Jamie Keech – Valuable Tips for Retail Investors

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

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

Matthew Gordon talks to Jamie Keech, 17th June 2020


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

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

Remuneration and Timing

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

Structure

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

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

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

Getting In Early

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

Look At What Management Got In At

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

Find Companies That Have Been “Beaten Down”

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

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

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

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

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

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

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

Sprott CEO, Peter Grosskopf – Making Investing Look Easy

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

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

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

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

We Discuss:

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

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

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

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

Sprott Inc. company logo

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

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

Interview with Peter Grosskopf, CEO of Sprott Inc.

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

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

We Discuss:

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

CLICK HERE to watch the full interview.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Peter Grosskopf: It is.

Matthew Gordon: Right.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Peter Grosskopf: Thank you. Okay, thank you.

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

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

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

Sprott Inc. company logo

Rick Rule, Sprott US – Renowned Investment Mind Shares His Knowledge

A photo of well-known investor, Rick Rule
Sprott Inc.
  • TSX: SII
  • Shares Outstanding: 255M
  • Share price C$3.52 (14.05.2020)
  • Market Cap: C$893M

We recently conducted a highly-anticipated interview with investment legend, Rick Rule, President & CEO of Sprott U.S. Holdings.

This is an incredibly informative and educational watch for investors and gives them the inside track on investment from the world of the institutions.

We go back in time to talk about Rule’s childhood, before proceeding chronologically down a long and winding road through Rule’s career. What has he learnt? What mistakes has he made? What tips does he have to offer budding investors? Compelling viewing.

We Discuss:

  1. Background of Rick Rule & Sprott
  2. Rick’s Childhood and Influences
  3. All About Sprott: On End Game, Competition, Power to Turn Markets and More
  4. Retail, High Net-Worths and Family Office Investors; Are They Equipped to Make Good Investment Decisions?
  5. Discussing Their Portfolio Approach, Business Model, and Uranium Holdings & Market Situation
  6. Confirmation Bias: Buying Behaviours Should Revolve Around a Strategy
  7. Approaches to Companies With(out) a Business Plan
  8. Success Follows Success: Precision of Investment and Peoples’ Belief in Sprott
  9. Establishing Trust: Types of Deals Approved by Mr. Rule
  10. Broker Relationships and Working Together
  11. ETF Fund Management
  12. Opinions on Naked Shorting, Ill Fates for Juniors, and the US Quantitative Easing Program

Company Website: https://www.sprottusa.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 well-known investor, Rick Rule

Rick Rule, Sprott US – BOOM, BOOM, BOOM, goes the big bass drum (Transcript)

A photo of well-known investor, Rick Rule
Sprott Inc.
  • TSX: SII
  • Shares Outstanding: 255M
  • Share price C$3.52 (14.05.2020)
  • Market Cap: C$893M

Interview with Rick Rule, President & CEO of Sprott U.S. Holdings.

We go back to where it all started, and ask about what he wanted to be when he grew up. Rule talks to us about his personal and business philosophy.

We look at the end game and legacy. As Sprott’s largest shareholder, what is he trying to build. And can they be considered an 800lbs gorilla yet? What does it take to move market and sentiment?

Can a company like Sprott, which has availability to cash and investors who follow their investments, afford to be less selective with the investment choices? Why does he spend so much time on marketing? We look at the different revenue and income streams and discuss perhaps why somer investors aren’t equipped to invest. Rule’s answer may surprise you.

Everyone has a different business model and will therefore have different outcomes even if they follow the same strategy. But we look at the importance of actually having a strategy. So how do the target investments? What about distressed companies? Who is in the driving seat.

What are the options available to retail investors. And how important are they at different times in the companies life cycle and different market conditions. And where do brokers fit in to the mix? Is the landscape changing?

And finally, what does the most recent bout of QE do for the global economy and the US?

We Discuss:

  1. 1:49 – Background of Rick Rule & Sprott
  2. 4:42 – Rick’s Childhood and Influences
  3. 9:26 – All About Sprott: On End Game, Competition, Power to Turn Markets and More
  4. 19:55 – Retail, High Net-Worths and Family Office Investors; Are They Equipped to Make Good Investment Decisions?
  5. 22:28 – Discussing Their Portfolio Approach, Business Model, and Uranium Holdings & Market Situation
  6. 31:50 – Confirmation Bias: Buying Behaviours Should Revolve Around a Strategy
  7. 36:28 – Approaches to Companies With(out) a Business Plan
  8. 39:42 – Success Follows Success: Precision of Investment and Peoples’ Belief in Sprott
  9. 46:01 – Establishing Trust: Types of Deals Approved by Mr. Rule
  10. 52:10 – Broker Relationships and Working Together
  11. 53:37 – ETF Fund Management
  12. 56:16 – Opinions on Naked Shorting, Ill Fates for Juniors, and the US Quantitative Easing Program

CLICK HERE to watch the full interview.

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

Rick Rule: I’m doing well, and I have to say I’m a fan of Crux Investor, so I’m delighted to be invited to participate. Thank you.

Matthew Gordon: That’s a pleasure. I think we could almost cut it there. That is perfect for us. But given we’ve made all this effort to get together, let’s talk. So, Rick, you know, we obviously know Sprott and Rick Rule from all of the work that you do in the mining sector. You are very well known in North America, not so much over here. So, I’d wonder if you could take some time out and sort of share a little bit about you and the company?

Rick Rule: Delighted. As you can see by now, I’m a rather elderly investor: I’m 67. I’ve spent my entire adult life in natural resource investing and investing management. I built a business called Global Resource Investments, and another business called Resource Capital Investments Corp, which I sold to Sprott in 2010, and I have been since then, Sprott’s largest shareholder and a Sprott employee.

 I’ve actually been reasonably involved in Australian markets going back to 1988. I tend to be more active in Australia when Australians aren’t. I have found that in local markets like that, the bear markets are more conducive to my presence than bull markets. So, I remember in 1989, 1990 1991, as an example, attending Diggers and Dealers, and having a strange sense that I was a very pretty girl in a short skirt.  A new cheque in Kalgoorlie was very, very welcomed. In good markets, of course, it’s difficult for non-Australian investors to participate against the locals, but in bad markets, when Australians go on strike, it’s an extraordinarily good market, even for foreigners like myself.

So as to Sprott, we are Canadian domiciled, enlisted, but most of our business is in the US. We manage something in excess of USD$12Bn in assets, virtually all of which is involved in precious metals and natural resources. As you suggest, we have about USD$7Bn in New York Stock Exchange-traded physical precious metals, trusts and ETFs. Then we have a variety of bespoke equity strategies and we are, I think, the largest provider of development and bridge credit for non-in investment grade issuers. That is sort of sub BHP issuers. And we have a fairly small but active wealth management business. Active primarily in the United States and Canada, but also frankly with many, many individual clients from both Australia and New Zealand.

