Junior Mining Executive Terry Lynch Introduces the Save Canadian Mining Initiative

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the Executive Director of Save Canadian Mining, Mr. Terry Lynch. Terry, how are you?

Terry Lynch: I'm doing great, Gerardo. Great to talk with you again. It's been a while, but looking forward to telling you our story.

Gerardo Del Real: It's been a bit. Let's be perfectly honest, this bear market that we're coming out of in the resource space has been, frankly, one of the most brutal that people that have been in the business for the past 50, 60, even 70 years have ever seen. I think we're coming in out of it.

I think 2020 is going to be a much better market. You reached out to Nick Hodge, my friend and business partner on Resource Stock Digest and other ventures, and the founder of Outsider Club about this Save Canadian Mining initiative.

I actually think that the timing was perfect. I commend what you're doing. I want to explain to everybody what it is first and then how we can all help, because I think it's important and I think it plays into the better market that we're getting into here for 2020 and 2021.

Terry Lynch: Great, Gerardo. Let me give it to you straight. It's pretty simple. In 2012, for about 142 years there was a rule in Canadian securities exchanges that you could only short a stock if the stock was going up. It was called the “no short unless on an uptick” rule. And it was a fairly common rule in, I think, most global exchanges at the time. And certainly, it was one of the key factors that led Canada become a leader in, I would say, mining finance.

It actually was sort of taken away inadvertently. It wasn't like it was a targeted rule that they took away, they basically did it to allow algorithmic trading and in order to get algorithmic trading on the TSX and TSX-V, the Ontario Securities Commission said, "Well, you guys got to have competition because we don't want you to sort of be setting prices on the trading." They said, "Okay, you've got to have multiple exchanges."

Then of course if you have multiple exchanges trading the same stock, how do you determine what's the last trade? It became a technical hurdle to try and figure that out. Instead of solving the technology, there was some push at the time of what they call efficient market theory. There's been some studies at Harvard on the Russell Index and how basically shorting didn't really impact.

But I remember speaking at the time when they were having the hearing saying, "The Russell, probably the smallest company in the Russell is $2 billion or something." Small cap is one thing. Microcap, which is what we're into in junior mining in really technical terms, is another thing. And in that case, this uptick rule was critical really for stable capital formation I would say. What we're trying to do really simply put is go back to what worked for 142 years and reinstate the uptick rule. That's really the primary objective of Save Canadian Mining.

Gerardo Del Real: Now the TSX Venture Exchange, according to your numbers, is down 245% more than commodity index since short selling was allowed. And this is the big reason why you're trying to get this overturned. Right?

Terry Lynch: That's correct. Yeah. The stats, if they don't smack you in the face, nothing will. And that's the TSX-V overall. We believe, and we're ultimately trying to generate this now, if you just segregate the mining securities only in the TSX-V index, you're probably looking at more like 350% or 400% down. Because you know and I know that since then mining stocks, a lot of them are down 90% plus.

It's ridiculous. I read some stat the other day from a reputable site talking that mining stocks are at a 100-year low. Obviously, we're in a cyclical business. We get that, we know that there are up booms and busts and that's sort of par for the course and nothing should change that.

But this time it's different, Gerardo. This time it's different because there's a structural problem. It's not a commodity price problem. It's a structural capital formation problem. And we can fix that.

Gerardo Del Real: So just to be clear, you only want to restore the “no short on the uptick” rule on companies under $250 million. Correct?

Terry Lynch: That's correct. Yeah. We think that as you move beyond that number, then maybe this efficient market theory sets in and people have research reports, they can make an informed decision on whether the shorts are betting right or wrong. But below that price there's not a lot of information. There's not a lot of critical analysis available for many of these companies. It's really hard for the retail investor to really tell and so as a result, a lot of times they just see the momentum going against them and they realize, “Oh I must've made a bad decision” and they bail.

Unfortunately, that's caused crippling losses for investors. And obviously the stock prices have plummeted in the space. And of course when people lose money, they don't reinvest. And that's where we're at in junior mining right now.

Gerardo Del Real: Absolutely agree. Let's talk about some of the people and organizations that are behind this initiative. It's a pretty robust group of people.

Terry Lynch: Yeah. We're excited. Literally just sort of coming out of a quiet period now, because obviously we just started it. I started it with a company called 6ix and Pendry Cannon. They were sort of an advertising and copywriting agencies to help me get the story out. And then we were very fortunate to get Stosic & Associates. It's a very sort of established, good government lobbyist because obviously we need the government change things. That was part of it.

