Light at the End of the Tunnel – Mickey Fulp, The Mercenary Geologist

Mickey has a mightily impressive 40+ years of experience as an exploration geologist and analyst. He’s spent much of his career searching for economic deposits of base/precious metals, industrial minerals, coal, uranium, oil & gas, and water in North and South America, Europe, and Asia. He has worked and travelled in 31 countries.

He describes the current U.S. political situation as “scary.” As a Libertarian, he’s been far from impressed by the GOP and the DNC. The fighting has been aggressive and visceral in a way not seen before in modern American politics. It’s the controversial figure of Donald Trump against Dems who think of him as the antichrist; it’s totally polarised. As a result of the bravely-named “Wuhan Flu” and the murder of George Floyd, “violence and anarchy” have descended onto the streets. He attributes the issue to an obvious fact: you can’t lock down male adolescents in inner cities for months and not expect them to go on a rampage once released. It has spread throughout numerous major cities in the US. He is clear: there is an element of anarchy here, and it is malignant.

Matthew Gordon talks to Mickey Fulp, 7th July 2020


Since Trump was inaugurated, a “can-do bureaucracy” has risen to prominence, environmental regulations have been rolled back and mining has been endorsed. There are no longer protracted permitting delays and this can only be a positive for North-American miners. The exploration industry was doing “quite well” in America before COVID-19, but huge disruption has thrown a spanner in the works. Fulp expects that once America works through its economic issues, things will improve sharply. The NASDAQ has already hit all-time record highs in recent weeks, and the S&P 500 is up well over 40% from the bottom. Moreover, the DOW is 8-9% up on its low this year. The markets have functioned and recovered in a “classically shaped” recovery. There are systemic problems in the US economy, and COVID-19 has exacerbated these. The economy is built on a house of cards, with the government spending US$6Tn that the country can’t afford to. Moreover, income tax due states have been postponed twice, so money is being spent with no receipts coming in. Many small businesses are going to go under, or they already have.  However, these market conditions have been favourable for the price of gold; it hit a V-shape recovery and has reached an over 7.5-year high. Fulp is clear: the system is going to collapse, we just don’t know when.

What should investors do with this information? The same thing they always do. Investors need to play this just like they would any other economic downturn by buying low and selling higher. They need to “stay the course.” This could actually be a real opportunity for investors to pick up stocks they otherwise wouldn’t have.

The battery metals thematic has been majorly affected by COVID-19. For the 25Mt pa market that is copper, in the short-term, these conditions have been far from ideal, with demand disruption and mining uncertainty; mining produces 21Mt of annual copper. Long-term, the copper narrative is still promising. Copper could be the space to be in, with demand increasing by 3.4% per year since 1900. However, the battery metals/EV revolution narrative has been much more negatively affected. Demand has been compressed enormously, and Fulp states that the most optimistic projection by 2030 for copper demand in electric vehicles is around 500,000t pa: a relatively uninspiring 4% increase in total copper demand. Luckily, the majority of copper demand lies outside of EVs. Right now, with a depressed copper price, many copper equities are priced low, and investors should keep their eyes peeled for a bargain.

We then asked Fulp about mining jurisdictions: what makes a safe jurisdiction? He highlights specific companies and projects in the Americas as his favourite, including Chile, Peru, Mexico, Canada and North America, though none of his dollars are in the former socialist haven of Ecuador. He tends not to “go across ponds” anymore, because he has been “burned so many times before.” It’s all about common sense. Don’t send your money somewhere you wouldn’t freely go yourself.

In terms of uranium, Fulp is still sitting on 3 uranium stocks that he has owned for quite some time, ranging from ISR producers to developers in the US. He is in no hurry, and he believes that uranium will go on a big run eventually. If the stocks go down any further, he’ll be buying some more. 1 in 5 Americans who turned on a light switch get their energy from nuclear fuel. This, combined with dwindling inventories, can only paint a bullish long-term uranium macro story.

What did you make of Mickey Fulp? If we interview him again, what questions would you like us to ask him?

Mickey Fulp’s newsletter can be found at http://www.goldgeologist.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

David Morgan – The US Economy is about to Implode

It’s us VS the banking elite… says David Morgan.

We hear plenty of benign waffling in the mining space. As a consequence, it was particularly interesting to hear a very robust and forthright argument from Morgan. He is a straight-talker who isn’t interested in skating around important issues. He wants to get to the Crux of the matter, whether people like what he says or not. He won’t be popular with everyone, but ‘there’s no money in the middle’ as some clever media person once said.

The Morgan report is a free newsletter, in addition to a variety of membership options. The gold standard is the US$5,000 pa insiders membership, which provides analysis on global stock markets with world-class analysts and publications, aiming to help build and secure the wealth of investors. Every newsletter starts with a quote and ends with a statement. The Morgan Report claims that its members’ investment portfolios outperform the S&P 500, averaging 63% returns. The Morgan Report serves at the “antithesis of the industry at large.” He remarks that within the gold industry, all gold companies used to be able to attract investors, regardless of whether they were a good company or not.

Matthew Gordon talks to David Morgan, 27th June 2020


A lot of the newsletter writers today are like shotguns, whereas Morgan tells us he is like a sniper rifle. Newsletter writers spread their bets over numerous stock recommendations to main their reputation. Morgan says that “if you can’t pick 6 companies to make you money, you don’t know what the hell you’re doing.”

What does he think of the current market? He thinks we’ve experienced a huge global economic contraction that will make the last depression look fairly weak. In particular, there has been a huge contraction in food supply, due to the “locust infestation” throughout Africa, the swine situation in China and the flooding in Mississippi, which has taken out a third of the plantable land. We can neither confirm nor deny these claims. “Many of the meatpacking plants are also down due to COVID-19. We are facing a global food shortage crisis over the next year.” On aggregate, Morgan would not be surprised to see food prices double in the next year. “It’s more of a supply problem than a quantitative easing problem.” This isn’t even inflation like many of our interviewees have been projecting. If you believe what he says, it could be deemed extremely concerning. “The trust factor of globalism has fallen, and there is a nationalist resurgence underway, primarily because of quantitative easing: why exchange goods for money when the country you are trading with is printing that money at will.” Is it worth anything? Countries are currently undergoing a complete reanalysis of the contractual terms between states, says Morgan.

“There is absolutely no relationship between most companies’ stock price and their physical economic activity,” he continues. “The stock market is completely out of touch with the economy as a whole. Just because the stock market is doing well, it doesn’t mean global economies are. Companies are no longer creating wealth for people; they’re instead creating inflated valuations.” Morgan thinks it’s obvious that we’re transitioning to a cashless system in the near future, but he’s not a huge fan of how crypto could be rejected or controlled by the US government. “The powers that be will never give up control of the monetary structure of the world. It’s just not realistic. We are all plugged into the system whether we like it or not. Expect to see a ‘fedcoin’ or something similar in the near future,” Morgan opines.

Like many of our interviewees, Morgan talks about the squeeze that is going to happen, which will be deflationary on a personal level, but the fed is still printing dollars. He mentions the Weimar Republic, but things aren’t going to get that bad… surely not? Luckily, Morgan doesn’t see hyperinflation on the horizon; the bond market is a good balancing mechanism, especially considering the US treasuries may not be trustworthy right now. Companies that make mistakes need to be left out in the cold rather than being bailed out, which will contract the money supply into the deflationary mode adding value to the dollar. This isn’t going to happen, regardless of who gets elected in November. We would need to have a restoration of the same rules, laws and accountability in order for things to be rectified. Nobody should be above the law. The current system is so corrupt that if we were to install these changes, would it be fixable? My inner pragmatist tells me this is unlikely to happen. However, it’s not over yet.

What did you make of David Morgan? Too much for you? Or the heavy dose of realism that you needed?

Company Website: https://www.themorganreport.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

EB Tucker – Gold Equities and Gold ETFs are dead!

Interview with market commentator and gold expert, EB Tucker. Also Non-Exec at Metalla Royalty (MTA).

“Gold is a unique asset right now because it does absolutely nothing.”

