Red Cloud Securities – Investment Tips From An Industry Insider

The Red Cloud Securities company logo

A conversation with Chad Williams, Chairman and Founder of Red Cloud Securities Inc. 

Sure he is not as good looking as Kate Hudson, but he is in as much demand. Red Cloud Securities offers capital markets services to mining companies. All the company does is “help mining companies.” While there are around 100 services that Red Cloud Securities provide, they can be grouped into categories. These include: capital raising, M&A, marketing, strategic advisory work and equities research. There is no other group in Canada that does everything Red Cloud Securities does and has enabled them to grow to be one of the go-to companies for junior looking for capital. But woe betide a company that doesn’t match up to Williams stringent assessment criteria. We think Retail Investors will find these useful too.

Marketing is particularly difficult, given current COVID-19 restrictions, but Red Cloud Securities is pushing online webinars amongst other things as potential solutions. Its team of analysts provides expert research and advice, and Red Cloud Securities has raised hundreds of millions in capital for 500 different mining companies over the last 10 years.

Williams is a mining engineer with an MBA. He has been in mining “since he was a kid,” and was a top-ranked gold mining analyst at some of the world’s major banks and brokerage firms. He managed mining equities and even ran a mining company: Victoria Gold Corp. He has seen the mining space from all angles.

Marketing is crucial for mining companies. How else would they manage to raise capital and fund their projects? Williams explains just how crucial telling a compelling story to investors is for mining companies the world over. When times are tough, mining companies really struggle to raise capital, and this is where Red Cloud Securities steps in.

Williams then gives some extremely useful information to investors: what criteria does Red Cloud Securities look for before funding a mining company? Williams states that he can sometimes tell within 15 seconds (YES, ONE-FIVE) whether a company will receive his investment or not. He states that he can tell by how the person is dressed, if they show up late, who is marketing with them, their age and their demographic. Essentially, “give me as few reasons to dislike you as possible.” Over 30 years of extensive experience can clearly make your gut instinct a powerful thing indeed! Investors will find the human/visual side of judging potential investments very interesting.

We Discuss:

  • 2:36 – Company Overview and Chad’s Background
  • 5:27 – The Importance of Marketing for Mining Companies
  • 11:50, 21:23 – “I Need Your Money”: A List of What You Need to Look Into Before Investing in Companies
  • 20:13 – From Us to You: Don’t Be Lazy, Do Your Homework
  • 24:58 – Promoters and Their Games: Getting Caught Out as an Investor
  • 27:28, 42:07 – Business Plans and Preparation for Success: How Will the Company Make You Money?
  • 37:30 – Timings, Urgency and Political Events: Uncontrollable Circumstances Affecting Investments
  • 45:54 – What Should You Question as an Investor?
  • 50:26 – Chad Williams On Joining RNC’s Board: A View on the Company

CLICK HERE to watch the full interview.

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

Matthew Gordon: Hey Chad, how are you sir?

Chad Williams: I’m very good thank you. Thanks for asking. How are you doing?

Matthew Gordon: Well, we are surviving. We are surviving. We’re all self-isolating in our little cabins. Now, you’re up in Quebec, you mentioned earlier?

Chad Williams: No, I’m actually North of Toronto, we call them cottages in Canada, but cabins or a lake house. And yes, so sorry for the beard and the casual look – but that’s me these days. And I think we’ll look back, maybe even next week or in a few months on this as truly extraordinary circumstances. But we’ll get through this, humanity has gotten through this and this too shall pass, as they say.

Matthew Gordon: We will endure and we will survive. There we go. Yes, it’s interesting times for sure. Hey look, Chad, we caught up a few weeks ago, before you went to PDAC, so I guess a few things have happened since then. But I know today we’re going to talk about serious business matters. So let’s kick off with a one minute summary for people who perhaps haven’t heard of Red Cloud Securities, and give us a little background on yourself if you don’t mind.

Chad Williams: Sure. Yes, so little bit on me: I’m a mining engineer with an MBA and I’ve been in mining really since I was a kid, as far as I can remember. But of note, I was a top-ranked mining analyst, a gold mining analysts at some of the bigger banks and brokerage firms. I managed mining equities. I even ran a mining company called Victoria Gold, which is still around. Of course they’re building a mine in the Yukon. So I’ve worn a lot of hats, so many hats that it’s cost me my hair, but you know, mining is my calling.

And what happened is about 10-years ago, maybe a little less than that, I had the idea to create a new type of company. It’s called Red Cloud and Red Cloud offers capital markets services to mining companies. That’s all we do is help mining companies. And literally, there are about, or there is about 100 different things that we do, but generally they can be grouped into different categories such as capital raising. We raised you know, lots of money, hundreds of millions of dollars for dozens and dozens of companies. We do M&A, we do marketing, which is interesting in this context because we can’t have human interaction anymore so we’re really pushing video and webinars and let’s call it virtual marketing. So we do marketing. We do also strategic advisory work. I remember when I was with the CEO of Victoria Gold; you know the old cliche, it’s lonely at the top – well I had no one to talk to really, so we provide strategic advisory services to mining companies and we provide equities research. We have a team of analysts as well.

So you know, that gives you a sense of what we do. There is no other group that does everything that we do. And there are groups that do various parts of it, but we’ve been a big success. If I could say that; I don’t think it’s an exaggeration. We have over 30 employees. We’ve helped hundreds of mining companies, I think it’s at last count 500 different mining companies over the last 10-years. So we’ve been very, very busy and things are actually going quite well right now because our clients, the mining companies are looking for alternatives for ideas and we’re able to offer some different ways to market and raise money.

Matthew Gordon: Brilliant, brilliant. Sorry I cut in; there are so many different components that, I mean we’re going to talk today about raising capital or the way that companies approach you and engage you to help them raise capital. But you touched upon something there: as an ex-banker it fascinated me – you talked about marketing. The importance of marketing must be significant if you have created internally a marketing function because normally you think, hey, give us the money. That’s all we need, you know, and then we’ll go off. We know how to mine, we are geologists, we know how to mine, we will go off and do that and that’s all there was to it. But it strikes me, having sort of come down from sort of, you know, the material big cap type of stuff down to the junior space, they don’t all have the necessary skills in-house to, you know, as a reasonable quality or reasonable experience to deliver everything that it’s union needs to deliver. So, you know, Red Cloud, being able to offer all of those things: not just the finance, the advisory, the fundraising, but the marketing as well, I can see why that may have been quite attractive. Were there certain times where that was more in need than others? You know, when times are good to people, they ignore marketing?

Chad Williams: It’s a funny thing because I mean, to be honest, we haven’t had really good markets since I started the company. I mean, we’ve had a few bright spots, but generally it’s been very, very tough. And what we’ve found is when times are really tough, mining companies really struggle to raise capital. So they need help and that’s when they reach out to us. And then when markets are very strong you know, they still reach out to us because they know we’ve got a big network and they want to tap that network, and so we boost their efforts. So some people call it ‘the Red Cloud miracle’ because we’ve been able to not only survive but thrive in mining finance in very, very difficult times. And the reason is because we’ve got this nice niche, we’re part of this, we’ve created a new niche in this, in the mining ecosystem, if you will, that nobody else can satisfy in aggregate. Okay, brokers can raise money at certain times and marketing firms do marketing at certain times, but because we offer so many different services, there seems to be a need for what we do all the time.

Matthew Gordon: Yes. It’s interesting actually because when I kind of stepped down to the junior space, like I said, it’s probably about three years ago, and like I said in a previous conversation with you, I promptly had my ass handed to me by a bunch of promoters and brokers. There’s a game, there’s a definite game, right? And I didn’t know what the game was and we learned a lesson along the way, and that’s what happens. But because of your ability to do diligence; when companies come to you, you go, ‘hey, one is this a company we believe in? And two, could we tell this story to wherever we go to raise our money from, whether it be institutions or you know, wherever you go to?’

So there’s a kind of, would you say those are kind of a stamp of an endorsement from you if you’re going to the market and asking, rather than this promoter route? Because I’ve just seen it too many times; there’s quite a few well-known groups who if they’re involved, we walk away, we definitely avoid.

Chad Williams: Well you know, we do pride ourselves on quality, and when I started Red Cloud I said at the very beginning that we’ll do business with about only 1% of all the mining companies, and that’s sufficient. There are so many mining companies, we don’t need to do business with more than that. We’re certainly not perfect. We’re misled too: people are at times very convincing, and I’m being polite, at other times they’re deliberately misleading. But you know, we’re not perfect but I would say our track record is very, very good. I would say out of the 400 or 500 companies, I’ve lost track, there’s only like four or five that haven’t worked out at all. Which isn’t bad at all in a very, very volatile industry with, you know, start-ups; because a lot of these companies are start-ups. And we have a team of technical people: we have metallurgists, mining engineers, geologists, fund managers, and we protect our franchise very carefully to the point where certain institutions will take meetings with our mining clients site unseen. As long as they’re a Red Cloud client, they will take a meeting.

That’s not easy to keep that reputation up. And you know, as you can imagine as we grow and times are good or times are bad and you know, there are always different agendas and problems really to keeping a good franchise. But we certainly think that’s very important.

Matthew Gordon: Okay. Let’s take that as a yes – a stamp of endorsement from Red Cloud works. If you can get through doors, then it’s got to help these companies, right? Because that’s the trouble.

Chad Williams: We do have an investment committee, it’s called the New Names Committee where there’s 10 people that vote and it’s got to be unanimous. And anyway, long story short; we do have processes and you know, the truth is as well is we’re a regulated broker, in Canada, it’s called an IRAK dealer. The equivalent in the US is FINRA. So we have the very highest level of designation possible as a broker dealer. So, you know, we are regulated and so we have to be careful. Plus, I was a top-ranked analyst for many years and so, you know, I’ve got a reputation and the people in my company have a reputation to maintain as well.

Matthew Gordon: Yes, but you know what I mean? I’ve been a banker myself and it’s difficult to, you know…there’s good and bad out there. And if you find some good ones, stick with them because the reputation clearly matters to them, and longevity is earned, you know? You can’t kid your way through that. So it’s been a learning experience for us and I, you know, I’m just conscious for our audience, which is retail investors, high net worth, family officers who don’t spend all day thinking about mining investment. It’s just when it comes across the table and and we’re keen to help them understand who’s who at the zoo, who’s good, who’s not so good, you know, what companies are good or not so good. So we talk about red flags and green lights, but that’s a conversation for another day.

Today we’re going to be talking about raising capital; so companies come to you, you’ve just explained the whole infrastructure behind Red Cloud, but companies come to you and they pitch. They pitch their companies and their assets and the management team. And they say, right now you’ve heard this story, give me some money. And some are better than others. Right? So what are the things that you need to hear? Because we need to be cognizant that this is a retail audience; slightly less sophisticated than you, so we need to put it in a language and position it in a way that they would understand how they could translate that into what they should be looking for in companies too. So if you don’t mind?

Chad Williams: Sure. And you know, I believe I’ve got a lot of credibility on that front because I’ve been doing it for over 30-years and I’ve financed, literally there must be 20 companies that get more than that, that come to see us every week at Red Cloud, raising money. They are looking to raise capital. So trust me, I’ve seen, you know, I can tell within probably 15 seconds whether this person is going to get money, right?

Matthew Gordon: Really?

