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Report on PDAC 2017

March 13, 2017

Last week was the annual PDAC conference in Toronto that brings investors and mining companies from all over the world together for a big meet and greet. I had the pleasure of being one of the guest speakers and wanted to present my talk to readers of my reports.

 

Whenever I do these, I tend to put a few points together, some picks, and do the talk off the cuff. It isn’t that I’m unprepared, I’ve been in the industry for over a couple decades and between television appearances and my many online shows I’ve spoken extensively about the mining business. I live and breathe this stuff.

 

Right out of the gate, I had to change things up when the speaker before me, Joe Mazumdar from Exploration Insights, made a comment I had to respond to. The last question he got from the audience was does he look at lithium stocks. He said they don’t do weed or lithium stocks, which was a swipe at lithium stocks as being hyped up on hot air like weed stocks.

 

As I run a lithium company, Alset Energy (ION.V), where I’m the CEO, he teed it up for me. I had to take the opportunity to respond for a couple reasons, one I don’t think all stocks in any commodity can be lumped into the hyped-up category. The other was his comment seemed odd to me as I know that he is an economic geologist.

 

My response was that I run a lithium company because our projects are exceptional and as a reporter and professional in the mining industry, I will look at anything that makes sense. I really don’t care what the commodity is, I want to determine how much is in the ground, what it will cost to build a mine and if they can make money producing the stuff in the ground. Which is what I thought an economic geologist does.

 

Despite Joe Mazumdar and Brent Cook at Exploration Insights ignoring lithium or any other commodity, I would recommend investors in the sector look at it like an economic geologist should. Try to get an idea of what commodity a company has in the ground, what is the grade and tonnage potential, which will give you an idea of the value of their material and how much they have. Then you want to consider the infrastructure, ease of access, cost of building a mine and how much it costs to pull the commodity out of the ground. Those are the things that matter, regardless of the commodity.

 

This shot me out of a cannon for my talk and after that opening, I went onto my points to discuss. I started with a chat about the last six months for me. Which included becoming President/CEO of two public companies, Alset Energy (ION.V) in lithium and Advance Gold (AAX.V) in precious metals. Additionally, I moved to Zacateca, Mexico, leaving my friends, family and son back in Vancouver. Plus, around 2 weeks before the PDAC, I published my first book, Smoke Signals Investing.

 

It seems the more things I accomplish in this business, it has a way of bringing on some detractors and because I’m prolific at getting stuff done they tend to come out of the woodwork whenever I put new stuff out. One of the hacks on me is I don’t have any experience at being a CEO. Which I respond by saying I have been a consultant in the mining sector since 1993, and have been giving advice to leaders of public companies for nearly a quarter of a century. The advice includes strategic planning, news release writing and other corporate communication to market their companies.

 

Another question I get from time to time, is about my commitment to the companies by how much money I’ve put in, or as folks like to say, skin in the game. I said that where I put my money is one thing, but leaving my friends, family and son to move a long way from my home says much more. Uprooting my life means a lot to me, but I felt as my son is 22 it would send a good message to him that when you see an opportunity to chase your dreams, if you can, go for it. I’m leading by example but I still miss seeing him all the time.

 

The key reasons that I made the move had to do with what I saw when I made my first visit to Zacatecas, Mexico in January to do property visits to Alset’s lithium projects and some precious and base metal projects. During my entire career, the projects I’ve worked on and followed are in remote areas where everything needs to be flown to and operated using diesel for power. All the various projects I visited around Zacatecas had road access with power lines beside the roads. This was an eye opener, as I mentioned earlier costs to build mines and operate them are crucial in every project and I was blown away by the infrastructure beside all the projects.

 

Another important factor when looking at a mining exploration and development project is how friendly the locals are to mining. Zacatecas was built for mining of silver, in fact 25% of the silver ever produced worldwide came from the state of Zacatecas and it is home to several of the largest silver mines. It started as a Spanish mining camp in the mid-16th century and has seen mining ever since. Everywhere you go, you see signs of the mining heritage, many streets have minas, mines in English, in their names.

 

They also have museums for mining, you can find mining antiques in the local shops and one of the key tourist attractions is a tour underground to a mine in the city of Zacatecas. Mining and farming are key industries, if there was ever a mining friendly jurisdiction, Zacatecas is it.

One of the biggest things that blew me away was even though there is this long history of mining in the state of Zacatecas, it is still an under explored mineral rich area. I feel that based on this, I will likely be involved in this area for the rest of my career.

 

Another compelling reason for my move was because I get to work closely with a local entrepreneur with an MBA who has contacts with everyone needed to move projects through permitting with politicians and professionals. In addition, I get to work daily with a living legend of a geologist in Senor Jose Parga. I like to say that Zacatecas is elephant country and Senor Parga is the best elephant hunter when it comes to Mexico and Zacatecas.

