(upbeat music) - Hey everyone, welcome in to the weekend edition of the KE Rob Port, Corey Fleck here, hosting this whole weekend show from Beaver Creek, Colorado at the Precious Metal Summit Conference at Chad and I have been attending all week, meeting one-to-one. With companies, it's a great conference to catch up with companies, catch up with everybody else in the sector that we know, but especially on the company front, because you get to talk so much to these companies, and you also get a feeling and an understanding of what the overall mood is and what stocks are doing the best. It's something that we're really gonna try to convey on this weekend show. This weekend show, it's one conversation with our good friend Dave Irflay. Dave, we're sitting outside in Beaver Creek. We've just wrapped up our meetings. For Thursday, Thursday was a good day on the market. The mood was better at the conference, but when the conference started, the mood was maybe a bit somber for how well gold was doing, how well. Metals are doing broadly, but that's also because it seems like very much a bifurcated market, something that we'll also talk about. So Dave, first and foremost, give us your recap of this conference, what's your maybe key takeaway? - Key takeaway is I've been coming to this conference for like eight or nine years straight, and I've never seen a more subdued conference. It's like people were accepting of what the situation is. And like you said, we've kind of got a bifurcated sector where you've got the haves and the have-nots and a lot of people that I talked to didn't have full schedules. There was less people here, but everybody was upbeat. There's no depression, unless of course you're an early stage junior and you need money. But yeah, I mean, it's still positive. It's still upbeat, just less people. And it's just a bit subdued. - What I was here into is there's a lot of money being offered to the right company. So there is money out here. We had a static couple of weekends ago that actually showed just how much money has been raised in the mining sector, which I think is mind boggling to some people because of the lack of liquidity in the junior stocks. But let's talk about really the main theme here. When I went to, I think I had about 30 meetings and they're very clear good companies. And very clear companies that are going to continue to struggle. However, share prices are also telling us this. So how do you navigate those waters? - Yeah, it's difficult. We were talking off Mike, you could tell the winners. I mean, you could tell which companies that you should be backing. You could tell the ones that are going to be successful. - And the market's been telling us too. - And the market's been telling us also. These companies have already gone up three, four, five times. So you have to say to yourself, okay, I got to pick my battles and when I'm going to get into this. But I've been trained not to chase a stock in this sector until the sector itself breaks out. So since we still have a bifurcated market, only the good stocks have been getting love, it's difficult. So it's basically, if you want to get really good value, you have to pick among the stocks that haven't moved yet, but talk to the management teams and find out if they have the catalyst to move. If they've got their ducks in a row, they've raised the money. If they've got an economic steady coming out, that's that they feel is going to wow the market and it'll be positive and it'll be taken positive by the market and they'll move the stock up. So you basically have to do your due diligence and talk to these companies and find out which ones that are still not getting any love that love yet that are about to. - But why not just ride the ones that are winning? They've been winning now for three months, at least some longer than that. They're still an uptrend. So why not take the easy road and play those? - Well because a lot of the upside might not be there anymore. There's more upside in the more depressed companies that have yet to do well, but you feel will do well if they meet certain goals and put out certain economic studies that are going to be loved by the market. As far as drill plays are concerned, the drill results still aren't getting any love. I continue to shy away from those, but you're right. I mean, I hold several of those companies that have already moved. Fortunately enough, my subscribers and I have gotten into those early, but I also hold some of them that have yet to move and are down 20, 30, 40%. So then you have to say to yourself, okay, the market's starting to move. Do I sell these and get into something that's already moved? Or if you do that-- - But those have catalysts though. What if the ones that have moved still have catalysts? - Then yes, absolutely. You just wait for some weakness and you buy it, but it's still a stock picker's market. I think it's going to remain a stock picker's market until a few things happen in the sector. One, the stock market needs to roll