 proved them right. As CEO Carman stated in the news release:

“The exceptional zinc grade in hole A18-129 is very exciting as it confirms Ayawilca mineralization can be very high-grade, while a repetition of the favorable Pucara limestone opens up a new exploration target at depth and also down-plunge of the new intercept. Previously, it was thought that the phyllite metamorphic rock represents a ‘floor’to the zinc mineralization. Past drill holes were typically stopped a few meters into the phyllite, and some holes at Ayawilca may have been stopped prematurely.

“The objectives of the drill program are to find additional high-grade zinc resources, as well as to improve the geological understanding of the Ayawilca deposit, which is evolving as more holes are drilled. The three-rig drill program is now focused on testing extensions of the zinc resources at West and South Ayawilca, including deeper repetitions of the limestone-hosted replacement mineralization, as well as possible connections of these areas with Central Ayawilca.”

It must have been a good feeling as a geologist to see your theories confirmed with such strong results. On a side note: the holes A14-020 and A14-033 appeared to be ending in a mineralized envelope, apparently located at around the same depth as the new, spectacular intercept, which intrigued me. After looking into the corresponding news releases of 2014 and 2015, it showed that the deepest intercepts of these two holes were situated a good 70m more to the surface compared to A18-129:

“A14-20: 2.2 metres at 21.0% zinc from 164 metres depth; and 34.15 metres at 5.3% zinc from 179.85 metres depth, including 12.0 metres at 10.5% zinc from 179.85 metres depth; and 42 metres at 4.3% zinc from 268 metres depth; A14-33: 77.1 metres at 4.0 % zinc from 268.0 metres depth, including 8.8 metres at 13.5 % zinc from 270.9 metres depth. . .”

So according to my view, and if these two holes ended in phyllite basement rock, the high-grade intercept of A18-129 needs to be drawn in the section at greater depth, and the border between limestone and phyllite needs to be drawn a lot more angled, trending down to the right (eastern direction). This could indicate that a bigger/longer slab of limestone (and hopefully potentially more mineralization) could be located in this wedge between the two low-angled faults that cut up the limestone exactly where it turns downward (anticline). CEO Carman wasn’t sure of this but is looking into it with his team.

We discussed the new concept of layered limestone a bit more in-depth, and Carman had some interesting insights to share. For example, he and his geos are contemplating that one or both of the two low-angle faults might actually be the feeder, or lead to the feeder, being the conduits transporting the mineralization. According to him, it is unusual to get this very high-grade zinc, and only zinc in it, in this location, as existing drill results directly around it are more irregular, containing other metals like led and silver. As a rule of thumb, with a precipitation event, copper and tin mineralization crystallizes first, then zinc, then lead and silver, the farther you go to the boundaries of a deposit or mineralized zone. The purity of the zinc tells Carman that it must be closer to a feeder than the more mixed zinc/led/silver intercepts.

As these two faults trend down, it is anticipated that an eventual feeder system could reside somewhere below Central Ayawilca, and could even be the actual source of all Ayawilca mineralization. This means that the earlier concept of all mineralization coming from the east (Zone 3 and farther away) seems to be less likely, despite the more early-stage copper and tin intercepts over there. For this reason, and not getting very meaningful zinc intercepts at this zone, Tinka management decided not to proceed with more Zone 3 drilling for now, and focus more on West and South. In the news release of May 24, the announced Zone 3 drill results showed little zinc in for example the highly anticipated hole A18-113:

“20.3 metres at 1.26 % tin & 0.30% copper from 658.0 metres depth, including 7.9 metres at 2.39 % tin & 0.64 % copper from 664.1 metres depth.”

Holes A18-113 and A18-110 returned substantial amounts of (high-grade) tin though, which could mean an interesting expansion of the existing tin tonnage. However, a hole that was actually pretty impressive in this news release was A18-118, drilled at West Ayawilca, stepping out about 50m: “106.5 metres at 6.8 % zinc (uncut), 0.2 % lead, 17 g/t silver & 48 g/t indium from 237.3 metres.”

Assuming continuous mineralization to West and a radius of 25m for this hole, I would like to estimate a hypothetical 1.5-2Mt of additional tonnage, bringing total tonnage to 45.5-46Mt at the moment (in the last April update I estimated 44.1Mt after reported intercepts). These were the highlights of the May 24 news release as a brief intermezzo, and I would like to continue with the new geological concept.

For now, management thinks that these low-angle faults may actually run from West to South, and provide a wide and angled plane(s), acting as possible conduits. To test this concept, they are drilling several holes at the western part of West and South toward the big NW/SE fault, and one hole in between these deposits, named A18-134. Management hopes at least to find more high-grade zinc in a displaced limestone area at the anticline, acting as a second mineralized layer, and possibly even more mineralized layers, and another goal is to try to connect West and South at depth through displaced mineralized limestone.

According to Carman, there is a particular order in time needed to get to the geology as it is now. He thinks the low-angle faults were first, then the big NW/SE fault came, and after this the mineralization event took place. This created a question mark for me regarding the South deposit. Consensus is that South used to be part of Central, and was laterally displaced to the Southwest by an east–west-running fault after the mineralization event. But the NW/SE fault runs uninterrupted when looking at the maps, with the anticline halting mineralization at the western side of South just as it did at the western side of West.

This isn’t possible with the currently assumed order of events, unless the NW/SE fault line actually didn’t run uninterrupted in a more or less straight line, but was partly located much more to the east, and got shifted to the west when South started moving laterally as well. As a consequence, management had to pick very consciously a spot to test the connection between West and South, as South was moved, and therefore hole A18-134 was located more to the east to anticipate on all this. See light orange as the estimated original trajectory of the NW/SE fault line:

Something must have happened, but it is not all clear-cut. When looking at the greyish satellite pic, which is the basis of the map, one sees a ridge running more or less at the projected ‘old’ fault trajectory. This is confusing but the current drilling will probably define the correct structural controls in this area.

More to the west the mineralization drops off quickly when the big northwest/southeast fault is encountered. This type of large fault can act as a subvertical conduit for mineral precipitation, but more often than not they are filled with clay and other material that acts like a barrier. Carman thinks, as mineralization halts abruptly at the NE/SW fault, this is, in fact, a barrier, and he wants to infill drill at a 50m grid spacing and test the consistency of this barrier as well.

For now, the most important objective is to prove up the eventual repetitiveness of the high-grade intercept in the third dimension, parallel at the C section. When the geologists succeed in this, this could create a mineralized zone at West of 300m long, 50m wide laterally and 10m thick that could be about 0.5Mt. The next question, of course, would be if it would be high grade across the entire envelope, if such a high-grade zone could be established at South, and between South and West, and finally if a feeder system could be discovered. Tonnage doesn’t need to be big as the ore would be incredibly profitable, and very much suitable to front-load a mining operation for rapid payback and very high IRR.

3. Economics

To get an idea of gross metal value: 30% zinc means US$759/t @ $1.15/lb Zn, which is the equivalent of 18.8 g/t gold. One million tonnes of this material mined in the first year or two years could mean a good US$400M pre-tax cash flow after opex, recovery, payability, general and administrative costs (G&A), penalties, treatment charges, etc., which in itself would account for almost the entire capex in my models. Of course, continuous 30% Zn mineralization would be optimistic, so I remained very conservative when modeling (adding around US$100M in total after-tax NPV at base case with more additional tonnage). As a reminder, the basic data for my estimated hypothetical Ayawilca PEA were based on a peer comparison of economic studies. For this article, I added two more studies, the PEA of Fireweed Zinc (FWZ:TSX.V) and the PEA of Callinex Mines Inc. (CNX:TSX.V; CLLXF:OTCQX). The last one is an open pit project, but I added it anyway to get some insight in open pit numbers too. Here is part I:

See Full Size Image

And part II:

See Full Size Image

I consider the 50-60 Mt target of Tinka management realistic after this recent development, so I modeled various discounted cash flows on this (6,000 tpd operation) with this new sensitivity table as a result:

I consider a post-tax internal rate of return (IRR) of 25% at a conservative zinc price the minimum for a medium-size zinc project to be attractive for takeover candidates. No wonder that Arizona’s Taylor project got acquired recently, with an IRR of 42% @US$1.10/lb Zn, which is stand-out world class, and traded well above 50% of PEA NPV8 before and after the PEA came out. Economics and jurisdiction of Ayawilca are not as good, but should be able to provide sufficient upside for investors, as it would trade at 17% of hypothetical PEA NPV8 at the moment, if my calculations are correct, of course. I view this project as the best available project behind Arizona’s Taylor project. Nonetheless, I still used the US$1.15/lb zinc price for base case, as I consider this a solid target price for the future. Zinc has a tendency to spike for only a few years, and gravitate back to more modest levels:

Looking at this chart, a new normal of US$1.00/lb wouldn’t even be too conservative in my view, but considering the lack of good, new advanced projects shovel ready, a US$1.15/lb long term zinc price doesn’t seem unrealistic.