Matthew Gordon: Okay, nice summary. I’m going to explore a little bit deeper, dig a little bit deeper please. We are speaking to some of the great and the good in the mining space and we are trying to understand the mentality and you know, perhaps what drives them. But let’s start off with; where were you brought up, what was your upbringing like?

Rick Rule: This will expose my first great career mistake. I was born and brought up in San Jose, California, the heart of Silicon Valley. It had zero interest in technology.

Matthew Gordon: I just spotted the glaring error. Right? Okay.

Rick Rule:  It was a consequence of a very poor decision made when I was 16 years old; I became merely rich as opposed to filthy rich. But I was even at that point in time, interested in, particularly, agriculture, mining and oil and gas, and I attended the University of British Columbia in Vancouver, British Columbia, beginning of 1970 as a consequence of both of them having a degree program in natural resource finance, which wasn’t available elsewhere in this hemisphere. And also, because in 1970, a young American was going to have to travel. Most of them went to Vietnam and I chose to go to Canada, which I still think in retrospect was a very good decision. Vietnam was warmer, but I didn’t want to be shot at or have to shoot other people. So, I chose Canada and I’ve been involved in natural resource investing literally ever since. For me, it was a wonderful, wonderful career choice. I have had an interesting and varied life and I’ve met a wonderful crew of people. It’s truly been a blessing.

Matthew Gordon: But what did you think you were going to be? I mean, you know, back in the day, you’re sort of making those choices. You know, you’ve got different visions and pictures in your head.

Rick Rule: This will expose me as a real nerd; my aspiration when I was 18, was to become an international taxation lawyer specialising in natural resources. How an 18-year old who should have been interested in girls or something, decided to become an international taxation lawyer specialising in natural resources is beyond me to today. I had the good fortune to befriend an international tax lawyer in Vancouver and I asked him for career advice and he said he’d come to know me fairly well and he thought that I’d be miserable as a lawyer and that I should become a businessman and investor, and in fact, hire lawyers. And he introduced me to one of the all-time deans of value investing, deep value investing: Peter Cundall, who became my first financial mentor and was responsible for my original investing discipline, which was value and deep value, particularly in natural resources. Much of the style that I have today, not all, but much of the style I have today owes itself, in fact to the influence of Peter Cundall. For those listeners that you have that are sort of into the values of the business, Peter Cundall is sort of the holy grail of deep value and the concept of valuing redundant assets and peak of cycle trough of cycle valuation disparities.

Matthew Gordon: Right. And would you say that that’s been your philosophy ever since? So maybe business philosophy, yes, but as your own personal philosophy too and the way that you go about your everyday life?

Rick Rule: I suspect it is, frankly, many value investors have odd personalities and I would certainly buy off on that. I know for Peter Cundall, a book that was of importance to him; coming of age was ‘Human Action’ by Ludwig von Mises which turned out to be other than perhaps securities analysis, no, even including securities analysis, ‘Human Action’ was probably the most important book  I’ve ever read in terms of understanding human motivation; both in terms of finance and other aspects of our lives, and also volition: how we get along with each other and how we function. So, I would suspect that the psychological formulation that goes into a value investor, the sort of tolerance or even reverence, frankly, for being lonely, for me it’s other aspects of my life.

Matthew Gordon: Well, I think that’s fantastic. I mean we’ve long held that, I think for our team, we want them to be able to read people, read situations, read sentiment in the market. And I think that never has that been truer than today and maybe what we are about to step into in terms of the unknown reaction after COVID-19. But maybe that’s a conversation for another time.

Let’s get on to Sprott. So, I think that’s given us a little flavour of what you have been about. You’ve told us about some of the things that you have built with Sprott, you’ve sold with Sprott and what they are trying to build, but what’s the end game there? Because I know you are a 67, spritely, very dynamic individual, but what are you trying to get out of this, and what is Sprott the company trying to build?

Rick Rule: I humbly, I would suggest that we are trying to build the finest, focused natural resource investment manager on the planet. And I think, frankly, we are pretty close to being there. Our franchise is mostly precious metals, and the consequence of that, I think that the next two or three years are going to be extraordinarily kind to us. The nature of all extractive industries, but particularly precious metals is that they are both capital intensive and cyclical. And we need to think for our clients and for the organisation itself beyond precious metals. My experience is that precious metals markets give you 3 or 4 extraordinarily good years, and then 3 or 4 or 5 or 6 fairly painful years. But if you are diverse, diversify across the whole spectrum of natural resource investments, which is to say, if you search in a forward-thinking manner for bear markets, that will become bull markets, you will do well over time. And that’s certainly worked for me. I am one of those who had come to understand that in cyclical businesses it’s bear markets that are safe, and bull markets that are in fact risky.

We have been through maybe the mother of all bear market in precious metals equities; beginning 2011 through 2019. Our thinking is that bear markets are the very authors of bull markets. And so, while our competitors were either in foetal position, doing nothing, or diversifying into businesses that they knew and loved like marijuana, we were focused on natural resources and precious metals. So, the consequences that we have been working 10-years to be the overnight successes that we are enjoying now. Our suite of products, as an example, include these New York Stock Exchange, physical precious metals trusts, which have tax advantages for US investors, but they end up being for investors who are concerned about the structure of the financial services business or concerned about the political structure of countries – very good vehicles in the sense that they are a hundred percent precious metals based. They don’t accept deposit receipts or anything like that. So, there’s never a chance that a holder in our trust could be the unsecured creditor of the counterparty. These were really built for bespoke precious metals portfolios. Built in fact because before we constructed the product, we had a lead order for USD$250M from a guy named Sprott, the same guy whose name was on the door. So, when we talk about a bespoke product, that was truly a bespoke product.

Matthew Gordon: Yes, you’re in the fortunate position that you’ve got money. This has been building up over time. If you were maybe starting off today, you might have to approach things differently. So, but, let’s stick with this – do you think you are the 800lb gorilla in the room? Can you compete because you are so niche? In terms of natural resources, particularly precious metals, and I know you’re trying to build a portfolio of products here, but can you claim to, say, move markets or move sentiment or change sentiment?

Rick Rule: We don’t try to move markets. We are definitely trying to change sentiments. Our whole marketing and advertising thesis involves investor education and investor outreach. And so, efforts like these, as an example, consume most of the time and treasure that we spend on marketing. And we are definitely trying to change the way that both institutional and retail investors address the market. And we are also trying to change in our own way the way that issuers face the market. So, in terms of trying to change sentiment, I would say that’s an important part of who Sprott is at its core. Trying to move markets – no, not so much. The markets are bigger than us.

As to the competition, we are blessed and cursed with a reasonable amount of competition. At the very top, in terms of equity markets, of course would be BlackRock. They forget from time to time that they have a precious metals business. It doesn’t matter much to them, but they matter an awful lot to the market. And there are, of course, lots of investment banks that are agents as capital providers.

We are probably unusual in the sense that we are as much principled as aged. If there’s a transaction, either lending or equity transaction that comes out of Sprott, it’s likely that the lead order for that transaction is Sprott. So, in terms of our capital markets group, think of a sell-side group with buy-side roots, which I think is healthy. I think investors should look at whether or not the agents are in fact are enthusiastic consumers of their own investment products. At Sprott, we certainly eat our own cooking because it’s the right thing to do. And over 40-years, it’s tasted pretty good.