Chad Williams: Oh, I can see it. I can see, I can tell by, you know, it’s kind of an odd thing, and this is the kind of advice we give to our clients as well. Right? Because not all of them come in prepped, but you know, I can tell by how they’re dressed, if they show up late, who is marketing with them. I mean, even before they say anything, I have a good sense you know, by their age, their demographic and all kinds of things.

Matthew Gordon: It’s a funny thing that, because my old man, we run a family business and my old man is like; if their shoes aren’t clean, they’re not getting my money. If they’re not presentable – you know, it’s all that kind of human personal traits where you are going, he said, ‘Give me as few reasons to dislike you as possible. It’s a funny thing that’s a very visual part of the decision-making. So I’m fascinated that you said that. Interesting.

Chad Williams:  Yes. I’ve been doing it for so long, but what I did Matt is I was asked by the PDAC, which is the largest mining conference in the world. They asked me to give a presentation on some advice for mining companies: how to raise money. And I came up with 10 different things, 10 different lessons, if you will. And these lessons come out of necessity and agony in the sense that I’ve seen so many bad pitches and so many people do things wrong that I figured it’s my duty to fix things. So the 10 lessons, the presentation I think is probably on the Red Cloud website and if it’s not, we’ll get it up there. But the first one is very basic, and how I came up with this in fact, I didn’t come up with any of this really; it’s only through trial and error, but I met a very wealthy air conditioning salesman, sold air conditioner; the guy had like a Ferrari collection and a 30,000ft home in Toronto. And I said, ‘Shit, you must be a really good sales guy.’ And he said, ‘Actually, I’m terrible at sales, but I’m really good at listening.’ And I try to figure out what people need and want and then I give them what they need and want. So it’s a very basic thing. You can never get someone to, you know, especially adults, maybe kids you can convince, but adults, you can’t convince them to do something they wouldn’t normally do. But if you figure out, you probe and you figure out what their needs are, then you might be able to give them what they need.

So the first one, the first lesson is: it’s never about you. As a mining promoter, it’s never about you, it’s always about the investor. Figure out what the investor needs, what their risk tolerance is. What commodities may be of interest, what stage, that kind of a thing. One thing that is constant for every investor is they want to make money. So they have to figure out how they make money and they all have risk tolerances and you know, what could be appealing, what could be too risky for them, that kind of a thing. So try to figure out what the investor wants. It’s always about them, never about you as a promoter.

And the next one is, this is a big pet peeve: most mining folks, most promoters or mining executives are all tech: they’re technical, they’re geologists, mining engineers, that kind of thing. So they have been trained and they think that to get someone to part with their money, they’re going to bamboozle them with technical terms and alteration, and 40-page or 80-page presentations. That can only go the wrong way. It has to be presented in a very clear manner. And the analogy I use is; pretend that you’re presenting to a 14-year old male, okay? So 14-year old males have a very short attention span. They’re thinking about partying and thinking about a million other things. For a very brief period, they may actually be thinking about you, but don’t take it for granted. So a very short window and make it super simple and present. And it takes a long time. And that’s where I’m pretty good and other people at Red Cloud are good at is, is after listening to a pitch, a presentation, we come up with the magic ingredient, what will be the pitch that will work? And then we reinforce that.

Matthew Gordon: It’s interesting you say that because we’ve interviewed like 250 CEOs in the last year, and we’ve had a few quite capable, articulate CEOs and they’ve been able to tell the story well and they make sure you understand it. And then we’ve had others at the other end of the spectrum, I think you’re indicating perhaps more geologically technical competent individuals and their view is, if you’re not bright enough to understand this, that’s not my fault. And I would go, I would counter that and say; it’s not my job to understand it as an investor, it’s your job to make it clear to me because it’s my money that you want, right? But how many times do you come across the CEO who’s just, they just want to show you how clever they are, rather than get what they need, which is your money.

Chad Williams: And it comes from insecurity. But you know, arguably the brightest guy in the history of mankind is Albert Einstein, and he could explain his very complex theories very simply so that anybody can understand. And if you’re trying to confuse me or use big words, then I’m going to be sceptical and I’m going to be immediately nervous. And it takes really, really smart, sophisticated people to dumb things down, but some people are so insecure that that they’re uncomfortable with that. But anyway, it is what it is.

The other, and I made a list here; the other one is, you have to define a clear use of proceeds. If you want my money, I need to know where my money is going because I am going to believe right off the bat that you’re going to be buying Ferrari’s with my money. Right? And I don’t trust you. I don’t trust your providing guy. I don’t trust anybody, quite frankly. But if you have a clear use of proceeds, and you spend the money wisely and then you’re probably going to get my money now and you might even get my money later.

Matthew Gordon: No, I think that’s right, but that seems a very normal, everyday question. If you’re lending someone $10, you’d be saying, well, what’s it for? Right? You’d be asking that simple question, but some people hand over USD$50,000, USD$100,000, and they don’t ask the question. Or even more bizarre to me is, they don’t read the prospectus which they’re signing up to. They’ll read the summary and go, ‘Oh, that seems reasonable.’ But in the detail, and it’s particularly prevalent when things go wrong, right? Further down the line, like say the market turns, there has to be some sort of, you know, merger or takeover, or quite frankly, you know, write down, and the management team get handed X million bucks even though the company’s lost money and the shareholder are in uproar. It’s like – well, that was in the prospectus. If that was ever going to be a problem for you, you should never put your money in. And again, that’s not a savoury example, but it is a good example of; read the detail.

Chad Williams: And you’re absolutely right. That being said, you know, we’re all very busy and if you’re going to hide stuff in a prospectus, that to me, that’s, not the kind of people that I want to invest in in the first place.

Matthew Gordon: That’s true as well.

Chad Williams: You’re right: you can go back and say, okay, well, okay, I was a dummy, I should have read page 800 of the prospectus, so shame on me. But nevertheless, that’s a little bit…it could be more obvious. But other things, and we don’t have to go through all of them, but the key one is, is you have to develop trust. At the end of the day businesses, it’s like a roller coaster; things go up, things go down, things go well, things go badly. But if you trust management, if you really have conviction that these people are going to spend your money wisely, especially with exploration; exploration by definition is risky, and you may find something or you may not find something, but if you’re spending the money wisely, and people are managing your money properly, that’s a good use of funds, in my opinion. And that’s the first advice I give to executives is; build trust. And trust doesn’t occur overnight. It takes years in some instances.

Matthew Gordon: Well, there you go. I mean, we would no sooner invest in a company we’ve just met than fly to the moon. We look at the company over time, we read the quarterly, have they consistently delivered everything that they said that they were going to deliver? Or if not, have there been mitigating circumstance?  And then there’s always deals, right? Your money is your money. You have got one go at this. If you get it wrong, you don’t got any money anymore. But there’s always deals, there’s more deals looking for money than there is money – that’s is my view.

Chad Williams: Yes, yes.

Matthew Gordon: So just take it easy. It’ll be fine.

Chad Williams: You’re right. As an investor as well, and I, you know, I’m guilty of that myself; I tend to fall in love with the geology and the prospects, and it serves me well. I’ve made a lot of money on mining stocks, but the reality is most of the time, exploration does not work. And you know, I’m actually very conservative; I don’t gamble. I go to Las Vegas, I don’t even touch the casinos. But nevertheless, I do see the merit in a lot of these stories, but nevertheless, it’s a very, very, very, very risky business. And the promoter won’t accurately portray the risk to you because he or she has the incentive of grabbing your money. And you’ve seen it, you know, you’ve been misled so many times.

Oh, the other thing too is, really one of my tops irritants is that the mining companies come in and they say, well, you know, I need let’s say USD$1M or 10M or $100M, and I need it by next week. And I’m thinking, why do you think that’s reasonable? Like, do you actually run your company with such a lack of foresight and planning that you think I’m going to come up with any amount of money within a week? I don’t have, you know, a bunch of cash laying around ready to deploy at any moment here. Right? And so it really takes about six months from the moment you think you need money to closing on a financing budget – six months.

Matthew Gordon: Oh, when someone says, ‘Have I got a deal for you, Matt? The returns are astronomical but we need to close it within two weeks.’ That’s the only, like I literally shut up shop at that moment. It’s like the doors are closed. There you go. Because that smells of, as you say, at best mis-planning, bad planning. At worst, it sounds just almost a little bit corrupt. It’s like one of those sort of pressure sales, scarcity sales, which again, there’s too many deals out there for us to worry about something like that. But yes, I know what you mean. I have some sympathy.

Chad Williams: And we get caught up as investors. Because I’m an investor too; I buy, you know, almost all, if not all of the deals that we work on, but, you know, you get caught up in the moment. Cobalt is up – I need a Cobalt name, or Silver is up, I need a Silver name.

Matthew Gordon: Well that’s the promotional world isn’t it? Again, we did see that with brokers: they’re going, oh, the next thing we’re going to push is Cobalt, and then actually, Cobalt’s no good anymore. Every quarter there was a new thing to push and they needed them, but it was just a case of, find me anything. It didn’t need to be good. Just buy me anything which has the word Cobalt in it, or you know, obviously you guys have had a big kind of cannabis run and up until recently.

Chad Williams: Yes. Not us at Red Club, but yes, generally in Canada. We didn’t touch the cannabis thing at all.

Matthew Gordon: Well, that was the kind of thing which made me just stop and have a look about. Again, 3-years ago, a buddy of mine who runs a brokerage in Canada, he was trying to get me in cannabis and I thought, great, and it’s all going well. And he came to me in the September before things went wrong and he said, ‘Time to get out.’ I said, ‘What are you talking about this? This thing’s still flying?’’ He said, ‘Yes, but we’re taking our clients, our good clients, out of this now. We’ll continue to sell it but we’re going to take our clients out of it now because we’re going to start dumping it after Christmas.’ I’m like, ‘Okay. I said, what happened?’ He said, ‘Well, the retail guys are going to be left holding the baby.’ And you’re like, ‘What do you mean?  Your retail guys?’ ‘Yes, that’s just the way it always works.’ I’m like, ‘Oh, that’s the game. That’s the game. Right?’ And I just felt that just left a bad taste in my mouth. And I was thinking it’s stacked against retail most of the time. And I just, you know, it was a real eyeopener, but I won’t talk too much more about that one for a fear of getting into trouble. But that was the genesis of doing what we do now, which is to say, Hey, the little guy matters here, especially in the junior space where, especially in mining where institutions kind of stepped out on mass, you know, and for all the reasons you know.

The next slide I’m looking at here, which always interests me is, ‘how will I get rich?’

Chad Williams: That’s all I need to know. I don’t really need to know what you’re doing or what the name of your property is. I just need to know how I’m going to make money because as the cliché goes, there’s only one reason to buy a stock, and that’s to make money. You can sell a stock for a multitude of reasons: your daughter’s wedding, you need the mortgage payments, you’re up, you want to lock in profit, but you need to explain to me in the next little while how I’m going to get rich. And that’s a very difficult and quite frankly, non-intuitive thing for technical people to do. You know they’re good at describing alteration or some sort of rock type or how your mind’s working, but I don’t really care. I need to know how you’re going to make me rich.

Matthew Gordon: Yes. I agree with this. Again, the amount of companies that come in to us now, or CEO’s that we talked to and I say, well, so what’s the business? Have you got a business plan in writing? I can count on two hands the number of companies who have given me a written business plan, right? Well, can you at least articulate your plan and the strategy for delivering it? Who’s going to deliver it? When are they going to do that? How much is it going to cost you? And when do I get my money? Your question? When do I get rich? Right. Again, I would say less than 5% of the management teams we’ve talked to are able to do that coherently. And it may be a factor of –

Chad Williams: You are being generous. You’re generous.

