Last week was a busy week here in Vancouver. On May 5-6th we had theMetals Investor Forum, which again was a highly informativeevent.
I know I’m biased because I help put the event together, but I reallyappreciate the MIF format. For those unaware, the conference brings together agroup of subscriber-supported newsletter writers, the key commonality beingthat none of us take money from companies for coverage. The writers then invitecompanies they follow (i.e. own) to present.
The result is a high caliber group. I was very familiar with more than halfof the companies there but I made sure to learn about the others, because ifthey earned a recommendation from one of my peer writers then they offersomething worth investigating. As a result I left the event very interested inthree new ideas.
Of course, it isn’t just the companies that make the conferencegreat. The attendees are a highly informed and engaged group, which makes forvery good questions and conversations.
And each of the newsletter writers spends 20 minutes at the podiumexplaining what opportunities and drivers they currently see in the market.
Those presentations are all available online. These videos represent a vaultof insight, so if you have a few 20-minute blocks to spare I encourage you towatch a few. Click on a presenter’s name to link to his video.
For those who prefer reading to writing, I also asked each letter writer tosummarize his presentation. This group represents a pile of knowledge,experience, and insight in this sector, so I wanted to take advantage of thegathering for your benefit.
So below: the key points from each, in his own words.
I focused my talk on major miners. Here is the summary page of mypresentation, titled ‘Too big to fail?’
href="https://www.youtube.com/watch?v=h4ui9eq-BN0">Eric Coffin – Hard Rock Analyst
Eric Coffin – Hard Rock Analyst
"There is a historically massive divergence between opinion about forward economic growth and actual economic activity. How this divergence resolves itself in coming months will determine the path of interest rates, economic growth rates and, in turn, precious and base metal prices.
“My expectation is that opinion or, if you will, confidence will dissipate somewhat as hard economic readings continue to underperform. That should lead to reduced nominal and real yields which should help precious metals and commodities in general. Lower actual growth in the US may lead to some selling in base metals but growth in China and Europe is far more important when it comes to base metal demands. Zinc should do well because of supply issues and copper should maintain current price levels.
“I remain focused on discovery stories where short term metal price moves don't really matter anyway, as well as successful developers because good lowest quartile cost metal deposits will always be in demand."
Jay Taylor – J Taylor’s Gold, Energy, and Tech Stocks
“Mainstream propaganda would have us believe interest rates are rising because the economy is gaining strength and thus generating demand for capital for productive use. But in fact, traditional sources of U.S. Treasury funding such as foreigners, social security and QE (previously called central bank monitization) have been declining dramatically such that a mysterious "Other" category had to be used to keep interest rates from rising rapidly post QE.
“The Treasury does not explain what "other" is but it accounts for over 51% of so called "domestic" sources, which have grown dramatically in light of a net outflow of funds to foreigners in the last two years and in light of a major decline in intergovernmental funding (mostly social security).
“So my view is that rates are rising not because the economy is strong but because there is a lack of saving. I speculate that the "other" category is likely back door central bank pumping of some kind or another to keep rates from rising even further as any significant rise in rates now would blow up the entire system.
“Note: IG stands for Intergovermental funding which is comprised almost entirely of social security funding, which is in a dramatic decline now due to a) an economy that sucks with lower wages and fewer workers and b) a surging number of older guys like me and gals who are enjoying social security and medicare insurance benefits.”
John Kaiser – Kaiser Research Online
“We are in the second year of a discovery and exploration bull market similar to the one that ran from 1992-1997. Its sentiment trajectory will be ready to go exponential in Q4 of 2017.
“The macro outlook does not offer any reason to believe in substantially higher metal prices over the next few years, though individual metals may experience higher prices due to supply disruptions or new technology driven demand. The market has tired of the tyranny of short term metal price trends, in particular gold, and is asking resource juniors to deliver gains through something they can control, such as exploration that results in a discovery worth developing into a mine at today's metal prices. The shift is evident in the surge of financing activity directed at juniors focused on discovery exploration, not feasibility demonstration, as well as a new trend whereby producers are outsourcing exploration to juniors with district scale or high potential projects by making strategic equity investments up to 19.9% without any project interest rights.
“Gold at $1,200 is the same as $400 gold in 1980, inflation adjusted to the present, and that’s worse than a big wash because since 1980 miners have doubled the above ground gold stock. Now that the ‘evil socialist Obama’ is gone and the Freedom Caucus controls all branches of the US government we no longer have to worry about fiat currency debasement, hyper-inflation or unlucky people sharing in the wealth of the nation. Time to make gold discoveries that work at $1,200, but do keep in mind that no Republican presidency has ever failed to increase the national debt by a greater amount than any predecessor.”
(For those who don’t know John, there may be some tongue-in-cheek in that last paragraph.)
Jordan Roy-Bryne – The Daily Gold
“My talk was titled The Bearish Bull, which references the dichotomy between the mining industry, which saw its bear market end 2015-2016, and metals prices, which have rolled over again and could threaten 2016 lows. I argued that the technicals are bearish and the fundamentals for precious metals will worsen over the balance of the year due to stable to rising rates (temporarily) and inflation which peaked a few months ago.