‘There’s a reason why the world’s elite count gold as a core asset. During periods of financial turmoil, it’s invaluable. Gold is the only asset that’s not someone else’s liability. Apartments rely on paying tenants, stocks rely on company profits, bonds rely on stable interest payments. Gold doesn’t rely on anyone or anything for its value.’

Matthew Gordon talks to EB Tucker, 16th June 2020

EB Tucker has been a renowned gold commentator for many years now. He’s a regular and go-to for gold interviews. For five years, he wrote the newsletter for the Casey Research team, which is led by a legendary speculator and bestselling author, Doug Casey. He’s been actively involved in writing about gold for years. Gold is hot right now; everyone knows it. Sitting pretty at c. US$1,700/oz today, investors need to know everything they can about the most alluring commodity of the last 3,000 years. It’s been a long journey in this gold cycle that stretches back to 2008.

Tucker recently released a book, ‘Why Gold? Why Now?: The War Against Your Wealth and How to Win It,’ which deconstructs and simplifies the gold investment space.

Part 1 cover covers ‘Why Gold?’ The book claims that history has shown an ‘ugly pattern’ of careless governments spending ineptly and in excess, leaving ignorant Joe Shmoe savers footing the bill.

Part 2 gets into ‘Why Now?’ It explores recent developments that forebode a ‘dangerous future’ for money, cementing gold’s status as a safe-haven investment.

Lastly, part 3 lays out some of the options available to gold investors. A ‘How To’ manual for investing in gold, which covers everything from gold bars to gold coins.

Let’s expand on these topics. Why gold? Tucker claims that negative interest rates will soon become a reality. This means that average savers will be paying banks for the convenience of having their money. When this reality hits, most savers will withdraw the money from their bank accounts and invest it into the market in some form, flooding the market with new capital.

The key thing that gold can provide to investors is financial freedom. Other investments are reliant on other volatile economic conditions to create value. Gold is stationary, solid and safe. Investors can buy gold, hold it for as long as they desire, then sell it instantaneously for any currency in the world. No liability = a safe bet for investors. However, if negative interest rates remain small, would individuals who lack sufficient knowledge of the gold space decide to take the risk and invest their money in gold? I’m not so sure. However, Tucker was keen to point out the frantic nature of the world we live in today. Be it COVID-19, the U.S. elections, or civil unrest, global economies are currently extremely volatile, so these small negative interest rates could potentially grow.

We are entering a new era; an era in which even kids in their 20s are going to need to figure out how to be some kind of macroeconomist. The price of goods is going up, while the value of owned goods is depreciating. Deflation is the order of the day, and the economic consequences will be vast and sweeping. “Never in history” have these types of conditions occurred, and they will continue to occur until the world decides to hit the reset button. If you believe that global governments have a terrible history of being stewards of their currencies, this could certainly be an investment methodology to consider in more depth.

The real question is: why buy gold now? It’s over US$1,700/oz! While buying at US$1,250 would have been more favourable, interestingly, Tucker says the gold price is going to go even higher. The total value of gold on the planet right now is US$10T. Debt is closing in on US$300T, and this is climbing extremely quickly. He is adamant that this system is going to get bigger and bigger until it is reset and revalued. As a consequence, if individuals don’t hold anything that isn’t subject to the revaluation, they are simply converted into the new system.

I buy some of what Tucker says, but I’m not sure if the vast majority of individuals will care. Most people simply want to work their 9-5, pay their bills and put food on the table. He foresees a behavioural revolution whereby individuals are forced to rethink their fiscal strategies. In previous generations, if our ancestors had saved US$1,000 in cash, US$1,000 in gold, the cash would retain very little value, whereas the gold would be worth around US$80,000. There is clearly an opportunity here for people who know what they are doing. Tucker himself is also a massive fan of royalty companies… being an NED of Metalla Royalty.

While Tucker is optimistic about the price of gold, but he thinks it is “sorcery” to try to predict the gold price beyond the end of this year. I agree. If you see headlines of someone is telling you they can predict the future, whilst attractive, especially in times this volatile, investors might want to err on the side of caution as this tends to be purely promotional and attention seeking rather than solid advice.

However, if you’re fully on-board with the gold macro thesis, and you buy the story about a lack of liability, how should one invest in gold? Tucker is very much against ploughing more money into the stock market right now. He thinks the stock market is incredibly inflated and is in a bubble that’s just waiting to burst. This has been caused by the lowest corporate tax rates in history and immense expenditure by companies buying back their own stocks. While stocks are unlikely to crash to zero, Tucker thinks it is simply a bad time to throw money into the stock market when it’s already juiced up to the max. What do you think? Is now a good time to put money into stocks or ETFs?

Moving away from equities, Tucker isn’t keen on newbie investors going out and buying bars of gold either. These come with big premiums. A good starting point could be South African Gold Krugerrand coins, Canadian Maple Leaf Coins, and US American Gold Eagles in 1oz denominations. This is a “really safe place to start.” Investors will just have to store it somewhere nobody would think to look… this includes keeping it in multiple different places to mitigate risk, and using safety deposit boxes.

What did you make of EB Tucker? Do you buy this story? Will you be looking into physical gold? Comment below and we will respond.

Jamie Keech – Valuable Tips for Retail Investors

Interview with Jamie Keech, Co-Founder of ‘Resource Insider.’

A mining engineer, investor and writer, Keech’s job is to look at private mining deals. His company, Resource Insider, is a “deal-flow service.” The focus is on allocating capital to early-stage mining deals and private placements. All members are accredited investors. Keech spends most of his time searching for private placements to invest his own money in. Investors/subscribers are then given the opportunity to get in on the deal with their own capital at the same price, on the same terms. Resource Insider doesn’t take any kickback fees from companies; instead, the company is bankrolled via an annual subscription fee from each investor to fund the research and due diligence process. We were keen to hear his insights into how global markets are recovering from COVID-19, in addition to exploring numerous other retail-oriented themes.

Matthew Gordon talks to Jamie Keech, 17th June 2020


The Vancouver junior mining sector has been going “ballistic” over the last 6-8 weeks. In terms of private mining deals and private placements, there has been a real abundance in the market recently. Life is gradually getting back to normal, and while it is far from the ‘business as usual’ approach in some Australiasian countries, Canada is a little ahead of parts of Europe.

What are the key red flags for retail investors to look out for when considering investing in a company?

Remuneration and Timing

Watch out for management teams, company insiders and directors who are making “boatloads” of money paying themselves well, while their company isn’t driving share price growth for investors; this includes investors who have entered at any time period, from IPO, all the way to the present day. Investors should never be ripped off by timing.

Structure

A poorly structured company can suck every ounce of value out of an investment for a retail investor. Investors need to closely check a company’s history, especially when it comes to share transactions, before taking the plunge. The game is so often stacked against retail investors, and moves like “friends & cronies” getting in for a “fraction of a penny” during “seed round financings” can mean they get masses of shares at an incredibly discounted price, compared to the amount acquirable and cost attainable of shares for retail investors in the next round of financing. By getting in before retail investors have access, these early starters are able to obtain a 100X lift on their initial investment for zero work, and there hasn’t even been an IPO yet.

Investors want to search for teams that are genuinely working in their favour and have align interests; these are becoming increasingly rare. Just a few weeks ago, an undisclosed management team gave themselves 12M shares for just US$9. This is remarkable behaviour, and it serves as further evidence for why retail investors struggle so heavily. The brutal reality is that this “Ponzi scheme” is simply the name of the game. If retail investors want to call, they’ll need to make sure they’re playing a good hand.

How can retail investors level the playing field? Watch to our CRUX-Club.com videos to find out.

Getting In Early

Retail investors need to seek out the appropriate resources to get in as early as possible. Companies like Resource Insider seek to provide this opportunity.

Look At What Management Got In At

This will give investors a pretty good idea of how exactly the management is aligning themselves with the interests of shareholders.

Find Companies That Have Been “Beaten Down”

Look for companies that are well-funded with a good team behind them and have a depressed share price. However, the caveat to this is that it is getting harder and harder each day. There is currently a lot of capital available in the junior mining space that companies with absolutely nothing are fully-subscribing their public offerings. The euphoric sentiment is inflating the stock market enormously.

Retail investors need to recognise their limitations. They do not have the budget, capacity and resources to spend months carrying out incredibly extensive and technical due diligence. Retail investors need to know what they don’t know and compare that to their desired risk profile. It is very unlikely they will ever know everything.