Matthew Gordon: I’m a generous guy.

Chad Williams: Yes. Like honestly, 5% is a big number.

Matthew Gordon: Yes, but don’t you as an investor, as a personal investor and all sorts of with Red Cloud, you need that. That tells me where, how I’m going to make my money, and if you’re unable to tell me that, I don’t know why retail guys should buy into this either. You know, ‘we’re going to drill’, is not a business plan. That’s not a monetization event.

Chad Williams: And you know, I’m able to see, I listen to these presentations and I’m able to see through them to come up with the magic that if this works, you know, if we get a, then the outcome is be in terms of share price, because I’ve been doing it for very long. But I can’t imagine retail, let’s call it, folks that aren’t as familiar with mining, I can’t imagine how they would ever be able to do that. You know, they’re thinking, why did you buy these claims? Why are you drilling? Why are you building a mine? What’s the value proposition? Again, I’ve done it for so long that I know, but I have to explain it sometimes to the mining teams. You know, this is why you’re doing it, you know? They don’t even know why they’re doing it.  And I know that seems odd, but they just know that, okay, I’m supposed to, you know, drill it – that’s the next step. I’m supposed to drill it. Okay, well, what happens if you find something, have you ever thought of that? What happens if you get lucky? Then what? Wow, okay, that’s going to be a good thing. But you know, at the end of the day, where are you going to process it? Who’s going to buy this from you? Are you going to build the mine? You need to prepare for these eventualities now.

Matthew Gordon: It’s interesting, I had a chat with a CEO this morning. I was on the motorway in the car and we were sort of talking about an exploration play in South America, and talking about moving from exploration, and next year we’re moving straight into development. And I was asking him, well that’s great, but where’s the evaluation phase? You know, at what point do you evaluate what it is that you’ve got? You know, rather than this rather broad categories of exploration, development, production. It’s not as easy as that. You know, you need to be able to assess what it is that you’ve got and how the hell you monetize this at a point down the line. And whether or not you stay for the entire journey or you bog out at a certain point.

So please tell us again, I’m talking about our viewers here, if the company can explain what they are – so we are a project development, product finder – great. Project developer – fine. We will need the help of a strategic at points A, B, and C. We will need a financial partner. If you can sort of articulate where you sit in this, you know, large, mass of mining companies, people can then get a sense of the risk profile that they’re looking at here, right? And that I think that’s really interesting; that these senior managers who’ve made money all their lives being employed in mining companies, start up these companies without necessarily knowing what all these missing pieces are, and being able to actually manage that process.

Chad Williams: And to me, the worst crime, if I could use the word crime, is when folks with a certain skillset, whether it’s geologists, I’ll give you an example; a good geologic team, they make a discovery and then they make the mistake of trying to build the mine. I can build a business, in fact, I can almost say Red Cloud was built on the back of bailing out, trying to fix mines that did not deliver what they were supposed to deliver because of overestimated assumptions or poor execution. You cannot count on a geologist to build a mine and you can’t count on a mine builder to find a mine. These are very different skillsets. And you’ve got some high net worth and family officers as clients, and honestly, there’s so many wealthy people, billionaires that have this dream of having a gold mine. It seems to be this bucket list thing, you know. I’ve got to check off this box. I need to own a Silver miner or a Gold mine, and then some promoter lies to them, and I literally, I could have a full-time job trying to fix these messes. And the bad news I can tell you is, they’re almost all non-fixable, or if they are fixable, the dilution, the equity dilution is incredibly devastating. Or you know, the continued capital injection, or I need to bring a team of superstars to fix it. And that isn’t cheap either. It’s almost like somebody saying, ‘Shit, I’ve got a dream of building my own house. It looks easy, right? I’ll go to the hardware store and I’ll buy some wood. I’ll build my own house.’ Until you realise that that’s a very different thing than you’re trained. And building a mine is outrageous-it looks simple. You know that it’s outrageously difficult. Leave it to the pros.

Matthew Gordon: Yes, I know. We had a lovely story: we belonged to a sort of family office network here in Europe and one of the guys, one of the big German family guys stood up in front of the room and said, guys – I won’t do the accent – he stood up and said, ‘Guys, I have discovered this new category of investment, which I think, I don’t know if anyone here has heard of it, I think it’s revolutionary. It’s very green and we’re going to, I think we can change the face of this industry. And it’s called tailings’.

Chad Williams: Yes, tailings and recovery: I run, man. If somebody says tailings – I run.

Matthew Gordon: I know, but this guy thought he’d discovered sliced bread, okay? He literally was. And I think the point here is that you know what you know, but ‘you don’t know what you don’t know’. And putting your money into things that you don’t know is always risky. It comes back to my thing; you know, you’ve got to do your homework, you’ve got to trust the team. You’ve got to believe that the team can deliver this because otherwise you’re out of control. You’re totally out of control here. And I think it’s the same for retail guys -you know, you have got to know what you’re getting into is what I’m saying.

Chad Williams: Yes. And you know, the good part though, because we’ve been negative really, a good part is, you know, in Toronto – arguably the mining capital of the world, certainly for smaller mining companies or certain size companies, long story short, there’s a major road called University, and on University there are lots of hospitals and these hospitals, they all carry the names of very successful mining promoters and investors: guys like Rob McEwen, Cheryl Assan, Seymour Schulich, Peter Monk, and so on. So the value creation in mining can be staggering. And you know, I’ve seen stocks go from a penny to USD$5 or 10 cents to USD$20. And so when you do get it right, you can create amazing amounts of wealth. And we’ve touched on certain things to look for, but you know, don’t give it up, there will be more discoveries. And I can’t tell you today which one it’s going to be. And even if I did know it, I probably wouldn’t recommend it because I don’t know the criteria of the investors on your show here, but long story short; they will be young, they’re old. That’s the good news – there are some good young entrepreneurs coming up in mining. There are some properties that appear to have merit. You know, there’s every reason to be optimistic that there will be some tremendous wealth creation.

Matthew Gordon: But what’s your view? I mean, on one of your slides here, it talks about the sense of urgency here. And I think that if you look at the past few weeks, obviously with the market reset and then Covid-19, and you know, there’s always something, right? There’s always something. And I think with mining, money costs, we spend a lot of money and invest in digging holes and drilling holes to find out what we’ve got in the ground. And you know, time is money. So you know,  what did you mean when you talk about no sense of urgency in your presentation?

Chad Williams: For mining companies, time is never on their side because for operating companies, companies that have mines, they’re depleting their asset all of the time. And it’s a finite resource, right? So they need to continue exploring. And for exploration companies that don’t generate cash, every day that they don’t make a discovery, they go through their cash reserves and they need to either replenish those. So it’s not sufficient to be doing studies. It’s not sufficient to be you know, there’s got to be a tremendous sense of urgency for these mining companies to create value. That’s what I meant.

Matthew Gordon: Okay. So you would encourage investors to look to management who have got a path to monetization and an accelerated timeline in which to do that. I mean, that’s always a winner. Okay. And I guess that kind of comes onto one of your other points, which was around planning, which is not about just walking into the room and asking you for money and how they do that, but in terms of their ability to demonstrate how they are planning to build out this business of theirs, right?  So what are the things that you look for there?

Chad Williams: Well you know, in terms of lack of planning, we talked about basically underestimating the time to raise capital. I look for budgets or use of proceeds. I look for a target. It’s okay to dream. It’s okay to have an objective. Sure. It’s okay to say I am doing this because if I am successful, I will find 1Moz. And if I find 1Moz, it will be worth USD$50M. And if I find 1Moz, somebody will buy me. It’s okay to walk me through your thought process. As you say, drilling is not a plan. Drilling on a certain property is not a plan. That is an activity or a tactic. A plan is having a grand vision of, if I do certain things, then those outcomes may happen and therefore that’s how we make a lot of money.

Matthew Gordon: I guess it comes back to that point we made when we talked about earlier, which is something about having a business planning in place and being able to describe the moving parts, but what is the helicopter view here? We are going to do M&A, we’re going to acquire these money assets and we’re going to divest them by being on different continents or whatever, whatever their thing is. But our exit point is very clear. It’s here. Now working back, here’s how we get there. You’re looking for that kind of clarity?

Chad Williams: Yes. And everything can be distilled into one thing. And I know it seems overly simplistic, but again, it’s taken me 30-years to figure this out: the recipe for success in mining is to increase your NAV per share – your net asset value per share. So it’s okay to issue shares as long as your asset value, your net asset value grows more quickly. Okay? And why companies get into trouble is they either destroy asset value or they, or they issue an incredible amount of shares and therefore they dilute the asset value. And I would say the follow on is, if you get the NAV per share thing right, you need to then make sure that people are awarethat you’re doing that. There is no award for modesty or bashfulness in mining. There are something like 2,000 mining companies. So it’s a very, very crowded field. So you could be doing all the right things in your basement -nobody will care. You need to get out there.

Matthew Gordon: So here’s a question for you: if a company’s got cash, do you want to see them do cash buybacks or do you want to see them creating multiple dollar returns for each dollar they have in the bank? And how would they go about doing that for you?

Chad Williams: Whatever, you know, I’m on a bunch of boards and whatever a management team proposes to me, whether it’s drilling or building a mine or doing nothing, or a share buyback, I don’t care what it is, I will simply respond to them and say, is it NAV per share accretive? So for example, if we’re trading at a fraction of NAV, then you should be buying your stock. If you’re trading at a multiple of NAV, and Franklin Nevada was famous, Seymour Schulich was famous for that. I mean, guy is a genius and you know, every time he used to watch a stock, and every time it got to over two times NAV, he would issue securities. He would issue shares. And I said, Seymour, you don’t need the money. He had USD$1Bn of cash. He said, I’m creating value by issuing securities.

Matthew Gordon: Interesting.

Chad Williams: So, you know, it all comes down to that – we don’t have to overcomplicate things.

Matthew Gordon: So you’re looking for that one thing – that’s fascinating. Okay. I think people watching this will note that loud and clear. And then of course, you know, not all companies are in a lucky position to be cash-producing, or half cash, but they all have one thing in common: they’re burning through it, doing whatever they did, they hunkered down or drilling the bejaysus out of their assets. They’re spending money. So they got to have an eye to the future. And as you say, and again we referred to it earlier, don’t come trotting up saying I need some money by the end of next week. That doesn’t work.

Chad Williams: No, it doesn’t work. But, when I was running Victoria Gold, I used to market, and investors would say, well, you’re here looking for money. I said, actually, no, I’m not. I’m here to tell you what I’m doing and then I’ll be back in six months looking for money or a year or whatever. But I’m planting seeds to build trust and credibility so that you know what I’m doing. And don’t forget – these Fund Managers like yourself, Matt, I’m sure, or any investor in general, we do get up in the morning and we say we need to make money. Like you cannot underestimate the pressure that these fund managers are under to generate returns. They are allocated pools of money and they need to generate returns. So they are desperate for ideas.