Matthew Gordon: Yes, no doubt. You have done very well out of it. And you know, your name appears with most of the conversations that I been having at the moment, you seem to have a little piece of the pie. But tell me specifically about what you’re trying to do; when you’re saying, I’m trying to change the sentiment and that could be, you know, at a corporate level, whether it be the issuer or otherwise, what is it you want them to do? I mean clearly some branding component? Because I see you rather eloquently; you’ve got a very cultured language, and I see these interviewers who are either doe-eyed or glazed over, not quite, you know, grasping the importance of what you’re saying. I do enjoy you when you’re having these conversations, but what is it that you’re trying to get out of the market and what do you think the immediate benefit to Sprott is? Is it just at a corporate level – that’s all you can hope to effect change in?

Rick Rule: I think that the first thing we’d like to do is on the retail investor side, is to cause people to exercise common sense and work a little harder. Common sense turns out to be fairly uncommon. And many speculators make many, many correctable mistakes. We would like the process to be more focused.

We believe in the contrarian approach to natural resource investing. We think that the first truth is the bear markets are the authors of bull markets and bull markets are the authors of bear markets. And so we would ask our clients and people who propose to become our clients to adopt a portfolio that’s more contrarian and more value oriented and less momentum oriented. We have also learned that in businesses below a billion dollars in market cap in particular, that the most important asset on the company’s books are seldom physical. They are much more commonly human. We have learned that almost all of the value delivered to resource equity investors over the last 40-years has been delivered by less than 5% of the management teams employed in the sector.

So we try to cause our clients to invest all of their money, if we can talk them into that, with tier-one management teams; with management teams that have been serially successful in the past, and in fact, confined their activities to companies where the business focus is the same as the business focus that the management teams have enjoyed success on in the past.

If someone comes to me and he says, ‘You know, Rick you know, I’ve listened to your blogs. I’ve been a success in mining because I turned around and operated successfully a Gold mine, a producing Gold mine in our key terrain in French speaking Quebec.’ But the value proposition in front of me is that the same person is exploring rather than producing for Copper-Gold in the Spanish speaking Peruvian Altiplano in tertiary volcanics. While the person may have been a success, it’s arguable that the task at hand is so different that his or her success is irrelevant.

So we would ask our clients to employ common sense. We would ask them to have a value orientation, in fact, search out sales rather than search out sectors that have already performed. And we would ask them to pay particular attention to the management teams and the concurrence between the management teams resumes and their task at hand. We would also finally, at least in the speculative aspects of our business, we would ask the clients to understand when they are analysing a company, that they look for the process of answering unanswered questions. In exploration, that might be a, will the drill hole prove the third dimension? In development, it might be on time, on budget, that kind of thing. But if you focus on answering the unanswered question, understanding where value might be delivered, you will do better over 10-years than if you skip from story to story with less of your own involvement in your own portfolio. So, I would say that that’s what we are trying to cause to occur with the mining and retailing.

Matthew Gordon: Okay. I buy that, but do you think that retail investors, or high net worths (HNWIs), even family officers are equipped to do that and you know, because I would put it to you that they don’t know what questions to ask, let alone look for. So that leaves them in a very difficult position.

Rick Rule: The answer to that is, yes. I think that a high net worth, retail investors and family officers, more small family officers, have an advantage over other investors in first of all that they know the client themselves better than anyone can. They need to be prepared to do the work, but the truth is that when you’re competing with many money managers, money managers often aren’t invested in their own product, first of all. They are employees rather than partners. But more importantly, they have a very short-term orientation, very short-term focus. Many managers seem to have trauma holding stock over a long weekend. When a high net worth investor or a family office can take a three year or four year or 5-year point of view, which is important.

It’s important, however, that the investor do the work; many people who transfer accounts to us, including family officers present us with a laundry list of securities: 60 or 70 securities, and it’s impossible that they could know all that they need to know about every security. So, as a rule of thumb I ask high net worth retail investors to own in their portfolio the number of speculative companies that corresponds with the number of hours per month that they are prepared to spend working on their portfolio. You don’t need to spend an hour a month, perhaps on BHP or Rio or Exxon. You have to have a point of view of where we are in the economic cycle, certainly. But if you are involved in smaller names, I think it’s really, really important that you yourself, not just your advisor, you yourself read the annual report, you read the proxy, you read the various disclosure documents, whatever form they take place in, and you ask informed questions of your advisor, be he or she with Sprott or anyone else. It’s really the proprietor’s involvement in his or her own portfolio that ultimately determines the success or failure of that portfolio.

Matthew Gordon; Agreed. Do your homework – that drum should be beaten loud and clear and repeatedly. So that’s great. Can we come back to you though, in terms of your blended portfolio approach? Because it’s that you can have commodities which are in a bull cycle and others which are a in a bear market, right? So, I’m thinking Uranium for instance, has not been flavour of the month for the last few years, but you weren’t pro it, then you realised that Gold was going to go shooting past it on the outside lane. So, you switched cars, well, you didn’t switch cars, there was another horse in the race for you there. So you’ve got options there because you can sit back, one of my favourite phrases that you use is the, ‘I will be correct, eventually,’ or words to that effect, which is when you have placed a bet and you can sit back and wait, which, you know, some people have the luxury of doing, and I think retail perhaps get a little more frustrated than you do. You are saying I’ve got foresight, but you are all in on Gold at the moment, which is great. Fantastic. But do you feel that therefore you’ve got the luxury of a different type of approach. You’ve got a different business model to retail and family officers, haven’t you, in effect?

Rick Rule: Maybe, because it’s mine, I think it’s correct. I’m not going to change. I think they should. I think first of all, I think that the wind is in Gold sales. I think that the policy response from the political class worldwide is awfully likely, maybe not certainly, but probably going to continue to propel precious metals higher. And the consequence of that is when the higher Gold price becomes reflected in the balance sheets and the income statements of the producers that they will follow, like they have in the last eight recoveries from oversold bottoms. That doesn’t keep me out of the Uranium space. The exact quote, to demean myself was, I usually forget that there’s a difference between inevitable, which I almost always get right and eminent, which I always get wrong.

What I’ve learned at age 67, however, is that three to five years is not an interminable length of time. In my career now, I’ve been through nine, five-year cycles, and oddly, while I have left less time on earth and time should be more precious, I become much more patient. So, I see, for a variety of reasons, the pressure off the Uranium price to go higher. I had believed two years ago that it was sort of 18 months before the Japanese reactor fleet restarted. And in that case, I wasn’t early, I was wrong. But I love the arithmetic associated with Uranium. I love the amount of energy that can be generated from a fairly small amount of fuel. I love the fact that if you had USD$7Bn or USD$8Bn into a reactor and that reactor is using, say, a million pounds of fuel, the price of Uranium is actually irrelevant to you, relevant to the cost of the capital employed, regulatory affairs and things like that.