We discuss more ideas and Red Flags with Keech in our extended version which you can find at CRUX-Club.com.

What did you make of Jamie Keech? Comment below and we will respond.

Company Website: https://resource-insider.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Precipitate Gold (PRG) – Dominican Gold Exploration, Partnered with Barrick Gold

Precipitate Gold Corp.
  • TSX-V: PRG
  • Shares Outstanding: 106M
  • Share price C$0.16 (04.06.2020)
  • Market Cap: C$16M

Interview with Jeffrey Wilson, President & CEO of Precipitate Gold Corp. (TSX-V:PRG).

Precipitate Gold Corporation is gold developer with 3 gold assets in the Dominican Republic:

The Juan de Herrera Project, adjacent to the Romero/Tireo project operated by GoldQuest, which has currently been parked up due to licencing issues. The company has conducted fairly extensive geophysics on the property, and there are drill permits for “up to 100 different drill pads” on the project. However, with neighbours GoldQuest struggling to obtain an exploitation permit, Wilson decided, although they like what they see, it was best if the project took the back seat for now.

The second project is the flagship: Pueblo Grande. It is located adjacently to the ‘world-class’ Puebla Viejo mine (operated by Barrick Gold Corp.) Precipitate Gold has recently reached an earn-in agreement with Barrick Gold, whereby Barrick can earn 70% by investing US$10M and delivering a PFS before the 6th anniversary of the agreement. Barrick will invest the US$10M within 6-years, and has paid an additional C$1.4M in up-front cash. Interestingly, Barrick has agreed to arrange the funding for Precipitate Gold’s 30% carry. Smart move.

The third and final project is the Ponton Project, c. 30km east of Pueblo Viejo and ‘hosted in the same Los Ranchos Formation geological terrain.’ The project is extremely early-stage exploration, but Precipitate Gold claims the deposit hosts a ‘significant, untested multi-element epithermal gold anomaly.’ All of the company’s gold assets are currently 100% owned by the company with no underlying vendor payments or work commitments.

Matthew Gordon interviews Jeffrey Wilson, 4th June 2020


Precipitate Gold’s aim appears to be to consolidate district-scale strategic land positions in the Dominican Republic’s two ‘most prospective and active’ copper-gold mining and exploration camps.

Why invest in the Dominican Republic? Wilson argues that while there is some obvious geological value to being in the region, the real benefit comes from a Dominican policy: within the Republic, there was a policy that restricted any single mining company to just 30,000 ha of land. At the time of GoldQuest’s Romero/Tireo discovery, the company was maxed-out on its 30,000 ha land package. Therefore, this gave an unlikely opportunity for a junior like Precipitate Gold to disrupt a potential regional monopoly by claiming highly-prospective land that in any other jurisdiction would have already been gone. This is a compelling argument. When we interview juniors who have acquired assets from majors, a common red flag during my analysis is that if this asset was really as valuable as the interviewee claims, why did the major let it go in the first place? We don’t have this problem here.

Precipitate Gold’s business model is not necessarily to become the next junior mining company. The company wants to identify mineralisation that mid-tier and major gold mining companies will want to acquire. Wilson intends to astutely develop and de-risk the projects for potential buyers. He is also clear that Precipitate Gold is not a project generator either. The company is inclined to put its own money into the ground.

Obtaining the licencing for a mining project in the Dominican Republic, on the whole, appears to be unproblematic. Wilson argues that GoldQuest’s trouble is a specific, regional, political issue, because Romero/Tireo is located in an area without any active mining operations or existing mining infrastructure.

The team at Precipitate Gold seems to be a healthy mixture of financial experts and geologists. Michael Moore, P.Geo, is the company’s VP Exploration. He speaks Spanish, and Wilson claims has the experience and expertise to lead Precipitate Gold to success. Dr Quinton Hennigh of gold explorer Novo Resources (TSX-V: NVO), who we interviewed several months ago, provides Precipitate Gold with macro geology expertise. The management doesn’t appear to have a huge amount of skin in the game, and Wilson was unclear about how much of his own money he has actually invested. He and his wife have around 2M shares; however, Wilson states he is not a founder of the company, which could explain this. He also claims his average purchasing cost for shares is higher than the value today, which could motivate him. The rest of the management team has a similar degree of shareholding.

The focus right now is on Pueblo Grande, but after revisiting Ponton recently, the company has realised it had overlooked certain historical data regarding potential anomalies. A magnetic geophysics survey was carried out at the project in the past. Ponton is still taking a back seat, but Precipitate Gold has now made it more of a priority.

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Precipitate Gold currently has c. US$2.3M in the treasury. The G&A is also very light, and Precipitate Gold should be able to continue developing Pueblo Grande while keeping Ponton as a side-project. The company has recently acquired its own drilling equipment, which can sometimes be a cash drain for inexperienced junior miners. However, some issues with the contractor for drilling at Pueblo Grande meant Precipitate had few other choices. Wilson thinks he and his team can make it work; he’ll have to prove it to the market.

What did you make of Jeffrey Wilson and Precipitate Gold? Would you invest? Comment your thoughts below and we’ll get back to you.

Company Website: https://www.precipitategold.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

CanAlaska Uranium (TSX-V: CVV) – Why should Investors be Interested in this Project Generator?

CanAlaska Uranium Ltd.
  • TSX-V: CVV
  • Shares Outstanding: 58M
  • Share price: C$0.16 (11.06.2020)
  • Market Cap: C$9M

Interview with Peter Dasler, President & CEO of Uranium explorer, CanAlaska Uranium Ltd. (TSX-V: CVV).

CanAlaska Uranium: a uranium-focussed explorer in the Athabasca Basin. The uranium junior also had a nickel project, but it has farmed it out.

CanAlaska has just C$1.5M in the bank, and times have been hard, so it has been hunkering down and waiting out the uranium bear market. Does a uranium project generation strategy stand the company in good stead for when the uranium market finally turns?

We Discuss:

  1. Company Overview
  2. Business Model: Project Generator or Explorer?
  3. $9M Company with a Large Land Package: Creating Value without Dilution
  4. Cash Position and Cost Cutting
  5. Constructing Deals That Make a Difference: Are They Capable of it?
  6. Macro Picture of the Uranium Market: COVID-19 a Saviour?
  7. Raising Funds for Exploration: Track Record to Convince Investors
  8. NexGen Comparison: What Similarities do the Two Companies Hold?
  9. Partner vs. Raising Funds
  10. Hunker Down and Wait For Price Discovery: Considered Strategy?
  11. All About Nickel: Choices Available, Terms of the Deal and Timeline for Deliverables

If you are a uranium market spectator, feel free to check out some of the recent uranium articles on our platform as well as one of our most recent interviews with a uranium mining company.

Company Page: https://www.canalaska.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Andromeda Metals (ADN) – Halloysite-Kaolin Business With Great Numbers

The Andromeda Metals company logo
Andromeda Metals Ltd.
  • ASX: ADN
  • Shares Outstanding: 1.51B
  • Share price A$0.06 (09.06.2020)
  • Market Cap: A$83M

Interview with James Marsh, Managing Director of Andromeda Metals (ASX: ADN)

Andromeda Metals (formerly copper-gold explorer Adelaide Resources) was founded on the 23rd December 1993, before being listed on the ASX on the 11th September 1996. Andromedia Metals’ headquarters is in Adelaide, South Australia. The company’s focus is on something most of us have never heard of: halloysite-kaolin and alumina material. Andromeda Metals’ vision is to be a sustainable industrial minerals producer of high-grade halloysite-kaolin and high purity alumina material.

With this in mind, Andromeda Metals has built a large exploration portfolio across Australia, with 19 exploration licences covering 5,374km2.

Andromeda Metals has farmed out all of its copper-gold assets in JVs, and they are currently sitting on the backburner with no value attributed to them. The new flagship project is the Poochera Halloysite-Kaolin Project, which is being developed in a JV with Minotaur Exploration Limited (ASX: MEP). Andromeda Metals can earn up to a 75% interest in the project. It was discovered a long time ago by a Cornish geologist, but is only now being advanced. The mineral resource has been calculated as 20.2Mt of ‘bright-white’ kaolinised granite, and the project is host to the ‘world-class’ halloysite-kaolin Carey’s Well deposit. In addition, and also in JV with Minotaur Exploration, the company is advancing the Camel Lake Halloysite Project.