over. We need to get that generalist capital in the sector. Two, I think the gold price needs to get above that. Inflation adjusted high, which is around $2,700 an ounce. And we've already seen margins increase considerably in these miners. Two consecutive quarters, blowout quarters for these miners. Generalist funds can't ignore this sector for too much longer, especially if the stock market starts to roll over and then they've got to start looking for the next thing that's going up. - Hey, some of the generalist funds are in the sector though. We talked last weekend about how overweight some of these funds are too. But there's still room obviously to grow on that. Okay, if you see value in or the opportunities in these ones that haven't moved, that's 80 plus percent of the sector. So let's talk about the more advanced ones that haven't moved, ones with resources. There's a lot of companies with resources out there. How do you differentiate between the ones that aren't going to grow those resources, but they're trying to move them forward. What stands out to you in that individual case of stock? - Well, the first thing you have to do is you have to identify the reason why they haven't moved yet. And then you talk to the companies and are they working on that reason? And do they have a clear strategy to solve that problem? And if they do, if they have a credible strategy to solve that problem and you feel that it's on the horizon, then it makes good sense to put a starter position into something like that. - What are some of these reasons? Give me examples of some reasons that you come across. - Well, the biggest reason I think is access to capital as strategic partner. You've got a lot of these. - Yeah, because their market caps are tiny compared to what the build caught. - Exactly, so they have to do something with their project to make it stand out, to attract that strategic partner. - Okay, how do they do that? What are the right answers? - Well, if they're drilling out a resource, maybe they find a high grade core to a resource that is lower grade. And it's a game changer for the project. Or maybe something happens in the jurisdiction where they're operating, something positive happens as far as permitting or as far as taxes or concern. Or like what just happened in Argentina, they're lowering the tax rate from 35 to 25% to attract more capital into Argentina. So something like that. - Okay, that's a tough one though, because that's out of the company's hands. What about these, okay, assets that have been around for a while, right? They're here. We know that they are here. Do you have any interest in them? You can call them optionality plays, but some of them do look like they have value. And then we hear from everybody, oh, well, let's use the current metals prices. Look at how much better our PEA or PFS gets. But that doesn't move the needle for an acquirer. So what does in those cases? - It doesn't, yeah, it doesn't. I mean, it's that access to capital is the huge one. I mean, they need the money to build the project. - Yeah, but that capital just isn't out there. That's the scary thing about all this, right? Is that capital isn't there to build all these assets? And do we then have enough assets in the development pipeline now, in your eyes that maybe some of these assets will just maintain on the sidelines, so they're not attracted? - I think that these majors and these midterms are gonna have to come into them eventually, 'cause they gotta replace ounces, and they see the upside in the ounces as far as the gold price is concerned, and as far as their economic studies are concerned, if they did an economic study, at a gold price base case of less than $2,000, and the gold price is rising above 25, 26, $2,700 an ounce, then that looks pretty good. But yeah, I mean, it's really difficult to raise money. It's really difficult to find that strategic partner that's gonna go ahead and give you the 9.9%, or even just the 5% to legitimize your project, right? So not all financings are created equal. If you get all your financing from private equity, if it's just hedge funds, they're gonna turn around and sell the stock in four months and strip the warrant. But if you've got a strategic partner that comes in, that's strong hands, and they do a deal for more money in the future, you know that then the street knows that you've got that access to capital. 