Your job as a mining executive is to help them out and to demonstrate to them how you’re going to create value for them. And you’re not going to be a troublemaker. You’re not going to be a basket case. You’re not going to be calling them constantly for more money, and you’re over budget or you’re just taking too long. You know, put yourself in their shoes; they need to manage money. Managing money is an extremely difficult job. I wouldn’t wish it on my worst enemy. I mean, I’ve done it. And your performance gets measured minute by minute, day by day, week by week. It is devastating, especially in these markets.

Matthew Gordon: Yes, there’s nothing soft about it. The numbers are there every hour of every day, and people are looking at you and they know and they know. It’s true. It’s true. It’s not a bad job, but it’s not an easy job for sure.

Chad Williams: It’s very stressful.

Matthew Gordon: Very stressful. Okay. So let me flip this on its head, Chad, which is, you know, for retail guys, they should be asking the same questions that you, as a big fund broker, M&A guy, institutional guy asks, they should be asking those questions too. And we’re at least expecting to be told those things by the management team. And if the company can’t articulate those things, you would say that’s a red flag?

Chad Williams: Pass. Yes. You don’t need to buy any particular stock, absolutely. You know, other things that I look for are, as an investor I look for, so we’ve talked about things:  planning, you know, trust, we talked about transparency, simplicity. There will be another hot thing, whether it’s Uranium or Cobalt or Lithium. So do some research on the macro economics as well so that you’re prepared and you can have a discussion with management. And trust some experts. I would say one of the things as well as is, you can ask management what is their track record of success? If a group has made money in the past, odds are they’ll do it again. It’s not a certainty, but you know, if this person is, say they’re 50-years old and they’ve never done anything in their life of any note, never won any awards, or if they’ve never been in the top of their class, or won the Olympics or whatever, you know, I’m making things up here, then odds are they’re going to have a mediocre performance, right?

Matthew Gordon: Yes. We see that a lot. We see that a lot. Okay, Chad, we should probably wrap it up there. I mean, we’ve trotted and skipped through a lot of things there and I’ve enjoyed that, but it sounds to me it’s like as you say, it’s taken years for you to kind of distil it down into those simple headlines. But these are very basic things that you need to, we need to understand, of any one, any group or any company to be able to say, here’s my hard-earned cash – I trust you. I’m going to give this to you because I know you’re going to make me rich and I know when by.

Chad Williams: Or at least you are going to give me the highest odds of me getting rich. I mean there’s no certainty; there’s hope. There’s no guarantee. And you know, if I lose money, I only get angry if people have misled me or have failed to execute on their plan, or you know, like stuff happens, you know; look at the current economic context. Can I be upset at a CEO because it’s stock is down 50%? It’s not his or her fault. But what are you doing to mitigate the risks? What are you doing to preserve cash? Or even, what I prefer is, what are you doing right now to be aggressive? What are you doing to use this as an opportunity? Because most people are in the foetal position right now. Very few of us are very aggressive.

Matthew Gordon: You’ve hit the nail on the head for me; we’re having these conversations this week and last week with companies; I think the companies who are getting out there, they’re getting on the front foot. You’re talking about getting on the front foot, right? You’re saying, I want the biggest share of voice in this marketplace because the companies which don’t have anything, have gone quiet, and they have gone quiet because they’ve got nothing. It’s very hard under this severe spotlight to say anything believable about your company. When there’s money sloshing around, it’s easy. Everyone thinks everything’s going to make money for everyone, right? And we’ve seen companies go into hiding, not just into the foetal position. They’ve gone to a foetal position hiding behind a wall in the dark. They have gone. And I’m interested in hearing from the companies who today are confident enough to say, look, the market is the market, but here’s what we  acknowledge that. Here’s what we know. Here’s what we’re going to do, and this is why we think we will eventually you know, when, or maybe when is a strong word, we will make it through this, so trust me and trust my team. Those are the guys I’m listening to in the next, you know, last week, this weekend and next week. The ones that have disappeared; that tells me something. It tells me a lot.

Chad Williams: Yes, yes.

Matthew Gordon: Now, I also heard that you are joining the board of RNC Minerals – is that true?

Chad Williams:  I did join the board on January 1st. Yes.

Matthew Gordon: Well done. Well done. How are things there?

Chad Williams: Things are, things are good. You know, talk about a group that’s active and I’ve been very, very pleased. I’m obviously on the board, so I’m preaching for my own company here but they’re doing well operationally. You know, they had the fires, which was a very difficult situation for them. So they dealt with that properly. Very well in fact. Now, with the virus, they’re dealing with that as well. They have a very good operating team in Australia. We have a lot of cash and the reason I joined RNC is that I was very close as an analyst to that company, in those days it was called Goldcorp. I mean, it’s morphed; Goldcorp had Red Lake, and Red Lake in those days it was the Arthur White mine. It was a very low quality mine in a camp, in an area that had very good quality mines, and nobody could figure out why Arthur White was such a dog. And then lo and behold, the geologist had a theory and he said, poke a hole here and you’re going to find some high-grade. And he found an amazing, a very small but amazingly high rich ore body.

And I find that Beta Hunt has many similarities, there is no guarantee of course, but it reminds me of the old Arthur White Mine where Beta Hunt was you know, a lower grade Nickel mine in fact, and had some Gold in it. And then all of a sudden we’re finding extremely high grades of gold, and it’s a different population of gold. And I don’t know what it means in the future, but I do find it very interesting. Yes. I want it to be associated with that.

Matthew Gordon: Well, we’re talking with Paul Hewitt next. Yes, the new guy. Well he’s not new anymore. It’s been 8, 9-months. But hell of a turnaround story as well. It’s been fascinating. We’ve been following it since the middle of last year. Great, great story.

Chad Williams: That’s a good example of, he’s done everything right. He’s added NAV per share and yet the stock is a quarter of what it was a year ago, you know? And so it’s frustrating for management teams when those kinds of things happen, but it’s not his fault. He’s done, in my opinion, he’s done everything right.

Matthew Gordon: It’ll get there. I think the good news for them is they don’t need to go to market for cash. They’re producing positive cash flow. And there’s a bunch of, I think, genuine catalyst about; you know, everyone talks, ‘oh, there’s a catalyst event’  and they come, they go; no one cares. But in their case, I think there’s a couple of biggies just around the corner. So yes, we’re going to catch up with them next week and talk about their end of year report.

Well, like say, Chad, thanks very much. I do appreciate that. I mean, it’d be lovely to talk to you again. If you ever get a moment from your busy schedule, and it gives you a view of the markets and what you think’s going on.

Chad Williams: And I’ll be I’ll be shaved and…

Matthew Gordon:  Oh, no way. Don’t do that. Well, hopefully you’re not still in your cabin there in 6-months, right? You’re going to go crazy.

Chad Williams: Come and rescue me.

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

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GoGold Resources (TSX: GGD) – 2 For The Price Of 1

The GoGold Resources company logo
GoGold Resources
  • TSX: GGD
  • Shares Outstanding: 222M
  • Share price C$0.59 (26.03.2020)
  • Market Cap: C$124M

Interview with Bradley Langille, President & CEO of gold and silver company, GoGold Resources (TSX:GGD).

This is a Mexican gold and silver play with plenty to be excited about. GoGold Resources Inc. is a Canadian-based silver and gold producer with projects in Mexico. The management has experience building, buying and selling mines. The team has built three mines, and is developed a fourth in Mexico, over the last 24 years. GoGold Resources has one project generating cash flow, the Parral Tailings Project, in addition to its recently acquired Mexican exploration play, Los Ricos. Langille thinks the project in Mexico is one of the very best remaining undeveloped trends in the jurisdiction.

Historically, the management team has raised over C$800M equity and C$200M debt for their projects. The management team appears to be decisive and does what it says it will do.

Langille starts by talking about what all investors want to know: how is COVID-19 affecting the business? It has certainly changed the way that GoGold Resources is operating though. Sanitation is the order of the day, but are these new WHO protocols anything more than a mild inconvenience? Langille says they aren’t. It is business as usual. Langille thinks these current market conditions are simply a broad-based sell-off. Investors are selling anything that isn’t nailed down. Langille thinks the quantitative easing that governments around the world are currently engaging in has historically always been good for gold and other precious metals companies.

Parral is currently generating around US$700,000 per month, and GoGold Resources has around US$20M in the bank and is owed US$11.5M from the Mexican government. GoGold’s US$25M financing at the end of February looks like a great deal given current market conditions; raising capital at today’s rates would be far from ideal.

The balance sheet looks strong, and Langille is confident GoGold Resources’ share price will bounce back once COVID-19 comes under some sort of control. Operational figures have been impressive, and other than a delay in delivering its 43-101 (now due in May), things appear to be running smoothly.

At Los Ricos, GoGold is currently undertaking a 10,000m diamond drilling program of HQ size core in conjunction with a field program of geological mapping, sampling and trenching on the property. This has recently increased from 2 drill rigs to 6. The focus is on the southern end of the 35km trend. Work is also underway at a separate project 20km North. Deals have been sealed to secure GoGold’s control of the Resource. A drill hole in the northern structure has demonstrated 24m @ 27g/t gold, and Langille claims there are plenty more. Langille believes Los Ricos South will have a Resource size of around 1Moz gold equivalent, but the earlier stage Northern project has the potential to be even larger.

In terms of timeline, Los Ricos North is about a year behind Los Ricos South. Los Ricos South should have a gold Resource delivered on it in the near future. If investors base their economic assessment around the “anchor” of 1Moz gold equivalent at Los Ricos South, without even factoring in the potential of the north and the existing cash flow at Parral, GoGold Resources is shaping up to be a strong player in the gold space.

Institutional investors have bought into the holistic business model: a solid producer at one end, with a secure, an expandable resource at Los Ricos South and cash flow from Parral, and the excitement and risk of exploration at Los Ricos North at the other end. This looks like a tempting package, but what do you think?

We Discuss:

  • 2:09 – Company Overview
  • 3:20 – Covid-19’s Impact: Business as Usual or New Problems to Deal With?
  • 5:57 – Market Conditions: Ongoing Struggles and Getting Back to Where They Were Once it Recovers
  • 9:42 – Company Financials: Recent Raise and Cash Position Going Forwards
  • 13:25 – Volatile Silver Prices & Managing Contract Terms
  • 15:25 – Tailings: Plans and Findings
  • 21:15 – Growing the Los Ricos Project: What Have They Got and Found?
  • 29:03 – Economic Studies and Timeline of Delivery
  • 32:49 – What did Institutions Buy Into: The Possibilities of GoGold

CLICK HERE to watch the full interview.

Company Website: https://gogoldresources.com/

Matthew Gordon: Hello Brad. How are you sir?

Bradley Langille: Good, good. I’m good in this new world were living in.

Matthew Gordon: You’re coping, you’re coping. So where are you at the moment?

Bradley Langille: I’m in Halifax, Nova Scotia – at home.

Matthew Gordon: At home. Okay. Well that’s the place to be. Well, let’s get into this. I’m sure we will talk about the C-word somewhere in the conversation, but for now, why don’t you kick off with a one-minute overview for people new to the story, and we’ll get into it.

Bradley Langille: Okay. GoGold Resources is a Mexican-focused mining exploration development company. We have one operating mine and we have an exploration project, which has really now developed into two exploration projects over a 35km trends. The group and the four public companies that I’ve been management of, CEO of, had been based in Mexico for, well my whole career; I’ve been at this 27-years now, so excellent relationships in the country of Mexico. We’re good at raising capital, which we deploy into our projects. We’ve built three mines over the last 24-years. We’ve major refurbished a 4th mine, raised over USD$800M equity for our projects and we’ve raised over USD$200M of debt for our projects over the years.