Matthew Gordon interviews James Marsh, 9th June 2020


So, what exactly is halloysite-kaoilin? The main applications are in ceramics: it is used in the manufacture of high-quality porcelain and adds whiteness, transparency and strength. It can also be used as a petroleum cracking catalyst. The global halloysite-kaolin market size was estimated at US$29.1M in 2017. It’s a small, niche space. China is one of the biggest producers. Marsh tells us that the total size of the entire kaolin market (halloysite and normal) by volume is 30Mt. Andromeda Metals signed up (letters of intent) for 1Mt per year of offtakes (raw ore). However, Marsh soon realised there was more money to be made by processing the ore themselves on site. Marsh has extensive experience working for kaolin companies around the world, and has created a wet processing technique that appears to be effective. This will allow Andromeda Metals to carry out a secondary refining process to arrive at the premium product. With several agreements with China already in place, Marsh is looking to expand Andromeda Metals’ footprint around the world. There is no real competition, so Andromeda Metals should have the rub of the green.

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Having now brought Poochera through to a PFS, why did the share price drop off? This also happened to Andromeda Metals after the completion of its PEA. Marsh, of course, mentions COVID-19, claiming it has caused several aspects of the approval process to slip for 3-6 months. Marsh claims marketing halloysite-kaolin is difficult because it is a much-misunderstood commodity: investors are used to fixed prices. Andromeda Metals currently has around 4,500 shareholders, but they are all retail investors and think differently to institutional investors. Moving forward, bringing institutional investors into the fold is a top priority for Andromeda Metals. The company could be in production by early 2022, and this could be a catalyst moment for share price discovery. The numbers look great, but marketing is clearly the biggest obstacle for Marsh to navigate.

Andromeda Metals has just under US$3M in the bank, in addition to a number of listed options in the market that will be exercised in November this year. This could result in an US$8M cash influx towards the end of the year. US$11M should be enough to take Andromeda Metals through its permitting approvals, the DFS, and into the operational phase. Marsh claims the company is currently being “bombarded” with offers of money from all manner of sources, but the real question that investors will want to be answered is: what sort of money will be taken? Institutional investors or Chinese money? Marsh claims the management team is considering all options.

What did you make of James Marsh and Andromeda Metals? Is halloysite-kaolin something you are interested in? Comment below and we will respond.

Company Website: https://www.andromet.com.au/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The Andromeda Metals company logo

Sprott CEO, Peter Grosskopf – Making Investing Look Easy

Sprott Inc. company logo
Sprott Inc.
  • TSX: SII
  • Shares Outstanding: 25M
  • Share price C$43 (03.06.2020)
  • Market Cap: C$1.1B

Crux Investor recently carried out an Interview with Peter Grosskopf, CEO of Sprott Inc.

Who better to listen to about the junior mining space than a man who has been at the top for decades?

Grosskopf gives investors insights and advice. He doesn’t need a be a salesman, and he steers clear of any sensationalism. Instead, he focusses on pragmatic, encouraging returns. He makes investing look simple. A really useful watch for retail investors.

We Discuss:

  1. Background Story of Peter and His Involvement with Sprott
  2. Fixing a Problem: Focusing on the Different Needs of Investors
  3. Last Man Standing: Securing Revenue Streams
  4. Emotion, as Significant Influencer in Investments, Removed?
  5. Power to Move Sentiment and Markets: Sprott Investments, Always Calculated or Left to Chance?
  6. Investment Decision Making Ecosystem: Parallels with Retail Investors
  7. Digitization of Gold: How Will it Work, Who Will Have Access to it?
  8. Gold Price Predictions and Pragmatism
  9. Concerns for Present-Day Markets and Geopolitical Decisions to Come
  10. Hedging: Optionality for Investors
  11. Are Investors Prepared for What’s Coming in the Near Future?

Company Website: https://www.sprott.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Sprott Inc. company logo

Precipitate Gold (TSX-V: PRG) – Dominican Gold Exploration, Partnered with Barrick Gold

Precipitate Gold Corp.
  • TSX-V: PRG
  • Shares Outstanding: 106M
  • Share price C$0.16 (04.06.2020)
  • Market Cap: C$16M

Interview with Jeffrey Wilson, President & CEO of Precipitate Gold Corp. (TSX-V:PRG).

Precipitate Gold Corporation is gold developer with 3 gold assets in the Dominican Republic:

The Juan de Herrera Project, adjacent to the Romero/Tireo project operated by GoldQuest, which has currently been parked up due to licencing issues. The company has conducted fairly extensive geophysics on the property, and there are drill permits for “up to 100 different drill pads” on the project. However, with neighbours GoldQuest struggling to obtain an exploitation permit, Wilson decided, although they like what they see, it was best if the project took the back seat for now.

The second project is the flagship: Pueblo Grande. It is located adjacently to the ‘world-class’ Puebla Viejo mine (operated by Barrick Gold Corp.) Precipitate Gold has recently reached an earn-in agreement with Barrick Gold, whereby Barrick can earn 70% by investing US$10M and delivering a PFS before the 6th anniversary of the agreement. Barrick will invest the US$10M within 6-years, and has paid an additional C$1.4M in up-front cash. Interestingly, Barrick has agreed to arrange the funding for Precipitate Gold’s 30% carry. Smart move.

The third and final project is the Ponton Project, c. 30km east of Pueblo Viejo and ‘hosted in the same Los Ranchos Formation geological terrain.’ The project is extremely early-stage exploration, but Precipitate Gold claims the deposit hosts a ‘significant, untested multi-element epithermal gold anomaly.’ All of the company’s gold assets are currently 100% owned by the company with no underlying vendor payments or work commitments.


Matthew Gordon interviews Jeffrey Wilson, 4th June 2020

Precipitate Gold’s aim appears to be to consolidate district-scale strategic land positions in the Dominican Republic’s two ‘most prospective and active’ copper-gold mining and exploration camps.

Why invest in the Dominican Republic? Wilson argues that while there is some obvious geological value to being in the region, the real benefit comes from a Dominican policy: within the Republic, there was a policy that restricted any single mining company to just 30,000 ha of land. At the time of GoldQuest’s Romero/Tireo discovery, the company was maxed-out on its 30,000 ha land package. Therefore, this gave an unlikely opportunity for a junior like Precipitate Gold to disrupt a potential regional monopoly by claiming highly-prospective land that in any other jurisdiction would have already been gone. This is a compelling argument. When we interview juniors who have acquired assets from majors, a common red flag during my analysis is that if this asset was really as valuable as the interviewee claims, why did the major let it go in the first place? We don’t have this problem here.

Precipitate Gold’s business model is not necessarily to become the next junior mining company. The company wants to identify mineralisation that mid-tier and major gold mining companies will want to acquire. Wilson intends to astutely develop and de-risk the projects for potential buyers. He is also clear that Precipitate Gold is not a project generator either. The company is inclined to put its own money into the ground.

Obtaining the licencing for a mining project in the Dominican Republic, on the whole, appears to be unproblematic. Wilson argues that GoldQuest’s trouble is a specific, regional, political issue, because Romero/Tireo is located in an area without any active mining operations or existing mining infrastructure.

The team at Precipitate Gold seems to be a healthy mixture of financial experts and geologists. Michael Moore, P.Geo, is the company’s VP Exploration. He speaks Spanish, and Wilson claims has the experience and expertise to lead Precipitate Gold to success. Dr Quinton Hennigh of gold explorer Novo Resources (TSX-V: NVO), who we interviewed several months ago, provides Precipitate Gold with macro geology expertise. The management doesn’t appear to have a huge amount of skin in the game, and Wilson was unclear about how much of his own money he has actually invested. He and his wife have around 2M shares; however, Wilson states he is not a founder of the company, which could explain this. He also claims his average purchasing cost for shares is higher than the value today, which could motivate him. The rest of the management team has a similar degree of shareholding.