'Cause let's face it, Corey, which we've talked about this before, we're still just trading amongst ourselves. There's no dumb money out there that's gonna bail us out if a company does something that looks good to the market, but the street knows better. - Yeah, so what about those companies that have a strategic in already? Five, 10% would have you, but they've been in for a couple of years. Maybe even five years. How do you discount that? - Yeah, I mean, especially if they've got more than one, the markets are already done that and they probably moved up the stock pretty nicely. And the one thing we haven't really mentioned is the dilution factor, right? So say you've got a company that's de-risk to the finance stage, the permit stage, what have you. They still haven't attracted that partner and their share price is still, you know, wallowing in the lows and they're running out of cash and they're gonna have to go to the private equity market since they can't find a strategic partner, they're gonna have to try to do something, you know, something just totally different, you know, just try to have to maybe sell a royalty or you've seen a lot of companies do that and that really hasn't worked. They get a little pop and then they just keep selling off after that, so. - Yeah, because that's short-term capital. - It's short-term, exactly. - Build the mine, right? - It's short-term capital and it also puts constraints on a project that makes the project less attractive to a major if you're lucky enough to come to a point where, you know, you've de-risked it to where maybe somebody will take it out and then they're gonna look at it and say wow, well, you sold this royalty. So yeah, it's very treacherous, it's very tough, but it's still very attractive because all you need is, let's say you accumulate a basket of 10 stocks, all you need is one or two of those stocks to have to be multi-baggers and let's say you end up having to sell the other ones at a small loss or maybe just a small gain, then you're doing really well. - Yeah, I still think this is the market though. If you just stick to the good ones, then a lot of them can be winners. Like it'll be the- - Absolute minority that are losers. So that's the easiest game. - You just have to change your strategy, right? Like my strategy when I started my newsletter in April of 2017 was, and it still is to a certain extent, you know, I don't touch anything unless it has at least three times upside. Well, some of the companies that I accumulated that I had that mindset, they've deluded themselves out to where I'm lucky if I get three times upside, right? And I consider a failed investment, anything that I have to sell that didn't make me three times my money. - Okay, I still think this is a good market though where you can just make two times. You're not a number of stocks and has some maybe safety protection because they are the better stocks. But look, these guys that need to get creative with financings, I think those are voids in general. That's too difficult to even time or know when it's gonna happen. What about exploration plays then? I know you've largely avoided those. What about more of the exploration plays that have assets, but they're exploring. So they're looking for something else. How do you discount them? - Yeah, anything that's early stage, I still, it's gotta be a PEA stage company for me to look at it. But, you know, it's always a bonus if you have a company that's de-risking an asset to the feasibility stage but they also have another project that they're drilling or that they're bringing in more drilling into the feasibility besides infill and making it bigger at the same time. So, there's these things that you look at and of course, you know, single asset, anything has gotten a lot of negativity because of what's happening to some of these single asset companies. Like, first we had Victoria Gold with the Heapleach Snafu and then it went into receivership last week. And then on the heels of that, you had Ascot having to shut down their mind just five months after pouring first gold and have to raise even more money and then saying in their press release hinting that they might not even be able to raise more money. So, it's very treacherous out there. So, even the companies that are starting to produce and you think they're gonna get a re-rate, something like this happens to Ascot, you know, the market's gonna be tentative. >> Yeah, fair enough. It seemed like Ascot was having trouble though. >> Oh, they kept having to raise money. I mean, how would you like to be one of the guys that participated in the third 34 million bot deal finance in July, right? Your shares are on hold. You got in at 43 cents, you know, and then just a few months later, they shut down the mind and you're sitting there holding the shares that you can't sell and you watch it fishing line down to 16 cents and you can't sell your stock until late November. Ascot might be in receivership by then. You might have lost, you might lose all your money within four months in a private place. I think there's gonna be some lawsuits over this one. >> Maybe, we'll see. I was never good for the sector. But there are success stories out there. So, okay, exploration, largely avoid right now, development style plays, you like those. Is there a certain market cap that you feel like the market if you're say sub 20 million, sub 30 million market cap, that the market's just ignoring? >> Yeah, you know, I hate to harp on this, especially to see that, let's say they got that 20, 30 million market cap, they've proved up four, five, six million ounces. >> The market's