4. Catalysts, Plans

According to CEO Carman, Tinka is planning to keep drilling until mid-August with three rigs, which would mean another 8 to 10 holes. This might change when they hit something really spectacular, but this is the current schedule they have in mind. After closing off the data for the upcoming resource update, the metallurgical test work results will be completed and published early Q4, and at the end of Q4 the Preliminary Economic Assessment (PEA) is planned. For now, management doesn’t really have a tonnage target in mind, but they are aiming at roughly 50-60Mt.

The idea is to keep drilling during the PEA work, with one rig at Central Ayawilca, probably doing one deep, vertical hole to look for potential layered mineralization over there as well, and/or a possible feeder of it all. Management is also looking at deepening some existing holes at Central after the PEA is completed.

Some final information: Tinka is fully financed for the next 12 months at least, with CA$15M of cash in the treasury. The issued and outstanding share count stands at 260.8M at the moment, and the fully diluted number is about 307M shares. At a current market cap of CA$143M, there is still plenty of upside to be expected, as opex in Peru is very low in general, providing lots of margin of error on my estimates.

5. Conclusion

Hole A18-129 was a very interesting hole. It might not be the biggest overall mineralized intercept for grade times meters, but it seems to be the best indicator for a potential feeder system so far. Besides this, if the new mineralization concept could be verified along the west side of South and West Ayawilca, and hopefully in between, including the extremely high grade, this could imply a significant improvement for already impressive hypothetical PEA economics. Tinka Resources seems very much on its way to a 50Mt target, and this estimated tonnage could prove to be very profitable as well. In that case, upcoming PEA-generated NPV and IRR figures could firmly establish Tinka as the next takeover target after Arizona Mining. This could be shaping up as a pretty interesting second half of this year.

Ayawilca project surroundings

I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter on my website http://www.criticalinvestor.eu to get an email notice of my new articles soon after they are published.

The Critical Investor is a newsletter and comprehensive junior mining platform, providing analysis, blog and newsfeed and all sorts of information about junior mining. The editor is an avid and critical junior mining stock investor from The Netherlands, with an MSc background in construction/project management. Number cruncher at project economics, looking for high quality companies, mostly growth/turnaround/catalyst-driven to avoid too much dependence/influence of long-term commodity pricing/market sentiments, and often looking for long-term deep value. Getting burned in the past himself at junior mining investments by following overly positive sources that more often than not avoided to mention (hidden) risks or critical flaws, The Critical Investor learned his lesson well, and goes a few steps further ever since, providing a fresh, more in-depth, and critical vision on things, hence the name.

Disclaimer:
The author is not a registered investment advisor, and has a long position in this stock. Tinka Resources is a sponsoring company. The views, opinions, estimates or forecasts regarding Tinka’s performance are those of the author alone and do not represent opinions, forecasts or predictions of Tinka or Tinka’s management. Tinka has not in any way endorsed the information, conclusions or recommendations provided by the author.

All facts are to be checked by the reader. For more information go to www.tinkaresources.com and read the company’s profile and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.

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Charts and graphics provided by the author.

On June 11, Cypress Development Corp. (CYP:TSX.V; CYDVF:OTCQB; C1Z1:FSE) published its resource estimate for its Clayton Valley Lithium Project in Nevada on SEDAR, detailing the technical report it first published on May 1. Putting the NI 43-101-compliant report on SEDAR gave CYP added exposure to what might become one of the most exciting stories in junior mining this year.

The Vancouver-based company has so far flown under the radar of investors, trading at a ridiculous 0.32 cents a share as of close of trading Friday. Ridiculous in our opinion because the stock price is nowhere near reflective of what Cypress has in the ground, providing junior mining investors with a spectacular entry point. (Read “Cypress has world class Clayton Valley Nevada lithium resource” for our calculation on what CYP should be worth, based on the current market value of lithium in the ground, multiplied by CYP’s resource estimate and divided by its outstanding shares).

Before we run through the numbers, let’s set the stage with a little background on electric vehicles (EVs) and the lithium market, which is growing daily as countries make the shift from internal combustion engine (ICE)-based vehicles to EVs and more auto-makers and battery manufacturers enter the space.

The EV revolution

While modern electric vehicles have existed as prototypes and with very limited commercial production since the 1990s (General Motors’ EV1—for a great history watch Who Killed the Electric Car?), the real momentum in the switch from cars equipped with gas and diesel-powered internal combustion engines to vehicles powered with lithium-ion batteries started in 2009 by then-President Obama. Obama announced his administration was putting aside $2.4 billion in order for American manufacturers to produce hybrid electric vehicles and battery components.

Of course Tesla Inc. (TSLA:NASDAQ) was a few years ahead of Obama, forming in 2003 and producing its first model, the all-electric Model S sedan, in 2008.

Electric vehicles have far fewer moving parts than gasoline-powered cars—they don’t have mufflers, gas tanks, catalytic converters or ignition systems. There’s also never an oil change or tune-up to worry about. But the clean and green doesn’t end there. Electric drives are more efficient than the drives on ICE-powered cars. They are able to convert more of the available energy to propel the car therefore using less energy to go the same distance. And applying the brakes converts what was wasted energy in the form of heat to useful energy in the form of electricity to help recharge the car’s batteries.

Electric vehicles are totally emissions-free. China, the world’s second-biggest economy, in a move to cap its carbon emissions by 2030 and curb worsening air pollution, said it will set a deadline for automakers to end sales of fossil-fuel powered vehicles and push into the market, led by Chinese EV juggernauts BYD and BAIC Motor Corp. India, France, Britain and Norway are doing the same.

But the key to EV market penetration has always been the batteries. How can they be made cheaply enough to compete with gas-powered vehicles, and with a reasonable range that doesn’t have the driver frantically searching for a charging station in the middle of nowhere? (As a personal aside, during a recent short drive from Kelowna to Vancouver an aheadoftheherd.com technician saw two EV charging stations at highway rest stops. The infrastructure is coming, folks.)

Part and parcel to this question is lithium. Lithium carbonate and lithium hydroxide are key components of the lithium-ion battery cathode, making it an extremely sought-after battery ingredient.

U.S. lithium dependence

The Clayton Valley in Nevada started producing lithium in 1966 and the Silver Peak lithium brine operation owned by Albemarle is currently the only producing lithium mine in the U.S. In 2008 the National Research Council saw lithium as potentially becoming a critical mineral due to the expected growth of hybrid vehicle batteries. Two years later the U.S. Department of Energy’s Critical Materials Strategy included lithium as one of 16 key elements. The country currently imports most of the lithium that it consumes—with import reliance today pegged at greater than 70%. Lithium is among 23 critical metals President Trump recently deemed critical to national security, and signed a bill that would encourage the exploration and development of new U.S. sources of these metals.

It’s unfortunate for the United States that its dependence on lithium coincides with the ramping-up of demand for the white metal. But it’s also an extraordinary opportunity for Cypress.

Demand outstripping supply

Approximately 215 kt LCE was produced in 2016. Chile was the world’s largest producer in 2016 with 37%, followed by Australia with 34%.

By 2025, if a very reasonable 30% of mining projects come to term, 700 kt LCE will be produced. Australia will supply 45% of world production at this time; Chile and Argentina will each supply 15%, China 10%, and the rest of the world 15%.

According to Roskill’s 15th edition market outlook report, demand from companies that produce batteries to power electric cars, laptops, cell phones, etc. is expected to increase 650% by 2027, with overall lithium demand forecast to rise more than threefold over that period. Electric vehicle lithium-ion battery pack manufacturers’ share of the overall market for lithium-ion batteries will grow from 46% in 2017 to 83% by 2027.

Use of lithium hydroxide will increase from 25% of lithium compounds used in rechargeable batteries in 2021 to 55% by 2027.

The Chinese vehicle market is forecast to grow to 29.1m units this year, on its way to 38.2m in 2025 (equal to 52% of global volume growth over that period). By 2030, 40% of vehicle sales in the region will be EVs. The European car market is likely to expand by 2.5m units by 2030 to reach 23.1m units annually with a roughly 30% penetration of EVs by that time. The U.S. will lag and only 16-21% or 2.6m–3.5m of sales in 2030 are likely to be electric.

“By 2030, Tianqi Lithium, SQM, Albemarle, and FMC, the companies that dominate the business, will have to supply enough lithium to feed the equivalent of 35 plants the size of the Tesla Gigafactory now being built in Nevada, according to BNEF. The total investment in new mines, including some for other elements used in lithium ion batteries, will likely range from $350 billion to $750 billion, according to analysts at researcher Sanford C. Bernstein & Co.” We’re Going to Need More Lithium, bloomberg.com.

Of course the other elephant in the energy storage sector is the not oft talked about growing grid level and behind the meter energy storage business.