The focus right now is on Pueblo Grande, but after revisiting Ponton recently, the company has realised it had overlooked certain historical data regarding potential anomalies. A magnetic geophysics survey was carried out at the project in the past. Ponton is still taking a back seat, but Precipitate Gold has now made it more of a priority.

This image has an empty alt attribute; its file name is company-profile-ad-copy-1024x115.jpg

Precipitate Gold currently has c. US$2.3M in the treasury. The G&A is also very light, and Precipitate Gold should be able to continue developing Pueblo Grande while keeping Ponton as a side-project. The company has recently acquired its own drilling equipment, which can sometimes be a cash drain for inexperienced junior miners. However, some issues with the contractor for drilling at Pueblo Grande meant Precipitate had few other choices. Wilson thinks he and his team can make it work; he’ll have to prove it to the market.

What did you make of Jeffrey Wilson and Precipitate Gold? Would you invest? Comment your thoughts below and we’ll get back to you.

Company Website: https://www.precipitategold.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Sprott CEO, Peter Grosskopf – Why Gold Only Gets to $2,000 by March 2021 (Transcript)

Sprott Inc. company logo
Sprott Inc.
  • TSX: SII
  • Shares Outstanding: 25M
  • Share price C$45 (03.06.2020)
  • Market Cap: C$1.1B

Interview with Peter Grosskopf, CEO of Sprott Inc.

Investing insights and a warning. The global economy is not OK and at some point the cracks can’t be plastered over. How do retail investors protect themselves? What should they be doing as cash goes negative?

We talk about digitising gold and the practicalities. Plus what is his call on physical gold price. What no screamingly alarmist headline! Sorry no. Grosskopf does not need headline grabbing statements to get noticed. He has carefully brought process and data to the way Sprott functions and is now at the helm of the ‘last man standing’ in the natural resources space. So when it comes to gold price, we’re listening to this guy and ignoring the sensationalists.

We Discuss:

  1. Background Story of Peter and His Involvement with Sprott
  2. Fixing a Problem: Focusing on the Different Needs of Investors
  3. Last Man Standing: Securing Revenue Streams
  4. Emotion, as Significant Influencer in Investments, Removed?
  5. Power to Move Sentiment and Markets: Sprott Investments, Always Calculated or Left to Chance?
  6. Investment Decision Making Ecosystem: Parallels with Retail Investors
  7. Digitization of Gold: How Will it Work, Who Will Have Access to it?
  8. Gold Price Predictions and Pragmatism
  9. Concerns for Present-Day Markets and Geopolitical Decisions to Come
  10. Hedging: Optionality for Investors
  11. Are Investors Prepared for What’s Coming in the Near Future?

CLICK HERE to watch the full interview.

Matthew Gordon: Hey Peter, how are you doing, Sir?

Peter Grosskopf: I’m well, how are you?

Matthew Gordon: Not bad, not bad. You’re back in the office. I can tell. So, things are relaxing a little bit over there, are they?

Peter Grosskopf: They are. We have been an essential business, so we have been fortunate, and we also can operate virtually. So, for our staff, it’s a bit of a choice that they have. But the office is a safe place right now. There are not many people in it and it’s kind of fun to be back. And you know, there’s a few more tools here so I feel I can be pretty active in the office right now.

Matthew Gordon: Okay, fantastic. First of all, thanks so much for coming on the show. We had Rick on a few weeks ago and he was fantastic. It was a really interesting chat through his life and times as it were. I kind of want to do the same thing.

Peter Grosskopf: Thanks for having me. Those are hard shoes to fill.

Matthew Gordon: I know, right? But we’ll try. I think we can do it. I think we can do it. So what I want to talk about is a little bit about you, if I may. So, you have come from a banking background into investment. Can you kind of just, again, for people, I suspect this is a slightly newer audience for you here with a kind of European slant here, because Sprott is very well known in North America, a very big player kind of globally in natural resources. But can you talk to us about where you were, what you did and why you moved?

Peter Grosskopf: Well, I’m happy to share my story; I started as a commodity futures and options trader in 1987, and I trained with a couple of the large Canadian banks, and I was always covering the global Gold and metals and mining sector from a position of being a banker and being a service provider, if you can think of it that way. So, I grew up in the business knowing the CEOs and helping them to either raise money or complete transactions. And as part of that, I met Eric Sprott back in 1992 when he was one of the preeminent growth investors in the sector. And I came in and worked with him and helped him open a Vancouver office. I was in Vancouver covering the mining sector at the time. So, from that background of being, and then increasingly I became senior in the investment business; I founded my own dealer. The dealer sold to TD in 2000. I went back to run Sprott Securities, which became Cormark. And then Eric asked me to join him in 2010. So, I walked across the street to ‘learn the buy side’ and learn to become an investor and help Eric run his company.

Now, who would have known? I top-tip the market, I had become a believer in Gold as a hedge against the general financial system and also government actions protecting the financial system. So, I believed in Gold, but I came in at the wrong time and it was a work in process. Eric was a star manager. He had another star manager, John Embry, working with him who came from RBC. And it was a star management culture in the metals and mining management sector in general.

So, for me, the first thing I had to do was try and systemise that to become an investment pedigree that could be followed by younger managers and provide some succession, and that took the best part of 10-years to do really. It wasn’t easy, and we had to hire lots of other experienced managers in the sector, including Rick Rule with his geologic mindset and experience base. And we also invented and rolled out new products, which became very important to us, like the bullion management product. So, it took a long time to build a platform that was capable of attracting funding, and making a bigger play in precious metals, like we think is still the opportunity today.

Matthew Gordon: So, I’m interested in that. I’m interested in the bedrock, the foundation of what you were trying to build. What was the actual problem you were trying to fix? You said, ‘I had to systemise it,’ right? Why did you have to systemise it? What was wrong with the star manager process? I guess it wasn’t a star manager process, the environment in which they existed?

Matthew Gordon: No disrespect to Eric. Eric is probably the single most impressive investor in our sector altogether. But to try and follow him is impossible because it’s the mind of a trading savant in the sector. And what we needed to take was the best parts of that process and put some risk management around it, put some institutional-style asset management around it and still trying to inherit its best parts. So that was what it was a core. Also, his performance is volatile, more volatile than the average investor because he only focuses on the end point. And if it’s your own money, you can do that. And if you have private clients you can do that. But for institutions and retail clients, a different style is needed. So, the volatility of investing in the sector, the timing challenges, investing in the sector; we needed some different products. So that’s where the bullion product came in. That’s where the lending product came in. Products that, that investors could get some of the upside but also protect their downside in the sector.

Matthew Gordon: So that’s really interesting as well because you’re saying basically, different people have different investment models, right? They have different strategies, different needs. So, your institutional guys need some degree of liquidity to this and a kind of constant growth. I suppose these, as you say, big violent swings, which is the mindset of an entrepreneur; you don’t mind going through some tough times, right? So how did you go about doing this? So, you have gone to the market and said, well, we will make money by bringing in investments and creating products for those people. So again, talk me through that because I think it’s fascinating how you build a company.

Matthew Gordon: Well, we had two great tools right from the start; and the first well, the most important was the brand, and being number one in the sector had a lot of advantages in terms of attracting talent and people. So that was always there. The second thing, and it was part of my coming to the firm, was that we had a lending business, a resource lending business, and that was a business that I knew could be grown to handle institutional and more conservative clients and used as an entree to the sector. And for my own capital, I know the challenges of timing and the nice thing about a lending business, you don’t have to worry about timing. You can go in at any time and earn, and the process was easy to identify. It was easy to sell that it was value added. Investors could not do that for themselves. So that was one core of the growth and that that business is still growing today.

And then there was this bullion management business that Eric and James Fox had seeded, and was a US listed trust that held the bullion. It had one huge advantage over the GLD, and that was that it was a physical trust that held 100% underlying metal and also was taxable on a capital gains account in most circumstances. So, we knew it had advantages. We knew we could grow it. And James and I in the early days, we did a lot of these offerings through Morgan Stanley and RBC. But recently that business is on fire. I mean, a lot of investors want bullion. A lot of them recognise the benefits of our trusts. John Ciampaglia and the other team that run that business have computers working for them now and the computers create and redeem units when required. And that has been an all star this year when investors have gravitated towards bullion itself more than the miners.