telling you something about that, right? >> And the market's telling you something about that, exactly, so what's the reason why it's not moved? What's the reason why a strategic partner has come in? It could be permitting, you know, this thing's not gonna be shovel ready for three, four years. You're a 20, 30 million market cap company, and you're not gonna be shovel ready for three or four more years. >> You know, and how do you raise, right? >> Exactly, how do you raise? >> No mine costs 20 million to build, well, very few, and they're not big enough. >> Right, no one's gonna give you a debt structure without any cash flow. >> Yeah, so there is a market, stay away from market caps, maybe sub 20, sub 30, maybe the special situation would draw you in, but the market's telling us this, right? >> Exactly. >> Exactly. >> The market is telling us the higher-- >> It's 20 or 30 million market cap, even though they have four or five million ounces for a reason. >> Yeah, okay, then producers. Producers are making money. >> Producers are making money. >> Cross the board are making money. Silver producers are starting to turn a profit, but that's still clearly not got the excitement. So, gold producers, what do you look for? >> Well, I mean, you look for high margins, right? If it's a gold producer, you make sure they have enough cash in the bank to cushion something bad that might happen that Victoria did not do. >> What's enough cash in the bank, though? 'Cause some of these guys are just starting to-- >> Yeah, I mean, 30, 40 million bucks and maybe a debt facility that's untapped, but that you have set up just in case you need it. But, you know, especially if it's single asset, you know? But is it a single asset producer with a mind that's really attractive and it's got blue sky potential and there could be multi-million ounces there, even though they've only proved up a couple million, they're mining them, but there is blue sky potential there that they've proved up a proof of concept where to try to attract a major, they said, "Hey, we need to be acquired." >> Well, also, that's been a better model for the sector, right? Don't just keep going back to the market. They'll actually start up a mind and generate some cash flow and then show the blue sky. >> Right. >> So, is there too small of a production profile for you or-- >> Oh, yeah, absolutely. I mean, if it's less than 100,000 ounces and you don't see the blue sky there, then yeah. I mean, absolutely, but do they have other assets? I mean, they just got this producing asset to have some cash flow because they've got some other assets that they're de-risking and now they've got the optionality of the gold price and production. Maybe they're producing some free cash flow to cover their expenses on what they're de-risking elsewhere. >> So, this is all very precious metals focused, right? Clearly, this is a precious metal summit. But there are different companies here that are exploring for other commodities, other metals. They don't seem to be getting the love though, do they? This is a precious metals market right now. >> Absolutely, yeah, I mean copper. It's a good time to look at copper plays because people hate them. >> What kind of copper plays, then? >> Well, not early stage. >> No, early stage isn't working anywhere. >> But if you're looking at late stage, you really have to look at permitting, you know? I mean, how far out are they going to get these permits? And is the land that they're on? Is it private land? Is it federal land? You know, if it's private land, you're probably going to get the permits a lot quicker. >> Okay, are there any copper companies? Any other metals that stand out to you in terms of companies that you are building positions in that? >> Yeah, there is. I mean, I could give you one that is my favorite copper plays in the Arizona Sonoran. My subscribers and I have been in that for a little over a year or so. And, you know, they've got a strategic partner. They just put out a fantastic economic study. I don't think they're going to have to raise money again because they got this really strong strategic partner. They did a JB with, they're on private land, they're fast tracking the project, and they've got something called a Newton technology that if it works, it's going to really upsize the project. >> Yep, we've had them on the show a number of times. It's a big asset in a good jurisdiction. But again, this all circles back to just keep it simple. Don't chase anything in terms of bottom fish, though. Like these stocks that are okay, that have a market cap, that might not be completely washed out, I guess stick to them. >> Yeah, well, if you're going to bottom fish, you really got to do your due diligence. You got to sharpen your pencil and really ask the tough questions of management team, look them in the eye when you get your answers because, yeah, because there is huge upside if you bottom fish in the right companies, but it's a tough sell. >> Well, looking management in the eye, what