So, if the price is USD$30/lbs, you’ll use it. If it’s USD$60/lbs, you’ll use it. If it’s USD$100/lbs, USD$120/lbs, you use it. The price of the input, the price of the Uranium is irrelevant to the price of the output, the electricity. And if you have a circumstance like today where the stuff is priced at $60/lbs but the fully loaded cost to produce it, including cost of capital, which the industry never talks about, is $50/lbs, that means that the industry worldwide is losing sort of USD$20/lbs.

Matthew Gordon: You said USD$60/lbs, I think you meant USD$30/lbs? The price is USD$30/lbs.

Rick Rule:  Yes. But fully loaded in including cost of capital and importantly including prior year write downs, which companies never like to talk about, the total cost associated with producing a pound of Uranium worldwide, we believe exceeds USD$50/lbs. So if you’re making this stuff for $50/lbs total cost and selling it for $30/lbs, losing USD$20/lbs, and of course, being a miner trying to make it up on volume, over time, that’s simply unsustainable. And I would suggest to you that the price of something that has to go up and can go up will go up. I just can’t tell you when.

Matthew Gordon: I won’t even ask because I think I’ve long lost faith in the ability to call that market. As you say, the maths is fantastic. The reality is somewhat more opaque in that inventory and mobile inventory is, it seems to be an unknown; for such a small market that’s quite extraordinary. Well, let’s kind of move on from, well actually, let’s talk about Uranium just a little bit more because obviously there’s a lot of, COVID has impacted supply. You’ve been talking about the demand side there partially, but the supply side has been knocked for 6, to use a cricketing analogy, whereby 25Mlbs to 40Mlbs has been taken out of the market, depending on how long this goes on for, because it’s rather indeterminate at the moment. So, there’s hopefully a big, I’ve got to be careful with my wording here; there’s a wave of price discovery to happen, which is great. Are you at all concerned about the lost opportunity cost? Having had your money tied up there for the last three, four years, you could have come back in now made your cannabis money, made your Bitcoin money?

Rick Rule: I resent it. But it’s a cost of doing business for me. Yes, it’s a cost of doing business. The last Uranium bull market, which I was early on too, I began to come into that market in 1998, and I guess the market started to move in 2002, I had the same circumstance. I had forgone rent in the money that I had employed in the sector for 4-years. But the truth is, in that bull market, the five Uranium juniors that had survived the 20-year bear market that led up to that bull market were such extraordinary performers in that brief bull market. The worst of the 5, the poorest performing of the 5 generated 22:1 returns. And what you find, pardon the pun, is that’s the sort of explosive upside in the better Uranium juniors is so much that they can impose, they can advertise almost any time value of money discount that you want to put in place.

Matthew Gordon: Do you think that is realistic this time around? Given the lessons learned.

Rick Rule: There are two reasons: there is still a club of investors, if you will; old fat rich guys that went through the last bull market, and if you give them half an excuse I think you’ll see a stampede into the few Uranium juniors that are left, and the Uranium juniors that are left are, you know, pretty tough survivors. They’ve managed to hang on since 2007, 2008. You know, they managed to hang on for 12 or 14-years of pretty hard markets. It is strange that there were five Uranium juniors at the beginning of the last full cycle. There were 500 Uranium juniors at the top of the last bull cycle, and there are probably 12 viable Uranium juniors, and I may be overstating the number today. So, the same circumstance happens when the investment community gets tempted back into the Uranium space there is a very small opportunity set available relative to the cash that remembers the last cycle and wants to come into it.

Matthew Gordon: But therein lies the problem: there were a lot of people left holding the baby the last time around: some people made a lot of money and a lot of people lost money and that enthusiasm. So, it comes back to the question of, are people equipped to make these sorts of decisions? You know, which horse do you bet on? You’ve given some clues as to what people should be looking at in terms of doing their homework and so forth, but Uranium is quite an interesting space. If it does replicate the last cycle, it replicates the last cycle.

Rick Rule: I think that is accurate. I think what you say is true across the broad spectrum of resources. Markets always over-correct. What will, what happens, let me rephrase that, what happens is that people who are interested in the Uranium narrative will because of their concern about time-value of money and because investors want the immediate gratification, people won’t buy the Uranium stocks in anticipation of a price move. The price move itself will be the stimulus that causes people to come into it. This is very strange to me and I’m guilty of this too, just probably to a lesser degree than some others. We believe that we are sort of, you know, sentient, rational human beings gathering information from the whole cosmos, processing this information, making rational conclusions, and that’s not true. What we really are, are people who are looking for information that supports and makes us comfortable with our existing paradigms.

Matthew Gordon: Confirmation bias, we call it.

Rick Rule: Correct. And the most important information to us is the most recent. Expectations of the future is set by experiences in the immediate past. What that means, oddly, is that, let’s say that there is a stock that is selling for USD$10, okay? And let’s say that it comes to the attention of some people, and it’s selling for USD$20, but there’s been no in the underlying fundamentals of the company. The investor who owns it at $10, loves it at $20, and the price information justifies his or her narrative. Now, the fact that it’s gone from $10 to $20 makes it arithmetically precisely half as attractive as before the move. But oddly, it becomes a Geffen good. It becomes one that is valued more highly as a consequence of the price than of the value.

When I, the first time through in the Uranium stocks came into them, the price of Uranium was between USD$8 -$10/lbs, and I remember thinking, you know, the price could go to USD$40. I was wrong: it went up to USD$150/lbs or something. Now, at about USD$60/lbs, it was very clear to me that the price of Uranium didn’t have to continue to go up and I began to loosen up. The truth was much, much, much too early, in retrospect, but I’d rather make that kind of mistake than overstay my welcome.

When you look at any commodity subset, what you see is, in Canadian parlance, a series over 30 or 40-years of hockey stick graphs. The front side of that chart is a lot of fun, but the backside is just as steep and much less fun. And so, you have to have a mechanism, a discipline that will cause you to sell. If your mechanism is a value-focused mechanism like mine, what happens is that you will inevitably buy too early and you will inevitably sell too early. You will make often a stunning amount of money in the middle, but you will punish yourself, or at least be punished psychologically, for two and a half or three years on the way in and you’ll punish yourself again for the last 12 to 18-months of the bull market, taking, however, perhaps a fat slug out of the middle.

Matthew Gordon: I agree with everything you’ve said. We do a lot with confirmation bias and trying to understand it from, you know, we’ve spoken with financial psychologists – did you know they existed? Neither did I – to try and understand people’s behaviour around these things. And I do agree with you, you know, if it’s at $10, goes to $20, it’s worth half. But the impassioned belief of the holder more than doubles, quadruples in effect. And we have been attacked and vilified for our views on that, and that’s fine – everyone is allowed their opinion, but it is a thing, and I wish people would sign up to your philosophy there, which is, at least have a strategy and stick to it.