Matthew Gordon: Okay, thanks, Brad. There’s, you know, and we’ll flash up some of the previous interviews on the screen up here. People should go and reference those for a bit more detail about the projects. But, so let’s kick off the question everyone’s going to be asking: is the Corona virus affecting business?

Bradley Langille: Well, certainly the way we’re operating is a little bit different than how we’re operating a month ago. We’re following all the procedures as far as sanitary, as far as, in fact, people entering the site. We’re taking care of temperatures, we’re following, abiding by all the you know, the laws enacted in Mexico to come up with this, and above; we’re trying to follow the WHO protocols. So the operation, the mine is still running as per normal with the exception of those protocols. And our development asset is still drilling away.

Matthew Gordon: Okay. So it hasn’t slowed down what you’re doing, but you have had to implement some new procedures. Those don’t sound like costly procedures. So is it generally business as usual?

Bradley Langille: No, it’s generally business as usual. Those procedures aren’t costly really at all. They’re just, you know, we are abiding to, most of it is just good common sense.

Matthew Gordon: Right. Okay.

Bradley Langille: In Mexico at least so far, and we certainly hope it remains this way, the rate of Covid in the population appears to be much lower than obviously in Europe, and in even in Canada, in the US. So for now, that’s a function of; who knows? We don’t know, maybe it’s warmer weather, or maybe it’s just a lack of testing; we’re not sure at this point and we’re monitoring it day by day.

Matthew Gordon: So all of your workers are Mexican, then you’re not having travel restrictions, and local Mexicans at that. So it’s not affecting travel plans, but it has a knock on effect on your business by the sounds of it.

Bradley Langille: So travel: I mean, we do have 2 gentlemen from Halifax who travel back and forth. So that has been, well for now it has been terminated, that travel. Myself, I’m very hands on. I’m usually there every month. It’s been a month now since I’ve been there. And you know, it’ll make it more difficult to be onsite from Canada here, but fortunately, most of our people, and we have a very, very strong team and a very strong management team in Mexico, our chief operating officer’s lives in Mexico, in Jalisco, so he’s there. So it really hasn’t impacted us too much.

Matthew Gordon: Now, we’re getting that a lot from a lot of the CEOs that we’ve been interviewing. There seems to be a resounding ‘business as usual’. However, obviously the markets are taking a different approach. I think we had that reset where, you know, at the end of quite a long bull run, I think a lot of the institutions are taking money off the table. Normal. You’d expect that, but very quickly followed close on the heels by the Covid-19 outbreak, and it going global very quickly. That’s had a big impact on a lot of junior companies. You’re in production, you’re got some cash flows, you’ve raised some money recently, but your share price got knocked. And I’m not going to pick companies up on this because everyone’s got knocked; the market sentiment seems to have taken a whack to the abdomen. So what’s your take on market conditions? When it’s going to recover? And if so, do you think you’ll get back to where you were?

Bradley Langille: You know, I think we’re just in a broad-base sell off right now, and people are selling anything that’s not nailed down. So it’s a run to cash, but we saw this in 2008. I mean everything was sold in 2008 and then it came back up after the crisis had settled down. I do feel that all this quantitative easing, and I think the governance and the central banks are doing the right thing; that’s what they have to do, but there’s been being a tremendous amount of money created right now, and that typically in the longer-term is good for precious metals. So I look forward to the price of the metal regaining what it’s lost and going up from there. I think that we just almost exponentially increased the amount of money out there. And the stimulus.

Matthew Gordon: Yes, for sure. But let’s be clear; you’re talking about 2 different things there: we’re talking about your share price and its ability to regain value, and then you’re talking about the price of Gold. So can you give me your views on how both of those things correct themselves?

Bradley Langille: Right. And we talk about how our share price has taken a hit. I mean, it had a very, very good year last year; we were up 200%, and we did get our new project down at Jalisco, and we’ve been drilling there and the results have been extremely good, which was very good for our share price. You know, we hit a high of USD$0.85 cents. We did opt to do a financing and there was some discussion about that. It was dilutive but we did it for one reason; because we were getting such great results on our project down in Jalisco at Los Ricos and we were able to nail down some deals for some plains in what we’re calling our Los Ricos North project. And that project, we’re slowly working, a little bit quietly working away at that. And we saw an opportunity there, but we had to get that consolidation done first. And really we’ve gone from starting at two rigs to now where it’s six drill rigs, so it hasn’t slowed us down there at all. And we had the opportunity, we were noted for USD$15M. There was a demand for over USD$50M, and we sell it at CAD$25M. So the company has over US$20M. We report in US dollars, in the bank. Parral, hey you know, the metal price just hit USD$1,250. But really, we’ve been making money at Parral at around USD$700,000 us a month. We’re also owed USD$11.5M from the Mexican Government. So you know, we’re well-positioned, and actually, the financing now in hindsight looks pretty good.

Matthew Gordon: Well, it looks like a stroke of genius, and sometimes luck plays a part, and timing plays a part. But you did that at $0.70 cents. It gives you a lot of cash in the bank at the moment. And you know, if things did get worse, you’ve got optionality I guess there. I should say that you’ve got a little bit of revenue coming in, I want to dig into that in a second. So the companies that we see struggling, the ones that don’t have cash in the bank, you know, they are restricted in terms of what they can do, and if they do go and raise now, just one short month after you raised your money, that’s a very expensive raise for most of these guys. So you must be pleased, I guess.

Bradley Langille: Yes, look, we’re happy. We’re happy with the raise. We’re very happy with our balance sheet. Even at USD$1,250, you know, USD$1,250 is below our All in Sustaining Costs (AISC), but now our All In Sustaining Costs has probably changed because the peso has just been clobbered. It’s up close to 24 pesos to the US dollar. And we generate, we sell in US dollars. 60% of our costs are in pesos. So the peso devalues, our costs goes down, and we’re getting that US dollar which is strengthening. It’s interesting that the US dollar is strengthening and Gold’s going up. But you know, so we look at that and we say, strong balance sheet, we have a mine that we’ve been operating now for five and a half years, which is working great. I really think that sober being at $1,250 is an anomaly, but the base will devalue. I think we’re pretty close to being cashflow positive still at site. And there’s one other thing there I’d like to mention; on site at the mine, we just are commissioning and we should be finished commissioning imminently a SART. And that is a plant that we built for USD$3M. It should pay back for the next 6-months. As we speak here, we were consuming 14t of cianide a day. That’s our biggest consumable, and it’s in US dollars by the way, and it’s about USD$2,500 per ton now. That SART plant right now is generating about 4t a day – so an extra USD$10,000 a day, and it’s generating Copper too.  

Really at Parral, I feel that at mine site, we’re breaking even still at these prices, or doing a little better and breaking even. And I think it’s an anomaly. The Silver price at $USD1,250. It’s at a ratio to Gold of, it almost a hit 120:1, which has never happened.

Matthew Gordon: Yes. So Silver has always has been fairly volatile, you know, so you’ve got to take a slightly longer-term view, which is, I guess what you’re doing in terms of your decision-making and your planning. I do understand that, but can I just compartmentalise, because I don’t want to bounce around too much, can I sort of compartmentalise this. So with the Silver component of revenue stream, you know, we talked last time about the tailings component for instance, where I think you talked about a USD$13 Silver price being paid. I mean, how do you manage the terms of those contracts whenever Silver dips to below the price which you’re being asked to pay, how does that work?

Bradley Langille: I’m sorry, the contracts?

Matthew Gordon: Yes, on the contracting side. Because you talked about, you know, with the tailings you were removing the liability, you’re doing the remediation there, but in the last interview you talked about a price of around USD$13, but at today’s prices that doesn’t necessarily work.

Bradley Langille: Yes,All in Costs was around USD$13, and the contracts that we have are with the municipality where it’s USD$50,000 a month that we pay; that’s our obligation. And no obligation to reacclimate the old tailing site, that’s the city’s obligation. We only have an obligation to reacclimate the facility we built, which is of course at the same standard is US, Canada, Europe at world standard. But as far as the cost at USD$13, I’d go back again to, you know, there’s been a lot of things shifting here, and one of the main things shifting here is that the peso has been massively devalued, because they’re an oil producer and their base got hit pretty hard. So that reduces our cost substantially.

Matthew Gordon: But by how much though? Are you making money still? I guess that is what I’m getting at.

Bradley Langille: Yes, that’s what I’m saying. We’re break even or making a bit of money at site, even at USD$12.50, so I think we’re in a very enviable position there. I doubt that there’s any, or very few other producers of Silver in Mexico right now making money at these prices. But we feel, and you know, we’re analysing it, but we feel that the peso will probably reduce our costs by around USD$1.50 an ounce.

Matthew Gordon: That’s the number I wanted. Okay. Understood. Understood. And with the tailings you talked about having some IP, some intellectual property there, you came out with your own process which you think is quite unique, obviously. And he talks about the ability to perhaps sell to other groups in South America because you know, companies like DRD Gold or Jubilee Metals, they are doing their thing in Africa. There’s no real competition in South America. Have you been carrying, I know it’s not the core focus, but have you been carrying on those conversations?

Bradley Langille: You know, we have, and the project is very much a project that the Mexican Government likes, you know, for obvious reasons, the social, economic environmental you know, we now have an operation that’s operating. It’s been operating five and a half years. We’re looking at all kinds of opportunities of other tailings, even if they’re kind of far away, if they’re high, high-grade or for us, high-grade, they can make economic sense to truck them over to our operation. So we have 8-years of Reserves today, next to us at Parral, but we’re looking for all of these other opportunities within trucking distance of our operation. And there’s some that we’re looking at right now that could substantially, if they come together, could substantially impact our costs; reducing it and increasing the metal produced. Also we’ve developed this technology, I mean this almost proprietary technology now, some of it’s an agglomerate deeply just not new to the world, but on tailings it is, and we’ve found a way to do it that works. And it wasn’t easy. The first 3-years were very difficult for the mine, but the last year and a half, 2-years have been running quite nicely, and I just wanted to touch base here as well – currently our operation is running beautiful: like we’re going to have another order in line with what we’ve been doing the last two or three quarters. So yes, we do have something there. It’s not the sexiest mining project in the world, but if it can make money, there’s nothing wrong with that. Especially in this new world.

Matthew Gordon: That’s again where I’m getting at, because I think this market reset is going to, you know, sort the wheat from chaff. Right? And I’m trying to dig down and look at companies which have something different about them. You know, in terms of mitigating risk, alternative revenue streams and this, the tailings component here, I know it’s not core and we’re going to come onto Las Rico’s in a second, it seems to be that if you’ve got the process right, and Silver, volatile Silver, bumps up a bit over the course on average, you’re going to be able to contribute to your overhead by making a margin on these things. And if you’re capable of nailing down these tailings contracts with other groups, it could be quite meaningful. And it’s very attractive in terms of a sort of non-dilutory financial contribution. So when you say, ‘it’s business as usual’, you mean it, as opposed to, I’m sure I’m going to this week and next be hearing lots of businesses usual messages without doubt. But it’s not business. It’s not making money as usual. It’s a case of we’re surviving. So just trying to dig down sort of understand if that’s still on the table and if that is still, you think, going to deliver revenue for you going forward?