 

My big move came down to a few things, the people I get to work with, the quality of the projects, infrastructure all around the projects, with projects in a mining friendly jurisdiction that is full of mineral wealth that is under explored. These add up to a place I will likely spend the rest of my career working in.

 

Next up during my talk, I talked about my book, Smoke Signals Investing, why I wrote it and how I think it will help readers understand what I do. The book is about how I learned from my mentors in geology, geochemistry and geophysics as well as other mentors that affect what I do. My mentors mean a lot to me, they taught me how to understand rocks and stocks and I feel that the lessons I’m passing on can help all investors become their own best stock pickers.

 

The final point that I made before moving into my stock picks was concerning the new American president. My main political statement is that regardless of which side of the political divide you are on, it is clear to see that with a new Twit in Chief that can swing markets when hitting send on his Twitter account, investors should keep this in mind.

 

In this new playing field with Trump at the helm, investors should position themselves to take advantage and I see a couple key places where investors should look. With a loose cannon in charge, that can drive markets investors with a tweet, at all times investors should be prepared for turmoil. The last place I would put my money right now is in the USD or US stocks. They are both priced for perfection and at any time, I can see them both getting hammered, especially if Trump spouts off on Twitter or anywhere else he gets on his soapbox.

 

Gold, silver and other commodities with bullish supply and demand stories are much safer. As these commodities are priced and traded in USD, which is extremely overvalued, any corrections in the USD will drive key commodity prices higher.

 

Another safe haven to look at are commodities based on a security of supply scenario. Take for example my new home country of Mexico. It is a major farming country, but yet it imports all of its potash and other farming related chemicals, often from the US. Now as ludicrous and uneconomic Trump’s wall between US and Mexico is, the security of supply for the farming chemicals that Mexico needs could be affected if he were to go through with it.

 

Even though I don’t see Trump ever building that wall because America can’t afford it and his other infrastructure promises while continuing to fund their war machine. The wall will be scrapped as Americans seem to love the war machine and nation building far beyond their borders more than building a wall. But despite these realities, Trump can send out a tweet on Twitter and send commodity prices into overdrive, investors prepared for this will get spikes in their investments.

 

The biggest thing I see happening with a Trump presidency is that the US debt, national and household is heading much higher. National debt sits at around $20 trillion and household debt is around $25 trillion, that gives us around 45 trillion reasons that interest rates can’t go up much and when the market figures that out, the USD will be under a lot of pressure.

Gold, silver and other commodities will do very well in that kind of scenario, and it has a lot to do with where I’m putting my money and time these days, and why I picked the group of stocks for my PDAC presentation.

 

Stock Picks

 

Tudor Gold (TUD.V) is a sponsor of my website, they are focused on the Golden Triangle of British Columbia and founded by Walter Storm who also founded Osisko. They have a group of projects, ranging from bulk tonnage to high-grade gold exploration targets. Last year, in addition to having success with the drill rig, they also built a camp to use as a central camp for their various projects. Another thing that I really like about Tudor Gold is with a wealthy founder like Walter Storm they shouldn’t have any problems raising money for their exploration work. I’m expecting an early start to the season for them with their camp already built and success with the drilling this season. Things are shaping up for the upcoming drilling season to be a breakthrough for Tudor Gold.

 

Premier Gold (PG.T) is a sponsor of my website, with an outstanding portfolio of projects from exploration through to production with partners including Centerra, Goldcorp and Barrick. They have been an exceptional buyer of projects and have a portfolio of projects that puts them in a great position to grow into a mid-tier producer. Being in this category is very important because in the last bull market, the majors pretty much bought out the whole mid-tier segment and this is an important segment for the long-term health of the gold mining sector. There are very few companies of this size which gives a company like Premier Gold distinct advantages as they can look at many more projects than the majors. Majors are so big these days that a lot of projects aren’t big enough to move the needle for them but could be company makers for mid-tiers. They have a strong management team with big aspirations and I like their chances to reach their goals. Premier Gold is what I consider a core holding for investors that want exposure to gold stocks.

 

Wolfden Resources (WLF.V) is a sponsor of my website and I’m also a shareholder, they have an exciting discovery of high-grade nickel-copper-cobalt in an area well-known for base metal mines. Snow Lake, Manitoba is an area with a lot of mines and close to it is Rice Lake where Wolfden has made their discovery. The region also benefits from infrastructure and a well-trained workforce experienced in mining close by. Even though they had a lot of success with the drilling, I still don’t think that the market clearly understands what they have at their Rice Island project. Part of the reason for that is they got off to a good start and then had to put the brakes on drilling in 2016 because the drilling was leading to ground that didn’t belong to them. Late in 2016 they did a deal with the prospector that had the ground beside them so they can go at it hard now. They have been drilling this winter and have more drilling and holes to report so stay tuned, they are getting a handle on the geology and geophysics and vectoring in on their drilling targets.