“Until the US stock market and economy run into problems, which will turn macro fundamentals in favor of precious metals and later the other metals, the bull market is on hold. Despite my bearish outlook I expressed extreme optimism for 2018 and believe we will see a good buy opportunity in juniors in the middle of the summer.”
Sean Brodrick – Energy & Resources Digest
“The title of my talk was Gold Cycles Higher. And it was about the regular gold bullish cycle being compounded by other forces in discoveries, the rising middle class in Asia, US debt and more. I also talked about how politics is affecting economics: "Feelings Trump Facts. Trust Trumps Truth." The global economy is sending up some warning flags. It could make for an interesting year. And I closed with some valuation ideas. A place for investors to start their own discoveries.
“Let me add a chart I wish I'd had at the Forum. I think I told attendees I was more bullish on gold than when I'd arrived simply because so many smart people there were not expecting a rally until the Fall ... or January. That made me take the opposite side. That we'd have a rally sooner rather than later. Simply because few expected that.
“But I made this chart today. See attached. It's an awfully short-term chart, and we'll see how things work out. In the end, we are fleas riding a dog around, thinking we're the bosses, right?”
Brien Lundin – The Gold Newsletter
“The big-picture, long-term view for gold remains very positive, with the likelihood of negative real rates for the next few years. Also, the towering debts that have built up in developed economies will keep rates at historically low levels for a generation.
“Near-term, gold remains in a bull market, with higher lows and higher highs, despite the recent technical breaks through its 50-day through 200-day moving averages. We should see price weakness for the next few weeks, but the June Fed meeting has set gold up for a rebound: A hike as expected will send gold higher as traders cover shorts, while a decision to hold rates steady will be a dovish signal that would propel gold even higher.
“I won’t tempt fate by saying it’s a can’t-lose proposition, so let’s just say it’s extremely favorable.”
As for me:
“If we get growth we’ll get inflation and rate hikes; if not, we won’t get either. It means pretty much no matter what happens we are looking at low or negative real interest rates for years, which bodes well for gold big picture.
“Majors are making big investments and the market is reacting to discoveries, which shows investors are engaged. Within that one does have to pay attention to seasonality and patterns.
“On other fronts: zinc has been consolidating its big gains and will resume a pattern of strength soon, silver has some serious catching up to do, and uranium players are doing what they can to bring that bull market forward (but don’t hold your breath just yet).”
If you’d like to watch my talk and slides, click the image below.
Also, those links all take you to the YouTube channel where all of the MIF presentations will be posted, including all the company presentations. A great resource.
The other comment I wanted to convey from MIF concerns management. The execs on stage at this conference were outstanding. In my session alone we
•Don Moore: currently president of Playfair Mining, Don has been a
broker and exec in mining for 40 years. He was involved in discovering the
rich deposits of Ontario’s Hemlo district, he supported the
discoveries in Red Lake through his work on the government side, and he has
charted the sector’s fundamentals throughout his career.
•Kerry Knoll: it’s hard to believe this list, but Kerry
Knoll founded Blue Pearl Mining (which is now Thompson Creek Metals),
Glencairn Gold (now B2 Gold), and Wheaton River Minerals (now Goldcorp). This
is an exec who knows how to identify and build successful mines. He is now
chairman of Darnley Bay.
•Steven Dean: Steven was one of the team who founded Normandy
Mining, which grew to become Australia’s largest gold producer before
its acquisition by Newmont Mining in 2002. After that he co-founded PacMin
Mining; it was acquired by Teck Resource and Dean moved up those ranks to
become President of Teck, managing 13 mines in four countries. Dean is now
president of Atlantic Gold.
•Jeff Wilson: Jeff is president of Precipitate Gold, a position he
took on just before the bear market set in. Despite all the challenges of
those years, Precipitate came out of the bear market with a tight share
structure, an engaged strategic partner, an exciting and progressed asset,
and a stellar board of directors. Wilson is still young but he is proving
that he belongs among this group.
That was just my session. Among the other 27 companies we had a wealth of
geologic and corporate success.
That really matters. The best projects will whither in the wrong hands. It
is extremely difficult to achieve success in exploration, development, and
mining. It starts with geology and all the unknowns therein. It continues
with the incessant need to raise capital within cyclical markets. It is
endlessly complicated by permitting and social requirements and logistics and
weather and access and marketing and mistakes and metal prices and on and
I really can’t stress enough how difficult it is to line everything
up. That is why good, experienced management is so essential.
Every company will say they have a strong team. But look into it.
Spend some time with the team. Get a feel for their work ethic, their
approach to risk, their ability to come up with alternatives, their network
and access to capital, their approach to social relations, their
understanding of time and money, their technical capacities, their financial
restraint, their approach to managing a share price and making a market.
The demands are wide and deep. Not many can do it successfully. I’m
not saying every team at MIF has all these demands handled, but the depth of
talent was readily apparent. And that really matters.