“The energy storage market grew 46 percent between 2016 and 2017, with 28.6 megawatts deployed in Q3 2016 and 41.8 megawatts deployed in Q3 2017.51 Additionally, the market is projected to grow nine times between 2017 and 2022.5. Recent policies and developments have further supported the growth of the energy storage sector. For example, New York recently set a statewide energy storage target of 1,500 megawatts by 2025.53 Similar to those set in California, Massachusetts and Oregon, the targets help reduce regulatory barriers in order to further develop market growth.54 These investments are helping grow the energy storage sector rapidly, translating directly into new jobs. In 2016, employment in energy storage increased 235 percent from the previous year to reach 90,800 jobs, with battery storage accounting for over half of these jobs.” Climatecorps.org.

According to Bloomberg New Energy Finance (BNEF) falling battery costs will have a huge impact on the electricity mix over the coming decades, BNEF predicts lithium-ion battery prices, already down by nearly 80% per megawatt-hour since 2010, will continue to tumble as electric vehicle manufacturing builds up through the 2020s.

“We see $548 billion being invested in battery capacity by 2050—two-thirds of that at the grid level and one-third installed behind-the-meter by households and businesses. The arrival of cheap battery storage will mean that it becomes increasingly possible to finesse the delivery of electricity from wind and solar so that these technologies can help meet demand even when the wind isn’t blowing and the sun isn’t shining. The result will be renewables eating up more and more of the existing market for coal, gas and nuclear.” Seb Henbest, head of Europe, the Middle East and Africa for BNEF and lead author of NEO 2018.

Among the other highlights of BNEF 2018 report are predicted high penetration rates for renewables in many markets:

• 87% of total electricity supply in Europe by 2050
• 55% for the U.S.
• 62% for China
• 75% for India

Monster deposit

It is in this context that a new U.S. lithium mine is being proposed next to Albemarle’s Clayton Valley Nevada, Silver Peak Mine. The timing is excellent. Silver Peak failed to increase production between 2012 and 2016 and its lithium grades are rumored to be dropping.

Cypress Development Corp. has discovered a different type of deposit than the usual brine or hard rock lithium deposits, which must either be mined using drill and blast methods, or pumped into shallow ponds and allowed to evaporate, after which the concentrated lithium carbonate is extracted.

On May 1 the company published a huge maiden resource estimate, and is currently working on an economically feasible, metallurgical process for what Cypress believes is a large, bulk-tonnage deposit of leachable, non-hectorite clay.

Of the 1.3 billion tonnes of lithium estimated in Cypress’ Clayton deposit, are 6.54 million tonnes of lithium carbonate equivalent (LCE)—2.857 million tonnes indicated and 3.683MT inferred.

The estimate is based on drill results from 23 holes completed by Cypress in 2017 and 2018. The deposit remains open at depth, with 21 of 23 holes ending in lithium mineralization, meaning the drills have plenty of room to run in expanding and growing the resource.

The grades are also exceptional—889 parts per million for the indicated mineral resource of 597 million tonnes and almost exactly the same, 888 ppm for the 779 million tonnes of inferred.

Of course, the size of a lithium deposit is of limited value if the metallurgy doesn’t work. In a recent article we discussed the difficulties of processing lithium, but in Cypress’ case the metallurgy looks relatively simple. The company has shown that lithium can be extracted from the clay using a flow sheet whereby recoveries of +80% can be achieved in short leach times (4 to 8 hours) using conventional dilute sulfuric acid and leaching. The amount of sulfuric acid and reagents needed is relatively low, and being able to leach the lithium with acid avoids costly calcine and regrind of material during processing, which would be the case if the deposit was hectorite clay.

A lithium “porphyry”

In an interview last week with Ahead of the Herd, Cypress’ CEO Bill Willoughby compared what Cypress has to an oxide copper porphyry deposit. While lower grade than copper sulfide ores, copper oxide ores are usually cheaper to process, with the copper mineral leached using sulfuric acid, before being put through an electro-winning process. In the same way, Cypress’ lithium-rich clays at its Clayton Valley Project aren’t as high-grade as some hard rock lithium mines, but the mining and processing is simpler and less expensive.

“It’s the exact opposite of mines that are going into production where there are very high costs, high grade. We’re extremely low-cost, lower-grade,” says Willoughby—a mining engineer with a doctorate in mining and metallurgy, and an industry veteran with close to 40 years of experience.

Mining Cypress’ Clayton Valley deposit would be much simpler than hard-rock mining—the method used to extract lithium at the Greenbushes mine in Australia—the world’s largest hard-rock lithium mine—and Nemaska Lithium’s Whabouchi spodumene mine in Quebec. That’s because the deposit starts at an outcrop at surface and drops to around 350 feet underground.

“When you talk about a hard rock operation, you have drilling and blasting and overburden removal involved. It’s hard material, you’ve got to crush and grind to the appropriate size faction. Then you do gravity and flotation to make a spodumene concentrate and then it’s followed by pyrometallurgy and leaching.” Willoughby said.

“If you look at our flow sheet, we’re virtually just scooping the material out, putting it in the mill and we’re jumping straight into the hydro-met section, so you can see there’s a whole series of events that we’re bypassing.”

Easy metallurgy

There are two primary means of extracting lithium: from brines in evaporated salt lakes known as salars, and hard rock mining, where the lithium is mined from granite pegamite orebodies containing spodumene, apatite, lepidolite, tourmaline and amblygonite. The lithium at Cypress’ Clayton Valley deposit is a clay-like material that is soft when wet and chunky and hard when dry.

The clay itself is volcanic-derived ash that fell into a lake bed and metamorphosed into clay. One theory about the brine that Albemarle has been pumping over the years is that it’s derived from volcanic ash, which is the source of the lithium brine. Cypress believes that lithium-bearing brine aquifers could be located below the clay. The company has identified rare “mudstones” found at the eastern flank of the Clayton Valley; nothing similar has been found at other properties in the valley.

The lithium-rich mudstones likely were allowed to accumulate in a protected, lagoon-type environment, compared to the rest of the valley where boulders and debris were washed away throughout millions of years of rainy seasons.

The mudstone resources are broken down into five units which are distinguished by stratigraphic position and color (see table below). The middle three units are higher grade and estimated to average greater than 950 ppm Li, whereas the uppermost and lowermost units average less than 700 ppm Li.

The lithium would be processed from a pregnant leach solution, similar, as mentioned, to processing copper oxide ore. Iron, silica, calcium and magnesium are precipitated out, leaving a solution containing lithium, potassium and sodium. The latter two minerals can be sold as byproducts.

The process is different from a lithium brine operation one might find in Chile or Argentina, because it involves a conventional mill, versus evaporation ponds found, for example, in the Salar de Atacama, Chile. That also saves time. Lithium brines can take up to take up to two years to evaporate and concentrate the lithium.

Willoughby noted the metallurgical flow sheet CYP has tested so far has three advantages: “We have a fast extraction time, so we’re under eight hours on an extraction. We’re low acid consumption, we’re probably going be under 100 kilos per ton of sulfuric acid per ton of clay processed. And because of the nature of our processing and a couple things we figured out in the circuit, we’re going to be low on our neutralization needs and that’s mainly in adding lime to the circuit to knock out the other elements.”

Cypress’ consultants ballpark the cost of production between $2,500 and $4,000 a tonne of lithium carbonate equivalent. More definite figures will be contained in the upcoming preliminary economic assessment (PEA). Set against an average 2017 price of $13,900/t for lithium carbonate, the economics are already looking great. But Willoughby knows the company needs to continue proving out the metallurgy, and that’s where the company is focused.

“I think right now we’re in the state of, ‘Show us that you can actually produce this material,’ he told Ahead of the Herd. Laboratory test work indicates that Cypress has the ability to produce a high purity lithium carbonate or lithium hydroxide product on site.

50 years worth of LCE, to start

Cypress has identified about 200 million tonnes of ore, estimated to contain a million tonnes of LCE, it would use for its initial open pit mine. The company is targeting 20,000 tonnes of lithium carbonate (LCE) production a day (1,000,000/20,000 = 50 years of mining), which is bang on 10% of the current global 200,000 tonnes per year LCE production.

Ten percent of world production is considered to be enough to affect the lithium price, so if Cypress goes mining and starts producing at the numbers it hopes to, the mine will be a price setter and will influence the entire lithium market.

The term “starter pit” is a misnomer because even that small chunk of the immense resource contained on Cypress’ Clayton Valley property has the ability, at current global LCE demand, to supply the entire world lithium market for five years. (1,000,000 tonnes of LCE divided by 200,000 tonnes annual global production).

Start scaling up, add another mine, or two, to the property, and the numbers become even more impressive. The indicated resource of 2.8 million tonnes LCE would supply the entire global current market for 14 years. But with lithium demand continuing to grow, we should put the annual production at 300,000 tonnes, for projection purposes. That would still give Cypress 9.3 years worth of global LCE supply by mining the indicated. Add in the inferred, which Cypress plans to upgrade to indicated with more drilling, and that’s another 12 years of lithium supply.