Rick Rule: No, that’s very true. But, you know, we asked issuers that come to us for a business plan, and we ask speculators and investors to understand that investing is in fact a business and they should have a business plan too. It doesn’t mean that if circumstances change, that the plan shouldn’t change. But the truth is understanding why you buy a stock, what the value proposition is and importantly, what will cause you to sell a stock. If you’re a speculator, the expectation on any individual speculation is failure. The arithmetic is that if you cut your losses, that your successful speculations will amortize your losers. But that presupposes that when data comes back that tells you that you’ve made a mistake, that you act on that data and limit the damage that you do to yourself from your mistake.

Matthew Gordon: Yes, I think that’s absolutely right. But the part of that, the flip side of that coin is the investments that the companies that you’re about to invest in, did they have a business plan? It’s one of the first questions we ask, and I would say mining is extraordinary like no other sector we’ve been in, in that I can count maybe less than 20 companies that I’ve spoken to this year, and we spend about 350 who have a business plan.

Rick Rule: In every case where an issuer comes to me, particularly a pre-revenue issuer, an explorer, I go in with the mindset that these aren’t asset based businesses, that they are intellectual property businesses, that you employ the intellectual property on a piece of ground and you propose a thesis and do you test the thesis? And so, in every circumstance I ask the people to explain to me what their thesis is and what facts caused them to develop a thesis, how they propose to test that thesis, and what is the big unanswered question? Over the years, about 80% of the companies that I’ve interviewed have said, ‘Oh, that’s interesting. We’ve never thought of it in that context,’ which you know, I think corresponds with the fact that 80% of junior resource issuers are valueless. The unanswered question for most of the managers is, will I have a salary in 18-months? And I realised that that’s a valid question to them, but I’m completely unconcerned about it.

Matthew Gordon: How do you make them money?

Rick Rule: Yes. When an issue where it doesn’t have a business plan the ability to execute a plan that one doesn’t have must necessarily be fairly difficult. But the same thing confronts the speculator; when speculators transfer these laundry lists of stocks to me and I try to go through them one by one, the process is always very similar. We’ll start, you know, with A, so, I don’t know, Amalgamated Aardvark or something like that. And the client will say, ‘Well, Rick, what do you think about Amalgamated Aardvark?’ And I try to be polite. You know, I say, ‘Well, I’ve been untroubled by its existence for a long time. What do you think about it?’ They will say, ‘Well, I don’t know anything about it.’ And I’ll say, ‘Well, why on earth do you still own it?’ And they say, ‘Oh, well, Bob Bishop recommended it,’ Bishop’s been retired for 12-years. ‘Well, yes, that’s true.’

‘Well, why don’t you sell it?’

‘Well, I can’t sell it.’

‘Why can’t you sell it?’

 ‘I bought it for USD$4 and it’s selling at $0.25. And if I sell it, I’ll lose USD$3 and $0.75.

And I said, ‘No, you’ve already lost the USD$3.75 cents. The real question is what are you going to do with the remaining $0.25?’

This is a very, very, very simple process, but people need to force themselves to go through it and they need to force themselves to go through it frequently.

Matthew Gordon: But I can understand the difficulty of that because you’re viewing it as a percentage of the remaining capital available, not as a percentage of the original bet, which it sounds like it would have been with the ‘Aardvark’ company. But it brings onto a nice point, and I segue off to the fact that, and I had this conversation with Ross Beaty last week and then he acknowledged that this existed, which was the mere fact that a Sprott name is associated with a company is enough to draw people in. That’s what you would hope. I mean, you’ve been doing all this marketing, you’d hope so, wouldn’t you?

Rick Rule: The fact that the Sprott in premature is useful in a market like this is useful to us. We have certainly spent a long time on brand recognition. We would hope that investors pay attention to the company as opposed to merely the fact that Sprott has invested in the company or lent money to the company. Our needs and perceptions, our risk tolerance, the amount of intellectual capital that we can bring to bear might exceed that speculator’s capabilities. And it’s unlikely that we will give the market prior notice when we are going to sell.

Matthew Gordon: I think that’s tremendously honest of you because again, when we speak to CEOs, they literally think they’ve cracked the code. The fact that the Sprott name is there in some way or another, and it may be a legacy thing because they have a bet which went wrong, you know, an investment which went wrong and it’s been regurgitated. But you’ve placed a lot of bets over time because you have a different risk tolerance and time thresholds and so forth. And as you say, you choose when you exit it because your model is different from everyone else’s. So, you’re not, you know, you’re not misleading anyone there. But likewise, I would encourage people, like you do, that people walk in with their eyes open and understand, does this meet my strategy, my thresholds before they follow blindly, as it were. So that’s not a negative about Sprott, it’s a call to retail investors and similar, to walk in and be clear about why they are making that investment, placing that bet.

Rick Rule: You know, what you say I think is equally appropriate to institutional investors. You will find, particularly when resources are out of favour, that well, first of all, the ETFs don’t consider fundamentals at all. They consider market cap and liquidity, which is to say they tend to favour the oversold, pardon me, the overbought overpriced equities. Active managers in big multi-sector funds when the sectors are out of favour, tend to attract managers that are popular with the fund group and who have failed in other specialties. You know, if somebody failed as a supermarket analyst and they failed as an auto analyst, but he went to a good school and his family is friends with the family of the CEO, you know, they will put this man or this young woman in charge of resources because the sector is so small, it’s unlikely that they can do much damage there. Those managers need to employ the same, precisely the same stratagem that you and I are encouraging a high net worth, retail and family offices to employ it. And believe me, that type of discipline is rare among institutions too.

Matthew Gordon: I think we are in violent agreement, which is wonderful. But again, just exploring the nuances here, but nevertheless, it does happen: people do follow you. And knowing that, are you able to be a little more casual or a little bit more, less precise with the investments that you do make, knowing that there’s a slew of money coming in behind you who know your name, recognise your expertise, I’m talking about Sprott’s name generally here and of course yourself, because it kind of papers over some of the cracks potentially, because money can do that: if the company has money, it has options.

Rick Rule: We first of all employ a variety of strategies with a variety of managers. And there may be some of the managers that may that manage small enough amounts of money that they can be nimble enough to do that. I tend to have a fairly concentrated portfolio. I often enter these circumstances in private placements, which is to say a negotiated transaction with warrants. The good news about that is that when I’m right, I’m usually really wrong, really, right. Pardon me. The bad news is that I can’t be too nimble with those positions. The idea that I could get into a private placement and then when the hold comes off that the fuel engendered by my participation lets the stock trade up and I can sell into it. Given the size of the positions that I take and the reasons behind my positioning that isn’t anything that’s of particular advantage to me.

Now, there are a couple of small issuers that we got involved in two years ago that used the furore engendered by our participation, the sort of legitimacy that conferred on the market, to broaden their constituency, which lowered their cost of capital, and they were able to raise capital subsequently from people other than ourselves at prices that we as existing shareholders felt were very attractive from our point of view, but they weren’t attractive from the point of view of new money. So, to the extent that promotional groups, successful promotional groups use the entree we had suggested to broaden your constituency, raised their share prices, and lower their cost of capital; we are certainly long-term indirect beneficiaries.