 

Serengeti Resources (SIR.V) may not be in Africa, but they are in elephant country with their Kwanika project near Fort St. James, British Columbia. In addition to a sizable resource of copper and gold at their main zone, it also benefits from road access and is close to important infrastructure. What caught my attention is a combination of them having the potential to increase the size of their resource but most importantly, they have a large geophysical target below the main zone that it looks like they just clipped the top of it in last year’s drilling. My friend John Kaiser put this target into perspective when we spoke about the company in past shows, it really is an elephant type target that could return an impressive discovery. I spoke with management at the PDAC and their plan is to drill right down the centre of that target this year and I’m looking forward to it because if they hit on this big target it will catch a lot of investor attention.

 

Sirios Resources (SOI.V) is a sponsor of my website, they have an exciting gold exploration project right beside Goldrop’s Eleonore gold mine in Quebec. The mine they are beside is one of the best gold discoveries in the past couple decades in Quebec which is one of the top jurisdictions in the world for mining. Sirios has hit a lot of gold with their drilling at the Cheechoo project and that is a good thing, especially when spread out over a sizable area. It also takes more work to understand. At the PDAC, I had a chance to chat with Dominque Doucet, Sirios’ CEO, and he explained to me how they are getting a handle on the multiple gold targets on the project and their plans for drilling. They can drill pretty much year-round and I expect to see a good flow of drilling news from one of the best gold exploration projects I can find in Canada.

 

Yamana Gold (YRI.T) is a much larger company than I generally follow, but I follow them because they are a barometer of sentiment when it comes to gold stocks. They are kind of a Rodney Dangerfield company as they don’t get a lot of respect compared to their peers in a bearish market for gold stocks. Whenever Yamana is trading near multiple year lows, it is a leading indicator that gold stocks are oversold and it is time to buy. I’ve picked them a few times in past reports, always when they have been beaten down worse than their peers. I’m a big fan of them now, because when they bounce back from hitting important lows they trade strongly to the upside. Recently, their stock made an important low on the charts and it looks like the worst is over and it is time to be buying gold stocks including Yamana.

 

Benton Resources (BEX.V) is a company founded and run by the Stares family that have been in the prospecting business for a long time. They also founded Alset Energy, so we shared a booth with them at the PDAC. They had some samples there from their Bedivere gold project in Ontario that stopped a lot of people in their tracks as they were walking by and brought a lot of people to the booth. You don’t often find such impressive surface samples, they reminded me of the rocks riddled with gold that Goldcorp used to bring to the PDAC from their Red Lake mine. I was also pleased to hear the story about the young prospectors that found it. A lot of gold mines have been found by prospectors, so it was great to see some young blood coming into the business. They have also stripped the outcrop of the vein over a significant area. In addition to this project they are also part of an emerging gold camp, Cape Ray in Newfoundland. I like the looks of both projects and I will be watching closely at the drilling from Bevidere as it looks like it has the potential to be a homerun.

 

Sabina Gold &Silver (SBB.T) has been a past pick, in fact they were one of the top picks from my Outlook 2016 report when I predicted that gold had ended its multiple year bear market and a new bull market had started. I left this company for last because I thought it would surprise a lot of people as I’ve been hard on them since they got into permitting issues. They were a very good performer while one of my top gold picks, then in the summer of 2016, I dropped them and some of the other top picks in the Outlook 2016 report. Their permitting issues from last year have continued until now and they remain to be resolved. In their application to move the project forward, they were rejected by the Nunavut Impact Review Board (NIRB) due to concerns about dwindling Caribou herds. I’m still not convinced how long it will take to resolve the permitting problem and I would do things differently if I was running the company. But what I can’t ignore is how good their gold project is, it is world-class and I don’t use that term loosely. It is very impressive, it looks like once they get their permits and I think they will it will be a future mine. I’m less certain of how long it will take but this will be a mine sometime in the future and for those that can handle the uncertainty of a lingering permitting problem they will likely be rewarded handsomely. With a world-class gold project and an area in dire need of jobs, I hope it does go through and not too long into the future. The list of takeover targets in the gold space is small as far as which ones I would takeover if I ran a major gold mining company, I would put Sabina at the top of my list.

 

In Closing

 

I closed my PDAC presentation off by inviting those that attended to buy my book, I’m very proud of it, especially because I got to share stories about my mentors that will help all investors understand rocks and stocks better.

 

I will close this report off the same way and invite readers to buy my book here.

All the best,

 

Allan Barry Laboucan

Founder/Writer/Host

Allan Barry Reports

 

President/CEO

Alset Energy (ION.V)

 

President/CEO

Advance Gold (AAX.V)

 

P.S. my reports are for information purposes only, before making any investment decisions it is important to do your homework and speak with your financial advisers.

 

 

 

 

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