you hear in almost every meeting you're in is, we're meeting with a lot of corporates. And that is what this conference is to a lot of corporates, a lot of tire kicking, but it's what we hear every year here. So how do you discount that? Because look, a lot of projects, the vast majority of projects need funding, right? And everyone says they're talking to corporates. Everyone's got some package that they have in mind. But when does it actually resonate? Simply on the back of news? >> Is it on the back of news? Is it a gold price? Does a gold price need to get to a certain level? >> Yeah, that's the question, but that's what you have to do. >> Do they have to de-risk to a certain point? Do they have to get a permit or whatever? I mean, it's very difficult. But I like challenges, I like challenges. And that's why I love this sector, especially in a bear market. Because it's a really, really big challenge. But if you get it right, it feels really good because it's a needle in a haystack as far as mining is concerned, most of them fail. >> Yeah, they do. But you can make money even in the ones that fail. Especially if we are truly in this bull market run where everything's going to go higher. But again, portfolio-wise, do you have a bigger portfolio now? Or are you much more narrow? I know you, with your subscribers, share your top 10 list, which is narrow in itself, but are you expanding your portfolio? >> Not at the moment. I expanded a little earlier this year. But no, not at the moment. I'm unhappy with what I have. >> Yeah, I've seen you trim some positions. >> Yeah. >> You've been there too. >> Right, build up a little cash. >> Yeah. >> To add to some other ones that I really like that I'm still accumulating. >> Mm-hmm. Man, this is just the market though, isn't it? It's selective, but there are good companies and the metals price is doing its job. So- >> And if you've been around long enough, you know the teams that you can trust that to back, right? >> But again, they don't- >> And you know the ones that you're waiting for them too. >> They're re-rated though. >> Right. >> Most of them are. And the less they've started a new company recently, right? And they've got a strong board and they've got a tight share structure and they just raised a bunch of money and they got that access to capital and- >> Yeah. >> Yeah. >> Yeah, it's actually a pretty simple playbook. >> It is. >> Like just focus on the ones that are- >> It could be really difficult if you get overwhelmed by the whole thing, but if you sit down and concentrate on the right things you need to concentrate on. >> Yeah. You meet with any Australian listed companies here? >> No, I don't invest in Australian companies because most of my subscribers are US-based and they can't invest in Australian companies. So I pretty much stay North American. >> Okay. I had a couple meetings with some, and man, they carry some high valuations for ounces in the ground. I'm still impressed as much as that market. >> It's a lot of Australians here, do you see that? >> Yeah. >> That's the way there is that? >> Yeah. >> Well, and as much as that Australian market has come off, it's still more richly valued than the US market. >> Absolutely. >> It's just- >> And they've got these share structures that are just- >> Yeah. >> Completely blown out. >> Yeah. >> Their share price is kind of hanging in there, at sense, but it equates over to decent market caps, I find. >> Yeah, absolutely, yeah. >> But, hey, these guys have built mine, so they've built up that reputation, they have more interested investors. >> Mm-hmm. >> Anything else that caught your eye at this conference? Anything that you're coming away with that maybe sparked a little something in you? >> In an atmosphere like this, I think it's easier to pick the winners, it's easier to know what to focus on. You know, in a bull market, it's really easy to pick the wrong horse. And in a bear market, it's really easy to pick the right horse. So, I'm picking the right horses, I think. I'm going to pick a few wrong ones, but it's going to happen. I know we keep saying that, it's going to turn around at some point, but. >> It's- >> When it has turned around. >> It has to. >> The majors are doing. >> The majors, yeah. >> The mid-seers are doing just fine. It's trickling down. And remember, this really just started in March, at least the gold break out. >> And we're seeing that, once the gold price got above 2,500, that's when the M&A started heating up. >> Yeah, but don't depend on M&A. It takes too long. >> No, but I like big M&A, because it draws more generalists into the sector, and what we need is a bidding war. >> Yeah, yeah, we need some excitement, some growth for growth's sake. I know it's not good in the end, but it brings in- >> Right. >> People, it brings in other investors. >> We might have an opportunity for a bidding war, you know, Anglo gold just offered to take out sentiment for at one point, 1.9 billion pounds. And if you recall, Endeavor attempted to take out