But for me, having a large position in the stock, let’s say it goes from AUS$0.25 to AUS$0.40, and let’s say it now trades 100,000 a day, If I have a USD$3M position, the ability to monetise any of that a hundred thousand dollars in volume a day is really infinitesimal. I have to be right in order to make money.

Matthew Gordon: Yes. So, what type of deals do you like doing? So, I have noticed a few deals that you’ve done recently, which were placements, but you know, if it goes right, if it helps the company to get to where it needs to be, it’s great. It’s good for you, it’s good for everyone, but you’re papering these things. So, if it doesn’t go well, it’s a slightly more painful upside for you in that it means the company hasn’t delivered what it said it was going to. And presumably, you’re either perfecting some kind of security or you’re taking a bigger chunk of the company because they owe you, well, it depends on what the terms are. But what’s your favourite kind of deal?

Rick Rule: That really depends on, as you probably know, I prefer now in my declining years, to be a lender rather than an equity investor. The reasons for that are fairly obvious: in the bear market that we endured in the last decade, the Toronto Stock Exchange Venture resource index, which is the index against were measured, fell by 88% in nominal terms, in value, which is to say that the performance over a decade was -88%. In our on-balance sheet lending activities during the same period of time, we generated a 15% annualised return on capital employed. 15% is a handsome headline number in any circumstance. But the relative performance is silly – really, really, truly silly. The idea that I can effect a reward transfer without very much of a risk transfer and I leave the shareholders in the management team and the ups, but I eliminate the downside for me is extremely attractive.

As a lender, if you’re lending money to an issuer with no visible means of support, you know, no visible means of repayment, you are really truly an asset-based lender. So, we look at all the financial projections associated with the loan and we certainly consider that, but we look at the management resumes and more particularly, the strategic value of the asset to other buyers, assuming that our borrower wobbled. And that’s the criteria that we use to make alone. We are more concerned with loan covenants and restrictions frankly, than we are with coupon because one bad deal obliterates the return on 12 good deals.

When you look at our track record relative to our competitors, and by the way, we have some very, very good competitors in that space. I think what you’ll see is that other guys at periods of time have written more business than us, but we have had to foreclose much, much less often. That obscures the fact that probably 40% of the loans that we’ve written in the last 30-years have violated one or another of the loan covenants over the course of the loan. If we have a management team that is honest with us, works hard and gives us prior notice that they are experiencing difficulty, we’ll move heaven and earth to support them. If by contrast, we don’t get a call and we don’t get a cheque, then the relationship gets different.

Matthew Gordon: Yes, I’ve seen both sides of that. I’ve spoken to someone this morning who, you know, has had a very positive experience with you guys. You know, they basically paid off the first loan, then got another loan and great, you’ve allowed them to grow, be able to tell that growth story, deliver that growth story. And you know, likewise, I’ve seen where it hasn’t worked out, but no one really wants that. Well, maybe that’s not true. Sometimes that’s what, you know, the terms are geared up to do, but it’s not easy. It’s not easy.

Rick Rule: We are not in the loan to own business. We are lenders. If we work out a loan, if we have to operate something, we have failed because it takes us away from what we are good at and we think it damages our reputation on the street. You know, we’ve had a relationship providing both debt and equity to the aforementioned Ross Beaty, going back to 1987 – a very, very long time. The first negotiation between Ross and I probably took 35 hard bloody hours. And I don’t think that the sum total of negotiations that we’ve done since, which probably number 30, have consumed 3-hours. Once the trust was established and once the basic framework of how we could do business with each other, various assets at various points in five minutes cycle was established, the relationship was extraordinarily clear cut and very, very mutually beneficial. And I think that’s one of the things that Sprott looks towards in its issuer facing business in every circumstance. We’d rather do more business with less people than less business with more people. We would rather concentrate where we know that we bring value and we know that they bring value and each side looks to develop a commercial relationship where everyone benefits.

Matthew Gordon: Yes. again, thank you. You’re not in the loan to own business. I get that. But when that second phone call comes in saying, we need a little bit more cash, you’re in the driving seat though?

Rick Rule: Certainly, we construct the loan based on the assumptions that the customer gave us and we tell them ahead of time what it will cost them if they wobble. So, if there are extension fees or if other capital is required, we will support them, but we won’t support them for free. If our risk increases, our coupon is going to increase too. That’s the way it’s going to work. If we are supposed to be able to redeploy the money in 12-months and we don’t get to redeploy the money for 30-months, we get it but there’s a cost associated with that because there’s a cost to us.

Matthew Gordon: Beautiful. Last opportunity cost. Right. We are getting to the end, you will be glad to hear. That’s the good news. So, we’ve talked about retail a bit, but can we talk about another component of, which really seems to be prevalent in Canada and North America more so than the UK, they are a different sort of animal; which is the broker relationship. Now, I asked about you being an 800lb gorilla in the room. As you’ve got bigger, do you still have to work with brokers or are they coming to you? I mean, how does it work now for a large USD$12Bn under management company in North America?

Rick Rule: We spend a lot of money cultivating broker and dealer networks. And of course, we have our own small private wealth business. So, we also have direct retail and direct to institutional. But in terms of the big products, the physical products and the ETF, those are very much distributed through normal distribution channels in North America. We are working now to build out our UK and European relationships too; we have our first Eustace product, European fund as a consequence of our acquisition of the Tocqueville Gold group. And we have explored from time to time a London listing for some product associated with our lending and yield oriented activities. So, I think that you can look to us instead of establishing dealer and distribution relationships in Europe to compliment what is by now a very deep us distribution.

Matthew Gordon: Fantastic. Okay. I look forward to that and look forward to hearing about it and I’m sure it will be imminent once we are allowed to leave our homes on a permanent basis. Can you just tell us a little bit about the ETF funds that you manage at the moment, if you don’t mind?

Rick Rule: We have, we have two ETFs: the Sprott Gold Miners Index, which is a small competitor to the Vanek product. Ours is different in the sense that it isn’t just oriented towards liquidity and market capitalisation. It’s a factors-based fund, and we take margin and profitability and revenue growth into account. The nervousness that we have with the non-factors based funds is that large companies, which may be shrinking, tend to dominate the market cap race, and we don’t want to have a circumstance where we own a lot of accompanies towards the end of its mine life and we face a precipitous decline. So, we look as much to margin and revenue growth as we do to market capitalisation and liquidity. We have a smaller company fund, the Sprott Junior Gold Miners Index which is similarly focused on factors rather than market capitalisation and liquidity.

The truth is that our ETF offerings are substantially smaller than VNX ETF offerings, and ours are small enough that this is convenient and inconvenient that we do not move markets when there are inflows into the major ETFs, especially the major junior ETFs. Their rebalancing becomes, in the near term, the most important part of the market capitalisation of their constituents. We are fortunately saved that challenge by virtue of the fact that we are smaller, but factors based. We suspect that over the course of the decade that we will be able to handle the out-perform them because we think that a blind ETF will always underperform the market to the exact extent of their fees. And we hope that by tailoring our own offering to some factors which are really pretty easy to construct algorithms for, but are also important over time in success, that our factors-based approach will overcome the impact that they have on markets as a consequence of their gorilla status.