Bradley Langille: No, it probably is going to deliver revenue. I think even at this price it’s delivering revenue. And I think this price is an anomaly, but even though it’s delivering revenue right now, our costs have just got reduced a lot by that SART plant as well – by USD$10,000 a day – that’s substantial. So Parral is delivering revenue. We’re looking at more opportunity for Parral, we tried to increase that revenue, and we have something that could be applicable to other tailings in Mexico in the future. But I think the game may have changed a bit. I mean, I’m talking not just for GoGold, I’m talking for everybody. I think we’ll come out of this there’ll be more of a focus on who is generating revenue. And the exploration development place, even the exploration development place,  I think the focus on them will be more around, okay, you have something. Is this going to be a mine in five years, seven years? Or maybe there’s the 1Moz that you have in front of you that you basically drilled off and that that could be a mine in a couple of years. So I think the benefit of what I believe will be higher prices for the commodity are going to filter down, obviously to majors first and then to mid-tiers and producers and projects that are not in the grassroots but in the development stage. And I think we’re well-positioned in that regard as well.

Matthew Gordon: No, I think that’s true. A lot of what you just said is true and it’s going to require people to look at the fundamentals of a business in a way of which perhaps pre this current phase we find ourselves in, they haven’t done very well, and we’re certainly going to encourage people to look a little bit deeper as to the business fundamentals. You know, what does the management team doing to enable and ensure its success going forward? And I just quite like the tailings component as part of the story. But let’s get onto the main attraction, which is, you told me on a couple of occasions is the best project you’ve been on or seen for the last 20 years: Los Ricos. So what’s been happening?

Bradley Langille: : It is. And it still is. We were drilling with 2 rigs, now we are at six. We’ve been focused on the first area, which is Los Ricos, now we have two projects. Really it’s a 35km trend. We’re focused on the Southern end of that trend, which we’re going to call now Los Rico South. And then we had another called Montefiore at the North end of the trend. It’s 20km away. It is a separate project and it’s very good-looking project. We were in there with crews on the ground, but a little bit quietly because we had some real holes in the claim package that we had to close deals on, which we’ve done. We announced one about a month ago, and those deals now have consolidated everything we need there. And brought in data; it’s almost like at Los Rico’s North, or Montefiore, we are renaming it Los Ricos North project, it’s almost like we’re starting all over again a year later where we were at Los Ricos South.

 We started looking at Los Ricos South, we had 60 drill holes, and we went in there and started drilling and getting great results and showing, you know, building up a resource there, which we will still get out in the next couple of months. And at Las Rico’s North, we started off there, and once we got this deal done a month ago, that deal was really pivotal for us. That also came with 50 drill holes, and they’re not bad drill holes. There’s a drill hole up there that’s 24 meters at 27g/t Gold. And there’s a lot of drill holes up there like that.

So the company we were dealing with, they were last in there in the early 2000s, and they just did a few small claims, and we were all around them with the claims that we own, and they did a deal, they had a change of business. They’re going in a different direction, in a different business and they contacted us and said, would you like these claims? I saw the drill holes; we said, absolutely. And it’s not an inexpensive deal either. I mean, we’re paying here about USD$450,000 over a couple of years, and you know, tying everything together up there. Our team really feels that Las Ricos North, now at 50 drill holes. At an earlier stage in Los Ricos South because that’s getting close to the first resource and we think it should be a Million or a Million plus there in that first resource, Gold equivalent, that project to the North, Los Ricos North, we feel that that has the potential to even be larger. And there’s an old map that we have up there from 1916. from the Jalisco monograph, and that map shows 50 prospects on our claims up there.

On the Los Ricos South project, that map showed about 5. And we’ve got one of them, or two of them drilled now almost to completion. At Los Ricos North, we’ve had one team, they’re just out climbing those hills and prospecting and finding targets to drill. And up there as well, we have the first three targets that are ready to drill, and we’re just now getting the final permits so we can start drilling off those plus Ricos North.

Matthew Gordon: So again, when we spoke before you thought you’d have the resource by the end of March, around now, right? You’ve just explained why that’s sort of setback When do you think that’ll be ready?

Bradley Langille: I think by May, for sure, we’re going to get that resource out by May. And it is a little delayed, and we’ve been doing a lot of drilling and we’ve just thrown a lot more machines at it after the financing. You know, we’re hitting good results. We want to get everything into this main resource. I don’t think, especially where things are in the world at the moment, that an extra 60 days will make much difference. So it’s better if it’s cross, if it’s a better defined resource and it is more measured and indicated, and if it’s that’s size.

Matthew Gordon: Yes, well I don’t think in today’s market it matters if it’s 60-days out, if there’s a reason for it, because people still, investors still expect management team to do what they say, and if the reasons are good enough; like you’re hitting some big numbers and you’ve got some more drill rigs in there and they’re still hitting the kinds of numbers that you wanted – that’s fine. I agree with you on that. But I think there’s a need to, I mean, I’ve just looked at some anecdotal information here, but you know, our viewing numbers are up 70% in this last crazy month, and it’s not necessarily because we’re doing anything different. It’s just because I think people are sitting at home waiting for news because they’re not allowed out. They’ve got to get the data, right?

Bradley Langille: That’s a good point. We’re not distracted with other things as much, right? They’re actually at home, turning it up.

Matthew Gordon: Yes. But they need you guys – guys like your company to be talking to them and explaining why things are going on. So resource will be out end of May-ish. Is that fair?

Bradley Langille: Yes.

Matthew Gordon: Okay. You’re expecting 1Moz or so?

Bradley Langille: 1Moz or so. The grade we’re expecting, you know, it’s two to three grams. Two and a half to three grams is still the Gold equivalent grade that we’re expecting, and the things that we’re focusing on right now and take a little more time. We want to get some deep drilling in there because what we had seen as we drove this thing deeper and deeper, we’re getting some great results. You know, we had one of our deepest holes that hit 18m of 8g/t. Now that’s something we want to follow up. That’s something that can be material to follow that up for the resource. And then to the Northwest, on the trend that we’re drilling, the 1,100m trend, we’ve been getting some real good results there in a second war shoot that we’re seeing. So we want to drill that and we want to include that in the resource. We want this resource. We put out to best represent what we feel we have. And look, we’re going to have lots of news over the next 60 days about things like the SART being finished. We got lots of news over, lots of drill results coming out, and there’s some great drill results. I’m sure they’re going to come out in the next 60-days. And we’re going to develop that first resource that really is a better defined resource as well; one that we can move quickly into a PEA.

Matthew Gordon: Well, that brings it nicely on to my next point, Brad, which is; guys like you, you’ve been there and done it before. We’ve been doing it for a long time, successfully. You have bought, sold and made people money, which is fabulous, right? But you’ve got a picture in your head, and I’m looking at this going, okay, we’ve got a 43-101 coming out in May. You have told me in the past you’ve got a sense of what this thing’s going to cost. You’ve got a sense of the economics because you’ve built:  you’ve built plants, you’ve built mines, you have drilled holes. You know what’s coming down the line and you get a feel for it. But at what point, and how quickly can you get into some kind of economic study, which is what the market’s going to look out at? First thing; probably a PEA, it’s, you know, as a fairly early economic study. But how quickly can you get there? And when does a Pre-Feasibility Study happen? What’s that timeline look like?

Bradley Langille: Well, I think we can get there very quickly, especially now with, you know, I look at it this way – I think that if we can have an anchor on this project, this is where I’d like to end up – there’s an anchor that’s 1Moz. One pit, great grade and that we can put a PEA around and it’s solid. It’s mostly measured and indicated. And we can do that and we can say to the world, here’s something that’s solid. You put your economics around that. And by the way, we’re a year behind up at the other end of the trend, but we’re hitting some amazing drill results up there. And then we have the best of both worlds. Well, we have a mine that is producing cash, we have a project that now becomes more shorts than a PEA, but it becomes more nearer term, nearer-term economics, nearer-term production. And with a team that’s built three mines, and we’ve rebuilt a fourth, you know, that people say, well, these guys can sell it, and there probably could be a lot of interest from buyers, and also these guys can build it. And let’s see where the dust settles here. Let’s see what brings real value in the market.

Matthew Gordon: But if we can, let’s come back to the question, which was tell me what that timeline looks like? Or could look like.

Bradley Langille: Well, for the PEA; really drilling this, all this drilling right now can actually shorten up that timeline as well because when we’re finished here we’re going to have good data to do that PEA, and I think we can get that PEA done by the end of the year or first quarter next year.

Matthew Gordon: Okay. Okay. So that’s nice and aggressive. And then because of the amount of drilling, do you envisage being able to get a PFS out quicker? Because these are the signals, this is the language that is used in the market, again, to define how people value you. You listed off a whole bunch of reasons why you are very comfortable: because you’ve done it, you’ve done it, been there, got the t-shirt. I get that. But people need these signals from you. So this accelerated timeline is important to them because there’s a lot of people screaming for attention out there at the moment. So I’m just going to get you to tell me how you’re going to do it.

Bradley Langille: I think about that in my head and from my experience, and my team, you know. And the key guys have been with me for 10 to 15-years and we’ve built mines together. The way I think about it is that we drilled us off, we drilled us off, you know, we drill it off with the mindset, how does this look in the mine? It’s not just that we’re out doing exploration, we’re building models all the time. We build PIP models all the time, block modelling all the time. Every 10 holes we build, we added to our block model.

So what I’m trying to say is that, you know, for us, we’re really drilling this off for it to be a mine, for it to be big for, you know, for this to be something very, very solid. This is not just promotion. This is real economics. This is real. Something that the institutions in particular, and we just brought in some of the best institutions into that last financing and  those institutions can quickly see, and all of our investors, are able to see the real value in that. And at the same time, at the other end of the project, we also have something that’s going to develop to be what I think very, very large along with this. So you have the best of both worlds. You have one end of the project, which is Million, a Million plus, that is defined, that can quickly be moved through the next studies to get to the point where you say – hey, this thing’s ready to go. And at the other end, at the same time, we’ll be building up the 1Moz up there. And that’s just a year or year and a half behind. So I think that is the strategy. I think it’s a strategy that’s going to get us the most value in the market, and I think it’s going to make us very appealing to some of our peers as well. So we’re not sitting there hostage, you know, just sitting, waiting for somebody to come in and make us an offer. We don’t have to build mines.

Matthew Gordon: That’s my point; what have the institutions bought into it there? They bought into the fact that you’ve got, you mentioned a word there – big. You’ve got scale to this. This is a very long strike zone we’re talking about here, and you’re sitting at both ends. And what’s the idea? Do you sort of work your way down and meet up in the middle kind of thing? Or do they have the option of doing that? That’s what’s going to get the big guys to take notice of you and step in.

Bradley Langille: I believe that we have one of the very best trends remaining in Mexico that is not developed. From my 24-years of experience doing this from building some large mines, and I believe that we have consolidated what hasn’t been essentially consolidated since, you know, the early part of the last century. And, and we are, you know, it’s to come up with things that are Millions of ounces -that’s quite remarkable. I think, you know, myself and this is my own personal view, I think we have a trend that ultimately with drilling and exploration success can be +5Moz. And it’s just a strategy of how we develop what we see from our experience as being that has world-class size to it. And you know, part of that would be what’s the narrative in the market? What does the investor want to see as well?