America’s mine

There currently exists no mine to battery supply chain in North America—not in the United States nor Canada. At Albemarle’s Silver Peak Mine, the lithium, produced at around 3,500 LCE a year, is shipped to Kings Mountain in North Carolina, which produces lithium hydroxide needed for lithium-ion batteries. This material is then loaded on ships and sent to Asian battery manufacturers, which sell the batteries to automakers. The irony is that Tesla’s Gigafactory in Nevada is located just a short distance away from Cypress’ Glory and Dean deposits.

But Tesla has shown little interest in making deals with current (Albemarle) and future U.S. lithium miners, despite Elon Musk’s entreaties to source its lithium from North America. While it’s true that Tesla signed an agreement with Pure Energy Minerals, also exploring in the Clayton Valley, to supply it lithium hydroxide, Tesla has been sniffing around the Chilean salars for a long-term source of lithium for its high-end electric vehicles. The company inked a deal in May with Kidman Resources, an Australian company, which is developing a lithium processing plant in Western Australia with SQM, the largest lithium producer in Chile. Tesla plans to buy lithium hydroxide from Kidman and manufacture batteries in China for its Nevada gigafactory.

North of the border, Canadian lithium miners aren’t looking in their own backyards either to build an EV battery supply chain. Nemaska Lithium will send its lithium hydroxide to Swedish battery maker Northvolt AV, which will take between 3,500 and 5,000 tonnes per year. Nemaska has also made deals with Asian companies, in April accepting an investment of $78 million from Japan-based Softbank, the world’s biggest technology investment fund ($100 billion) in return for a 9.9% stake. In May Nemaska agreed to supply spodumene concentrate to Hanwa Co., Ltd. of Japan and General Lithium Corp from China.

You can hardly blame the battery-cos from locking up lithium supply in offtake agreements with future lithium miners. As the prices of EV battery ingredients—copper, lithium, cobalt and graphite—continue to climb and the prices of finished products, the batteries, continue to fall margins are being squeezed, these companies need to hedge their bets, hence the off-take agreements securing long term prices/supply. But wouldn’t it be great if North American lithium mining companies kept their lithium on the continent instead of shipping it overseas?

If we want a lithium-ion battery industry and electric vehicles built in North America we need lithium security of supply. No longer can we rely on the good graces of other countries, namely Australia, China, Chile and Argentina, where 90% of the lithium is produced. We need to develop an energy metals industry in North America—from mine to battery.

Asia and particularly China are looking to lock up lithium supply, and are years ahead of North America in terms of EV penetration and battery supply chains. Last year China sold about 700,000 electric cars, 200,000 more than 2016. Government subsidies to EVs have been reduced by 20%. The Asian superpower sees EVs as the key to unlocking the pollution dilemma that has plagued its car-choked cities. China represents over a quarter of the global EV market, and will own 40% by 2040 according to the International Energy Agency (IEA). The country has signed lithium offtake agreements with mines in Australia, Canada and Africa.

In May Tianqi Lithium, which owns 51% of Talison’s Greenbushes mine in Australia, the largest hard rock lithium mine in the world, succeeded in purchasing a 24% stake in SQM, paying $4.1 billion to buy it from Canada’s Nutrien—the world’s largest potash miner. The company was created through the merger of PotashCorp and Agrium.

But Chile doesn’t want to lose control of lithium, which it considers to be a strategic metal, and rightly so. Citing concerns that China is trying to create a lithium monopoly, Chile in March filed a complaint trying to block Tianqi from acquiring the stake.

But according to Corfo, Chile’s economic development agency responsible for overseeing SQM’s lithium leases in the Salar de Atacama, Tianqi and SQM combined will now control 70% of the global lithium market. Tianqi is aiming to nearly triple production capacity through 2020.

The race to lock up lithium in Chile is actually good news for Cypress, because having a mine in the United States frees up the company to cut deals with Tesla or other domestic auto manufacturers rather than trying to compete with the Chinese who are already sealing offtakes in South America and Australia. This is especially important now, considering that we are in the early stages of a trade war between the United States and China, with lithium in the crosshairs.

Earlier this month, the U.S. threatened to impose $200 billion worth of additional tariffs on Chinese imports, adding to the $150 billion in tariffs already in play from both sides—not including steel and aluminum duties. China vowed to retaliate in kind. The U.S. has already promised 25% tariffs on about $50 billion worth of Chinese products, including semiconductors and lithium batteries.

In the midst of this trade instability, imagine a North American mine that can supply lithium to American car companies, making electric vehicles, in the US, free of tariffs? And with no foreign offtake agreements in place—the only North American lithium mine that can say that. Willoughby told Ahead of the Herd that Cypress’ intention is to supply local. “In my mind, I see the battery plant up the road at Tesla, that would be a nice ‘Made in Nevada’ story.”

Conclusion

Three years ago Cypress began prospecting in the Clayton Valley, home to Albemarle’s Silver Peak Mine, which has been mining Nevada lithium brines for decades.

Cypress’ Clayton Valley Lithium Project is an elephant. The sheer size of the resource means that a lot of attention will be focused on the company, particularly beneficiation methods. With a million dollars in the kitty, Cypress is well-financed.

Cypress has a non-hectorite claystone, starting at surface deposit in Nevada, U.S. No tariffs, no trade war worries, next to the only producing lithium mine in the U.S. and in the home state of Tesla’s Gigafactory, which needs lithium. With its monstrous resource, high-grade lithium content, a superior location in regard to permitting and all the existing infrastructure in place, the uniqueness of the new deposit model, and with no competition in the Clayton Valley basin, Cypress is focused on perfecting its metallurgy and proceeding to the next stage, a PEA, slated for July, with a prefeasibility study planned for shortly thereafter.

Could Cypress be THE company with THE lithium mine in the U.S. that provides lithium carbonate and lithium hydroxide security of supply to a U.S. based battery manufacturing sector freeing the U.S. from foreign dominance of its EV revolution?

Could Cypress Development Corp. (TSX.V:CYP) actually own the means to developing a U.S. mine to battery manufacturing sector? The possibility is certainly very real, and exciting.

I see two possibilities here for investors. One is that Cypress will take this project all the way to production, and from what Willoughby has told us, that is the plan. On the other hand, juniors, especially those with mining engineers at the helm, often take that position with investors, but as we all know, no reasonable explorer will refuse a buyout. How often have you heard, “We’re going mining, we’ve got the project, the team is assembled, it’s just a matter of doing the studies and acquiring the permits…What’s your offer?”

I’ve got Cypress Development Corp. and upcoming catalysts, including what we here at aheadoftheherd.com anticipate to be a very attractive PEA coming shortly, on my radar screen.

Richard (Rick) Mills, aheadoftheherd.com
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Richard (Rick) Mills, AheadoftheHerd.com, lives on a 160-acre farm in northern British Columbia. Richard’s articles have been published on over 400 websites, including: WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Beforeitsnews, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTreport, Vantagewire, Indiatimes, Ninemsn, Ibtimes, Businessweek, HongKongHerald, Moneytalks, SeekingAlpha, BusinessInsider, Investing.com, MSN.com and the Association of Mining Analysts.

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Osisko Gold Royalties Ltd. (OR:TSX; OR:NYSE, US$9.30), has been involved in several transactions this week.

• Arizona Mining, in which OR holds a 1% royalty, is being acquired by Australian miner South 32.
• Dalradian, in which OR holds 9% of the shares and a royalty, is being acquired by a private mining finance company (Orion). The purchase offer is at a 62% premium to the share price, but is still only at 60% of the NAV, so Osisko has decided to hold on to its shares.
• Osisko has acquired a silver stream on the Horne 5 project of Falco, one of Osisko’s “incubator” companies. For $180 million, in staged payments, plus a per-ounce payment, Osisko will receive 100% of the silver. The return on the investment is attractive, though Horne is not considered an easy project, and Falco still has to raise the bulk of the capex. The staging of payments helps minimize the risk to Osisko.

Though none of these developments is a game changer, all are positive, and all help the building of a cash flowing portfolio of royalties and streams. The market seems to have focused on the negatives—the capex required for Horne, that Dalradian was not acquired by a mine-builder, and so on—and the stock has fallen. At $9.27, it is within pennies of its annual low (last week it traded at $9.18) and very close to is end-2016 low. Buy.

Drill results continue to justify going alone

Lara Exploration Ltd. (LRA:TSX.V, CA$0.61) released further results on its Planalto project in Peru, right after my last note was published. The new results include 130 meters of 0.88% copper, with the length of mineralization as impressive as the grade. Lara is undertaking a reinterpretation of data from its previous joint venture partner on the project. That partner dropped out, but has now been acquired by OZ Minerals, an Australian company already active in the region. Lara is seeking another partner on the project, but is prepared to do some more work to advance the project. With its multiple properties and several high-potential projects, Lara stock has barely budged with the results from Planalto and earlier the Puituco property, making it a very strong buy at the current level.