Matthew Gordon: Okay. So, what you’re doing as an organisation is what I think you’d probably recommend that retail or family officers do; which is kind of build a portfolio approach to their investing. That’s effectively what you’re doing as a business.

Peter Grosskopf: It is. We can, we can be anything from an advisor and consultant to people looking at the sector, to handling a very specific product for a very specific need. So, we cover the whole gamut and we can advise investors on how to enter and what their expectations should be when they enter. And of course, the most difficult bet is public equities because they’re so volatile, and you know, we have tools and teams and a process and a deep way of looking for catalysts in that sector now that I think we can comfort those who are investing that we have got a plan, and that the plan is to take advantage of the leverage inherent in the equities. And right now, it probably looks like just about the best opportunity out there.

Matthew Gordon: And you as a business; you have also got different revenue streams to kind of see you through the tough times and the good. Like obviously at the moment it feels like a case of last man standing because you –

Peter Grosskopf: It is.

Matthew Gordon: Right.

Peter Grosskopf: That’s the other thing; so when we were investing in the business and making acquisitions right at the bottom of a market, a lot of others were leaving and that was for two reasons: first of all, there was a bear market in precious metals, and secondly, asset management had completely changed. Sector funds were you know, totally being shunned by investors and brokers. If you wanted a view on a sector, you simply bought an index, you bought an ETF, you didn’t come into a fund. So, a lot of the world’s largest precious metal funds just shut down and we were able to sweep in, and in some cases pick up talent or another case as by an undervalued franchise. And there is a bit of a last man standing exercise to it and that we just stuck with it and we knew that at some point there was the high degree of likelihood that Gold would shine when the credit bubble kind of started to burst, which is what’s happened this year.

Matthew Gordon: That’s a great thing about cycles – you’ll always eventually be right?

Peter Grosskopf: Well, you have got to make it through the bottom. You have got to have the money to invest at the bottom.

Matthew Gordon: But that what I’m getting at with, that’s why I wanted to understand how you have gone about building the business. Because if you think about what you have done: you have protected yourself by finding different revenue streams which are going to see through the different cycles for different commodities, et cetera. And I think that’s what I’m saying.

Peter Grosskopf: Yes, lending in the bullion funds paid our dividend while we waited for the sector to reignite. It was as simple as that. And those 2 businesses are stable. They powered our dividend. At one point we were paying over a 5% dividend. So, what we started to realise is that most of our shareholders were holding us as a precious metal proxy, and almost as they would a royalty company, as opposed to being royalties of ounces produced in the ground, out of the ground. We were royalties in ounces held in storage. And a similar margin quite frankly, and similar small staff. So, levels of profitability were getting better even while the Gold market was low.

Matthew Gordon: Okay. That makes total sense to me, but it has been brought about by the way that you have re-engineered the business away from star manager status, where you are taking the best bits, like are you kind of almost in a way ‘AI-ing’ company by taking the best bits and removing… what would you say you did remove? Did you remove the emotion from the decision-making?

Peter Grosskopf: Individual decision-making processes that were based more on gut instinct, and in the 1990s or 2000s, when some of these managers were absolutely killing it; returns were astronomical, and astronomical compared to the benchmarks. Those systems were based on personal information that was gained.  I’m not talking about insider information, but personal relationships they gained from CEOs and that’s the way the business was transacted. Nowadays, computers, as we all know, run much faster than humans. The information, once a drill hole is out, is known by everybody and everybody can model that information. So, we needed a system that could react to that as opposed to gut instinct. And that’s what it was.

But let me just run through a list of names in terms of the collaborative DNA that we put together: so there was Eric, there was John Embry, there was Charles Oliver, there was Paul Stephens, there’s Whitney George, there’s Rick Rule, there’s Neil Adshad. I mean the list of investors that we had to combine to get that, that system, you know, as good as we could, was a long line. It took a long time.

Matthew Gordon: Yes, it’s fascinating. There is a lot of knowledge, a lot of power in there, but you have got to engage it, you have got to control it in a way you can control the good bits. I mean, do you think there’s a, with the advent of technology and the fact that this data comes out quicker and it’s more understood throughout the market quicker and disseminates through the market quicker, that it’s kind of removed the playing to the crowd component of decision making of investing? Is the hype around individuals, is that part of what you wanted to remove?

Peter Grosskopf: Well, originally yes, but of course you need to know how the crowd’s going to react as well. So, it’s not got out of it entirely. You still need, I think, human beings to analyse – okay, is that drill data going to disappoint? Is that production data going to disappoint, or is this now onto another phase where it could get better? And I think it’s a combination of the system, risk management and individuals that add the necessary ingredients.

Matthew Gordon: But it’s the last man standing? Don’t you feel that you can move sentiment? I get that the fundamentals need to be there, but sentiment needs to follow very swiftly behind. People need to get behind the Sprott decision, or the Sprott investment. And you do place a lot of bets and people do use that as an investment strategy.

Peter Grosskopf: We do. We’re incredibly active. We look at probably you know, five different investment opportunities per day that are new. For a smaller investment situation, we might be able to move markets, but certainly not anything that’s bigger-cap. We recently took over the Tocqueville Gold business in the US, and John Hathaway is now also one of the contributing investors to that methodology. And even with him and his large US Gold fund, we still focus on mid-cap companies, and when we’re holding a stake, it might be five or 10%, it’s not really enough on its own to move markets. You know, it’s a good sign I guess, of endorsement for the companies. But the market is pretty broad.

Matthew Gordon: Let me talk to you about that because I interview a lot of companies and I’ve lost count of the amount of CEOs who tell me, and of course, Eric Sprott or Sprott Inc or investors, but you guys have big bets and then you have, not big bets, big investments, sorry, where you are kind of doubling down on an investment because you truly believe in it and it, and it does, you know, the company needs that cash and it’s able to do things without cash, which is great. But there are a lot of companies where you’re placing USD$1M, USD$2M, even USD$5M, that in itself is not enough to, you know, get the company to where it needs to be. But the fact that your name is there seems to resonate in the marketplace and it’s something that the CEOs latch on to. I mean, do you, please take this the right way? Do you place casual bets? Do you think, well, it’s mining. Sometimes you have got to get lucky and sometimes it’s based on pure data. So, are there investments that you make, which you think, well actually, I’m not sure, but it’s probably worth a couple million bucks on this one?

Peter Grosskopf: it’s a very good question; but I can tell you, absolutely not is the answer. We, as part of this system and as part of attracting our own clients to whatever best suited their own risk objectives, we have earlier stage funds. Neil Adshead runs an exploration partnership for us. Rick Rule’s business is based on earlier stage companies – that attracts a certain kind of investor. But to make those bets, due diligence is done. I mean, Neil’s a PhD in the sector and would never make a casual bet. He would always look at the drill data, he would always think it’s a world class project potentially in order to accept the risk-reward. So, for us, those small bets, when you see us making them, that’s about seeding. That’s about seeding investments for the future. And talk about the Sprott system: it’s something that we think is an essential service, it is to know what’s going on from the earliest stages of the drill play right to as it goes into production. What we don’t do, generally speaking is focused on big caps. We leave big caps to our indexes and we do have indices that hold big cap stocks. But once it’s in big cap format, it’s very hard to make a difference. And you know, we’d have to have a very specific thesis to go overweight, a big cap.

Matthew Gordon: Okay. So, tell me a little bit about the investment decision making committee ecosystem that you have. Is it down to individuals or do you sit down on a Monday morning and go, guys, let’s talk about what’s happening this week?

Peter Grosskopf: Well, there’s always an individual PM that has a fiduciary duty to make the tie-breaking decisions. Some funds run by way of investment committee where there’s a vote, an official vote, and some funds are unofficial, and they have a group of PMs sitting around a table and having that Monday morning meeting. But in all cases, it’s a teamwork-based approach.