Like, we could do good technical work; we know how to take a project and move it through the stages of resource, economic studies, and we know how to do it quickly. And we have a lot of experience that we know what’s worth chasing. And I’ll tell you one thing, that 35kms of strike length and Los Ricos North, and the project where we’re now moving on to the next stage, resource and beyond. That’s the things from my experience in my career that is exactly what we should be doing right now with GoGold Resources, and I hold the same opinion. This is the best thing I’ve had in the last 20-years. Maybe the best thing I’ve had in my career. And we have the bank account, we have the skill, we have the experience to develop this into what will be, I think the most attractive project in Mexico.

Matthew Gordon: Brilliant. Brad, ultimately though you’ve got to deliver for shareholders. Okay. So there’s a lot of positives today. It’s a difficult market. It’s mining; it was tough already. You’re going to have to deliver for shareholders this year, and I think you’re going to do that by better communication, or regular communication with them, because it seems to me that you know what you’re doing and you know where you’re going. So I appreciate your time today. Thank you very much. From your bolt hole to mine here. I hope we get out of this and the next few months but stay in touch. Let us know how you’re getting on.

Bradley Langille: I’m very sure we will get out of this. And we’re continuing on as per normal, and stay safe.

Matthew Gordon: Thanks very much.

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 GoGold Resources company logo

GoGold Resources (TSX: GGD) – 2 For The Price Of 1

The GoGold Resources company logo
GoGold Resources
  • TSX: GGD
  • Shares Outstanding: 222M
  • Share price C$0.59 (26.03.2020)
  • Market Cap: C$124M

Crux Investor recently enjoyed a great discussion with Bradley Langille; he’s the President & CEO of gold and silver company, GoGold Resources (TSX: GGD).

GoGold Resources is a gold producer with existing, reliable cash flow from the Parral Tailings Project.

However, GoGold also provides the excitement of exploration, in the form of the extremely promising Los Ricos projects (north & south).

While you’re here, why not check out another one of our informative gold market articles, or maybe a different gold mining interview?

GoGold Resources appears to be a great opportunity that might well be very undervalued.

We Discuss:

  1. A Business Model That Combines The Best Of Both Worlds
  2. The Impact Of COVID-19
  3. Current Cash Situation
  4. Raising Capital Last Month – An Inspired Move?

Company Website: https://gogoldresources.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.

The GoGold Resources company logo

Red Cloud Securities – Investment Tips From An Industry Insider

The Red Cloud Securities company logo

Crux Investor recently sat down for an informative discussion with Chad Williams, the Chairman and Founder of Red Cloud Securities Inc.

Red Cloud Securities offers capital markets services to mining companies. All the company does is “help mining companies.” While there are around 100 services that Red Cloud Securities provides, they can be grouped into categories. These include: capital raising, M&A, marketing, strategic advisory work and equities research.

Williams shared some of the lessons he’s learned over a 30-year career that has covered all aspects of the mining world.

We Discuss:

  1. Company Overview and Chad’s Background
  2. The Importance of Marketing for Mining Companies
  3. A List of What You Need to Look Into Before Investing in Companies
  4. Don’t Be Lazy, Do Your Homework
  5. What Should You Question as an Investor?

Company Website: https://www.redcloudfs.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.

The Red Cloud Securities company logo

The COVID-19 Crisis – The Inside Word From Goldman Sachs

A crowd of people wearing masks on a busy public street.

COVID-19 – The Reality

There is plenty of blatant fearmongering right now, be that from the media or from individuals. It has struck the heart of the business world, causing convulsions of panic selling to overwhelm international markets. Investors have seemingly lost their bottle, but that is hardly surprising when the ‘news media’ constitutes clueless, dramatic speculation, rather than cold, hard evidence. I recently penned a different article about COVID-19 that you may be interested in reading.

Investors need to cut through the misinformation that is currently thriving and hear what the big business institutions are actually saying. Who better to hear from than Wall Street powerhouse, Goldman Sachs Group?

In an emergency conference call on Sunday 15th March, Goldman cut through the palpable anxiety and explained the fundamentals of the COVID-19 situation in a pragmatic way to 1500 of its clients.

The Goldman Sachs logo on a wooden wall.

Even the most logical investors do not have their heads in the sand. This is a serious, worrying situation that will take thousands of lives. However, let’s hear how the market is reacting beyond sentiment. It would be ignorant and insensitive to have a ‘good’ and ‘bad’ category for the impact of COVID-19 on markets given the large number of deceased individuals. Let’s settle on reasons to be bearish, and reasons to be more bullish.

Bearish (1/2)

  • “50% of Americans will contract the virus (150m people) as it’s very communicable.”

This is an enormous number, and there is no getting away from the unavoidable impact that COVID-19 is going to have on investors and markets. The scale of the problem creates immense volatility and unpredictability. The scale of this number is likely one of the main drivers behind current investor sentiment.

Bullish (2/2)

  • “This is on a par with the common cold (Rhinovirus) of which there are about 200 strains and which the majority of Americans will get 2-4 per year.”

This puts the Coronavirus situation into perspective. While nobody is pretending this is a normal flu situation, it is important for investors to avoid getting carried away. For the vast, vast majority of people, COVID-19 will exhibit either moderate or no symptoms. The elderly population and those with pre-existing conditions, especially respiratory, are at an increased risk, and this needs to be a constant consideration. However, let’s all calm down and take a breath before unnecessarily panicking.

Bearish

  • “70% of Germany will contract it (58M people). This is the next most relevant industrial economy to be affected.”

This is an even more intimidating number than the figure for the U.S and is likely generated by the greater population density in Germany. The German economy is integral to international trade, especially the automotive industry. One of the most important global economies possibly descending into paralysis is a very persuasive factor behind the mass panic selling.

Bearish

  • “Peak-virus is expected over the next eight weeks, declining thereafter.”

Investors will be seriously considering why they should invest now in these unprecedented market conditions, rather than waiting several months to global markets to begin to recover and stabilise. The extended timescale of the virus makes a strong case of caution.

Bearish/Bullish

It Depends On The Geographical Location Of Your Investments!

  • “The virus appears to be concentrated in a band between 30-50 degrees north latitude, meaning that like the common cold and flu, it prefers cold weather.”          

If you are investing in mining companies that are listed on an exchange that either finds itself in the cold season, or operates in an environment that is currently wintry/cold year-round, investors should make this a consideration. The virus appears to flourish in colder environments, so it is likely that environment will play a large factor in national economic performance.

COVID-19 on a cell level.

The coming summer in the northern hemisphere should help. The virus is regarded by many experts as seasonal. Investors like myself are interested in the climate logistics: does this mean a gold mine in what is currently and usually a very hot country, such as in Northern and Central Africa, is a safer, more predictable investment than one in Canada?

Bullish

  • “Of those impacted 80% will be early-stage, 15% mid-stage and 5% critical-stage. Early-stage symptoms are like the common cold and mid-stage symptoms are like the flu; these are stay at home for two weeks and rest. 5% will be critical and highly weighted towards the elderly.”

While this is devastating news, investors will hopefully be able to process these statistics for what they are. The majority of the workforce should be either unaffected or mildly affected. It is incredibly sad that the elderly people are suffering by far the worst, but investors will be aware that elderly individuals do not comprise a huge portion of the mining workforce. The lives of older people do not matter any less; that goes without saying. However, the logistics of this situation are clear.

Bullish

  • “Mortality rate on average of up to 2%, heavily weighted towards the elderly and immunocompromised; meaning up to 3m people (150m*.02).”

The mortality rate is a shocking figure but is relatively low. In addition, the mortality rate is based on total confirmed cases, when the true number may be much higher (but let’s not speculate). Again, the mortality rate is weighted towards the elderly, who play a reduced role in the world of mining and wider business.

Bullish (1/2)

  • “In the US about 3M/year die, mostly due to old age and disease, those two being highly correlated (as a percent very few from accidents). There will be significant overlap, so this does not mean 3M new deaths from the virus, it means elderly people dying sooner due to respiratory issues.”

This further confirms the COVID-19 situation. COVID-19 is not usually the sole cause behind an individual’s demise. It often hastens the death of those already suffering from severe health conditions. That is not to say that all those suffering from these underlying conditions are usually in any mortal danger on a day-to-day basis.

Bearish (2/2)

  • “This may however stress the healthcare system.”

An overworked, possibly overwhelmed healthcare system is rarely an indicator of economic prosperity.

Bearish/Bullish

  • “There is a debate as to how to address the virus pre-vaccine. The US is tending towards quarantine. The UK is tending towards allowing it to spread so that the population can develop natural immunity. Quarantine is likely to be ineffective and result in significant economic damage but will slow        the rate of transmission giving the healthcare system more time to deal with the caseload.”

How well your national economy is preserved depends on the competence of your government, the effectiveness of their coping strategy, and the actions of the populace. If Goldman Sachs is right on the ineffective nature of quarantine, which has perhaps been demonstrated by the situation in Italy, western investors seem to have a big reason to be concerned.

NYSE workers look stressed while talking over a headset.

A lack of national trust in the polarising Donald Trump and Boris Johnson could reduce the confidence of investors in their COVID-19 strategy, creating more volatility and leading to citizens refusing to heed advice. This could cause further deterioration to the situation.

Let’s hope the U.S and UK electorates have elected the right people for the job.

Bearish/Bullish

  • “China’s economy has been largely impacted which has affected raw materials and the global supply chain. It may take up to six months for it to recover.”

China’s economy is crucial to world economic health. The world relies on China for a huge amount of manufacturing. Disruption to the supply chain will create global uncertainty and this looks to be for an extended time period. This likely means more investors will be keen to sell and remain passive.

However, western investors will be hoping China’s economic frailties can be capitalised on by western businesses. Will western businesses be able to position themselves more strongly? Most of how this plays how depends on a company’s ability to mitigate losses from supply chain and demand disruption, in addition to ability of national governments to deal with this situation appropriately. This is far from a predictable outcome.

Bearish

  • “Global GDP growth rate will be the lowest in 30 years at around 2%. S&P 500 will see a negative growth rate of -15% to -20% for 2020 overall.”

Even the most ardent of contrarians will be aware this is likely to destroy investor sentiment for the foreseeable future and have a negative impact on growth.

Bearish/Bullish

  • “There will be economic damage from the virus itself, but the real damage is driven mostly by market psychology. Viruses have been with us forever. Stock markets should fully recover in the 2nd half of the year.”

This is encouraging for investors because, if Goldman Sachs is to be believed, it shows that markets should fully recover from the impact of COVID-19 by 2H/20. However, the impact on investor sentiment/market psychology will be much more long-lasting, insidious and damaging. 

Bearish/Bullish

  • “In the past week there has been a conflating of the impact of the virus with the developing oil price war between USA and Russia. While reduced energy prices are generally good for industrial economies, the US is now a large energy exporter, so there has been a negative impact on the valuation of the domestic energy sector. This will continue for some time as the Russians are attempting to economically squeeze the American shale producers and the Saudi’s are caught in the middle and do not want to further cede market share to Russia or the US.”

Whether this is a positive or negative for you depends entirely on which side of the investment aisle you are stood. Investors perhaps need to decide how they feel this geopolitical situation will develop and may need to adjust their position depending on their degree of confidence in their predicted outcome.

Bullish

  • “Technically the market generally has been looking for a reason to reset after the longest bull market in history.”

If Goldman Sachs is right, COVID-19 could have taken the form of any other catalyst. The message appears to be that this market reset was inevitable, but even optimistic investors will acknowledge the current market situation is far from routine or intentional.