Strong resource estimate and market yawns

Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.MKT, CA$3.22) announced an initial inferred resource for the lower Zone at Timok. This lies below the 100%-owned Timok Upper Zone, currently under development, and is a joint venture with Freeport. The resource estimate was strong, with 1.7 billion tonnes of copper and with better grade copper than anticipated, again showing that this is one of the very top undeveloped copper deposits in the world.

The stock did not respond, however. In my view, this was because first, production from the Lower Zone is well into the future, and the resource is all inferred at present; and second, the market is more focused on the possibility of a revised bid from Lundin (or someone else) at present. Of course, if Lundin publicly withdrew its proposal and no other bid was out there, the stock would fall back. But this resource adds more value to Nevsun, and, notwithstanding the near-term risk, it is a buy at current prices.

Equities add to balance sheet strength

Altius Minerals Corp. (ALS:TSX.V, CA$13.02) has a portfolio of equities. This is currently valued at approximately $160 million, itself significant. Most of it is in junior exploration projects, but nearly half of that is held in the liquid Labrador Iron Ore Co., which yields about 9% and could be turned to cash quickly if needed. Altius is a buy.

Adrian Day, London-born and a graduate of the London School of Economics, heads the money management firm Adrian Day Asset Management, where he manages discretionary accounts in both global and resource areas. Day is also sub-adviser to the EuroPacific Gold Fund (EPGFX). His latest book is “Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks.”

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Disclosure:
1) Adrian Day: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Osisko Gold Royalties, Lara Exploration and Altius Minerals. 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: None. Funds controlled by Adrian Day Asset Management hold shares of the following companies mentioned in this article: Osisko Gold Royalties, Lara Exploration, Nevsun Resources and Altius Minerals. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports (including members of their household) own securities of Osisko Gold Royalties, Lara Exploration, Nevsun Resources and Altius Minerals., companies mentioned in this article.

Industry watchers are keeping their eyes on summer drilling in British Columbia’s Golden Triangle for signs of the next GT Gold or Garibaldi Resources, both of whose shares leaped last year after the announcement of significant discoveries.

One company on the radar screen is Aben Resources Ltd. (ABN:TSX.V; ABNAF:OTCQB). Last year, Aben had some high-grade results, but due to getting a late start in the season, was not able to follow up immediately.

But this year, the company has hit the ground running, announcing on June 21 that it has mobilized field crews to its Forrest Kerr gold project and today reporting that it has begun its 5,000 meter diamond drill program consisting of approximately 18 holes.

The company noted that the “initial focus for the drill program will be to expand the high-grade precious metal mineralization discovered in 2017 at the Boundary North Zone, located near the center of the Forrest Kerr Property. Three separate drill holes, collared from the same drill pad, pierced a near-surface high-grade zone of gold-silver-copper mineralization, in addition to broad intercepts containing gold bearing quartz veins.”

Aben also stated that the company believes “the 2017 discovery demonstrates that the Boundary Zone has additional discovery potential for significant precious metal mineralization. This area of the Forrest Kerr Property hosts gold-silver-copper in rock and soil anomalies that span in excess of 2 km by 4km and remain relatively under-explored.”

Jim Pettit, the president and CEO of Aben, stated, “Notable regional discoveries by Pretium, GT Gold, Garibaldi Resources and others have illustrated the significant discovery upside remaining in the district and we are confident in the potential at Forrest Kerr given the newly discovered and historic high-grade mineralization there as well as the numerous untested gold-in-soil anomalies present.”

Numerous industry watchers have Aben in their sights. On June 19, Energy and Gold Ltd., in an article titled, “A Good Time To Get Into This Golden Triangle Gold Explorer,” noted that Aben is “flying out of the gate with plans to have the first batch of assays from its 5,000 Meter Drill Program (20 holes) out by late July.” It noted that “Golden Triangle exploration stocks have a strong tendency to deliver strong returns during the months of July and August. This seasonal pattern is due to the fact that these companies are actively drilling/releasing results during this time period, and also due to the fact that precious metals often perform well during July & August.”

“For the 2018 drilling season Aben expects to be one of the first exploration companies to release drill results. This should give Aben the advantage of having extra attention on it during the next couple of months and good results with the “truth machine” should in turn be well-rewarded by the market,” the article concluded.

Bob Moriarty of 321 Gold noted on June 19 that “Aben Resources was at $0.09 in June of 2017 and rocketed higher, with all of the Golden Triangle sisters, to a top of $0.495 before correcting to $0.105 in November as we drifted into the seasonal low at the end of the year.”

“Aben just began a 5,000-meter drill program at Forrest Kerr to follow up on the discovery from last year they call the Boundary zone. Look for assays coming from a variety of companies in the Golden Triangle to start hitting the market in just over a month. Hopefully with a tailwind from the price of gold and silver Aben Resources will duplicate last year’s action,” Moriarty stated.

Rick Mills of Ahead of the Herd wrote on June 23 that “these are exciting times for Aben and other juniors conducting exploration programs this summer in the Golden Triangle. While geological models, geophysics, soil and rock samples can all be excellent guides to the mineralization, there’s nothing like drilling to find out what really lies beneath. And the results can be surprising. Just look at Garibaldi Resources. Who would have thought that a nickel discovery would be made in an area known for gold-copper deposits? It’s the element of “anything can happen” that makes junior exploration so exciting. I can’t wait to see what Aben finds at North Boundary. That’s why Aben Resources and its Forrest Kerr property is on my radar screen.”

Thibaut Lepouttre, editor of Caesars Report, wrote on May 22, “Exploration isn’t an exact science, and all companies like Aben can do is increase their odds by identifying the projects (and the targets on those projects) with a good probability of hitting something. And we think that’s exactly what Aben Resources did in 2017 before the drill season in the Golden Triangle abruptly ended.”

He went on to comment that “with CA$3.5 million in cash and an improved understanding of the gold mineralization in British Columbia’s Golden Triangle compared to last year, Aben Resources seems to be ready to hit the ground running to follow up on the interesting drill results encountered at the Boundary zone in 2017.”

“Aben will be one of the first companies starting its field work in the Golden Triangle this year, so we would expect the company to be in the pole position to announce assay results throughout the summer. And having the first mover advantage could be important in this market, as it could allow the ‘early movers’ to retain the attention of the market,” Lepouttre concluded.

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Disclosure:
1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an employee. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Aben Resources and Pretium Resources. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Aben Resources. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Aben Resources. Please click here for more information.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Aben Resources, a company mentioned in this article.

Disclosure from Energy and Gold Ltd., June 19, 2018
EnergyandGold has been compensated to cover Aben Resources Ltd. and so some information may be biased. EnergyandGold.com, EnergyandGold Publishing LTD, its writers and principals are not registered investment advisors and advice you to do your own due diligence with a licensed investment advisor prior to making any investment decisions.

Disclosure from Bob Moriarty, 321 Gold, June 19, 2018
I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Aben Resources. Aben Resources is an advertiser on 321 Gold.

Disclosure from Rick Mills, Ahead of the Herd, June 23, 2018
Rick Mills owns shares of Aben Resources.

Disclosure from Thibaut Lepouttre, May 22, 2018
I, or members of my immediate household or family, own shares of the following companies mentioned in this article: a long position in Aben Resources. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company currently has a financial relationship with Aben Resources.

Johnson Camp Mine

Despite copper and other base metals being punished these days, and mining sentiment not at its best with China being drawn into a potential trade war with the U.S., Excelsior Mining Corp. (MIN:TSX; EXMGF:OTCQB) proved a lot of nay-sayers wrong on June 25, 2018. The company was granted the second (and most difficult to obtain) operational permit, the Underground Injection Control area permit (UIC) by the Environmental Protection Agency (EPA). It was quite an ordeal, as it took Excelsior from October 25, 2017 (receiving the draft permit) until now, which is almost exactly eight months. In comparison, the first operational permit, the APP permit, took not even three months going from draft permit to granted permit. On an important side note: the APP permit was finalized after another five-week appeal period, which returned no appeals at all, fortunately. It can be assumed that the UIC permit also has to go through this kind of appeal period before management has it in hand. As I explained in an earlier update on the permitting process, I view the chances of no appeals on the UIC permit to be equally as good for Excelsior Mining. This period is likely reflected in the effective date, as per the news release:

“The EPA has issued Excelsior a UIC Permit with an effective date of August 1, 2018. Once effective, the UIC Permit (along with the Aquifer Protection Permit), requires the Company to be in compliance with protective permit conditions prior to the initiation of production activities. The UIC Permit is good for production of up to 125 million pounds per annum; this is the final operating permit required to get into production.”

Also note that this permit is covering the nameplate production capacity, so no additional extensions/expansions on the current permit, etc. are needed.