Matthew Gordon: Okay. You mentioned a word there; kind of got me excited – algorithms. We’ve been talking this week about naked shorting and you referred earlier on to the fall of the market over since, what, 2012-ish? I know Eric is a sponsor of the savecanadianmining.com. Are you a believer?

Rick Rule: I’m not.

Matthew Gordon: There you go.

Rick Rule: With reference to Eric, he’s one of my favourite human beings and he was as good a partner as I ever had. The junior mining industry’s worst challenges are all self-inflicted. The general and administrative expense. The zombie listings. Without going into too much detail, it is alleged that 25 years ago, in addition to being a money manager, that I occasionally dabbled in promotion. Without going too deeply into those allegations, I can only say that if it were true, I would have loved to have a good short position against me because a short position is a committed buyer. We have a little saying down here: he who sells what isn’t his has got to buy it back or go to prison. And the truth is that if you catch somebody short, sort of 10 or 12% of your float, they have to buy back. And the question becomes at what price? And that’s established by whether you are right, or they are right. So, if it is in fact true that I was a promoter 25-years ago, I would have been delighted to see large short positions. If your product is good, you win the war against the shorts. If your product is not so good, you lose the war against the shorts. And so, I think the shorts perform a useful function both for the market And, frankly for the better companies that long short positions get built up against.

There are several companies that I had been around a lot in earlier days. First, Quantum Silver Standard, Pan-American Silver, famously in Australia, Paladin, BIMA, that all had very large short positions against them. All of them had circumstances where the backers and the management teams understood the short positions, worked hard to catch the shorts and use that short position to do financings that occurred at higher prices than they otherwise would have as a consequence of the short squeezes that were engendered.

Matthew Gordon: That’s fascinating. Again, worth exploration another day, but I’m going to, because we are only halfway through – I’m going to kidding. Last question. Last question is, I can’t help every day, but watch US politics. It’s just Golden TV. It’s fantastic. It’s entertainment that that I didn’t know was possible. So, as a credit analyst, can you tell me your view of the recent quantitative easing program and is it possible for a country USD$24Tn in debt to ever recover?

Rick Rule: Let’s do the arithmetic first. Yes, we are not, we are not USD$24Tn in debt. We are USD$130Tn in debt. $24Tn on balance sheet liabilities, but that doesn’t include the net present value of entitlements. When your viewers look at me in the screen, they see what an on-balance sheet liability is: social security, Medicare, Medicaid. So, it’s important to understand the quantum first of all, we are not USD$24Tn in debt. We are USD$124Tn in debt. Is that serviceable? Well, you service it from the national income, which is taxes and fees, less expenses. The problem is that the national income is also in deficit of USD$2Tn a year. But maybe they teach better math in Great Britain than we teach here. But I don’t understand how you add a column of negative numbers and arrive at a positive sum. So, I would say no. The only thing that keeps us afloat, I think, and keeps US treasury securities, the world benchmark securities as US dollars is the reserve currencies. This is horrible to say, but as pathetic as we are, we are better than anybody else.

Matthew Gordon: You’re the least pathetic.

Rick Rule: The United States is very competitive, and we are endeavouring right now to win the race to the bottom. But the Euro and the Canadians and the Aussies and the Japanese are, in that sense, enjoying a great head start.

Doug Casey described the US dollar as the prettiest mare in the slaughterhouse, which might be a bit harsh but the circumstances that we are in today, unless you can’t do your arithmetic is very challenging.

Look, let’s unpack it 3 ways: the first is quantitative easing. If you and I did it, it would be called counterfeiting. It debases the currency. There can be no doubt about that. Making a whole bunch of new currency units out of thin air debases the currency. Now, you and I both probably have some problem with the people who are creating these false currency units too, but that’s not arithmetic, that’s personal.

The second is different, quantitative easing is one thing. The debt and the deficits are a different thing. The debt and the deficits challenge of course, the current account, the income statement while they obliterate the balance sheet. And so, at the same time that we are debasing the currency by USD$4Tn, 3 or USD$4Tn a year, we are adding to the aggregate debt, including the off-balance sheet, net present value of off balance sheet liabilities by another 3 or USD$4Tn a year.

And then the third leg of the stool, if that’s what you might call it, is artificially low interest rates. The interest rate is of course the reward that savers get for subsidising spenders. They at once preserve the purchasing power of the money that’s been lent, and they reward you for taking the risk. The problem with that is that we don’t have interest rates anymore. We have negative interest rates, which is to say you’re being penalised to save. I understand why this is; we exist in functioning or semi functioning democracies.

The circumstance that we have now really constitutes attacks on savers to benefit spenders, and in a democracy, spenders are much more numerous than savers. There’s a wonderful saying in the Western United States, ‘an election is where four coyotes, small dogleg predators and a lamb vote on the lunch menu’. And I think that the circumstance that confronts us with regards to quantitative easing debts and deficits and the interest rate is very much a function of that vote between four coyotes and the lamb. I must say, it gets tiring to be the lamb. So, one does the best one can.

Matthew Gordon: What’s going to happen when everyone works this out? What happens when everyone watches this video and goes, ‘Oh boy.’

Rick Rule: You know, when most people watch this video, they will say, ‘You know what? The big thinkers have handled it somehow. They got us through 2008. They got us through March’. I think most people want to consign responsibility for their financial future to other people, big thinkers. Most people believe that the function of politics is to benefit them and defend them from their neighbours simultaneously. There’s another, a couple of great political quotes that I think will put this in mind. You can understand the word politics by examining the root words: poly of course from the Latin for many, but tic from the English colloquial for small blood-sucking insects. If you think about many small blood-sucking insects, you understand something about politics.

And then of course, there was the famous Mencken quote that, ‘elections are best understood as advanced auctions to stolen property’. And if you take all that into account, I think you understand something about our current circumstance. How long can this go on? We are an innovative world. We create wealth individually faster so far, than we manage to steal our wasted collectively – may that continue.

As long as the big thinkers are able to maintain confidence in the system, I think that the system can continue to limp along. I myself have decided to maintain very large cash balances despite the fact that I understand that the purchasing power of my cash is declining on an ongoing basis. I believe that the declining purchasing power is an option premium that I have to pay because cash will give me the means and the liquidity to take advantage of volatility rather than to be taken advantage of. And I consider precious metals to be very good liquidity, volatile liquidity to be sure, but I would love to see somebody try and quantitatively ease Gold or Silver. It’s a very difficult thing to counterfeit over time. So, you know, my own defence mechanism is to try and divorce myself from the prevailing ethos as much as I can and to prepare myself to become in the Taleb phrase, ‘antifragile’.

Matthew Gordon: These are great topics that I’m really excited and I hope I get the opportunity to talk to you again. I’m conscious of time because I know you have another call.