Bullish

  • There is NO systemic risk. No one is even talking about that. Governments are intervening in the markets to stabilize them, and the private banking sector is very well capitalized. It feels more like ​9/11 than it does like 2008.

This is a very significant point. If Goldman Sachs it to be believed, the ferocity of the panic of investors is not fundamentally justified. There are obvious reasons for caution, but the risk appears more temporary than previous economic crashes, and the idea that markets are in dire straits appears to be exaggerated.

After reading this, I hope investors can at least feel more informed about the COVID-19 situation. I hope this article has brought some balance to the discussion, and investors now need to continue to go digital, research, and make their own minds up.

There are significant obstacles for us to overcome. However, this is no reason for people to switch off from investment entirely. Volatility brings risk, but it also brings opportunity. This situation will not last forever. In the meantime, take advantage of your free time at home as my country of residence, the U.K, edges towards what looks like an inevitable total lockdown.

Things will likely get worse before they get better. Stay safe, take care, and be selfless.

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.

A crowd of people wearing masks on a busy public street.

The COVID-19 Crisis – A Time Of Opportunity?

A virtual photo of COVID-19 attacking cells

In his famous 1986 letter to investors of Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B), Warren Buffett came out with one of his most famous pearls of advice:

“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

“I’m A Contrarian… Honest!”

Investors across the world have endorsed and repeated this advice for years, describing themselves as dedicated contrarians.

Indeed, one need only consult Twitter to see an endless flow of age-old contrarian adages that are loyally reiterated with complete faith.

However, another adage is especially relevant, considering the international market’s plight at the invisible hands of coronavirus disease (COVID-19), ‘It is easy to be brave when there is no danger.’ That is what is becoming abundantly clear. Shareholders are currently selling hard in a blind panic.

If you are a contrarian investor, be a contrarian investor. This is the exact economic environment the phrase was coined for. Investors spend their entire lives with faith in a certain investment philosophy but abandon it at the first sign of risk. Yes, anxiety in this situation is a natural human reaction, but the simple reality is that unless you are willing to accept a certain degree of risk, investing isn’t for you. Volatility is a fixture in the world of investment, and this is an inescapable reality. If you want to play this game, be brave, or suffer the consequences. Just as a disclaimer, in case it isn’t already obvious, that doesn’t mean being reckless. Don’t invest money you can’t afford to lose.

COVID-19: Remarkable Fear

So, COVID-19; I’ve been shackled by jury service for the last few weeks and returning to work has been frenetic to say the least.

With Wall Street experiencing its biggest drop since the Black Monday crash of 1987, and the FTSE 100 & 250 plummeting further with each passing day, fears of a global recession are becoming as menacing as the virus that is causing them.

A graph of a market crash

There is no one piece of universal advice that can put investors’ minds at ease in a situation like this. Make no mistake, the COVID-19 pandemic creates a level of concern that I haven’t witnessed for many years, not least because of the initial un-co-ordinated response by governments around the world and the lack of clear data used to make these decisions (fake news is alive and well folks). This virus is going to take, and already has taken, thousands of lives across the world. We need to take this scenario extremely seriously, react selflessly and follow advice from our national medical establishments.

half of America will get sick

Goldman Sachs In An Emergency Conference Call To Clients Last Sunday

In fact, in an emergency Sunday conference call, The Goldman Sachs Group, Inc., told 1500 clients that “half of America will get sick.” They acknowledged the fed is in serious trouble and provided some additional insights into the current market situation. I’ll be looking at those in a future article.

Volatility = Opportunity?

However, despite the obvious and somewhat justified fear, it does not mean we cannot be pragmatic.

This is not a time to panic. Do not buy into the media-induced hysteria that is currently sweeping the land. While COVID-19 is terrible, potentially fatal news, investors must not lose sight of reality: this is a time of immense volatility, but also of immense opportunity. Stocks across the board have gargantuan discounts, and investors need to keep their cool, unlike the thousands of inconsiderate individuals piling their trolleys, quite bizarrely, with mountains of toilet rolls. We’ll be looking at some specific undervalued stocks in the near future.

All indications from the mining industry are that COVID-19 shouldn’t have a particularly damaging impact on the mining sector. I’ve spoken to many CEOs and the message is a cautious ‘it’s business as usual.’ Mining communities are often housed in isolation, away from general society and urban areas, and the workforce is usually young and fit, with no underlying health conditions. This means that while the virus will undoubtedly cause some disruption, the vast majority of the workforce is not in an at-risk category. Therefore, business should continue close to normal with minimal major health concerns. It is worth noting that this could change, and investors should monitor this situation closely as it develops.

So, what should investors be doing right now? They shouldn’t be panic selling, and they shouldn’t be abandoning investment philosophies they have believed in for so long. Selling at a loss and hoping to get back in the bottom, or even to preserve cash, seems an approach at odds to contrarian mentality. It seems much more like fear than rational thought.

attempt to be fearful when others are greedy and to be greedy only when others are fearful

Warren Buffett

Most gold producers have seen meaningful drops to their share price in the past month. What happened to gold being a safe haven investment? Possibly, the fear is not about what the markets are doing and is instead more of personal fear: a fear of dying? Whatever it is, it is changing the way investors have traditionally reacted and behaved in previous scenarios. Has the situation been exacerbated by social media and fear-mongering online? Some terrifying health headlines out there seem very far from the reality of the situation.

It might be time to stop, take a deep breath and pause for thought. It’s not like we don’t have plenty of time on our hands in this new stationary world.

An empty toilet roll shelf in a supermarket: the consequence of panic buying.
Panic Buyers Seem To Be Big Fans Of Toilet Roll

Without wanting to sound like a Hunger Games obsessive, we humans adapt, evolve and survive. Based on every single piece of data from the scientific community, while coronavirus is here to stay for the short-term, this is not something that is going to affect markets forever. Using existing evidence, investors need to decide on a timescale estimate, after which point their shares should have rebounded towards pre-outbreak levels. Investors will also need to decide if they think a company can survive this new obstacle. It is without question that COVID-19 will drown some companies that otherwise would have splashed and spluttered to shore in normal market conditions.

The biggest discounts are likely to be had in the coming weeks. Remember before COVID-19 hit, the institutions had taken some profit off the table, so they will be back. However, like an ‘everything must go’ shop sale, investors need to make sure the goods they select have a strong resale value.

Stay healthy. Stay sane. Think.

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.

A virtual photo of COVID-19 attacking cells

Altamira Gold (TSX-V: ALTA) – Gold Junior Aiming For Production In 2020

The Altamira Gold company logo.
Altamira Gold Corp.
  • TSX-V: ALTA
  • Shares Outstanding: 99M
  • Share price C$0.04 (19.03.2020)
  • Market Cap: C$4M

We recently interviewed Michael Bennett, President & CEO of Altamira Gold (TSX-V: ALTA). Gold had a great 2019, so has Altamira Gold managed to capitalise on it?

Altamira Gold is trying to fast-track itself into production by 2020. An outsourcing model is key to this; Bennett was keen to explain it in depth.

Now is the time for gold producers to pounce, and for gold investors to take note, especially given the current discount rates courtesy of COVID-19.

While you’re here, why not check out another one of our informative gold market articles, or maybe a different gold mining interview?

We Discuss:

  1. Company Overview
  2. Company Financials: Money Raised so far, its Uses and a $6.5M Raise. Where Will They Spend it?
  3. An Outsourcing Model to Get into Production: How Much Control Have They Got?
  4. Possible Barriers and Issues: Permitting, Licensing and Mining in Brazil
  5. The Future: Will Shareholders be Sitting Around for 2yrs or is There a Catalyst Moment Coming?

Company Website: https://altamiragold.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.

The Altamira Gold company logo.

Intercontinental Gold and Metals (TSX-V: ICAU) – Bolivian Gold Play With No Exploration Risk

The Intercontinental Gold and Metals company logo
Intercontinental Gold and Metals
  • TSX-V: ICAU
  • Shares Outstanding: 18M
  • Share price C$0.28 (17.03.2020)
  • Market Cap: C$5M

We recently interviewed Gord Glenn, President and CEO of gold trader, Intercontinental Gold and Metals.

Intercontinental Gold and Metals tried to give investors exposure to the exciting upside of gold/precious metals investment, with none of the risk associated with the typical exploration, development and operation in the mining sector.

We’re a big fan of alternative mining-related investment opportunities here at Crux Investor, so how does this one stack up?

While you’re here, why not check out another one of our informative gold market articles, or maybe a different gold mining interview?

We Discuss:

  1. A Unique Business Model
  2. The Gold Market Outlook For 2020
  3. How Do Shareholders Make Money
  4. Delivering Growth

Company Website: https://www.intercontinentalgold.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.

The Intercontinental Gold and Metals company logo

Integra Resources (TSX-V: ITR) – A Renowned Team And Exciting Drill Results

A gold tinted photo of some US$100 bills and a pile of gold coins with a white Crux Investor logo in the top right, and a white Integra Resources logo in the top left.
Integra Resources Corp.
  • TSX-V: ITR
  • Shares Outstanding: 119.6M
  • Share price CAD$1.25 (20.02.2020)
  • Market Cap: CAD$150M

We recently conducted an interview with George Salamis, President & CEO of gold-silver explorer, Integra Resources Corp.

We regularly discuss interesting gold market proceedings on this platform. Check out one of our other recent gold company interviews, or maybe some of our recent informative gold investment articles.

The management team at Integra Resources is the former executive team of Integra Gold Corp, renowned for turning a C$15M gold company into a C$590 million (sold to Eldorado in 2017). What have they got this time around? We discussed:

  1. The share price increase: doubled in less than a year.
  2. Its flagship asset purchased from Kinross Gold Corp. in 2017.
  3. Promising drill results in 2019.
  4. Exploration plans for 2020.

We were also keen to ask why a gold-producing giant like Kinross Gold Corp. would sell its gold-silver asset to Integra Resources unless it was a dud? We explored some very impressive drill results and big plans for 2020. Do shareholders have a reason to get excited? With these results and a management team with such an impressive track record, maybe they do…

Company Website: https://www.integraresources.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.

A gold tinted photo of some US$100 bills and a pile of gold coins with a white Crux Investor logo in the top right, and a white Integra Resources logo in the top left.

China Gold Int (TSX: CGG) – Gold And Copper On A Grand Scale

A photo of a silhouette hand picking out a gold Chinese ring.
China Gold International Resources Corp.
  • TSX: EQX
  • Shares Outstanding: 113.5M
  • Share price C$12.6 (21.02.2020)
  • Market Cap: C$1.43B

We recently sat down for an intriguing interview with Jerry Xie, Executive Vice President and Corporate Secretary of China Gold International Resources Corp. (TSX: CGG, HKSE: 2099).

Investors may want to read one of our most recent gold-related articles, or even watch a different gold interview.

Gold had a good year and an especially positive 2H/19. However, China Gold Int. had a negative correlation on its share price throughout 2019. The company operates two producing gold mines that form a low-grade, bulk-tonnage gold operation with a copper by-product. The operational statistics look good on paper, so why this share price tail-off? We discuss:

  1. The Decline In Share Price: Why?
  2. The Gold Market Outlook For 2020
  3. How China Gold Int. Plans To Get The Share Price Back Up

Company Website: http://www.chinagoldintl.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.

A photo of a silhouette hand picking out a gold Chinese ring.