As Gunnison is the first new copper project in Arizona in a decade being fully permitted, and the first greenfield ISR copper project in North America to be fully permitted (nearby Florence got just a pilot plant permitted not too long ago, not the full project), plus Arizona as a jurisdiction is very strict on mining regulations, this is clearly quite an achievement. I fancied the chances of Excelsior a great deal, but with permits you always have to wait for the element of proof: a granted permit. A lot of credit goes to VP Sustainability Rebecca Sawyer, very familiar with Arizona agencies, who led the permit application process, and to CEO Stephen Twyerould who worked tirelessly to inform nearby communities on a very regular basis.

As Excelsior raised US$30 million in January of this year, the company is sufficiently cashed up to start the construction phase this summer, as CEO Twyerould indicates in the news release. Because of the staged construction, the initial capex is very small, just US$49 million, so some of the current cash position can already be used to start with upgrading and constructing the SX-EW plant, the ponds, power and transmission and the pipelines from the wellfield to the processing plant. After arranging the necessary balance of capex, the wellfield can be constructed.

Management indicated to me that they want to raise US$50–60 million, as they forecast a need for about US$25 million in working capital (which has already been raised more or less with the US$30 million). Such an amount (actually really small, although there are always capex overruns in mining projects, but it sure helps there already is an existing processing facility, and the project is relatively small compared to those multi-billion-dollar traditional giant copper mines) should be easy to finance for management. Usually I would say, that the equity part is almost a done deal in a typical 1/3–2/3 equity/debt capex funding, and the remaining US$50–60 million could easily be all debt.

However, the reality is these days that the debt financiers also like to have an additional equity sweetener, so it could very well be possible that Excelsior could indeed arrange US$45–55 million in debt, but also has to accept another estimated US$5–8 millin in equity. I would prefer all debt, of course, in order to avoid more dilution, but such an amount would be limited, assuming such a raise would happen at C$1.00 or higher (F/D share count stands at 222 million at the moment).

Speaking of C$1.00 share price levels, the UIC permit announcement caused a pretty intense liquidity event, as can be witnessed here:

Share price MIN.TO, 1 year time period; source tmxmoney.com

It can be speculated that some of the participants in the US$30 million round of December 2017 and January 2018 were selling some of their positions for a quick profit, but coming from C$1.00 and having to dump at C$1.10–1.30 a mere six months later doesn’t really sound very convincing. Excelsior is a long-term copper play, and institutional parties using this as a trading vehicle would instantly flag them as unreliable flippers. Therefore, in my view this is all retail, aiming to exit at a hoped-for spike on the news. Unfortunately for them, market- and metal sentiment isn’t very strong, and marketing on Excelsior is light, so there wasn’t enough buying pressure.

Notwithstanding this, I view this as a convincing buying opportunity once the selling has subsided. The undervaluation on Excelsior is pretty substantial after this sell-off, which I will show in a minute, especially after being fully permitted very recently. Another subject to consider is the changed corporate tax regime in the U.S., thanks to President Trump. We can say a lot about the guy, but he isn’t bad for mining projects in the U.S. I sure hope he quiets down on the impending trade war with China, which could send the entire world economy in a downward spiral, but for project economics and permitting, things have definitely improved.

Another detail helping the Gunnison economics is the cheaper Canadian dollar versus the U.S. dollar. Since my last analysis, the ratio went down from 0.81 to 0.75, which is a good thing for a Canada headquartered company like Excelsior Mining. The currency factor improves the after-tax NPV with roughly 9%, and the newly combined 24.9% tax rate increases the NPV with approximately 16%.

The resulting table looks like this, with copper @$2.75/lb as the Excelsior base case scenario, and @$3.00/lb spot:

In comparison, here is the old table with the old tax regime and higher valued CAD (and a higher spot price at the time in January):

My estimated targets raise roughly 16% as well, so the impact is definitely not negligible. As a reminder: full NPV can be used when commencing commercial production, but in this case production ramp-up is staged. The first stage is planned at 20% of maximum nameplate capacity, but since maximum capacity can be reached in four years according to management, it isn’t realistic to use just 20% of NPV for valuation purposes when commercial production commences. 50% of NPV seems like a more reasonable discount at that stage, as further ramp-up is already baked in.

As a large copper deficit is expected in a few years from now, it seems the ramping up of Gunnison could take place at exactly the right moment, as higher copper prices seem inevitable by then:

Image Source: Visual Capitalist, Source for Copper Data: Wood Mackenzie

An important note on the risk/reward thesis for Excelsior Mining is involving its recovery method. In fact, it is so important that it could explain the current and persistent undervaluation, as a fully permitted project with very low capex, strong financial backing, such a stellar after-tax IRR and based on the base metal with the strongest fundamentals, should trade much higher. Management strongly believes in their chosen recovery method, and I am thinking of doing a Q&A with CEO Twyerould soon, where he can explain in detail why any doubts might very well be unfounded. After capex funding and construction are completed in the hopefully near term (management aims at first production in Q1 2019), the first stage of 25M lbs Cu per annum will function as the necessary pilot stage of Gunnison.

ISR projects on uranium and copper brownfield are no novelty in mining land, so Excelsior isn’t really boldly going where no one has gone before. With the UIC permit practically in hand, there is another estimated five weeks of waiting for the appeal ahead, and when no appeal would be filed, I expect capex funding to be arranged within a month. First construction will start next month, and this could accelerate after the debt package has been secured. The current sell-off looks like a blessing in disguise in my view, and the oversold situation makes up for a perfect buying opportunity.

Gunnison project location

I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter on my website http://www.criticalinvestor.eu, and follow me on Seekingalpha.com, in order to get an email notice of my new articles soon after they are published.

The Critical Investor is a newsletter and comprehensive junior mining platform, providing analysis, blog and newsfeed and all sorts of information about junior mining. The editor is an avid and critical junior mining stock investor from The Netherlands, with an MSc background in construction/project management. Number cruncher at project economics, looking for high quality companies, mostly growth/turnaround/catalyst-driven to avoid too much dependence/influence of long-term commodity pricing/market sentiments, and often looking for long-term deep value. Getting burned in the past himself at junior mining investments by following overly positive sources that more often than not avoided to mention (hidden) risks or critical flaws, The Critical Investor learned his lesson well, and goes a few steps further ever since, providing a fresh, more in-depth, and critical vision on things, hence the name.

Disclaimer:

The author is not a registered investment advisor, and currently has a long position in this stock. Excelsior Mining is a sponsoring company. All facts are to be checked by the reader. For more information go to http://www.excelsiormining.com/ and read the company’s profile and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.

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Charts and graphics provided by the author.

Vancouver-based eCobalt Solutions Inc. (ECS:TSX; ECSIF:OTCQX; ECO:FSE) provided the status of the optimized feasibility study (OFS) and the financing for its 100%-owned Idaho cobalt project.

As for the OFS, metallurgical optimization testing continues on more than 8 tons of ore from the Idaho project’s Ram deposit. Testing to date identified the need to alter the methodology used for concentrate extraction.

Pilot tests done on the initial flowsheet used a fluidized bed roaster, the traditional way to remove arsenic from metal concentrates via roasting. However, based on the results, process engineers opted to use a rotary kiln instead to maximize cobalt recovery and arsenic sequestration. The Ram ore proved to be more amenable to the rotary kiln “as it is less vulnerable to adverse effects from changes in material properties of the concentrate during the roasting process,” the news release explained.

Tests using the rotary kiln produced the desired goal of a low arsenic-containing concentrate. Now, bench-scale rotary kiln tests are being done to establish the ideal process to allow for consistently achieving a concentrate arsenic level of less than 0.5%. According to the release, “Results of the pilot test work will determine the final detailed design and procurement of the critical process equipment.”

Due to the change in the eventual process to be employed, to use of a rotary kiln from a fluidized bed roaster, additional time is needed now to modify the roasting portion of the flowsheet relative to the new method. Consequently, delivery of the OFS has been pushed out to Q3/18. However, while the flowsheet is being revised, the company plans to adhere to the existing project schedule.

As for the financing, the company noted that interest in offtake agreements for future cobalt from Idaho “has been strong,” from traders, producers and end users in the battery and other sectors. ECobalt is continuing its thorough due diligence efforts to ensure it selects “the right long-term partner(s).”

Additionally, eCobalt has “received preliminary project finance term sheets from multiple counterparties, including strategic investors, private equity lenders, fixed income securities and commercial banks, to finance the capital requirements” of the Idaho project, the release indicated. The company has reviewed them all and will circle back to the offerers once the OFS is further advanced. Management intends to choose the options that provide the best value to shareholders while getting the project fully financed.

ECobalt aims to begin commercially producing cobalt concentrate in H1/20 and will continue providing project updates in the interim.