Matthew Gordon: Okay. And I know we have been a little bit focused on the capital market stuff, but that’s kind of, I guess where the magic happens, right? So, and you have got your ETFs and you have got your bullion and so forth. You have got lots of products out there, which retail investors, family officers can go and latch onto, but the bit which they, I guess, enjoy is going and making these bets themselves on certain companies. So, I’m trying to sort of draw the parallels between the decision making that you go through; you’re telling me that you are heavily informed, you have done a lot of diligence, a lot of homework, and the way that retail go about it, in which there’s a little bit more emotion to the decision-making and less homework. I mean, do you think that retail investors are equipped to make decisions on capital markets?

Peter Grosskopf: Not always. There are retail investors that are simply great traders. I know that one of my doctors at my local medical facility is an awesome trader of precious metal junior equities, but it’s because he’s a chartist and he’s extremely good at that; at reading charts and he does very well. So, everybody’s got their own skillset. I think throwing darts, or in particular listening to brokerage recommendations that are based on commission. You know, when a deal is coming, and you’re being pitched to buy a deal because there’s a big commission. I think those are dangerous events because you shouldn’t be throwing darts. You should have some knowledge. You should be betting on either the charts or you should be betting on management or you should be knowledgeable enough as some investors are to read the drill results or the production results.

Matthew Gordon: Yes. I think that’s true. You have got to understand what your own strategy is, right? We said at the beginning, everyone’s got a different strategy, and stick to it and be able to make that call. Because we get into discussions with individual retail investors and I don’t say anything, but you kind of walk away going, you’re not really here to make money, are you? You’re here, you’re here to be right. Which is not necessarily the same as making money.

Peter Grosskopf: Yes. It’s tough. I mean, it is not an easy sector. It’s a sector that’s humbling and where even the best investors in this sector probably make more mistakes than they get things right. But they know how to trade those that they get right in a way that that more than makes up for all the losses. So, the most experienced and successful investors in this sector, I say, do two things extremely well: number one, when others are selling, they are buying, and when others are buying, they are selling. And number two, they know how to keep their winners. And it’s usually the 80/20 rule: 20% of your investments will make 80% of your return and the rest will probably detract from that return.

Matthew Gordon: I think that’s right. It is tough. It is tough. You’re right. It’s very tough. You have got to make some calls on your investments, you need to know when to get out. And sometimes getting out of the loss is the best decision that you’ll make on that particular investment. But look, we could talk on and on about retail investment strategy, but I want to talk about something which I think you’re a little bit excited about, which is the digitalisation of Gold. Why don’t you tell us about that? Because that that feels like something new that people don’t know too much about but makes a lot of sense. So, what’s your take on it?

Peter Grosskopf: Well, I’m an ardent believer that this is going to make a big difference to the sector, and it’s been slow to take root, but the technologies are there and they’re available. And what we’re talking about is the digitisation of the Gold ledger. The Gold ledger is a record of every bar that’s in storage, and it forms the vast majority of the net worth of the Gold business. If you think about the Gold business, it’s about $8Tn . There’s a certain percentage that’s held by central banks. There’s a certain percentage that is held in jewellery, and then there’s a certain percentage that’s available in above-ground bullion storage. And that number is in the trillions. So, we’re talking about a huge market. I mean, talk about Gold versus Bitcoin – Gold absolutely swamps Bitcoin. Bitcoin is like a flea on the back of an elephant comparative to Gold.

So, the digitisation of that Gold that is above surface is absolutely required for Gold to enter the modern age. And by modern age, what I mean is to lower the trading spreads, to allow Gold to be moved in a reliable, quick, safe fashion between investment accounts for an individual, and to allow Gold to be spent in small increments as a payment system as well, which it’s never been able to do before. So, when you look at those goals, those are all entirely possible now with technologies that are already working and on the table. So why isn’t it taking off like Bitcoin? Well, it’s because there are existing players in Gold that are making too much money keeping the system the way it is. And we’re talking about the LBMA and its members. We’re talking about the big traders in Gold. We’re talking about even the World Gold Council and the GLD itself, which is a phenomenal moneymaking ETF. And most of all, we’re talking about the spreads in the business to the retail customer, which are extremely punitive; whether it’s coins or whether it’s even buying small bars on storage. Who would invest in an asset that’s supposed to be liquid if you’re being charged 5% or 7% to go in and out of it? I mean, it’s never, it’s never going to take hold.

So, what digital Gold does is whether it’s on the blockchain, which I think is by far the most exciting and secure way of building the Gold Ledger digitally, or whether it’s simply an electronic form. If you have a certificate of deposit that has now been verified and put into an electronic contract, those can both be sent in seconds. They can be traded in seconds. They can be traded with very low margins. Theoretically it’s all based on the claim that you have to the physical Gold. And it would not work in our view unless an individual having such an electronic certificate could go to the point of origin where it’s being held and claim their Gold physically. That has to be the case. So once again, it’s brought standing up for what we believe in, which is you need physical Gold ownership to properly store that value outside of the financial system.

Matthew Gordon: So that, I mean obviously you’re talking about Gold here, but blockchain in itself has had a difficult ride in anything other than security, because people need to know how to harness that. Governments need to know how to control it. Banks need to know how to manage that process, because it effectively, it sends information in a way which is hard for people. It’s encrypted, heavily encrypted. It’s hard for people to break that down. So, I think until you get the big players who you mentioned… how do they make their piece from this? How do people understand how they monetise it? It’s going to be very difficult to get the kind of ground swell of support that it needs, isn’t it? I mean, do you see this? It’s been happening slowly, but it’s been happening slowly in lots of sectors. So, is this going to get over the line commercially?

Peter Grosskopf: I think it is. I think it is going to get over the line because I think it’s too compelling for, for instance, the LBMA not to digitise what they already describe as lemon good delivery Gold. So, it also ties in with ESG and proper provenance on the Gold. Once the Gold is produced, it should be able to be traced, and if it’s properly produced and ethically produced, it should be able to be traced onto a digital certificate. So, the LBMA and its members have too much to gain by not endorsing this at some point. They just want to figure out how they’re going to make the most money from it, which is within their rights. And, and so we do think it’s going to happen.

In terms of the regulation, which is what you were touching on there, it’s pretty simple for Gold. Gold needs to go onto the electronic rail and off of the electronic rail in a regulated fashion. It’s light regulation, but it’s still, it’s a know your client requirement primarily. So, you’re not going to be able to create digital Gold and send it around the internet to criminals and then have them take it out in some fashion, in some country where it can’t be noticed that it’s being taken out. Perhaps in the interim it can be sent through the, you know, the hypermarkets, the unregulated internet, but going in and coming out, it’s regulated. So, for Gold, it’s pretty simple.

And the existing regulated entities that handle Gold will be handling digital Gold. There’s not going to be, you know, black market dealers in digital Gold. So that, I think is fairly straight forward and it has already been established.

Matthew Gordon: It has, I guess what I’m trying to get to is, you know, how quickly does this get to the point where,  retail, family officers, you know, people outside of the institutional bubble can access a product like that but understand it first of all and then access a product like that?

Peter Grosskopf: Yes, so I think that the information and the technology is there to be understood. It’s working. So, small commercial, we have a website that we JV with APMEX, which is the world’s largest Gold coin online dealer. And that website is called One Gold and you can go on One Gold and then you can buy physical, digital Gold within one and a half seconds.

Matthew Gordon: Fantastic. We will put a link to that.

Peter Grosskopf: It is a very acceptable spread, like an institutional-like spread. And it will be stored for you. So, there are certain websites that are up and running that have the capability of handling it already. The question is, when does it get to be the volumes that the Gold market is known for? The Gold market is an incredibly liquid market. $140Bn a day of trading, $90Bn a day, $70Bn to $90Bn a day of settlements. You need some big organisations going digital in order for it to really take off.

Matthew Gordon: Okay. I guess this is one of those, let’s watch this space, see how that grows, see what the sentiment for that is. Just staying on Gold, because it’s your thing, I read something recently: where you were talking about your view on the price of Gold. You talked about USD$1,800 in March of 2021 as being realistic. I see a lot of ads and headlines; people saying USD$3,000 Gold, USD$5,000 Gold, USD$10,000 Gold. These are sensationalists, and I think if you look back over time, they are no more than that. You know, the last five years, people calling those big numbers, but things don’t happen. Why are you so pragmatic about where Gold’s going to go?