Then our biggest get to was Eric Sprott, the legendary fund manager who really believes shorting is a critical problem in the industry. Eric has come on as part of the founding team and been super helpful and opened up his network. That's enabled us to sort of outreach to people like yourself and Nick and several brokers and several mining companies are coming on.

This should be a very across the board movement from people that have investment interest and people that have mining companies that want to have a level playing field. That's really what we're trying to do.

Gerardo Del Real: Let me play devil's advocate for a bit and say, "Okay, Terry. Well you started this great organization. It's got a very worthwhile cause. It's good for the industry and the business that we're in. Why are you involved? What's your salary? What are you getting out of this, Terry?"

Terry Lynch: Yeah. I'm not getting anything, Gerardo. You know what? Honestly, I've got to say, luckily or not, mining represents about 1% of Terry's net worth. That's probably been a good thing. It's just been such a struggle, as you know, the last number of years. I got involved around 2012 in mining as a principal. It's been a painful experience to say the least. There's nothing in this personally for me other than, honestly, I was at PDAC this last February, March and it was so deathly quiet. I was talking with my fellow boothmates and they're all sort of similar guys like me, 55 to 65. Sort of aging. But we've all sort of done okay. We're going to survive, but where are the young people?

I'm thinking like, my God, this whole industry's going down. Nobody wants to get into mining and what a sad state of affairs that is. It's like if there's anything in Canada we should be good at, it's mining. We got more territory than most, other than Russia. And a lot of it's unexplored.

But of course, the TSX and the CSE have been world leaders in finances so we don't just do mining here. Of course I'm with Chilean Metals. I explore in Chile. But I raise my money in Canada. If you have a bad environment for mining in Canada, you're not able to explore in a lot of places. I just felt that we needed to do something, we need to rally the troops and I thought, hey, somebody's got to start something.

I just started and luckily now I'm getting a bunch of industry leaders on side to sort of say, "Hey, this is really something that's really, it really was an inadvertent rule change.” It's not helping anyone and it's hurting the sector very adversely and we can change it. I've started to obviously spread the word and talking to people like yourself, and the Midas Letter the end of this week, and Brien Lundin. Knowledgeable people are coming on side and recognizing wow, hadn't really focused on this. But yeah, this is a big issue.

Gerardo Del Real: No, I absolutely agree. T. Boone Pickens, I believe the last note that was publicized from him to everybody made mention of the fact that private citizens have to do more and be more active in creating the change that we want to see in industry and government. And I think this is a perfect example of that. You should be commended.

What's the next step for people that want to get involved? Nick Hodge, myself, Eric Sprott, yourself, you have a good group of initial people. How can people get involved?

Terry Lynch: You know what? If you could go to savecanadianmining.com and obviously have a read of what we've got there. It lays out how you can get involved, whether you're a company or an individual. And we welcome all to participate in this very necessary change to sort of restore confidence in the junior mining capital markets. Because honestly, Gerardo, I know you believe this, if you could ever solve that problem of capital formation in this sector, you'd never have a better time to invest than now.

Things are trading at 1 to 5% of what they're worth almost across the board. It's crazy some of the deals. There's of course a bunch of garbage deals that are worth nothing and should be worth nothing. But there's also a ton of really good deals that are trading at pennies on the dollar. And if we have capital, investors are going to make multiples of their money. And that's when people make money they tell their friends and then you get a healthy sector again.

Gerardo Del Real: Agreed. SaveCanadianMining.com. We will put a link up. We're happy to help through Resource Stock Digest and individually. Terry, thank you so much for putting this together, for coming on and frankly for reaching out to leaders in the industry that agree with you and I think the timing couldn't be better so thank you.

Terry Lynch: Listen, Gerardo, thanks so much for your support. It's through voices like yourself and through Nick that we can get the word out to the many people, because obviously I don't have a cast of thousands. This is a volunteer-driven organization. We're really trying to reach as many people as we can and in a most efficient way to come together.

I can say, we've been getting good feedback initially from the government and from the OSC. I think if we get behind this, we can get this rule changed and wouldn't that be wonderful thing?

Gerardo Del Real: Yes it would. Yes it would. Fingers crossed. Looking forward to having you back on for updates. Thanks again, Terry.

Terry Lynch: Thanks, Gerardo. Appreciate it. Cheers.