sentiment in December of 2019 for 1.5, 1.47 billion pounds. But the gold price back then was about $1,500. So the gold price now is $1,000 more, is it 65% more, $1,000 more. So the margins at that huge mine in Egypt that sentiment has, Zakari, right? So those margins are huge right now. So I wouldn't be surprised if Endeavor might make another swipe at it and try to maybe make a better bid. >> Yeah, that'd be nice. >> Well, and that brings up this other concept too, and it's what we hear in every meeting, somebody that has a PEA or some economics, look at the sensitivity. You brought it up earlier and look, everything looks better, 2,500 gold, no matter where you did your economics before. But that's everybody. So do you run the numbers at say 2,200 and then compare these PEA's? Or do you kind of ignore these guys and say, look, this is sector wide? >> I mean, you have to compare the PEA's, 'cause it's not just about the gold price. There's so many variables. What's the payback period? What's the cap X? What's the sustaining cap X? What's the mine life? What's the discount? They're still using 5% discount rate. I mean, come on, that's a fantasy. That's never going to happen again. >> I know, but for comparison purposes, right? So that's why when you do hear these guys say, oh, that's the current metals price. All right, our goes to this. Do you then look at your other holdings and say, okay, what is there, our go? >> Yeah. >> At this price. >> Sure. >> Yeah, absolutely, yeah. I mean, not everything's, right, we haven't had a bull market in the entire sector yet. We've just had a bull market in specific stocks. >> Yeah. >> Yeah, but they're growing. There's more and more of them that are joining in. >> There is. >> It's encouraging, right? >> Yes. >> As interesting as this conference was, there are less people here this year. >> Oh yeah. >> Compared to last year, and it's a better market. >> Right. >> There are clearly some companies that are very happy and very busy and, again, what I'm hearing is there is money available. But I'm also hearing from some companies that they need to raise and they're worried. >> Yeah. >> That is this. >> Because maybe they know their project is not solid. Maybe they know they're a lifestyle company. >> Yeah. >> Well, in the market, again, is telling us this. >> I think. >> The market is telling you you're a lifestyle company. >> Look at the share price. The market is telling you what is higher quality. >> And in a way, Corey, this is all a good thing because remember in past pendulum swings from bear market to bull market, once the finance window opened, everything got financed. >> Yeah. >> Right? When money was cheap, everything got financed. Money's not cheap anymore. Banks are being selective. Equity investors are being more selective. So that the shit isn't getting financed anymore, which is a good thing. >> Yeah. >> A lot of these companies need to go away. >> Yeah. >> Many of them need to merge. And many more of them need to go away. We always say, well, this time it's going to happen. These companies are going to go away. >> No. >> And they end up getting the lights on Ray somehow. >> Yeah, they stick around. >> Mm-hm. And they probably will here again. >> Yeah. >> But it is interesting. >> It is. >> As much money has been raised. >> And there's been a lot raised, it's much more selective. >> Right. >> Which is fine. Look, this is a bull market. I don't usually say that kind of stuff, but this is a bull market. But it's just selective. And quite frankly, all the other times when financing windows opened up, it was a six to eight month run. >> Right. >> And then it just went back over. >> Yeah, well look at the past eight years, right? We've had two six month bull markets followed by two four year bear markets. >> Yeah. Yeah, maybe that's what we're waiting for, that same degree of bull market behavior. And then it took the market up. >> Bull market mentality. But if you take a look at the volume on the GDX and GDXJ, it's half of what it was after the COVID spike. >> Yeah. >> Keeps declining. >> Yeah, we've talked about that a number of times. >> Yeah. >> There you go. >> Dave, man, great seeing you at the conference. Always enjoyable being here. We'll be back at it next week, full slate of interviews, and bringing on some new companies that we met with. Everyone, thanks for tuning in to this weekend show. Send me any emails that you have fleck@kereport.com. I love hearing from each and every one of you. Dave, let's take it off from here. (upbeat music) >> The Corland Economics Report is produced for AP Corland and Associates. Opinions expressed on this program are intended solely for the entertainment of our listeners. Do not constitute investment advice and are not necessarily those of this network, radio station, or our sponsors. Find out more about this program and today's guests by visiting www.kereport.com. For Al Corland, this is Colleen Robbins. Join us again next week for the Corland Economics Report. (upbeat music)