Rick Rule:  I love the circumstances; in too many interviews it’s a, ‘Well Rick, what do you think of a consolidated orangutan? Will it be $0.45 cents by Christmas? You know, honestly, I have no idea. These are much more amusing interviews for me.

Matthew Gordon: Great. Well, I’m glad you said that. It’s been fascinating. I do love your phraseology I do love your grasp and execution of the English language, when doing these interviews with some groups, and I do feel that sometimes the importance of what you said isn’t necessarily always grasped, and you do beat a few drums very loudly, and long may you continue to because I think they are super bits of advice. Have a wonderful day. Whatever the rest of the day holds in store for you. And let’s talk soon.

Rick Rule: I look forward to it to, Cali can always schedule it and I look forward to doing this.

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

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A photo of well-known investor, Rick Rule

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.

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

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

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.

Equinox Gold (TSX: EQX) – The Sum of the Parts Sets it Apart.

A graph of rising gold bars with a red arrow curving up them.
Equinox Gold Corp.
  • TSX: EQX
  • Shares Outstanding: 113.5M
  • Share price C$9.73 (29.02.2020)
  • Market Cap: C$1.1B

We recently interviewed Christian Milau, CEO of large-cap gold producer, Equinox Gold (TSX: EQX). CLICK HERE to watch the full interview.

Equinox Gold Corp.

Equinox Gold is a story most gold investors should be familiar with: it is the model of how to build a gold producer in a short timeframe. This gold producer has had a remarkable rise over the past 18 months. Its share price hovered around C$5 at the start of 2019 and rose to heights of C$13.54 this year.

However, this week has seen even successful gold producers, like Equinox Gold, have their share prices brought to a shuddering halt, and even drop back. Equinox Gold’s share price has fallen this week alone from C$13.34 to C$9.73; this has been a truly extraordinary and noteworthy week of panic selling of a commodity that has been traditionally positioned and heralded as a ‘safe haven.’ It seems that truism isn’t true.

Let’s try to look to the world before the Coronavirus and hopefully the world after it. I know that may seem like a casual, almost dismissive statement, but it is not meant to be. There is clearly great global concern about the near-term impact on society and business, and possibly in the light of the current media spotlight, a normal future seems implausible, but history tells us that we humans persevere, adapt and survive, and we will again.

So let’s look to the future, if we may.

Equinox Gold was listed around 2 years ago, with the prodigious Ross Beaty as the main shareholder; if you are familiar with the school of ‘Bet on Beaty Bets’ investing, it will be no surprise to see Equinox Gold doing so well. Its founding goal was to become a multi-jurisdiction, large-cap, low-grade, bulk-tonage gold mining company.

Assets

Equinox Gold has a promising portfolio of assets:

  1. Mesquite Gold Mine, a Californian project producing 125,000-145,000oz gold per annum with an AISC of US$930-$980/oz and a grade of 0.46g/t gold (exclusive of reserves)
  2. Aurizona Gold Mine, a Brazilian gold mine producing 75,000-90,000oz per annum with inferred Resources of 1.1Moz @ 1.98g/t gold (with an exploration upside) and an AISC of US$950-$1,025
  3. Castle Mountain Gold Mine, an under-construction gold mine with a PFS and production potential of 200,000oz per annum and a 16-year life-of-mine (LOM)
  4. A copper-focussed spin-out operation in the form of Solaris Copper Inc.

Our Interview

Milau covered a variety of topics. Equinox Gold’s targets have been well and truly delivered. Mesquite and Aurizona are up and running, producing at a reasonable scale with a good AISC. Castle Mountain should be ready to rock by Q3/20.

These have not been without their hiccups; after all, this is mining. Equinox Gold has, however, kept things simple and it is reaping the rewards. The portfolio is focussed. The management team has created a relentless mining business for low-grade bulk processing. Equinox Gold’s message is simple: make strong acquisitions, then get that gold out of the ground!

Equinox Gold's Corp.'s share price for the last year.
Despite a late tail-off, what a year for Equinox Gold!

Equinox Gold has a significant 11% insider ownership: another reassuring fact for investors. The management team has succeeded in attracting a diversified shareholder base since the last time we spoke with Milau.

Milau also discussed Equinox Gold’s spending strategy and his view on the gold macro environment. What does the outlook for the gold market look like for 2020? He states this is only the beginning of this new gold cycle. He is conscious it won’t all be plain sailing in the gold sector, but this is in the early stage of the turn (US$17T of negative-yielding debt, solid stock markets and slowing global growth). Is the best really yet to come? Gold investors will be breathing heavily and hoping for more.

Equinox Gold has no intention of being taken out, and why would it? The company plans to become a long-term investment opportunity that can last through several cycles. Equinox Gold has had great momentum for those seeking fast returns, but it now also looks supremely appealing to those looking for steadier returns. Could it be a dividend payer in the next 2-3 years? Milau suggest so, but that is a long way away, and markets change. Let’s focus on today. Can that share price continue to grow at the same rate?  

As a gold producer, Equinox Gold has the rising gold price working in its favour, should the price continue on its recent trajectory. Can the management team start to accumulate cash, given they have been buying ounces in the ground? We appreciate Milau’s pragmatic take on gold margins: Equinox Gold is not rushing to produce and there is no spike in production. Equinox Gold is managing a steady, structured increase. However, the markets often don’t reward pragmatism and sensible management decisions. They often prefer pie in the sky stories of twenty-baggers and miracle proprietary technology. The fact the market has latched onto Equinox Gold with such excitement is a testament to just how solid this project seems to be. 1Moz per annum of gold is impressive, but this degree of investor enthusiasm is rare to say the least.

To continue on this trend of growth, Equinox Gold will proceed to develop its current assets and look at new acquisitions when the time is right. On the 28th January, Equinox Gold announced a merger with Leagold Mining Corporation that will combine the companies, ‘creating one of the world’s top gold producing companies operating entirely in the Americas.’ This should position Equinox Gold even more strongly.

one of the world’s top gold producing companies operating entirely in the Americas

Equinox Gold has recently received Serabi Gold’s C$14M payment for the Coringa project in Brazil, as it targets becoming a 1Moz per annum producer.

As far as remuneration, one of our favourite elements of the story, Milau stated that Equinox Gold has continued with its directors’ remuneration policy of paying them mainly shares. Milau claims he hasn’t cashed any in yet, but we can’t see any reason why he’d want to.

A photo of a Seal with a sign saying 'yes.' The words seal of approval are written underneath.
We Are Big Fans Of The Equinox Story

Equinox Gold is an anomaly. It is an abnormal story of inspired management, favourable prices, excellent assets and, as is always the case in mining, luck. We expect Equinox Gold to keep delivering on its promises for shareholders; the team has shown us nothing to make us believe otherwise. No, they don’t pay us and no we don’t own any shares. In an industry of over claiming and under delivering, we see Equinox Gold as company that does what it says.

Company Website: https://www.equinoxgold.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 graph of rising gold bars with a red arrow curving up them.