Peter Grosskopf: Well, because it’s a huge market and it takes a lot of volume to move it and it takes a lot of believers to move the price even a hundred dollars. There are people that of course take profits on the way up and use it as a trading tool. And look, I’m a huge believer in Gold, and if you take a look at the financial system and what’s happening with the financial system now, you actually don’t need to go too far. In fact, you need to be wilfully blind not to see that governments have created debt which will never be repaid in a conventional way. There will be financial repression, sovereign bonds will become certificates of confiscation, and if you want to park cash, so to speak, you’re not going to be parking it and fee currencies or sovereign bonds and making money. You’re going to be parking it in those instruments and losing money every year guaranteed.

So, in that kind of an environment, there’s a lot of adoption that needs to happen into Gold. I mean, it’s still a minority of investors that even consider it. It is growing. It’s not a fringe asset anymore. And we keep talking about this; our client basis expanding you know, laterally, and going from sovereigns all the way to the smallest retail investors, but still, households in general haven’t converted. The average household has no money that’s denominated in Gold in their system. Institutions, I would say, are still only 20% adoptive to Gold. And so, there’s this huge influx that needs to happen as Gold retains its legitimate status as the preeminent store of value. And the question then is, how much volume can it handle and where does it go? And I think that process is a very slow process, because of course, governments are fighting it every step of the way. And I think it’s going to take until we see some inflation after this current crisis. I think it’s going to take until we see some loss of control and budgets and fiscal deficits. And I just think, based on everything I’ve seen over 2000 is now healthy recommendation by the end of the year, by early 2021. Personally, I’m going to take it one step at a time. You know, I’m not going to go out and say it should be USD$3,000 based on, on the amount of debt that’s outstanding compared to during the financial crisis or what have you. I recognise that those are all valid, but so are those people that are worried about deflation. So, it takes a while for this super-tanker to plumb its way higher, especially against its main competitor, which is of course the US dollar.

Matthew Gordon: Absolutely. No, I’m with you Peter. I have to say, I’m absolutely 100% with you. One step at a time. Less sensationalism, because I think, again, it affects retail investors.

Peter Grosskopf: Yes, well let’s just make money as we go here and you know, put some runs on the board.

Matthew Gordon: There you go. There you go. So, what makes you nervous about the market? Well, you have mentioned a few things there, but what makes you especially nervous about where we find ourselves today? Clearly COVID-19 has had a kind of ramping up effect, but some of the quantitative easing which has gone on around the world. What do you think the impact of that is going to be and when? When do you think we’re going to start being impacted by some of that decision making?

Peter Grosskopf: I mean, it’s absolutely massive, right? And governments have now taken on an entirely new mandate. They now seem to think it is within their mandate to control all markets, including the markets for employment, the markets for treasury debt, including the, obviously the fiscal and monetary techniques that they’ve had available to them. And now they’re responsible for the health and safety of all of their citizens, it really, you know, frighteningly reminds me of you know, the books that were written decades ago, like Anne Rand, Atlas Shrugged, and 1984. So, it has come to this now. The numbers are staggering. In order to support those numbers, again, I do not think there needs to be debate as to what happens. Sovereign bond yields need to be anchored at close to zero nominal rates. Real rates need to be zero or less for an extended period of time. Cash needs to be confiscated by a process of inflation that will eventually make sovereign debts more manageable. That process will take from savers and it will potentially reward risk-takers with equities, because some equities of course can do well during inflation, but it will hurt anyone that sits in cash. And, you know, from a very personal perspective to a corporate perspective, to my perspective as an investor, as a professional investor, I would say it is absolutely time to hedge that. So that’s how I see it. I don’t think it’s debatable anymore. These deficits are never going to come down. These sovereign and central bank balance sheets are never going to come down.

Matthew Gordon: Yes, well, yes, I agree. It is tough. It is going to be tough.

Peter Grosskopf: They are going to be monetised. As in money printing, MMT, whatever you want to call it.

Matthew Gordon: Yes, I know. It is tough, I struggle to wrap my head around the size of the numbers that we’re talking about here.

Peter Grosskopf: Just look at what is happening in Japan:  I mean, the Japanese government is going to end up owning half that stock market. When is the stock market not just going to become a controlled market of the government? I mean it’s shocking what’s going on.

Matthew Gordon: Yes. It is shocking, but no one really seems to have a cohesive plan as to how we collectively solve this. So, I again, I think it’s probably one for another day, one to monitor for sure.

Peter Grosskopf: That’s a question of democracy and you know, subjects that are beyond the scope of what I can kind of discuss.

Matthew Gordon: I think that it is also beyond the scope of democracy in a way, because these are decisions that people have not had to make before on this sort of scale. But like I say, let’s not make this too big a subject for now.

You have used a phrase previously, which I think you have sort of covered, which is, you know, anti confidence in the momentum or in the shape of Gold. But I did want to talk about that, but I think that you have covered it beautifully elsewhere. Can I just, one thing you just talked about, which I think is interesting and I want to help people watching the show understand how they can go about doing it, which is, you should hedge. You have got to hedge against this scenario because there will come a point where this gets tough. So what are their options? Sign up to Sprott?

Peter Grosskopf Okay, well, of course, yes, we would love to talk to them about it, but what are the options? So, the options are to sit on cash, and one step removed from that is to sit in treasuries, because of course they give you hardly any yield, but they’re liquid, so you can sit and wait. And I think there’s some rationale to doing that. I think there’s some rationale to sitting and waiting because as other markets stumble, they create buying opportunities. So, it’s good to have some ready cash. However, every year you’ll be taxed on that cash. You’ll be taxed on it through the process of inflation and reflation, and it is going to penalize you to hold that cash so that that’s an option. I like Gold better than that option, but it is an option. And then of course, the equity markets can provide amazing trading opportunities and also very solid investment opportunities. And some of those can keep pace with inflation. Some of them can even do better with inflation. So, it would be, I think, imprudent not to have an equity portfolio.

In terms of hedging the risks to the world going the wrong way and confidence starting to bleed and you know, major corrections in markets. I really only think there is Gold and put options on the market, which are expensive, and you need to know how to time them. And there are you know, perhaps some other hard assets like agriculture, timber, other necessary hard assets, you know, even some forms of infrastructure investment that are fairly immune to economic shocks and fairly immune to inflation or should even benefit from inflation. So, you have to start going fairly far afield to get those options. As an individual investor, you need to look at liquid alts, you need to look at very specific funds. So, unfortunately the way the FSC and the other regulators have made it, it’s tough for smaller investors to get into those areas.

Matthew Gordon: No, it certainly is. And I think that it comes back to, you have got to know what you’re doing. You have got to know what you’re investing in before you kind of put your money down. And that’s why I asked the question earlier: do you think that all retail investors are equipped to do this with what you and I are talking about; knowing what’s coming down the line pretty quick.

Peter Grosskopf: Well, I didn’t want to be too commercial and again, get into a you know, a Sprott advertisement here, but it really is the kind of area where it would benefit most investors to have a consultant and an advisor, a broker, you know, a money manager who can handle their interest. Bullion itself once it gets to be digital is going to be a bit more simple. You’re going to be able to own bullion and have it in your financial accounts, but as soon as you go past that, I think having a professional help you is a good idea.

Matthew Gordon: Yes, I think that’s an extremely, extremely good idea for sure. And if you still want to play with some of your money, play with some of your money, but it comes back to this portfolio approach of different risk strategies for different parts of your portfolio, depending on what your needs are, obviously.

Peter Grosskopf: Yes, like what’s your timing? Timing is, especially for Gold equities, it’s everything, because even outside of bullion movements, those equity cycle up and down 30% on sentiment.

Matthew Gordon: Yes, never a truer word. Peter, I’ve got so many more questions, but I am very conscious that you have got to dash off for another meeting shortly. And I’ve learned a lot today and I’d love to, we should definitely speak again, and we have drilled down on some other areas of –

Peter Grosskopf: Please. Let’s do it. You have asked some very good questions and we took our time. So, I think if you have follow-up questions, I’d be happy to do that.

Matthew Gordon: Beautiful. Peter. Well, I’ll let you go, Sir. Thanks so much for your time, it was an absolute pleasure to have spoken to you.

Peter Grosskopf: Thank you. Okay, thank you.

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