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Potash producer Verde AgriTech Plc (NPK:TSX; AMHPF:OTCQB) received from an existing customer an order that is 15 times larger than its previous one. This time, the Brazilian agricultural producer ordered 3,250 tons of Super Greensand versus 198 tons in 2017, according to a news release. The product’s sale price this time around was higher than that indicated in Verde’s November 2017 prefeasibility study (PFS), due to higher potash prices.

Verde’s president and CEO Cristiano Veloso noted that receiving a second, much larger order from the client was gratifying. He added that “this growth in demand for Super Greensand is what we expect from the market, both from famers that run a trial over a harvest period and from farmers that learn about prior success from neighboring farms.”

Verde had begun working with this customer back in 2014 to help meet the needs for potash across the plantations and kept the buyer updated about the various field tests done on Super Greensand.

As for progress on its Cerrado Verde project in Brazil, Verde is constructing a production plant from which it “intends to produce solutions for crop nutrition, crop protection, soil improvement and increased sustainability,” the release described. The plant is expected to be operating in H2/18.

There, the company should ultimately be able to process about 300 thousand tons per year (300 Kt/year), which equals a rate of roughly 45 tons per hour, at a cost of $500,000. The project PFS outlined that production would ramp up in three phases: 600 Kt/year to 5 million tons per year (5 Mt/year) to 25 Mt/year.

The PFS also showed for Cerrado Verde a net present value of $1.98 billion and an internal rate of return of 290%.

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Maurice Jackson: Today we will highlight a company that has established itself as a premier project generator, Millrock Resources Inc. (MRO:TSX.V; MLRKF:OTCQX). Joining us today is Gregory Beischer, the president, CEO and director of Millrock Resources.

Gregory, Millrock Resources has had a very busy week publishing three press releases. Let’s begin our discussion in Mexico at the La Navidad (Press Release). What can you share with us regarding trench results?

Gregory Beischer: It has been a busy time. Active on many fronts, but La Navidad project is one of the most active. We’ve been working away since February doing several different types of surveys, but mostly we’ve done trenching. Cutting through the soil with an excavator exposing the rock so that we can collect rock samples, continuous chip samples, along the length of the trench. We’ve announced the results of that work. Nineteen different trenches were excavated. We got some pretty darn good results. I would point out trench number six, for example, where we got 16 meters of rock that averaged 0.59 grams per ton gold. That’s a decent width at a decent grade.

That’s the sort of grade that we’re looking for in this type of deposit. We seek here an orogenic deposit. This type of deposit has large volumes of relatively low grade gold. We’ve got the grade in places. We’ve got the width exposed at surfaces in the trenches, but ultimately we need thicker intersections than most that are listed here in this table. The only way to find that is to drill. We started drilling about a month ago and drilling continues now.

Maurice Jackson: Speaking of drilling, in addition with this press release, you have some great news for shareholders. Centerra Gold, which is the JV partner on La Navidad, just made a decision regarding future drilling. What can you comment on that?

Gregory Beischer: We had initially been authorized to drill a number of holes totaling around 1,500 meters and then we were meant to pause, evaluate the results before authorization to continue would be given, but upon review Centerra said, “Well, let’s just go ahead and drill the entire program that was proposed in the order of 2,900 or 3,000 meters.” No break. Just keep drilling. That is in progress now.

Maurice Jackson: Let’s move on to New Mexico where Millrock made another strategic move (Press Release). Talk to us about staking and claims being sold.

Gregory Beischer New Mexico seems to be an emerging jurisdiction and destination for mineral investment. It’s opened up. It’s a state that’s now much more open to mining than it was. Millrock’s actually been in New Mexico for a number of years. We own a uranium deposit in the state. We continue to hold those claims, but more recently we acquired claims on a lithium brine project and immediately sold them to a company called Xinda International Corp. It was a good move for us. We didn’t have to put a lot of our cash resources to work to acquire the claims, but have immediately recouped that investment.

We’re now a large shareholder of Xinda International Corp., and we will hold a royalty if there’s ever a discovery of a viable lithium brine mine. It’s something new for us. We know that there’s lots of companies pursuing very similar geologic prospects in Nevada. We thought, “Well, why not New Mexico?” There was really no competition in this area, so we staked it and sold it all in one move.

Maurice Jackson: That press release really speaks to Millrock’s business acumen. Before we leave New Mexico, give us the name of the uranium project you have there.

Gregory Beischer: We call it the Red Basin Project. It’s a deposit of uranium that was discovered by Gulf Minerals back in the 1970s. That company delineated it with quite a number of drill holes. We don’t have the drill hole data, but we understand that there’s a reasonable size deposit not verified yet. We own the claims over the deposit and covering below surface where we suspect that there could be extensions of mineralization. The idea would be to recover any uranium deposit by in-situ mining methods—very low cost mining that’s being done in Texas and in Kazakhstan, and elsewhere in the world. It was a target of opportunity. We saw it come open and available for staking some years ago.

The uranium market’s not in good shape, although maybe there are signs of life. We expect though that uranium will one day increase in price. We fully expect that we’ll be able to vend our claims or make an agreement to see a partner explore those.

Maurice Jackson: It’s important to remember that as a shareholder of Millrock Resources you have exposure to gold, silver, lithium, copper and uranium, which speaks to the value proposition that we have before us. Finally, moving on to Alaska, Millrock issued a Press Release regarding the Alaska Range Project, which is funded by PolarX. Are the drills train there yet?

Gregory Beischer: You bet. We know we have a copper and gold deposit there. Our partner, PolarX, is funding the work. Millrock’s executing it. I’ve just returned from the site. The crew was all comfortably installed. That’s really a beehive of activity. Both drill rigs are turning. We’re drilling holes that, if successful in hitting the target, will extend the known deposit significantly, a long strike to the east. That would be a good news for everybody.

Maurice Jackson: I want to commend you and the entire Millrock team for working laboriously to make these projects come to fruition. Because of press releases such as the aforementioned, Millrock Resources once again has been hand selected by Rick Rule to be an attendee at the Sprott Natural Resource Symposium, which will be held the 17th through the 20th of July in Vancouver, British Columbia. That speaks volume for Millrock Resources. Congratulations.

Gregory Beischer: Thanks, Maurice. We’re looking forward to it. This will be the third year running that we’ve participated in this conference. I look back at them that we’ve been really dragging along the bottom of the market for these entire three years. I keep feeling like we’re on the verge of a breakout in the general markets in mining, but it hasn’t really come yet. I know that I’ve seen quite a few cycles in the mining business now. It’s got to change at some point. All those roughly 50 companies that are hand selected by Mr. Rule to participate are going to do very well.

Maurice Jackson: Speaking of Mr. Rule, he and I were in New Orleans two years ago and were having a private discussion. I know he doesn’t mind me sharing this, but he said, “Everyone is a contrarian when the price goes up.” This is the time to deploy your capital to companies such as Millrock Resources. I know that Sprott thinks highly of the company and there’s a reason why as we’ve heard in today’s interview. Mr. Beischer, what is the next unanswered question for Millrock? When should be expect an answer? What determines success?

Gregory Beischer: I think the mark of any successful project generator is how many partners have you generated to fund work on the projects. We find it pretty easy to generate projects, Maurice, but the harder part is convincing mining companies with cash to part with it to test our geologic ideas. We’re working hard all the time showing our projects to potential partners. We’ve done quite a lot of that lately. It’s clear that mining companies have bigger exploration budgets than they have in past years because they’re really shopping.

I’m reasonably confident that we’re going to have new partnerships formed in Sonora, Mexico, on some of our projects there and also a new one we’ve developed in Alaska. That’s what we’ve been working on mostly and that you can expect potentially some news on soon.

Maurice Jackson: If plan A doesn’t work, what is plan B?

Gregory Beischer: It really does come down to partner funding, Maurice. We’re sticking with plan A. We know it works. We’re not going to deviate from our model. We’re close enough and major mining company budgets have certainly improved. That’s what we’ll stick with. We’ll raise most of our funding by joint venturing our projects with other companies.

Maurice Jackson: Last question, what did I forget to ask?

Gregory Beischer: You didn’t ask about Millrock’s share prices. Since you and I last talked, it increased fairly a substantial amount. I think finally the market’s recognizing that Millrock has a lot of potential catalysts. We’ve got two projects being drilled now. I know another one will be drilling soon. We’ll have a drill turning on one project or another throughout the rest of 2018. Every one of those drills is a chance to make the discovery that will really propel Millrock’s share price, but it’s nice to see the share price improving and rewarding our shareholders.

Maurice Jackson: If readers want more information on Millrock Resources, please share the contact details.

Gregory Beischer: The easiest is just to Google our website millrockresources.com and you’ll find all the contact information there.

Maurice Jackson: And last but not least, please visit our website www.provenandprobable.com where we interview the most respected names in the natural resource space. You may reach us at [email protected].

Gregory Beischer of Millrock Resources, thank you for joining us today on Proven and Probable.

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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Disclosure:
1) Gregory Beischer: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Millrock Resources. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: Millrock Resources.
2) Maurice Jackson: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Millrock Resources. 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: Millrock Resources 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: None. Click here for important disclosures about sponsor fees.
4) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
5) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Millrock Resources, a company mentioned in this article.

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Fission Uranium Corp. (FCU:TSX; FCUUF:OTCQX; 2FU:FSE) recently announced that the company has begun preparing for a $6.4 million work program at its PLS project in Canada’s Athabasca Basin this summer. According to the company, he project is designed to complete all remaining resource and geotechnical drilling leading up to a prefeasibility study (PFS).

“Our goal is to deliver a PFS report by Q4 2018 on the PLS project. We remain on target and budget to do so. The focus of the summer field program is to complete all resource and geotechnical drilling to provide data to be able to meet this objective. The completion of a PFS on the Triple R deposit will be a major milestone towards the potential of eventual mining at PLS. The Triple R deposit is the largest, most significant near surface high-grade uranium deposit in the Athabasca basin district,” explained Ross McElroy, president, COO, and chief geologist for Fission.

Compilation of all technical inputs to complete and deliver a PFS will be the focus of the post-field program. Delivery of a prefeasibility will be a key event for potential mining at the PLS site.

Roscoe Postle Associated Inc. has been retained by Fission to serve as the lead consultant for the completion of a PFS and to author an NI 43-101 Technical Report. The mine development plan will also be implemented by Roscoe Postle. Overall project management services will also be provided to manage inputs from all technical contributors for the prefeasibility study.

For the study, 14 holes (3,425m) will continue to advance the resource development of the Triple R deposit to PFS level.

According to Fission, some other focus areas of the field work will be:

• Upgrade resource classification for important high-grade, high-impact areas of the R780E zone from inferred to indicated category (9 holes in 2,925m). Drilling of these holes is expected to convert all of the high-grade domain of the R780E zone, which is anticipated to have a positive impact on the PFS.
• Geotechnical drilling of overburden for a Proposed Tailings Management Area (5 holes in 500m)
• Continue monitoring hydrogeological holes required for long-term ground-water analysis.

Headquartered in Kelowna, British Columbia, Fission Uranium Corp. specializes in the strategic exploration and development of the Patterson Lake South uranium property, which hosts the “class-leading Triple R uranium deposit.”

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Disclosure:
1) Jake Richardson compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Fission Uranium. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.MKT, US$3.31) continues to make progress on advancing the Timok property in Serbia, as well as turning around Bisha in Eritrea. Earlier in the month, Nevsun started construction of the exploration decline, a necessary development for the development and eventual construction of a mine at the site. This project will take approximately 24 months.

An alternative development plan is being studied, to de-risk the project by reducing the initial capex and production in the early years. If the company adopts this scenario, an updated prefeasibility study will be released in the fall, with a full feasibility by the middle of next year, on schedule. Concurrently, an initial resource estimate for the Lower Zone, a joint venture with Freeport, is expected in coming months.

The company is looking at various alternatives for project capex, including strategic partners who could provide political, technical, or offtake support in addition to the capital.

In Eritrea, the company is proceeding with an expansion of mining at Bisha, with an incremental capital cost of around $40 million. This reflects confidence that the metallurgical problems that bedevilled recoveries at the end of last year and early this. The expansion is estimated to generate an additional $104 million in cash flow over the next five years, which will go towards development at Timok.

The lawsuit against Nevsun for alleged mistreatment of workers in Eritrea will now move to the Supreme Court of Canada. Nevsun argues that the case should be heard in Eritrea not in Canada, but lost its argument in lower courts.

Bidders for company

Separately, Euro Sun said it would pay half its share of the joint proposal with Lundin to buy the company in cash; earlier, the proposal included C$1 in Euro Sun shares. (The cash would come from Nevsun’s war chest, if the bid were successful.) This came in response to investor reluctance to take Euro Sun stock. Significantly, this revised offer was made by Euro Sun alone. We surmise this indicates that Lundin may have heard the market message that Euro Sun is not regarded as a serious partner. We could also infer that Lundin may be talking with Nevsun.

Is another offer coming?

We would not be surprised to see an improved offer—perhaps for a joint venture—from Lundin, or from some other company, though any such offers are slow in coming. Nevsun has stated, however, that after the Lundin proposal was made public, it received interest from several other companies. Given the long-term value of the Lower Timok as well as the significant, if largely ignored, regional exploration potential, we think the current offer undervalues Timok and its long-term potential. It is possible that a formula whereby Lundin buys the Upper Timok and shares with Nevsun in the Lower Zone and exploration could be found, increasing the overall value to shareholders without meaningfully increasing what Lundin has to put up.

This is clearly a story to be continued. In the meantime, Nevsun is good value at the current price level, notwithstanding that the stock could fall back in the near term if it became clear that no offer would be forthcoming.

A quality company with lots of activity

Midland Exploration Inc. (MD:TSX.V, 0.87) continues to advance work on several projects. At the prospective Vortex zone, a new high-grade discovery at a joint venture with Soquem near the Detour Lake mine, a follow-up drill campaign of eight holes has been completed. Once the assays have been received, which should be shortly, the next drill campaign, to target the best zones identified, will be planned and perhaps commenced later this month.

In the James Bay region, there has been work with partner Osisko in the Éléonore area, work on several gold and base metals projects in the joint venture with Altius, and on its wholly owned James Bay Gold project owned property.

In all, Midland has 11 active projects at varying stages, in joint venture, under option, and some 100% owned, with a total of $6.7 million of exploration spending budgeted, of which Midland is responsible for a little over $4 million. Of course, these numbers can change depending on results, but we can expect a continued steady news flow throughout the rest of the year.

With nearly $15 million in cash—including some $1.75 million from the exercise of expiring warrants in May—Midland is well funded to continue its program. Top management, a solid balance sheet, and multiple active projects add up to a company that is well positioned for success. At the current price, Midland is a buy.

Adrian Day, London-born and a graduate of the London School of Economics, heads the money management firm Adrian Day Asset Management, where he manages discretionary accounts in both global and resource areas. Day is also sub-adviser to the EuroPacific Gold Fund (EPGFX). His latest book is “Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks.”

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Disclosure:
1) Adrian Day: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Midland Exploration. 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: None. Funds controlled by Adrian Day Asset Management hold shares of the following companies mentioned in this article: Midland Exploration and Nevsun Resources. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports (including members of their household) own securities of Midland Exploration and Nevsun Resources, companies mentioned in this article.

In a June 21 research note, analyst Kerry Smith with Haywood Securities reported that Equinox Gold Corp. (EQX:TSX.V) intends to spin out its copper assets, three of which have upside potential, into a new corporation called Solaris Copper Inc. “Our valuation for Equinox included nominal value for the copper assets (CA$20 million) and we think this is a smart transaction to potentially provide additional value to shareholders for projects that have been overshadowed by gold assets,” Smith added.

He listed and described the assets that the Solaris spinco will primarily encompass primarily, which are:

1. A 100% interest in the Warintza project in southeastern Ecuador, which has a current mineral resource estimate of 1.8 billion pounds (1.8 Blb) of copper at an average grade of 0.42% and 132.3 million pounds of molybdenum at an average grade of 0.031%. Equinox has an individual who is working to garner local support for the company to resume exploration at Warintza. Once this happens, Solaris could raise funds, privately or through an initial public offering, for such a program. “It’s expected Equinox will remain a supportive shareholder, as least in the near term,” noted Smith.

2. A 60% interest in the La Verde copper-silver-gold project in Michoacan, Mexico. It contains 3.7 Blb of copper in the Measured and Indicated category at an average grade of 0.41% along with 2.7 Blb of copper in the Inferred category at an average grade of 0.37%. An update to the 2012 PEA on La Verde should be released in late June.

3. A 100% interest in the Ricardo copper property near Calama, Chile, which encompasses about 16,000 hectares on the copper-rich West Fissure Fault.

4. Earn-in agreements for two recently acquired, early-stage copper prospects in Peru.

5. About $500,000 in cash, until Solaris has agreements in place to drill at Warintza.

After a “10:1 rollback,” Equinox shareholders will hold 60% of Solaris whereas Equinox Gold will hold 40%, Smith wrote. “Solaris will operate as a reporting issuer but will not initially be listed.”

A shareholder vote on the spinout is taking place at the July 26, 2018 meeting. Two-thirds of the votes must be in favor of the spinout for it to happen. In the event that it does, closing would occur in August.

On the gold front, Equinox is focused on restarting its Aurizona open-pit project in Brazil, on which additional construction updates are anticipated throughout 2018, said Smith. Another development target is its past-producing Castle Mountain project in San Bernardino County, California, on which a prefeasibility study incorporating results of the 2014 PEA is expected in Q3/18. The company aims to pour its first gold by 2018E.

Haywood has a Buy rating and a per-share price target of CA$2.80 on Equinox.

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Equinox Gold Corp., a company mentioned in this article.